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Landauer Inc. (NYSE:LDR)

F4Q07 (Qtr End 09/30/07) EarningsCall

December 4, 2007 2:00 pm ET

Executives

Jon Singer - Senior Vice President and Chief FinancialOfficer

Bill Saxelby - President and Chief Executive Officer

Craig Yoder - Senior Vice President of Marketing andTechnology

Analysts

Stephen O'Neil - Hilliard Lyons

Yuri Feldman - Sagard Capital

Jason Rodgers - Great LakesReview

Tom Lamb - Weybosset Research

Operator

Ladies and gentlemen, thank you for standing by, and welcometo Landauer Incorporated Fourth Quarter and Full Year 2007 Results ConferenceCall. During today's presentation all parties will be in a listen-only mode.

(Operator Instructions) This conference is being recordedtoday, Tuesday, December 4, 2007.

I will now like to turn the conference over to Jon Singer,Senior Vice President and CFO. Please go ahead, sir.

Jon Singer - SeniorVice President and Chief Financial Officer

Thank you, operator. Good afternoon. I am Jon Singer, theChief Financial Officer for Landauer. On behalf of the company, I'd like towelcome everyone to the fourth quarter and yearend fiscal 2007 conference call.With us today on the line we have Bill Saxelby, President and Chief ExecutiveOfficer; and Craig Yoder, Senior Vice President of Marketing and Technology.

By now, you should have all received a copy of the pressrelease. If not, please contact [Rebecca Warmes] at 708-441-8311, and she willsend one to you immediately, or visit the company's website atwww.landauerinc.com under the Investors heading.

This conference call will follow a standard format with areview of fourth quarter and fiscal year followed by a Q&A session.

Before I turn the call over to Bill, I need to remind youthat certain statements made in the press release and on this conference callthat are not historical may be deemed forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. AlthoughLandauer believes the expectations reflected in any forward-looking statementsare based on reasonable assumptions, they can give no assurance that itsexpectations will be attained. Please refer to the complete Safe Harborstatement within the press release. Additional information may be obtained byreviewing the significant risk factor section in the company's annual report onForm 10-K for the year ended September 30th, 2006, and other reports filed bythe company from time to time with the SEC.

Additionally, we want to let people know that theinformation and statements made during the call are made as of the date of thecall, December 4th, 2007. Listeners to any replay should understand that thepassage 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 ortransmission of the call may be done only with the consent of Landauer.

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

Bill Saxelby -President and Chief Executive Officer

Thank you, Jon. Good afternoon, everyone, and thank you forjoining us for our earnings conference call. We're pleased to report Landauer'sfourth quarter and fiscal 2007 full year results.

As you can see in this morning's release, our fiscal fourthquarter continued along the path of steady growth, and our solid results for2007 reflect our commitment to financial discipline in performance excellence.This year was a record year for Landauer as we generated $83.7 million inrevenues, which is a 6% increase over the prior year.

Our revenues for the quarter ended September 30, 2007 were$21.3 million, which is 6% higher than the same quarter last year. Ouroperating cash flow for the full year was $28 million, a 17% increase overfiscal 2006. We feel that the strong growth in cash generated is a goodindicator of our health as a business.

As a result of internal initiatives, we generatedimprovements in our gross margin and gross profit, which enabled a continuedinvestment in the business. More importantly, we achieved all of this whileinitiating investment in the business for future growth. Jon will get intoadditional detail on the financial results during his portion of the call.

I wanted to review the three priorities that have comprised Landauer's strategic focus in 2007. This year has been -- hasshown significant progress in the areas of improving the base businessprofitability, global expansion via our InLight product portfolio, andincreased focus on building shareholder value. I'd like to take thisopportunity to revisit each of these strategic initiatives and add some clarityto our accomplishments in each of these areas.

Let me start by talking about some of the important stepstaken to improve our base business profitability. In 2007, we undertook acomplete review of our order-to-cash business processes with the goal ofreengineering inefficient practices to not only reduce costs, but also toimprove our time to market and responding the customer and market requirements.In order to achieve these goals, as well as improve productivity and increasecash flows, we determined that we needed to make the investment to transformour customer-facing systems.

