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Mirion

Filed: 15 Oct 09, 8:00pm
Table of Contents

As filed with the Securities and Exchange Commission on October 16, 2009
Registration No. 333-161329
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
Amendment No. 1
to
 
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
MIRION TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
 
     
Delaware
 3829 20-3979555
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization)
 Classification Code Number) Identification Number)
 
3000 Executive Parkway, Suite 222
San Ramon, CA 94583
(925) 543-0800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
 
 
 
 
Jack A. Pacheco
Vice President and Chief Financial Officer
Mirion Technologies, Inc.
3000 Executive Parkway, Suite 222
San Ramon, CA 94583
(925) 543-0800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)
 
 
 
 
Copies to:
   
Alan F. Denenberg, Esq. 
 Tad J. Freese, Esq.
Davis Polk & Wardwell LLP
 Latham & Watkins LLP
1600 El Camino Real
 140 Scott Drive
Menlo Park, CA 94025
 Menlo Park, CA 94025
(650) 752-2000
 (650) 328-4600
   
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after the effective date of this Registration Statement.
 
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  o
 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer oAccelerated filer oNon-accelerated filer þSmaller reporting company o
(Do not check if a smaller reporting company)
 
 
 
CALCULATION OF REGISTRATION FEE
 
           
   Proposed Maximum
   
Title of Each Class
  Aggregate Offering
  Amount of
of Securities to be Registered  Price(1)(2)  Registration Fee(3)
Common stock, par value $0.001 per share  $100,000,000   $5,580 
           
 
(1)Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
 
(2)Includes shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.
 
(3)Previously paid.
 
 
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.
 
SUBJECT TO COMPLETION, DATED OCTOBER 16, 2009
 
(MIRION TECHNOLOGIES, INC. LOGO)
 
           Shares
 
Mirion Technologies, Inc.
 
Common Stock
 
 
 
This is an initial public offering of shares of common stock of Mirion Technologies, Inc.
 
We are selling           shares of common stock.
 
Prior to this offering, there has been no public market for our common stock. We expect the initial public offering price to be between $      and $      per share. We will apply to list our common stock for quotation on the NASDAQ Global Market under the symbol “MION.”
 
We have granted the underwriters an option to purchase a maximum of          additional shares of common stock. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
 
Investing in our common stock involves risks. See “Risk Factors” on page 8.
 
       
    Underwriting
  
  Price to
 Discounts and
 Proceeds to
  Public Commissions Us
 
Per Share $             $             $            
Total $             $             $            
 
Delivery of the shares of common stock in book-entry form only will be made on or about          , 2009.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
 
     
Credit Suisse
 BofA Merrill Lynch J.P. Morgan
 
 
Robert W. Baird & Co.
 
 
The date of this prospectus is          , 2009.


 

 
TABLE OF CONTENTS
 
     
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  F-1 
 EX-10.1
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 EX-10.8.1
 EX-10.8.2
 EX-10.9
 EX-10.10
 EX-10.19.2
 EX-23.1
 
 
You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us. Neither we nor the underwriters have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.
 
“Mirion Technologies,” “Mirion,” “GDS,” “Global Dosimetry Solutions,” “HandFoot-Fibre,” “Imaging and Sensing Technology,” “IST,” “MGP Instruments,” “MGPI,” “SPIR Ident,” “Synodys,” “TwoStep-Exit” and any corresponding logos, are our common law and registered trademarks. Solely for convenience, we refer to our trademarks in this prospectus without thetm and® symbols, but such references are not intended to indicate that we will not assert our rights to our trademarks. Other service marks, trademarks and trade names referred to in this prospectus are the property of their owners.
 
References to “fiscal” before any year refer to our fiscal year ending on June 30th of the year referenced.
 
Dealer Prospectus Delivery Obligation
 
Until and including          , 2009 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriter and with respect to unsold allotments or subscriptions.


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PROSPECTUS SUMMARY
 
This summary highlights the more detailed information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read the entire prospectus, including the risk factors, the consolidated financial statements and the related notes, and the other documents to which this prospectus refers, carefully before making an investment decision. In this prospectus, “Mirion,” the “Company,” “we,” “us” or “our” refer to Mirion Technologies, Inc. and its subsidiaries, except where the context makes clear that the reference is only to Mirion Technologies, Inc. and is not inclusive of its subsidiaries.
 
Our Company
 
We are a leading global provider of radiation detection, measurement, analysis and monitoring products and services to the nuclear, defense and medical end markets. Our customers rely on our solutions to protect people, property and the environment from nuclear and radiological hazards. Our products and services include: dosimeters; contamination & clearance monitors; detection & identification instruments; radiation monitoring systems; electrical penetrations; reactor instrumentation & control equipment and systems; dosimetry services; imaging systems; and related accessories, software and services. Many of our end markets are characterized by the need to meet rigorous regulatory standards, design qualifications and operating requirements. We believe these industry dynamics create substantial barriers to entry, thereby reinforcing our leading market position. We have leveraged the strength of our nuclear platform to expand the commercial applications of our technologies to defense and medical end markets. The diversity of our end markets and the global nature of our customer base are illustrated in the charts below:
 
   
Fiscal 2009 Revenue by End Markets
 Fiscal 2009 Revenue by Geography
   
(PIE CHART) (PIE CHART)
 
Fiscal 2009 Revenue: $207.6 Million
 
For more than 50 years, we and our predecessor companies have delivered products and services that help ensure the safe and efficient operation of nuclear facilities. We believe the breadth and proven performance of our solutions support our longstanding strategic customer relationships across diverse end markets. Our products and services have been sold directly and indirectly to a variety of end-use customers including, but not limited to, all of the U.S. nuclear power producers, 397 of the global installed base of 436 active nuclear power reactors, many of the leading reactor design firms, 17 of the 28 NATO militaries, numerous international government and supranational agencies, as well as medical service providers and industrial companies worldwide.
 
Our broad product and services portfolio of radiation detection, measurement, analysis and monitoring solutions is supported by 159 scientists, engineers and technicians, who represented approximately 19% of our workforce as of June 30, 2009. We possess numerous product qualifications, trade secrets and patents that support our market position and our ability to deliver next generation products and services. In addition, we maintain design, manufacturing and sales capabilities across seven countries, enabling us to capitalize on growth opportunities, including the anticipated increase in demand for nuclear power and ongoing spending for defense and homeland security.


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Our financial performance is driven by the replacement of products and the recurring provision of services into our core end markets, as well as the construction of new nuclear power plants, or NPPs, globally. Many of our products are ordered well in advance of the anticipated shipment date, providing visibility into future revenue through our backlog and deferred revenue, which totaled $184.2 million and $43.4 million as of June 30, 2009. We generated revenue of $207.6 million, Adjusted EBITDA of $41.4 million and a net loss of $3.7 million for fiscal 2009. See page 7 for a definition and reconciliation of Adjusted EBITDA to net loss.
 
Our Market Opportunities
 
We sell our radiation detection, measurement, analysis and monitoring products and services into the global nuclear, defense and medical end markets. We believe that our end markets are characterized by strong fundamentals that support a robust revenue base and provide numerous growth opportunities.
 
Nuclear
 
The nuclear end market spans the entire nuclear fuel cycle, including mining, enrichment, fuel manufacturing, nuclear power generation, waste management and fuel reprocessing. Key nuclear installations include mines, fuel fabrication facilities, commercial nuclear power reactors, reprocessing facilities, research facilities, military facilities and ships, weapons facilities and waste storage facilities. We sell products and services for use in each of these types of installations, with commercial nuclear power reactors representing the majority of our sales into the nuclear end market. As of June 30, 2009, our products were installed at 91% of active nuclear power reactors globally, including all of those in the United States. We believe that the global installed base of nuclear reactors presents opportunities for replacements and upgrades of our products, as well as those of legacy suppliers, and for participation in the “decommissioning” process.
 
We also expect the increase in nuclear reactor construction worldwide to provide opportunities across our offerings.
 
Defense
 
Our global defense end market is driven by a combination of military, civil defense and event-driven security spending which in turn has been fueled by the unprecedented growth in global security threats.
 
Medical
 
The use of radiodiagnostic and radiotherapeutic procedures is expanding globally due to aging population demographics, technological advancements and emerging middle classes in China and India, creating a significant opportunity for us in the medical end market.
 
Our Competitive Strengths
 
Trusted radiation detection, measurement, analysis and monitoring provider.  The nuclear industry is highly regulated and requires compliance with strict product specifications. Our trusted, recognized brands supported by our tradition of technical excellence, product reliability and customer service have enabled us to develop strong market share across our product and service offerings.
 
Broad and complementary product and service portfolio.  We offer radiation detection, measurement, analysis and monitoring products and services to satisfy customer requirements throughout the NPP life cycle.
 
Large installed base drives recurring revenue.  Our large installed base at active nuclear power reactors drives recurring revenue through replacement and service cycles.
 
Technical leadership creates high barriers to entry.  We design products to meet demanding customer specifications, qualifications and regulatory requirements.
 
Global footprint designed to meet local customer needs.  Our global footprint, augmented by our established network of suppliers and distributors, enables us to be responsive to our customers and provide locally customized solutions.


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Seasoned management team complemented by highly skilled engineers.  We are led by an experienced management team with a mix of private sector and government experience across different industries and functions.
 
Our Strategy
 
Our objective is to continue enhancing our position as a leading provider of radiation detection, measurement, analysis and monitoring products and services for the global nuclear, defense and medical end markets. We intend to achieve this through the following strategies:
 
 • Exploit under-penetrated market opportunities.
 
 • Expand addressable market.
 
 • Geographic expansion.  We believe we can increase our presence in the international market. For example, we intend to leverage our relationships with leading reactor design firms to capitalize on the opening of India’s nuclear end market to U.S. firms due to a recent treaty ratification.
 
 • Customer outsourcing.  Some NPP operators have recently outsourced their dosimetry services in order to reduce costs. We have been able to benefit from economies of scale as well as advantages in materials procurement and processing technology to provide enhanced dosimetry services to many of these NPPs at a lower cost.
 
 • Service privatization.  In some regions outside the United States, dosimetry services have historically been provided by government agencies. However, privatization of dosimetry services is accelerating in some regions, such as Europe, as providers seek to reduce costs and benefit from enhanced service offerings, providing an opportunity to leverage our expertise and North American service experience.
 
 • New applications for existing technologies.
 
 • Develop new products and services.
 
 • Continuously improve our cost structure and productivity.
 
 • Pursue strategic acquisitions.
 
Our Principal Investor
 
Upon completion of this offering, American Capital, Ltd. (together with American Capital Equity I, LLC and American Capital Equity II, LP, “ACAS”) will beneficially own approximately     % of our outstanding common stock, or approximately     % if the underwriters exercise in full their over-allotment option to purchase additional shares of common stock. We are party to a number of agreements with ACAS and its affiliates. These agreements are described in the sections of this prospectus captioned, “Risk Factors—Risks Related to this Offering and Our Common Stock,” “Use of Proceeds,” “Certain Relationships and Related Party Transactions” and “Principal and Selling Stockholders.”
 
ACAS is a publicly traded private equity firm and global asset manager, with $11 billion in capital resources under management as of June 30, 2009.
 
Risk Factors
 
Our business is subject to many risks and uncertainties, including those highlighted in the section of this prospectus entitled “Risk Factors.” These risks could materially and adversely affect our business, financial condition and results of operation, which could cause the trading price of our common stock to decline and could result in a partial or total loss of your investment. Some of these risks include:
 
 • the long and unpredictable nature of our sales cycle;
 
 • fluctuations in our financial performance;
 
 • our short operating history as a consolidated entity;


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 • the highly competitive nature of our markets and the resources of our competitors;
 
 • the uncertain fulfillment of our backlog;
 
 • the effect of the current global financial crisis and worldwide economic conditions; and
 
 • changes in our customers’ budgets for radiation detection products and services and the timing of their purchasing decisions.
 
Company Information
 
We incorporated in Delaware in October 2005 as Global Monitoring Services, Inc., acquired control of our predecessor companies in December 2005 and changed our name in January 2006 to Mirion Technologies, Inc. Our principal executive offices are located at 3000 Executive Parkway, Suite 222, San Ramon, California 94583 and our telephone number is(925) 543-0800. Our website is www.mirion.com. The information that appears on our website is not part of, and is not incorporated into, this prospectus.


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The Offering
 
Common stock offered by us          shares
 
Common stock to be outstanding after this offering          shares
 
Over-allotment optionWe have granted the underwriters a30-day option to purchase from us up to an additional           shares of our common stock to cover over-allotments.
 
Dividend policyWe do not anticipate paying any dividends on our common stock in the foreseeable future. See “Dividend Policy.”
 
Risk factorsInvesting in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 9 of this prospectus for a discussion of factors you should carefully consider before investing in our common stock.
 
Use of proceedsWe estimate that the net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $      million, assuming the shares are offered at $      per share, the midpoint of the price range set forth on the cover page of this prospectus. We intend to use $      million of the net proceeds from the shares that we sell in this offering to repay borrowings from ACAS and its affiliates. We also intend to use net proceeds from this offering to make a one-time payment of $8.0 million to American Capital Financial Services, Inc., or ACFS, a subsidiary of ACAS, to terminate an investment banking services agreement between us and ACFS. We will use the balance of the net proceeds for working capital and general corporate purposes. See “Use of Proceeds.”
 
Proposed NASDAQ symbolMION
 
The number of shares of common stock to be outstanding after this offering is based on 1,197,094 shares outstanding as of June 30, 2009 and excludes:
 
 • 113,288 shares subject to outstanding options as of June 30, 2009 at a weighted average exercise price of $122.77 per share;
 
 • 5,402 additional shares reserved for issuance under our existing stock option plan, all of which are expected to be granted to our employees, including our executive officers, immediately following the pricing of this offering at an exercise price equal to the initial public offering price;
 
 • 106,160 shares to be reserved for issuance under our amended and restated stock plan to become effective upon the pricing of this offering; and
 
 • 402,428 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.00152 per share.
 
Except as otherwise indicated, all information in this prospectus assumes that:
 
 • a          -for-           split of our common stock will occur prior to the consummation of this offering;
 
 • all of the outstanding shares of our convertible preferred stock will be converted into shares of our common stock;
 
 • all of the outstanding shares of our Class A Voting Common Stock and Class B Non-Voting Common Stock will be converted into shares of our common stock on a one-to-one basis;
 
 • we will file our amended and restated Certificate of Incorporation prior to the consummation of this offering;
 
 • the underwriters will not exercise their over-allotment option; and
 
 • warrants to purchase           shares of our common stock at a weighted average exercise price of $      per share will remain outstanding after the consummation of this offering.


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Summary Consolidated Financial Data
 
The following table summarizes the consolidated financial data for our business. You should read this summary consolidated financial data in conjunction with the sections titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, all included elsewhere in this prospectus. The summary financial data in this section is not intended to replace the consolidated financial statements and related notes included in this prospectus. The summary consolidated statements of operations data for each of the three fiscal years ending June 30, 2007, 2008 and 2009 are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The consolidated balance sheet data as of June 30, 2009 is derived from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that should be expected in the future. The amounts below are in thousands, except percentages and per share data.
 
             
  Year Ended June 30, 
  $2007  2008  2009 
 
Consolidated Statements of Operations Data:
            
Revenue  175,361  $189,933  $207,582 
Cost of revenue  97,222   102,871   110,761 
             
Gross profit  78,139   87,062   96,821 
             
% of revenue  44.6%  45.8%  46.6%
Operating expenses            
Selling, general and administrative expenses  59,792   63,008   66,057 
Research and development expenses  11,875   14,865   11,188 
             
Total operating expenses  71,667   77,873   77,245 
             
Income from operations  6,472   9,189   19,576 
Interest expense, net  (19,068)  (20,290)  (17,787)
Other income, net  786   1,650   474 
             
(Loss) income before provision for income taxes  (11,810)  (9,451)  2,263 
Provision for income taxes  6,050   4,546   5,915 
             
Net loss $(17,860) $(13,997) $(3,652)
             
Paid-in-kind preferred dividends
  (8,141)  (8,993)  (9,892)
             
Net loss attributable to common stockholders $(26,001) $(22,990) $(13,544)
             
Pro forma loss per common share — basic and diluted(1)         $  
             
 
         
  As of June 30, 2009 
     Pro Forma
 
  Actual  as Adjusted(1) 
 
Consolidated Balance Sheet Data:
        
Cash and cash equivalents(2) $5,390     
Total assets  317,036     
Notes payable to ACAS(3)  170,012     
Total stockholders’ equity  10,268     
 
             
  Year Ended June 30, 
  2007  2008  2009 
 
Other Data:
            
Adjusted EBITDA(4) $32,045  $32,304  $41,431 
Amortization of intangible assets  12,215   10,076   8,114 
Capital expenditures  3,897   5,142   6,845 
 
           �� 
  As of June 30, 
  2007  2008  2009 
 
Backlog(5) $143,887  $177,956  $184,218 
Deferred revenue  30,567   38,988   43,419 


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(1)On a pro forma as adjusted basis to give effect to the conversion of           shares of our outstanding convertible preferred stock into           shares of our common stock, the conversion of           outstanding shares of our Class A Voting Common Stock and Class B Non-Voting Common Stock into           shares of our common stock on aone-to-one basis, the sale of          shares of our common stock in this offering by us at an assumed initial public offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus), and the application of the $     estimated net proceeds to be received by us as described in “Use of Proceeds” to effect the repayment and refinancing of $     of our indebtedness and to make a one-time $8 million payment to ACFS, after deducting underwriting discounts and estimated offering expenses of $     .
 
(2)As of June 30, 2009, we also had $6.0 million of restricted cash.
 
(3)In addition, as of June 30, 2009, we had $7.2 million of outstanding debt held by third parties not affiliated with ACAS.
 
(4)We include Adjusted EBITDA in this prospectus because (i) it is a basis upon which our management assesses our operating performance, (ii) it is a factor in the evaluation of the performance of our management in determining compensation and (iii) certain maintenance covenants under our debt agreements are tied to ratios based upon Adjusted EBITDA, as defined. Adjusted EBITDA is calculated as net income (loss) less extraordinary gains (loss) and interest income, plus interest expense, charges against income for taxes, depreciation expense, amortization expense, mark to market (loss) gain,non-recurring charges, management fees paid to ACFS and all non-cash compensation expenses (in accordance with the definitions in our credit facilities with ACAS). Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP, and should be viewed as a supplement to—not a substitute for—our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity. Our statements of cash flows, included elsewhere in this prospectus, present our cash flow activity in accordance with U.S. GAAP. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.
 
(5)Represents purchase orders or contracts received by us that have not been shipped. Amounts representing backlog are not recorded in our financial statements.
 
The following is a reconciliation of net loss to Adjusted EBITDA:
 
                     
  Year Ended June 30,       
  2007  2008  2009       
 
Net loss $(17,860) $(13,997) $(3,652)        
Interest expense, net  19,068   20,290   17,787         
Income tax expense  6,050   4,546   5,915         
Depreciation  4,072   4,022   4,417         
Amortization(a)  12,215   10,076   8,114         
ACFS fees  1,625   1,625   1,739         
Stock option compensation  244   275   1,161         
Mark to market (loss) gain  (14)  9   83         
Other non-recurring charges(b)  6,645   5,458   5,867         
                     
Adjusted EBITDA $32,045  $32,304  $41,431         
                     
 
(a)Represents the non-cash amortization of intangible assets, such as customer relationships, backlog, qualification, enterprise software, technology, territorial rights, trade names and noncompete agreements. We have included portions of this non-cash amortization expense in cost of revenue, research and development expenses and selling, general and administrative expenses.
 
(b)Represents non-recurring expenses, including severance expenses and costs associated with the preparation for our initial public offering, as well as certain professional and legal expenses.


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RISK FACTORS
 
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information contained in this prospectus, before deciding whether to purchase our common stock. If any of the following risks occurs, the trading price of our common stock could decline and you could lose all or part of your investment.
 
Risks Related to Our Business
 
Our sales cycle can be long and unpredictable, and we may be unable to recognize revenue until many months or years after an order is placed. As a result, our revenue can be difficult to predict and may vary substantially from quarter to quarter, which may cause our operating results to fluctuate.
 
Our sales efforts for many of our products involve substantial discussion with customers regarding product customization and deployment. This process can be extremely lengthy and time consuming and typically involves a significant product evaluation process. The typical sales cycle for products whose procurement relates to the construction of new, or the refurbishment of existing, NPPs ranges from 12 to 36 months and has, in some cases, extended up to 60 months. In addition, these customers generally make a significant commitment of resources to test and evaluate our products prior to purchase. As a result, our sales process is often subject to delays associated with the lengthy approval processes that typically accompany the design, testing and adoption of new, technologically complex products. This results in our investing significant resources prior to orders being placed for our products, with no assurances that we will secure a sale.
 
In addition, a significant amount of time can pass before we recognize the revenue associated with an order once it has been placed. We may not recognize revenue for sales of certain of our products until the customer certifies the successful installation and operation of the product, which can be many months or, particularly with regard to our Sensing Systems and Radiation Monitoring Systems products, years following the receipt of a customer order. The installation of our systems are also subject to construction or scheduled outage delays unrelated to our products, which can further defer the recognition of revenue.
 
Our long and uncertain sales cycle and the unpredictable period of time between the placement of an order and our ability to recognize the revenue associated with the order makes revenue predictions difficult, particularly on a quarterly basis, and can cause our operating results to fluctuate significantly.
 
Our financial performance is unpredictable.
 
Our business depends on the demand for our radiation detection, measurement, analysis and monitoring products and services in the nuclear, defense and medical end markets. In the past, the demand for our products in these markets has fluctuated due to a variety of factors, many of which are beyond our control. This has caused our financial performance to fluctuate. Among the factors affecting our performance are:
 
 • general economic conditions, both domestically and internationally;
 
 • the timing, number and size of orders from, and shipments to, our customers, as well as the relative mix of those orders;
 
 • the timing of revenue recognition, which often requires customer acceptance of the delivered product;
 
 • delays, postponements or cancellations of construction or decommissioning of NPPs caused by, for example, financing difficulties or regulatory delays;
 
 • adverse economic, financialand/or political conditions in one or more of our target end markets;
 
 • variations in the volume of orders for a particular product or product line in a particular quarter;
 
 • the size and timing of new contract awards;
 
 • the timing of the release of government funds for procurement of our products;
 
 • the degree to which new end markets emerge for our products;


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 • the budget cycles of U.S. and foreign governments and commercial enterprises that affect timing of order placement for or delivery of our products; and
 
 • the tendency of commercial enterprises to fully utilize annual capital budgets prior to expiration.
 
We have a short operating history as a consolidated entity and have incurred net losses since our inception.
 
We were formed in 2005 as a merger of several companies acquired by ACAS but operated separately. Accordingly, we rely on the employees, goodwill, brand strength, product history and qualifications of our legacy acquired companies. In addition, some of our senior executive officers have a limited history with us and no prior experience in the industries in which we compete. Furthermore, we have not achieved positive net income and, as of June 30, 2009, had an accumulated deficit of $98.3 million. We cannot assure you as to when we will achieve positive net income or, if we do so, whether we will continue to do so.
 
We operate in highly competitive markets and in some cases compete against larger companies with greater financial resources.
 
The market for radiation detection, measurement, analysis and monitoring products and services is fragmented, with a variety of small and large competitors, where the degree of fragmentation and the identities of our competitors vary among our target end markets. Some of our competitors have greater financial resources than do we, and they may be able to focus those resources on developing products or services that are more attractive to potential customers than those that we offer, or on lobbying efforts to enhance their prospects of obtaining government contracts. Some of our competitors, for example, are substantially larger and better capitalized than we are and have the ability to combine solutions into an integrated offering at attractive prices. Our competitors may offer these solutions at prices below cost in order to improve their competitive positions. Any of these competitive factors could make it more difficult for us to attract and retain customers, cause us to lower our prices to compete, and reduce our market share and revenue, any of which could have a material adverse effect on our business, financial condition and results of operations.
 
Amounts included in our order backlog may not result in actual revenue or translate into profits.
 
Some of our more profitable services are not reflected in our backlog because they are reflected in deferred revenue. Although the amount of our backlog is based on signed purchase orders or other written contractual commitments, we cannot guarantee that our order backlog will result in actual revenue in the originally anticipated period or at all. In addition, the mix of contracts included in our order backlog can greatly affect our margins in future periods, which may not be comparable to our historical product mix and operating results. Our customers may experience project delays or cancel orders due to factors beyond our control. If our order backlog fails to result in revenue in a timely manner or at all, we could experience a reduction in revenue and liquidity.
 
The current global financial crisis and adverse worldwide economic conditions may have significant effects on our business, financial condition and results of operations.
 
The current global financial crisis—which has included, among other things, significant reductions in available capital and liquidity, substantial reductions and fluctuations in equity and currency values, a reduction in global demand for energy and a worldwide recession, the extent of which is likely to be significant and prolonged—may have a material adverse effect on our business. We have begun to experience some weakening in demand for certain of our products and services, particularly for our high-temperature cameras used as monitoring tools in petrochemical facilities and cement kilns. Factors such as lack of business investment, government spending, the volatility and strength of the capital markets and inflation all affect the business and economic environment and, ultimately, our business, financial condition and results of operations. Continued market disruptions and broader economic downturns may affect our and our customers’ access to capital, lead to lower demand for our products and services, increase our exposure to losses from bad debts or result in our customers ceasing operations, any of which could materially adversely affect our business, financial condition and results of operations.


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The credit markets have been experiencing extreme volatility and disruption for more than twelve months, and the volatility and disruption have reached unprecedented levels. In many cases, the markets have limited credit capacity for certain issuers, and lenders have requested shorter terms. The market for new debt financing is extremely limited and in some cases not available at all. In addition, the markets have increased the uncertainty that lenders will be able to comply with their previous commitments. If current levels of market disruption and volatility continue or worsen, we may not be able to refinance our existing debt, or incur additional debt, which may require us to seek alternative funding sources to meet our liquidity needs or to fund planned expansion. Such alternative sources of funding may not be available on acceptable terms or at all.
 
Furthermore, the tightening of credit in financial markets may delay or prevent our customers from securing funding adequate to operate their businesses and purchase our products and services and could lead to an increase in our bad debt levels.
 
Unfavorable currency exchange rate fluctuations could adversely affect our profitability.
 
Our international sales and our operations in foreign countries expose us to risks associated with fluctuating currency values and exchange rates. Most of our sales, costs, assets and liabilities are denominated in foreign currencies. For fiscal 2009, 57.6% and 5.1% of our sales were denominated in euros and pounds sterling. Gains and losses on the conversion of accounts receivable, accounts payable and other monetary assets and liabilities to U.S. dollars may contribute to fluctuations in our results of operations. In addition, increases in the value of the U.S. dollar relative to the euro and the pound sterling could have an adverse effect on our results of operations. We do not currently purchase forward contracts to hedge against the risks associated with fluctuations in exchange rates.
 
We may be less competitive if we fail to develop new or enhanced products and introduce them in a timely manner.
 
The markets in which we compete are subject to technological change, product obsolescence and evolving industry standards. Our ability to successfully compete in these markets and to continue to grow our business depends in significant part upon our ability to develop, introduce and sell new and enhanced products in a timely and cost-effective manner, and to anticipate and respond to changing customer requirements. We have experienced, and may in the future experience, delays in the development and introduction of new products. These delays could provide a competitor a first-to-market advantage and allow a competitor to achieve greater market share. Defects or errors found in our products after commencement of commercial shipment could result in delays in market acceptance of these products. Lack of market acceptance for our new products will jeopardize our ability to recoup research and development expenditures, hurt our reputation and harm our business, financial condition and results of operations. Accordingly, we can not assure you that our future product development efforts will be successful.
 
Our existing and future customers may reduce or halt their spending on radiation detection, measurement, analysis and monitoring products and services.
 
A variety of factors may cause our existing or future customers to reduce or halt their spending on radiation detection, measurement, analysis and monitoring products and services. These factors include:
 
 • disruptions in the nuclear fuel cycle, such as insufficient uranium supply or conversion;
 
 • unfavorable financial conditions and strategies of the builders, owners and operators of nuclear reactors;
 
 • civic opposition to or changes in government policies regarding nuclear operations;
 
 • a reduction in demand for nuclear generating capacity;
 
 • accidents, terrorism, natural disasters or other incidents occurring at nuclear facilities; and
 
 • the decision by one or more of our customers to acquire one of our competitors or otherwise administer the services we provide internally.


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Certain of these events could also adversely affect us to the extent that they result in the suspension or reduction of nuclear reactor construction, refurbishment or operation; the reduction of supplies of nuclear raw materials; increased regulation; increased operational costs for us or our customers; or increased liability for actual or threatened property damage or personal injury.
 
If we are unable to obtain adequate supplies in a timely manner, our results of operations would be adversely affected.
 
We are dependent upon certain sole or limited source suppliers for critical raw materials or components of some of our products. For example, we rely on the U.S. government for the enriched uranium used in certain equipment employed in our sensing systems. We also rely on limited source suppliers of certain precious metals used in some of our reactor instrumentation, scintillator materials used in our detection & identification equipment and for analog sensor tubes used in certain of our imaging products. Most of our suppliers are not required to supply us with any minimum quantities, and we cannot assure you that we will receive adequate quantities of components on a timely basis in the future. Our suppliers could have financial or other problems that could cause a disruption in the supply of components to us. In addition, were we to change suppliers of components in some of our products, we may be required to seek new qualifications for such products, which can be a time-consuming and costly process. As a result of interruption of supply, we may not be able to obtain the raw materials or components that we need to fill customer orders. The inability to fill these orders could cause delays, disruptions or reductions in product shipments, require us to negotiate alternate supply arrangements with replacement suppliers where available or require product redesigns which could, in turn, damage relationships with current or prospective customers, increase costs or prices and have a material adverse effect on our business, financial condition and results of operations.
 
We rely on third-party manufacturers to produce non-core components for certain of our products and services. If our manufacturers are unable to meet our demand or requirements, our business could be harmed.
 
We use third-party manufacturers to produce certain non-core components for some of our products. From time to time demand for our products has grown faster than the supply capabilities of these vendors. In many cases, these manufacturers have no obligation to supply products to us for any specific period, in any specific quantity or at any specific price, except as set forth in a particular purchase order. Our requirements represent a small portion of the total production capacities for many of our manufacturers, and our manufacturers may reallocate capacity to other customers, even during periods of high demand for our products or services. We have in the past experienced, and may in the future experience, quality control issues and delivery delays with our manufacturers due to factors such as high industry demand or the inability of our manufacturers to consistently meet our quality or delivery requirements. In addition, third-party manufacturers may have financial difficulties and face the risk of bankruptcy, especially in light of the current worldwide economic downturn. If one of our suppliers was to cancel or materially change a commitment with us or fail to meet the quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, be unable to develop or sell our products or services cost effectively or on a timely basis, if at all, and have significantly decreased revenue, which would harm our business, financial condition and results of operations. We may qualify additional suppliers in the future which would require time and resources. If we do not qualify additional suppliers, we may be exposed to increased risk of capacity shortages due to our dependence on our current suppliers.
 
Some of our suppliers and customers are also our competitors.
 
Some of our competitors are also our suppliers and customers. For example, Canberra, one of our chief competitors in the nuclear and defense end markets, supplies us with some of the detectors employed in the radiation monitoring systems that we supply to the nuclear end market. At the same time, Areva, the controlling shareholder of Canberra, is a customer for our radiation monitoring systems for use in its EPR reactors and in other fuel cycle industry applications. Similarly, Thermo Fisher Scientific both supplies our Dosimetry Services division with TLD crystals used in some of our thermoluminescent dosimeters that we deploy as part of providing dosimetry services to our customers, and sells products competitive with those


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offered by our Health Physics division. As with our other suppliers, our competitor suppliers are not required to supply us with any minimum quantities, and we cannot assure you that we will receive adequate quantities of components on a timely basis in the future. The loss of orders stemming from the actions of our supplier or customer competitors could cause delays, disruptions or reductions in product shipments or require product redesigns which could, in turn, damage relationships with current or prospective customers, increase costs or prices and have a material adverse effect on our business, financial condition and results of operations.
 
We could lose money if we fail to accurately estimate our costs or fail to execute within our cost estimates on fixed-price contracts.
 
Many of our contracts are fixed-price contracts which do not provide for price escalation in the event of unanticipated cost overruns. Under these contracts, we perform our services and provide our products at a fixed price. Fixed-price contracts carry inherent risks, including risks of losses from underestimating costs, operational difficulties and other changes that may occur over the contract period. We have in the past experienced unanticipated cost overruns on some of our fixed-price contracts. If our cost estimates for a contract are inaccurate, or if we do not execute the contract within our cost estimates, we may incur losses or the contract may not be as profitable as we expected. In addition, we are sometimes required to incur costs in connection with modifications to a contract that may not be approved by the customer as to scope or price, or to incur unanticipated costs, including costs for customer-caused delays, errors in specifications or designs or contract termination, that we may not be able to recover. These, in turn, could adversely affect our business, financial condition and results of operations. The revenue, cost and gross profit realized on such contracts can vary, sometimes substantially, from the original projections due to changes in a variety of factors, such as:
 
 • failure to properly estimate, or changes in, the costs of material, components or labor;
 
 • currency exchange rate fluctuations;
 
 • unanticipated technical problems with the products or services being supplied by us, which may require that we spend our own money to remedy the problem;
 
 • our suppliers’ or subcontractors’ failure to perform;
 
 • difficulties of our customers in obtaining required governmental permits or approvals;
 
 • changes in local laws and regulations;
 
 • unanticipated delays in construction of new NPPs and decommissioning of existing NPPs; and
 
 • limited history with new products and new customers.
 
Many of our large contracts have penalties for late completion.
 
In some cases, including many of our fixed-price contracts, we have agreed to complete a project by a scheduled date. If we fail to complete the project as scheduled, we may be held responsible for costs associated with the delay, generally in the form of liquidated damages, in some cases up to the full value of the contract. We have in the past incurred penalties associated with late completion on some of our contracts. In the event that a project is delayed, the total costs of the project could exceed our original estimates, and we could experience reduced profits or a loss for that project.
 
Our products and services involve the detection and monitoring of radiation, and the failure of our products or services to perform to specification could adversely affect our business, financial condition or results of operations.
 
Our products and services involve the detection and monitoring of radiation and are crucial components of the safety measures employed with respect to ionizing radiation. The failure of our products to perform to specification could result in personal injury or death and property damage (including environmental contamination). Legal and regulatory actions taken in response to product failure could result in significant costs to us. Additionally, the failure of our products to perform to specification could adversely affect market perception of the quality and effectiveness of our products and services, which would harm our ability to attract new customers and could cause our existing customers to cease doing business with us.


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While we have attempted to secure appropriate insurance coverage at a reasonable cost, we do not insure against all risks and a claim can exceed the limits of our policies. We cannot assure you that our insurers will pay a particular claim, or that we will be able to maintain coverage at reasonable rates in the future, or at all. We may also be subject to significant deductibles.
 
Our contracts with customers generally seek to limit our liability in connection with product failure, but we cannot assure you that these contractual limitations on liability will be effective or sufficient in scope in all cases or that our insurance will cover the liabilities we have assumed under these contracts. The costs of defending against a claim arising out of such failure, and any damages awarded as a result of such a claim, could adversely affect our business, financial condition and results of operations.
 
Certain of our products and technologies for the defense end market may be eligible for designation or certification as “qualified anti-terrorism technologies” under the “SAFETY Act” provisions of The Homeland Security Act of 2002 and its implementing regulations. Under the SAFETY Act, the federal government provides for certain liability limitations and a presumption that the “government contractor” defense applies if the Department of Homeland Security “designates” or “certifies” technologies or products as “qualified anti-terrorism technologies,” and if certain other conditions apply. We may seek to qualify some or all of our products and technologies under the SAFETY Act’s provisions in order to obtain such liability protections, but there is no guarantee that the Department of Homeland Security will designate or certify our products and technologies as qualified anti-terrorism technology. To date, we have not sought such designation or certification, and our products have been sold without such qualification, and we may continue to sell our products and technologies without such qualification. To the extent we do so, we will not be entitled to the benefit of the SAFETY Act’s limitations on tort liability or to any U.S. government indemnification.
 
We and our customers operate in a politically sensitive environment, and the public perception of nuclear power can affect our customers and us.
 
We and our customers operate in a politically sensitive environment. The risks associated with radioactive materials and the public perception of those risks can affect our business. Opposition by third parties can delay or prevent the construction of new NPPs and can limit the operation of nuclear reactors. Adverse public reaction to developments in the use of nuclear power, including incidents involving the discharge of radioactive materials, could directly affect our customers and indirectly affect our business. In the past, adverse public reaction, increased regulatory scrutiny and litigation have contributed to extended construction periods for new nuclear reactors, sometimes delaying construction schedules by decades or more. For example, no new reactor has been ordered in the United States since the 1970s and anti-nuclear groups in Germany successfully lobbied for the adoption of the Nuclear Exit Law in 2002, which requires the shutdown of all German NPPs by 2021. Adverse public reaction could also lead to increased regulation or limitations on the activities of our customers, more onerous operating requirements or other conditions that could have a material adverse impact on our customers and our business.
 
Our operations in foreign countries are subject to political, economic and other risks, which could have a material adverse effect on us.
 
Sales outside of the United States and Canada accounted for approximately 62.8%, 63.8% and 62.6% of our net sales in fiscal 2007, 2008 and 2009. We anticipate that international sales will continue to constitute a material percentage of our total net sales in future periods. As a result, our operations are subject to risks associated with global operations and sales, including:
 
 • foreign currency exchange fluctuations;
 
 • changes in regulatory requirements;
 
 • tariffs and other barriers;
 
 • timing and availability of export licenses;
 
 • difficulties in accounts receivable collections;
 
 • difficulties in protecting our intellectual property;


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 • difficulties in staffing and managing foreign operations;
 
 • difficulties in managing sales agents, distributors and other third parties;
 
 • coordination regarding, and difficulties in obtaining, governmental approvals for products that may require certification;
 
 • rescission or termination of contracts by governmental parties without penalty and regardless of the terms of the contract;
 
 • restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions;
 
 • the burden of complying with a wide variety of complex foreign laws and treaties;
 
 • potentially adverse tax consequences; and
 
 • uncertainties relative to regional political and economic circumstances.
 
We are also subject to risks associated with the imposition of legislation and regulations relating to the import or export of radiation detection and monitoring technology. For example, certain export control approvals of our sales, including sales to NPP operators located in Pakistan and India, were granted because of the supervision of customer sites by the International Atomic Energy Agency, or the IAEA. If the IAEA ceases to supervise such sites, our ability to sell to certain customers would be limited and our sales could be adversely affected. Furthermore, the failure to comply with export control regulations and to obtain required approvals could result in loss of the ability to export products, fines and penalties.
 
We cannot predict whether quotas, duties, taxes or other charges or restrictions upon the importation or exportation of our products will be implemented by the United States or other countries. Some of our customers’ purchase orders and agreements are governed by foreign laws, which often differ significantly from the laws of the United States. Therefore, we may be limited in our ability to enforce our rights under such agreements and to collect damages, if awarded. These factors may have a material adverse effect on our business, financial condition and results of operations.
 
Changes in our effective tax rate or adverse outcomes resulting from examination of our income tax returns could adversely affect our results.
 
Our effective tax rate could be adversely affected by several factors, many of which are outside of our control, including:
 
 • earnings being lower than anticipated in countries where we are taxed at lower rates as compared to the U.S. statutory tax rate;
 
 • material differences between forecasted and actual tax rates as a result of a shift in the mix of pre-tax profits and losses from one tax jurisdiction to another, our ability to use tax credits or effective tax rates by tax jurisdiction that differ from our estimates;
 
 • changing tax laws or related interpretations, accounting standards and regulations and interpretations in multiple tax jurisdictions in which we operate, as well as the requirements of certain tax rulings;
 
 • an increase in expenses not deductible for tax purposes, including certain stock-based compensation expense and impairment of goodwill;
 
 • the tax effects of purchase accounting for acquisitions and restructuring charges that may cause fluctuations between reporting periods;
 
 • changes related to our ability to ultimately realize future benefits attributed to our deferred tax assets, including those related to other-than-temporary impairments;
 
 • tax assessments resulting from income tax audits or any related tax interest or penalties that would affect our income tax expense for the period in which the settlements take place; and
 
 • a change in our decision to indefinitely reinvest foreign earnings.


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In addition, we may be subject to examination of our income tax returns by the Internal Revenue Service or other tax authorities. If tax authorities challenge the relative mix of our U.S. and international income, our future effective income tax rates could be adversely affected. While we regularly assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision for income taxes, we cannot assure you that such provision is sufficient and that a determination by a tax authority will not have an adverse effect on our business, financial condition and results of operations.
 
Localization requirements could adversely affect our business.
 
Many emerging markets, including China and South Korea, impose localization requirements which favor locally based component manufacturers in the construction of NPPs and which require some degree of technology transfer to local manufacturers. Over time, such localization requirements could limit our ability to sell into such markets and could affect our ability to maintain our trade secrets. In the past, international development agencies have, as a condition of funding, imposed localization requirements that require the transfer of technology to local manufacturers, and this requirement has affected our ability to monitor and maintain control over our intellectual property. We may be subject to similar requirements as a condition of funding in the future.
 
We must comply with the U.S. Foreign Corrupt Practices Act, or FCPA. Failure to comply with the FCPA could subject us to, among other things, penalties and legal expenses that could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
 
We are required to comply with the United States Foreign Corrupt Practices Act, which generally prohibits U.S. companies and their intermediaries from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and/or other benefits. We operate in a number of jurisdictions that pose a high risk of potential FCPA violations, we have government customers and we utilize a number of third-party sales representatives. Although we have begun to inform our personnel and third-party sales representatives regarding the requirements of the FCPA and have developed and will continue to develop and implement systems for formalizing contracting processes, performing diligence on agents and improving our record-keeping and auditing practices, we cannot assure you that our employees, third-party sales representatives or other agents have not or will not engage in conduct for which we might be held responsible under the FCPA.
 
If our employees, third-party sales representatives or other agents are found to have engaged in such practices, we could suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures (including further changes or enhancements to our procedures, policies and controls, as well as potential personnel changes and disciplinary actions), any of which could have an adverse impact on our business, financial condition, results of operations and liquidity. Any investigation of any potential violations of the FCPA or other anti-corruption laws by U.S. or foreign authorities also could have an adverse impact on our business, financial condition and results of operations.
 
Certain foreign companies, including some of our competitors, are not subject to prohibitions as strict as those under the FCPA or, even if subjected to strict prohibitions, such prohibitions may be laxly enforced in practice. If our competitors engage in corruption, extortion, bribery, pay-offs, theft or other fraudulent practices, they may receive preferential treatment, from personnel of some companies, giving our competitors an advantage in securing business, or from government officials, who might give them priority in obtaining new licenses, which would put us at a disadvantage.
 
We may make acquisitions that involve numerous risks. If we are not successful in integrating the technologies, operations and personnel of acquired businesses or fail to realize the anticipated benefits of an acquisition, our operations may be adversely affected.
 
As part of our business and growth strategy, we may acquire or make significant investments in businesses, products or technologies that allow us to complement our existing product offerings, expand our


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market coverage, increase our engineering workforce or enhance our technological capabilities. Any future acquisitions or investments would expose us to many risks, including:
 
 • problems integrating the new personnel or the purchased operations, technologies or products;
 
 • difficulty securing adequate working capital;
 
 • unanticipated costs associated with the acquisition;
 
 • negative effects on our ability to generate excess free cash flow;
 
 • negative effects on profitability;
 
 • adverse effects on existing business relationships with suppliers and customers;
 
 • risks associated with entering markets in which we have no or limited prior experience;
 
 • loss of key employees of the acquired business;
 
 • litigation arising from the operations before they were acquired by us; and
 
 • difficulty completing financial statements and audits.
 
Our inability to overcome problems encountered in connection with any acquisition could divert the attention of management, utilize scarce corporate resources and otherwise harm our business. In addition, we are unable to predict whether or when any prospective acquisition candidate will become available or the likelihood that any acquisition will be completed. Even if we do find suitable acquisition opportunities, we may not be able to consummate the acquisitions on commercially acceptable terms or realize the anticipated benefits of any acquisitions we do undertake.
 
A failure to expand our manufacturing capacity and scale our capabilities to manufacture new products could constrain our ability to grow our business.
 
