Landauer, Inc. F4Q08 (Qtr End 9/30/08) Earnings Call Transcript

Landauer, Inc. (LDR)

F4Q08 Earnings Call

December 2, 2008 2:00 pm ET

Executives

Jonathon M. Singer – SVP and CFO

William E. Saxelby – President and CEO

R. Craig Yoder – SVP, Marketing & Technology

Gerard P. Bilek - Vice President, Controller

Analysts

Greg Halter - Great Lakes Review

Robert Kosowsky - OFI Institutional

Tom Lamb – Weybosset Research

Lawrence Goldstein - Santa Monica Partners

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Landauer, Inc. fourth quarter and full year 2008 conference call. (Operator Instructions)

I would now like to turn the conference over to Jonathon Singer, Chief Financial Officer. Please go ahead, sir.

Jonathon M. Singer

Good afternoon. I'm Jonathon Singer, the Chief Financial Officer for Landauer. On behalf of the company, I'm pleased to welcome everyone to the fiscal 2008 year end conference call.

With us today on the line we have Bill Saxelby, President and Chief Executive Officer, Craig Yoder, Senior Vice President, Marketing and Technology, and Gerry Bilek, Vice President and Controller.

By now you should have received a copy of the press release. If not, please contact Rebecca Warmes at 708-441-8311 and she will send one to you immediately. Alternatively, you can visit the company's website at www.LandauerInc.com under the Investors heading.

This conference call will follow a standard format, with a review of the results followed by a Q&A session.

Before I turn the call over to Bill, I need to remind you that certain statements made in the press release and on this conference call that are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Landauer believes the expectations reflected in any forward-looking statements are based upon reasonable assumptions, the company can give no assurance that its expectations will be obtained. Please refer to the complete safe harbor statements within the press release.

Additional information may be obtained by reviewing the Significant Risk Factor section in the company's annual report on Form 10-K for the year ended September 30, 2007 and other reports filed by the company from time to time with the SEC.

Additionally, we wanted to let people know that the information and statements made during the call are made as of the date of the call, December 2, 2008. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements.

Also, the contents of the call are the property of the company and any replay or transmission of the call may be done only with the consent of Landauer.

At this time, I'd like to turn the call over to Bill.

William E. Saxelby

Thank you, John. Good afternoon, everyone, and thank you for joining us for our fourth quarter and fiscal year end 2008 earnings call. I'm pleased to have the opportunity to discuss our results and accomplishments for what's proven to be a very successful year for our company.

As you can see from the results, our fiscal fourth quarter was another strong quarter for Landauer, completing what's been a record year for the company. Our revenues for the full year 2008 were $90 million, which is an 8% increase over the prior year. These record revenues translated into strong profitability as our net income grew to $23 million, which is up 10.3% from what we earned in the year ago period after excluding the fiscal 2008 accelerated depreciation charges and the fiscal 2007 charges for accelerated depreciation and asset impairment.

Given the current economic environment, we believe an important benchmark to gauge the health of our business is operating cash flow. Landauer's operating cash flow for the full year was $34.7 million, a 24% increase over fiscal 2007. This strong cash flow signifies the financial health of the business and gives us the ability to reinvest in our business and pursue growth initiatives. Jon will provide an overview of both the quarterly and full year financial results in more detail during the financial review portion of the call.

2008 was a year of many milestones for Landauer. From securing the largest single order in company history to making inroads into new markets around the globe, Landauer has not lost sight of its commitment to strategic growth and delivering value to its shareholders. The results we reported for this recent quarter and 2008 reflect the consistent and successful execution on our three strategic growth initiatives, which are optimizing the core business, driving competitive growth, and pursuing strategic expansion.

One of our key priorities is to optimize the core business and we've invested internally to drive productivity improvements and strengthen our core infrastructure. In fiscal 2008 we made significant progress towards the completion of our systems initiative. As you recall, we determined in 2007 that we needed to make the investment to transform our customer-facing systems to improve service to our customers, improve productivity, and increase cash flows.