There are two important components to this initiative.First, we determined that we had to simplify the way we serve customers. Thisinvolves reducing the number of operational steps involved in meeting theirrequirements. And second, we found the need to increase the speed with which wecan develop, introduce and support new and existing products.

Our legacy systems have limited ability to handle newproducts. Our new ERP system will rectify this by using a highly flexibledesign, which facilitates easy support for new products and customer additions.We're on track with the systems initiative, and believe that the new systemwill be implemented and stabilized in fiscal 2008 as planned within ouroriginal cost estimates of $9 million to $10 million with approximately $2million to $3 million to be expensed.

We've also increased our sales and marketing resourcesduring 2007. We felt that this expansion was needed to better reach markets wehave targeted for growth. We're focusing on opportunities we conserve with ourexisting technology in areas we're pursuing for a competitive growth, which includenuclear power, the military, Homeland Security and first responders, andpatient monitoring for therapeutic and diagnostic procedures.

During the year, we recruited Amy Cosler, our new VicePresident of Sales and Marketing. She has 15 years of strategic sales and marketingexperience, selling into the hospital radiology market. And I'm confident thather proven track record will pay dividends for Landauer in the coming years.

Next, I'd like to discuss the global expansion opportunitiesutilizing the InLight family of products. InLight is an integral part of ourgrowth strategy. It leverages our proprietary OSL technology and itsoperational simplicity, reliability and technical were identified and arecurrently underway -- excuse me -- technical performance, which makes thisfamily of products -- it's not good to go to page 4 when you're meant to be onpage 3 -- makes this family of products uniquely suitable for a wide variety ofdosimetry applications.

In a simple way, think of InLight as a flexible way todeliver Landauer's radiation dosimetry technology and expertise anywhere in theworld. The InLight family of products gives Landauer the ability to take our Glenwoodservice model to the field, and the field is really defined by customer's needsand applications and is not constrained by geography.

We currently serve customers in 30 states domestically and13 countries worldwide. Furthermore, our customer applications for InLight arevery diverse. The customer could range from our new joint venture partner in Australia, to an EMS worker in the City of Chicago, to a nuclearpower plant.

InLight also allows for expansion into additional globalmarkets. Similar to our recent joint venture utilizing InLight and Landauer Australasia,we're seeing strong demand for this product portfolio in Southeast Asia and Latin America.

As with nuclear power, we believe that the InLight family ofproducts offers a superior alternative for the military to support theiroccupational monitoring needs. The military has an ongoing need for radiation monitoringcapabilities, and we are pursuing several initiatives in a well planned mannerin this market segment.

As we discussed in our last call, we are investigating newopportunities in conjunction with hospital customers that use our Luxel andInLight products. We're exploring new applications for the microStar portablereader beyond occupational monitoring. These applications involve measurementsmade in diagnostic and therapeutic radiology, as well as nuclear medicine. Opportunitieslike these will enable us to improve our focus on current customers, whileincreasing the return on our existing invested capital base.

Finally, I'd like to comment generally on some of theinitiatives to improve focus and build shareholder value. We've introducedinternal measurements to be more responsive to our customers, access andevaluate growth products and markets, and to ensure financial disciplinerelative to allocating capital for investments. Utilizing this disciplinedapproach, we've undertaken a strategic review which has highlighted severalopportunities.

For us to take full advantage of these opportunities, twokey initiatives were identified and are currently underway; namely, theanalysis and review of Landauer's business processes and investment in our ITinfrastructure, which I mentioned earlier, and secondly, we'll continue ouremphasis on improving cash flow and returns for shareholders.

For years, Landauer has been the industry leader in medicaland industrial monitoring. While we enjoy a secure position as the leadingprovider of dosimetry services, we have become aware of some current globaltrends that we have identified as potential areas in which we could leverageour business offerings.