We have needed to increase our manufacturing capacity, particularly in our locations in Lamanon, France and Hamburg, Germany to support the fulfillment of certain large contracts and to put us in position to accommodate growth in our business. Accordingly, we have initiated an expansion of our manufacturing facilities in Lamanon and renovated and reorganized our facilities in Hamburg. The future growth of our business depends on our ability to successfully expand our manufacturing capacity. Expansion of our manufacturing capacity may require us to obtain regulatory approvals or additional financing. Delay in the expansion of our manufacturing capacity could constrain our ability to grow our business, which would adversely affect our business, financial condition and results of operations.
 
Similarly, we could have substantial difficulty in dealing with rapid growth in markets for new products that we may introduce. If demand for our new products increases rapidly, we will need to expand internal production capacity or implement additional outsourcing. Success in developing, manufacturing and supporting products manufactured in small volumes does not guarantee comparable success in operations conducted on a larger scale. Manufacturing yields and product quality may decline as production volumes increase. If we are unable to deliver products quickly and cost effectively and in the requisite volumes, our customers may decline to purchase our new products or may purchase substitute products offered by our competitors. The costs associated with implementing new manufacturing technologies, methods, and processes, including the purchase of new equipment, and any resulting delays, inefficiencies and loss of sales, could harm our results of operations.
 
We rely on third-party sales representatives to assist in selling our products and services, and the failure of these representatives to perform as expected could reduce our future sales.
 
We typically derive 25% to 30% of our revenue from sales to our customers through third-party sales representatives. We have established relationships with some of our third-party sales representatives recently, and we are unable to predict the extent to which our third-party sales representatives will be successful in marketing and selling our products and services. Moreover, many of our third-party sales representatives also market and sell competing products and services, which may affect the extent to which our third-party sales


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representatives promote our products and services. Even where our relationships are formalized in contracts, our third-party sales representatives often have the right to terminate their relationships with us at any time. Our future performance will also depend, in part, on our ability to attract additional third-party sales representatives who will be able to market and support our products and services effectively, especially in markets in which we have not previously sold our products and services. If we cannot retain our current third-party sales representatives or recruit additional or replacement third-party sales representatives, our business, financial condition and results of operations could be harmed.
 
The elimination or any modification of the Price-Anderson Act’s indemnification authority could have adverse consequences for our business.
 
In the United States, the Atomic Energy Act of 1954, as amended, or the AEA, comprehensively regulates the manufacture, use and storage of radioactive materials. Section 170 of the AEA, which is known as the Price-Anderson Act, supports the nuclear services industry by offering broad indemnification to commercial NPP operators and Department of Energy, or DOE, contractors for liabilities arising out of nuclear incidents at power plants licensed by the Nuclear Regulatory Commission, or NRC, and at DOE nuclear facilities. The indemnification authority of the NRC and DOE under the Price-Anderson Act was extended through 2025 by the Energy Policy Act of 2005. Some of our customers are covered by the indemnification provisions of the Price-Anderson Act. In addition, other jurisdictions have similar indemnification authority. If the indemnification authority in the United States or other countries is eliminated or adversely modified in the future, our business could be adversely affected if the owners and operators of NPPs cancel or delay plans to build new plants or curtail the operations of existing plants.
 
Our ability to provide bid bonds, performance bonds or letters of credit is limited and could negatively affect our ability to bid on or enter into significant contracts.
 
We are sometimes required to provide bid or performance bonds or letters of credit to guarantee performance under contracts across our various divisions. Our ability to obtain such bonds and letters of credit depends upon several factors, including our capitalization, working capital, past performance, management expertise and reputation and external factors beyond our control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the amount of our tangible net worth and other underwriting standards that may change from time to time. Events that affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly higher cost. Our inability to obtain adequate bonding and, as a result, to bid for, or enter into, significant contracts, could adversely affect our future financial condition and results of operations.
 
As a U.S. government contractor, we are subject to a number of procurement rules and regulations.
 
U.S. government contractors and subcontractors must comply with specific procurement regulations and other requirements and are subject to routine audits and investigations by U.S. government agencies. If we fail to comply with these rules and regulations, we could be subject to reductions in the value of our government contracts, contract modification or termination, the assessment of penalties and fines,and/or suspension or debarment from government contracting or subcontracting for a period of time or permanently.
 
Furthermore, we have bid, and may in the future submit bids, for U.S. government contracts that require our employees to maintain various levels of security clearances and require us or our subsidiaries to maintain certain facility security clearances in compliance with Department of Defense and other government requirements. Obtaining and maintaining security clearances for employees involves a lengthy process, and it can be difficult to identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain or retain security clearances, or if our employees who hold security clearances stop working for us, we may face delays in fulfilling contracts, or be unable to fulfill or secure new contracts, with any customer involved in classified work. Any breach of security for which we are responsible could seriously harm our business, damage our reputation and make us ineligible to work on any classified programs.


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The classified work that we currently perform at one of our facilities subjects us to the industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against unauthorized access by foreigners and others to classified and other sensitive information. We may be subject to penalties for violations of these regulations. If we were to come under foreign ownership, control, or influence, the U.S. government could terminate our contracts with it or decide not to renew them and such a situation could also impair our ability to obtain new contracts and subcontracts. The government may also change its procurement practices or adopt new contracting rules and regulations that could be costly to satisfy or that could impair our ability to obtain new contracts.
 
We are subject to a variety of federal, state and foreign laws and regulatory regimes. Failure to comply with laws and regulations could subject us to, among other things, penalties and legal expenses which could have an adverse effect on our business.
 
Our business is subject to regulation by various federal and state governmental agencies. Such regulation includes the radioactive material and exposure regulatory activities of the NRC, the anti-trust regulatory activities of the Federal Trade Commission and Department of Justice, the import/export regulatory activities of the Department of Commerce, the Department of State and the Department of Treasury, the regulatory activities of the Occupational Safety and Health Administration, the environmental regulatory activities of the Environmental Protection Agency, the labor regulatory activities of the Equal Employment Opportunity Commission and tax and other regulations by a variety of regulatory authorities in each of the areas in which we conduct business. We are also subject to regulation in other countries where we conduct business. In certain jurisdictions, such regulatory requirements may be more stringent than in the United States. We are also subject to a variety of U.S. federal and state employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the Worker Adjustment and Restructuring Notification Act, which requires employers to give affected employees at least 60 days’ notice of a plant closing or mass layoff, and other regulations related to working conditions,wage-hour pay, overtime pay, employee benefits, anti-discrimination and termination of employment. We are also subject to the employment and labor laws and regulations of the foreign jurisdictions, including France and Germany, where the majority of our employees are located.
 
Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. In addition, from time to time we have received, and may in the future receive, correspondence from former employees terminated by us who threaten to bring claims against us alleging that we have violated one or more labor or employment regulations. An adverse outcome in any such litigation could require us to pay damages.
 
Governmental enforcement actions could harm our business, financial condition and results of operations. If any governmental sanctions are imposed, or if we do not prevail in any civil or criminal litigation, our business, financial condition and results of operations could be materially adversely affected. In addition, responding to any action could be costly and result in a significant diversion of management’s attention and resources.
 
We and our customers operate in highly regulated industries that require us and them to obtain, and to comply with, national, state and local government permits and approvals.
 
We and our customers operate in a highly regulated environment. Many of our products and services must comply with various domestic and international standards that are used by regulatory and accreditation bodies for approving such services and products. Many of our products, particularly those offered by our Radiation Monitoring Systems and Sensing Systems divisions, are subject to an array of product testing under extreme temperature, pressure, radiation and seismic conditions, known collectively as a qualification, for any given nuclear reactor design. The qualification is typically owned by the party who pays for the testing and so, in certain cases, we license such qualifications from a third party. In addition, many of our products and services, particularly those offered by our Dosimetry Services division, must be certified by the National Voluntary Laboratory Accreditation Program in the United States and by other governmental agencies in international markets. The termination of any such accreditation or our failure to obtain and maintain required qualification or accreditation for our products and services may adversely affect our revenue and results of operations.


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Changes in these standards and accreditation requirements may also result in our having to incur substantial costs to adapt our products. Such adaptations may introduce quality assurance issues during transition as new features and products may not perform as expected. Additionally, changes affecting radiation protection practices, including new understandings of the hazards of radiation exposure and corresponding changes in regulations, may impact how our services are used by our customers and may, in some circumstances, cause us to alter our products and services.
 
In addition, our customers are required to obtain, and to comply with, national, state and local government licenses, permits and approvals with respect to their facilities. Any of these licenses, permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to obtain or comply with the conditions of licenses, permits or approvals may adversely affect our customers’ operations by suspending their activities and may subject them to penalties and other sanctions. Although existing licenses, permits or approvals are routinely renewed by various regulators, renewal could be denied or jeopardized by various factors, including:
 
 • failure to provide adequate financial assurance in the event of decommissioning or closure;
 
 • failure to comply with environmental and safety laws and regulations or permit conditions;
 
 • local community, political or other opposition;
 
 • executive action; and
 
 • legislative action.
 
Furthermore, if new environmental legislation or regulations are enacted or existing laws or regulations are amended or are interpreted or enforced differently, our customers may be required to obtain additional operating licenses, permits or approvals. Regulatory issues experienced by our customers may lead to delay or cancellation of their orders for our products and services or the discontinuance of future orders. We cannot assure you that we or our customers will be able to meet all potential regulatory challenges.
 
We could incur substantial costs as a result of violations of or liabilities under environmental laws.
 
Our operations and properties are subject to a variety of U.S. and foreign environmental laws and regulations governing, among other things, air emissions, wastewater discharges, management and disposal of hazardous and non-hazardous materials and waste and remediation of releases of hazardous materials. Our failure to comply with present and future requirements, or the identification of contamination, could cause us to incur substantial costs, includingclean-up costs, fines and penalties, investments to upgrade our facilities or curtailment of operations. The future identification of presently unidentified environmental conditions, more vigorous enforcement by regulatory agencies, enactment of more stringent laws and regulations or other unanticipated events may arise in the future and give rise to material environmental liabilities and related costs which could have a material adverse effect on our business, financial condition and results of operations.
 
A European Union, or EU, directive relating to the restriction of hazardous substances, or RoHS, in electrical and electronic equipment and a directive relating to waste electrical and electronic equipment, or WEEE, have been and are being implemented in EU member states. Among other things, the RoHS directive restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment and the WEEE directive requires producers of electrical goods to be responsible for the collection, recycling, treatment and disposal of these goods. In addition, laws similar to RoHS and WEEE were passed in China in 2006 and South Korea in 2007. Governments in other countries, including the United States, are considering implementing similar laws or regulations.
 
In addition, a new regulation regarding the registration, authorization and restriction of chemical substances in industrial products, or REACH, became effective in the EU in 2007. Over time this regulation, as well as other regulations, may require us to substitute certain chemicals contained in our products with substances the EU considers less dangerous. We have not yet assessed the impact this legislation may have on our operations.
 
The costs associated with complying with this legislation could include costs associated with modifying our products, recycling and other waste processing costs, legal and regulatory costs and insurance costs. We


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have recorded in the past and may be required to record in the future additional expenses for costs associated with compliance with these regulations. The costs of complying with these new laws, or with current and future environmental and worker health and safety laws, could a material adverse effect on our business, financial condition and results of operations.
 
Our future success is dependent on our ability to retain key personnel, including our executive officers, and attract qualified personnel. If we lose the services of these individuals or are unable to attract new talent, our business will be adversely affected.
 
Our future operating results depend in significant part upon the continued contributions of our key technical and senior management personnel, many of whom would be difficult to replace. We are particularly dependent on the continued service of Thomas D. Logan, our President, Chief Executive Officer and Chairman of the Board, W. Antony Besso, our Regional Vice President, EMEA, and President, Health Physics Division, Iain F. Wilson, our Regional Vice President, Asia, and President, Sensing Systems Division, and Jean-Louis Gouronc, our President, Radiation Monitoring Systems.
 
Our future operating results also depend in significant part upon our ability to attract, train and retain qualified management, manufacturing and quality assurance, engineering, marketing, sales and support personnel. In particular, engineers skilled in the analog technologies used in certain of our products are in high demand and competition to attract such personnel is intense. In addition, the expected increase in construction of new NPPs may exacerbate the shortage of radiation engineers and other qualified personnel. We are continually recruiting such personnel; however, we cannot assure you that we will be successful in attracting, training or retaining such personnel now or in the future. There may be only a limited number of persons with the requisite skills to serve in these positions, and it may be increasingly difficult for us to hire such persons over time. The high demand for such personnel may increase the costs to us to recruit and retain employees.
 
The loss of any key employee, the failure of any key employee to perform in his or her current position, our inability to attract, train and retain skilled employees as needed or the inability of our officers and key employees to expand, train and manage our employee base could materially and adversely affect our business, financial condition and results of operations.
 
Our ability to compete successfully and achieve future growth will depend on our ability to protect our intellectual property and to operate without infringing the intellectual property of others.
 
Our business is largely dependent upon our design, engineering, manufacturing and testing know-how. We attempt to protect our intellectual property rights through trade secret laws, non-disclosure agreements, confidentiality procedures and employee disclosure and invention assignment agreements. To a lesser extent, we may also seek to protect our intellectual property through patents, trademarks and copyrights. We rely upon unpatented proprietary radiation detection expertise, continuing technological innovation and other trade secrets to develop and maintain our competitive position, some of which is licensed from third parties. Confidentiality agreements with our employees and third parties are often limited in duration and could be breached, and therefore they may not provide meaningful protection for our trade secrets or proprietary radiation detection expertise. Adequate remedies may not be available in the event of an unauthorized use or disclosure of our trade secrets. Others may obtain knowledge of our trade secrets through independent development or other access by legal means. It is possible that our efforts to protect our intellectual property rights may not:
 
 • prevent our competitors from independently developing similar products, duplicating our products or designing around the patents owned by us;
 
 • prevent third-party patents from having an adverse effect on our ability to do business;
 
 • provide adequate protection for our intellectual property rights;
 
 • prevent disputes with third parties regarding ownership of, or exclusive rights to, our intellectual property;
 
 • prevent disclosure of our trade secrets and know-how to third parties or into the public domain;


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 • prevent the challenge, invalidation or circumvention of our existing patents;
 
 • result in patents that lead to commercially viable products or provide competitive advantages for our products; and
 
 • result in issued patents and registered trademarks from any of our pending applications.
 
The laws of foreign countries also may not adequately protect our intellectual property rights. Many U.S. companies have encountered substantial infringement problems in foreign countries. Because we conduct a substantial portion of our operations and a majority of our sales have been outside of the United States, we have significant exposure to foreign intellectual property risks.
 
Others have in the past attempted, and may in the future attempt, to copy or otherwise obtain and use our intellectual property without our consent. Monitoring the unauthorized use of our intellectual property is difficult. There is a risk that our customers or their end users’ customers may attempt to copy or otherwise obtain and use our intellectual property without our consent. It may be necessary, from time to time, to initiate litigation against one or more third parties, including our customers or companies with whom we have manufacturing relationships, to preserve our intellectual property rights or to challenge the validity and scope of proprietary rights asserted by others, and we could face counterclaims. Legal disputes with our customers or companies with whom we have manufacturing relationships could substantially harm our relationships and sales. Litigation is expensive and time consuming, and an adverse outcome could subject us to significant liability for damages or invalidate our proprietary rights.
 
From time to time, third parties may claim that we have infringed upon, misappropriated or misused other parties’ proprietary rights, and we may already be infringing without knowing it. Any of these events or claims could result in litigation. Such litigation, whether as plaintiff or defendant, could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not such litigation is ultimately determined in our favor. In the event of an adverse result in such litigation, we could be required to pay substantial damages, cease the manufacture, use and sale of certain products, expend significant resources to develop or acquire non-infringing technology, discontinue the use of certain processes, obtain licenses to use the infringed technology, or indemnify our customers. Product development or license negotiating would likely result in significant expense to us and divert the efforts of our technical and management personnel. We cannot assure you that we would be successful in such development or acquisition or that such licenses would be available on reasonable terms, or at all.
 
Our obligations to indemnify our customers for the infringement by our products of the intellectual property rights of others could require us to pay substantial damages.
 
We currently have in effect a number of agreements in which we have agreed to defend, indemnify and hold harmless our customers and suppliers from damages and costs that may arise from the infringement by our products of third-party patents, trademarks or other proprietary rights. We may periodically have to respond to claims and initiate or participate in litigation in connection with these indemnification obligations, which may result in our paying substantial damages. Our insurance does not cover intellectual property infringement.
 
Some of our workforce is represented by labor unions in the United States and by works councils and trade unions in the EU, which may lead to work stoppages that could adversely affect our business.
 
As of June 30, 2009, approximately 34, or 12%, of our U.S. employees were unionized, and the majority of our EU employees are members of, or are represented by, works councils or trade unions. Since 1988, we have experienced only two work stoppages, at our facility in Lamanon, France. We may experience work stoppages or other labor problems in the future, which could adversely affect our business. We cannot predict how stable our relationships will be or whether we will be able to satisfy union or works council requirements without impacting our operating results and financial condition. Union and works council rules may limit our flexibility to respond to changing market conditions and the application of these rules could harm our business. The unions and works councils may also limit our flexibility in dealing with our workforce. Work stoppages and instability in our relationships could negatively impact the timely production of our products,


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which could strain relationships with customers and cause a loss of revenue that would adversely affect our results of operations.
 
Our operations could be subject to natural disasters and other business disruptions, which could materially adversely affect our business and increase our expenses.
 
Our operations could be subject to natural disasters and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. For example, our corporate headquarters in San Ramon, California and the center of operations of our Dosimetry Services division in Irvine, California are located near major earthquake fault lines. In the event of a major earthquake or other natural or manmade disaster, we could experience business interruptions, destruction of or damage to facilitiesand/or loss of life, any of which could have a material adverse effect on our business and increase our expenses.
 
Risks Related to this Offering and Our Common Stock
 
If we cannot generate sufficient operating cash flow and obtain external financing, we may be unable to make all of our planned capital expenditures and other expenses.
 
Our ability to fund anticipated capital expenditures and other expenses depends on generating sufficient cash flow from operations and the availability of external financing. Since our inception in 2005, ACAS and its affiliates have provided us with the capital and debt financing that we have used to fund our growth and operations. Although ACAS will continue to be a controlling stockholder in our company upon completion of this offering, ACAS is under no obligation to continue making capital investments in us or to provide debt financing to us.
 
Our debt service obligations and our capital expenditures, together with on-going operating expenses, will be a substantial drain on our cash flow and may decrease our cash balances. The timing and amount of our capital requirements cannot be precisely determined at this moment and will depend on a number of factors, including demand for our products, product mix, changes in industry conditions and market competition. We intend to regularly assess markets for external financing opportunities, including debt and equity. Such financing may not be available when needed or, if available, may not be available on satisfactory terms, particularly in light of the limited financing available as a result of the current global financial crisis. Any equity financing would cause further dilution to our stockholders. See “Dilution.” Our inability to obtain needed financing or to generate sufficient cash from operations may require us to abandon projects or curtail capital expenditures, and we could be materially adversely affected. If we are not able to independently generate excess free cash flow and obtain third party debt or equity financing, our ability to grow our business may be materially adversely affected.
 
Upon completion of the offering, ACAS will continue to have an effective veto over matters determined by our Board of Directors and will be in a position to determine the outcome of all matters submitted to a stockholder vote as long as it continues to hold a majority of our outstanding common stock, which will limit your ability to influence corporate actions and may adversely affect the market price of our common stock.
 
Upon completion of this offering, ACAS and its affiliates will collectively hold approximately     % of our outstanding common stock, or approximately     % if the underwriters exercise in full their over-allotment option to purchase additional shares of common stock. As a result, ACAS will continue to determine the outcome of votes on all matters requiring approval by our stockholders, including the election of directors, the adoption of amendments to our Certificate of Incorporation and Bylaws and approval of significant corporate transactions, as long as it continues to hold a majority of our outstanding common stock. In addition, a provision of the Bylaws that we will adopt prior to the consummation of this offering will provide that at least one of the directors designated by ACAS must be part of the majority in any action taken by our Board of Directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, other than on matters in which ACAS has a conflict of interest (as it would if it appointed a majority of our directors). Our Bylaws will also provide that ACAS will have the right to designate three of our seven directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, two directors so long as


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they hold at least 25% but less than 50.1% and one director so long as they hold at least 10% but less than 25%. ACAS will also be able to take actions that have the effect of delaying or preventing a change in control of us or discouraging others from making tender offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other stockholders oppose them. In addition, this significant concentration of stock ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. This concentration of control could be disadvantageous to other stockholders with interests different from those of our principal stockholder and the trading price of our common stock could be adversely affected. See “Principal Stockholders” for a more detailed description of the ownership of our common stock.
 
Conflicts of interest may arise because some of our directors are principals of ACAS.
 
Three persons designated by ACAS will serve on our Board of Directors upon completion of this offering. ACAS and its affiliates may invest in entities that directly or indirectly compete with us, or companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of ACAS and the interests of our other stockholders arise, these directors may not be disinterested.
 
Although our directors and officers will have a duty of loyalty to us under Delaware law and the Certificate of Incorporation that we will adopt prior to the consummation of this offering, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as the material facts relating to the director’s or officer’s relationship or interest as to the transaction are disclosed to our Board of Directors and a majority of our disinterested directors, or a committee consisting solely of disinterested directors, approves the transaction.
 
ACAS and its affiliates do not have any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do.
 
Under the Certificate of Incorporation that we will adopt prior to the consummation of this offering, none of ACAS or its affiliates and investment funds, or any other ACAS entity, nor any director, officer, stockholder, member, managerand/or employee of an ACAS entity, has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do. In the event that any ACAS entity acquires knowledge of a potential transaction or matter which may be a corporate opportunity for both itself and us, the ACAS entity will not have any duty to communicate or offer the corporate opportunity to us and may pursue or acquire the corporate opportunity for itself or offer the opportunity to another person. In addition, none of ACAS’s designees on our Board of Directors will be required to offer to us any transaction opportunity of which he or she becomes aware and could take any such opportunity for him or herself or offer it to other companies (including ACAS and its other portfolio companies) in which they have an investment, unless such opportunity is expressly offered to him or her solely in his or her capacity as a director of us.
 
As a “controlled company,” as defined in the NASDAQ Marketplace Rules, we qualify for, and rely on, exemptions from certain corporate governance requirements.
 
ACAS owns, and will continue to own immediately after the completion of this offering, common stock representing more than a majority of the voting power in the election of our directors. As a result, we are considered a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Marketplace Rules. Under these rules, a “controlled company” may elect not to comply with certain corporate governance requirements, including the requirement that a majority of its board of directors consist of independent directors, the requirement that it have a nominating/corporate governance committee that is composed entirely of independent directors and the requirement that it have a compensation committee that is composed entirely of independent directors. We have elected to be treated as a controlled company and will rely on these exemptions. As a result, we do not have a majority of independent directors and our compensation and nominating and corporate governance committees do not consist entirely of independent directors. Furthermore, until one year following the offering, as permitted by applicable rules, we do not anticipate having an audit committee consisting solely of independent directors. Accordingly, you do not have the same protection afforded to stockholders of companies that are subject to all of the NASDAQ Marketplace corporate governance requirements.


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The price of our common stock may be volatile and subject to wide fluctuations.
 
The market price of our common stock may be subject to wide fluctuations due to a number of factors. We may experience significant period-to-period fluctuations in our backlog, revenue and operating results in the future and any such variations may cause our stock price to fluctuate. It is likely that in some future period our operating results will be below the expectations of securities analysts or investors. If this occurs, our stock price could drop significantly. A number of factors, in addition to those cited in other risk factors applicable to our business, may contribute to fluctuations in our backlog, sales and operating results, including:
 
 • the timing and volume of orders from our customers;
 
 • the rate of acceptance of our products by our customers;
 
 • the rate of adoption of our products in the end markets we target;
 
 • delays or cancellations in the construction of new NPPs by our customers;
 
 • cancellations or deferrals of customer orders in anticipation of new products or product enhancements from us or our competitors or other providers;
 
 • changes in product mix; and
 
 • the rate at which new markets emerge for products we are currently developing.
 
Broad market and industry factors may also adversely affect the market price of our common stock, regardless of our actual operating performance. Market and industry factors that could cause fluctuations in our stock price may include, among other things:
 
 • incidents affecting the nuclear industry;
 
 • regulatory changes or legal developments affecting the nuclear industry;
 
 • changes in financial estimates by us or by any securities analysts who might cover our stock, or our failure to meet the estimates made by securities analysts;
 
 • changes in the market valuations of other companies operating in our industry;
 
 • announcements by us or our competitors of significant acquisitions, strategic partnerships or divestitures;
 
 • additions or departures of key personnel; and
 
 • a general downturn in the stock market.
 
The market price of our common stock also might decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. The initial public offering price of our common stock will be determined through negotiations between the representatives of the underwriters, ACAS and us and may not be representative of the price that will prevail in the open market. You might be unable to resell your shares at or above the offering price. In the past, companies that have experienced volatility in the market price of their stock have been the subjects of securities class action litigation. If we were to become the subject of securities class action litigation, it could result in substantial costs and a diversion of management’s attention and resources.
 
We have and will continue to incur increased costs as a result of becoming a reporting company.
 
We have and will continue to face increased legal, accounting, administrative and other costs as a result of becoming a reporting company that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission, or the SEC, and the Public Company Accounting Oversight Board, have required changes in the corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make legal, accounting and administrative activities more time consuming and costly. For example, prior to consummation of this offering we will add independent directors, create additional committees of our Board of Directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect to incur substantially higher costs to obtain directors and officers’ insurance.


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In addition, as we gain experience with the costs associated with being a reporting company, we may identify and incur additional overhead costs.
 
Our independent registered public accounting firm reported to us that, at each of June 30, 2008 and June 30, 2009, we had material weaknesses and significant deficiencies in our internal controls over financial reporting that, if not remediated, could result in material misstatements in our financial statements in future periods and impair our ability to comply with the accounting and reporting requirements applicable to public companies.
 
Our independent registered public accounting firm reported to us that at each of June 30, 2008 and June 30, 2009, we had material weaknesses and a significant deficiency in our internal controls over financial reporting. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis, and a “significant deficiency” is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting. The material weaknesses identified were with respect to our controls in our financial accounting and reporting functions, which are necessary in order to produce PCAOB compliant financial statements. These weaknesses related to a lack of sufficient accounting personnel and depth of knowledge, formal policies and procedures to ensure that subsidiary financial information reflect accounting under U.S. generally accepted accounting principles, account reconciliation procedures and appropriate review and approval procedures are performed in a timely manner. A significant number of audit adjustments were also required to appropriately reflect account balances in accordance with U.S. GAAP. In connection with these weaknesses, we were required to restate our consolidated financial statements for fiscal 2007 and 2008 as a result of the reclassification of paid-in-kind dividends on our Convertible Participating Preferred Stock as additional paid-in capital rather than accrued liabilities. We determined that such dividends should not have been recorded as liabilities as they do not involve an obligation to make future sacrifices of assets. The significant deficiencies identified were with respect to inadequate systems and recordkeeping processes resulting in the need for manual intervention. As we prepare for the completion of this offering, we are in the process of addressing the issues raised by our independent registered public accounting firm by hiring additional finance personnel and documenting and enhancing formalized information technology policies and procedures, and through the implementation of software upgrades throughout our operations. However, these and other remediation efforts may not enable us to remedy the material weaknesses and significant deficiency or avoid other material weaknesses or significant deficiencies in the future. Because of these material weaknesses, there is heightened risk that a material misstatement of our annual or quarterly financial statements will not be prevented or detected. In the event that we have not adequately remedied these material weaknesses, and if we fail to maintain proper and effective internal controls in future periods, it could adversely affect our operating results, financial condition, ability to run our business effectively and our ability to timely meet our reporting requirements and could cause investors to lose confidence in our financial reporting. In addition, these and any other material weaknesses and significant deficiencies will need to be addressed as part of the evaluation of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and may impair our ability to comply with Section 404.
 
Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on us.
 
Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, standards that we will be required to meet in the course of preparing our fiscal 2011 financial statements. We do not currently have comprehensive documentation of our internal controls, nor do we document or test our compliance with these controls on a periodic basis in accordance with Section 404 of the Sarbanes-Oxley Act. Furthermore, we have not tested our internal controls in


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accordance with Section 404 and, due to our lack of documentation, such a test would not be possible to perform at this time.
 
We are in the early stages of addressing our internal control procedures to satisfy the requirements of Section 404, which requires an annual management assessment of the effectiveness of our internal control over financial reporting. If, as a public company, we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to attest to the effectiveness of our internal control over financial reporting. If we are unable to maintain adequate internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules and may breach the covenants under our credit facilities. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
 
Future sales of shares could depress our stock price.
 
If our existing stockholders sell substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline. Based on shares outstanding as of June 30, 2009, upon completion of this offering we will have outstanding approximately           shares of common stock. Of these shares, only the           shares of common stock sold in this offering will be freely tradable, without restriction, in the public market. After thelock-up agreements pertaining to this offering expire, our existing stockholders will be able to sell their shares in the public market, subject to legal restrictions on transfer. Prior to consummation of this offering, we will enter into a registration rights agreement that provides for registration rights with respect to the          shares of our common stock that will be held by ACAS and its affiliates, Thomas D. Logan, W. Antony Besso and certain other stockholders following this offering. Registration of the sale of the common stock would permit their sale into the market immediately. If for any reason ACAS sells a large number of shares, the market price of our common stock could decline, as these sales may, among other things, be viewed by the public as an indication of an upcoming or recently occurring shortfall in the financial performance of our company. Moreover, the perception in the public market that these investors might sell our common stock could depress the market price of the common stock. See “Shares Eligible for Future Sale” for more detailed information. Additionally, we may sell or issue additional shares of common stock in subsequent public offerings or in connection with acquisitions, which will result in additional dilution and may adversely affect market prices for our common stock.
 
If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our stock or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
 
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. In addition, it is likely that in some future period our operating results will be below the expectations of securities analysts or investors. If one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.
 
Some provisions of our Certificate of Incorporation and Bylaws may deter third parties from acquiring us and diminish the value of our common stock.
 
The Certificate of Incorporation and Bylaws that we will adopt prior to consummation of this offering will provide for, among other things:
 
 • restrictions on the ability of our stockholders to fill a vacancy on our Board of Directors;
 
 • our ability to issue preferred stock with terms that our Board of Directors may determine, without stockholder approval;
 
 • the absence of cumulative voting in the election of directors;


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 • advance notice requirements for stockholder proposals and nominations;
 
 • our Board of Directors to be divided into three classes, with each class serving staggered terms; and
 
 • the requirement that at least one of the directors designated by ACAS must be part of the majority in any action taken by our Board of Directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, other than on matters in which ACAS has a conflict of interest (as it would if it appointed a majority of our directors).
 
These provisions may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interest of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts.
 
We do not anticipate paying any cash dividends for the foreseeable future.
 
We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay any dividends to holders of our common stock and the agreements governing our debt significantly restrict our ability to pay dividends. As a result, capital appreciation in the price of our common stock, if any, will be your only source of gain on an investment in our common stock. See “Dividend Policy.”
 
New investors in our common stock will experience immediate and substantial book value dilution after this offering.
 
The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding common stock immediately after the offering. Based on an assumed initial public offering price of $      per share (the midpoint of the price range set forth on the cover of this prospectus) and our net tangible book value as of June 30, 2009, if you purchase our common stock in this offering, you will suffer immediate dilution in net tangible book value per share of approximately $      per share. See “Dilution.”


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FORWARD-LOOKING STATEMENTS
 
This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
 
The forward-looking statements contained in this prospectus are based on assumptions that we have made in light of our industry experience and on our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus, you should understand that these statements are not guarantees of performance or results. They involve assumptions as well as risks and uncertainties, some of which are beyond our control. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results and cause them to differ materially from those anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements.
 
Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.


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USE OF PROCEEDS
 
We estimate that the net proceeds from this offering, after deducting underwriting discounts and estimated offering expenses will be approximately $      million, assuming the shares are offered at $      per share (the midpoint of the price range set forth on the cover page of this prospectus). We intend to use $      million of the net proceeds from this offering to repay certain borrowings from ACAS and its affiliates. We also intend to use net proceeds from this offering to make a one-time payment of $8.0 million to ACFS, a subsidiary of ACAS, to terminate an investment banking services agreement between us and ACFS. See “Certain Relationships and Related Party Transactions.” We will use the balance of the net proceeds for working capital and general corporate purposes. We may also use a portion of the net proceeds to make strategic acquisitions of other companies or businesses, although no agreements or understandings exist with respect to any such acquisitions. Pending their application we intend to invest the net proceeds in short-term interest-bearing obligations.
 
We intend to enter into arrangements to refinance, prior to the consummation of this offering, or to repay with a portion of the proceeds of this offering, the debt of our subsidiaries that is held by our principal stockholder, ACAS, or its affiliates. For purposes of this section, EURIBOR means the Euro Interbank Offered Rate and LIBOR means the London Interbank Offered Rate. All amounts are as of June 30, 2009, but reflect amendments to extend maturity that were entered into subsequent to that date.
 
 • approximately $11.0 million of LIBOR + 4.5%, $20.25 million commitment amount Revolving Loan Facility due July 1, 2011;
 
 • approximately $14.0 million of LIBOR + 5%, $14.0 million commitment amount Revolving Loan Facility due July 1, 2011;
 
 • approximately $3.6 million of EURIBOR + 2%, $8.2 million commitment amount Revolving Loan Facility due July 1, 2011;
 
 • approximately $24.9 million of EURIBOR + 3%, $24.9 million principal amount Senior Term B Notes due July 1, 2011;
 
 • approximately $5.1 million of LIBOR + 8%, $7.5 million principal amount Senior Term B Notes due July 1, 2011;
 
 • approximately $1.9 million of LIBOR + 8%, $2.0 million principal amount Senior Term B Notes due July 1, 2011;
 
 • approximately $4.0 million of LIBOR + 9%, $4.0 million principal amount Senior Term C Notes due October 29, 2011;
 
 • approximately $4.0 million of LIBOR + 8.25%, $4.0 million principal amount Senior Term C Notes due November 10, 2011;
 
 • approximately $26.0 million of LIBOR + 6.5%, $27.0 million principal amount Senior Term D Notes due October 14, 2011;
 
 • approximately $14.4 million of LIBOR + 6.5%, $15.0 million principal amount Senior Term D Notes due October 21, 2011;
 
 • approximately $8.3 million of 14%, $7.5 million principal amount Senior Subordinated Notes due July 1, 2011;
 
 • approximately $9.7 million of 15%, $8.6 million principal amount Senior Subordinated Notes due July 1, 2011;
 
 • approximately $15.6 million of EURIBOR + 11%, $12.2 million principal amount Senior Subordinated Notes due July 1, 2011;
 
 • approximately $5.1 million of 17%, $4.3 million principal amount Junior Subordinated Notes due July 1, 2011;


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 • approximately $5.1 million of 17%, $4.3 million principal amount Junior Subordinated Notes due July 1, 2011;
 
 • approximately $1.4 million of 14%, $1.25 million principal amount Junior Subordinated Notes due May 24, 2012;
 
 • approximately $6.7 million of EURIBOR + 12%, $4.9 million principal amount Junior Subordinated Notes due July 1, 2011; and
 
 • approximately $9.2 million of three-month EURIBOR + 2%, €6.5 million commitment amount Shareholder Loan due June 30, 2011.
 
A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) the net proceeds to us from this offering by $      million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us.
 
DIVIDEND POLICY
 
We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of our business. We do not intend to pay dividends to holders of our common stock and the agreements governing our debt significantly restrict our ability to pay dividends.


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CAPITALIZATION
 
The following table sets forth our consolidated capitalization as of June 30, 2009:
 
 • on an actual basis; and
 
 • on a pro forma as adjusted basis to give effect to the conversion of           of our outstanding convertible preferred stock into           shares of our common stock, the conversion of          shares of our Class A Voting Common Stock and Class B Non-Voting Common Stock into           shares of our common stock on a one-to-one basis, the sale of          shares of our common stock in this offering by us at an assumed initial public offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus), and the application of the $       estimated net proceeds to be received by us as described in “Use of Proceeds” to effect the repayment and refinancing of $      of our indebtedness and to make a one-time, $8 million payment to ACFS, after deducting the underwriting discounts and estimated offering expenses of $      .
 
You should read this table along with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.
 
         
  As of June 30, 2009 
     Pro Forma
 
  Actual  as Adjusted(1) 
  (in thousands, except share data) 
 
Total debt, including current portion:        
Notes payable to ACAS $170,012     
Notes payable to third parties  7,204              
         
Stockholders’ equity (deficit):        
Series A-1 Convertible Participating Preferred Stock, $0.001 par value; 1,200,000 shares authorized, actual; 678,804 shares issued and outstanding, actual; none authorized, pro forma as adjusted; none issued and outstanding, pro forma as adjusted
  1     
Series A-2 Convertible Participating Preferred Stock, $0.001 par value; 300,000 shares authorized, actual; 70,000 shares issued and outstanding, actual; none authorized, pro forma as adjusted; none issued and outstanding, pro forma as adjusted
        
Class A Voting Common Stock, $0.001 par value; 2,500,000 shares authorized, actual; 2,091 shares issued and outstanding, actual; none authorized, pro forma as adjusted; none issued and outstanding, pro forma as adjusted        
Class B Non-Voting Common Stock, $0.001 par value; 700,000 shares authorized, actual; 45,650 shares issued and outstanding, actual; none authorized, pro forma as adjusted; none issued and outstanding, pro forma as adjusted        
Common stock, $0.001 par value; none authorized, actual; none issued and outstanding, actual;          shares authorized, pro forma as adjusted;          shares issued and outstanding, pro forma as adjusted       
Additional paid-in capital  98,206     
Accumulated deficit  (98,323)    
Accumulated other comprehensive income  10,384     
         
Total stockholders’ equity (deficit)  10,268     
         
Total capitalization $187,484  $ 
         
 
 
(1)Assuming the number of shares sold by us in this offering remains the same as set forth on the cover page, a $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, our total cash, total stockholders’ equity and total capitalization by approximately $      million.


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The table above excludes, as of June 30, 2009:
 
 • 113,288 shares subject to outstanding options at a weighted average exercise price of $122.77 per share;
 
 • 5,402 additional shares reserved for issuance under our existing stock option plan, all of which are expected to be granted to our employees, including our executive officers, immediately following the pricing of this offering at an exercise price equal to the initial public offering price;
 
 • 106,160 additional shares to be reserved for issuance under our amended and restated stock option plan to become effective upon the pricing of this offering; and
 
 • 402,428 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.00152 per share.


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DILUTION
 
If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of common stock initially upon completion of this offering.
 
Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. After giving effect to the sale of shares of common stock offered in this offering and after deducting the underwriting discounts and estimated offering expenses, our pro forma net tangible book value as of June 30, 2009 would have equaled $      per share of common stock. This represents an immediate increase in net tangible book value of $      per share to our existing stockholders and an immediate dilution in net tangible book value of $      per share to new stockholders of common stock in this offering. If the initial public offering price is higher or lower, the dilution to new stockholders will be greater or less. The following table summarizes this per share dilution:
 
         
Assumed initial public offering price per share         $      
Net tangible book value per share as of June 30, 2009 $      
Increase per share attributable to this offering        
         
Pro forma net tangible book value per share after this offering        
         
Dilution in pro forma net tangible book value per share to new stockholders     $  
         
 
A $1.00 increase or decrease in the assumed initial public offering price of $      per share would increase or decrease, as applicable, our pro forma net tangible book value by $      million, the pro forma net tangible book value per share by $      per share, and the dilution in pro forma net tangible book value per share to new stockholders by $      per share.
 
If the underwriters exercise their over-allotment in full, pro forma net tangible book value per share after the offering will be $     , and dilution in pro forma net tangible book value per share to new stockholders will be $     .
 
The following table summarizes on a pro forma basis, as of June 30, 2009, the differences between our existing stockholders and new stockholders with respect to the number of shares of common stock issued by us, the total consideration paid and the average price per share paid:
 
                     
  Shares Purchased Total Consideration Average Price
  Number Percent Amount Percent Per Share
  (in thousands)   (in thousands)    
 
Existing stockholders                    
New stockholders                    
 
A $1.00 increase or decrease in the assumed initial public offering price of $      per share would increase or decrease, as applicable, total consideration paid by new stockholders and total consideration paid by all stockholders by $      million.
 
If the underwriters exercise their over-allotment option in full, the following will occur: (1) the number of shares of common stock held by existing stockholders will represent approximately     % of the total number of shares of common stock outstanding after this offering; and (2) the number of shares of common stock held by new public stockholders will be increased to          , or approximately     % of the total number of shares of common stock outstanding after this offering.
 
The number of shares of common stock to be outstanding after this offering is based on 1,197,094 shares outstanding as of June 30, 2009 and excludes:
 
 • 113,288 shares subject to outstanding options as of June 30, 2009 at a weighted average exercise price of $122.77 per share;
 
 • 5,402 additional shares reserved for issuance under our existing stock option plan, all of which are expected to be granted to our employees, including our executive officers, immediately following the pricing of this offering at an exercise price equal to the initial public offering price;
 
 • 106,160 additional shares to be reserved for issuance under our amended and restated stock option plan to become effective upon the pricing of this offering; and
 
 • 402,428 shares of common stock issuable upon the exercise of outstanding warrants at a weighted average exercise price of $0.00152 per share.
 
To the extent that the options or warrants are exercised, there may be further dilution to new stockholders.


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SELECTED CONSOLIDATED FINANCIAL DATA
 
You should read the following selected consolidated historical financial data below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. The selected financial data in this section is not intended to replace the consolidated financial statements and related notes included elsewhere in this prospectus.
 
The selected consolidated statements of operations data for each of the three fiscal years ending June 30, 2007, 2008 and 2009 and the consolidated balance sheet data as of June 30, 2008 and 2009 are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The consolidated statements of operations data for the fiscal year ended June 30, 2006 and the consolidated balance sheet data as of June 30, 2007 are derived from our audited consolidated financial statements not included in this prospectus. The consolidated statements of operations data for the fiscal year ending June 30, 2005 and the consolidated balance sheet data as of June 30, 2005 and 2006 are derived from our unaudited financial statements not included in this prospectus. Until their merger in December 2005 resulting in the formation of Mirion, we were comprised of GDS, IST and Synodys, entities which were under the common control of ACAS. Our historical results are not necessarily indicative of the results that should be expected in the future. The amounts below are in thousands, except percentages and per share data.
 