We made significant progress towards the implementation of our new system and are currently in the final development phase. The implementation is taking a little longer than expected, but we continue to be focused on ensuring that the transition is as smooth as possible, with zero impact to our core service. We expect this new platform to be ready to go live during fiscal 2009. We expect this and other internal initiatives to continue to support our long-term growth and continued strong return on invested capital.

Continuing with the theme of optimizing our core business, investments in strengthening our infrastructure in the sales, marketing and R&D areas continue to benefit Landauer as we gain market knowledge and begin to build momentum in markets that we've targeted for growth.

Within our domestic portfolio we continue focus on driving growth in our core occupational monitoring services, while expanding our served markets through a focus on nuclear power, the military, and patient monitoring for therapeutic and diagnostic procedures. We introduced a number of new products this year that will position us for continued success in these markets.

For example, we expanded the monitoring capabilities of our proprietary OSL technology to include a neutron capability. And although we've always provided neutron monitoring, it was through another material that was not integrated into our InLight family of products. This caused increased costs and limited our InLight offering to certain nuclear power customers.

During fiscal 2008, we introduced OSL with a neutron monitoring capability which we call OSLN and made our first sale to a domestic nuclear power customer. As of the end of fiscal 2008, Landauer's technology now provides personal dosimetry for 23 plants at 17 sites in the form of InLight service from our Glenwood headquarters and for 6 plants and 3 sites in the form of InLight equipment located at utility owned and managed labs.

It's important to note that this count only represents our domestic nuclear power penetration. We expect the OSLN product to support our continued expansion into nuclear power with a number of domestic and international opportunities which we'll be exploring in fiscal 2009.

In addition to enhancing Landauer's culture of productivity improvements and executing on projects within our core infrastructure, the company is actively pursuing our second strategic priority of driving competitive growth. The success of our competitive growth initiative is centered on leveraging our best in class OSL technology and the InLight family of products.

The InLight family of products is a flexible solution that offers the customer the choice of acquiring our proprietary OSL technology either as a traditional service or as equipment and badges to manage their own monitoring programs. The application of OSL technology through the InLight platform is simple and reliable from a customer's perspective and it also delivers outstanding results. With the InLight product family as a foundation, we experienced a number of significant milestones this fiscal year.

2008 saw us close the single largest order in Landauer's history as we signed a $2 million agreement to provide our InLight products to the National Dosimetry Services of Health Canada. The InLight products will be used by Health Canada to support Canada's emergency response strategy. Health Canada is the lead federal department responsible for coordinating the response to a nuclear or radiological emergency under the Federal Nuclear Emergency Plan.

Health Canada plans to introduce InLight into its core occupational radiation monitoring services following product licensing and will continue to invest in their InLight platform over the next several years. The agreement with Health Canada reflects the scalability of the InLight family of products to support the needs of a national laboratory and the capacity of Landauer to execute an order of this size.

The other benefit of the InLight family of products is that it enables us to bring next-generation dosimetry technology anywhere in the world. The most visible example during fiscal 2008 was the formation of our newest subsidiary with the leading provider of dosimetry services [break in audio].

Our new partner, Arsa, was founded in 1980 by Carlos Rodriguez and Manuel Nunez, two of the pioneers in the development of radiation safety standards in Mexico. They entered the market during a period in which the market was unregulated and they've been tireless advocates for the need for appropriate standards to ensure the safety of radiation workers.

Along with our partners in Brazil, we were introduced to Arsa in mid-2007. Mr. Rodriguez was eager to have Arsa be the entity that brought the benefits of the OSL technology to the market in Mexico. Similarly, we were attracted to the following strengths of Arsa: strong market position, with over 25 years of experience in providing pioneering radiation protection programs in Mexico; solid relationships with Mexico's radiology and regulatory leaders, and an established infrastructure of fullservice radiation monitoring.

During the year, we formed ALSA, a venture in which Landauer owns 56.25%. The venture provides and brings the strength of three partners - Arsa, Landauer, and Sepra. These strengths have been evident in the early performance of the venture as we've seen double-digit growth in participants and geographic expansion of the service into other Central American countries. With our new partnership in Mexico and our long-standing venture in Brazil, we now have coverage in Central and South America. We expect to see continued growth in these regions.