We've seen a growing awareness of the risks of the globalthreat of radiation exposure, which is reflected in the regulatorystandardization in developing countries relating to employee safety. As theleading provider of monitoring services, we are poised to better serve thisgrowing demographic.

Example of the impact of this trend is the doubling ofrevenue in our Chinese venture. This was accomplished through a combination ofproviding badges for occupational monitoring and the sale of InLight equipmentin support of local regulatory requirements.

Worldwide momentum is growing in favor of nuclear power asan appropriate energy alternative with accelerating global construction plant.Nuclear power is in an equipment renewal cycle in existing facilities and iscurrently investigating monitoring alternatives in these new facilities.

The increased focus within the military and HomelandSecurity for the need for robust and cost effective monitoring solutions forfield deployment is another recent trend. After evaluating the military's needfor radiation monitoring, we believe it represents an interesting opportunity.

This is a split between occupational monitoring of militaryworkers who operate in an environment where they could be exposed to radiation,tactical monitoring of troops in the field and military medical facilities. Aswith nuclear power, we believe that the InLight family of products offers asuperior alternative for the military to support their occupational monitoringneeds.

As you can see, there are many opportunities available toLandauer as the need for monitoring develops. As we executed against ourstrategic priorities in 2007 and refined the strategic thinking of ourbusiness, we have evolved our three strategic priorities as we head into 2008.Landauer's first strategic priority is going to be to continue to optimize thecore business.

We took important strides over the past several quarters inimproving our core business by strengthening our management team. We alsoimplemented a culture of productivity improvement and helped to establish a lowcost manufacturing infrastructure.

We will continue to optimize our core business by completingthe initiative to reengineer our order-to-cash business processes through theimplementation of our customer-facing systems and aligning management'sperformance with strategic goals.

Our second strategic initiative is competitive growth. Wehave worked hard over the past several months to lay the foundation to achieveand sustain competitive growth, starting with our renewed focus on sales and marketing.

We are also looking to grow the global InLight portfolio aswell as expand internationally through the InLight product platform. Finally,we will look beyond our current base markets and explore possibilities in themilitary and first responder applications of our OSL technology.

Finally, our third strategic initiative is strategicexpansion. We will investigate expanded applications of our core technologiesand competencies to broader monitoring markets. We believe that our corecompetencies in the areas such as patient dose monitoring, chain of custodyanalysis and high volume testing are applications that can be leveraged outsideof our base business. We will continue to evaluate peripheral markets andtechnologies that can be leveraged within our existing infrastructure.

Based upon available opportunities, we will also evaluatewhether we want to supplement organic growth with strategic acquisitions.Overall, we are pleased with the progress that we have made in making Landauermore efficient and profitable business.

Starting in 2006, we began a process of auditing theLandauer business model. We found that we had a terrific product offering in asecure position as the market leader in dosimetry services. And in the process,we were also able to identify significant opportunities in both our technologycapabilities and our operating structure.

During fiscal year 2007, we demonstrated traction inpursuing these opportunities via our new strategic initiatives and willcontinue to execute upon strategic initiatives into 2008 and beyond.

Landauer has a tremendous platform. It includes globalmarket share leadership, proprietary technology in OSL that's superior toanything on the market today and will allow us to capitalize on globalopportunities, strong margins, excellent cash flow generation and no debt.

Furthermore, we have a talented and experienced managementteam and an outstanding workforce who know the dosimetry market, its customers.And we are on top of emerging trends. Landauer has a great track record ofgenerating excellent returns for our shareholders, and we're dedicated tocontinuing to build that value.

And with that, I'd like to turn the call over to John Singerfor a review of our financials and our outlook for 2008.

Jon Singer - SeniorVice President and Chief Financial Officer

Thanks, Bill.

As Bill indicated in the opening, revenues for fiscal 2007were $83.7 million, an increase of 6% compared with revenues of $79 million forfiscal 2006. Domestic revenue growth for fiscal 2007 was $1 million or 1.5%from strong performance within HomeBuyer's Preferredsubsidiary and continued growth of domestic InLight equipment and services.