                         
  Year Ended June 30,    
  2005  2006  2007  2008  2009    
 
Consolidated Statements of Operations Data:
                        
Revenue $135,177  $147,148  $175,361  $189,933  $207,582     
Cost of revenue  77,832   79,452   97,222   102,871   110,761     
                         
Gross profit  57,345   67,696   78,139   87,062   96,821     
                         
     % of revenue  42.4%  46.0%  44.6%  45.8%  46.6%    
Operating expenses                        
Selling, general and administrative expenses  45,055   68,174   59,792   63,008   66,057     
Research and development expenses  6,548   9,726   11,875   14,865   11,188     
                         
Total operating expenses  51,603   77,900   71,667   77,873   77,245     
                         
Income (loss) from operations  5,742   (10,204)  6,472   9,189   19,576     
Interest expense, net  (21,287)  (20,613)  (19,068)  (20,290)  (17,787)    
Other (expense) income, net  (10,465)  4,964   786   1,650   474     
                         
(Loss) income before provision for income taxes  (26,010)  (25,853)  (11,810)  (9,451)  2,263     
Provision for income taxes  3,375   1,585   6,050   4,546   5,915     
                         
Net loss $(29,385) $(27,438) $(17,860) $(13,997) $(3,652)    
                         
Paid-in-kind preferred dividends
  (1,785)  (4,949)  (8,141)  (8,993)  (9,892)    
                         
Net loss attributable to common stockholders $(35,322) $(32,387) $(26,001) $(22,990) $(13,544)    
                         
Net loss per common share attributable to common stockholders’ per share — basic and diluted     $(724.22) $(546.08) $(482.31) $(283.70)    
                         
Shares used in computing net loss attributable to common stockholders — basic and diluted      44,720   47,614   47,666   47,741     
                         
Pro forma net loss per common share — basic and diluted(1)                 $(11.80)    
                         
Shares used in computing pro forma basic and diluted net loss per common share                  1,147,638     
                         
 
                     
  As of June 30, 
  2005  2006  2007  2008  2009 
 
Consolidated Balance Sheet Data:
                    
Cash and cash equivalents(2) $4,073  $4,858  $6,561  $8,959  $5,390 
Total assets  282,728   302,327   299,982   336,663   317,036 
Notes payable to ACAS(3)  128,194   148,273   159,461   173,186   170,012 
Total stockholders’ equity (deficit)  (29,555)  36,944   24,862   22,743   10,268 
 


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  Year Ended June 30, 
  2007  2008  2009 
 
Other Data:
            
Adjusted EBITDA(4) $32,045  $32,304  $41,431 
Amortization of intangible assets  12,215   10,076   8,114 
Capital expenditures  3,897   5,142   6,845 
 
             
  As of June 30, 
  2007  2008  2009 
 
Backlog(5) $143,887  $177,956  $184,218 
Deferred revenue  30,567   38,988   43,419 
 
 
(1)Pro forma and diluted net loss per common share is adjusted to give effect to the conversion of      shares of our convertible preferred stock into      shares of our common stock pursuant to our Certificate of Incorporation, which provides that our Convertible Participating Preferred Stock is convertible at any time, at the option of the holder, into the number of fully paid and nonassessable shares of Class A Voting Common Stock that results from dividing the applicable original issue price per share by the initial conversion price of $100.
(2)As of June 30, 2009, we also had $6.0 million of restricted cash.
(3)In addition, as of June 30, 2009, we had $7.2 million of outstanding debt held by third parties not affiliated with ACAS.
(4)We include Adjusted EBITDA in this prospectus because (i) it is a basis upon which our management assesses our operating performance, (ii) it is a factor in the evaluation of the performance of our management in determining compensation and (iii) certain maintenance covenants under our debt agreements are tied to ratios based upon Adjusted EBITDA, as defined. Adjusted EBITDA is calculated as net income (loss) less extraordinary gains (loss) and interest income, plus interest expense, charges against income for taxes, depreciation expense, amortization expense, mark to market (loss) gain, non-recurring charges, management fees paid to ACFS and all non-cash compensation expenses (in accordance with the definitions in our credit facilities with ACAS). Adjusted EBITDA is not a measure of financial performance calculated in accordance with U.S. GAAP, and should be viewed as a supplement to—not a substitute for—our results of operations presented on the basis of U.S. GAAP. Adjusted EBITDA also does not purport to represent cash flow provided by, or used in, operating activities in accordance with U.S. GAAP and should not be used as a measure of liquidity. Our statements of cash flows, included elsewhere in this prospectus, present our cash flow activity in accordance with U.S. GAAP. Furthermore, Adjusted EBITDA is not necessarily comparable to similarly titled measures reported by other companies.
(5)Represents purchase orders or contracts received by us that have not been shipped. Amounts representing backlog are not recorded in our financial statements.
 
The following is a reconciliation of net loss to Adjusted EBITDA:
 
             
  Year Ended June 30, 
  2007  2008  2009 
 
Net loss $(17,860) $(13,997) $(3,652)
Interest expense, net  19,068   20,290   17,787 
Income tax expense  6,050   4,546   5,915 
Depreciation  4,072   4,022   4,417 
Amortization(a)  12,215   10,076   8,114 
ACFS fees  1,625   1,625   1,739 
Stock option compensation  244   275   1,161 
Mark to market (loss) gain  (14)  9   83 
Other non-recurring charges(b)  6,645   5,458   5,867 
             
Adjusted EBITDA $32,045  $32,304  $41,431 
             
 
 
(a)Represents the non-cash amortization of intangible assets, such as customer relationships, backlog, qualification, enterprise software, technology, territorial rights, trade names and noncompete agreements. We have included portions of this non-cash amortization expense in cost of revenue, research and development expenses and selling, general and administrative expenses.
 
(b)Represents non-recurring expenses, including severance expenses and costs associated with the preparation for our initial public offering, as well as certain professional and legal expenses.

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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of the financial condition and results of our operations should be read together with “Selected Consolidated Financial Data” and the consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements, based on current expectations related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.
 
Overview
 
We are a leading global provider of radiation detection, measurement, analysis and monitoring products and services to the nuclear, defense and medical end markets. Our customers rely on our solutions to protect people, property and the environment from nuclear and radiological hazards. Our products and services include: dosimeters; contamination & clearance monitors; detection & identification instruments; radiation monitoring systems; electrical penetrations; instrumentation & control equipment and systems; dosimetry services; imaging systems; and related accessories, software and services.
 
We provide our products and services through five segments: Health Physics, Radiation Monitoring Systems, Sensing Systems, Dosimetry Services and Imaging Systems. Our Health Physics segment derives revenue from the nuclear, defense and medical end markets. We provide our Health Physics customers, which include power and utility companies, military organizations, engineering companies as well as governmental agencies, with dosimeters, contamination & clearance monitors as well as equipment that detects and identifies radioactive isotopes. Our Radiation Monitoring Systems segment offers systems that provide process and post-event radiation monitoring to the nuclear end market. Our Radiation Monitoring Systems customers include power and utility companies, engineering companies, research laboratories, universities, as well as governmental agencies. Our Sensing Systems segment supplies electrical penetrations as well as reactor instrumentation & control equipment and systems to the builders and operators of nuclear reactors. Our Sensing Systems customers include power and utility companies, the U.S. Navy, as well as engineering companies. Our Dosimetry Services segment provides analytical services to determine occupational and environmental radiation exposure to employers of radiation workers in the nuclear and medical end markets. Our Dosimetry Services customers include power and utility companies, hospitals, governmental agencies, medical professionals, dentists and veterinarians. Our Imaging Systems segment provides specialized closed circuit camera systems used for inspection and surveillance in difficult and hazardous environments to the nuclear and other end markets. We provide these systems to power and utility companies, operators of waste management facilities, cement kilns and petrochemical facilities.
 
Of the $207.6 million in total revenue we generated in fiscal 2009, $71.4 million, or 34.4%, was attributable to our Health Physics segment, $44.6 million, or 21.5%, was attributable to our Radiation Monitoring Systems segment, $45.0 million, or 21.7%, was attributable to our Sensing Systems segment, $29.5 million, or 14.2%, was attributable to our Dosimetry Services segment and $17.1 million, or 8.2%, was attributable to our Imaging Systems segment. Please see Note 15 of our consolidated financial statements for additional financial information about our segments.
 
Despite achieving positive operating income in fiscal 2007, 2008 and 2009, we have not achieved positive net income, due in large part to our leverage, in any fiscal year since our inception in 2005. As of June 30, 2009, we had an accumulated deficit of $98.3 million. We expect to reduce our leverage through the repayment of certain of our indebtedness with a portion of the net proceeds from the offering. See “Use of Proceeds.”
 
We incorporated in Delaware in October 2005 as Global Monitoring Services, Inc. Our business was formed through a series of transactions in December 2005 resulting in the combination of three companies, all owned by ACAS, our principal stockholder, and its affiliates. The three companies were GDS, a provider of dosimetry services to the nuclear and medical industries, IST, a manufacturer of electrical penetrations, reactor


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instrumentation & control equipment and systems and imaging systems for the nuclear, defense and other industries and Synodys, a designer and manufacturer of radiation detection, measurement, analysis and monitoring equipment for the nuclear, defense and medical industries. Following these transactions, we changed our name in January 2006 to Mirion Technologies, Inc.
 
We are a global company with operations in Canada, China, Finland, France, Germany, the United Kingdom and the United States. Accordingly, currency exchange rates can impact our reported results of operations. Revenue outside of the United States and Canada accounted for 63.8% and 62.6% of total revenue for fiscal 2008 and 2009. Please see Note 15 to our consolidated financial statements for additional financial information about geographic areas.
 
References to “fiscal” before any year refer to our fiscal year ending on June 30th of the year referenced.
 
Key Indicators of Performance
 
In evaluating our business, our management considers Adjusted EBITDA as a key indicator of operating performance. We include Adjusted EBITDA in this prospectus because (i) it is a basis upon which our management assesses our operating performance, (ii) it is a factor in the evaluation of the performance of our management in determining compensation and (iii) certain maintenance covenants under our debt agreements are tied to ratios based upon Adjusted EBITDA, as defined. We define Adjusted EBITDA as net income (loss) less extraordinary gains (loss) and interest income, plus interest expense, charges against income for taxes, depreciation expense, amortization expense, mark to market (loss) gain, non-recurring charges, management fees paid to ACFS and all non-cash compensation expenses.
 
We use Adjusted EBITDA as a key performance measure because we believe it facilitates operating performance comparisons from period to period by excluding potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the impact of depreciation and amortization expense on definite lived intangible assets. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes, to incentivize and compensate our management personnel, in measuring our performance relative to that of our competitors and in evaluating acquisition opportunities.
 
In addition, we believe Adjusted EBITDA and similar measures are widely used by investors, securities analysts, ratings agencies and other interested parties as a measure of financial performance and debt-service capabilities. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:
 
 • it does not reflect our cash expenditures for capital equipment or other contractual commitments;
 
 • although depreciation, amortization and asset impairment charges and write-offs are non-cash charges, the assets being depreciated, amortized or written off may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements;
 
 • it does not reflect changes in, or cash requirements for, our working capital needs;
 
 • it does not consider the potentially dilutive impact of issuing equity-based compensation to our management team and employees;
 
 • it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness;
 
 • it does not reflect certain tax payments that may represent a reduction in cash available to us; and
 
 • other companies, including companies in our industry, may calculate these measures differently, and as the number of differences in the way two different companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.


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Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only supplementally. We carefully review our operating income at a segment level, which is discussed in detail in ourperiod-to-period comparison of operating results.
 
Components of Revenue and Expenses
 
Revenue and Cost of Revenue
 
Health Physics
 
We generate revenue in our Health Physics segment primarily from the sale of dosimeters, both active and passive, which measure ionizing radiation dose; contamination & clearance monitors, which detect alpha, beta, gammaand/or neutron contamination of objects of various sizes and types, from tools to trucks; and devices that detect, locate and identify radioactive isotopes. We sell our equipment either pursuant to written agreements or contracts requiring delivery of products or services over a specified time period or one-time purchase orders depending on the nature of the product and the dollar value of the sale. We typically use contracts for large installations of our equipment to power and utility companies as well as military organizations. These contracts are typically fixed price, where we bear the risk for changes in material costs as well as currency movements. The time period from receipt of a contract to the recognition of revenue generally ranges from a few months to a year. We typically use purchase orders for the sale of replacement components as well as small dollar value orders. We typically do not recognize revenue and the related cost of revenue until our customer has installed the equipment and certified that it is operating correctly or until we have otherwise determined that all customer-specific acceptance criteria have been met. Furthermore, customers may delay delivery or acceptance of equipment, causing postponement of revenue recognition even though we may have received payment. We record payments received from customers prior to the time we recognize revenue for associated sales as deferred revenue.
 
Revenue in our Health Physics segment has been primarily driven by product sales for new nuclear power reactor construction in Asia, replacement product sales for NPPs in the Americas and Europe, as well as replacement product sales for the defense end market.
 
Cost of revenue in our Health Physics segment primarily consists of cost of goods purchased for the manufacture of our equipment, facility costs, compensation and benefits to manufacturing employees and outsourcing costs for subcontractor services for the manufacture of various materialsub-components.
 
Radiation Monitoring Systems
 
We generate revenue in our Radiation Monitoring Systems segment from the sale of radiation monitoring systems and services to engineering firms that design and construct nuclear reactors, power and utility companies that operate NPPs and, to a lesser extent, research laboratories and universities. We generate most of the revenue in our Radiation Monitoring Systems segment from contracts with a duration greater than one year. These contracts are typically fixed price, where we bear the risk for changes in material cost as well as currency movements.
 
Revenue in our Radiation Monitoring Systems segment can fluctuate significantly from period to period because of customer requirements, which depend upon the operating schedules of nuclear reactors. The operating schedules of nuclear reactors are affected by, among other things, seasonality in the demand for electricity and reactor refueling and maintenance. Power and utility companies typically schedule refueling and maintenance to coincide with periods of reduced power demand, typically in the spring and fall. Therefore, our revenue may be higher during these periods when equipment is typically installed. Revenue may also fluctuate from period to period as our equipment is installed in newly constructed nuclear reactors. We typically do not recognize revenue and the related cost of revenue until our customer has installed the equipment and certified that it is operating correctly, which generally can extend to 12 months from shipment, although in some cases can be longer or until we have otherwise determined that all customer-specific


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acceptance criteria have been met. Furthermore, customers may delay delivery or acceptance of equipment, causing postponement of revenue recognition, even though we may have received payment. In each of the preceding circumstances, we record payments received from customers prior to the time we recognize revenue for associated sales as deferred revenue.
 
Revenue in our Radiation Monitoring Systems segment has been primarily driven by new nuclear power reactor construction in Asia and Europe, as well as the retrofitting of existing reactors. Revenue in the Americas region has been primarily driven by renewed sales for the retrofitting of existing reactors.
 
Cost of revenue in our Radiation Monitoring Systems segment primarily consists of cost of goods purchased for the manufacture of our equipment, facility costs, compensation and benefits to employees and outsourcing costs for subcontractor services for the manufacture of various materialsub-components.
 
Sensing Systems
 
We generate revenue in our Sensing Systems segment primarily through sales of our electrical penetrations which are conduits through a nuclear reactor containment structure, as well as sales of our reactor instrumentation & control detectors, which are used in nuclear facilities to monitor radiation and temperature within a nuclear reactor core (“in-core” detectors) and in surrounding areas (“ex-core” detectors). Our Sensing Systems segment sells primarily through contracts with engineering firms that design and construct nuclear reactors as well as power and utility companies that operate NPPs. These contracts are typically fixed price, where we bear the risk for changes in material costs as well as currency movements. We have generated the majority of the revenue in our Sensing Systems segment from contracts with a duration greater than one year.
 
Revenue in our Sensing Systems segment has been primarily driven by new nuclear power reactor construction in Asia and Europe for our electrical penetrations as well as by the replacement of reactor instrumentation & control equipment and systems for existing reactors in Asia, Europe and the Americas.
 
Cost of revenue in our Sensing Systems segment primarily consists of cost of goods purchased for the manufacture of our equipment, facility costs, compensation and benefits to employees and outsourcing costs for subcontractor services for the manufacture of various materialsub-components.
 
Dosimetry Services
 
Revenue from our Dosimetry Services segment is of a subscription nature. We provide these services to customers on anagreed-upon recurring monthly, quarterly or annual basis. Badge production, badge analysis and report preparation are all integral to the service that we provide to our customers, and therefore, we define the service period to include the provision of all of those services. We recognize revenue and related costs on a straight-line basis over the service period as the service is continuous.
 
Revenue in our Dosimetry Services segment has been primarily driven by the increased use of our dosimetry services in hospitals and other medical facilities resulting from increases in the incidence of radiological medical procedures, along with the increased use of our services by dental and veterinary offices in the United States.
 
Cost of revenue in our Dosimetry Services segment primarily consists of compensation and benefits to employees, outsourcing costs for subcontractor services and cost of goods purchased for use in our badges.
 
Imaging Systems
 
We generate revenue in our Imaging Systems segment through the sale of highly specialized closed circuit camera systems used for inspection and surveillance in difficult and hazardous environments through contracts with engineering firms that design and construct nuclear reactors, power and utility companies that operate NPPs, waste management facilities, as well as companies that operate pulp and paper recovery boilers, gas or coal-fired power boilers and cement kilns. These contracts are typically fixed price, where we bear the risk of changes in material cost and currency movements.


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Revenue in our Imaging Systems segment has been primarily driven by increased demand in Asia for high radiation-tolerant cameras for use in new NPP construction, and for use in radioactive waste management and nuclear facility decommissioning projects globally.
 
Cost of revenue in our Imaging Systems segment primarily consists of cost of goods purchased for the manufacture of our equipment, facility costs, compensation and benefits to employees, and outsourcing costs for subcontractor services for the manufacture of various materialsub-components.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative, or SG&A, expenses consist primarily of personnel costs (including salaries, performance-based bonuses, commissions and employee benefits), facilities and equipment costs, costs related to advertising and marketing and other general corporate and support costs including utilities, insurance and professional fees. SG&A expenses also include $1.6 million per year in management fees we have paid to ACFS under an investment banking services agreement. We intend to use a portion of the net proceeds from this offering to make a one-time payment of $8.0 million to ACFS upon completion of this offering to terminate the agreement related to these payments. This $8.0 million payment will be included in SG&A expenses in the period paid. See “Certain Relationships and Related Party Transactions.”
 
Research and Development Expenses
 
Research and development expenses consist primarily of the costs associated with the design and testing of new products, as well as the upgrading of existing products. These costs relate primarily to compensation of personnel involved with our product development efforts, materials and outside design and testing services. Our customers sometimes compensate us separately for design and engineering work involved in developing our products for them. However, in most cases we expense product development efforts for our customers and we do not receive reimbursement.
 
Interest Expense, Net
 
Interest expense, net includes both cash and accrued interest expense and income and amortization of financing costs as well aspaid-in-kind interest on our long-term debt.
 
Other Income, Net
 
Other income, net includes gains and losses on the sale of assets,mark-to-market gains and losses on our interest rate swap agreements and foreign exchange windows.
 
Paid-In-Kind Preferred Dividends
 
Paid-in-kind, or PIK, dividends expense consists of expenses attributable to dividends on our convertible preferred stock payable in additional shares of such convertible preferred stock. Our preferred stock will convert into common stock upon the completion of this offering. As a result, following the completion of this offering, we will no longer pay any additional PIK dividends.
 
Provision for Income Taxes
 
Provision for income taxes represents our estimated income tax expense for the period presented. Despite historical net losses, we have incurred income tax expense for each of the past three fiscal years, as we incur income taxes in various jurisdictions as a result of the global nature of our business and operations.
 
Off-Balance Sheet Arrangements
 
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, nor do we have any undisclosed material transactions or commitments involving related persons or entities.


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Critical Accounting Policies
 
This management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions about matters that are uncertain. These estimates and assumptions are often based on judgments that we believe to be reasonable under the circumstances, but all such estimates and assumptions are inherently uncertain and unpredictable. Actual results may differ from those estimates and assumptions, and it is possible that other professionals, applying their own judgment to the same facts and circumstances, could develop and support alternative estimates and assumptions that would result in material changes to our operating results and financial condition.
 
Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex or subjective estimates and assumptions. Our critical accounting policies are discussed below.
 
Revenue Recognition
 
We record revenue and the related costs of revenue when all of the following conditions exist:
 
 • evidence of an agreement with our customer;
 
 • work has been performed;
 
 • the amount of revenue can be reasonably estimated; and
 
 • collection of revenue from our customer is reasonably assured.
 
Revenue from certain of our fixed-price contracts in our Sensing Systems segment is recognized on thepercentage-of-completion method, measured by thecost-to-cost method to determine revenue. Acost-to-cost approach accurately reflects our obligations and performance on these contracts, as this is the best available measure of our progress as well as meeting our customers’ expectations of the production being performed. Therefore, we believe that input measures used to measure progress toward completion on certain fixed-price projects provide a reasonable surrogate for output measures.
 
Revisions to revenue, cost and profit estimates, or measurements of the extent of progress toward completion are changes in accounting estimates accounted for in the period of change (using the cumulativecatch-up method). Contracts typically provide for periodic billings on a monthly basis or based on contract milestones. Costs and estimated earnings in excess of billings on uncompleted contracts represent amounts recognized as revenue that has not been billed. Billings in excess of costs represent amounts billed and collected for which revenue has not been recognized and is recorded as deferred revenue.
 
We derive most of our revenue in our Dosimetry Services segment from subscriptions and such revenue is continuous. We recognize revenue on a straight-line basis over a set service period that includes badge production, badge wearing, badge analysis and report preparation as the service is continuous and no other discernable pattern of recognition is evident. We provide these services to customers on anagreed-upon monthly, quarterly or annual basis that our customers choose for their wear period, payable in advance or in arrears. The amounts recorded as deferred contract revenue on our balance sheets represent customer deposits invoiced in advance for services to be rendered over the service period, net of a reserve for estimated cancellations and net of services recognized through the balance sheet date.
 
In our Radiation Monitoring Systems and Health Physics segments, revenue recognition is sometimes delayed until customer acceptance and certification of the product. As a result, revenue recognition can be delayed, sometimes materially, following delivery of the product by us to the customer. Funds received from the customer in advance of revenue recognition are recorded on our balance sheets as deferred revenue.


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Recoverability of Long-Lived Assets, Including Goodwill
 
Goodwill represents the excess of costs over the fair value of net assets of businesses acquired. Goodwill is tested at the reporting unit level at least annually for impairment and is reviewed for impairment more frequently if events and circumstances indicate that the asset might be impaired. FAS No. 142,Goodwill and Other Intangible Assets,requires a two-step impairment test. In the first step, we determine the fair value of the reporting unit using a discounted cash flow valuation model and compare the fair value to the reporting unit’s carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired, and no further testing is required. If the fair value does not exceed the carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. In the second step of the goodwill impairment test, we compare the implied fair value of the reporting unit’s goodwill to the carrying value. We determine the implied fair value of the reporting unit’s goodwill as if the reporting unit had been acquired in a business combination. If the carrying value of the reporting unit’s goodwill exceeds the implied value, we recognize an impairment loss in an amount equal to the excess.
 
We estimate future cash flows at the reporting unit level using a discounted cash flow methodology by assessing each major existing contract and projecting the earnings that will be recognized in future periods. We also make estimates for earnings from new contracts that we anticipate based on our evaluation of future business prospects. The valuation of goodwill could be affected if actual results differ substantially from our estimates. Circumstances that could affect the valuation of goodwill include a significant change in our business climate, decisions by our customers to terminate our existing contracts and decisions by our customers to award to our competitors new contracts that we anticipated to be awarded to us.
 
We measure intangible assets acquired in a business combination at fair value at the date of acquisition. We assess the useful lives of other intangible assets to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, we amortize the remaining carrying amount of the intangible asset prospectively over the revised remaining useful life. We review intangible assets for impairment whenever events or circumstances indicate that the carrying value of such assets may not be recoverable. As of June 30, 2009, we had $139.0 million of goodwill and $23.8 million of intangible assets with estimable useful lives on our consolidated balance sheets. We do not have any intangible assets with indefinite useful lives.
 
Intangible assets subject to amortization consist of customer relationships, backlog, qualifications, software, territorial rights, trade names, technology and non-compete agreements. We evaluate customer relationships and territorial rights, which include the fair value of acquired customer contracts, using a discounted cash flow methodology, and amortize them over a term of 5.2 to 17 years. We derive estimated future cash flows based on detailed budgets and projections prepared by management. We amortize backlog over a term of one to three years based on the estimated delivery of the backlog. We prepare the valuation of order backlog based on a discounted cash flow methodology. We evaluate qualifications using a discounted cash flow methodology and amortize them over six years. We derive estimated future cash flows based on projections prepared by management. We amortize software over a five year life and derive it by estimating the replacement cost of the software. We amortize trade names over a period of four to 13 years and derive it based on the relief from royalty method, which tries to estimate a royalty stream for the trade names derived from a benchmark for similar industrial products. We evaluate technology and non-compete agreements using a discounted cash flow methodology. We amortize intangible technology assets over a term of eight years, and non-compete agreements over a term of five years. We derive estimated future cash flows for each technology and non-compete agreement based on detailed budgets and projections prepared by management.
 
We review long-lived assets such as property, plant and equipment annually for impairment and whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. We measure recoverability of assets to be held and used by comparing the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, we recognize an impairment charge by the amount of excess carrying value over fair value.


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Stock-Based Compensation Expense
 
Pursuant to FASB Statement No. 123(R),Share-Based Payment(“FAS No. 123(R)”), we account for equity-based compensation payments, including grants of employee stock options, based on the fair values of the equity instruments issued. We determine fair value of our equity instruments based on a valuation using an option pricing model which takes into account various assumptions that are subjective. Key assumptions used in the valuation included the expected term of the equity award taking into account both the contractual term of the award, the effects of employees’ expected exercise and post-vesting termination behavior, expected volatility, expected dividends and the risk-free interest rate for the expected term of the award. The exercise prices of our options were set at values for us consistent with those reported in ACAS’s publicly filed financial statements.
 
Prior to July 1, 2005, we measured compensation expense for our employee stock-based compensation plans using the intrinsic value method under the provisions of Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(“APB 25”), and related interpretations. As the exercise price of all options granted under this plan was at or above the estimated market price of the underlying common stock on the date of grant, no stock-based compensation cost was recognized in the consolidated statements of operations under APB 25.
 
We adopted FAS No. 123(R) using the prospective transition method. This method requires the recognition of compensation cost for all share-based payments that are unvested as of July 1, 2005. The cost related to stock-based compensation included in the determination of consolidation net loss for the twelve months ended June 30, 2007, 2008 and 2009 includes all awards outstanding that vested during those periods. In connection with the reorganization of our three predecessor companies into Mirion on January 1, 2006, we exchanged stock options of the three predecessor companies for stock options in the newly formed company. Under FAS No. 123(R), the exchange was deemed a modification, resulting in incremental compensation expense of $932,000 recorded at January 1, 2006 for those options that were vested as of January 1, 2006. For the unvested options at January 1, 2006, we are expensing incremental compensation expense of $767,000 over the remaining vesting period of approximately two years.
 
In order to determine the fair value of options granted, the fair value of the underlying stock must first be determined. Following is a discussion of the methodology used in the valuation of the Company’s stock on dates where options were granted.
 
The valuation of our common stock was determined in accordance with the guidance set forth in the AICPA Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation. We considered three methods for the allocation of value among our various classes of equity: the Current Value Method, the Probability Weighted Expected Return Method, or PWERM, and the Option-Pricing Method. The Current Value Method is useful for early stage companies or when a liquidation is imminent. PWERM is useful when there are several potential future scenarios for a company to achieve a return on investment for its investors; it is future looking and incorporates future economic events and outcomes into the determination of value as of the present. The Option-Pricing Method is useful when the range of possible future outcomes is difficult to predict.
 
We did not use the Current Value Method in our valuation since we have not been an early stage company nor have we been near liquidation. Since our inception there have been several potential alternatives for changes in our ownership structure, including an initial public offering, a sale or merger, and retention in our current form as a private company. For most of the time since the Company’s inception, the range of possible future outcomes has been difficult to predict, and PWERM could not be used. Therefore, we used the Option-Pricing Method. However, as of the most recent valuation which was performed for June 2009, we believe that the range of possible future outcomes could be reasonably predicted, and as such used PWERM for this period.
 
Following is a description of the Option Pricing Method, which we used to allocate value among the various classes of equity for the period from January 2006 through December 2008.
 
The first step in determining the valuation of our common stock was to determine the value of our total equity. The second step was to allocate the total equity among the different classes of stock. In determining


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the fair value of our total equity, we considered the three traditional approaches to valuation: the cost approach, the market approach and the income approach. The cost approach was not utilized, while the market approach and income approach were.
 
The market approach is based on the assumption that the value of an asset (including a company) is equal to the value of a substitute asset with the same or similar characteristics. Therefore, the value of an asset can be determined by finding similar assets (or interest in similar assets) that have been sold in recent arms-length transactions.
 
One methodology in the market approach is the Guideline Company Method, which compares the subject company with guideline publicly-traded companies. Valuation multiples are calculated from selected guideline companies to provide an indication of how much a current investor in the marketplace would be willing to pay for a company with similar characteristics to the subject company. The Guideline Company Method is most appropriate when public companies that are reasonably similar to the subject company can be found.
 
Another methodology in the market approach is the Guideline Transaction Method. This method relies on data of actual transactions (such as mergers and acquisitions) that have occurred in the subject company’s industry or in related industries. As in the Guideline Company Method, valuation multiples are developed and applied to the subject company’s operating data to estimate fair value.
 
The income approach seeks to measure the future benefits that can be quantified in monetary terms. The income approach typically involves two general step: the first step is to make a projection of the total cash flows expected to accrue to an investor in the asset; the second step involves discounting these cash flows to present value at a discount rate that considers the degree of risk (or uncertainty) associated with the realization of the projected monetary benefits. The discounted cash flow method is a form of the income approach often used in the valuation of entire businesses, major segments of a business or intangible property.
 
Once we determined our valuation using each of the various methods, we then weighted the results to arrive at a single valuation of our equity. The market approach Guideline Company Method, the market approach Guideline Transaction Method and the income approach were weighted 25%, 25% and 50%.
 
We then allocated this total value to the different classes of our equity using the Option-Pricing Method. As disclosed in Note 12 to our consolidated financial statements, we have issuedSeries A-1 andA-2 preferred stock, Class A and Class B common stock, stock options and warrants, over which to allocate the total value of equity. Stock options and warrants are assumed to be converted if they arein-the-money.
 
The Option-Pricing method treats the preferred and common stock as call options that give their owner the right but not the obligation to buy the underlying total equity at a predetermined price. This is done by creating a series of call options with exercise prices based on the liquidation preference, participation rights and conversion behavior of the preferred stock. The value of each share of preferred and common stock can then be inferred by analyzing these options. Based on the seniority of the classes of equity in liquidation, three call options were created and valued. The first option uses an exercise price in whichSeries A-1 andA-2 preferred stock begin to receive values in liquidation. Since these are the most senior classes of equity, the exercise price is $0. The second option uses an exercise price in whichSeries A-1 andA-2 preferred stock have received their full liquidation preferences. The third option uses an exercise price in whichSeries A-1 andA-2 preferred stock will convert to common stock to share in the upside gain (the as-converted value is greater than the liquidation preference). Thus, common stock is valued as a call option with a claim on us at an exercise price equal to the remaining value beyond the preferred stock’s liquidation preference.
 
The following is a description of the PWERM Method, which we used to allocate value among the various classes of equity as of June 2009.
 
In PWERM, our total equity valuation was developed for various potential scenarios: an initial public offering, a sale or maintaining current ownership as a private company.
 
In determining the fair value of our equity under each of the scenarios, the three traditional approaches to valuation were considered: the cost approach, the market approach and the income approach. The cost approach was not utilized, while the market approach and income approach were. We used the Guideline


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Company Method of the market approach in the valuation of our equity for the initial public offering scenario. We used the Guideline Transaction Method of the market approach to value our equity for the sale scenario. We used the income approach to value our equity in the continuing operations scenario.
 
After we determined the valuation of our common equity using the three methodologies above, the results were then weighted based on our estimate of expected outcomes. The initial public offering scenario, the sale scenario and the current ownership as a private company scenario were weighted 60%, 35% and 5%.
 
During fiscal 2009, we granted options to employees to purchase a total of 45,886 shares of common stock at exercise prices ranging from $138.58 to $144.95 per share. The deemed market value of our common stock on the dates these options were granted ranged from $46.60 to $96.18 per share.
 
We also previously reserved 5,402 additional options for issuance under our existing stock option plan to our employees, including executive officers. The purpose of this option grant will be to incentivize employees to work to increase shareholder value. The options will be valued using the Black-Scholes option pricing model. Key assumptions used to value these options will be determined as of the grant date of the options and are as follows: expected term is           years, risk-free interest rate is     %, dividend yield is 0.0%, volatility is     %, the exercise price is $      and the fair value of our common stock is $     . The aggregate value of these 5,402 options is $      , which will be recognized evenly over their four-year vesting period.
 
Information on employee stock options, granted since the beginning of fiscal 2009 is summarized as follows:
 
                 
  Number of
     Deemed
  Intrinsic
 
Date of Issuance
 Options Granted  Exercise Price  Market Value  Value 
 
July 28, 2008(1)  12,000  $138.58  $96.18  $0.00 
August 5, 2008  32,886   144.95   96.18   0.00 
December 9, 2008  1,000   144.24   46.60   0.00 
 
 
(1)The 12,000 options granted at July 28, 2008 were a modification of 15,000 options granted on November 5, 2007. The 12,000 options, which have time-based vesting, replaced the 15,000 options, which had performance-based vesting.
 
We make a number of estimates and assumptions related to FAS No. 123(R). The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results differ from our estimates, we will record such amounts as an adjustment in the period such estimates are revised. Actual results may differ substantially from these estimates. In valuing share-based awards under FAS No. 123(R), significant judgment is required in determining the expected volatility of our common stock and the expected term individuals will hold their share-based awards prior to exercising. We base expected volatility of the stock on our peer group in the industry in which we do business, because we do not have sufficient historical volatility data for our own stock. We determine the expected term of the option based on factors including vesting period, life of option, strike price and fair market value of our common stock on the date of grant. In the future, as we gain historical data for volatility in our own stock and the actual term employees hold our options, expected volatility and expected term may change, which could substantially change the grant date fair value of future awards of stock options and ultimately the expense we record.
 
We recorded non-cash compensation expense of $0.3 million and $1.2 million for fiscal 2008 and 2009.
 
Accounts Receivable
 
We evaluate the collectability of accounts receivable based on a combination of factors. In cases where we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations, we record a specific allowance against amounts due and, thereby, reduce the net recognized receivable to the amount we reasonably believe will be collected. We record increases to the allowance for bad debt as a component of general and administrative expenses.


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Income Taxes
 
The determination of our tax provision is subject to judgments and estimates due to the complexity of the tax law that we are subject to in several tax jurisdictions. Earnings derived from our international business are generally taxed at rates that are different than U.S. rates, resulting in an effective tax rate different than the U.S. statutory tax rate of 34.0%. The ability to maintain our current effective tax rate is contingent on existing tax laws in both the United States and the respective countries in which our international subsidiaries are located. In addition, a decrease in the percentage of our total earnings from international business or a change in the mix of international business among particular tax jurisdictions could alter our overall effective tax rate.
 
Income taxes are accounted for under the asset and liability method in accordance with Statement of Financial Accounting Standards (“FAS No. 109”),“Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their financial statement carrying amounts, and consideration is given to operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We have provided a valuation allowance of $31.4 million as of June 30, 2009, compared to $27.6 million as of June 30, 2008 on primarily our U.S. jurisdiction deferred tax assets. The $3.8 million increase in valuation allowance in fiscal 2009 is the result of fiscal 2009 taxable losses in the United States.
 
On July 1, 2007, we adopted Financial Interpretation No. 48,“Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109”(“FIN 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS No. 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result of the implementation of FIN No. 48, we recognize the tax liability for uncertain income tax positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires us to determine the probability of various possible outcomes. We evaluate these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If we later determine that our exposure is lower or that the liability is not sufficient to cover our revised expectations, we adjust the liability and effect a related change in our tax provision during the period in which we make such determination.
 
Inventory Valuation
 
At each balance sheet date, we evaluate our ending inventories for excess quantities and obsolescence. This evaluation includes analysis of sales levels by products. Among other factors, we consider historical demand and forecasted demand in relation to the inventory on hand, product life cycles and the number of facilities using our products when determining obsolescence and net realizable value. We adjust remaining balances to approximate the lower of our manufacturing cost or market value. We determine inventory cost on afirst-in, first-out basis and include material, labor and manufacturing overhead costs. We may be required to write-down inventory for reasons such as obsolescence, excess quantities and declines in market value below our costs.


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Outlook
 
We expect the following factors to affect our results of operation in future periods. In addition to these factors, please refer to “Risk Factors” for additional information on what could cause our actual results to differ from our expectations.
 
Industry growth trends.  Our performance depends on the timing and level of spending for our products by each of our customers in each of our five segments. Our success is dependent upon the continued increase in construction activity for new NPPs in Asia and Europe, as well as the operating life extension of plants in Europe, Asia and the United States. We expect defense spending to detect and prevent radiological threats to continue, as well as spending in connection with large-scale public events. The expansion of radiological medical procedures is also providing us with opportunities for continued growth. For discussion of the factors that influence spending on our products, see “Industry.”
 
Research and development expenses.  We expect our research and development expenses as a percentage of revenue to decrease as we grow our business, focus our engineering activities on customer driven initiatives and benefit from the reduced engineering costs associated with optimized product lines.
 
SG&A expenses.  We expect our SG&A expenses as a percentage of revenue to decrease as our business grows and we continue to manage expenses and reduce our amortization expense on an annual basis. The majority of our amortization expenses are in SG&A expenses. We have incurred expenses in the past in connection with the integration of the legacy businesses of which we are comprised, in addition to severance costs associated with our cost reduction efforts. We do not expect these expenses to recur. We also expect to eliminate $1.6 million per year in annual management fees we have paid to ACFS pursuant to an investment banking services agreement that we intend to terminate by making a one-time payment of $8.0 million to ACFS upon completion of this offering. We expect any reduction in our SG&A expenses to be partially offset by expenses we will incur as a result of becoming a reporting company following this offering.
 
Interest expenses.  We expect that our interest expenses will be reduced in periods following the completion of this offering reflecting the reduced level of our outstanding indebtedness.
 
Foreign exchange impact.  We are a global company with operations in Canada, China, Finland, France, Germany, the United Kingdom and the United States. Accordingly, currency exchange rates can impact our reported results of operations.
 
Unamortized debt issuance costs.  We expect to record a non-cash charge associated with the repayment of certain of our indebtedness with a portion of the net proceeds of this offering. This charge will consist of the write-off of unamortized debt issuance costs.
 
Income taxes.  Despite historical net losses, we have incurred income tax expense for each of the past three fiscal years. In any given period, the jurisdictional mix of our income can vary significantly as a result of the global nature of our business and operations. The income tax rates, available deductions and credits vary significantly in the jurisdictions we do business. Accordingly, the income tax expense in any given period is a function of the effective tax rate and related income secured in a particular jurisdiction. Although the Company has reported historic consolidated losses, the company recognized income in foreign jurisdictions and losses in the United States for the past three years. The Company has incurred tax expense in the foreign jurisdictions due to the taxable income position. The Company has provided a valuation allowance on its United States based tax attributes and as a result, no tax benefit is recognized for the United States operating losses.
 
We have subsidiary net operating loss carryforwards (“NOLs”) which we can use to reduce our United States tax expense in future periods. These NOLs are subject to elimination or reduction in the event of a change of control. We do not expect such a change of control to occur in connection with this offering. However, a future sale of our common stock by ACAS could result in such a change of control.


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Amortization costs related to intangible assets.  Our non-cash amortization costs related to intangible assets were $12.2 million, $10.1 million and $8.1 million for fiscal 2007, 2008 and 2009. Our future amortization expense at the current foreign exchange rate is as follows (in thousands):
 
     
  Annual
 
  Amortization
 
Year Ending June 30,
 Expense 
 
2010 $6,484 
2011  4,760 
2012  3,709 
2013  2,749 
2014  1,622 
2015 and thereafter  4,458 
     
Total $23,782 
     
 
Consolidated Results of Operations
 
The following table summarizes certain items for our consolidated results of operations for fiscal 2007, 2008 and 2009 (in thousands, except percentages):
 
                     
  Year Ended June 30,       
  2007  2008  2009       
 
Revenue $175,361  $189,933  $207,582         
Cost of revenue  97,222   102,871   110,761         
                     
Gross profit  78,139   87,062   96,821         
% of revenue  44.6%  45.8%  46.6%        
Operating expenses:                    
Selling, general and administrative expenses  59,792   63,008   66,057         
Research and development expenses  11,875   14,865   11,188         
                     
Total operating expenses  71,667   77,873   77,245         
                     
Income from operations  6,472   9,189   19,576         
Interest expense, net  19,068   20,290   17,787         
Other income, net  786   1,650   474         
                     
(Loss) income before provision for income taxes  (11,810)  (9,451)  2,263         
Provision for income taxes  6,050   4,546   5,915         
                     
Net loss $(17,860) $(13,997) $(3,652)        
                     
 
Period-to-Period Analysis
 
As the results of operations of our business are best understood when examined on asegment-by-segment basis, we have more fully describedperiod-to-period changes in the section of this Management’s Discussion and Analysis of Financial Condition and Results of Operation entitled “Segment Results of Operations” rather than in the section immediately below.
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue
 
Consolidated revenue for fiscal 2009 was $207.6 million, an increase of $17.7 million, or 9.3%, from revenue of $189.9 million for fiscal 2008.


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Revenue in our Health Physics segment increased 17.2%, or $10.5 million, principally due to higher sales volumes in the following product lines:
 
 • $8.8 million increase in sales of dosimeters, principally into existing NPPs in Asia and the Americas; and
 
 • $1.0 million increase in sales of contamination & clearance monitors, principally into existing NPPs in the Americas.
 
Revenue in our Radiation Monitoring Systems segment increased 13.7%, or $5.4 million, principally due to the timing of revenue recognition on projects with customer-specific acceptance criteria.
 
Revenue in our Sensing Systems segment increased 13.2%, or $5.2 million, principally due to higher sales volumes in the following product lines:
 
 • $3.4 million increase in revenue recognized from contracts for the production of penetration products used in the construction of NPPs; and
 
 • $1.8 million increase in revenue recognized from contracts for the production of detectors used in NPPs.
 
Revenue in our Dosimetry Services segment was largely flat between years, while revenues in our Imaging Systems segment fell by 19.3%, or $4.1 million, due to weakening demand for high-temperature cameras in industrial end markets.
 
Revenue in fiscal 2009 was negatively impacted due to foreign currency movements by approximately $10.4 million.
 
Gross Profit
 
Consolidated gross profit for fiscal 2009 was $96.8 million, an increase of $9.8 million, or 11.2%, from gross profit of $87.1 million for fiscal 2008. Gross margin increased 0.8% to 46.6% for fiscal 2009, primarily due to lower material costs in the Sensing Systems segment. Gross profit was negatively impacted due to foreign currency movements by approximately $4.8 million.
 
Operating Expenses
 
SG&A expenses for fiscal 2009 were $66.0 million, an increase of $3.0 million, or 4.8%, from $63.0 million for fiscal 2008. This increase was primarily due to an increase in professional fees associated with preparation for our initial public offering, offset by a reduction in compensation expense, as well as an overall reduction of expense due to favorable currency exchange as our expenses in U.S. dollars were positively impacted by weaker foreign currencies, primarily the euro and the British pound.
 
Research and development expenses for fiscal 2009 were $11.2 million, a decrease of $3.7 million, or 24.7%, from $14.9 million for fiscal 2008. This decrease was primarily due to a decrease in compensation and subcontractor expense due to product rationalization as well as a reduction of expense due to favorable currency exchange as our expenses in U.S. dollars were positively impacted by weaker foreign currencies, principally the euro and the British pound, offset by an increase in supplies and services.
 
Interest Expense, Net
 
Interest expense, net for fiscal 2009 was $17.8 million, a decrease of $2.5 million, or 12.3%, from $20.3 million for fiscal 2008. This reduction was primarily the result of the decline in our interest expense on our variable rate instruments as our interest rates tied to LIBOR and EURIBOR declined from fiscal 2008.


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Other Income, Net
 
Other income, net decreased $1.2 million, or 71.3%, to net other income of $0.5 million for fiscal 2009, from net other income of $1.7 million for fiscal 2008. This decrease of net other income was primarily a result of a decrease in foreign exchange gains of $1.2 million.
 
Income Taxes
 
We recognized income tax expense of $5.9 million for fiscal 2009, an increase of $1.4 million, or 30.1% from fiscal 2008. The increase was primarily due to the geographic composition of our consolidated income and greater tax expense attributable to foreign operations. In addition, the fiscal 2009 effective tax rate was impacted by losses generated in the U.S. where no benefit for tax attributes is recorded due to the assessed valuation allowance.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue
 
Consolidated revenue for fiscal 2008 was $189.9 million, an increase of $14.6 million, or 8.3%, from revenue of $175.4 million in fiscal 2007. Revenue from detectors sold by our Sensing Systems segment into NPPs increased 33.7%, or $5.2 million, while revenue recognized for electrical penetrations sold by our Sensing Systems segment grew 33.1%, or $4.2 million. Revenue from sales of dosimeters by our Health Physics segment increased 12.5%, or $3.2 million, principally due to sales to NPPs and military forces. Revenue in fiscal 2008 was positively impacted due to foreign currency movements by approximately $11.1 million.
 
Gross Profit
 
Consolidated gross profit for fiscal 2008 was $87.1 million, an increase of $8.9 million, or 11.4%, from $78.1 million for fiscal 2007. Gross margin increased 1.3% to 45.8% for fiscal 2008, from 44.6% for fiscal 2007, due to better factory utilization in our Health Physics and Sensing Systems segments. The increase in gross profit was primarily due to the increase in revenue in our Health Physics and Sensing Systems segments. Gross profit in fiscal 2008 was positively impacted due to foreign currency movements by approximately $5.3 million.
 