During the year we experienced a number of internal milestones that provide signals that we're making progress within the markets we've targeted for competitive growth. We continue to learn about these opportunities and adjust our strategies to be responsive to what the market is telling us.

As we've discussed on earlier calls, the market is signaling that the medical community has an interest in expanding their understanding of the impact of the increased utilization of radiation in medical procedures on the patient population. While in most instances the use of radiation is in support of critical diagnostic and therapeutic procedures, there is an emerging desire to understand the nature of the exposure for either quality assurance or patient safety reasons.

During fiscal 2008 we placed our 100th microStar, with over 80% of these placements into the medical market for applications outside of traditional occupational monitoring. In support of these placements we upgraded the operating software of the microStar to integrate key features identified by the medical market and launched a new product called the nanoDot that was specifically designed to their specifications.

While we believe our product offering presents significant growth opportunities both domestically and abroad, we are evaluating opportunities to facilitate strategic expansion, which is our third priority. We feel that our core technologies and competencies, such as patient dose monitoring, chain of custody analysis, and high-volume testing, can be leveraged across peripheral markets. Based upon available opportunities, we will also evaluate whether we want to supplement organic growth with strategic acquisitions.

While this past year has proven to be difficult for the overall macroeconomic environment, our strong performance during these uncertain times continues to highlight the sustainability of our product offering as well as the continued global awareness of the risks of radiation exposure.

Recent global trends and current market opportunities present us with attractive growth prospects in areas where we can leverage our business offerings in the foreseeable future. Recent regulatory standardization in developing countries relating to employee safety and the desire for current dosimetry technology speaks to the need for our products and has helped bolster our international InLight sales. As the leading provider of monitoring services, we are poised to increase penetration of this growing demographic.

Within our domestic portfolio we continue to focus on driving growth in our core occupational monitoring services while expanding our served markets through a focus on nuclear power, the military, and patient monitoring for therapeutic and diagnostic procedures.

In conclusion, we are pleased with the success that we've achieved in 2008 and believe that the market opportunities that exist currently will continue to present us with attractive prospects to grow and expand our business. These results demonstrate the balanced approach we take in pursuit of new growth opportunities, and we continue to manage resources to ensure progress against all three of our strategic priorities. Our strong cash flow generation and financial discipline allows for a prudent and effective cost structure, in turn providing Landauer the flexibility to be opportunistic in expanding its bestinclass offerings to other markets.

Ultimately, we believe that the commitment to our shareholders' best interest, the strength of our product offering, and our position as the market leader in global dosimetry services will continue to drive the growth and development of Landauer over the long term. We're excited about these opportunities and will continue to execute on our strategic initiatives into 2009 and beyond.

And with that, I'd like to turn the call over to Jon for a review of our financials and our outlook for 2009.

Jonathon M. Singer

Thanks, Bill.

Revenues for fiscal 2008 were $90 million, an increase of 7.5% compared with revenues of $83.7 million for fiscal 2007. Domestic revenue growth for fiscal 2008 was $1.7 million or 2.7% from continued growth of domestic InLight equipment and services. International revenue increased $4.5 million or 24%, supported by growth in volume in most regions, led by InLight service, the addition of the 56.25% owned subsidiary in Mexico, and favorable currency rates. Favorable currency, primarily the strengthening of the euro and real against the dollar, contributed approximately $2.1 million or 250 basis points of the revenue growth.

As mentioned during Bill's comments, the domestic InLight equipment increase was driven partially by a sale to Health Canada. The company completed a $2 million contract during the quarter ended March 31, 2008 under which [$1.9 million] of product was delivered.

Approximately $1.1 million of the product requires additional processing by Landauer to be fully utilized for its intended purposes. Per the terms of the agreement, Health Canada has the option to obtain additional processing of the material from the company or to exchange the materials for finished product. Consistent with GAAP and the company's accounting policy, we recorded $1.1 million of deferred revenue related to the portion of the sale that requires additional performance by the company.