International revenue increased $3.7 million or 25%,supported by growth in volume in most regions led by InLight service, theaddition of a 51% owned joint venture in Australia and favorable currencyexchange rates. Favorable currency, primarily the strengthening of the Euroagainst the Dollar, contributed approximately $1.3 million of the revenue growth.

Total cost of revenue for fiscal 2007 were $27.5 million, adecline of $1.2 million or 4.2% compared with cost of revenue of $28.7 millionfor fiscal 2006. Gross margins for fiscal 2007 were 67.1% of revenue comparedwith 63.6% in fiscal 2006. The improvement in gross margin is a result of theprofit improvement plan initiated in the second quarter of fiscal 2006, whichresulted in a reduction in labor and related expenses and material costs.

Also contributing to the gross margin improvement was reduceddepreciation expense due to certain investments in manufacturing and laboperation equipments becoming fully depreciated during fiscal 2007.

As Bill discussed earlier, during the fiscal year, our boardof directors approved a plan to support Landauer's long-term profitability andgrowth. This plan supported investment in two initiatives to strengthenLandauer's quarter.

First, the company expanded sales and marketing resources tobetter reach markets we have targeted for growth. Secondly, the companyaccelerated its program to reengineer business processes. A key to this programis the replacement of a portion of the company's information technologyinfrastructure.

The information system's initiative is expected to cost $9million to $10 million over the life of the project with approximately $2million to $3 million to be expensed. The project was initiated during fiscal2007 and is targeted to be completed during fiscal 2008.

Selling, general, administrative expenses for fiscal 2007were $24.7 million, an increase of $5.6 million or 29% compared with selling,general and administrative expense of $19.2 million for fiscal 2006.

Factors contributing to the increase in selling, general andadministrative cost include: $2.1 million in spending to reengineer businessprocesses and to replace the company's information technology systems thatsupport improved customer relation management in the order-to-cash cycle;$489,000 incremental operating expense from the addition of the new 51% ownedjoint venture in Australia; $908,000 of increased cost in other foreignoperations to support growth and the impact of increased foreign exchangerates; $920,000 in higher spending for salary and benefits; and $802,000 ofincreased spending for professional fees, primarily for investments for thesupport of certain strategic initiatives and increased spending related to taxservices.

As part of the IT initiative initiated during this fiscalyear, management completed an evaluation of the usefulness of investments madein legacy information systems' hardware and software having a net book value of$4.6 million. Of these assets, approximately $3.5 million were determined to beeither impaired or subject to accelerated depreciation, which resulted in afiscal 2007 charge of $2.9 million, $1.7 million after-tax, of which $2.2million was for impaired assets.

During fiscal 2006, the company recognized $1.7 million forreorganization expense and management transition cost. As you may recall, inthe second quarter of 2006, the company initiated programs to reorganizeseveral departments and functions to eliminate redundant positions, requireemployees to meet established performance criteria and significantly alter oreliminate some benefit programs.

The implementation of these programs resulted in a pre-taxcharge in the amount of $600,000, primarily related to severance payments,extended employee benefits and related separation costs.

In addition, in September of 2006, Landauer recognized someadditional reorganization charge of $1.1 million for management transitionexpenses, primarily related to early retirement incentives and associatedpension benefit expenses arising from the retirement of the company’s formerChief Financial Officer and the resignation of the Vice President ofOperations.

These charges discussed above had the following impact onresults. In 2007, they reduced operating income by $2.9 million, net income by$1.7 million and diluted earnings per share by $0.19. In 2006, the chargesreduced operating income by $1.7 million, net income by $1 million and dilutedearnings per share by $0.11.

Including these charges, reporting operating income forfiscal 2007 was $28.6 million, a decline of $902,000 or 3.1% compared withoperating income of $29.5 million for fiscal 2006. The decline in operatingincome is due primarily to $2.1 million of spending in fiscal 2007 for thesystems initiative and the impact of a $2.9 million charge for accelerateddepreciation in impaired assets.