Operating Expenses
 
SG&A expenses for fiscal 2008 were $63.0 million, an increase of $3.2 million, or 5.4%, from $59.8 million for fiscal 2007. This increase was primarily due to an increase in compensation and benefit cost due to the hiring of the majority of our corporate staff and severance costs due to employee terminations, offset by a reduction in amortization cost and professional fees. SG&A expenses in fiscal 2008 were negatively impacted due to foreign currency movements by approximately $3.3 million.
 
Research and development expenses for fiscal 2008 were $14.9 million, an increase of $3.0 million, or 25.2%, from $11.9 million for fiscal 2007. This increase was primarily due to an increase in compensation and supplies expense for new projects and products, offset by a decrease in professional fees.
 
Interest Expense, Net
 
Interest expense, net for fiscal 2008 was $20.3 million, an increase of $1.2 million, or 6.4%, from fiscal 2007 expense of $19.1 million. The $1.2 million increase was primarily due to increased borrowings to fund our growth.


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Other Income, Net
 
Other income, net increased $0.9 million, or 109.9%, to a net other income of $1.7 million for fiscal 2008, from net other income of $0.8 million for fiscal 2007. This increase in other income was primarily the result of an increase in foreign exchange gains of $0.8 million.
 
Income Taxes
 
We recognized income tax expense of $4.5 million for fiscal 2008, versus $6.1 million for fiscal 2007. The $1.5 million decrease was primarily due to the geographic composition of our consolidated income and less tax expense attributable to foreign operations. In addition, the fiscal 2008 effective tax rate was impacted by losses generated in the U.S. where no benefit for tax attributes is recorded due to the assessed valuation allowance.
 
Segment Results of Operations
 
The following table summarizes certain items for our segments for fiscal 2007, 2008 and 2009. The amounts below are in thousands.
 
                     
  Year Ended June 30,       
  2007  2008  2009       
 
Revenue:                    
Health Physics $53,837  $60,886  $71,353         
Radiation Monitoring Systems  44,109   39,253   44,620         
Sensing Systems  29,049   39,800   45,046         
Dosimetry Services  27,709   28,807   29,461         
Imaging Systems  20,657   21,187   17,102         
                     
Total $175,361  $189,933  $207,582         
                     
Operating income:                    
Health Physics $(2,763) $(691) $6,824         
Radiation Monitoring Systems  6,726   (912)  4,561         
Sensing Systems  4,110   10,197   14,870         
Dosimetry Services  5,802   7,729   7,855         
Imaging Systems  207   1,344   1,124         
Unallocated corporate items  (7,610)  (8,478)  (15,658)        
                     
Total $6,472  $9,189  $19,576         
                     
 
Health Physics
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue in our Health Physics segment increased $10.5 million, or 17.2%, to $71.4 million for fiscal 2009, from $60.9 million for fiscal 2008. This increase was primarily due to increased dosimeter sales of $8.8 million, principally into existing NPPs in Asia and the Americas and $1.0 million of increased sales of contamination & clearance monitors principally into existing NPPs in the Americas. Revenue for fiscal 2009 was negatively impacted by foreign currency movements by approximately $3.8 million.
 
Operating income in our Health Physics segment increased $7.5 million, or 1087.5%, to $6.8 million for fiscal 2009, from $(0.7) million for fiscal 2008. This increase was due to increased gross profit due to higher revenues and lower research and development expenses arising from our product rationalization efforts. During fiscal 2009, we continued to review our product portfolio and discontinued engineering work on products that were deemed to be duplicative or nearing the end of useful life. As a result we were able to eliminate a portion of our temporary and consulting engineers and correspondingly reduce engineering expense. Expenses


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were positively impacted by foreign currency movements, which partially offset the negative impact of currency movements on revenue.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue in our Health Physics segment increased $7.0 million, or 13.1%, to $60.9 million for fiscal 2008, from $53.8 million for fiscal 2007. This increase was attributable to increased dosimeter sales of $2.6 million principally to European militaries to replace existing dosimeters, $2.0 million of increased sales of contamination & clearance monitors, principally into existing NPPs in Europe, and $1.7 million from the sale of detection & identification devices in connection with the 2008 Olympic Games. Revenue in fiscal 2008 was positively impacted due to foreign currency movements in the euro-dollar exchange rate by approximately $5.2 million.
 
Operating income for our Health Physics segment increased $2.1 million, or 75.0%, to $(0.7) million for fiscal 2008, from $(2.8) million for fiscal 2007. This increase was due to increased gross profit margin due to improved factory utilization and lower material costs, offset by an increase in operating expenses related to professional fees for cost improvement initiatives and severance costs due to employee terminations. We engaged an outside consulting firm to review our current cost structure assist us with the implementation of certain cost improvement initiates. Expenses were negatively impacted due to foreign exchange currency movements in the euro-dollar exchange rate.
 
Radiation Monitoring Systems
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue in our Radiation Monitoring Systems segment increased $5.4 million, or 13.7%, to $44.6 million for fiscal 2009, from $39.3 million for fiscal 2008. This increase was principally due to the timing of revenue recognition from projects with customer-specific acceptance criteria. Revenue in fiscal 2009 was also negatively impacted due to foreign currency movements by approximately $3.8 million.
 
Operating income in our Radiation Monitoring Systems segment increased $5.5 million, or 600.1%, to $4.6 million for fiscal 2009, from $(0.9) million for fiscal 2008. This increase was principally due to the increase in revenue while a substantial portion of our operating costs remained constant. Expenses were positively impacted by foreign currency movements, which partially offset the negative impact on revenue related to currency movements.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue in our Radiation Monitoring Systems segment decreased $4.9 million, or 11.0%, to $39.3 million for fiscal 2008, from $44.1 million for fiscal 2007. This decrease was principally due to timing of customer acceptance of radiation monitoring systems shipped in fiscal 2008 and beyond of $10.7 million, offset by customer acceptance of orders of $4.5 million from projects shipped in fiscal 2006 and fiscal 2007. Revenue in fiscal 2008 was positively impacted due to foreign currency movements in the euro-dollar exchange rate by approximately $4.4 million.
 
Operating income for our Radiation Monitoring Systems segment decreased $7.6 million, or 113.6%, to $(0.9) million for fiscal 2008, from $6.7 million for fiscal 2007. This decrease was due to the decrease in revenue along with an increase in material costs. Operating expenses also increased due to professional fees for cost improvement initiatives and severance costs due to employee terminations. We engaged an outside consulting firm to review our current cost structure assist us with the implementation of certain cost improvement initiates. Expenses were negatively impacted by foreign exchange currency movements in the euro-dollar exchange rate.


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Sensing Systems
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue in our Sensing Systems segment increased $5.2 million, or 13.2%, to $45.0 million for fiscal 2009, from $39.8 million for fiscal 2008. This increase was due to an increase in revenue recognized for new electrical penetrations of $3.4 million and an increase in revenue recognized for our nuclear reactor core detectors of $2.4 million, partially offset by a reduction in other replaceable detector revenue of $0.6 million.
 
Operating income in our Sensing Systems segment increased $4.7 million, or 45.8%, to $14.9 million for fiscal 2009, from $10.2 million for fiscal 2008. This increase was primarily due to increased revenue as well as a decrease in material costs due to declining prices over fiscal 2009 for precious metals and other raw materials, while operating expenses remained constant.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue in our Sensing Systems segment increased $10.8 million, or 37.0%, to $39.8 million for fiscal 2008, from $29.0 million for fiscal 2007. This increase was due to an increase in other replaceable detector revenue of $5.2 million, an increase in revenue recognized for new electrical penetrations of $4.2 million and an increase in sales of replaceable detectors in Canadian heavy water reactors of $1.4 million.
 
Operating income for our Sensing Systems segment increased $6.1 million, or 148.1%, to $10.2 million for fiscal 2008, from $4.1 million for fiscal 2007. This increase was primarily due to increased revenue and a $1.2 million reduction in amortization expense in fiscal 2008, as customer relationship intangible assets are amortized using an accelerated method to reflect estimated customer attrition patterns and rates. Other operating expenses remained constant between years.
 
Dosimetry Services
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue in our Dosimetry Services segment increased $0.7 million, or 2.3%, to $29.5 million for fiscal 2009, from $28.8 million for fiscal 2008. This increase was primarily due to an increase in sales to the small medical practitioner market.
 
Operating income in our Dosimetry Services segment increased $0.1 million, or 1.6%, to $7.9 million for fiscal 2009, from $7.7 million for the nine months ended March 31, 2008. This increase was principally due to increased revenue, offset by increased research and development expenses related to new product development.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue in our Dosimetry Services segment increased $1.1 million, or 4.0%, to $28.8 million for fiscal 2008, from $27.7 million for fiscal 2007. This increase was primarily due to increased business in the nuclear and medical end markets of $0.6 million and growth in sales of dosimeters to the small medical practitioner market of $0.2 million.
 
Operating income for our Dosimetry Services segment increased $1.9 million, or 33.2%, to $7.7 million for fiscal 2008, from $5.8 million for fiscal 2007. This increase was primarily due to increased revenue as well as a decrease in amortization costs.
 
Imaging Systems
 
Fiscal 2009 as Compared to Fiscal 2008
 
Revenue in our Imaging Systems segment decreased $4.1 million, or 19.3%, to $17.1 million for fiscal 2009, from $21.2 million for fiscal 2008. This decrease was primarily attributable to a reduction in sales of our high temperature cameras of $3.0 million. We have begun to experience some weakening of demand for these products into the industrial end market, as a result of the current economic climate. The products represented $7.3 million, or 42.6% of sales in fiscal 2009, compared to $10.3 million, or 48.0% of segment


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sales in fiscal 2008. Revenues for fiscal 2009 were negatively impacted by foreign currency movements by approximately $2.0 million, due to the weaker British pound.
 
Operating income in our Imaging Systems segment decreased $0.2 million, or 16.4%, to $1.1 million for fiscal 2009, from $1.3 million for fiscal 2008. This decrease was primarily attributable to the impact of a weaker British pound, with a $0.7 million positive currency impact on operating expenses partially offsetting the negative impact on revenues. Aside from the currency impact, there was a reduction of operating expenses in fiscal 2009 due to a decrease in facilities costs, primarily due to the consolidation of office facilities.
 
Fiscal 2008 as Compared to Fiscal 2007
 
Revenue in our Imaging Systems segment increased $0.5 million, or 2.6%, to $21.2 million for fiscal 2008, from $20.7 million for fiscal 2007. This increase was due to an increase in sales of high temperature cameras of $1.1 million, partially offset by a decrease in sales of cameras for the nuclear end market of $0.7 million.
 
Operating income for our Imaging Systems segment increased $1.1 million, or 549.3%, to $1.3 million for fiscal 2008, from $0.2 million for fiscal 2007. This increase was due to a decrease in operating expenses, primarily reduced compensation expenses, partially offset by higher costs for our camera products for the nuclear end market.
 
Liquidity and Capital Resources
 
We have financed our operations primarily through cash provided by operations and our lines of credit. As of June 30, 2009, our principal sources of liquidity consisted of $5.4 million of cash and cash equivalents and $13.8 million available under our revolving credit facilities. A substantial majority of our outstanding debt has been provided by ACAS, our principal stockholder, through senior and junior debt facilities as well as lines of credit. ACAS has also provided us with substantially all of our equity financing.
 
The terms of our credit agreements with ACAS require us and our subsidiaries to meet certain restrictive financial covenants and ratios computed quarterly, including a minimum fixed charge coverage ratio (adjusted EBITDA—capital expenditures over cash paid for interest, debt payments, tax payments and management fees), maximum debt to adjusted EBITDA ratio (total debt over adjusted EBITDA), minimum interest coverage ratio (adjusted EBITDA over cash interest expense) and a maximum capital expenditure level. We are in compliance with all our financial covenants as of June 30, 2009.
 
During fiscal 2009 our cash and cash equivalents decreased $3.6 million to $5.4 million. During this time we had cash inflows from operating activities of $10.0 million. This was offset by cash outflows from investing activities of $7.6 million, primarily for the purchase of property, plant and equipment, and financing activities of $5.9 million from borrowings under our revolving credit facilities.
 
During fiscal 2008, we incurred net cash outflows from investing activities of $3.6 million, primarily for the purchase of property, plant and equipment, and net cash outflows from operating activities of $8.5 million. These outflows were offset in part by net cash inflows from borrowings under our revolving credit facilities with ACAS of $10.3 million, as well borrowings under our third-party credit agreements of $4.3 million.
 
Our principal need for liquidity has been, and will continue to be, for working capital, to pay down debt and for capital expenditures. We believe that our cash flow from operations, available cash and cash equivalents and available borrowings under the revolving portion of our credit facilities will be sufficient to meet our liquidity requirements for at least the next twelve months. However, our ability to make scheduled payments of principal and to pay the interest on, or to refinance, our debt and to fund planned capital expenditures will depend on our future performance. Accordingly, we may be required to raise debt or equity financing, and such financing may not be available on acceptable terms.
 
Although we currently have no specific plans to do so, if we decide to pursue one or more significant strategic acquisitions, we may incur additional debt or sell additional equity to finance the purchase of those businesses.


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Historical Cash Flows
 
Cash Flow from Operating Activities
 
We generated $10.2 million and used $8.5 million and $4.0 million in cash flows from operating activities in fiscal 2009, 2008 and 2007.
 
The $18.7 million increase in cash provided from operating activities in fiscal 2009 versus fiscal 2008 was primarily due to (i) a $10.3 million decrease in net loss due mainly to higher revenue with slightly improved gross margins, (ii) a $10.2 million decrease in costs in excess of billings on uncompleted contracts due to timing of billings versus costs incurred and (iii) a $5.2 million decrease in receivables pledged to creditors which was partially offset by a $9.6 million decrease in accounts payable due to timing of material and service receipts versus payments.
 
The $4.5 million increase in cash used in operating activities in fiscal 2008 compared to fiscal 2007 was primarily due to (i) a $14.4 million increase in accounts receivable due to an increase in billings in the last 60 days of fiscal 2008 versus the last 60 days of fiscal 2007 as compared to a decrease in billings in the same period of fiscal 2007 versus fiscal 2006, (ii) a $10.5 million increase in deferred cost of sales associated with an increase in deferred contract revenue for the same period, (iii) an $8.7 million decrease in income taxes payable, (iv) a $2.6 million increase in costs in excess of billings on uncompleted contracts, (v) a $2.0 million decrease in deferred income taxes and (vi) a $1.2 million increase in prepaid expenses and other current assets, which was partially offset by (1) a $16.7 million increase in deferred contract revenue due to an increase in customer payments for future deliverables as of June 30, 2008 versus June 30, 2007 as compared to a decrease in customer payments for future deliverables as of June 30, 2007 versus June 30, 2006, (2) an $8.4 million increase in other liabilities, (3) a $5.7 million increase in accounts payable and (4) a $4.9 million increase in accrued expenses and other current liabilities.
 
Cash Flow from Investing Activities
 
We used $7.6 million, $3.6 million and $4.6 million in cash from investing activities during fiscal 2009, 2008 and 2007.
 
The $4.0 million increased use of cash in fiscal 2009 as compared to 2008 was due to higher purchases of property plant and equipment in fiscal 2009 as well as a one-time return of escrow funds that occurred in fiscal 2008. The $1.0 million decreased use of cash in fiscal 2008 as compared to 2007 was primarily due to the cash inflow of $2.8 million from escrow funds during fiscal 2008, which was partly offset by higher purchases of property, plant and equipment in that same year.
 
Cash Flow from Financing Activities
 
We used $5.9 million and generated $14.6 million and $10.2 million in cash from financing activities during fiscal 2009, 2008 and 2007.
 
The $20.5 million decrease in cash from financing activities in fiscal 2009 as compared to 2008 was due to a $14.3 million reduction in net borrowing on notes from ACAS as well as a $6.2 million reduction in net borrowing from third parties. The $4.4 million increase in cash from financing activities in fiscal 2008 as compared to 2007 was primarily due to increased borrowings from third parties.
 
Capital Expenditures
 
We had capital expenditures of $3.9 million, $5.1 million and $6.8 million in fiscal 2007, 2008 and 2009. The majority of our capital expenditures has been the replacement of existing equipment or the purchase of new equipment to support our continued growth.


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Contractual Obligations and Other Commitments
 
As of June 30, 2009, our contractual obligations and other commitments were as follows (in thousands):
 
                     
  Total  2010  2011-2012  2013-2014  Thereafter 
 
Debt obligations(1) $177,216  $6,962  $170,102  $152  $0 
Operating lease obligations  16,306   4,207   6,899   4,254   946 
                     
Total $193,522  $11,169  $177,001  $4,406  $946 
                     
 
 
(1)Includes only obligations to pay principal (as described below) and does not reflect the use of net proceeds from this offering. A portion of our debt has a PIK interest feature. As a result, the principal amount of such debt increases on a periodic basis. Also does not include pensions, which are described in Note 11 of our consolidated financial statements.
 
Credit Facilities and Long-term Debt
 
Our credit facilities and long-term debt with ACAS, our principal stockholder, are as follows (in thousands):
 
           
       Amount
 
       Outstanding
 
  Maturity
  Contractual
 as of
 
Credit Facilities and Long-term Debt Due  Interest Rate (%) June 30, 2009 
 
Revolving credit facilities:          
$20.25 million  July 2011  LIBOR + 4.5% $11,000 
$14.0 million  July 2011  LIBOR + 5%  13,997 
$8.2 million  July 2011  EURIBOR + 2%  3,631 
           
        $28,628 
           
Senior term notes:          
$24.9 million Senior Term B  July 2011  EURIBOR + 3% $24,944 
$7.5 million Senior Term B  July 2011  LIBOR + 8%  5,062 
$2.0 million Senior Term B  July 2011  LIBOR + 8%  1,938 
$4.0 million Senior Term C  Oct 2011  LIBOR + 9%  4,000 
$4.0 million Senior Term C  Nov 2011  LIBOR + 8.25%  4,000 
$27.0 million Senior Term D  Oct 2011  LIBOR + 6.5%  25,988 
$15.0 million Senior Term D  Oct 2011  LIBOR + 6.5%  14,437 
           
        $80,369 
           
Senior subordinated notes:          
$7.5 millionpaid-in-kind
  July 2011  14% $8,317 
$8.6 millionpaid-in-kind
  July 2011  15%  9,650 
$12.2 millionpaid-in-kind
  July 2011  EURIBOR + 11%  15,552 
           
        $33,519 
           
Junior subordinated notes:          
$4.3 millionpaid-in-kind
  July 2011  17% $5,112 
$4.3 millionpaid-in-kind
  July 2011  17%  5,112 
$1.25 millionpaid-in-kind
  May 2012  14%  1,386 
$4.9 millionpaid-in-kind
  July 2011  EURIBOR + 12%  6,666 
           
        $18,276 
           
Stockholder loan:          
$8.0 million  June 2011  Three-month
EURIBOR + 2%
 $9,220 
           
Total notes payable to ACAS       $170,012 
           


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We were in compliance with all of our financial covenants as of June 30, 2009. The credit facilities include customary events of default and affirmative, restrictive and financial covenants that, among other things, require us to maintain certain financial ratios and limit our ability to incur additional indebtedness, create liens, pay dividends, redeem capital stock or make certain other restricted payments or investments, sell assets including capital stock, engage in transactions with affiliates and effect a consolidation or merger. We are not in compliance with certain non-financial covenants that were in effect prior to the formation of Mirion. These non-financial covenants were negotiated with the predecessor companies (GDS, IST and Synodys) and were not amended at the time of the formation of Mirion. The non-financial covenants relate to matters such as changing the fiscal years or names of our subsidiaries, amending the charter documents and bylaws of our subsidiaries and the provision of audited financial statements to ACFS. We have obtained a waiver for the violations of non-financial covenants through July 1, 2010.
 
We also have a $1.1 million term loan that matures in November 2012 and bears interest at three-month EURIBOR + 1%, as well as a $2.4 million credit line that matures in June 2015 and bears interest at EURIBOR + 1%.
 
Recent Accounting Pronouncements
 
Business Combinations
 
In December 2007, the FASB issued Statement of Financial Standards No. 141(R),Business Combinations(“FAS No. 141(R)”). This statement changes the accounting for acquisition transaction costs by requiring them to be expensed in the period incurred and also changes the accounting for contingent consideration, acquired contingencies and restructuring costs related to an acquisition. FAS No. 141(R) is effective for fiscal years beginning on or after December 15, 2008, which is effective for our fiscal year beginning July 1, 2009. The adoption of FAS No. 141(R) is expected to change our accounting treatment for business combinations on a prospective basis beginning in the period it is adopted.
 
Fair Value Measurements
 
Effective July 1, 2008, we adopted the provisions of FAS No. 157,Fair Value Measurements(“FAS No. 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The fair value criteria are primarily applied prospectively upon adoption of FAS No. 157. FAS No. 157 was effective for fiscal years beginning November 15, 2007. In February 2008, the FASB issued FASB Staff PositionNo. 157-2, delaying the effective date of FAS No. 157 for non financial assets and non financial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis. We will adopt the delayed portions of FAS No. 157 beginning in the first quarter of our fiscal year ending June 30, 2010 and we do not expect the adoption of those delayed portions to have a material impact on our consolidated financial statements. The adoption of FAS No. 157 for financial assets and liabilities did not have a material impact on our consolidated financial statements.
 
In October 2008, the FASB issuedFSP 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP 157-3”).FSP 157-3 clarified the application of SFAS 157.FSP 157-3 demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive.FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on our financial position, results of operations or cash flows.
 
In April 2009, the FASB issued FSPFAS No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(“FSP 157-4”).FSP 157-4 provides additional guidance for estimating fair value when the market activity for an asset or liability has declined significantly.FSP 157-4 is effective for interim and annual periods ending after June 15, 2009 and will be applied prospectively. The implementation of this standard did not have a material impact on our financial position, results of operations or cash flows.


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Fair Value Option for Financial Assets and Liabilities
 
In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115(“FAS No. 159”). FAS No. 159 provides the option to measure, at fair value, eligible financial instrument items using fair value, which are not otherwise required to be measured at fair value. The irrevocable decision to measure items at fair value is made at specified election dates on aninstrument-by-instrument basis. Changes in that instrument’s fair value must be recognized in current earnings in subsequent reporting periods. If elected, the first measurement to fair value is reported as a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. We did not elect to measure eligible assets at fair value. The standard was effective for us beginning in fiscal 2009.
 
Disclosures about Derivative Instruments and Hedging Activities
 
In March 2008, the FASB issued Statement of Financial Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133. The statement establishes enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities and its related interpretations and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We adopted this statement at the beginning of the third quarter of our fiscal 2009, as required.
 
Instruments Granted in Share-Based Payment Transactions
 
In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”)03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. This FSP states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions in this FSP. Earlier adoption is prohibited. We will adopt this FSP beginning fiscal 2010, as required. We are currently evaluating the impact FSPEITF 03-6-1 will have on our consolidated financial statements when it becomes effective.
 
Disclosures about Postretirement Benefit Plan Assets
 
In December 2008, the FASB issued Staff Position No. FAS 132(R)-1,Employers’ Disclosures about Postretirement Benefit Plan Assets,which is effective for fiscal years ending after December 15, 2009. This FSP requires additional disclosures such as: the investment allocation decision making process; the fair value of each major category of plan assets; inputs and valuation techniques used to measure the fair value of plan assets; and significant concentrations of risk within plan assets. We will adopt this FSP beginning in fiscal 2010, as required. We do not believe the adoption of this FSP will have a material impact on our consolidated financial position, results of operations and cash flows.
 
Recognition and Presentation ofOther-Than-Temporary Impairments
 
In April 2009, the FASB issued FSPFAS No. 115-2 andFAS No. 124-2,Recognition and Presentation ofOther-Than-Temporary Impairments.FSP 115-2 andFSP 124-2 establish a new method for recognizing and reportingother-than-temporary impairment of debt securities and also contain additional disclosure requirements for both debt and equity securities.FSP 115-2 andFSP 124-2 are effective for interim and


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annual periods ended after June 15, 2009. The implementation of this standard did not have a material impact on our financial position, results of operations or cash flows.
 
Interim Disclosures about Fair Value of Financial Instruments
 
In April 2009, the FASB issued FSPFAS 107-1 and APB28-1,Interim Disclosures about Fair Value of Financial Instruments.This FSP amends FAS No. 107,Disclosures about Fair Value of Financial Instruments,to require an entity to provide disclosures about the fair value of financial instruments in interim financial information. This FSP also amends Accounting Principles Board Opinion No. 28,Interim Financial Reporting,to require those disclosures in summarized financial information at interim reporting periods. FSPFAS 107-1 and APB28-1 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We will adopt this FSP beginning in our first quarter of fiscal 2010.
 
Subsequent Events
 
In May 2009, the FASB issued FAS No. 165,Subsequent Events.FAS 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date—that is, whether that date represents the date the financial statements were issued or were available to be issued. FAS 165 is effective for interim and annual periods ended after June 15, 2009 and should be applied prospectively. We have adopted this statement for fiscal 2009.
 
Codification and the Hierarchy of Generally Accepted Accounting Principles
 
In June 2009, FASB issued FAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. FAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (U.S. GAAP). This Statement is effective for our first quarter of fiscal 2010. Beginning with the first fiscal quarter of 2010, references made to U.S. GAAP by us will use the new Codification numbering system prescribed by the FASB. As the Codification is not intended to change or alter existing U.S. GAAP, we do not expect FAS 168 to have any impact on our consolidated financial statements.
 
Qualitative and Quantitative Disclosures about Market Risk
 
Foreign Exchange Risks
 
We have foreign currency exposure related to our operations in France, Germany and the United Kingdom, as well as in other foreign locations. This foreign currency exposure arises primarily from the translation or re-measurement of our foreign subsidiaries’ financial statements into U.S. dollars. For example, a substantial portion of our annual revenue and operating costs are denominated in euros, and we have exposure related to revenue and operating costs increasing or decreasing based on changes in currency exchange rates. If the U.S. dollar increases in value against these foreign currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will decrease. Conversely, if the U.S. dollar decreases in value against these foreign currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will increase. Thus, increases and decreases in the value of the U.S. dollar relative to these foreign currencies have a direct impact on the value in U.S. dollars of our foreign currency denominated assets and liabilities, even if the value of these items has not changed in their original currency. At present we do not purchase forward contracts as hedging instruments, but may do so as circumstances warrant.


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We also have 17 foreign currency window contracts to mitigate currency exposures from fluctuations in the euro/U.S. dollar exchange rate. These contracts resulted in a net gain of $94,000 during the year ended June 30, 2009.
 
Interest Rate Risks
 
We are subject to interest rate risk in connection with our long-term debt and our revolving lines of credit. As of June 30, 2009, we had total long-term debt of $170.3 million. Our debt consists of both variable interest rate as well as fixed interest rate debt. As of June 30, 2009, we had $146.6 million of debt with variable interest rates. We swapped approximately $1.8 million of variable debt for a fixed rate of 3.865% that expires in November 2012. A 1% increase in our variable interest rates would increase our annual interest expense and decrease our cash flows and income before taxes by approximately $1.5 million per year.
 
Inflation
 
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business, financial condition and results of operations.


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INDUSTRY
 
We sell our radiation detection, measurement, analysis and monitoring products and services into the global nuclear, defense and medical end markets. We believe that our end markets are characterized by strong fundamentals that support an established revenue base, as well as provide numerous growth opportunities.
 
Nuclear
 
The nuclear end market spans the entire nuclear fuel cycle, including mining, enrichment, fuel manufacturing, nuclear power generation, waste management and fuel reprocessing. Key nuclear installations include mines, fuel fabrication facilities, commercial nuclear power reactors, reprocessing facilities, research facilities, military facilities and ships, weapons facilities and waste storage facilities. We sell products and services for use in each of these types of installations, with commercial nuclear power reactors representing the majority of our sales into the nuclear end market.
 
Increasing Global Demand For Electricity and Nuclear Power
 
Increasing electricity demand.  The International Energy Agency, or IEA, projects a near doubling of world electricity demand from 2006 to 2030, creating the need for approximately 4,500 GWe of new generating capacity. The IEA projects this increase in electricity demand is expected to be driven by a wide range of global trends including (i) population growth, (ii) increasing standards of living in the developing world, including in China and India and (iii) continued proliferation and commercialization of technologies dependent on the delivery of a reliable electricity supply, such as consumer electronics and information technology.
 
Increasing demand for nuclear power.  We believe that nuclear energy is the best-positioned alternative to fossil fuels (e.g., coal, natural gas and oil) with the capability to meet electricity demand for base-load, or continuously delivered, electricity production. In addition, increased public concern regarding the effects of greenhouse gas emissions has accelerated interest in reliable, low-emissions alternatives to fossil fuels, such as nuclear power. The use of other renewable energy sources, such as wind and solar power, for base-load generation suffers from issues of intermittency while also requiring major investments to create a transmission grid capable of moving the power from the remote geographic areas where it is generated to consumers, and to adequately manage variable load-shifting requirements. We believe the existing global installed base of nuclear power reactors to be the most cost-effective and reliable source of base-load energy currently available, with relatively low marginal cost of energy production, as compared to fossil fueled generation with higher input cost volatility.
 
Increased public support for nuclear power also has been augmented by an increasing global desire to reduce dependency on foreign sources of fossil fuels as well as the recognition that nuclear power has maintained a very safe operating track record. Significant regulatory oversight, as well as rigorously enforced safety, quality and inspection protocols, have helped the nuclear industry achieve an excellent safety record. Many governments around the world are adopting policies favorable to nuclear power.
 
Nuclear Power Global Installed Base
 
According to the WNA, as of September 2009, there were 436 nuclear power reactors in operation globally. Additionally, there are 50 reactors currently under construction with an additional 137 reactors planned and 295 proposed worldwide. The average expected life cycle of an NPP (which contains one or more reactors), including planning, construction, operation and decommissioning, is between 55 and 80 years, of which the expected operating life is 40 to 60 years.
 
As of September 2009, nuclear power was responsible for approximately 15% of electricity generation globally and substantially more in certain nuclear-intensive countries. As shown in the table below, in 2009, nuclear


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power provided 76% of the electricity output in France, over 40% in Belgium, Ukraine and Sweden, over 30% in Switzerland, South Korea and the Czech Republic and over 20% in Germany, Japan and the United States.
 
   
  Percentage of National Electricity Output from
Number of Operational Reactors by Country Nuclear Power by Country
 
(BAR CHART) (BAR CHART)
 
 
Source: World Nuclear Association, as of September 2009.
 
Nuclear power plant re-licensing.  Regulatory authorities worldwide have established timely license renewal processes and requirements to extend plant life in a manner that assures safe operation. In the United States, for instance, the Atomic Energy Act and NRC regulations limit commercial power reactor licenses to an initial term of 40 years, but also permit such licenses to be renewed for up to an additional 20 years. The NRC views the timely renewal of licenses as an important step to ensure an adequate domestic energy supply. Of the 104 nuclear power reactors in operation in the United States as of May 2009, eight are subject to license expiration within the next five years. In the United States, the NRC has approved license renewal for 54 reactors to date, with an additional 21 reactor re-licensings currently under review and 23 more reactor re-licensing applications anticipated. License renewals are generally approved for those plants where the reactor continues to operate at an efficient level and only after any necessary upgrades to the instrumentation & control equipment and systems have been made.
 
Nuclear power plant up-rating.  NPP up-rating is a licensing, improvement and equipment modification process designed to enhance power output of existing plants by enabling reactors to operate at increased temperature and pressure levels. Utilities have used power up-rates since the 1970s as a way to generate more electricity from existing nuclear plants. In the United States alone, 127 up-rates have been approved by the NRC as of July 2009, resulting in the creation of an additional 5,695 MWe capacity within the existing nuclear footprint. Collectively, these up-rates have added generating capacity at existing plants that is equivalent to more than five new reactors, according to the NRC. In most cases, up-rating activities involve an upgrade of many critical reactor components, including instrumentation & control equipment and systems.
 
Nuclear power capacity factors.  Increasing the capacity factor of existing plants provides a means of generating more nuclear power without building new reactors. The capacity factor of a power plant is defined as its actual power generation divided by its rated capacity. The average capacity factor for U.S. NPPs was 56% in 1980, but improved substantially to greater than 90% in 2002, according to a 2008 report of the United States Energy Information Administration. Based on this data, we estimate that the increase in capacity factor from 1990 to 2008 was equivalent to the construction of approximately 26 new reactors at 1,000 MWe capacity each. Suppliers providing reliable radiation detection, measurement, analysis and monitoring products and services have played a crucial role in the improvement of capacity factors.
 
New Nuclear Power Plant Construction
 
The re-licensing, up-rating and increased capacity factors have helped to improve the output of the existing nuclear power reactor fleet. However, in order to keep pace with increasing demand for nuclear power


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globally, 50 new reactors are currently under construction, with an additional 137 reactors planned and 295 proposed for future development, as of September 2009.
 
We expect strong long-term economic growth in Asia and Eastern Europe to drive the demand for new nuclear power reactor builds, as economic growth and power usage in these regions would require additional power generation capacity. Additionally, the U.S. government has also initiated programs to provide incentives to build new reactors. The Energy Policy Act of 2005, for example, provides a tax credit of 1.8 cents perkilowatt-hour for up to 6 GWe of capacity built before 2021 and also authorizes the Department of Energy to issue loan guarantees worth approximately $18.5 billion for up to 80% of the cost of new nuclear projects.
 
Worldwide Nuclear Power Reactors
 
                         
  Nuclear
                
  Electricity
  % of National
  Number of Reactors 
  Generation 2008
  Electricity
     Under
       
Country
 (Billion KWh)  Output  Operable  Construction  Planned(1)  Proposed(2) 
 
United States  809   20   104   1   11   19 
France  418   76   59   1   1   1 
Japan  241   25   53   2   13   1 
Russia  152   17   31   9   7   37 
South Korea  144   36   20   5   7   0 
Germany  141   28   17   0   0   0 
Canada  89   15   18   2   4   3 
Ukraine  84   47   15   0   2   20 
Sweden  61   42   10   0   0   0 
China  65   2   11   18   35   90 
United Kingdom  53   14   19   0   4   4 
Spain  56   18   8   0   0   0 
Belgium  43   54   7   0   0   0 
Switzerland  26   39   5   0   0   3 
Czech Republic  25   33   6   0   0   2 
Rest of World  194   N/A   53   12   53   115 
                         
Total
  2,601   15   436   50   137   295 
                         
 
 
Source: World Nuclear Association, as of September 2009.
 
(1)  Planned reactors have approvals, funding or major commitments in place, mostly expected to be in operation within eight years, or with construction well advanced but suspended indefinitely.
 
(2)  Proposed reactors have specific program or site proposals, with expected operation within 20 years.
 
Nuclear Decommissioning
 
Following the useful life of any nuclear reactor, it must be decommissioned and decontaminated. The decommissioning process can take ten years or more to complete, with the facility requiring ongoing radiation detection, monitoring and measurement services throughout this period. Through 2007, 90 commercial nuclear power reactors and 250 research reactors had been retired from operation globally.


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Other Nuclear Facilities
 
According to the WNA, there are more than 280 operational nuclear research reactors in 56 countries, with more under construction, as of March 2009. Most of these reactors reside on university campuses and are used for research and training, materials testing, medicine and industrial functions. Additionally, the WNA estimates that, as of March 2009, approximately 150 maritime vessels, primarily naval submarines, are powered by more than 220 nuclear reactors. Although not used for commercial power generation, these facilities require similar levels of radiation detection, measurement, analysis and monitoring products and services as commercial reactors.
 
Defense
 
Our global defense end market is driven by a combination of military, civil defense and event-driven security spending. The proliferation of global security threats has reached unprecedented levels, driven by an unstable geopolitical climate, the emergence and expansion of terrorist organizations and the proliferation of radiological and nuclear technologies. Taken together, these threats have the potential to cause significant human casualties and economic loss. As a result, militaries, civil defense and other security organizations have bolstered investment in the prevention and detection of radiological threats as well as in technologies capable of detecting and monitoring radiation levels in the aftermath of radiological attack.
 
Militaries throughout the world utilize radiation detection technologies for troop security. Spending on personnel protection and detection of radiological threats is a high priority for both NATO and non-NATO militaries and, as such, has led many countries to provide dosimeters to military personnel on a standard-issue basis. We believe that spending on these technologies will remain a high priority among armed forces globally.
 
Spending within the global civil defense, or homeland security, market has rapidly expanded in recent years based on increased threats presented by terrorist organizations. As a result, civil defense, first responder and other security organizations have invested in technologies and services designed both to protect civil defense personnel, civilians and domestic infrastructure from radiological threats and to detect and monitor radiation levels following a radiological incident, such as the release of a nuclear or other radiological device. In addition, homeland security organizations are increasingly focused on enhancing radiological detection capabilities at critical points of entry, such as airports, ports and borders. Within the United States, for example, the Domestic Nuclear Detection Office, or DNDO, was created within the Department of Homeland Security to implement a comprehensive inter-agency system to detect, report and respond to nuclear or radiological threats. The enacted 2009 DNDO budget was $514.2 million, representing a 7% and 6% increase from the enacted 2007 and 2008 levels.
 
Additionally, large-scale public meeting events have greatly increased security measures at facilities, including rapid adoption of radiological detection technologies to address the increased threat of radiological attacks, due to their profile as high visibility targets. For example, the Olympic Games increased its security spending ten-fold from $180 million for the 2000 Sydney summer games to $1.9 billion for the 2008 Beijing summer games. We believe security spending at the Olympic Games and other public events and venues will continue to expand and increasingly incorporate radiological detection capabilities as a necessary component of crowd and facility security solutions.
 
Medical
 
Nuclear and radiological medical technologies are used for diagnostic and therapeutic procedures. These technologies provide highly accurate, cost-effective and less invasive alternatives compared to traditional techniques. Procedures where radiation exposure is most prevalent include radiodiagnostic procedures, such as x-rays and computed axial tomography (CAT) scanning, as well as radiotherapeutic procedures, such as external linear accelerator therapy, gamma knife stereotactic radiotherapy and brachytherapy. Medical imaging improves diagnosis and treatment of a variety of illnesses and conditions, including cancer, stroke, heart disease, trauma, sports injury and abdominal and neurological conditions. According to the WNA, as of


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August 2009, there are over 10,000 hospitals worldwide using radioisotopes in medicine, with about 90% of the procedures for diagnostics. There are approximately 37 million nuclear medicine procedures performed per year globally, with the United States and Europe accounting for approximately 18 million and 10 million procedures per year.
 
As a result of the proliferation of radiological medical technologies, hospitals, clinics and other medical facilities rely on dosimetry systems and services to ensure the safety of both medical personnel and patients. The proliferation of nuclear and radiological medical technologies coupled with increased use of radiological medical procedures have increased the market for radiation detection and monitoring products and services. The WNA estimates that the use of radiopharmaceuticals in diagnosis continues to grow at over 10% per year.
 
Other
 
Other end markets include industrial facilities such as cement kilns, pulp and paper mills and coal/gas fired power boilers that utilize high-temperature industrial processes. These high-temperature processes are critical to plant operation and must be accurately monitored to ensure optimal operating conditions. Imaging equipment capable of withstanding the high temperatures and environmental conditions found in these facilities is employed to monitor and optimize process efficiency. Similar to the products employed in NPPs, these imaging systems require routine replacement or upgrades.


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BUSINESS
 
Business Overview
 
We are a leading global provider of radiation detection, measurement, analysis and monitoring products and services to the nuclear, defense and medical end markets. Our customers rely on our solutions to protect people, property and the environment from nuclear and radiological hazards. Our products and services include: dosimeters; contamination & clearance monitors; detection & identification instruments; radiation monitoring systems; electrical penetrations; reactor instrumentation & control equipment and systems; dosimetry services; imaging systems; and related accessories, software and services. Many of our end markets are characterized by the need to meet rigorous regulatory standards, design qualifications and operating requirements. We believe these industry dynamics create substantial barriers to entry, thereby reinforcing our leading market position. We have successfully leveraged the strength of our nuclear platform to expand the commercial applications of our technologies to defense and other end markets. The diversity of our end markets and the global nature of our customer base are illustrated in the charts below:
 
   
Fiscal 2009 Revenue by End Markets
 Fiscal 2009 Revenue by Geography
   
(PIE CHART) (PIE CHART)
 
Fiscal 2009 Revenue: $207.6 Million
 
For more than 50 years, we and our predecessor companies have delivered products and services that help ensure the safe and efficient operation of nuclear facilities. We believe the breadth and proven performance of our solutions support our longstanding strategic customer relationships across diverse end markets. Our products and services have been sold directly and indirectly to a variety of end-use customers including, but not limited to, all of the U.S. nuclear power producers, 397 of the global installed base of 436 active nuclear power reactors, many of the leading reactor design firms, 17 of the 28 NATO militaries, numerous international government and supranational agencies, as well as medical service providers and industrial companies worldwide.
 
Our broad product and services portfolio of radiation detection, measurement, analysis and monitoring solutions is supported by our research and development organization of 159 scientists, engineers and technicians, who represented approximately 19% of our workforce as of June 30, 2009. We possess numerous product qualifications, trade secrets and patents that support our market position and our ability to deliver next generation products and services. In addition, we maintain design, manufacturing and sales capabilities across seven countries, enabling us to capitalize on growth opportunities, including the anticipated increase in demand for nuclear power and the ongoing spending for defense and homeland security.
 
Our financial performance is driven by the replacement of products and the recurring provision of services into our core end markets, as well as the construction of new NPPs globally. Many of our products are ordered well in advance of the anticipated shipment date, providing visibility into future revenue through our backlog and deferred revenue, which were $184.2 million and $43.4 million as of June 30, 2009. We generated revenue of $207.6 million, Adjusted EBITDA of $41.4 million and a net loss of $3.7 million for fiscal 2009. See page 8 for a definition and reconciliation of Adjusted EBITDA to net income.


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Our Market Opportunity
 
We believe that significant opportunities for growth exist within each of our primary end markets.
 
Nuclear
 
Our legacy in the nuclear industry positions us to capitalize on the growth in demand for radiation detection, measurement, analysis and monitoring products and services in each phase of the nuclear life cycle, as outlined in the chart below.
 
(CHART)
 
We believe the following dynamics support the sustainability of our existing business and will drive new sources of organic growth.
 
Predictable upgrade, replacement and retirement cycles.  Our radiation detection, measurement, analysis and monitoring products and systems have predictable life spans, typically ranging from four to 25 years. Our complex monitoring systems typically require at least one comprehensive upgrade during their useful life to optimize their functionality. In addition, many of our products require replacement parts, components and service due to normal wear during their useful lives.
 
Aging installed base.  The existing global installed base of nuclear reactors has an average age of 25 years. This aging installed base requires frequent product replacements and upgrades over an operating life cycle that generally ranges from 40 to 60 years. Furthermore, as reactors reach the end of their useful lives, the onset of a multi-year “decommissioning” process represents a further revenue opportunity in the reactor life cycle for our products.
 
Large installed base of “orphaned” products and systems.  Most currently operating reactors were commissioned prior to 1990. Operators of many aging NPPs often must consider new suppliers to meet their detection needs as many of the suppliers of legacy radiation detection, measurement, analysis and monitoring systems no longer service the nuclear industry.
 
Reduction in trade barriers.  Historically closed markets, such as India, have recently opened due to enhanced globalization and free trade.
 
Dosimetry outsourcing.  NPPs have historically managed the majority of their dosimetry service requirements internally. However, the cost benefits of outsourcing these services have become increasingly attractive to NPP operators as they focus on improving profitability and enhancing service.


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New build opportunity.  We expect the increase in the installed base of nuclear reactors worldwide to provide opportunities across our offerings. The nuclear industry is experiencing robust growth in activity related to new reactor build. As of September 2009, there were 50 reactors under construction, 137 planned and 295 proposed, according to the WNA. The first phase of this “nuclear renaissance” is occurring internationally and our global footprint positions us to capitalize on these opportunities. Since the early stages of reactor development generally represent more than 20% of our revenue opportunity over the life cycle of a reactor, we are positioned to benefit from increased global reactor construction. In addition, as new plants are added to the global nuclear fleet, we believe our recurring revenue opportunity associated with replacements, spares, software, services and system upgrades should continue to increase. Although no new commercial reactors have been ordered in the United States since the 1970s, there is support to build new nuclear power reactors in the United States, including federal government incentives, the need to meet long-term energy demand with reduced CO2 emissions and an increased focus on energy self-sufficiency.
 