Total cost of revenues for fiscal 2008 were $28.9 million, an increase of $1.4 million or 5% compared with cost of revenue of $27.5 million for fiscal 2007.

Gross margins for fiscal 2008 were 68% of revenues compared with 67.1% in fiscal 2007. The improvement is primarily a result of increased revenue without a corresponding increase to the fixed cost structure as well as lower depreciation expense.

Selling, general and administrative expenses for fiscal 2008 were $26.6 million, an increase of $1.9 million or 7.6% compared with selling, general and administrative expenses of $24.7 million for fiscal 2007. Factors contributing to the increase in SG&A costs include $695,000 for domestic sales and marketing resources, $1.8 million for incentive compensation programs, and approximately $700,000 for foreign operations, primarily relating to increased foreign exchange rates and the addition of a new subsidiary in Mexico. These increases were partially offset by $1.4 million in reduced spending for our IT initiative.

During the 2007 fiscal year, the company implemented a plan to support long-term profitability and growth. As part of this plan, the company accelerated its program to re-engineer business processes. As Bill indicated, an important part of the program is replacing the company's information technology system. The information systems initiative was initially expected to cost $9 to $10 million over the life of the project with approximately $2 to $3 million to be expensed and $7 to $8 million to be capitalized. The project was initiated during fiscal 2007 and was targeted to be completed during fiscal 2008.

The project has extended beyond its initial timeframe due to increased customization of the software to capture the unique business requirements of the company. Due to the timeline extension, the information system initiative is expected currently to cost $14.5 million to $16.5 million over the life of the project with approximately $3 to $4 million to be expensed and $12.5 to $13.5 million to be capitalized. The project is now targeted to be system ready during fiscal 2009.

Also as part of the IT initiative, in the 2007 fiscal year we completed an evaluation of the usefulness of investments made in legacy information systems hardware and software having a net book value of approximately $4.6 million. Of these assets, approximately $3.5 million were determined to be either impaired or subject to accelerated depreciation. This resulted in a fiscal 2008 charge of $376,000 for accelerated depreciation and a fiscal 2007 charge of $2.9 million or $1.7 million after tax, of which $2.2 million was for impaired assets.

Reported operating income for fiscal 2008 was $34.1 million, an increase of $5.5 million or 19.1% compared with operating income of $28.6 million for fiscal 2007. The increase in operating income is due to the growth in revenue, in gross profit, reduced spending in fiscal 2008 for the systems initiative, and reduced impact of the charge for accelerated depreciation and impaired assets.

Net other income, including equity in income of joint ventures for fiscal 2008, was $2.4 million, an increase of $129,000 or 5.8% compared with net other income of $2.2 million for fiscal 2007. The increase in net other income is primarily due to increases in interest and investment income. Nagase-Landauer equity earnings were approximately $1.4 million in both fiscal 2008 and 2007.

Income tax expense for fiscal 2008 and 2007 was $13.1 million and $11.4 million, respectively. The effective tax rate was 36% this year and 37% in fiscal 2007. The decline in the effective tax rate was driven by a number of factors, including the increased impact of foreign and state tax credits and foreign source income.

Net income for the year ended was $23 million, an increase of 19% compared with net income of $19.3 million for fiscal 2007, with resulting diluted earnings per share for the current year at $2.47 compared with $2.10 reported a year ago.

Now looking at the fourth quarter results of operations, revenue for the fourth quarter of 2008 were $22.5 million, an increase of $1.2 million or 5.5% compared with $21.3 million a year ago. Domestic revenue for the quarter was approximately flat with prior year. International revenue increased $1.1 million or 22.1%, supported by growth in volume in most regions, the addition of the 56.25% owned subsidiary in Mexico, and favorable currency exchange rates, which contributed $263,000 of the growth.

Cost of revenues for the fourth quarter of fiscal 2008 and 2007 were $7.3 million and $6.7 million, respectively.

Gross margin declined to 67.7% versus 68.5% for last year's fourth quarter, due primarily to product mix.

Selling, general and administrative costs for the fourth quarter of 2008 were $7.3 million compared with $7.2 million in fiscal 2007.