Net other income, including equity income of joint venture,for fiscal 2007 was $2.2 million, an increase of $735,000 or 49.3% comparedwith other income of $1.5 million in fiscal 2006. The increase in other incomeis due to increases in interest investment income and higher Nagase-LandauerLimited equity earnings. As you will recall, fiscal 2006 equity earningsincluded a charge for the write-down of accounts receivable. Our share of thatcharge was $237,000.

Income tax expense for fiscal 2007 and 2006 was $11.4million and $11.8 million respectively. The effective tax rate was 37% thisyear and 38% in fiscal 2006. The decline in the effective tax rate is driven bya number of factors including the increased impact of foreign source income.

Net income for the year just ended was $19.3 million, anincrease of 1.4% compared with net income of $19 million for fiscal 2006, whichresulted in diluted earnings per share for the current year at $2.10 comparedto $2.09 reported a year ago.

Now, looking at the fourth quarter results of operations,revenues for the fourth fiscal quarter of 2007 were $21.3 million, an increaseof $1.2 million or 5.7% compared with $20.2 million a year ago. Net revenue forthe quarter was approximately flat. International revenue increasedapproximately $1 million or 22.6%, supported by growth in volume in mostregions, the addition of the 51% owned joint venture in Australia and favorable currencyexchange rates.

Cost of revenues for the fourth quarter and fiscal 2007 and2006 were $6.7 million. Selling, general and administrative costs for thefourth quarter of 2007 were $7.2 million, an increase of $2.4 million or 50.2%compared to $4.8 million in fiscal 2006. The increase is due primarily to $1.1million of expense spending for the company's systems initiative, employeerelated expenses and international spending.

Accelerated depreciation charges were $518, 000 in thefourth quarter of fiscal 2007. The reorganization costs, primarily formanagement transition costs, were $1.1 million in the fourth quarter 2006.

Operating income for the fourth quarter 2007 were $6.9million, a decline of $771,000 or 10.1% compared with $7.6 million a year ago,primarily due to the spending for the company's systems initiative. Otherincome for the quarter increased by $338, 000 to $526,000 in fiscal 2007.

Income tax expense and the effective tax rate were $2.8million and 37.3% in fiscal fourth quarter 2007 and $3.1 million and 40% infiscal fourth quarter 2006 respectively. The lower effective tax rate in 2007was due to higher foreign source income and certain nonrecurring adjustmentsbooked last year.

Net income for the quarter just ended was $4.6 millioncompared with net income of $4.7 million for the fourth quarter 2006, whichresulted in diluted earnings per share for the quarter at 50% -- $0.50 thisyear compared with $0.51 reported a year ago.

Now let's shift the focus to the balance sheet and cashflow. As Bill indicated, the strongest indicator of the continued financialstrength of Landauer and the progress we have made in strengthening thefoundation of the business is the fact that we generated $5.6 million in cashduring fiscal 2007 to end the year with $21.1 million in cash on hand. Thisincremental cash was generated after investing $7.4 million in the new systems initiative,paying $1.7 million to retire all outstanding debt and returning $17.2 millionto shareholders through dividends.

Cash flow provided by operating activities for fiscal 2007were $28 million, an increase of almost $4 million or 16.6% from fiscal 2006.The increase was due primarily to higher cash earnings and a reduction inaccounts receivables during fiscal 2007, the first such reduction in the recenthistory of the company.

Investing activities primarily for the acquisition ofproperty, plant and equipment amounted to $7.4 million. The company investedapproximately $5.3 million for its systems initiative in fiscal 2007. Capitalexpenditures for fiscal 2008 are expected to be approximately $5 million to $6million. Company anticipates the funds for these capital improvements will beprovided from operations.

As mentioned earlier, during fiscal 2007 we paid cashdividends of $17.2 million or $1.90 per share. We announced last Friday theBoard has approved a 5% increase in the annual dividend to $2 per share. Thefirst quarter dividend will be paid on January 4th, 2008 to shareholders recordon December 14th 2007. Accordingly, there are only 11 more shopping days untilthe next dividend record date.