Defense
 
Focus on military personnel.  Global militaries must contend with radiological threats and the difficulties of protecting soldiers and monitoring areas of enemy engagement. The combination of our active dosimeters and telemetry technology provide a differentiated solution that addresses the radiation detection needs of modern militaries.
 
Increased civil defense spending on radiation detection.  Civil defense and homeland security organizations are focused on preventing the illicit transportation of radiological materials across borders. The commercial application of our radiation detection expertise positions us to benefit from government spending on detection technologies.
 
Enhanced event specific security.  The visibility of high profile events and venues has increased their value as targets of terrorist activity. In response, security spending at events, such as the Olympic Games, has increased substantially, as has the utilization of radiation detection technology, providing an expanding market opportunity for our products.
 
Medical
 
Radiological procedure growth.  The use of radiodiagnostic and radiotherapeutic procedures is expanding globally due to aging population demographics, technological advancements and emerging middle classes in China and India. As the use of radiological procedures increases in the medical industry, so does our associated market opportunity.
 
Dosimetry outsourcing.  In some regions outside the United States, dosimetry services for health care practitioners historically have been provided by government agencies. We believe that more government agencies are outsourcing dosimetry services to private providers due to favorable cost dynamics in some regions, such as Europe. This provides a market opportunity where we can leverage our technical expertise and North American service experience to expand into other regions.
 
Our Competitive Strengths
 
We believe that the following competitive strengths will enable us to maintain our leadership position and capitalize on growth opportunities in our end markets:
 
Trusted radiation detection, measurement, analysis and monitoring provider.  The nuclear industry is highly regulated and requires compliance with strict product specifications. Our track record in the nuclear end market enables us to gain market share across our product and service offerings. We and our predecessor companies have served the radiation detection, measurement, analysis and monitoring needs of our customers for over 50 years, having developed trusted, recognized brands supported by our tradition of technical excellence, product reliability and customer service. In addition, we have leveraged our detection expertise to commercialize applications for the defense and medical end markets. In the defense market, our products serve as critical components of personnel protection for military and civil defense applications around the


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world while our medical products and services support important reporting and measurement requirements for medical personnel.
 
Broad and complementary product and service portfolio.  We are one of the only companies that offers radiation detection, measurement, analysis and monitoring products and services to satisfy customer requirements throughout the NPP life cycle. Our comprehensive product line supports virtually all radiation detection and monitoring needs associated with the nuclear, defense and medical end markets. As a result, we believe that we have consistently gained market share as some of our key customers rationalize their supply chain. Furthermore, our portfolio provides us with a natural opportunity to cross-sell our products and services to our customers. For example, our relationships developed through sales of dosimeters led us to win a recently announced contract to supply radiation monitoring systems and electrical penetration adaptors to Ringhals NPP in Sweden.
 
Large installed base driving recurring revenue.  We possess longstanding customer relationships in all of our end markets. As of June 30, 2009, our products were installed at 397 of the 436 active nuclear power reactors globally, which have an average age of 25 years. This installed base drives recurring revenue through replacement and service cycles associated with our offerings and the typical 40 to 60 year operating life cycle of an NPP. The length and quality of supplier relationships are important customer buying criteria due to high switching costs and the importance of proven product reliability. In addition, we maintain relationships with global military and government organizations that value operating longevity and technological expertise. For example, our products have been sold to 17 of the 28 NATO militaries as well as the U.S. Departments of Energy, State, Defense and Homeland Security. Our customers’ focus on personnel protection drives their recurring expenditures on service, recalibration and product upgrades in our defense end market.
 
Technical leadership creates high barriers to entry.  Across our end markets, we design our products to meet demanding customer specifications, qualifications and regulatory requirements. In many circumstances, we design our products to be compatible with highly complex facilities and operate effectively in harsh environments. Reliability is critical for our safety-related products since a product failure may cause an unplanned nuclear power reactor shutdown resulting in costs that may exceed $1.0 million per day.
 
Global footprint designed to meet local customer needs.  Our global footprint, augmented by our established network of suppliers and distributors, enables us to be responsive to our customers and provide locally customized solutions. We operate facilities in seven countries, accommodating the desire of certain of our customers to procure products and services from local providers. Sales outside of the United States and Canada accounted for 62.6% of total revenue for fiscal 2009. We believe that our established global infrastructure provides a scalable platform to meet the growing worldwide demand for our products and services.
 
Seasoned management team complemented by highly skilled engineers.  We are led by an experienced management team with a mix of private sector and government experience across different industries and functions. Our five divisional presidents have an average tenure of over 20 years in the nuclear industry. Our management team has successfully integrated the legacy businesses of which we are comprised, and has positioned us as a global leader in radiation detection, measurement, analysis and monitoring. Our senior management team is complemented by a team of 159 scientists, engineers and technicians. A number of our employees are participants in international and U.S. standards setting organizations related to radiation detection in the nuclear, defense and medical end markets. Through these activities, we help define the setting of standards and preview changes that impact our products, customers and end markets.
 
Our Strategy
 
Our objective is to continue enhancing our position as a leading provider of radiation detection, measurement, analysis and monitoring products and services for the global nuclear, defense and medical end markets. We intend to achieve this through the following strategies:
 
Exploit under-penetrated market opportunities.  We believe that we can exploit historically under-penetrated segments of our end markets by leveraging our leadership positions across our major product categories. For example, we have leveraged our market-leading position in active dosimetry in the North American nuclear market to increase sales of our contamination & clearance monitors, as evidenced by the


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sale of over 100 whole body contamination monitors to Bruce Power L.P., a large Canadian nuclear power generating company.
 
Expand addressable market.  We believe that substantial opportunities exist for us to expand our addressable market by marketing our products and services to customers in new geographic regions; providing products and services to customers moving to an outsource model; entering markets where the government is privatizing services; and introducing new applications for existing technologies.
 
 • Geographic expansion.  Although we sold products and services to customers in over 90 countries between fiscal 2006 and 2009, there remain international markets where we believe we can increase our presence. One such market is India, where we intend to leverage our relationships with leading reactor design firms to capitalize on the opening of the nuclear end market to U.S. firms due to a recent treaty ratification. Other markets for expansion include the Middle East, Eastern Europe and the former Soviet Union, where we intend to increase our presence by leveraging relationships with local partners.
 
 • Customer outsourcing.  We believe we will continue to capitalize on customer outsourcing within the nuclear end market. Within the United States, several NPP operators have recently outsourced their dosimetry services in order to reduce costs. We have been able to benefit from economies of scale as well as advantages in materials procurement and processing technology to provide enhanced dosimetry services to many of these NPPs at a lower cost.
 
 • Service privatization.  In regions outside the United States, dosimetry services have historically been provided by government agencies. However, privatization of dosimetry services is accelerating in some regions, such as Europe, as providers seek to reduce costs and benefit from enhanced service offerings, providing an opportunity to leverage our expertise and North American service experience.
 
 • New applications for existing technologies.  A portion of our development effort is focused on adapting existing technologies to alternative applications. For example, in response to market demand, we adapted our proprietary fiber-optic detector technology used in our TwoStep-Exit whole body monitor designed for the nuclear end market to create the HandFoot-Fibre hand and foot monitor designed for both the nuclear and medical end markets.
 
Develop new products and services.  We believe that significant near-term opportunities exist for us to develop new products and services by capitalizing on our understanding of our customers’ needs and requirements. For example, we developed our proprietary fiber-optic technology that is used in certain of our contamination & clearance monitors through consultation with existing customers. This technology is attractive to customers because, unlike conventional contamination & clearance monitors, its detection functionality does not require a gas supply, thus reducing maintenance and total life cycle costs for end users. This technology recently helped us secure a sale for installation in two Russian utilities.
 
Continuously improve our cost structure and productivity.  As we continue to grow our business, we have implemented a coordinated program of ongoing operating improvements, such as rationalizing costs, optimizing our product portfolio, minimizing working capital requirements, as well as reducing the use of subcontractors, that we believe will permit us to improve our operating margins. We will continue to actively pursue other continuous improvement initiatives through programs across all of our operating segments.
 
Pursue strategic acquisitions.  We have successfully integrated acquisitions to augment our organic growth. We were formed by the merger of GDS, IST and Synodys, each of which was a leader in its field. Since our formation, we have effectively integrated these businesses, creating a global leader in radiation detection, measurement, analysis and monitoring. We intend to further complement our organic growth with selective acquisitions that enhance our existing products and services, strengthen our position with existing customers and enable us to expand into new markets.


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Our Segments
 
Our segments correspond to our five operating divisions: Health Physics, Radiation Monitoring Systems, Sensing Systems, Dosimetry Services and Imaging Systems.
 
Health Physics
 
The Health Physics division encompasses three major product lines focused on detecting radiation and protecting individuals from hazardous exposure. The dosimeters, contamination & clearance monitors, and detection & identification equipment have applications across the nuclear, defense and medical end markets. The products in our Health Physics division are summarized below:
 
         
Product Category End Markets Applications NPP Life Cycle Phase Products
 
Dosimeters •   Nuclear

•   Defense

•   Medical
 Pager-sized personnel monitors which monitor radiation dose rate and cumulative dose, along with readers, telemetry, software and other accessories •   Plant operation

•   Recommissioning

•   Decommissioning

•   Waste management
 •   Active dosimeters

•   Passive dosimeters

•   Readers

•   Calibrators

•   Dosimetry software

•   Telemetry systems

•   Accessories

•   Software

•   Services
         
Contamination & Clearance Monitors •   Nuclear

•   Defense

•   Medical
 Stationary systems designed to detect radioactive contamination of people, waste, tools, laundry, vehicles and cargo •   Plant operations

•   Recommissioning

•   Decommissioning

•   Waste management
 •   Body monitors

•   Waste chambers

•   Tool monitors

•   Laundry monitors

•   Vehicle monitors

•   Accessories

•   Software

•   Services
         
Detection & Identification Devices •   Nuclear

•   Defense

•   Medical
 Hand-held and fixed devices used for detecting and locating ionizing radiation sources and/or spectroscopically identifying the active radioisotopes •   Plant operations

•   Recommissioning

•   Waste management
 •   Survey meters

•   Handheld identifiers

•   Spectroscopic portal monitors

•   Accessories

•   Software

•   Services
 
Dosimeters
 
Our dosimeter product line, which measures ionizing radiation dose, consists of both active and passive dosimeters. Active dosimeters detect and measure radiation levels in real time and provide warnings if the dose rate or cumulative dose exceeds specific thresholds. Passive dosimeters are worn by personnel and monitor cumulative radiation dosage.
 
Our active dosimeters are most often utilized in NPP and defense environments. Active dosimeters are typically pager sized, and may be worn or fix-mounted, with some models having wireless capabilities. We


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generally sell our dosimeters as part of larger systems, which often include readers, software, telemetry and other accessories.
 
Our active dosimeters have an average lifespan of approximately seven to ten years, depending on the usage and environment. Replacement cycles can vary by country, depending on the applicable regulatory regime or customer practices. This provides recurring revenue opportunities as customers must replace and upgrade components during this timeframe. In addition, as companies upgrade their dosimeters, they often purchase upgraded readers, software, services and accessories.
 
We believe we are a global leader in providing active dosimetry products and services to the nuclear end market. Over 68% of operating NPPs in the United States use our active dosimetry products and services. In addition, sales to the defense end market constitute a significant portion of our active dosimeter revenue. For example, 17 of the 28 NATO militaries have purchased our active dosimeters. We designed our military dosimeter to be flash-dose capable, enabling the device to effectively measure radiation dose following a nuclear event. Also, civil security forces in various countries, including first responders from France, Italy and the United States, use our active dosimeters to assess radiological risk.
 
We also sell passive dosimeters, which are worn by nuclear, defense and medical and industrial workers with the potential to be exposed to radiation. As with active dosimeters, we typically sell passive dosimetry equipment as a system, consisting of dosimeters, readers, accessories and software.
 
Contamination & Clearance Monitors
 
Our contamination & clearance monitors include products that detect alpha, beta, gammaand/or neutron contamination of objects of various sizes and types, from people to trucks. We have a wide range of products, ranging from small tool monitors to whole body monitors for personnel, to large portal monitors for vehicles and cargo. Our monitors utilize gas, inorganic or plastic scintillators with fiber-optic technology to detect radioactive contamination. Our patented fiber-optic technology is differentiated in the market because its detection functionality does not require a gas supply, thus reducing maintenance and total life cycle costs for end users.
 
In the nuclear end market, our monitors are used to screen personnel, their clothing and tools, as well as vehicles entering and exiting reactor sites. In the defense end market, our products are used for homeland security applications to screen people, luggage, vehicles and cargo transiting a port or border. In the medical end market, our monitors are used to screen the hands and feet of nuclear medicine workers in hospitals and are used in the steel industry to screen scrap metal for radioactive contamination.
 
Detection & Identification Devices
 
We provide a suite of devices that detect, locate and identify radioactive isotopes. These are typically handheld or fixed devices and can also be integrated into more complex mobile systems. For example, our SPIR Ident product has been incorporated into both military vehicles and helicopters. These detection & identification devices distinguish themselves through their high level of sensitivity and their capacity to distinguish between different radioisotopes using spectroscopy identification algorithms.
 
For this reason, these devices are typically used in the defense end market. In homeland security and military environments, these devices are used to rapidly identify potential radiological threats originating from dangerous nuclear material, while distinguishing such threats from naturally occurring radioactive materials and medical isotopes.


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Radiation Monitoring Systems
 
Our Radiation Monitoring Systems division supplies fixed and mobile systems consisting of sensors, display and processing electronics and software, which are used for barrier leak control, effluent release monitoring, radiation protection of workers, operational process monitoring and post event monitoring in nuclear installations. The products in our Radiation Monitoring Systems division are summarized below:
 
         
Product Category End Markets Applications NPP Life Cycle Phase Products
 
Radiation Monitoring Systems •   Nuclear Systems consisting of sensors, displays, control electronics and software which are used for barrier leak control, effluent release monitoring, radiation protection of workers, operational process monitoring and “post event” monitoring in NPPs, nuclear fuel cycle industry, reactors and military installations •   Construction

•   Plant operation

•   Recommissioning

•   Decommissioning

•   Waste management
 
•  Alpha, beta, gamma and neutron sensors

•  Channels for monitoring: volume contamination (particulates, iodine, gas and liquids); dose rates (gamma and neutron); and neutron flux

•  Fixed and mobile instrumentation skids

•  Display and processing electronics

•  Accessories

•  Software

•  Services
 
We believe we are a leading provider of radiation monitoring systems globally, with particularly strong positions in Europe and Asia. We sell fully integrated systems that can transmit data to a central computer that tracks radiation levels continuously throughout the plant. To accompany these systems, we also supply proprietary software, which allows operators to monitor trends, alarm levels, historical incident files and status reports.
 
Within a typical nuclear reactor, a radiation monitoring system consists of between 40 and 120 sensors and a similar number of processing and display units, all of which are generally networked to a central control system. Safety-related monitors are subject to qualifications which are time consuming and expensive to obtain. Qualification of our products often requires close cooperation by us with customers and substantial technical expertise, sometimes requiring a multi-year process and substantial expenditures of funds in advance of customer orders. Qualification is a lengthy and costly endeavor in which equipment is rigorously tested in simulated real-world environmental conditions to ensure that it meets the criteria defined in the standards applicable to the nuclear environment. Qualifications must be performed according to independent reference standards that define the methodologies, criteria and severity required. Upon achievement, qualifications are not typically subject to requalification, revocation or challenge, although a qualification may be obsoleted or required to be revised if the standards organization or regulatory changes determine that the original qualification is insufficient for its intended purpose or the standards themselves evolve, inducing changes in the methodology, criteria or severity required of the qualification. Some equipment requires lengthier qualification periods than others, but the typical period ranges from one to four years. Once a component’s qualified life has been reached, it must be replaced. The qualification process for our radiation monitoring systems typically requires one to three years.
 
Radiation monitoring systems are typically installed in nuclear facilities during construction, and they are replaced or upgraded upon life extensions or reactor upgrades. The expected life for a radiation monitoring system is 15 to 25 years, depending on the usage and environment, necessitating a significant upgrade of equipment at least once during a nuclear facility’s useful life. Replacement cycles can vary by country, depending on the applicable regulatory regime or customer practices. This provides recurring revenue opportunities as customers must replace and upgrade components and services during this timeframe.


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The decommissioning of an NPP, which can take over ten years, also requires radiation monitoring systems. Typically, a larger deployment of mobile monitors is required during the decommissioning process than in normal NPP operations. The new construction, operation and decommissioning phases of the NPP life cycle each provide opportunities for sales of our radiation monitoring systems.
 
Radiation monitoring systems are also prevalent in the nuclear fuel cycle industry, spanning fuel fabrication, reprocessing and storage. These systems are used in many types of accelerators, including medical positron emission tomography and high-energy particle accelerators and can also be used in the operation and monitoring of nuclear military installations.
 
Sensing Systems
 
Our Sensing Systems division provides products that facilitate reactor control, safety and containment structure integrity. These products meet proprietary reactor design qualifications and are essential to the safe and efficient operation of a reactor. The products in our Sensing Systems division are summarized below:
 
         
Product Category End Markets Applications NPP Life Cycle Phase Products
 
Electrical Penetrations •   Nuclear Conduit systems that are used to pass electrical and fiber-optic lines through the containment structure of an NPP, without compromising the pressure or radiological integrity of the structure •   Construction

•   Recommissioning
 •   Electrical penetrations containment assemblies

•   Temperature sensors

•   Instrumentation seals

•   Thermowells

•   Explosive valves
Reactor Instrumentation & Control Equipment and Systems 
•   Nuclear

•   Defense
 Sensors and electronics designed to monitor radiation and temperature within a reactor core and in surrounding areas to facilitate safe and efficient reactor operation •   Construction

•   Plant operation

•   Recommissioning
 •   In-core detectors

•   Ex-core detectors

•   Control electronics
 
Electrical Penetrations
 
Electrical penetrations are conduits through a nuclear reactor containment structure. Our penetrations allow wiring for electrical and optical signals to pass safely through the containment structure wall, while maintaining the integrity of the wall and not permitting radiation or pressure to escape. Containment structures consist of concrete walls that can extend up to fourteen feet in thickness with a stainless steel liner designed to contain radioactive emissions in a confined space. The containment wall is the primary safety barrier in the reactor.
 
Our electrical penetrations enable the supply of power for safety systems as well as the reception of signals from neutron flux detectors, radiation monitoring detectors, cameras and other control surveillance devices. Typically, a nuclear reactor has 40 to 70 major electrical penetrations with up to 12,000 individual electrical connections, or feedthroughs.
 
We believe we are a leader in electrical penetrations. As with radiation monitoring systems, electrical penetrations must be qualified. The qualification process for our electrical penetrations typically requires three to four years, and our electrical penetrations have been qualified for installation in most major reactor designs by reactor design firms and the major utilities.
 
As a critical component of reactor design, electrical penetrations provide us with increased visibility into new plant builds. Our leading position in electrical penetrations provides us with cross-selling opportunities for other products, such as detectors, radiation monitoring systems, imaging systems and contamination & clearance monitors.


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Reactor Instrumentation & Control Equipment and Systems
 
We believe we are one of the global leaders in reactor instrumentation & control equipment and systems. Our reactor instrumentation & control detectors are used in nuclear facilities to monitor radiation and temperature within a nuclear reactor core (“in-core” detectors) and in surrounding areas (“ex-core” detectors). Our detectors measure the distribution of neutron/gamma flux and temperature both in, and adjacent to, a reactor core and are critical components to maintaining the efficient and safe operation of a reactor. Our detectors generate a signal, giving a precise measurement of the radiation flux, which contributes to safe and efficient reactor operation.
 
As with radiation monitoring systems and electrical penetrations, these detectors must be qualified and such qualification is established by tests which are designed to demonstrate the intended function of a detector when subjected to conditions that simulate installed life under design service conditions. The qualification process typically requires one to two years for our detectors. Our reactor instrumentation & control detectors are qualified for all major reactor designs. Once a qualification is obtained and a contract is awarded, the supplier is well positioned for replacement revenue due to the high switching costs involved in qualifying new products and services from other suppliers.
 
Reactor instrumentation & control detectors are typically installed in nuclear facilities during construction and are replaced or upgraded regularly. The expected life of a detector can range from four to 25 years, depending on the type of detector and the operating environment. This provides recurring revenue opportunities as customers must replace and upgrade components during these timeframes. In addition, there are opportunities to provide more comprehensive upgrades of reactor instrumentation & control detector systems in certain existing reactors to facilitate up-rating.
 
Dosimetry Services
 
Our Dosimetry Services division provides an official “dose of record” to employers of radiation workers. The services in our Dosimetry Services division are illustrated below:
 
         
Product Category End Markets Applications NPP Life Cycle Phase Products
 
Dosimetry Services   •   Nuclear

•   Defense

•   Medical
 An information service, which provides environmental radiation monitoring services as well as an official dose of record to employers and occupationally exposed employees •   Plant operation

•   Decommissioning

•   Waste management
 
• Extremity, whole body, eye, environmental and fetal monitoring reports

• Online applications for dosimetry data management

•   Consulting services
 
At the request of employers, we provide cumulative dose monitoring services to personnel at nuclear installations, research labs, government agencies, hospitals, dental offices, veterinary offices and other medical facilities where there is a potential for radiation exposure. Government regulations and industry guidelines (e.g., OSHA, NCRP, ANSI, IAEA) often require these individuals to wear dosimeters to monitor their radiation dose. We provide our customers with services such as cumulative dose reports and data management. We believe we are a leader in the provision of dosimetry services to the U.S. nuclear power market.
 
Our service uses film, thermoluminescent and track-etch dosimeters. Each of these has distinct characteristics that make them suitable for specific applications and customer types.
 
Dose is calculated algorithmically using filtering mechanisms to customize the dosimeter response for the type of radiation and potential exposure. Each dosimeter is identified to provide a chain of custody throughout the service cycle. We ship the dosimeters to the customer, whose personnel wear them for intervals ranging from one month to one year. As the wear period nears its end, we send the customer a new set of dosimeters, and the customer returns the original dosimeters to us for processing. After processing, we report dose information to the customer in a format that complies with relevant governing standards or regulations.


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Reports generally take seven to ten business days to process and document each wearer’s current wear period dose, quarter-to-date dose, year-to-date dose and lifetime dose.
 
In fiscal 2009 over 90% of our dosimetry services customers, representing 65% of our dosimetry services revenue, pre-paid their annual subscriptions.
 
Imaging Systems
 
Our Imaging Systems division is a leader in the sale of highly specialized closed circuit camera systems used for inspection and surveillance in difficult and hazardous environments. The products in our Imaging Systems division are illustrated below:
 
         
Product Category End Markets Applications NPP Life Cycle Phases Products
 
Imaging Systems 
•   Nuclear

•   Other
 
Nuclear: imaging systems for nuclear fuel handling, control, monitoring and inspection; reactor vessel maintenance; underwater surveillance; tank and vessel inspection; and cameras for remotely operated vehicles

High-temperature: kiln viewing and recovery boiler monitoring
 •   Construction

•   Plant operation

•   Recommissioning

•   Decommissioning

•   Waste management
 •  Radiation hardened surveillance and inspection cameras

•  Video management and control systems

•  Lighting systems

•  Telemetry control units

•  Thru-wall endoscopes

•  High temperature cameras with pyrometry

•  Software
 
We have designed our imaging systems to operate in nuclear installations, with many of our cameras being radiation “hardened,” allowing them to operate in the high levels of radiation frequently found in these installations. We supply cameras for all stages of the nuclear life cycle, from construction through operation, to decommissioning and waste management. Our products are used in NPPs, nuclear reprocessing plants and waste management facilities. For example, our cameras are used during refueling shutdowns for inspecting the integrity of critical structures in nuclear reactors.
 
Our products are also designed for use in high temperature environments, such as pulp and paper recovery boilers, gas or coal-fired power boilers and cement kilns. In these environments, our cameras provide real time video as well as accurate temperature measurement. This enables operators to closely monitor their processes, helping to ensure plant safety and increased operational efficiency. For example, our cameras are used by two of the world’s largest cement producers to monitor flame patterns and temperature in cement kilns, helping operators maximize operational efficiency.
 
The expected life of our cameras typically ranges from one to five years, depending on the operating environment. This provides recurring revenue opportunities as customers must replace and upgrade components during these timeframes.
 
Research and Development
 
Our research and development efforts allow us to introduce new products to the marketplace, fulfill specific customer needs and continue to meet qualification requirements for next generation nuclear reactors and other evolving regulatory standards. Our five operating divisions are committed to both technology research and product development to fulfill their strategic objectives and are supported by our engineering and research and development organization consisting of 159 scientists, technicians and engineers, representing approximately 19% of our total workforce, as of June 30, 2009. A number of them participate in international standards setting organizations and committees. We engage in research and development activities at most of our facilities worldwide.


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We spent approximately $11.2 million, $14.9 million and $11.9 million on research and development for fiscal 2009, 2008 and 2007. Research and development activities range from the development of radiation tolerant electronics to the development of customized software solutions for customer-specific applications, among others. We conduct these efforts through a mix of in-house research, collaboration with academia, customers and regulatory authorities as well as selected outsourcing through external vendors. The scope and extent of the outsourced portion of research and development activities vary by division, but typically, critical hardware design, software development and project management activities are conducted in-house while specialized services such as consulting services, algorithm design, thermal analysis, complex modeling and calculations and testing services are provided by third parties.
 
Sales and Marketing
 
We sell our products and services through our direct sales organization and indirectly through our global network of independent, third-party sales representatives and distributors. Our internal sales team is organized by operating division and end market to provide a higher level of service and understanding of our customers’ unique needs. We recently instituted a key account strategy in which we have designated senior executives taking a lead role with our top customers. This enables us to systematically and actively maintain close relationships with our top customers and provide solutions that meet their specifications. We have 14 sales offices in North America, Europe and Asia, and as of June 30, 2009, our sales and marketing personnel consisted of 135 employees, which represents approximately 16% of our total workforce.
 
We derive a portion of our revenue from sales of our products and services through channel partners, such as independent sales representatives and distributors. In particular, our independent sales representatives are an important source of sales leads for us and augment our internal resources in remote geographies. We sell through distributors in situations in which our customers prefer to purchase from a local business entity or purchase in smaller volume.
 
Our marketing activities include participation in many tradeshows worldwide across our nuclear, defense and medical end markets. We advertise in technical journals, publish articles in leading industry periodicals and utilize direct mail campaigns.
 
We host our annual Users’ Training and Benchmarking Seminar, where customers participate in a variety of programs designed to exchange ideas and discuss occupational challenges. The event also brings together key channel partners and vendors to strengthen our sales and marketing network. Attendees gain insight into our product plans and participate in interactive sessions that give them the opportunity to better understand our current suite of products and services as well as provide feedback on our product roadmap.
 
Our Customers
 
Our principal customers include power and utility companies, reactor design firms, NPPs, government agencies, military organizations, medical service providers and industrial companies. For fiscal 2009, no single customer accounted for more than 8.0% of our consolidated revenue, while our top ten customers together accounted for approximately 25.5% of our consolidated sales.
 
Manufacturing and Supply Chain
 
Given the diversity of our products, we employ numerous manufacturing techniques, including high-volume process manufacturing, discrete manufacturing, cellular manufacturing and hybrid approaches. Our production personnel engage in manufacturing, procurement and logistics activities. Our production activities are located in the United States, Canada, France, Germany, Finland and the United Kingdom. As of June 30, 2009, our production personnel consisted of 416 employees, which represents approximately 49% of our total workforce.
 
Our manufacturing activities are focused mainly on the production of the core value-add devices and components of our products, while non-core components and sub-assemblies are generally outsourced. This strategy enables us to protect important intellectual property while minimizing the time, cost and effort to


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produce commoditized components. Most of the time, the design, assembly and integration of the components are performed in-house, allowing our engineers to customize the products according to customer specifications. For highly engineered nuclear products, production volumes are typically low, with a high degree of custom engineering required. For other product lines, such as passive dosimetry products, production volumes tend to be higher. We apply rigorous quality control processes and calibrate radiation detection devices internally, leading to high quality standards and customization capabilities. Most of our production sites are certified to production quality standards such as ISO 9001, 10 CFR 50 Appendix B andASME NQA-1.
 
The principal materials used in our manufacturing processes are commodities that are available from a variety of sources. The key metal materials used in our manufacturing processes include precious metals, tungsten, copper, aluminum, magnesium products, steel, stainless steel and various alloys, which are formed into parts such as detectors, sensors and cable assemblies. The key non-metal materials used include amorphous and crystalline scintillator materials, ceramics, epoxies, silicon and fused silica, polyethylene, polyurethane and injection molded plastic parts and components such as lenses, monitors, sensors, dosimeters, electronic boards, detectors and cables.
 
Properties
 
The table below lists our properties at June 30, 2009:
 
         
    Approximate
   
Location
 Square Feet  
Facility Use / Description
 
Production facilities:
      
Canada Cambridge, ON  25,000  Sensing Systems
Finland Turku  9,800  Health Physics
France Fussy (Bourges)  24,000  Sensing Systems
France Lamanon  76,600(1) Health Physics & Radiation Monitoring Systems
France Lamanon  6,500  Health Physics & Radiation Monitoring Systems
Germany Hamburg  29,600  Health Physics
Germany Munich  28,100  Radiation Monitoring Systems
United Kingdom Alton  27,000  Imaging Systems
United States Atlanta (Smyrna), GA  24,100  Health Physics & Radiation Monitoring Systems
United States Buffalo (Cheektowaga), NY  26,200  Sensing Systems
United States Horseheads, NY  51,500(2) Sensing Systems & Imaging Systems
United States Irvine, CA  43,500  Dosimetry Services
   
Sales / Research and Development / Administrative locations(3)
  
China Beijing  500  Sales center
China Beijing  2,200  Sales center
Germany Bonn  1,000  Imaging Systems
United Kingdom Whitehaven, Cumbria  3,000  Imaging Systems
United States Pickerington, OH  2,900  Imaging Systems
United States San Ramon, CA  10,300  Corporate headquarters
United States Woodinville, WA  1,000  Imaging Systems
 
 
(1)We lease all listed properties except the property located in Lamanon, France, which we own.
 
(2)Our current lease consists of a total of approximately 86,300 square feet, of which we sublet, or otherwise do not use, approximately 34,800 square feet.
 
(3)We currently lease an approximately 5,400 square foot facility in Pointe-Claire, QC, Canada related to discontinued operations. We intend to vacate the facility by December 31, 2009.


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Competition
 
The global markets for our products and services are competitive and continually evolving. Within each of our operating segments, we encounter a variety of competitors, ranging from small independent companies providing niche solutions to larger multi-national corporations providing a broader set of products and services to our targeted end markets. We believe that the principal bases upon which we compete in our target end markets include product quality and reliability, technical capability and product qualification, strength of customer relationships, customer service and price. In particular, customers in the nuclear and defense end markets tend to emphasize product quality and reliability, technical capability and strength of supplier relationships, while customers in the medical end markets, in particular for passive dosimetry products and services, tend to make purchasing decisions on a combination of brand recognition, price, service and reliability.
 
We believe the primary competitors in each of our segments are as follows:
 
 • Health Physics:  Thermo Fisher Scientific and Areva (Canberra).
 
 • Radiation Monitoring Systems:  General Atomics (Sorrento Electronics) and Areva (Canberra).
 
 • Sensing Systems:  Reuter-Stokes (General Electric), Schott and Areva.
 
 • Dosimetry Services:  Landauer.
 
 • Imaging Systems:  Diakont.
 
Intellectual Property
 
We rely on a combination of intellectual property rights, including qualifications, trade secrets, patents, copyrights and trademarks, as well as contractual protections, to protect our proprietary products, methods, documentation and other technology.
 
As of June 30, 2009, we held approximately 12 issued U.S. patents, 35 issued foreign counterparts of U.S. patents and three other issued foreign patents with expiration dates ranging from 2010 to 2025. In addition, we have filed two U.S. patent applications, nine foreign counterpart patent applications and one other foreign patent application. We also hold exclusive and non-exclusive licenses related to patents and other intellectual property of third parties. We held approximately 16 U.S. registered and pending trademarks, 18 international counterparts of such registered and pending trademarks and eight additional international registered and pending trademarks, as of June 30, 2009.
 
In many instances, we rely on trade secret protection and confidentiality agreements to safeguard our interests. Due to the long useful life of certain aspects of our technology, we believe that the patent registration process, which requires public disclosure of patented claims and inventions, could harm our competitive position. We differentiate our products and technologies primarily through our proprietary know-how, technology or data that are not covered by patents or patent applications, including technical processes, equipment designs, testing and other procedures. Our employees are generally required to assign to us all of the inventions, designs and technologies they develop during the course of employment with us, either through written agreements or by operation of law, depending on the jurisdiction. Where appropriate, we require third parties with whom we deal to enter into agreements with us that address issues of confidentiality and intellectual property.
 
Environmental Matters
 
We are subject to a variety of environmental, health and safety and pollution-control laws and regulations in the jurisdictions in which we operate. We do not believe the costs of compliance with these laws and regulations will be material. We use, generate and discharge hazardous substances, chemicals and wastes at some of our facilities in connection with our product development, testing and manufacturing activities. Any failure by us to control the use of, to remediate the presence of, or to restrict adequately the discharge of, such substances, chemicals or wastes could subject us to potentially significant liabilities,clean-up costs, monetary


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damages and fines or suspensions in our business operations. In addition, some of our facilities are located on properties with a history of use involving hazardous substances, chemicals and wastes and may be contaminated. Although we have not incurred, and do not currently anticipate, any material liabilities in connection with such contamination, we may be required to make expenditures for environmental remediation in the future. See “Risk Factors—Risks Relating to Our Business—We could incur substantial costs as a result of violations of or liabilities under environmental laws.”
 
Regulation
 
We are subject to a variety of laws and regulations, including but not limited to those of the United States, Canada, the EU, the EU member states and the People’s Republic of China, that impose regulatory systems that govern many aspects of our operations, including but not limited to our use, storage and disposal of radioactive materials and hazardous waste. In addition, these jurisdictions impose trade controls requirements that restrict trade to comply with applicable export controls and economic sanctions laws and requirements, and legal requirements that are intended to curtail bribery and corruption. These laws and regulations apply by virtue of the nature of our industry, end markets and products, as well as the range of potential uses of our products, the origin of the technology incorporated into our products, and the jurisdictions in which we produce and sell our products.
 
The multi-jurisdictional legal and regulatory environments in which we operate are subject to extensive and changing laws and regulations administered by various national, regional and local governmental agencies both within and outside the United States.
 
We are a federal government contractor and, as such, we are subject to Executive Order 11246 and other relevant laws and regulations. As part of our compliance obligations, we implement on an annual basis an affirmative action plan and program which, in part, include our good faith efforts to achieve in our workforce full utilization of qualified women and minorities. In addition, we have in place an affirmative action plan with respect to disabled individuals, as well as Vietnam era, disabled or other veterans.
 
Some of the U.S. laws affecting our operations include, but are not limited to, the AEA, the Energy Reorganization Act of 1974, or ERA, the Resource Conservation and Recovery Act of 1976 as amended by the Hazardous and Solid Waste Amendments of 1984, or RCRA, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, the Hazardous Materials Transportation Act, the Federal Water Pollution Control Act, or the Clean Water Act, the Toxic Substances Control Act of 1976, or TSCA, the Organized Crime Control Act of 1970, or the OCCA, and the Occupational Safety and Health Act, or OSHA, as well as the state laws governing radiation control, hazardous waste management, water quality and air quality in the states of New York, Georgia and California, each as from time to time amended. We are also subject to a variety of U.S. federal and state employment and labor laws and regulations, including the Americans with Disabilities Act, the Federal Fair Labor Standards Act, the Worker Adjustment and Restructuring Notification Act, or WARN Act, which requires employers to give affected employees at least 60 days’ notice of a plant closing or mass layoff, and other regulations related to working conditions,wage-hour pay, overtime pay, employee benefits, anti-discrimination and termination of employment. The classified work that we currently perform at one of our U.S. facilities subjects us to the industrial security regulations of the Department of Defense and other federal agencies that are designed to safeguard against unauthorized access by foreigners and others to classified and other sensitive information.
 
In the United States, the AEA and ERA authorize the NRC to regulate the receipt, possession, use and transfer of radioactive materials. The NRC sets regulatory standards for worker protection and public exposure to radioactive materials or wastes to which we are required to adhere in our operations that use radioactive materials for research and development, testing and calibration.
 
RCRA provides a comprehensive framework for the regulation of hazardous and solid waste which apply to our operations that use and dispose of hazardous waste. RCRA prohibits improper hazardous waste disposal and imposes criminal and civil liability for failure to comply with its requirements. TSCA provides a comprehensive framework for the management by the EPA of over 60,000 commercially produced chemical substances, some of which are used by our operations. The EPA may impose requirements involving


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manufacturing, record keeping, reporting, importing and exporting. The Clean Water Act regulates the discharge of pollutants into streams and other waters. If wastewater or runoff from our facilities or operations may be discharged into surface waters, the Clean Water Act requires us to apply for and obtain discharge permits, conduct sampling and monitoring and, under certain circumstances, reduce the quantity of pollutants in those discharges. The OCCA provides for the regulation of explosives, which applies in particular to our facility in Buffalo which manufactures and tests products that incorporate explosives. The OCCA establishes a framework for licensing, use, storage and sale of explosives and products containing explosives and imposes criminal and civil liability for failure to comply with its requirements. OSHA provides for the establishment of standards governing workplace safety and health requirements, including setting permissible exposure levels for hazardous chemicals. We must follow OSHA standards, including the preparation of material safety data sheets, hazardous response training and process safety management, as well as various record-keeping, disclosure and procedural requirements.
 
Our operations outside the United States are subject to similar, and sometimes more stringent, laws and regulations. For example, an EU directive relating to the restriction of hazardous substances, or RoHS, in electrical and electronic equipment and a directive relating to waste electrical and electronic equipment, or WEEE, have been and are being implemented in EU member states. Among other things, the RoHS directive restricts the use of certain hazardous substances in the manufacture of electrical and electronic equipment and the WEEE directive requires producers of electrical goods to be responsible for the collection, recycling, treatment and disposal of these goods. In addition, laws similar to RoHS and WEEE were passed in China in 2006 and South Korea in 2007. Governments in other countries, including the United States, are considering implementing similar laws or regulations. In addition, a new regulation regarding the registration, authorization and restriction of chemical substances in industrial products, or REACH, became effective in the EU in 2007. Over time this regulation, as well as other regulations, may require us to substitute certain chemicals contained in our products with substances the EU considers less dangerous. We have not yet assessed the impact this legislation may have on our operations. We are also subject to the employment and labor laws and regulations of the foreign jurisdictions where the majority of our employees are located.
 
We deal with numerous U.S. andnon-U.S. government agencies and entities, including the U.S. military, the armed forces of many NATO countries, the U.S. Department of Defense, the U.S. Department of State, the U.S. Department of Treasury, the U.S. NRC, the U.S. Department of Homeland Security and the corresponding governmental agencies and entities in the European Union and Canada. When working with these and other government agencies and entities, we must comply with, and are affected by, laws and regulations relating to the formation, administration and performance of contracts. These laws and regulations, among other things require certification and disclosure of all cost or pricing data in connection with various contract negotiations; impose acquisition regulations that define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-based U.S. government contracts; and restrict the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
 
We believe that certain of our products and technologies are eligible for designation or certification as “qualified anti-terrorism technologies” under the SAFETY Act provisions of The Homeland Security Act of 2002, and its implementing regulations. Under the SAFETY Act, the federal government provides for certain liability limitations and a presumption that the “government contractor” defense applies if the Department of Homeland Security “designates” or “certifies” technologies or products as “qualified anti-terrorism technologies,” and if certain other conditions apply. We may seek to qualify some or all of our products and technologies under the SAFETY Act’s provisions in order to obtain such liability protections, but there is no guarantee that the Department of Homeland Security will designate or certify our products and technologies as qualified anti-terrorism technology. To date, we have not sought such designation or certification as a qualified anti-terrorism technology, and our products have been sold without such qualification and we may continue to sell our products and technologies without such qualification. To the extent we do so, we will not be entitled to the benefit of the SAFETY Act’s limitations on tort liability or to any U.S. government indemnification.
 
Many of our products are subject to export controls of the United States, Canada and the member states of the EU, depending on a number of factors, including the nature of the product and its potential uses, the


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origin of the technology incorporated into the product, and the jurisdictions in which we produce and sell our products. Certain of our products are subject to U.S. export control laws and regulations, which have certain registration, licensing and recordkeeping requirements for the sale or transfer of controlled technology or information tonon-U.S. persons. These regulations include the U.S. Department of Commerce’s Export Administration Regulations, or the EAR, the U.S. Department of State’s International Traffic in Arms Regulations, or ITAR and the U.S. Nuclear Regulatory Commission regulations. Certain products that have dual-use commercial and military applications are controlled under the EAR’s Commerce Control List, and we have export compliance systems for determining the proper export licensing requirements for such products. We need to keep such export compliance systems, which include third-party service provider screening of compliance lists, monitoring of Department of Commerce notifications and periodic reviews of applicable regulations, up to date and properly maintained.
 
U.S. laws restrict the ability of U.S. companies, U.S. citizens and U.S. permanent residents, or U.S. persons, from involvement in certain types of transactions with countries, businesses and individuals that have been targeted by U.S. economic sanctions. For example, U.S. persons are precluded from undertaking virtually any activity of any kind on the part of any U.S. person with regard to any potential or actual transactions involving Cuba, Iran and Sudan without the prior approval of the U.S. Department of Treasury’s Office of Foreign Assets Control, or OFAC. OFAC also administers U.S. sanctions against a lengthy list of entities and individuals, wherever they may be located, that the United States considers to be closely associated with these sanctioned countries or that are considered terrorists or traffickers in either narcotics or weapons of mass destruction. Furthermore, U.S. economic sanctions forbid U.S. persons from circumventing direct U.S. restrictions or from facilitating transactions bynon-U.S. persons if those activities are forbidden to U.S. persons. Penalties for violating provisions such as these can include significant civil and criminal fines, imprisonment and loss of tax credits or export privileges.
 
The Foreign Corrupt Practices Act of 1977, or the FCPA, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the International Anti-Bribery and Fair Competition Act of 1998, makes it a criminal offense for a U.S. corporation or other U.S. domestic concern to make payments, gifts or give anything of value directly or indirectly to foreign officials for the purpose of obtaining or retaining business, or to obtain any other unfair or improper advantage. In addition, the FCPA imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments, and to prevent the establishment of “off books” slush funds from which such improper payments can be made. We are also subject to laws and regulations covering subject matter similar to that of the FCPA that have been enacted by countries outside of the United States. For example, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions was signed by the members of the Organization for Economic Cooperation and Development and certain other countries in December 1997. The Convention requires each signatory to enact legislation that prohibits local persons and firms from making payments to foreign officials for the purpose of obtaining business or securing other unfair advantages from foreign governments. Failure to comply with these laws could subject us to, among other things, penalties and legal expenses, which could harm our reputation and have a material adverse effect on our business, financial condition and results of operations.
 
Compliance with the myriad of export control laws of the various jurisdictions in which we do business is a challenge for any company involved in export activities within the nuclear and defense end markets. We have compliance systems in our U.S. andnon-U.S. subsidiaries to identify those products and technologies that are subject to export control regulatory restrictions and, where required, we obtain authorization from relevant regulatory authorities for sales to foreign buyers or for technology transfers to foreign consultants, companies, universities or foreign national employees. We also have a compliance system that is intended to proactively address potential compliance issues including those related to export control, trade sanctions and embargoes, as well as anti-bribery situations, and we are implementing this through such mechanisms as training, formalizing contracting processes, performing diligence on agents and continuing to improve our record-keeping and auditing practices with respect to third-party relationships and otherwise. Thus far, as part of our compliance system, for instance, we have developed a Code of Ethics and Conduct that informs all of our employees of their compliance obligations. Furthermore, we have developed an ethics and conduct training


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program that all of our employees are required to undertake, as well as other targeted compliance training relevant to their position, such as specific FCPA training for all of our worldwide controllers. Violations of any of the various U.S. ornon-U.S. export control laws can result in significant civil or criminal penalties, or even loss of export privileges, as mentioned above. We recognize that an effective compliance program can help protect the reputation and relationship of a regulated company with the regulatory agencies administering these laws and regulations. In the United States, each of the regulatory agencies administering these laws and regulations has a voluntary disclosure program that offers the possibility of significantly reduced penalties, if any are applicable, and we intend to use these programs as part of our overall compliance program, as necessary.
 