Accelerated depreciation charges were $518,000 in the fourth quarter of fiscal 2007.

Operating income for the fourth fiscal quarter of 2008 was $8 million, an increase of $1.1 million or 15.9% compared with $6.9 million a year ago.

Net other income for the fourth quarter declined by $88,000 to $438,000 in fiscal 2008. The decline is primarily due to the decline in equity earnings in Nagase-Landauer to $198,000 in fiscal 2008 fourth quarter from $301,000 in fiscal 2007. The decline is due to certain onetime charges as they initiate a project to transition the business to the InLight platform.

Income tax expense and the effective tax rate respectively were $2.9 million and 34% in fourth fiscal quarter 2008 and $2.8 million and 37.3% in the fiscal fourth quarter of 2007. The lower effective tax rate in the fourth quarter of 2008 compared to the rate in the fourth quarter of fiscal 2007 was due to the year end adjustments and revision for foreign and state tax credits as well as the resolution of certain uncertain tax positions.

Net income for the quarter just ended was $5.5 million compared with net income of $4.6 million for the fourth quarter 2007, with resulting diluted earnings per share for the current quarter at $0.59 compared with $0.50 reported a year ago.

Now let's shift the focus to the balance sheet and my favorite topic, cash flow. A strong indicator of the continued financial strength of Landauer and the continued progress we have made in strengthening the foundation of the business is the fact that we generated $12.9 million in cash during fiscal year 2008. We ended the year with $33.9 million in cash on hand. This incremental cash was generated after investing $7.5 million in property, plant and equipment, primarily for the new systems initiative, investing approximately $500,000 for our subsidiary in Mexico, and returning $18.3 million to shareholders through dividends.

Cash flows provided by operating activities for fiscal 2008 were $34.7 million, an increase of approximately $6.6 million or 24% from fiscal 2007. The increase is due primarily to increased net income, increased deferred contract revenue, and other operating activity.

Investing activity included acquisition of property, plant and equipment in the amounts of $7.5 million and $7.4 million in fiscal 2008 and 2007, respectively. The company capitalized approximately $5.7 million for its systems initiative in fiscal 2008. Capital expenditures for fiscal 2009 are expected to be approximately $6 to $8 million, principally for the development of software systems and supporting computer hardware. The company anticipates that funds for these capital improvements will be provided from operations.

As mentioned earlier, during fiscal 2008 we paid cash dividends of $18.3 million or $2.00 per share. As you're aware, we announced last Wednesday that the Board has approved a 5% increase in the annual dividend to $2.10 per share. The first quarter dividend will be paid on January 2, 2009 to shareholders of record on December 12, 2008.

Turning to our outlook for fiscal 2009, Landauer's business plan for fiscal 2009 currently anticipates aggregate revenue growth for the year to be in the range of 3% to 5%. The company anticipates this will translate into a net income increase in the range of 6% to 8%. Contemplated in our guidance [break in audio] [appreciation] of the dollar against other currencies. In addition, the increased contribution of the InLight products to our revenue mix may lead to increased lumpiness in our quarter-over-quarter results; therefore, our guidance is intended to be applied to the full year performance.

Operator, we will now open the call to questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Your first question comes from Greg Halter - Great Lakes Review.

Greg Halter - Great Lakes Review

Jon, I'm wondering if you could comment on your tax rate outlook for '09. Do you think it would hold at around the 36% for the full year?

Jonathon M. Singer

Yes, I think the 36% is probably a pretty good level for forecasting purposes.

Greg Halter - Great Lakes Review

And that's for '09. Anything beyond that or too early?

Jonathon M. Singer

It's too early.

Greg Halter - Great Lakes Review

And I know you gave the commentary on dividends and capital spending, but what was your depreciation and amortization for '08 and what would you expect for '09?

Jonathon M. Singer

Depreciation and amortization for '08, depreciation was approximately $6 million, amortization was about 650, and I think our forecast has us right around those numbers going forward.

Greg Halter - Great Lakes Review

And on the Health Canada, if you could run through that; you went kind of quickly. On the total contract, I think you said you've included $1.9 million in revenue and there's still $1.1 million to go with additional performance and when you would expect that to come into revenue?