Also during the year, we renewed our credit agreement for$15 million. We did change bank this year as we attempted to consolidate ourdomestic banking activities with a single vendor. In conjunction with thatchange, we renegotiated the new line.

Now turning to our outlook for fiscal 2008. Landauer's businessplans for fiscal 2008 currently anticipate aggregate revenue growth for theyear to be in the range of 4% to 5%. Company anticipates this will translateinto a net income increase in the range of 6% to 8%, excluding the impact ofthe fiscal 2007 accelerated depreciation and impairment charges.

Operator, we will now open the call for questions.

Question-and-AnswerSession

Operator

Thank you, sir. We will now begin the question-and-answersession. (Operator Instructions)

Our first question comes from the line of Stephen O'Neilwith Hilliard Lyons. Please go ahead.

Stephen O'Neil -Hilliard Lyons

Good afternoon.

Bill Saxelby -President and Chief Executive Officer

Hi, Steve. How are you doing?

Stephen O'Neil -Hilliard Lyons

Just a couple of housekeeping things. Jon, did you say inthe fourth quarter international revenue was up 22.6%?

Jon Singer - SeniorVice President and Chief Financial Officer

Yes.

Stephen O'Neil -Hilliard Lyons

Okay. Can you comment on the HomeBuyer's performance withinthe domestic business?

Jon Singer - SeniorVice President and Chief Financial Officer

In the quarter or for the year?

Stephen O'Neil -Hilliard Lyons

For the quarter. I think you said it was strong for theyear.

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah, it was flat. I think if you remember, in last year'sfourth quarter call, we had picked up a significant new account. And so that --the benefit of that was recognized in last year's fourth quarter, and then thefull year impact annualized to end it around the beginning of the third quarterthis year. So we were essentially flat. Also contributing to that as theHomeBuyer's Preferred was also highly correlated to the housing market.

Stephen O'Neil -Hilliard Lyons

Okay. Also, can you give me an idea of how much theAustralian joint venture adds to quarterly revenues?

Jon Singer - SeniorVice President and Chief Financial Officer

Quarterly revenues, it adds -- I think it's approximately$200,000.

Stephen O'Neil -Hilliard Lyons

Okay. And you referred to Southeast Asia and Latin America,are you selling to Southeast Asia through the Australian joint venture, andthen how are you selling in Latin America?

Jon Singer - SeniorVice President and Chief Financial Officer

We are selling into Southeast Asia through really acombination of the Australian venture, Nagase-Landauer, and a little bit China.And so we've kind of -- we've divided up the region based upon who we believehas the strongest relationships or who is closest and so. It's really comingthrough a combination of all of the partnerships that we have in that region,and it's been pretty effective in that regard.

Latin America, we're primarily servicing through the SAPRAarrangement, although in Chile,Peru, we have a distributionpartners, who has been a longstanding partner who services Peru.

Stephen O'Neil -Hilliard Lyons

Okay. Any new nuclear contracts added during the quarter?

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah. We added two new contracts, and so we've got -- well,I'll let Bill give you this.

Bill Saxelby -President and Chief Executive Officer

Yeah. We have 104 license plants in US. We were at 26 deep,we're now at 28 out of 64 locations and sites. We were at 17, we're now at 20.

Stephen O'Neil -Hilliard Lyons

Okay. And then, finally, the $2.1 million you referred to,how much of that -- how much or will all of that drop off next year, but then,I guess, will there be a higher deprecation expense offsetting some of thelesser spending?

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah. If you look, the project had a cost of $9 million to$10 million with expenses being $2 million to $3 million, okay. So, we spend --the expense portion was $2.1 million. We'll probably spend somewhere in thevicinity of another million from an expense perspective going into, really, tothe first half of next year.

And then, the increment -- then the project will start todepreciate when we go wide. I know it's not going to be a one and the spendingwill decline when we begin to depreciate the project. We're going to have about-- I'm just kind of doing a reverse math -- let's just call it around $7million of capital with the five-year useful light. Now, there's pieces, parts ofthat that are going to be different based on licensing and what not, but ingeneral that gives you pretty good sense.