Backlog and Deferred Revenue
 
Total backlog represents committed but undelivered contracts and purchase orders at period end. Backlog excludes maintenance-related activity and agreements that do not represent firm purchase orders. Customer agreements that contain cancellation for convenience terms are generally not reflected in backlog until firm purchase orders are received. Backlog is not a complete measure of our future business due to these customer agreements. Backlog can fluctuate significantly due to the timing of large project awards. In addition, annual or multi-year contracts are subject to rescheduling and cancellation by customers due to the long-term nature of the contracts.
 
Deferred revenue represents the prepayment of measuring and monitoring services. The amounts are recorded as deferred contract revenue in our balance sheets and represent customer deposits invoiced in advance for services to be rendered over the service period.
 
Information on backlog and deferred revenue follows (in thousands):
 
                 
  As of June 30,    
  2007  2008  2009    
 
Backlog $143,887  $177,956  $184,218     
Deferred revenue  30,567   38,988   43,419     
 
Furthermore, we anticipate that approximately 31% of our total backlog will not be filled within the current fiscal year.
 
Legal Proceedings
 
From time to time, we are involved in various routine legal proceedings. We cannot predict the outcome of these lawsuits, legal proceedings and claims with certainty. Nevertheless, we believe that the outcome of these proceedings, even if determined adversely, would not have a material adverse effect on our business, financial condition and results of operations.
 
Employees
 
As of June 30, 2009, we had 847 employees worldwide, consisting of 135 employees in sales and marketing, 416 in production, 159 in research and development and 137 in general and administrative functions. Geographically, we had 323 employees in North America, 520 in Europe and four in Asia and other regions as of June 30, 2009. We maintain both union and non-union workforces in the United States, with unionized workforces comprising a small minority of the overall U.S. employee base. As of June 30, 2009, 34U.S.-based employees, primarily located in Horseheads and Buffalo, New York, were members of a union. Pursuant to applicable industrial relations laws, our employees located in France and Germany were represented by works councils, and our employees located in France and Finland were represented by trade unions.


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MANAGEMENT
 
The following table sets forth certain information with respect to our executive officers and members of our Board of Directors:
 
     
Name
 
Age
 
Position
 
Thomas D. Logan 48 President, Chief Executive Officer and Chairman of the Board
Jack A. Pacheco 49 Vice President and Chief Financial Officer
Seth B. Rosen 41 General Counsel, Vice President, Corporate Development, and Secretary
W. Antony Besso 39 Regional Vice President, EMEA, and President, Health Physics Division
Iain F. Wilson 47 Regional Vice President, Asia, and President, Sensing Systems Division
Robert J. Klein(1)(2)(3)(4) 45 Director
 
 
(1)ACAS-designated representative.
 
(2)Member of the Nominating and Corporate Governance Committee.
 
(3)Member of the Audit Committee.
 
(4)Member of the Compensation Committee.
 
Thomas D. Loganhas been our President, Chief Executive Officer and Chairman of the Board since our formation in December 2005. From 2004 to 2007, Mr. Logan served as CEO for Global Dosimetry Solutions, one of our predecessor companies and currently a subsidiary of ours. Mr. Logan has more than 22 years of energy industry experience. In addition, he has nine years of experience within the contract manufacturing and consumer products industries. Mr. Logan holds a Bachelor of Science degree and a Master of Business Administration degree from Cornell University.
 
Jack A. Pachecohas served as our Vice President and Chief Financial Officer since March 2008. From 2004 to 2008, Mr. Pacheco served as Chief Financial Officer of Smart Modular Technologies, a public company listed on the NASDAQ stock exchange. From 2001 to 2004, Mr. Pacheco served as Chief Financial Officer for Ignis Optics, Inc., an optical components startup acquired by Bookham Technology. He holds a Master of Business Administration degree from Golden Gate University and a Bachelor of Science degree in Business Administration from Washington State University.
 
Seth B. Rosenis our General Counsel, Vice President, Corporate Development, and Secretary, a position he has held since January 2008. In 2007, Mr. Rosen served as a business and legal consultant to a variety of existing and startup businesses. From 2006 to 2007, he was CEO of Golden Gate Energy Corporation, a solar energy startup company. From 1998 to 2006, he served as Senior Licensing Associate and then Principal Licensing Associate at the Technology Transfer Department of Lawrence Berkeley National Laboratory. Mr. Rosen received his Juris Doctor degree from Harvard Law School, his Master of Business Administration from the joint program at the Haas School of Business at the University of California at Berkeley and the Graduate School of Business at Columbia University, and his Bachelor of Arts from the University of California at Berkeley.
 
W. Antony Bessohas been our Regional Vice President, EMEA, and President, Health Physics Division since February 2006. From 2004 to 2006, Mr. Besso acted as an advisor and interim manager for private equity firms and individual investors in a diverse range of industries. From 1996 to 2004, Mr. Besso held a series of senior management positions in the global engineering group ALSTOM SA. Mr. Besso was also a founding partner in Advention Business Partners, a leading independent consulting firm with operations in France, Germany and China. Mr. Besso holds a Bachelor of Arts degree from Queen’s University and a Master of Business Administration from Dalhousie University.
 
Iain F. Wilsonhas served as our Regional Vice President, Asia, and President, Sensing Systems Division since our formation in December 2005. From 2000 to 2005, Mr. Wilson was General Manager, Sensing


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Systems Group of IST, one of our predecessor companies. Previously, Mr. Wilson held numerous technical roles with IST, focused principally in the areas of Quality Management, Engineering and Plant Operations. He began his career as the Quality Manager for GE Reuter Stokes, Canada. Mr. Wilson holds a Bachelor of Science degree from Ryerson University, Toronto, Canada. Mr. Wilson is a member of the American Nuclear Society.
 
Robert J. Kleinhas served as a Director since our formation in December 2005. Mr. Klein has served as a Managing Director of ACAS, our principal stockholder, since 2004, where he leads the New York private equity practice. From 2002 to 2004, he served as a Principal of ACAS. Prior to joining ACAS, he was a Principal at American Securities Capital Partners. Mr. Klein received a Bachelor of Arts degree from Yale University and a Juris Doctor degree from Stanford University Law School. Mr. Klein is an ACAS-designated member of our Board of Directors.
 
Board Structure and Compensation
 
The Bylaws that we will adopt prior to the consummation of this offering will provide that at least one of the directors designated by ACAS must be part of the majority in any action taken by our Board of Directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, other than on matters in which ACAS has a conflict of interest (as it would if it appointed a majority of our directors). Our Bylaws will also provide that ACAS will have the right to designate three of our seven directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, two directors so long as they hold at least 25% but less than 50.1% and one director so long as they hold at least 10% but less than 25%.
 
Our Board of Directors currently consists of two members. Effective upon the closing of this offering, our Board of Directors will consist of seven members and will be divided into three classes, as follows:
 
 • Class I, which will consist of           and          , and whose term will expire at our annual meeting of stockholders to be held in 2010;
 
 • Class II, which will consist of           and          , and whose term will expire at our annual meeting of stockholders to be held in 2011; and
 
 • Class III, which will consist of Messrs. Logan, Klein and          , and whose term will expire at our annual meeting of stockholders to be held in 2012.
 
At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified.
 
Our Board of Directors has the following committees:
 
Audit Committee
 
Upon completion of this offering, the Audit Committee shall consist of Mr. Klein,          and          . We intend to replace Mr. Klein with an independent director prior to the date that is one year following the completion of this offering. The Audit Committee reviews and, as it deems appropriate, recommends to the Board of Directors our internal accounting and financial controls and the accounting principles and auditing practices and procedures to be employed in preparation and review of our financial statements. The Audit Committee also makes recommendations to the Board concerning the engagement of independent public auditors and the scope of the audit to be undertaken by such auditors.          shall serve as chairperson of the Audit Committee.
 
Compensation Committee
 
Upon completion of this offering, the Compensation Committee shall consist of Mr. Klein,          and          . The Compensation Committee reviews and, as it deems appropriate, recommends to the Board of Directors policies, practices and procedures relating to the compensation of our officers and the establishment


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and administration of employee benefit plans. The Committee advises and consults with our officers as may be requested regarding managerial personnel policies.          shall serve as chairperson of the Compensation Committee.
 
Nominating and Corporate Governance Committee
 
Upon completion of this offering, the Nominating and Corporate Governance Committee shall consist of Mr. Klein,          and          . The Nominating and Corporate Governance Committee reviews and, as it deems appropriate, recommends to the Board of Directors policies and procedures relating to director and board committee nominations and corporate governance policies. Mr. Klein shall serve as chairperson of the Nominating and Corporate Governance Committee.
 
Director Compensation
 
During fiscal 2009, there was one non-employee director, Robert J. Klein, who is affiliated with ACAS and received no compensation for services as a member of either our Board of Directors or of the Board’s Compensation Committee. Mr. Logan’s compensation is reported below under the Summary Compensation Table, and he did not receive separate compensation for his service on our Board of Directors.
 
We have not yet determined the compensation for members of our Board of Directors who are not employees of Mirion or who are not affiliated with ACAS.
 
Directors who are employees of Mirion or its subsidiaries or affiliated with ACAS will receive no compensation for services as members of either our Board of Directors or committees.
 
We will reimburse all directors for reasonable expenses incurred to attend meetings of our Board of Directors or committees.
 
Code of Ethics and Conduct
 
On June 12, 2008, our Board of Directors adopted a revised Code of Ethics and Conduct that establishes the standards of ethical conduct applicable to all of our directors, officers and employees. The Code of Ethics and Conduct (the “Code of Conduct”) addresses, among other things, competition and fair dealing, conflicts of interest, financial matters and external reporting, company funds and assets, confidentiality and corporate opportunity requirements and the process for reporting violations of the Code of Conduct, employee misconduct, conflicts of interest or other violations.
 
In connection with this offering, our Board of Directors will adopt a revised code of ethics that revises the process for reporting violations of the Code of Conduct, employee misconduct, conflicts of interest or other violations to conform with applicable legal requirements of the United States and the other jurisdictions in which Mirion operates.
 
Our Code of Conduct will be publicly available on our website at www.mirion.com. Any waiver of our Code of Conduct with respect to the Chief Executive Officer, Chief Financial Officer, controller or persons performing similar functions may only be authorized by our Audit Committee and will be disclosed as required by applicable law.
 
EXECUTIVE COMPENSATION
 
Compensation Discussion and Analysis
 
The following discussion specifically relates to the compensation for fiscal 2009 of our “named executive officers” set forth in the Summary Compensation Table below, as well as discussing the overall principles underlying our executive compensation policies and decisions.


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Objectives of Executive Compensation Program
 
The objectives of our executive compensation program are to recruit and retain an executive management team with the skills necessary to achieve our business objectives and thereby create value for our stockholders. Our executive compensation program is designed to support key business goals, such as integrating acquired businesses and retaining key executives, that are particularly important to us as a company with a limited operating history.
 
We implement this program through a combination of fixed cash compensation, variable short-term incentive compensation (determined by our operating performance as well as achievement of individual annual performance objectives), and equity incentives designed to reward long-term performance and align interests of our executive officers with our stockholders.
 
As a company whose equity was not publicly traded before this offering, our compensation philosophy has focused on the achievement of performance objectives that we believe would deliver meaningful return to our investors through a public offering or a sale of our company. In connection with this offering, we have reviewed our compensation philosophy and expect to adopt a compensation philosophy and objectives that are generally more consistent with those of a public, rather than private, company.
 
Executive Compensation Program
 
Our compensation program reflects our stage of development as a company. We have a limited operating history. We were incorporated in October 2005 and consist of a series of earlier acquisitions of geographically and technologically diverse companies. We have recruited several of our executive officers from other employers, and our initial compensation for these officers generally reflects the outcome of negotiated recruitment and hiring process.
 
As a company with a limited operating history, retention of executive officers is a key business objective. Weathering undesirable personnel changes would be more difficult for us than for a more established company. Accordingly, our Board of Directors believes it is critical to pay sufficient base compensation and provide adequate incentives to our executive officers to ensure continuity of our management team.
 
The Compensation Committee of the Board of Directors was established in July 2006. During fiscal 2009, Mr. Robert Klein was the sole member of the Compensation Committee. Our current executive compensation policies and objectives were developed and implemented by the Compensation Committee while we were a private company. The Compensation Committee has allocated compensation between long-term and short-term, between cash and non-cash compensation and among different forms of non-cash compensation in a manner considered to be typical of a private equity-backed enterprise. Our compensation program has focused on offering incentives necessary to recruit and retain executives from diverse backgrounds who possess the skills necessary to achieve our business objectives. We have not adopted any formal or informal policies or guidelines for allocating compensation between long-term and short-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation.
 
Since the inception of the Compensation Committee, it has sought to review our executive officers’ compensation packages at least annually to determine whether they provide adequate incentives to achieve our business goals. In evaluating the market, the Compensation Committee has relied generally on its experience as well as market feedback and experience derived inherently from the process of recruiting new executives to our team. Our Chief Executive Officer recommends to the Compensation Committee compensation allocations for our named executive officers other than himself. The Compensation Committee sets the compensation for our Chief Executive Officer.
 
During fiscal 2009, the Compensation Committee of our Board of Directors engaged The Hay Group as an outside compensation consultant to undertake a review of director and executive officer compensation trends in the regions in which we operate and at comparable public and private companies. The Hay Group has provided the Compensation Committee with an assessment of executive officer compensation and recommendations with respect to compensation arrangements for both executive officers and directors. The Hay Group has not provided us with any other services beyond the scope of this engagement.


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Elements of Compensation
 
The following describes each element of our executive compensation program and discusses determinations regarding compensation for fiscal 2009:
 
Base Compensation.  Our Compensation Committee sets named executive officer base salaries based on the skills, experience and scope of responsibilities of each executive. Our Compensation Committee reviews base salaries at least annually. Base salaries are adjusted from time to time to reflect each executive’s overall contribution and to conform salaries to market levels. Our Compensation Committee has relied primarily on its experience to negotiate base salaries. Our named executive officers’ base salaries were determined initially in the context of negotiated employment agreements. Our Compensation Committee increased the base salary of our Chief Executive Officer in 2009 to be closer to the level of other companies comparable to Mirion, especially those that are publicly traded. As noted above, our Compensation Committee engaged The Hay Group to undertake a review that included an assessment of the compensation of our Chief Executive Officer, and the Compensation Committee has taken these findings into account in adjusting the compensation of our Chief Executive Officer as of January 1, 2009 to $325,000 and to agreeing to increase his base salary to $400,000 on the date of the initial public offering to reflect the significant increase in responsibilities of a chief executive officer of a public company and to $450,000 on the one year anniversary of the initial public offering. With respect to our other named executive officers, we did not make material changes to base compensation during fiscal 2009. We did not target base compensation to a specific percentile within a comparative group.
 
Annual Incentive Bonuses.  Our executive bonus program provides for executives to receive a bonus based on the following factors:
 
 • the achievement of financial and operational goals for the fiscal year;
 
 • commitment to future growth in revenue and earnings for the subsequent fiscal year in the financial forecast approved by our Board of Directors upon recommendation of our Chief Executive Officer; and
 
 • achievement of individual annual performance objectives.
 
Annual performance objectives are approved by the Compensation Committee as part of the Board of Director’s review of our prior fiscal year financial results. Our Chief Executive Officer makes recommendations to our Compensation Committee regarding individual performance objectives and awards for named executive officers other than himself. Performance objectives and awards for our Chief Executive Officer are determined solely by the Compensation Committee. The Compensation Committee retains full discretion to determine the final bonus amounts and does not rely solely on our financial results. For fiscal 2009, the total potential bonus pool is calculated based on achievement of the financial goals, as further described below. Then payment of the bonus pool is allocated as follows:
 
 • 50% of the bonus pool is paid based solely on this achievement of Adjusted EBITDA and working capital, as described below;
 
 • 25% of the bonus pool is paid based on attainment of personal objectives; and
 
 • 25% of the bonus pool is paid based on financial objectives specified in the following year’s plan.
 
For fiscal 2009, the Compensation Committee specified that the financial goal would be achievement of Adjusted EBITDA (or, for named executive officers who are division presidents, Adjusted EBITDA for the applicable division), subject to a percentage increase or decrease based on our goal of decreasing working capital requirements. We calculate Adjusted EBITDA as net income (loss), less extraordinary gains and losses and interest income, plus interest expense, charges against income for taxes, depreciation expense, amortization expense, non-recurring charges, management fees paid to ACFS and all non-cash compensation expenses. For more information about the calculation of Adjusted EBITDA and a reconciliation to net income, see page 7 of this prospectus. Adjusted EBITDA results are not set forth in our audited financial statements and our calculations of these goals as a private company may differ from actual audited results. For purposes of the bonus plan, the determination of Adjusted EBITDA is made on a currency-adjusted basis, so although the calculation is derived from our audited result, the numbers will not be the same as the audited result.


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Although we expect the financial results to require improved performance and exceptional work each year, the goals are set to be consistent with our business plan objectives and to be achievable. For fiscal 2009, the potential bonus pool percentage set forth in the table below is increased or decreased by up to 30% depending on how the change in our working capital (generally defined for this purpose as accounts receivable plus inventory, minus the sum of accounts payable and non-financial accrued liabilities) compares to our percentage increase in revenue. That is, if there was a 20% or greater increase in working capital versus revenue, the bonus pool would be decreased by 30%; if there was between a 10% increase and 10% decrease in working capital versus revenue, there would be no change in the bonus pool; and if there was a 20% or greater decrease in working capital versus revenue, the bonus pool would be increased by 30%.
 
Each named executive officer was given a target bonus (expressed as a percentage of base salary), with a minimum threshold and maximum target bonus based on financial goal performance (prior to any working capital adjustment). The following table shows the target bonus pool amounts for each of our named executive officers for different levels of achievement of the Adjusted EBITDA financial target (which for fiscal 2009 ranged from approximately $35 million to $42.8 million):
 
                 
  Below
  90%
  100%
  110%
 
  Threshold  Target  Target  Target or Above 
 
Thomas D. Logan $0   25% salary   50% salary   100% salary 
Jack A. Pacheco $0   25% salary   50% salary   100% salary 
Seth B. Rosen $0   25% salary   40% salary   80% salary 
 
For each division president, target levels were based on Adjusted EBITDA for the particularly business unit for which he is responsible (the Health Physics Division for Mr. Besso and the Sensing Systems Division for Mr. Wilson):
 
                 
  Below
  $1.5 MM
  100%
  $1.5 MM
 
  Threshold  Below Plan  Target  Above Plan 
 
W. Antony Besso $0   40% salary   50% salary   60% salary 
Iain F. Wilson $0   25% salary   40% salary   80% salary 
 
Although the determination of our financial performance is an important factor in approving the actual bonus payment, our Compensation Committee believes it is preferable to retain discretion to determine awards (including above or below the amounts in the table above) based on qualitative and quantitative contributions of our named executive officers.
 
After determining our success during fiscal 2009 in achieving the financial goals described above, the Compensation Committee reviewed each named executive officer’s achievement of individual annual performance objectives and addition of long-term value, particularly in carrying out our integration plan and positioning us for this offering. Many of the individual performance objectives are subjectively determined, but for any individual executive officer, each performance objective generally carries the same weight as other objectives. The individual objectives vary because they are specific for each executive officer’s particular functions. For example, for fiscal 2009: Mr. Logan’s objectives included steps preparing for our initial public offering as well as commercializing and repositioning specific business lines and products; Mr. Pacheco’s goals focused on audit objectives as well as reduction of working capital; Mr. Rosen’s objectives focused on legal preparation for an initial public offering and implementing internal systems; Mr. Besso’s goals mainly related to specific products and business lines for which he is responsible; and Mr. Wilson’s goals included developing and implementing business unit strategies in particular locations.
 
In September 2009, the Compensation Committee determined performance results for fiscal 2009 and awarded bonuses in the amounts set forth under “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below. In determining the amount of the bonuses for the year, the Committee first reviewed our financial results. Our Adjusted EBITDA results exceeded our maximum target level at the corporate level and for our Sensing Systems division, so the potential bonus pool for Messrs. Logan, Pacheco, Rosen and Wilson was the maximum amount in the table above. Mr. Besso’s potential bonus pool was between his target and maximum level. There was no working capital adjustment at the corporate level, but


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each of Mr. Besso and Mr. Wilson achieved the maximum working capital goals for their divisions, and so their potential bonus pools were increased. The Committee then reviewed each named executive officer’s individual performance objectives, some of which require a subjective determination. After this review, each of our chief executive officer, chief financial officer and general counsel received a bonus greater than his target bonus and received, on average, approximately 80% of the “maximum” bonus set forth in the table above. Each of Mr. Besso and Mr. Wilson received a bonus greater than their “maximum” bonus because of the upward working capital adjustment for each of their divisions.
 
Going forward, the type of financial performance target we use, and individual performance objectives, may change if our Compensation Committee determines it would be appropriate to use different types of goals as a public company, although for fiscal 2010 we expect to use the same types of financial goals. In addition, we will pay bonuses to some of our employees, including certain executive officers, if and when this initial public offering is completed. Mr. Logan will be eligible to receive a bonus of up to $125,000 (or less to the extent the offering is completed prior to January 1, 2010 because Mr. Logan’s salary will increase when the offering is completed) and Mr. Besso will be eligible to receive a bonus of up to $507,509. The amount of Mr. Besso’s bonus was negotiated with him in conjunction with efforts to retain him by fulfilling an earlier commitment to him and as a supplement to his stock options, which also vest on an initial public offering.
 
Equity Awards.  We design our equity programs to align employees’ interests with those of our stockholders by offering employees the opportunity to acquire stock and therefore have a direct interest in helping to increase the value of our stock. The design of these equity incentives is typical of the Compensation Committee’s experience with a private equity-backed enterprise. To date, we have granted stock options to our executive officers and a limited group of other employees. Stock options permit the employee to exercise the option at a fixed price (at or above the fair market value of the stock on the grant date) in the future after the option has become vested. Grants typically are made around the time an employee is hired, and we may make additional grants following a significant change in job responsibilities or to meet other specific retention objectives. Our Compensation Committee determines the size and type of equity awards taking into account the recommendations of management and also determines the vesting schedule of the options. The terms of initial equity grants made to each named executive upon joining the company are based primarily on competitive conditions applicable to the executive officers’ specific position. We made the equity awards reflected in the compensation tables below primarily in the context of negotiated employment agreements. As a private company, the overall size of our option pool was based on a range of potential dilution levels historically used by our majority stockholder with its other private companies. The chief executive officer receives the largest share of the option pool because he has the most significant impact on value. Other executive officers’ option amounts were then determined, although individual allocations were not based on a specific formula or value. Instead, the number of options depended on a combination of share availability in the option pool, negotiations at the time of offering employment to a new officer, the Compensation Committee’s expectation for the officer’s potential impact on future value of our company and the past experience of the Compensation Committee. We have not currently adopted stock ownership or equity grant guidelines, but we may implement guidelines regarding the issuance of new equity awards in the future.
 
Severance and Change in Control Arrangements.  Each of our named executive officers, with the exception of Mr. Wilson, has an employment agreement that would provide severance on specified involuntary terminations of employment. We have also agreed to accelerated vesting of Messrs. Logan’s and Pacheco’s stock options in the event of certain change in control events and of Mr. Besso in the event of this initial public offering or a change in control. The terms and estimated amounts of these benefits are described below under “Employment Agreements and Potential Payments upon Termination or Change in Control.” Based on the past experience of the Compensation Committee, we believe these arrangements are competitive with arrangements offered to senior executives by companies with whom we compete for executives and are necessary to the achievement of our business objective of management retention. Given our limited operating history, our Compensation Committee believes these provisions were a key part of hiring and retaining management to ensure continuity of our management team.
 
Perquisites and Other Benefits.  Our named executive officers are eligible to participate in our employee benefit plans provided for employees which vary by country. In the United States, these benefits include a


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401(k) plan with a matching contribution, group medical and dental insurance, group life insurance and short- and long-term disability insurance. As set forth in the Summary Compensation Table below, Messrs. Besso and Wilson receive specified benefits that are typical for executives in their locations, or required by law, but these additional benefits are limited in amount and scope.
 
Tax and Accounting Considerations.  We recognize a charge to earnings for accounting purposes for equity awards granted. As we become a public company, we expect that the Compensation Committee will consider the accounting impact of equity awards in addition to consider the impact to dilution and overhang when deciding on amounts and terms of equity grants. We do not require executive compensation to be tax deductible for the Company, but instead balance the cost and benefits of tax deductibility to comply with our executive compensation goals, including the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to our executive officers. Section 162(m) disallows a tax deduction for any publicly held company for individual compensation exceeding $1 million in any taxable year for our Chief Executive Officer and each of the other named executive officers (other than our Chief Financial Officer), unless the compensation is performance-based.
 
Summary Compensation Table
 
The following table sets forth information concerning the compensation of our Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers for fiscal 2009. We refer to these individuals as our “named executive officers” elsewhere in this prospectus.
 
                             
              Non-Equity
       
           Option
  Incentive Plan
  All Other
    
     Salary
  Bonus
  Awards
  Compensation
  Compensation
  Total
 
Name and Principal Position
 Fiscal Year  ($)  ($)  ($)(1)  ($)  ($)  ($) 
 
Thomas D. Logan
President, Chief
Executive Officer and Chairman
  2009   312,473         251,094(2)  36,884(3)  600,451(2)
Jack A. Pacheco
Vice President and Chief Financial Officer
  2009   278,000      198,870   199,813(2)  6,906(3)  683,589(2)
Seth B. Rosen
General Counsel,
Vice President Corporate
Development, and
Secretary
  2009   232,000      100,698   154,667(2)  6,853(3)  494,218(2)
W. Antony Besso(4)
Regional Vice
President, EMEA and
President, Health Physics
Division
  2009   303,861      215,080   184,586(2)  62,806(3)  766,333(2)
Iain F. Wilson(4)
Regional Vice President, Asia and President,
Sensing Systems Division
  2009   185,726      71,629   204,298(2)  16,749(3)  478,402(2)
 
 
(1)The amounts in this column reflect the dollar amount of compensation cost recognized for financial statement reporting purposes for fiscal 2009 in accordance with FAS No. 123(R) with respect to stock options that have been granted, whether or not the awards were granted during fiscal 2009. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting


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conditions. For information on the valuation assumptions, see Note 13 to our consolidated financial statements. See the Grants of Plan-Based Awards Table below for additional information on the stock options granted in fiscal 2009.
 
(2)Represents payments under our executive bonus program for performance during fiscal 2009, as described above under Compensation Discussion and Analysis.
 
(3)Includes our matching 401(k) contributions for the following named executive officers’ accounts in the following amounts: Mr. Logan ($5,702), Mr. Pacheco ($6,906) and Mr. Rosen ($6,853). For Mr. Logan, the amount also includes car allowance ($9,217) and amounts paid for accrued vacation above the maximum accrual limit ($21,965) under our annual vacation cashout policy for executive officers. For Mr. Besso, the amount consists of his car allowance ($6,259), an allowance for travel ($8,670), child school allowance ($13,743), a housing allowance ($24,050) which was discontinued in February 2009 and private unemployment insurance ($10,083). For Mr. Wilson, this amount consists of car allowance ($5,183) and contributions to his Registered Retirement Savings Plan, a defined contribution plan in Canada ($7,280) and vacation pay ($4,286).
 
(4)Mr. Besso’s compensation, which is paid in euros, and Mr. Wilson’s compensation, which is paid in Canadian dollars, have been converted into U.S. dollars using the respective average rate of exchange for the fiscal year.
 
Grants of Plan-Based Awards for Fiscal 2009
 
The following table sets forth information concerning grants of plan-based awards made to the executive officers named in the Summary Compensation Table during fiscal 2009.
 
                             
              All Other
       
              Option
       
     Estimated Future
  Awards:
       
     Payouts Under
  Number of
  Exercise
  Grant Date
 
     Non-Equity Incentive
  Securities
  Price
  Fair Value
 
     Plan Awards(1)  Underlying
  of Option
  of Option
 
  Grant
  Threshold
  Target
  Maximum
  Options
  Awards
  Awards
 
Name
 Date  ($)  ($)  ($)  (#)  ($/Sh)  ($)(2) 
 
Thomas D. Logan  08/05/08   78,118   156,237   312,473             
Jack A. Pacheco  08/05/08   69,500   139,000   278,000             
Seth B. Rosen  08/05/08   58,000   92,800   185,600             
   08/05/08               2,000   144.95   99,400 
W. Antony Besso(3)  08/05/08   120,635   150,794   180,953             
   08/05/08               12,731   144.95   586,583 
Iain F. Wilson(3)  08/05/08   46,431   74,290   148,580             
   08/05/08               5,000   144.95   248,499 
 
 
(1)Threshold, Target and Maximum amounts refer to the annualized eligible bonus for each named executive officer if specified financial performance criteria were met, as more fully discussed above in the “Compensation Discussion and Analysis” and below under “Executive Bonus Program.” The actual annual performance bonus payable is subject to determination by the Compensation Committee after a review of the financial performance of Mirion or the applicable business unit, as well as each named executive officer’s achievement of their individual annual performance objectives, which may result in a higher or lower actual bonus payment. See “Compensation Discussion and Analysis—Elements of Compensation.” Actual amounts paid for fiscal 2009 are set forth in the Summary Compensation Table above.
 
(2)The amounts in this column represent the grant date fair value, computed in accordance with FAS No. 123(R), of each option granted to the named executive officer in fiscal 2009. For information on valuation assumptions, see Note 13 to our consolidated financial statements.
 
(3)Converted into U.S. dollars using the average rate of exchange for the fiscal year.


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Executive Bonus Program.  As further described in the Compensation Discussion and Analysis above, the awards for fiscal 2009 were first determined on our corporate Adjusted EBITDA performance (or business segment for each of Messrs. Besso and Wilson) and working capital, but are also subject to determination of individual performance and other factors. Each of the executive bonus awards would be 0% of base salary if the performance level was below a specified threshold of performance. Between the threshold level and target level, and between the target level (payable if 100% of plan was achieved) and the maximum level, amounts would be interpolated. The Compensation Committee retains discretion to pay amounts over the maximum level for exceptional performance. Each executive officer’s target bonus amount is set as a percentage of base salary, with target amounts for fiscal 2009 of 50% of base salary for Messrs. Logan, Pacheco and Besso and 40% of base salary for Messrs. Rosen and Wilson.
 
Outstanding Equity Awards at Fiscal Year-End June 30, 2009
 
The following table sets forth information concerning unexercised stock options for the executive officers named in the Summary Compensation Table as of the end of fiscal 2009. There were no unvested stock awards outstanding as of the end of the fiscal year.
 
                     
  Option Awards 
        Number of
       
  Numbers of
  Numbers of
  Securities
       
  Securities
  Securities
  Underlying
       
  Underlying
  Underlying
  Unexercised
  Option
    
  Unexercised
  Unexercised
  Unearned
  Exercise
  Option
 
  Options (#)
  Options (#)
  Options
  Price
  Expiration
 
Name
 Exercisable  Unexercisable  (#)  ($)  Date 
 
Thomas D. Logan  14,564           88.75   1/1/16 
   17,750(1)     54,564(1)  88.75   8/18/14 
Jack A. Pacheco  5,328(2)  10,672(2)      111.30   3/31/18 
Seth B. Rosen  3,006(3)  4,994(3)      138.58   1/7/18 
      2,000(4)      144.95   8/5/18 
W. Antony Besso     12,731(5)      144.95   8/5/18 
Iain F. Wilson  1,837          88.75   1/1/16 
   1,837          88.75   1/1/16 
   484(6)  841(6)      121.24   9/6/17 
      5,000(4)      144.95   8/5/18 
 
 
(1)These options were not granted by us, and represent options to purchase shares of Mirion stock from ACAS and its affiliates. The unearned portion of these options is subject to performance vesting following this initial public offering, as described further under “Certain Relationships and Related Party Transactions—Interested Transactions—Transactions with Management.”
 
(2)Options vest in equal monthly installments over four years from March 31, 2008.
 
(3)Options vest in equal monthly installments over four years from January 7, 2008.
 
(4)25% of options vest on August 5, 2009, and thereafter the remaining 75% of options vest in equal monthly installments over three years.
 
(5)25% of options vest on August 5, 2009, and thereafter the remaining 75% of options vest in equal quarterly installments over three years.
 
(6)Options vest in equal monthly installments over five years from September 6, 2007.
 
Option Exercises and Stock Vested for Fiscal 2009
 
No executive officers named in the Summary Compensation Table above exercised any stock options, or had any stock award become vested, during fiscal 2009.


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Employment Agreements and Potential Payments on Termination and Change of Control
 
We have entered into employment agreements with each of our named executive officers as described below. Generally, these agreements were the result of negotiations with the executive and provide that we will pay severance benefits to an executive if he is terminated without cause or resigns for good reason (which generally includes a material reduction in compensation or duties or a significant relocation), subject to the executive signing a general release of claims. In addition, our Chief Executive Officer and our Chief Financial Officer, as well as Mr. Besso, would receive accelerated vesting of some of their equity awards on change in control transactions, as further described below.
 
Thomas D. Logan.  Under the terms of his August 2006 employment agreement, as amended in December 2008 and January 2009, if Mr. Logan is involuntarily terminated without cause or resigns for good reason, he will be entitled to receive the following benefits if he signs a general release:
 
 • an amount equal to his annual base salary;
 
 • a pro rata portion of his incentive bonus, if any, for the applicable period during the fiscal year in which termination occurs; and
 
 • continuation of all health benefits offered to senior executive for one year after the date of termination.
 
In addition, Mr. Logan’s Employment Agreement provides that upon a change in control, 100% of his unvested options will vest and, if applicable, he will receive reimbursement for excise taxes imposed on him as a result of Section 280G of the Internal Revenue Code, and that 50% of his unvested options will vest upon completion of this offering. Further, Mr. Logan’s Employment Agreement provides for a one-time bonus upon completion of this offering, equal to $50,000 plus an amount not to exceed $75,000, with such additional amount to be determined based upon the time taken to complete the offering.
 
Jack A. Pacheco.  Under the terms of his March 2008 employment agreement, as amended in December 2008, if Mr. Pacheco is involuntarily terminated without cause or resigns for good reason, he will be entitled to receive the following benefits if he signs a general release:
 
 • an amount equal to his annual base salary; and
 
 • a pro rata portion of his incentive bonus, if any, for the applicable period during the fiscal year in which termination occurs.
 
In addition, his employment agreement provides that 100% of his unvested options will vest in the event that either (i) ACAS or its affiliates no longer own at least 50% of the outstanding capital stock of the Company currently held by ACAS and its affiliates; provided that no such vesting shall occur as a result of the initial public offering of the capital stock of the Company or a company affiliated with the Company formed for the purpose of an initial public offering; or (ii) all or substantially all of the assets of the Company are sold, transferred or disposed of to a person (or group of persons acting in concert) that is not an affiliate of ACAS.)
 
Seth B. Rosen.  Under the terms of his January 2008 employment agreement, as amended in December 2008, if Mr. Rosen is involuntarily terminated without cause or resigns for good reason, he will be entitled to receive the following benefits if he signs a general release:
 
 • an amount equal to his annual base salary;
 
 • a pro rata portion of his incentive bonus, if any, for the applicable period during the fiscal year in which termination occurs; and
 
 • continued payment by us for a maximum of 12 months of his health coverage premiums under COBRA.
 
Iain F. Wilson.  There are no specific requirements with respect to any obligations of us in connection with a termination of Mr. Wilson’s employment under any employment agreement. Pursuant to Canadian law,


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executive officers may be entitled to benefits or a notice period upon termination of employment, depending on length of service and other factors.
 
W. Antony Besso.  Mr. Besso’s employment agreement is governed by French law. Under the terms of his 2006 employment agreement, as amended in November 2007, if Mr. Besso is terminated, he will be entitled to receive the following benefits:
 
 • an amount equal to 12 months of remuneration, consisting of base salary, incentive bonus, and all other bonuses and benefits received by Mr. Besso during the last twelve months preceding his termination; and
 
 • any payments under the applicable collective bargaining agreement.
 
Mr. Besso’s agreement provides that either party may terminate the agreement with three months’ notice. The agreement includes a non-competition covenant for two years following the termination of Mr. Besso’s employment, if we pay to Mr. Besso an amount not to exceed6/10 of the monthly average of specified pay and benefits from the last 12 months of his employment. In addition, Mr. Besso received stock options in August 2008 that provided for accelerated vesting upon a change in control or an initial public offering.
 
Potential Termination and Change in Control Benefits.  The table below provides an estimate of the value of the compensation and benefits due to each of our named executive officers in the event of: (i) an involuntary termination; (ii) death or disability; or (iii) a change in control. The amounts shown assume that specified event was effective as of June 30, 2009. The actual amounts to be paid can only be determined at the time of the termination of employment or change in control, as applicable.
 
             
  Involuntary
  Disability
  Change in
 
  Termination
  or Death
  Control
 
Name
 ($)  ($)  ($) 
 
Thomas D. Logan  497,661(1)  172,661(2)  (3)
Jack A. Pacheco  417,000(1)  139,000(2)  (3)
Seth B. Rosen  341,225(1)  92,800(2)   
W. Antony Besso  517,461(4)      (3)
Iain F. Wilson  (5)       
 
 
(1)Consists of payments due on a termination without cause or resignation for good reason, subject to the executive signing a release. This amount consists of (i) 100% of annual base salary, (ii) a pro rata portion of any incentive bonus (which for a termination at June 30, 2009, we have assumed to be 100% of the target bonus for fiscal 2009), and (iii) our payments for continued health benefits in the case of Mr. Logan and Mr. Rosen. Such amount would be payable at the same time as such payment would be made while the executive was employed with us. This amount does not include any amounts that are accrued and owing at the time of termination (such as accrued vacation and salary through the date of termination).
 
(2)Consists of pro rata portion of any incentive bonus (which we have assumed to be 100% of the target bonus) and, for Mr. Logan, continued health benefits for his family for 12 months.
 
(3)For Mr. Logan, this amount reflects (i) 100% vesting of any unvested stock options and (ii) remittance of net proceeds upon the sale by ACAS of vested and unexercised IRR Options under the Call Option Agreement. For Mr. Pacheco, this reflects 100% vesting of any unvested stock options in the event that (i) ACAS no longer owns at least 50% of our outstanding capital stock, or (ii) all or substantially all of our assets are sold, transferred or disposed of, in the case of Mr. Pacheco. The dollar value in each case is based on an assumed public offering price of $     , based on the mid-range of the offering price range, but otherwise assumes the transaction occurred based on unvested options at June 30, 2009.
 
(4)Amount includes 12 months of salary and other compensation paid for 2009, assuming payment of the target bonus for fiscal 2009. Amount does not include three months of notice and assumes we do not elect to pay for Mr. Besso’s continued non-competition agreement, as described above.
 
(5)Does not include amounts that may be payable as required by law.


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Employee Benefit Plans
 
Stock Plan
 
The following contains a summary of the material terms of our 2006 Stock Plan, which was originally approved in December 2005. Prior to the consummation of this offering, we expect our Board of Directors and stockholders to approve amendments to this plan, and we refer to the amended plan as the Stock Plan below.
 
Share Reserve.  As of June 30, 2009, an aggregate of 118,690 shares of our common stock were reserved for issuance, options to purchase 113,288 shares were outstanding and 5,402 shares were available for future grant under the Stock Plan. Prior to the consummation of this offering, we expect to reserve 106,160 additional shares under the Stock Plan. In general, if options or other awards granted under the Stock Plan are forfeited or terminate for any other reason before being exercised or settled, then the shares subject to such options or awards will again become available for awards under the Stock Plan.
 
Administration of the Stock Plan.  The Stock Plan will be administered by our Board of Directors or our Compensation Committee or another committee designated by our Board of Directors. The administrator has complete discretion to make all decisions relating to the interpretation and operation of the Stock Plan. The administrator will have the discretion to determine who will receive an award, the type of award, the number of shares that will be covered by the award, the vesting requirements of the award, if any, and all other features and conditions of the award. The administrator may implement rules and procedures that differ from those described below in order to adapt the Stock Plan to the requirements of countries other than the United States.
 
Eligibility.  Any employee, consultant or non-employee director may be selected by the administrator to participate in the Stock Plan. Directors affiliated with ACAS and its affiliates are not expected to receive grants.
 
Type of Awards.  To date, we have granted options under the Stock Plan. Following this offering, awards granted under the Stock Plan may include any of the following:
 
 • stock options to purchase shares of our common stock at a specified exercise price;
 
 • restricted stock units, representing the right to receive a specified number of shares of our common stock, the fair market value of such common stock in cash or a combination of cash and shares upon expiration of the vesting period specified for such stock units by the administrator;
 
 • restricted shares, which are shares of common stock issued to the participant subject to such forfeiture and other restrictions as the administrator, in its sole discretion, shall determine;
 
 • stock appreciation rights, which are rights to receive shares of our common stock, cash or a combination of shares and cash, the value of which is equal to the spread or excess of (i) the fair market value per share on the date of exercise over (ii) the fair market value per share on the date of grant with respect to a specified number of shares of common stock; and
 
 • other equity-based awards.
 
Vesting of Awards.  Equity awards vest at the time or times determined by the administrator. In most cases, our options granted to date vest over the four-year period following the date of grant, but the administrator has the discretion to determine the vesting schedule and whether the vesting will accelerate on events such as death, disability, change in control or involuntary termination of employment. In addition, the administrator may grant performance awards based on performance criteria measured over a specified period.
 
Other Terms of Awards.  After termination of service by an employee, director or consultant, for any reason other than misconduct, he or she has a period of 30 days (or such longer period as specified in an award agreement) following the date of termination during which to exercise his or her option. The administrator may, at its discretion, extend the period of time for which the option is to remain exercisable, but no option may be exercisable after the expiration of its term.


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Change in Control.  In the event of a merger or consolidation of us, all outstanding awards will be subject to the agreement of merger or consolidation, which may provide for the continuation or assumption of outstanding awards; substitution with substantially similar awards; accelerated vesting of awards; or cancellation of awards in exchange for a cash payment equal to the fair market value of the shares over the applicable purchase price of the award.
 
Amendment and Termination of Plan.  Our Board of Directors may amend or terminate the Stock Plan at any time. No amendment can be effective prior to its approval by our stockholders, to the extent that such approval is required by applicable legal requirements or any exchange on which our common stock is listed. The Stock Plan will continue in effect for ten years from the last approval by stockholders, unless our Board of Directors decides to terminate the plan earlier.
 
Limitation of Liability and Indemnification of Officers and Directors
 
The Certificate of Incorporation and Bylaws that we will adopt prior to the consummation of this offering contain provisions that limit the personal liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages or any breach of fiduciary duties as directors, except liability for:
 
 • any breach of the director’s duty of loyalty to us or our stockholders;
 
 • any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
 • unlawful payments of dividends, or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
 
 • any transaction from which the director derived an improper personal benefit.
 
The Certificate of Incorporation and Bylaws that we will adopt prior to the consummation of this offering provide that we must indemnify our directors and officers to the fullest extent permitted by Delaware law. Our Certificate of Incorporation and Bylaws shall also provide that we shall advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity, regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. Prior to the effectiveness of this offering, we expect to enter into agreements to indemnify our directors and executive officers, and other employees as determined by our Board of Directors, against expenses and liabilities to the fullest extent permitted by Delaware law. With certain exceptions, these agreements also provide for indemnification for related expenses including, among others, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. The indemnification agreement also provides for indemnified directors and officers to select the method by which a determination of eligibility for indemnification is made. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.
 
The limitation of liability and indemnification provisions in the Certificate of Incorporation and Bylaws that we will adopt prior to the consummation of this offering may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty of care. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.


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PRINCIPAL STOCKHOLDERS
 
The following table sets forth certain information regarding the beneficial ownership of our common stock by (1) each person known by us to be the beneficial owner of 5% or more of the outstanding common stock, (2) each of our directors, (3) each of the executive officers named in the section entitled “Management” above and (4) all of our executive officers and directors as a group.
 
Percentage of ownership is based on 1,197,094 shares of common stock outstanding as of June 30, 2009. Beneficial ownership is calculated based on SEC requirements. These requirements also treat as outstanding all shares of common stock that a person would receive upon exercise of stock options or warrants held by that person that are immediately exercisable or exercisable within 60 days of the determination date, which in the case of the following table is September 1, 2009. Shares issuable pursuant to stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of the person holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock.
 