Jonathon M. Singer

Yes. No, the total contract was $2 million, okay? We deferred $1.1 million and we recognized $900,000. Of the $1.1 million that we deferred, we anticipate that we'll either convert the material or exchange it for product during this fiscal year, and that's been considered in the guidance we've provided.

Greg Halter - Great Lakes Review

And that could come at any time?

Jonathon M. Singer

Yes. We're working with them right now on a delivery schedule.

Greg Halter - Great Lakes Review

And beyond that type of contract, are there others out there that you're seeking with other either domestic areas or international areas that would rival that size or maybe be larger?

Jonathon M. Singer

You know, we're constantly looking at the opportunities to place the InLight systems into environments like Canada. You know, obviously Health Canada - Canada's about 150,000 participants of which Health Canada services about 110,000, so it's one of the larger monitoring countries, but we continue to work across the globe on opportunities for InLight in environments both large and small.

Operator

Your next question comes from Robert Kosowsky - OFI Institutional.

Robert Kosowsky - OFI Institutional

I noticed in the press release you guys mentioned some product mix changes in the fourth quarter. I was wondering if you can give a little bit more kind of clarification as to what that was.

William E. Saxelby

Yes. It's the contribution of InLight versus the traditional occupational monitoring, and that was really in reference to what I would call a slight variation in margin last year versus this year.

Robert Kosowsky - OFI Institutional

Okay. And is this something that we should expect to kind of continue as some of the other products start to gain better [break in audio].

Jonathon M. Singer

When you look at the full year margin that we experienced this year, I think its representative of what we would expect for full year margin next year. It's just, as I indicated in the guidance, depending upon the mix of equipment and badges that we deliver in a period, there could be some lumpiness and slight changes, but I think overall when you look at the gross margin the full year margin is representative of how we're managing the business.

Robert Kosowsky - OFI Institutional

Any kind of light on the little slowdown in the U.S. growth in the second half of this year?

Jonathon M. Singer

I think in the core monitoring business the performance has been consistent with what we've seen over the past several years, and then I think what you're seeing is the impact of the InLight equipment on the business. And so, as we processed the large Health Canada order in the second quarter and maybe not as large an order in the fourth quarter, you see some variability quarter to quarter, but overall we saw reasonable growth in the domestic portfolio.

Robert Kosowsky - OFI Institutional

So it's just normal lumpiness of the business?

Jonathon M. Singer

Increasing normal lumpiness as InLight continues to be a changing portion of the business.

Robert Kosowsky - OFI Institutional

And then how much of the IT system was expensed in '08?

Jonathon M. Singer

The expensed portion of the IT initiative in '08 was $707,000.

Robert Kosowsky - OFI Institutional

So then you expect a fairly good headwind next year, I guess, as you ramp up some of the spending?

Jonathon M. Singer

Yes.

Robert Kosowsky - OFI Institutional

And then finally just kind of some broad commentary about the acceptance of nanoDot and kind of any kind of new, I guess, feedback from potential customers?

William E. Saxelby

I would actually say two things. One, back to your previous question, when we talk about the second priority, which is competitive growth for the company, I just wanted to emphasize, as we've talked about in previous calls, international expansion is a key part of the growth that we see on a go forward basis. So I think Jon's comment about where domestic performance was is accurate, but it's just kind of to reemphasize InLight's ability to help us position the company both for service as well as equipment opportunities overseas.

I think it's premature relative to the nanoDot to speak about anything other than what we see as this growing level of interest and awareness on the part of major institutions in particular right now to try to understand patient dose in both therapeutic and diagnostic procedures or applications. We're spending a fair amount of time, both from a sales and marketing direct perspective with customers. We put a fair amount of emphasis into analysis of the market with some independent third party groups. It's one we stay very close to.

I would say to the comments that we made, to have placed our 100th microStar, I would call that for Landauer a significant achievement. I'd be cautious, though, about trying to then extrapolate that number across the entire market, at least at this point. But we think it's very promising.