Other than as specifically noted below, the address of each of the named entities or individuals isc/o Mirion Technologies, Inc., 3000 Executive Parkway Suite 222, San Ramon, California 94583.
 
                         
     Common Stock
    
  Common Stock
  Beneficially Owned
  Common Stock
 
  Beneficially Owned
  After the Offering
  Beneficially Owned
 
  Prior to the Offering  Without Over-Allotment  After the Offering With Over-Allotment 
Beneficial Owner
 Number  Percentage  Number  Percentage  Number  Percentage 
 
Greater than 5% Stockholders:
                        
American Capital, Ltd. and affiliated entities(1)  1,586,416   99.51%                
2 Bethesda Metro Center
14th Floor
Bethesda, MD 20814
                        
American Capital Equity I, LLC(2)  475,164   35.78%                
2 Bethesda Metro Center
14th Floor
Bethesda, MD 20814
                        
American Capital Equity II, LP(3)  185,366   14.72%                
2 Bethesda Metro Center
14th Floor
Bethesda, MD 20814
                        
Named Executive Officers and Directors:
                        
Thomas D. Logan(4)  39,867   3.19%                
Jack A. Pacheco(5)  6,660   *                 
Seth B. Rosen(6)  4,300   *                 
W. Antony Besso(7)  7,792   *                 
Iain F. Wilson(8)  5,808   *                 
Robert J. Klein  0   *                 
All Executive Officers and Directors as a group (6 persons)  64,427   5.20%                
 
 
*Indicates less than 1%.
 
(1)Includes 24,503 shares of Class B Non-Voting Common Stock held of record, warrants to purchase 222,156 shares of common stock that are exercisable within 60 days of September 1, 2009, 530,222 shares ofSeries A-1 Convertible Participating Preferred Stock as-converted to 600,635 shares of common stock and 75,803 shares ofSeries A-2 Convertible Participating Preferred Stock as-converted to 78,592 shares of


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common stock. The members of the Board of Directors of American Capital, Ltd. are Mary Baskin, Neil Hahl, Philip Harper, John Koskinen, Stan Lundine, Kenneth Peterson, Alvin Puryear and Malon Wilkus. These individuals may be deemed to have shared voting power over the shares held by American Capital, Ltd. Each of these individuals disclaims beneficial ownership of such shares, except to the extent of his or her pecuniary interest therein. Also includes 475,168 shares held directly by American Capital Equity I, LLC (“ACE I”), and 185,366 shares held directly by American Capital Equity II, LP (“ACE II”). See footnotes (2) and (3) below.
 
(2)Includes 12,610 shares of Class B Non-Voting Common Stock held of record, a warrant to purchase 113,017 shares of common stock that are exercisable within 60 days of September 1, 2009, 272,858 shares ofSeries A-1 Convertible Participating Preferred Stock as-converted to 309,093 shares of common stock and 39,009 shares ofSeries A-2 Convertible Participating Preferred Stock as-converted to 40,444 shares of common stock. American Capital Equity Management, LLC (“ACEM”), a portfolio company of American Capital, Ltd., is the manager of this entity, and pursuant to an operating agreement, ACEM exercises voting power on behalf of ACE I. The members of the Board of Directors of American Capital, Ltd. are Mary Baskin, Neil Hahl, Philip Harper, John Koskinen, Stan Lundine, Kenneth Peterson, Alvin Puryear and Malon Wilkus. These individuals may be deemed to have shared voting power over the shares held by American Capital, Ltd. Each of these individuals disclaims beneficial ownership of such shares, except to the extent of his or her pecuniary interest therein. See footnote (1).
 
(3)Includes 4,919 shares of Class B Non-Voting Common Stock held of record, a warrant to purchase 44,089 shares of common stock that are exercisable within 60 days of September 1, 2009, 106,446 shares ofSeries A-1 Convertible Participating Preferred Stock as-converted to 120,582 shares of common stock and 15,217 shares ofSeries A-2 Convertible Participating Preferred Stock as-converted to 15,776 shares of common stock. American Capital Equity Management II, LLC (“ACEM II”), a portfolio company of American Capital, Ltd., is the general partner of this entity, and pursuant to a management agreement, ACEM II exercises voting power on behalf of ACE II. The members of the Board of Directors of American Capital, Ltd. are Mary Baskin, Neil Hahl, Philip Harper, John Koskinen, Stan Lundine, Kenneth Peterson, Alvin Puryear and Malon Wilkus. These individuals may be deemed to have shared voting power over the shares held by American Capital, Ltd. Each of these individuals disclaims beneficial ownership of such shares, except to the extent of his or her pecuniary interest therein. See footnote (1).
 
(4)Consists of 2,091 shares of Class A Voting Common Stock held of record, a warrant to purchase 4,063 shares of common stock that are exercisable within 60 days of September 1, 2009, 1,235 shares ofSeries A-1 Convertible Participating Preferred Stock as-converted to 1,399 shares of common stock, options to purchase 14,564 shares of common stock that are exercisable within 60 days of September 1, 2009 and options to purchase 17,750 shares of common stock held by ACAS that are exercisable within 60 days of September 1, 2009.
 
(5)Consists of options to purchase 6,660 shares of common stock that are exercisable within 60 days of September 1, 2009.
 
(6)Consists of options to purchase 4,300 shares of common stock that are exercisable within 60 days of September 1, 2009.
 
(7)Consists of 2,700 shares of Class B Non-Voting Common Stock held of record and options to purchase 5,092 shares of common stock that are exercisable within 60 days of September 1, 2009.
 
(8)Consists of options to purchase 5,808 shares of common stock that are exercisable within 60 days of September 1, 2009.


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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
 
Agreements with ACAS
 
We have entered into certain agreements with ACAS and its affiliates, which will own     % of our issued and outstanding common stock after the completion of this offering, assuming no exercise of the underwriters’ over-allotment option. One of our directors, Mr. Klein, is an employee of ACAS. Set forth below is a brief description of the relationships and agreements between us and ACAS.
 
Certificate of Incorporation and Bylaws
 
The Bylaws that we will adopt prior to the consummation of this offering will provide that ACAS has the right to designate up to three members of our seven member Board of Directors, as set forth under “Management—Board Structure and Compensation.”
 
The Bylaws that we will adopt prior to the consummation of this offering will provide that at least one of the directors designated by ACAS must be part of the majority in any action taken by our Board of Directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, other than on matters in which ACAS has a conflict of interest (as it would if it appointed a majority of our directors). Our Bylaws will also provide that ACAS will have the right to designate three of our seven directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, two directors so long as they hold at least 25% but less than 50.1% and one director so long as they hold at least 10% but less than 25%.
 
Registration Rights Agreement
 
Prior to the consummation of this offering, we shall enter into a registration rights agreement with ACAS and certain of its affiliates, Thomas D. Logan, W. Antony Besso and certain other of our stockholders, pursuant to which such stockholders will have registration rights with respect to our common stock. Under the agreement, ACAS may from time to time require us to effect registrations of our securities held by ACAS and its affiliates, and ACAS, Thomas D. Logan, W. Antony Besso and certain other of our stockholders may join in registrations which we may effect, either for our benefit or for the benefit of other holders of our common stock. See “Description of Capital Stock—Registration Rights.”
 
Investment Banking Services Agreement
 
In December 2005, our predecessor entered into an investment banking services agreement with ACFS, a subsidiary of ACAS, pursuant to which ACFS may provide financial and advisory services to us. These services include evaluating, initiating and structuring any potential acquisitions by us, raising debt or equity financing, financial analysis and modeling, and related tasks.
 
The agreement also includes customary indemnification provisions in favor of ACFS, and customary limitations of each entity’s liability for services rendered under the investment banking services agreement in good faith and with reasonable care.
 
So long as the agreement is effective, we are required to pay to ACFS an annual management fee of $1.6 million, plus reimbursement for all reasonableout-of-pocket expenses. The management fee is payable on a quarterly basis, in advance. We incurred $1.6 million for management fees in each of fiscal 2007, 2008 and 2009. We and ACFS have agreed to terminate this agreement upon the consummation of this offering in return for a one-time payment by us to ACFS of $8.0 million.
 
Indebtedness
 
ACAS and its affiliates hold certain indebtedness of our subsidiaries. Such indebtedness consists of senior term notes, senior subordinated notes, junior subordinated notes, revolving notes and stockholder loans. Certain of such indebtedness are governed by Note and Equity Purchase Agreements, and are guaranteed and secured by us and our subsidiaries. See “Use of Proceeds,” “Management’s Discussion and Analysis of


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Financial Condition and Results of Operation—Credit Facilities And Long-Term Debt,” and Note 8 of our consolidated financial statements.
 
The largest aggregate principal amounts outstanding under our NEPAs and stockholder loans were $159.5 million, $173.2 million and $170.0 million in fiscal 2007, 2008 and 2009. The amount currently outstanding as of August 31, 2009 is $180.2 million. We paid $2.5 million, $0.5 million and $0.5 million in principal in fiscal 2007, 2008 and 2009, and $16.5 million, $17.2 million and $14.8 million in interest in fiscal 2007, 2008 and 2009. The interest rates under our debt are described in “Use of Proceeds.”
 
Interested Transactions—Transactions with Management
 
Call Option Agreement between ACAS and Thomas D. Logan
 
Our President, Chief Executive Officer and Chairman of the Board, Thomas D. Logan, entered into a Call Option Agreement with ACAS and certain of its affiliates, in which ACAS granted time and performance-based options to Mr. Logan to purchase shares of the common stock of one of our predecessors on account of his services as an officer and director. After the formation of Mirion, the agreement was amended to provide Mr. Logan with an option to purchase certain of our Class A Common Stock held by ACAS.
 
The agreement provides Mr. Logan with a performance-based option to purchase 54,564 shares of our common stock held by ACAS or its affiliates at an exercise price of $88.75 per share. The performance-based options are divided into three tranches, each of which will either vest or become cancelled in two halves upon our IPO or change in control, depending on whether ACAS achieves certain internal rates of return or returns on investment in such an event.
 
Upon completion of this offering, vesting of the performance-based options will occur in two stages. The first stage occurs 30 days after the effective time of this offering at which time 50% of the options in each tranche will vest if ACAS achieves certain minimum internal rates of return, ranging between 25–40% or certain minimum returns on investment ranging between 2.0–2.7x. If neither goal is met, the portion of such options will be cancelled. The second stage occurs on the earlier of two years after the effective time of this offering or upon the sale by ACAS of its investments in us, at which time the remaining 50% of the options in each tranche will vest if ACAS achieves certain minimum internal rates of return ranging between 25–40% or certain minimum returns on investment of 2.0–2.7x. If neither goal is met, such options will be cancelled. The price of our common stock required to achieve a 25% internal rate of return is $      per share, and the price required to achieve a 2.0x return on investment is $      per share. The price of our common stock required to achieve a 40% internal rate of return is $      per share, and the price required to achieve a 2.7x return on investment is $      per share.
 
The Call Option Agreement also provides Mr. Logan with an option to purchase 17,750 shares of our common stock held by ACAS that vest on a monthly schedule. All such options have vested as of June 30, 2008.
 
All options granted by ACAS and its affiliates to Mr. Logan pursuant to the Call Option Agreement are to be reduced on an economically equivalent basis in the event we grant Mr. Logan options to purchase shares of our common stock after the date of the Call Option Agreement, provided such options are no less favorable to Mr. Logan.
 
Indemnification and Employment Agreements
 
Prior to the consummation of this offering, we shall enter into indemnification agreements pursuant to which we will indemnify our directors and our executive officers in certain circumstances, and hold them harmless against any expenses and liabilities incurred in the performance of their duties to us. Such indemnification includes, among other things, advancement of expenses to indemnitees, payment of fees of independent counsel and conditions of full release of liability to indemnitees in settlement. See “Executive Compensation—Limitation of Liability and Indemnification of Officers and Directors.” We have also entered into employment agreements and non-competition agreements with certain of our executive officers. See


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“Executive Compensation—Employment Agreements and Potential Payments on Termination and Change of Control.”
 
Policies and Procedures for Related Party Transactions
 
We do not currently have a formal, written policy or procedure for the review and approval of related party transactions. However, all related party transactions are currently reviewed by our Board of Directors.
 
Our Board of Directors intends to adopt a written related person transaction policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness or employment by us of a related person.


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DESCRIPTION OF CAPITAL STOCK
 
Following the consummation of this offering, our authorized capital stock will consist of           shares of common stock, par value $0.001 per share and           shares of preferred stock, par value $0.001 per share, undesignated as to series. As of June 30, 2009, 1,197,094 shares of common stock were issued and outstanding and held by nine stockholders of record and no shares of undesignated preferred shares were outstanding, assuming the conversion of all of our convertible preferred stock and the conversion of our Class A Voting Common Stock and Class BNon-Voting Common Stock on a one-to-one basis. The following summary description relating to our capital stock does not purport to be complete and is qualified in its entirety by the Certificate of Incorporation and Bylaws that we will adopt prior to the consummation of this offering, and that will be filed as an exhibit to the registration statement of which this prospectus forms a part.
 
Common Stock
 
The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available therefor. See “Dividend Policy.” In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon completion of this offering will be fully paid and non-assessable.
 
The Bylaws that we will adopt prior to the consummation of this offering will provide that at least one of the directors designated by ACAS must be part of the majority in any action taken by our Board of Directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, other than on matters in which ACAS has a conflict of interest (as it would if it appointed a majority of our directors). Our Bylaws will also provide that ACAS will have the right to designate three of our seven directors so long as ACAS and its affiliated funds hold at least 50.1% of our outstanding common stock, two directors so long as they hold at least 25% but less than 50.1% and one director so long as they hold at least 10% but less than 25%.
 
Preferred Stock
 
Pursuant to the Certificate of Incorporation that we will adopt prior to the consummation of this offering, our Board of Directors will be authorized, without any action by our stockholders, to designate and issue shares of preferred stock in one or more series and to designate the powers, preferences and rights of each series, which may be greater than the rights of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of our common stock until our Board of Directors determines the specific rights of the holders of such preferred stock. However, the effects might include, among other things:
 
 • impairing dividend rights of our common stock;
 
 • diluting the voting power of our common stock;
 
 • impairing the liquidation rights of our common stock; and
 
 • delaying or preventing a change of control of us without further action by our stockholders.
 
Upon completion of this offering, no shares of our preferred stock will be outstanding.
 
Registration Rights
 
Prior to the consummation of this offering, we shall enter into a registration rights agreement with ACAS and certain of its affiliates, Thomas D. Logan, W. Antony Besso and certain other of our stockholders, under


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which these stockholders may require us to register their shares of common stock under the securities laws for sale.
 
Requested Registration
 
The agreement shall provide that, any time following 180 days (subject to extension in the event thelock-up agreement with the underwriters is extended) after the effective date of a registration statement for this offering, ACAS and any transferee receiving at least 25% of ACAS’s registrable securities held at the time of signing the agreement, so long as the requesting party holds at least 25% of the registrable securities held by all the parties holding requested registration rights at the time of the request for registration, may require us to effect a registration under the Securities Act of 1933 of all or a portion of our securities held by them.
 
We may decline to honor any of these requested registrations if more than four requested registrations have already been undertaken.
 
Form S-3 Registration
 
We are also obligated in certain circumstances under the registration rights agreement to use our best efforts to effect and maintain the effectiveness of a registration onForm S-3, if ACAS, a permitted transferee of ACAS or other stockholder under the agreement holding two percent or more of our common stock requests that we make such registration and the aggregate gross proceeds of such registration are reasonably anticipated to exceed $5,000,000. Upon such a request, all other eligible holders of our securities under the registration rights agreement may also elect to register their securities under such registration statement.
 
We may decline to honor a requested registration 30 days prior to or 90 days immediately following the effective date of another registration statement. Furthermore, we may postpone the filing of a requested registration onForm S-3, but not more than once in any 12-month period, for a reasonable period of time if filing the registration statement would have a material adverse effect on us, including if our Board of Directors determines that a registration would materially interfere with a significant acquisition or company reorganization, require premature disclosure of material nonpublic information or render us unable to comply with requirements under the Securities Act or the Securities Exchange Act of 1934, as amended, or the Exchange Act.
 
Incidental Registration
 
In addition to our obligations with respect to requested registrations, if we propose to register any of our securities (other than a registration on FromS-8 orS-4 or successor forms to these forms), whether or not such registration is for our own account, ACAS, permitted transferees of ACAS and other stockholders party to the registration rights agreement will have the opportunity to participate in such registration.
 
If the incidental registration relates to an underwritten primary registration on our behalf and marketing factors require a limitation of the number of shares to be offered, first priority of inclusion shall be given to us and second priority will be given to ACAS and other stockholders participating in the incidental registration. If the incidental registration relates to an underwritten secondary registration on behalf of holders of our securities and marketing factors require a limitation of the number of shares to be offered, first priority of inclusion will be given to the original requesting stockholder, and second priority will be given to the remaining stockholders participating in the incidental registration.
 
Expenses of Registration
 
We will pay all expenses of registration, other than underwriting discounts and commissions, related to any requested,Form S-3 or incidental registration.
 
Indemnification
 
The agreement contains customary cross-indemnification provisions under which we are obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the registration


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statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.
 
Anti-Takeover Effects of Delaware Law
 
Pursuant to the Certificate of Incorporation that we will adopt prior to the consummation of this offering, we shall opt out of the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder (defined generally as a person owning 15% or more of the corporation’s voting stock) for a period of three years following the date the person became an interested stockholder unless:
 
 • prior to the date the person became an interested person, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
 
 • upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or
 
 • at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock which is not owned by the interested stockholder.
 
Listing
 
We will apply to have the common stock approved for quotation on the NASDAQ Global Market under the symbol “MION.”
 
Transfer Agent and Registrar
 
The transfer agent and registrar for our common stock is          .


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SHARES ELIGIBLE FOR FUTURE SALE
 
Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the public market could adversely affect market prices prevailing from time to time. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.
 
Upon completion of this offering, we will have           shares of common stock outstanding, assuming the exercise of the underwriters’ over-allotment option, the conversion of           outstanding shares of preferred stock and no exercise of any options and warrants outstanding as of          . Of these shares, the           shares, or           shares if the underwriters exercise their over-allotment option in full, sold in this offering will be freely transferable without restriction or registration under the Securities Act, except for any shares purchased by one of our existing “affiliates,” as that term is defined in Rule 144 under the Securities Act. The remaining           shares of common stock existing are “restricted shares” as defined in Rule 144. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 of the Securities Act. As a result of the contractual180-daylock-up period (subject to customary extension) described below and the provisions of Rules 144 and 701, these shares will be available for sale in the public market as follows:
 
   
Number of Shares
 
Date
 
           On the date of this prospectus.
           After 90 days from the date of this prospectus.
           After 180 days from the date of this prospectus (subject, in some cases, to volume limitations).
           At various times after 180 days from the date of this prospectus (subject, in some cases, to volume limitations).
 
Rule 144
 
In general, under Rule 144 as currently in effect, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days, an affiliate who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell within any three-month period a number of shares that does not exceed the greater of either of the following:
 
 • 1% of the number of shares of common stock then outstanding, which will equal shares immediately after this offering; and
 
 • the average weekly reported volume of trading of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
 
However, the six month holding period increases to one year in the event we have not been a reporting company for at least 90 days. In addition, any sales by affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and the availability of current public information about us.
 
The volume limitation, manner of sale and notice provisions described above will not apply to sales by non-affiliates. For purposes of Rule 144, a non-affiliate is any person or entity who is not our affiliate at the time of sale and has not been our affiliate during the preceding three months. Once we have been a reporting company for 90 days, a non-affiliate who has beneficially owned restricted shares of our common stock for six months may rely on Rule 144 provided that certain public information regarding us is available. The six month holding period increases to one year in the event we have not been a reporting company for at least 90 days. However, a non-affiliate who has beneficially owned the restricted shares proposed to be sold for at least one year will not be subject to any restrictions under Rule 144 regardless of how long we have been a reporting company.


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We are unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our common stock, the personal circumstances of the stockholder and other factors.
 
Rule 701
 
In general, our employees, directors, officers, consultants or advisors who purchase shares from us under Rule 701 in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering are entitled to resell such shares 90 days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other restrictions contained in Rule 701, but subject to the lock-up agreements described below.
 
The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 90 days after the date of this prospectus, may be sold by persons other than “affiliates,” as defined in Rule 144, subject only to the manner of sale provisions of Rule 144 and by “affiliates” under Rule 144 without compliance with its one-year minimum holding period requirement.
 
Registration Rights
 
Prior to the consummation of this offering, we shall enter into a registration rights agreement with ACAS and certain of its affiliates, Thomas D. Logan, W. Antony Besso and certain other of our stockholders, under which these stockholders may require us to register their shares of common stock under the securities laws for sale. Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates.
 
Stock Options
 
As of June 30, 2009, options to purchase a total of 113,288 shares of common stock were outstanding. All of the shares subject to options are subject tolock-up agreements. An additional 5,402 shares of common stock were available for future option grants under our Stock Plan.
 
Upon completion of this offering, we intend to file a registration statement under the Securities Act covering all shares of common stock subject to outstanding options or issuable pursuant to our equity plans. Shares registered under this registration statement will be available for sale in the open market, subject to Rule 144 volume limitations applicable to affiliates, vesting restrictions with us or the contractual restrictions described below.
 
Lock-up Agreements
 
Our officers, directors and substantially all of our stockholders, who hold an aggregate of approximately           shares of our common stock, have agreed, subject to customary exceptions, not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock for a period of 180 days after the date of this prospectus, without the prior written consent of each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.


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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FORNON-U.S. HOLDERS OF COMMON STOCK
 
The following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a beneficial owner that is a“Non-U.S. Holder,” other than aNon-U.S. Holder that owns, or has owned, actually or constructively, more than 5% of our common stock. A“Non-U.S. Holder” is a person or entity that, for U.S. federal income tax purposes, is a:
 
 • nonresident alien individual, other than a former citizen or resident of the United States subject to tax as an expatriate;
 
 • foreign corporation; or
 
 • foreign estate or trust.
 
A“Non-U.S. Holder” generally does not include a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of disposition of our common stock. Such an individual is urged to consult his or her own tax adviser regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of our common stock.
 
If an entity that is classified as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partnerships holding our common stock and partners in such partnerships are urged to consult their tax advisers as to the particular U.S. federal income tax consequences of holding and disposing of our common stock.
 
This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus may affect the tax consequences described herein. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant toNon-U.S. Holders in light of their particular circumstances and does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. Prospective holders are urged to consult their tax advisers with respect to the particular tax consequences to them of owning and disposing of our common stock, including the consequences under the laws of any state, local or foreign jurisdiction.
 
Dividends
 
As discussed under “Dividend Policy” above, we do not currently expect to pay dividends. In the event that we do pay dividends, dividends paid to aNon-U.S. Holder of our common stock generally will be subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding, aNon-U.S. Holder will be required to provide an Internal Revenue ServiceForm W-8BEN certifying its entitlement to benefits under a treaty.
 
If aNon-U.S. Holder is engaged in a trade or business in the United States, and if dividends paid to theNon-U.S. Holder are effectively connected with the conduct of this trade or business (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment), theNon-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be taxed in the same manner as a U.S. person. Such aNon-U.S. Holder will be required to provide a properly executed Internal Revenue ServiceForm W-8ECI in order to claim an exemption from withholding. Anon-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).
 
Gain on Disposition of Common Stock
 
Subject to the backup withholding rules discussed below, aNon-U.S. Holder generally will not be subject to U.S. federal income tax on gain realized on a sale or other disposition of our common stock unless:
 
 • the gain is effectively connected with a trade or business of thenon-U.S. holder in the United States, or
 
 • the Company is or has been a U.S. real property holding corporation, as defined in the Code, at any time within the five-year period preceding the disposition or theNon-U.S. Holder’s holding period, whichever period is shorter, and our common stock has ceased to be traded on an established securities market prior to the beginning of the calendar year in which the sale or disposition occurs.


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The Company believes that it is not, and does not anticipate becoming, a U.S. real property holding corporation.
 
If aNon-U.S. Holder is engaged in a trade or business in the United States and gain recognized by theNon-U.S. Holder on a sale or other disposition of our common stock is effectively connected with the conduct of such trade or business, theNon-U.S. Holder will generally be taxed in the same manner as a U.S. person, subject to an applicable income tax treaty providing otherwise.Non-U.S. Holders whose gain from dispositions of our common stock may be effectively connected with a conduct of a trade or business in the United States are urged to consult their own tax advisers with respect to the U.S. tax consequences of the ownership and disposition of our common stock, including the possible imposition of a branch profits tax.
 
Information Reporting Requirements and Backup Withholding
 
Information returns will be filed with the Internal Revenue Service in connection with payments of dividends on our common stock. Unless theNon-U.S. Holder complies with certification procedures to establish that it is not a U.S. person, information returns may be filed with the Internal Revenue Service in connection with the proceeds from a sale or other disposition of our common stock and theNon-U.S. Holder may be subject to backup withholding on dividend payments on our common stock or on the proceeds from a sale or other disposition of our common stock. The certification procedures required to claim a reduced rate of withholding under a treaty described above will satisfy the certification requirements necessary to avoid backup withholding as well. The amount of any backup withholding from a payment to aNon-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service.
 
Federal Estate Tax
 
IndividualNon-U.S. Holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty benefit, our common stock will be treated as U.S. situs property subject to U.S. federal estate tax.


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UNDERWRITING
 
Under the terms and subject to the conditions contained in an underwriting agreement dated          , we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. are acting as representatives, the following respective numbers of shares of common stock:
 
     
  Number
 
Underwriter
 of Shares 
 
Credit Suisse Securities (USA) LLC        
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
    
J.P. Morgan Securities Inc.    
Robert W. Baird & Co.     
     
Total    
     
 
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
 
We have granted to the underwriters a30-day option to purchase on a pro rata basis up to           additional shares from us and an aggregate of           additional outstanding shares from the selling stockholders at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over allotments of common stock.
 
The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $      per share. The underwriters and selling group members may allow a discount of $      per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers.
 
The following table summarizes the compensation and estimated expenses we will pay:
 
                 
  Per Share  Total 
  Without
  With
  Without
  With
 
  Over-Allotment  Over-Allotment  Over-Allotment  Over-Allotment 
 
Underwriting Discounts and Commissions paid by us $       $       $       $      
Expenses payable by us $   $   $   $ 
 
The representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered. The underwriters will not confirm sales to any accounts over which they exercise discretionary authority without first receiving a written consent from those accounts.
 
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. for a period of 180 days after the date of this prospectus. However, in the event that either (1) during the last 17 days of the“lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the“lock-up” period, we announce that we will release earnings results during the16-day period beginning on the


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last day of the“lock-up” period, then in either case the expiration of the“lock-up” will be extended until the expiration of the18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. waives, in writing, such an extension.
 
Our officers, directors and substantially all of our stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. for a period of 180 days after the date of this prospectus, subject to customary exceptions. However, in the event that either (1) during the last 17 days of the“lock-up” period, we release earnings results or material news or a material event relating to us occurs or (2) prior to the expiration of the“lock-up” period, we announce that we will release earnings results during the16-day period beginning on the last day of the“lock-up” period, then in either case the expiration of the“lock-up” will be extended until the expiration of the18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. waives, in writing, such an extension.
 
We have agreed to indemnify the underwriters against liabilities under the Securities Act, or contribute to payments that the underwriters may be required to make in that respect.
 
We will apply to list the shares of common stock on the NASDAQ Global Market.
 
In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.
 
 • Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
 
 • Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment optionand/or purchasing shares in the open market.
 
 • Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.


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 • Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
 
 • In passive market making, market makers in the common stock who are underwriters or prospective underwriters may, subject to limitations, make bids for or purchases of our common stock until the time, if any, at which a stabilizing bid is made.
 
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions, if commenced, may be discontinued at any time.
 
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.


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NOTICE TO CANADIAN RESIDENTS
 
Resale Restrictions
 
The distribution of the shares of our common stock which are the subject of this offering (the “Shares”) in Canada is being made only on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of the Shares are made. Any resale of the Shares in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the Shares.
 
Representations of Purchasers
 
By purchasing the Shares in Canada and accepting a purchase confirmation a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:
 
 • the purchaser is entitled under applicable provincial securities laws to purchase the Shares without the benefit of a prospectus qualified under those securities laws,
 
 • where required by law, that the purchaser is purchasing as principal and not as agent,
 
 • the purchaser has reviewed the text above under Resale Restrictions, and
 
 • the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the Shares to the regulatory authority that by law is entitled to collect the information.
 
Further details concerning the legal authority for this information is available on request.
 
Rights of Action—Ontario Purchasers Only
 
Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the Shares, for rescission against us in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the Shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the Shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us. In no case will the amount recoverable in any action exceed the price at which the Shares were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we will have no liability. In the case of an action for damages, we will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the Shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.
 
Enforcement of Legal Rights
 
All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.
 
Taxation and Eligibility for Investment
 
Canadian purchasers of the Shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the in their particular circumstances and about the eligibility of the           for investment by the purchaser under relevant Canadian legislation.


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NOTICE TO RESIDENTS OF THE
EUROPEAN ECONOMIC AREA AND THE UNITED KINGDOM
 
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of the Shares which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of the Shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
 
(a) to legal entities which are authorised or regulated to operate in the financial markets or, if not so authorised or regulated, whose corporate purpose is solely to invest in securities;
 
(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
 
(c) by the underwriters to fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. for any such offer; or
 
(d) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
 
provided that no such offer of the Shares shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.
 
Any person making or intending to make any offer within the EEA of the Shares which are the subject of the offering contemplated in this prospectus should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorised, nor do they authorise, the making of any offer of the Shares through any financial intermediary, other than offers made by underwriters which constitute the final offering of Shares contemplated in this prospectus.
 
For the purposes of this provision, and the buyer’s representation below, the expression an “offer to the public” in relation to the Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Shares to be offered so as to enable an investor to decide to purchase the Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
 
Buyer’s Representation
 
Each person in a Relevant Member State who receives any communication in respect of, or who acquires the Shares under, the offers contemplated in this prospectus will be deemed to have represented, warranted and agreed to and with each underwriter and us that:
 
(a) it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and
 
(b) in the case of the Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the Shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, or in circumstances in which the prior consent of each of Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc. has been given to the offer or resale; or (ii) where the Shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of the Shares to it is not treated under the Prospectus Directive as having been made to such persons.


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NOTICE TO PROSPECTIVE INVESTORS IN SWITZERLAND
 
This document as well as any other material relating to the Shares which are the subject of the offering contemplated by this prospectus do not constitute an issue prospectus pursuant to Article 652a of the Swiss Code of Obligations. The Shares will not be listed on the SWX Swiss Exchange and, therefore, the documents relating to the Shares, including, but not limited to, this document, do not claim to comply with the disclosure standards of the listing rules of SWX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SWX Swiss Exchange.
 
The Shares are being offered in Switzerland by way of a private placement, i.e., to a small number of selected investors only, without any public offer and only to investors who do not purchase the Shares with the intention to distribute them to the public. The investors will be individually approached by the Issuer from time to time.
 
This document as well as any other material relating to the Shares is personal and confidential and do not constitute an offer to any other person. This document may only be used by those investors to whom it has been handed out in connection with the offering described herein and may neither directly nor indirectly be distributed or made available to other persons without express consent of the Issuer. It may not be used in connection with any other offer and shall in particular not be copiedand/or distributed to the public in (or from) Switzerland.


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NOTICE TO PROSPECTIVE INVESTORS IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE
 
This document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The Shares which are the subject of the offering contemplated by this prospectus may be illiquidand/or subject to restrictions on their resale. Prospective purchasers of the Shares offered should conduct their own due diligence on the Shares. If you do not understand the contents of this document you should consult an authorised financial adviser.


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LEGAL MATTERS
 
The validity of the issuance of the shares of common stock offered hereby will be passed upon for us by Davis Polk & Wardwell LLP, Menlo Park, California and by Latham & Watkins LLP, Menlo Park, California for the underwriters.
 
EXPERTS
 
The consolidated financial statements of Mirion Technologies, Inc. at June 30, 2009 and 2008, and for each of the three years in the period ended June 30, 2009, appearing in this prospectus and amendment no. 1 to the Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We have filed with the SEC, Washington, D.C. 20549, a registration statement onForm S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to the company and its common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules thereto, may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at1-800-SEC-0330. In addition, the SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. The registration statement, including the exhibits and schedules thereto, are also available for reading and copying at the offices of NASDAQ Operations, 1735 K Street, N.W., Washington, D.C. 20006.
 
As a result of the offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, as amended. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. We also maintain an Internet site at www.mirion.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part.


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REPORT OF ERNST & YOUNG LLP,
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
The Board of Directors and Shareholders
Mirion Technologies, Inc.
 
We have audited the accompanying consolidated balance sheets of Mirion Technologies, Inc. and subsidiaries (the Company) as of June 30, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mirion Technologies, Inc. and subsidiaries at June 30, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2009, in conformity with U.S. generally accepted accounting principles.
 
As discussed in Note 2 to the consolidated financial statements, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxes — An Interpretation of FASB No. 109, effective July 1, 2007.
 
As discussed in Note 2 to the consolidated financial statements, the Company has restated previously issued financial statements as of June 30, 2008, 2007 and 2006 and for each of the years in the periods then ended to correct the classification of accrued stock dividends.
 
/s/ Ernst & Young LLP
 
San Francisco, California
October 15, 2009


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MIRION TECHNOLOGIES, INC.
Consolidated Balance Sheets
 
             
        Pro Forma 
  June 30,  June 30,
 
  2008  2009  2009 
  (as restated)     (unaudited) 
  (in thousands, except par and share data) 
 
ASSETS
Current assets:            
Cash and cash equivalents $8,959  $5,390              
Restricted cash — current  1,455   1,515     
Accounts receivable — net of allowance for doubtful accounts  36,983   39,740     
Costs in excess of billings on uncompleted contracts  17,515   17,073     
Receivables pledged to creditors  5,272   2,364     
Inventories — net of provision for excess and obsolete inventory  33,214   30,614     
Prepaid expenses and other current assets  3,859   7,998     
Deferred cost of sales  17,803   19,243     
Deferred income taxes — current  3,961   3,782     
             
Total current assets  129,021   127,719     
Property, plant and equipment — net  17,413   17,963     
Goodwill  147,841   139,021     
Intangible assets — net  33,171   23,782     
Restricted cash  3,909   4,532     
Deferred income taxes  304   2,945     
Other assets  1,772   1,074     
             
Total assets $333,431  $317,036     
             
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:            
Accounts payable $25,323  $19,269     
Accrued expenses and other current liabilities  35,152   37,395     
Income taxes payable  2,552   1,547     
Deferred contract revenue  38,988   43,419     
Deferred income tax liabilities — current  2,055   848     
Notes payable — current  9,033   6,442     
Notes payable to ACAS — current  520   520     
             
Total current liabilities  113,623   109,440     
Notes payable to ACAS  172,666   169,492     
Notes payable  1,200   762     
Deferred income taxes  11,795   14,334     
Other liabilities  11,404   12,740     
             
Total liabilities  310,688   306,768     
             
Commitments and contingencies (Note 9)            
Stockholders’ equity:            
Convertible Participating Preferred stock — $0.001 par value;Series A-1 authorized, 1,200,000 shares; issued and outstanding 678,804 shares at June 30, 2008 and 2009;Series A-2 authorized, 300,000 shares; issued and outstanding 70,000 shares at June 30, 2008 and 2009
  1   1    
Common stock — $0.001 par value; Class A — authorized 2,500,000 shares: issued and outstanding, 2,091 shares at June 30, 2008 and 2009; Class B — authorized 700,000 shares; issued and outstanding 45,650 shares at June 30, 2008 and 2009        1 
Additional paid-in capital  97,045   98,206   98,206 
Accumulated deficit  (94,671)  (98,323)  (98,323)
Accumulated other comprehensive income  20,368   10,384   10,384 
             
Total stockholders’ equity  22,743   10,268   10,268 
             
Total liabilities and stockholders’ equity $333,431  $317,036     
             
 
See notes to consolidated financial statements.


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MIRION TECHNOLOGIES, INC.
Consolidated Statements of Operations
 
             
  Years Ended June 30, 
  2007  2008  2009 
  (in thousands, except share data) 
 
Revenue $175,361  $189,933  $207,582 
Cost of revenue  97,222   102,871   110,761 
             
Gross profit  78,139   87,062   96,821 
             
Operating expenses:            
Selling, general and administrative expenses  59,792   63,008   66,057 
Research and development  11,875   14,865   11,188 
             
Total operating expenses  71,667   77,873   77,245 
             
Income from operations  6,472   9,189   19,576 
Interest income  127   145   78 
Interest expense  (19,195)  (20,435)  (17,865)
Other income, net  786   1,650   474 
             
(Loss) income before provision for income taxes  (11,810)  (9,451)  2,263 
Provision for income taxes  6,050   4,546   5,915 
             
Net loss  (17,860)  (13,997)  (3,652)
Paid-in-kind preferred dividends
  (8,141)  (8,993)  (9,892)
             
Net loss allocable to common stockholders $(26,001) $(22,990) $(13,544)
             
Net loss per common share allocable to common stockholders per share — basic and diluted $(546.08) $(482.31) $(283.70)
             
Weighted average number of shares used in computing net loss allocable to common stockholders — basic and diluted  47,614   47,666   47,741 
             
Pro forma net loss per common share — basic and diluted         $(11.80)
             
Shares used in computing pro forma basic and diluted net loss per share          1,147,638 
             
 
See notes to consolidated financial statements.


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
(in thousands, except share data)
 
                             ��   
  Convertible
                   
  Participating
              Accumulated
    
  Preferred
        Additional
     Other
  Total
 
  Stock  Common Stock  Paid-in
  Accumulated
  Comprehensive
  Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Deficit  Income (Loss)  Equity 
              (as restated)        (as restated) 
  (in thousands, except share amounts) 
 
BALANCE — June 30, 2006 (as previously reported)  748,804  $749   47,637  $48  $91,945  $(62,814) $3,259  $33,187 
Restatement of accrued dividends (Note 2)              3,757         3,757 
Reclassification of par values     (748)     (48)  796          
                                 
BALANCE — June 30, 2006 (as restated)  748,804   1   47,637      96,498   (62,814)  3,259   36,944 
Stock issued for compensation        1,104      130         130 
Stock-based compensation              244         244 
Repurchase of common stock        (1,150)     (115)        (115)
Preferred stock dividend              (8,141)        (8,141)
Dividends distributable              8,141         8,141 
Components of comprehensive loss:                                
Net loss                 (17,860)     (17,860)
Unrecognized actuarial gains and prior service benefit, net of tax of $34                    248   248 
Foreign currency translation, net of tax of $0                    5,271   5,271 
                                 
Total comprehensive loss                       (12,341)
                                 
BALANCE — June 30, 2007  748,804   1   47,591      96,757   (80,674)  8,778   24,862 
Exercise of stock options        150      13         13 
Stock-based compensation              275         275 
Preferred stock dividend              (8,993)        (8,993)
Dividends distributable              8,993         8,993 
Components of comprehensive income:                                
Net loss                 (13,997)     (13,997)
Unrecognized actuarial gains and prior service benefit, net of tax of $65                    161   161 
Foreign currency translation, net of tax of $0                    11,429   11,429 
                                 
Total comprehensive loss                       (2,407)
                                 
BALANCE — June 30, 2008  748,804   1   47,741      97,045   (94,671)  20,368   22,743 
Stock-based compensation              1,161         1,161 
Preferred stock dividend              (9,892)        (9,892)
Dividends distributable              9,892         9,892 
Components of comprehensive loss:                                
Net loss                 (3,652)     (3,652)
Unrecognized actuarial losses and prior service benefit, net of tax of $22                    (192)  (192)
Foreign currency translation, net of tax of $0                    (9,792)  (9,792)
                                 
Total comprehensive loss                       (13,636)
                                 
BALANCE — June 30, 2009  748,804  $1   47,741  $  $98,206  $(98,323) $10,384  $10,268 
                                 
 
See notes to consolidated financial statements.


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
 
             
  Year Ended June 30, 
  2007  2008  2009 
  (as restated)  (as restated)    
  (in thousands) 
Operating activities:
            
Net loss $(17,860) $(13,997) $(3,652)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:            
Depreciation and amortization  16,287   14,098   12,664 
Actuarial (gain) loss  (282)  (226)  208 
Paid-in-kind interest expense
  1,810   1,904   1,992 
Stock-based compensation  374   275   1,161 
Loss on disposal of property, plant and equipment  191   418   177 
Amortization of loan fees, debt discounts and preferred stock discounts  320   513   599 
Provision for doubtful accounts  205   30   6 
Provision for deferred income taxes  404   (1,643)  (996)
Change in estimated fair value of derivative instruments  (14)  9   (11)
Changes in operating assets and liabilities:            
Accounts receivable  7,555   (6,890)  (5,586)
Receivables pledged to creditors  (2,307)  (2,965)  2,273 
Prepaid expenses and other current assets  266   (924)  (4,308)
Inventories  (4,019)  (4,707)  76 
Deferred cost of sales  2,371   (8,173)  (3,293)
Costs in excess of billings on uncompleted contracts  (4,950)  (7,559)  2,663 
Other assets  1,856   611   112 
Accounts payable  330   5,970   (3,591)
Accrued expenses and other current liabilities  1,189   6,050   4,709 
Income taxes payable  2,985   (5,666)  (718)
Deferred contract revenue  (8,857)  7,864   3,765 
Other liabilities  (1,853)  6,502   1,935 
             
Net cash (used in) provided by operating activities  (3,999)  (8,506)  10,185 
             
Investing activities:
            
Purchases of property, plant and equipment  (3,897)  (5,142)  (6,845)
Return of escrow funds     2,750    
Change in restricted cash  (699)  (1,217)  (779)
             
Net cash used in investing activities  (4,596)  (3,609)  (7,624)
             
Financing activities:
            
Borrowings from notes payable to ACAS  15,259   13,804   6,600 
Payments of notes payable to ACAS  (6,520)  (3,520)  (10,644)
Net (payments) borrowings from notes payable to third parties  (701)  1,352   (298)
Net (payments) borrowings under revolving credit facility  2,307   2,964   (1,556)
Proceeds from issuance (repurchases) of common stock  (115)  13    
             
Net cash provided by (used in) financing activities  10,230   14,613   (5,898)
             
Effect of exchange rate changes on cash and cash equivalents  68   (100)  (232)
             
Net increase (decrease) in cash and cash equivalents  1,703   2,398   (3,569)
Cash and cash equivalents at beginning of period  4,858   6,561   8,959 
             
Cash and cash equivalents at end of period $6,561  $8,959  $5,390 
             
Supplemental information:
            
Cash paid for interest $16,032  $16,515  $15,505 
             
Cash paid for income taxes $3,324  $7,179  $6,277 
             
Mirion common stock issued for compensation $130  $  $ 
             
Paid-in-kind preferred dividends
 $8,141  $8,993  $9,892 
             
 
See notes to consolidated financial statements.


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Table of Contents

MIRION TECHNOLOGIES, INC.
 
 
1.  ORGANIZATION AND OPERATIONS OF THE COMPANY
 
Mirion Technologies, Inc. (“Mirion” or the “Company”) is a leading global provider of radiation detection, measurement, analysis and monitoring products and services to the nuclear, defense and medical end markets. Mirion was incorporated in October 2005 as Global Monitoring Systems, Inc. in the state of Delaware and subsequently changed its name to Mirion Technologies, Inc. in January 2006.
 
Mirion was formed through the combination of three companies: Global Dosimetry Solutions, Inc. (“GDS”), Imaging and Sensing Technology Corporation (“IST”) and Synodys SA (“Synodys”), all owned by American Capital, Ltd. and affiliates (together “ACAS”). The combination ( “Reorganization”) was effective as of December 31, 2005. Because the three companies were under the common control of ACAS, the Reorganization was accounted for by combining the assets, liabilities and accumulated deficit of the three companies at each company’s historical basis. The accompanying financial statements and related notes present the combined financial performance of the three companies (see Note 12.).
 
The Company is headquartered in San Ramon, California, and has operations in the United States, Canada, the United Kingdom, France, Germany, Finland and China.
 
Basis of Presentation — The accompanying consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
 
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and negative cash flows from operations since its inception. At June 30, 2009, the Company had an accumulated deficit of $98.3 million, and approximately $170.0 million of debt obligations due to American Capital Financial Services (“ACFS”), a related party. The Company has negotiated extensions on the repayment of its debt obligations with ACFS. As more fully disclosed in Note 8, debt obligations due in 2010 to ACFS total $520,000, debt obligations due in 2011 to ACFS total approximately $9.7 million and debt obligations due in 2012 to ACFS total approximately $159.8 million.
 
Unaudited Pro Forma Information — If a public offering is consummated, all of the currently outstanding shares of Convertible Participating Preferred Stock will convert into 1,149,353 shares of common stock and currently outstanding shares of Class A and Class B Common Stock will convert on a one-to-one basis to 47,741 shares of common stock based on the number of shares outstanding as of June 30, 2009. However, based on their weighted averages outstanding during fiscal 2009, the Convertible Participating Preferred Stock and Class A and Class B Common Stock would convert into 1,147,638 shares of common stock.
 
The Company intends to issue shares of common stock in connection with the public offering to generate proceeds to repay borrowings from ACAS and its affiliates, make a one-time payment of $8 million to ACFS, a subsidiary of ACAS, to terminate an investment banking services agreement and provide additional funds for working capital and general corporate purposes. Unaudited pro forma stockholders’ equity, as adjusted for the assumed conversion of the convertible participating preferred stock, is presented in the pro forma June 30, 2009 column of the accompanying consolidated balance sheet.
 
2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Restatement of Prior Year Financial Statements — The Company has restated its consolidated financial statements as of June 30, 2006, 2007 and 2008 and for the years then ended to reflect the correction of an error in the previous classification of accrued but unpaid dividends on the Company’sSeries A-1 andA-2 preferred stock. For the years ended June 30, 2006, 2007 and 2008, the Company incurredSeries A-1 andA-2 stock dividends of $3.8 million, $8.1 million and $9.0 million, resulting in accrued but unpaid preferred stock dividends of $3.8 million, $11.9 million and $20.9 million at June 30, 2006, 2007 and 2008. The dividends


F-7


Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
are payable through the issuance of preferred stock. The Company determined that these accrued dividends should not be recorded as liabilities as they do not involve an obligation to make future sacrifices of assets. The correction was made to reclassify these stock dividends previously presented under current liabilities to additional paid-in capital in accordance with Statement of Financial Concepts No. 6,Elements of Financial Statements. The impact of the correction of this error has been reflected in the June 30, 2008 consolidated balance sheet and the consolidated statement of changes in stockholders’ equity and comprehensive loss as of June 30, 2006 and for the years ended June 30, 2007 and 2008.
 
Reclassifications — Certain reclassifications have been made to the 2007 and 2008 financial statements to conform to the 2009 presentation:
 
 • $748,000 has been reclassified from Convertible Participating Preferred Stock to Additional Paid-in Capital as of June 30, 2006 to accurately reflect par value;
 
 • $48,000 has been reclassified from Common Stock to Additional Paid-in Capital as of June 30, 2006 to accurately reflect par value;
 
 • $2.4 million and $3.2 million of value-added tax liabilities as of June 30, 2007 and 2008 have been reclassified from accrued expense and other current liabilities to prepaid expenses and other current assets in the Balance Sheets to appropriately reflect rights of offset by jurisdictions; the related changes have also been reclassified in the Statements of Cash Flows;
 
 • $282,000 and $226,000 of Actuarial gains for fiscal 2007 and 2008 were reclassified in the Statements of Cash flows from “Effect of exchange rate changes on cash and cash equivalents” to “Operating Activities.”
 
The impact of the changes on the Company’s consolidated balance sheet as originally reported and as restated is summarized as follows:
 
                 
  June 30, 2007  June 30, 2008 
  As Reported  As Restated  As Reported  As Restated 
 
Prepaid expense and other current assets $5,270  $2,908  $7,091  $3,859 
Total current assets $94,485  $92,123  $132,253  $129,021 
Accrued expense and other current liabilities $42,278  $28,018  $59,276  $35,152 
Total current liabilities $106,750  $92,490  $137,747  $113,623 
Additional paid-in capital $84,063  $96,757  $75,358  $97,045 
Total stockholders’ equity $12,964  $24,862  $1,852  $22,743 
 
Cash and Cash Equivalents — The Company considers all cash on deposit, money market accounts and highly liquid debt instruments purchased with original maturities of three months or fewer to be cash and cash equivalents. Cash equivalents primarily consist of amounts held in interest-bearing money market accounts that are readily convertible to cash.
 
The Company invests its excess cash with high credit quality financial institutions. The Company reviews its investments in money market accounts or other instruments for potential impairment on a regular basis. As part of the evaluation process, the Company considers the credit ratings of these securities and its intent and ability to hold the investment for a period of time sufficient to allow for any anticipated improvement in financial condition.
 
Restricted Cash — The Company maintains restricted cash and cash equivalent accounts held with financial institutions to support performance bonds with irrevocable letters of credit for contractual obligations to certain customers.


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
Accounts Receivable and Allowance for Doubtful Accounts — Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as historical experience, credit quality, the age of the accounts receivable balances and current economic conditions that may affect a customer’s ability to pay. The Company has an allowance for doubtful accounts of $223,000 and $135,000 as of June 30, 2008 and 2009.
 
Accounts Receivable Securitization —The Company sold certain of its European-based accounts receivables without recourse to an unrelated third-party financial institution. The securitization agreement allowed the operating subsidiaries participating in the securitization program to receive a cash payment for sold receivables, less a fee paid of 5%. In accordance with the Financial Accounting Standards Board (“FASB”) Statement No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities(“FAS No. 140”), the accounts receivable balances that were sold were determined to not have been legally isolated from the transferor. The uncollected balances of $864,000 and $0 are therefore included in accounts receivable and notes payables as of June 30, 2008 and 2009. Fees incurred in connection with the factoring arrangement were recorded as part of selling, general and administrative expenses and totaled $154,000, $158,000 and $1,000 in fiscal 2007, 2008 and 2009.
 
The Company also has arrangements with several French financial institutions for borrowings which are effectively secured by the Company’s French subsidiary’s accounts receivables. Borrowings outstanding at June 30, 2008 and 2009 were $5.3 million and $2.4 million which were equal to the accounts receivables pledged. As the financial institutions have the right to sell or repledge the collateral, the Company records these accounts receivables to “Receivables pledged to creditors” in the consolidated balance sheets in accordance with FAS No. 140.
 
Inventories — Inventories are stated at the lower of cost or market. Cost is computed using actual costs or standard costs that approximate actual cost, determined on afirst-in, first-out basis. The Company provides inventory provisions for excess and obsolete inventories, as determined by either future demand forecasts or historical demand trends.
 
Deferred Cost of Sales — Deferred cost of sales consists of completed products shipped to customers for which the related revenue has been deferred pending completion of services or determination that all customer-specific acceptance criteria have been met. The deferred costs are recognized in cost of sales in the same period that the related revenues are recognized. The Company evaluates the carrying value of deferred cost of sales on a lower of cost or market basis, consistent with its evaluation of the carrying value of the related products.
 
Property, Plant and Equipment — Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Property, plant and equipment acquired through the acquisition of a business are recorded at their estimated fair value at the date of acquisition.
 
Depreciation is computed when assets are placed into service using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over the shorter of the related lease term or estimated useful life of the improvements. Repair and maintenance costs are expensed as incurred.
 
Estimated useful lives of property, plant and equipment are as follows:
 
     
Buildings and leasehold improvements  3–39 years 
Machinery and equipment  5–15 years 
Furniture, fixtures, computer equipment and software  3–10 years 
 
Goodwill and Purchased Intangible Assets — Goodwill is recorded as the excess of the acquisition purchase price over the fair value of net tangible and identifiable intangible assets acquired. In accordance with FASB Statement No. 142,Goodwill and Other Intangible Assets(“FAS No. 142”), goodwill is not


F-9


Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
amortized but is tested for impairment on an annual basis or more frequently if indicators of potential impairment arise. Following the criteria of FASB Statement No. 131,Disclosures about Segments of an Enterprise and Related Informationand FAS No. 142, the Company has tested goodwill for impairment based on an evaluation of the Company’s five operating segments, which are also reporting units. Based on the impairment tests performed, there was no impairment of goodwill in fiscal 2007, 2008 or 2009. Purchased intangible assets other than goodwill are amortized using a straight-line or an accelerated method over their estimated useful lives, which range from three to seventeen years. Remaining useful lives of definite-lived intangible assets are evaluated on a periodic basis to determine whether events or circumstances warrant a revision to the remaining estimated amortization period.
 
Impairment of Long-Lived Assets — The Company reviews long-lived assets and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset as compared to its carrying value. If an asset is determined to be impaired, the Company measures the amount of any impairment as the difference between the carrying amount and the fair value of the impaired asset. No impairment indicators have been identified through June 30, 2009.
 
Facility and Equipment Decommissioning Liabilities —The Company accounts for asset retirement obligations (primarily equipment and facility decommissioning costs) in accordance with FASB Statement No. 143,Accounting for Asset Retirement Obligations(“FAS No. 143”). FAS No. 143 requires that the estimated fair value of liabilities for asset retirement obligations (“ARO”) be recognized in the period in which they are incurred. A corresponding increase to the carrying value of the related asset is recorded and depreciated over the useful life of the asset. The estimates are based principally on legal and regulatory requirements. The amount of the liability is subject to remeasurement at each reporting period. The Company’s estimates of its ultimate asset retirement obligation could change as a result of changes in regulations, the extent of environmental remediation required, the means of reclamation, cost estimates, or time period estimates. Changes in estimates are accounted for prospectively from the period in which the estimate is revised.
 
As of June 30, 2008 and 2009, the Company’s ARO liabilities totaled $430,000 and $421,000 and were included in other long-term liabilities. Accretion expense related to these liabilities was $29,000, $36,000 and $41,000 in fiscal 2007, 2008 and 2009.
 
Revenue Recognition — The Company recognizes revenue from sales contracts in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104,Revenue Recognition(“SAB No. 104”). Under SAB No. 104, revenue is recognized when there is persuasive evidence of an arrangement, product delivery has occurred or services have been provided, the sales price is fixed or determinable and collectability is reasonably assured. For sales contracts that contain customer-specific acceptance provisions, revenue and the related costs are deferred until the customer has indicated successful completion of site acceptance tests or the Company has otherwise determined that all acceptance criteria have been met. For sales contracts that contain multiple deliverables, such as equipment and commissioning services, the Company recognizes revenue and the related costs as each element is delivered or completed based upon its relative fair value. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery is complete. All amounts billed to a customer related to shipping and handling are classified as revenue, while all costs incurred by the Company for shipping and handling are classified as cost of sales. Provisions and allowances for discounts to customers, estimated sales returns, service cancellations and other adjustments are provided for in the same period that the related revenue is recorded.
 
Certain of the Company’s products are sold through distributors and third-party sales representatives under standard agreements whereby distributors purchase products from the Company and resell them to customers. These agreements give distributors the right to sell the Company’s products within certain


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
territories and establishes minimum order requirements. These arrangements do not provide stock rotation or price protection rights. Rights of return are limited to repair or replacement of delivered products that are defective or fail to meet the Company’s published specifications. Provisions for these warranty costs are provided for in the same period that the related sale is recorded.
 
Revenue from certain fixed price contracts in the Sensing Systems and Imaging Systems divisions that involve customization of equipment to customer specifications is recognized in accordance with the American Institute of Certified Public Accountants Statement of PositionNo. 81-1,Accounting for Performance of Construction-Type and Certain Production-Type Contracts, using thepercentage-of-completion method measured by thecost-to-cost method. Thecost-to-cost method is used because management considers incurred costs to be the best available measure of progress on these contracts. Contract costs include all direct materials and labor costs, as well as indirect costs related to contract performance. Changes in job performance, job conditions and estimated profitability result in revisions to costs and revenue and are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are first determined. Revenue earned in excess of billings on contracts in progress (underbillings) is classified as a current asset. Amounts billed in excess of revenue earned (advance billings) are classified as a current liability and included in Deferred Revenue.
 
Revenue from the Company’s Dosimetry Services division is of a subscription nature, with passive dosimetry and analytical services provided to customers on anagreed-upon recurring monthly, quarterly or annual basis. Services are provided principally through film and thermo luminescent dosimeter badges that are worn by the customer’s personnel and returned to the Company for analysis. The Company believes that badge production, badge wearing, badge analysis and report preparation are all integral to the benefit that the Company provides to its customers, and therefore, the service period is defined as the period over which all of these services are provided. Revenue and the related costs are recognized on a straight-line basis over the service period as the service is continuous, and no other discernible pattern of recognition is evident. Many customers pay for these measuring and monitoring services in advance. The amounts are recorded as deferred contract revenue in the balance sheets and represent customer deposits invoiced in advance for services to be rendered over the service period, net of a reserve for estimated cancellations.
 
Derivative and Hedging Activities — The Company uses certain derivative financial instruments to help manage its risk or exposure to changes in interest rates in relation to variable rate debt and foreign currency exchange rate fluctuations. The Company records these derivatives at fair value in the balance sheets as either an asset or a liability as required by FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities(“FAS No. 133”). The Company did not meet the hedge criteria for these existing derivatives, so any changes in fair value are recognized in earnings as incurred. As of June 30, 2008 and 2009, the Company has recorded other assets (liabilities) of $73,000 and $(21,000), to reflect the fair value of the Company’s interest rate swap. The Company has recorded gains (losses) of $14,000, $(9,000) and $(83,000) in other income, net for fiscal 2007, 2008 and 2009. The swap had an initial notional value of $1.8 million that declines through expiration in November 2012. At June 30, 2009, the notional amount was $1.1 million.
 
On January 1, 2009 the Company executed a series of foreign currency window contracts to mitigate currency exposure on sales contracts due to fluctuations in the euro/U.S. dollar exchange rate. Each window is an agreement to sell the U.S. dollar and purchase euros. There are a total of 17 contracts to sell $5.8 million and purchase €4.2 million from February 2, 2009 through September 18, 2009. As of June 30, 2009, the Company has recorded other assets of $94,000 to reflect the fair value of the Company’s foreign currency window contracts. The Company recognized in earnings a total net gain of $94,000 on foreign currency window forward contracts not designated as hedging instruments in accordance with FAS No. 133 during the year ended June 30, 2009.


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
Share-Based Payments — The Company adopted FASB Statement No. 123(R),Share-Based Payment(“FAS No. 123(R)”), on July 1, 2005. This statement requires the Company to recognize compensation expense for the fair value of all stock-based awards granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. The fair value of stock options is estimated using the Black- Scholes-Merton option valuation model. This model requires the input of subjective assumptions, including estimated stock volatility, risk-free interest rate and the expected life of each award. Furthermore, FAS No. 123(R) requires the Company to estimate forfeitures of each award. The Company amortizes the fair value using the straight-line method over the requisite service period.
 
The Company adopted FAS No. 123(R) using the modified prospective transition method. This method requires the recognition of compensation cost for all share based payments that are unvested as of July 1, 2005. The cost related to stock-based compensation included in the determination of consolidated net loss for the twelve months ended June 30, 2007, 2008 and 2009 includes all awards outstanding that are vesting during those periods. In connection with the Reorganization on January 1, 2006, stock options of the three predecessor companies were exchanged for stock options in Mirion. Under FAS No. 123(R), the exchange was deemed a modification, resulting in incremental compensation expense of $932,000 recorded at January 1, 2006 for those options that were vested as of January 1, 2006. For the unvested options at January 1, 2006, incremental compensation expense of $767,000 is being expensed over the remaining vesting period of approximately two years.
 
Advertising Costs — The Company expenses advertising costs in the period incurred.
 
Accounting for Income Taxes — The determination of the Company’s tax provision is subject to judgments and estimates due to the complexity of the tax law that the Company is subject to in several tax jurisdictions. Earnings derived from the Company’s international business are generally taxed at rates that are different than U.S. rates, resulting in an effective tax rate different than the U.S. statutory tax rate of 34.0%. The ability to maintain the Company’s current effective tax rate is contingent on existing tax laws in both the United States and the respective countries in which the Company’s international subsidiaries are located. In addition, a decrease in the percentage of the Company’s total earnings from international business or a change in the mix of international business among particular tax jurisdictions could alter the Company’s overall effective tax rate.
 
Income taxes are accounted for under the asset and liability method in accordance with Statement of Financial Accounting Standards (“FAS No. 109”),Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the tax bases of assets and liabilities and their financial statement carrying amounts, and consideration is given to operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. The Company has provided a valuation allowance of $31.4 million as of June 30, 2009, compared to $27.6 million as of June 30, 2008 primarily on its U.S. jurisdiction deferred tax assets. The $3.8 million increase in valuation allowance in fiscal 2009 is the result of fiscal 2009 taxable losses in the United States.
 
On July 1, 2007, the Company adopted Financial Interpretation No. 48,Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FAS No. 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result of the implementation of FIN No. 48, the Company recognizes the tax liability for uncertain income tax


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
positions on the income tax return based on the two-step process prescribed in the interpretation. The first step is to determine whether it is more likely than not that each income tax position would be sustained upon audit. The second step is to estimate and measure the tax benefit as the amount that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Estimating these amounts requires the Company to determine the probability of various possible outcomes. The Company evaluates these uncertain tax positions on a quarterly basis. This evaluation is based on the consideration of several factors, including changes in facts or circumstances, changes in applicable tax law, settlement of issues under audit, and new exposures. If the Company later determines that its exposure is lower or that the liability is not sufficient to cover its revised expectations, the Company adjusts the liability and effects a related change in its tax provision during the period in which it makes such determination.
 
Defined Benefit Pension Plans and Other Employee Benefits — The Company has defined benefit pension plans that cover the majority of its employees in France and Germany. The Company also has a postretirement plan that provides for the reimbursement of a portion of medical and life insurance premiums for certain retirees and eligible dependents. The accounting for these plans is subject to the guidance provided in FASB Statement No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)(“FAS No. 158”).
 
Plan liabilities are revalued annually based on assumptions relating to the long-term rate of return on plan assets, discount rates used to measure future obligations and expenses, salary-scale inflation rates, health care cost trend rates, mortality and other assumptions. The selection of assumptions is based on historical trends and known economic and market conditions at the time of valuation; however, actual results may differ substantially from the Company’s estimates. For pension plans, accumulated gains and losses and prior service costs are recognized in income when incurred.
 
Use of Estimates — The Company’s consolidated financial statements are prepared in conformity with generally accepted accounting principles, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. Specific areas, among others, requiring the application of management’s estimates and judgment include assumptions pertaining to the valuation of fixed assets, including depreciable lives assigned, the estimated earnings on contracts in progress, accruals, share-based compensation costs, pension and post-employment benefit costs, fair value of derivatives, future cash flows associated with impairment testing of goodwill and other long-lived assets, credit worthiness of customers, uncertain tax positions, tax valuation allowances and legal, environmental and insurance matters. Management believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results could differ from the original estimates.
 
Fair Value of Financial Instruments — The Company has evaluated the estimated fair value of financial instruments using available market information and management estimates. The use of different market assumptions or estimation methodologies could have a significant effect on the estimated fair value amounts. The fair value of the Company’s cash, cash equivalents, short-term investments, accounts receivable and other current and noncurrent liabilities approximate their carrying amounts due to the relatively short maturity of these items. The fair values of the debt instruments are estimated using a discounted cash flow analysis with an interest rate similar to that of current market borrowing arrangements. The estimated fair value of the Company’s debt instruments is $181.0 million and $162.8 million as of June 30, 2008 and 2009.
 
Fair Value — Effective July 1, 2008, the Company adopted the provisions of FAS No. 157,Fair Value Measurements(“FAS No. 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The fair value criteria are primarily applied prospectively upon adoption of FAS No. 157. FAS No. 157 was effective for fiscal years beginning November 15, 2007. In February 2008, the FASB issued FASB Staff PositionNo. 157-2, delaying the effective date of FAS No. 157


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
for non financial assets and non financial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis. The delayed portions of FAS No. 157 will be adopted by the Company beginning in the first quarter of its fiscal year ending June 30, 2010 and the Company does not expect the adoption of those delayed portions to have a material impact on the Company’s consolidated financial statements. The adoption of FAS No. 157 for financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements.
 
FAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FAS No. 157 are described below:
 
Level 1 — Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
 
Level 2 — Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
 
Level 3 — Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
 
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
The following table summarizes the financial assets and liabilities of the Company measured at fair value on a recurring basis in accordance with FAS No. 157:
 
                 
  Balance
          
  as of
          
  June 30,
  Fair Value Measurements at June 30, 2009 Using 
  2009  Level 1  Level 2  Level 3 
 
Assets (Long Term Liabilities):                
FX forward rate contracts  94      94    
Interest rate swaps $(21)    $(21)   
 
Foreign Currency Translation — Local currencies are the functional currencies for substantially all of the Company’s foreign operations. When the transactional currency is different than the functional currency, transaction gains and losses are included as a component of other income, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet reporting date. Income and expenses are translated at the average monthly exchange rates during the year. Gains and losses on foreign currency translations are reported as a component of other comprehensive income. Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries from certain subsidiaries and joint ventures that are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to other comprehensive income.
 
Concentrations of Risk — The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country. The Company has not experienced any losses in such accounts. Management believes that the Company is not exposed to significant credit risk related to cash.
 
The Company sells its products and services mainly to large private and governmental organizations in the Americas, Europe, Middle East and Asia Pacific regions. The Company performs ongoing evaluations of its customers’ financial conditions and limits the amount of credit extended when deemed necessary. The Company generally does not require its customers to provide collateral or other security to support accounts receivable.


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
Net Loss Per Common Share — The Company calculates net loss per common share in accordance with FASB Statement No. 128,Computation of Earnings Per Share(“FAS No. 128”). Under FAS No. 128, basic loss per common share is calculated by dividing net loss allocable to common stockholders by the weighted-average number of common shares outstanding for the period using the two-class method. Under the two-class method, net income is allocated between common stock and convertible preferred stock as it is deemed to be a participating security based on its participation rights. Diluted loss per common share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common and potential dilutive securities outstanding during the period if the effect is dilutive. The numerator of diluted earnings per share is calculated by starting with income allocable to common stock under the two-class method and adding back income allocable to preferred stock to the extent they are dilutive. Potential common shares consist of incremental shares of common stock issuable upon the exercise of the stock options and warrants and upon conversion of preferred stock.
 
The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share amounts):
 
             
  Year Ended June 30, 
  2007  2008  2009 
 
Numerator:
            
Net loss $(17,860) $(13,997) $(3,652)
Effect of preferred stock dividends  (8,141)  (8,993)  (9,892)
             
Income available to common stockholders $(26,001) $(22,990) $(13,544)
             
Denominator:
            
Weighted average common shares outstanding (basic)  47,614   47,666   47,741 
Effect of dilutive securities         
             
Weighted average common shares outstanding (diluted)  47,614   47,666   47,741 
             
Net loss per share:            
Basic and Diluted $(546.08) $(482.31) $(283.70)
             
 
The computation of basic loss per share excludes the conversion of Convertible Participating Preferred Stock as the Company has net losses and therefore the effect of applying the two-class method is anti-dilutive. The computation of dilutive shares outstanding excludes the common equivalent shares related topaid-in-kind dividends, conversion of the Convertible Participating Preferred Stock, stock options and warrants as the Company had net losses and the effect would be anti-dilutive.


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
The following table shows the common equivalent shares related topaid-in-kind dividends, the conversion of Convertible Participating Preferred Stock, stock options and warrants that would have been included in diluted earnings per share had the Company recorded net income as of the respective dates:
 
             
  Year ended June 30, 
  2007  2008  2009 
 
Weighted Average Common Share Equivalents of Potentially Dilutive Securities:            
Convertible preferred stock, includingpaid-in-kind dividends
  919,806   1,005,475   1,099,897 
Stock options         
Warrants  402,428   402,428   402,428 
             
Total  1,322,234   1,407,903   1,502,325 
             
 
Recently Adopted Pronouncements
 
In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115(“FAS No. 159”). FAS No. 159 provides the option to measure, at fair value, eligible financial instrument items using fair value, which are not otherwise required to be measured at fair value. The irrevocable decision to measure items at fair value is made at specified election dates on aninstrument-by-instrument basis. Changes in that instrument’s fair value must be recognized in current earnings in subsequent reporting periods. If elected, the first measurement to fair value is reported as a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. The Company did not elect to measure eligible assets at fair value. The standard was effective for the Company beginning in its fiscal year ending June 30, 2009.
 
In October 2008, the FASB issued FASB Staff Position (“FSP”)No. 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP 157-3”).FSP 157-3 clarified the application of SFAS 157.FSP 157-3 demonstrated how the fair value of a financial asset is determined when the market for that financial asset is inactive.FSP 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The implementation of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
In April 2009, the FASB issuedFSP No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(“FSP 157-4”).FSP 157-4 provides additional guidance for estimating fair value when the market activity for an asset or liability has declined significantly.FSP 157-4 is effective for interim and annual periods ending after June 15, 2009 and will be applied prospectively. The implementation of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133(“FAS No. 161”). FAS No. 161 requires disclosure of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. FAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement was adopted by the Company at the beginning of the third quarter of its fiscal year ending June 30, 2009 as required.
 
In April 2009, the FASB issuedFSP No. 115-2 andFSP No. 124-2,Recognition and Presentation ofOther-Than-Temporary Impairments.FSP 115-2 andFSP 124-2 establishes a new method for recognizing and reportingother-than-temporary impairment of debt securities and also contains additional disclosure


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
requirements for both debt and equity securities.FSP 115-2 andFSP 124-2 are effective for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
 
In May 2009, the FASB issued FAS No. 165,Subsequent Events (“FAS��No. 165”). FAS No. 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date — that is, whether that date represents the date the financial statements were issued or were available to be issued. FAS No. 165 is effective for interim and annual periods ended after June 15, 2009 and should be applied prospectively. The adoption of FAS No. 165 on July 1, 2008 did not have an impact on the Company’s financial position or results of operations. The Company determined that the basis for the date through which the entity has evaluated subsequent events represents the date the financial statements were issued: October 15, 2009. Details of subsequent events can be found in Notes 8 and 16 to these consolidated financial statements.
 
New Accounting Pronouncements
 
In December 2007, the FASB issued Statement No. 141 (Revised 2007),Business Combinations(“FAS No. 141(R)”). FAS No. 141(R) will significantly change the accounting for future business combinations after adoption. FAS No. 141(R) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed (including contingent liabilities) and any non controlling interest in the acquired business. FAS No. 141(R) also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS No. 141(R) is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. This Statement will be adopted by the Company beginning in its fiscal year ending June 30, 2010 as required. The Company is currently evaluating the impact FAS No. 141(R) will have on its consolidated financial statements when it becomes effective.
 
In June 2008 the FASB issued FSP Emerging Issues Task Force (“EITF”)03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). This FSP states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions in this FSP. Earlier adoption is prohibited. This FSP will be adopted by the Company beginning in its fiscal year ending June 30, 2010 as required. The Company is currently evaluating the impact FSPEITF 03-6-1 will have on its consolidated financial statements when it becomes effective.
 
In December 2008, the FASB issued Staff Position No. FAS 132(R)-1,Employers’ Disclosures about Postretirement Benefit Plan Assets,which is effective for fiscal years ending after December 15, 2009. This FSP requires additional disclosures such as: the investment allocation decision making process; the fair value of each major category of plan assets; inputs and valuation techniques used to measure the fair value of plan assets; and significant concentrations of risk within plan assets. This FSP will be adopted by the Company beginning in its fiscal year ending June 30, 2010 as required. The Company does not believe the adoption of this FSP will have a material impact on its consolidated financial position, results of operations and cash flows.


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
In April 2009, the FASB issued FSPNo. 107-1 and APB28-1,Interim Disclosures about Fair Value of Financial Instruments.This FSP amends FAS No. 107,Disclosures about Fair Value of Financial Instruments,to require an entity to provide disclosures about the fair value of financial instruments in interim financial information. This FSP also amends Accounting Principles Board Opinion No. 28,Interim Financial Reporting,to require those disclosures in summarized financial information at interim reporting periods.FSP 107-1 and APB28-1 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. This FSP will be adopted by the Company beginning in its first quarter of fiscal year 2010.
 
In June 2009, FASB issued FAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (“FAS No. 168”). FAS No. 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (U.S. GAAP). This Statement is effective for the Company’s first quarter of fiscal 2010. Beginning with the first fiscal quarter of 2010, the Company’s references made to U.S. GAAP will use the new Codification numbering system prescribed by the FASB. As the Codification is not intended to change or alter existing U.S. GAAP, the Company does not expect FAS No. 168 to have any impact on its consolidated financial statements.
 
3.  CONTRACTS IN PROGRESS
 
Costs and billings on uncompleted construction-type contracts consist of the following (in thousands):
 
         
  As of June 30, 
  2008  2009 
 
Costs incurred $26,151  $34,602 
Estimated earnings  16,448   26,329 
         
Contracts in progress  42,599   60,931 
Progress billings on contracts in progress  (27,382)  (49,132)
         
  $15,217  $11,799 
         
Costs and estimated earnings in excess of billings on uncompleted contracts $17,515  $17,073 
Billings in excess of costs and estimated earnings on uncompleted contracts(1)  (2,298) $(5,274)
         
  $15,217  $11,799 
         
 
 
(1)Included in deferred contract revenue within the consolidated balance sheets.


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
 
4.  INVENTORIES
 
The components of inventories consist of the following (in thousands):
 
         
  As of June 30, 
  2008  2009 
 
Raw materials $12,398  $10,234 
Work in progress  10,126   9,889 
Finished goods  10,690   10,491 
         
Net inventories $33,214  $30,614 
         
 
As of June 30, 2008 and 2009, inventory reserves were approximately $4.5 million and $4.3 million.
 
5.  PROPERTY, PLANT AND EQUIPMENT
 
Property, plant and equipment consist of the following (in thousands):
 
         
  As of June 30, 
  2008  2009 
 
Land, buildings and leasehold improvements $12,086  $11,352 
Machinery and equipment  24,240   23,997 
Furniture, fixtures, computer equipment and software  13,634   16,950 
Construction in progress  1,526   841 
         
   51,486   53,140 
Less accumulated depreciation and amortization  (34,073)  (35,177)
         
  $17,413  $17,963 
         
 
Total depreciation and amortization of property, plant and equipment was $4.1 million, $4.0 million and $4.4 million for fiscal 2007, 2008 and 2009.
 
6.  ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
 
Accrued expenses and other current liabilities consist of the following (in thousands):
 
         
  As of June 30, 
  2008  2009 
  (as restated)    
 
Compensation and related benefit costs $13,654  $14,151 
Customer deposits  4,564   8,688 
Accrued warranty  1,620   1,409 
Accrued legal, accounting and professional fees  7,773   4,190 
Other accrued expenses  7,541   8,957 
         
  $35,152  $37,395 
         
 
7.  GOODWILL AND INTANGIBLE ASSETS
 
Goodwill and intangible assets were recorded in connection with the acquisitions of GDS, IST and Synodys by ACAS as well as other subsequent acquisitions by Mirion. GDS was acquired by ACAS in October 2003 for cash of $60.8 million. IST was acquired by ACAS in May 2004 for cash of $53.5 million. Synodys was acquired by ACAS in June 2004 for cash and equity of $75.1 million. The three acquisitions by


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
ACAS were accounted for using the purchase method of accounting which resulted in goodwill of approximately $123.9 million (including the recognition of deferred tax assets of $18.4 million associated with the acquisitions) and intangible assets of approximately $72.3 million (valued using exchange rates in effect on the date of each acquisition). The Company completed three other acquisitions during fiscal 2005 and 2006 that resulted in goodwill of approximately $8.3 million and intangible assets of approximately $12.5 million. In fiscal 2008, the Company received $2.8 million from the return of escrow funds associated with the IST acquisition. This payment was treated as a reduction in the IST purchase price, with a corresponding reduction in goodwill.
 
The changes in the carrying amount of goodwill allocated to the Company’s reportable segments are as follows (in thousands):
 
                         
     Radiation
             
  Health
  Monitoring
  Sensing
  Dosimetry
  Imaging
    
  Physics  Systems  Systems  Services  Systems  Total 
 
Balance — June 30, 2007 $46,374  $19,312  $11,001  $52,413  $9,965  $139,065 
Return of escrow funds        (1,367)     (1,383)  (2,750)
Translation adjustment  7,996   3,330   200         11,526 
                         
Balance — June 30, 2008  54,370   22,642   9,834   52,413   8,582   147,841 
Translation adjustment  (6,163)  (2,507)  (150)        (8,820)
                         
Balance — June 30, 2009 $48,207  $20,135  $9,684  $52,413  $8,582  $139,021 
                         
 
Intangible assets consist of the following (in thousands):
 
                             
     As of June 30, 2008  As of June 30, 2009 
  Weighted
  Gross
     Net
  Gross
     Net
 
  Average Life
  Carrying
  Accumulated
  Book
  Carrying
  Accumulated
  Book
 
  in Years  Amount  Amortization  Value  Amount  Amortization  Value 
 
Customer relationships  11  $64,360  $(39,826) $24,534  $61,714  $(44,048) $17,666 
Trade names  11   9,128   (3,597)  5,531   8,605   (4,153)  4,452 
Backlog  2   9,190   (9,190)     8,659   (8,659)   
Enterprise software  5   2,500   (2,375)  125   2,500   (2,500)   
Qualifications  6   1,600   (1,094)  506   1,600   (1,360)  240 
Complete technology  8   3,500   (1,957)  1,543   3,500   (2,394)  1,106 
Territorial rights  5   2,852   (2,025)  827   2,537   (2,292)  245 
Other  3   279   (174)  105   183   (110)  73 
                             
Total     $93,409  $(60,238) $33,171  $89,298  $(65,516) $23,782 
                             


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
Aggregate amortization expense for intangible assets was $12.2 million, $10.1 million and $8.1 million for fiscal 2007, 2008 and 2009. Future annual amortization expense at the current foreign exchange rate is as follows (in thousands):
 
     
  Annual
 
Years Ending
 Amortization
 
June 30,
 Expense 
 
2010 $6,484 
2011  4,760 
2012  3,709 
2013  2,749 
2014  1,622 
2015 and thereafter  4,458 
     
Total $23,782 
     
 
8.  BORROWINGS
 
Notes Payable to ACAS — The Company has entered into several Note and Equity Purchase Agreements (“NEPAs”) with ACFS, a subsidiary of ACAS, which contain revolving credit facilities, senior term notes payable and subordinated note agreements. The interest rates on the revolving credit facilities and notes payable are based on a fixed stated rate or a variable LIBOR or EURIBOR based rate plus additional basis points. The one-month LIBOR rates were 2.5% and 0.3%, the one-month EURIBOR rates were 4.4% and 0.8% and the three-month EURIBOR rates were 4.9% and 1.1% as of June 30, 2008 and 2009.


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
Notes payable to ACAS consist of the following:
 
             
    Contractual
 As of June 30, 
  Due Interest Rate 2008  2009 
      (in thousands) 
 
Revolving Credit Facilities:            
$20.25 million July 2011 LIBOR + 4.5% $13,750  $11,000 
$14.0 million July 2011 LIBOR + 5%  10,197   13,997 
$8.2 million July 2011 EURIBOR + 2%  8,205   3,631 
Senior Term Notes:            
$24.9 million Senior Term B July 2011 EURIBOR + 3%  24,944   24,944 
$7.5 million Senior Term B July 2011 LIBOR + 8%  5,135   5,062 
$2.0 million Senior Term B July 2011 LIBOR + 8%  1,965   1,938 
$4.0 million Senior Term C October 2011 LIBOR + 9%  4,000   4,000 
$4.0 million Senior Term C November 2011 LIBOR + 8.25%  4,000   4,000 
$27.0 million Senior Term D October 2011 LIBOR + 6.5%  26,258   25,988 
$15.0 million Senior Term D October 2011 LIBOR + 6.5%  14,588   14,437 
Senior Subordinated Notes:            
$7.5 millionpaid-in-kind
 July 2011 14%  8,150   8,317 
$8.6 millionpaid-in-kind
 July 2011 15%  9,446   9,650 
$12.2 millionpaid-in-kind
 July 2011 EURIBOR + 11%  14,710   15,552 
Junior Subordinated Notes:            
$4.3 millionpaid-in-kind
 July 2011 17%  4,951   5,112 
$4.3 millionpaid-in-kind
 July 2011 17%  4,951   5,112 
$1.25 millionpaid-in-kind
 May 2012 14%  1,358   1,386 
$4.9 millionpaid-in-kind
 July 2011 EURIBOR + 12%  6,211   6,666 
Stockholder Loan:   Three-month        
$8.0 million June 2011 EURIBOR + 2%  10,367   9,220 
             
Total notes payable to ACAS      173,186   170,012 
Less current portion      (520)  (520)
             
Notes payable to ACAS — long term     $172,666  $169,492 
             
 
The revolving credit facilities and notes issued under the NEPAs require the Company to maintain certain financial ratios and contain financial covenants and non-financial restrictive and affirmative covenants. As of June 30, 2008 and 2009, the Company was not in compliance with certain non-financial covenants that were in effect prior to the formation of Mirion. These non-financial covenants were negotiated with the predecessor companies (GDS, IST and Synodys) and were not amended at the time of the formation of Mirion. The non-financial covenants relate to matters such as changing the fiscal years or names of subsidiaries, amending the charter documents and by-laws of subsidiaries and the provision of audited financial statements to ACFS. In September 2009, the Company obtained waivers from ACFS for breaches of any non-financial covenants that may occur through July 1, 2010. A description of the debt agreements payable to ACAS is as follows:
 
Revolving Credit Facilities — The Company has entered into three separate credit facilities with ACFS, each represented by a revolving credit note. The Revolving Credit Facilities contain various financial covenants and a first security position on all Company assets. The Company is required to pay an annual non-usage fee of 0.7% of the average annual unused balance on the Revolving Credit Facilities.
 
Senior Term Notes — The $24.9 million Senior Term B Note and the Senior Term C Notes provide for monthly interest only payments. The notes are secured by assets of the Company and are subordinated to


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MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
the Revolving Credit Facilities and Senior Term Notes B and D. The $7.5 million and $2.0 million Senior Term B Notes provide for quarterly principal payments totaling $25,000 plus monthly payments of interest. The notes are secured by assets of the Company and are subordinated to the Revolving Credit Facilities and the Senior Term D Notes. The Senior Term D Notes provide for quarterly principal payments of $105,000 plus monthly payments of interest. The notes are secured by assets of the Company and are subordinated to the Revolving Credit Facilities.
 
Senior Subordinated Notes — The outstanding balances on Senior Subordinated Notes include the principal amount outstanding plus a compoundingpaid-in-kind (“PIK”) interest component calculated at rates between 2% and 5.5% per annum. The Company is required to make monthly payments of stated interest only. The notes are secured by assets of the Company and are subordinated to the Revolving Credit Facilities and Senior Term B, C and D Notes.
 
Junior Subordinated Notes — The outstanding balances on Junior Subordinated Notes include the principal amount outstanding plus a compounding PIK interest component calculated at rates between 2% and 7% per annum. The Company is required to make monthly payments of stated interest only. The notes are secured by assets of the Company and are subordinated to the Revolving Credit Facilities and Senior Term B, C and D Notes and Senior Subordinated Notes.
 
Stockholder Loan — The stockholder loan provides for quarterly interest-only payments. The loan is secured by the assets of the Company and is subordinated to all other debt.
 
During 2007, the NEPAs were amended to (i) increase the $20.25 million revolving credit facility from an original commitment of $5.25 million to $10.25 million, (ii) increase the $14 million revolving credit facility from a commitment of $6 million to $14 million, (iii) extend the due date on the stockholder loan from September 13, 2006 to September 23, 2008 and (iv) issue an additional $2.0 million of Senior Term B Notes on March 20, 2007 with an interest rate of LIBOR + 8% and a due date May 24, 2010.
 
During 2008, the NEPAs were further amended to (i) increase the $20.25 million revolving credit facility from a commitment amount of $10.25 million to $20.25 million and extend the due date from May 24, 2008 to October 14, 2010, (ii) extend the due date on the $8.2 million revolving credit facility from June 23, 2008 to October 14, 2010 and (iii) extend the due date on the stockholder loan from September 23, 2008 to October 14, 2010.
 
The modifications made during 2007 and 2008 were analyzed in accordance with EITF StatementNo. 96-19 and EITF StatementNo. 98-14,Debtor’s Accounting for Changes inLine-of-Credit orRevolving-Debt Arrangementsand were not determined to be significant to the financial statements. There were no unamortized loan fees expensed in 2007 or 2008 as a result of the amendments.
 
In August 2009, the Note and Equity Purchase Agreements with ACFS were amended to extend the due dates on the (i) Senior Term B Notes to July 1, 2011, (ii) Senior Subordinated Notes to July 1, 2011, (iii) Junior Subordinated Notes to July 1, 2011 except $1.25 million Junior Subordinated Notes which due


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
date remains unchanged, (iv) Stockholder loan to June 30, 2011 and (v) Revolving Credit Facilities to July 2011.
 
Third-Party Borrowings
 
The Company has notes payable and other borrowings to third parties as follows:
 
           
    As of June 30, 
  
Due
 2008  2009 
    (in thousands) 
 
Term loan November 2012 $1,543  $1,067 
Revolving line of credit On demand  5,272   2,364 
Bank lines of credit On demand  2,554   3,773 
Factoring financing As collected  864    
           
Total third-party borrowings    10,233   7,204 
Less current portion    (9,033)  (6,442)
           
Third-party borrowings-long term   $1,200  $762 
           
 
The Company has a term loan with a French financial institution with an initial balance of €1.4 million as of May 2006 ($1.8 million), which is due November 2012. The note bears annual interest at the three-month EURIBOR + 1% with quarterly payments of €54,000. The amount due under this term loan at June 30, 2009 was €760,000 ($1.1 million).
 
As described in Note 2, the Company has pledged certain accounts receivable balances to several French institutions to secure a revolving line of credit. The line of credit bears interest at EURIBOR + 1%. Amounts outstanding under these arrangements are due when the related receivable is collected or upon demand. The Company also has a factoring arrangement which allows it to sell certain receivables without recourse for a 5% fee. Amounts outstanding under this arrangement are repaid as the related receivables are collected.
 
The Company has entered into various line of credit arrangements with local banks in France and Germany. In Germany, these arrangements provide for short-term bank overdrafts, U.S. dollar advances and the issuance of documentary and standby letters of credit of up to €3.5 million. As of June 30, 2009, €2.0 million of the lines had been utilized to guarantee documentary and standby letters of credit, with interest rates ranging from 1.25% to 1.35%. In France, these arrangements provide for short-term bank overdrafts that are due on demand and bear interest at EURIBOR + 1%. Additionally, during fiscal 2008, the Company obtained a credit line with French financial institution to borrow up to €2.0 million bearing interest at EURIBOR + 1%. Amounts outstanding on the credit line are due on demand or at the termination of the credit line in June 2015.
 
Maturities on all notes payable as of June 30, 2009 are as follows (in thousands):
 
     
Years Ending
   
June 30,
 Amount 
 
2010 $6,962 
2011  10,044 
2012  160,058 
2013  152 
2014 and thereafter   
     
Total $177,216 
     


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Table of Contents

 
MIRION TECHNOLOGIES, INC.
 
Notes to Consolidated Financial Statements — (Continued)
 
9.  COMMITMENTS AND CONTINGENCIES
 
Leases and Other Contractual Obligations — In the normal course of business, the Company enters into contractual arrangements with third parties for noncancelable operating lease agreements for its offices and vehicles. Under these agreements, the Company commits to provide specified payments to a lessor, based upon contractual arrangements.
 
The total future minimum commitments for these and other contractual arrangements in place as of June 30, 2009, are scheduled to be paid as follows (in thousands):
 
                             
  2010  2011  2012  2013  2014  Thereafter  Total 
 
Minimum future operating lease payments $4,377  $3,929  $3,310  $2,875  $1,719  $946  $17,156 
Less income from subleases  (170)  (170)  (170)  (170)  (170)     (850)
                             
Net minimum operating lease payments $4,207  $3,759  $3,140  $2,705  $1,549  $946  $16,306 
                             
 
Total rent expense for fiscal 2007, 2008 and 2009 was $2.8 million, $2.9 million and $3.2 million.
 
Legal Proceedings — The Company is subject to claims and legal proceedings for matters that have arisen through the ordinary course of business. Management believes any liability that may ultimately result from the resolution of these matters will not have a material a