Operator

(Operator Instructions) Your next question comes from Tom Lamb – Weybosset Research.

Tom Lamb – Weybosset Research

I was wondering if you might go into a little bit of detail regarding the cost increases on your IT system, why that might have occurred. It seemed pretty high for the size of company that you are.

William E. Saxelby

You know, Tom, I think Jon's characterization of the need to really understand customization that's specific to the business is probably not only the simplest but it's the most accurate description. You know, when you think about it, this was a 30-year-old mainframe system that had not gone through any type of a major upgrade over that period of time.

And, in all candor, I think our focus just continues to be that we want to make sure that we do this properly, the right way. We don't want to interrupt service in any way to the customer. Kind of to your point about predictability and stability, we want to make sure that we ensure that that continues going forward.

It's not really much more complicated than that, Tom. When you get into the number of badges that we process - in excess of a million badges a month and badges that we read - the systems that support that have a high degree of customization. It's one of the things that differentiates the company. And as we continue to go through what I kind of term the archeological dig of the 30year-old system, we learn as we go.

As well as we thought we had that scoped out properly upfront, there have been things that have come up that we've just needed to address. And with the Board and the management team's approach being that we just want to make sure we get this right, I think that's probably the best explanation.

Tom Lamb - Weybosset Research

But you're pretty sure that you have your arms around the total cost at this point?

William E. Saxelby

Yes.

Tom Lamb - Weybosset Research

The other question I had was regarding '09, I guess. It seems like your earnings target is conservative and doable, but what might go wrong? Do you see sales agreements or sales negotiations stretching out? Do you see maybe governments tightening up? What gives you some confidence that you're going to achieve the sort of growth goals that you've set for yourself?

William E. Saxelby

You know, Tom, I think the best answer that we can give you to that is we put a fair amount of time and effort into tying back our revenue goals for the year to specific opportunities, both at the account and the country level.

So I think I'll answer your question about what is it that we think could go wrong, I think we're already aware of what that could be and that is the challenge that we have with the changing currency. Our confidence level is such that - and I think this gets to Jon's point earlier - that we need to focus on the number being the full year number, but we feel confident in the pipeline that we have to be able to give the guidance that we've given.

My only other comment would be given that we saw favorability in terms of currency that was an assist this year, that's an opposite issue for us this year, so I actually thing 6 to 8 at the net income line is not a lay down number for us given that challenge, but we feel comfortable and confident that we've got the plans in place to deliver.

But account level detail is probably the best thing I can tell you relative to being able to plan revenue growth and ultimately net income.

Operator

Your next question comes from Greg Halter - Great Lakes Review.

Greg Halter - Great Lakes Review

I know you had in the past discussed the transition from film in some areas like France and the U.K. with an opportunity for InLight sales there. I just wondered if you could give us an update on progress in that regard.

R. Craig Yoder

We continue to see small services move from the film technology and in many cases they're coming to the OSL. We're in discussions now with several European countries, including the U.K. There are several film users in the U.K. that have now made specific plans to change, so we think over the next year or two we're going to have a reasonable number of opportunities to capture that business.

Our solution with InLight is very easy for them to adopt. It's almost a turnkey kind of an approach, so for people who are not familiar with the newer technologies, we really provide that advantage for them.

Greg Halter - Great Lakes Review

And in regard to this CT - computed tomography dosimeter - if you could give us an update on what's happening there, if there's been any kind of increased or decreased acceptance of that as well going forward or what the outlook looks like.

R. Craig Yoder

I would say that it's been fairly static at this point in time. The industry's trying to really come to grips with some of the newer CT technology and what kind of radiation measurements that are most appropriate for that. The traditional types of measurements no longer apply with some of the newer what we call cone beam and multi-detector CT elements. So as the industry begins to define what they want to measure, we would expect that we would fine-tune our product to hit that.

Greg Halter - Great Lakes Review

And I believe you had talked about a commitment from a leading research institution that would be moving to OSL, and I think they had 2,000 domestic facilities. Has that moved along? Is that in place now?

R. Craig Yoder

Yes, it's in process. It's a single facility that does 2,000 tests during the year. And they'll be transitioning the material from TLD to OSL, and that transition will be occurring during fiscal '09.

Operator

Your next question comes from Lawrence Goldstein - Santa Monica Partners.

Lawrence Goldstein - Santa Monica Partners

I think you more or less answered this question, but I'll ask it again in case there's anything you might want to add. Is there any impact of the Depression-like economic climate that you see impacting the company?

And secondly, I can't help but notice that last year - and I think if I look back over all the years  the statement was made in the press release of almost the same date that the company anticipates a net income increase in the range of 6% to 8%, quote-unquote. And this year it reads, "The company anticipates a net increase in the range of 6% to 8% excluding the impact of 2007 impairment, etc." unquote. It's like you have a patent or lock on this 6% to 8%. And you always do better or similar or a little worse, but you always make progress most of the time.

Is there anything that you can see doing that would break you out of 6% to 8% and make it 8% to 16% or something totally different?

William E. Saxelby

I think there were three things there, but let me take first of all on the Depression piece and/or the slowing of the economy, the recession, etc. You know, no business is immune from that so, number one, we have businesses that we're trying to watch carefully. The fortunate thing for Landauer is that we have a large percentage of our revenue spread across a number of customers and our dollar dependency on any one customer is not - the word is not insignificant, but it is less of an issue than it may be with a company, for instance, that has 30% or 40% of their revenue riding on either one market or one particular customer.

So we feel like we're in a better position, let's put it that way, but certainly not immune. You know, we have a business that monitors radon for homes. Those are the kinds of things that we obviously need to watch carefully.

On the other hand, by and large it's a regulated service that's required so, for instance, if a hospital was going to stay in business or a medical manufacturer is going to continue to service its equipment in the field, there's going to be a need in the requirement for badges, so that's obviously a positive for the company, especially in an uncertain time.

To your second point, we don't have a patent or a lock on 6% to 8%. I wish we did, in particular this year because the company has got to manage through, at least for our size company, a relatively significant currency issue, which I think I spoke to to the last caller. So therefore, for us to deliver 6% to 8%, we obviously have to make up for the currency divot from the prior year. So, in effect, our performance on a year-to-year basis has got to be better than that to make up for the currency issue.

Point number three, I think what we're trying to do in terms of is there a way to break out, if you'll listen to some of the things that we're trying to get involved with, on competitive growth in particular and then when we start speaking about strategic expansion, for those of you that have kind of been on this call, let's say at least over the last three years, we've been trying to communicate as effectively as we can that this is a step process for us.

And I think maybe, Lawrence, it was on a previous call with you, once in the past you'd asked about some of the management team that we had brought into the company, coupled with the existing team, to try to build for growth. I think we've started to see that. We've been able to grow effectively the last couple of years without the reliance on price increases, which I think is fairly significant for the company.

So I view us as having taken the right steps towards the beginning of organic growth as opposed to growth being driven by a high degree of reliance on price increases, number one. Number two, the InLight family of products is clearly positioning us to be able to grow at least equal to or better than what we've done in the past, again, without the reliance on price.

And then the last thing is we are beginning the initiative of looking more aggressively, as we talked about under strategic expansion, for growth opportunities that may or may not require acquisitions. We however want to emphasize that we're going to be extremely planful in those because the financial platform and position of the company, we're not interested in making a decision that's going to signal a change in that regard.

So I just think prudent financial discipline coupled with a good strategic approach and kind of, as we leave year three and move into at least year four of the time I've been here, I would say we're starting to increase that level of activity. And, as all of you know, though, on this call, those things take time. So we're just trying to go about those in a planful way.

Operator

And there are no further questions. At this time, I would like to turn the call back over to management for any closing remarks.

William E. Saxelby

Well, ladies and gentlemen, we'd like to just thank you for your time. We look forward to reviewing our Q1 performance with you and thanks for your continued interest in Landauer.

Operator

Thank you, ladies and gentlemen. That does conclude the Landauer, Inc. fourth quarter and full year 2008 conference call. Thank you for your participation. You may now disconnect.

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