Stephen O'Neil -Hilliard Lyons

Great. Thank you. I'll get back in the queue.

Operator

Thank you. Our next question comes from the line of YuriFeldman with Sagard Capital. Please go ahead.

Yuri Feldman - SagardCapital

Hi, guys. I was wondering if you could maybe talk about howmany badge orders you have for your major markets and how that has grown overthe last year?

Bill Saxelby -President and Chief Executive Officer

Yuri, those aren't numbers that we've traditionallydisclosed or talked about on the call.

Yuri Feldman - SagardCapital

Okay. Maybe just at a high level, can you talk about thetotal? I think it was about $1.4 million or $1.5 million last year.

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah. And I think, in general, I mean when you're talking ofthat high level, the range of badge users are about the same. I don't think --that's our badge service users. What that number doesn't capture is the InLightbadges that we're selling. And Yuri, I don't have that number, and that'sreally where we're seeing the growth in what I would call badge units really inthe globalization of InLight.

Yuri Feldman - SagardCapital

Okay. Thank you.

Operator

Thank you. Our next question comes from the line of JasonRodgers with Great Lakes Review. Please go ahead.

Jason Rodgers - Great Lakes Review

Hello. I had a few questions on -- starting out, do you havethe InLight sales total for fiscal '07?

Jon Singer - SeniorVice President and Chief Financial Officer

We haven’t been breaking that out, Jason, separately, justbecause it's -- you know, it's -- well we just -- how am I going to explain. Wejust haven’t been breaking that out separately.

Jason Rodgers - Great Lakes Review

Okay. And were there any price increases at all in fiscal'07?

Jon Singer - SeniorVice President and Chief Financial Officer

There were none.

Jason Rodgers - Great Lakes Review

Okay. And what were international revenues for the year as apercent of sales?

Jon Singer - SeniorVice President and Chief Financial Officer

Just about 20. Yes, just about 20 as an approximation. Giveme a second. I can give you an exact number.

Jason Rodgers - Great Lakes Review

And while you're checking that out, do you have the Nagase-Landauersales for the year, the net income?

Jon Singer - SeniorVice President and Chief Financial Officer

Total?

Jason Rodgers - Great Lakes Review

Yes.

Jon Singer - SeniorVice President and Chief Financial Officer

I may have to follow-up. Do you have this total.

Bill Saxelby -President and Chief Executive Officer

$14 million revenue --.

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah, $14 million in revenue

Bill Saxelby -President and Chief Executive Officer

Consolidated.

Jon Singer - SeniorVice President and Chief Financial Officer

On consolidated. And the net income was 2.8.

Jason Rodgers - Great Lakes Review

Okay. I think Greg had some questions as well.

Greg Halter - Great Lakes Review

Hello, good afternoon.

Jon Singer - SeniorVice President and Chief Financial Officer

Hey, Greg, how are you doing?

Greg Halter - Great Lakes Review

Okay. There is a frog in my throat. Relative to yourtax-rate, I know you had talked about it possibly being able to come down withmore international, and we're looking at about 37% tax rate for fiscal '08. Isthat about where you think you'll fall out?

Jon Singer - SeniorVice President and Chief Financial Officer

I think it's going to be closer to 37.3 to 37.5. You know,the 37 is a rate this year that incorporates some adjustments from some auditsthat are going to be nonrecurring. So -- but when you look at, you know, kindof what we are seeing as the effective tax rate, it's up 37 through to 37.5.

Greg Halter - Great Lakes Review

All right. And on the InLight, I know you don't give out therevenue, but can you give you some indication on what percentage it was up on ayear-over-year basis?

Jon Singer - SeniorVice President and Chief Financial Officer

The domestic InLight was up about 26%.

Greg Halter - Great Lakes Review

Okay. And -- sorry.

Jon Singer - SeniorVice President and Chief Financial Officer

Yes.

Greg Halter - Great Lakes Review

Relative to competition, any changes that you couldn'tcomment on relative to the domestic industry at least?

Jon Singer - SeniorVice President and Chief Financial Officer

You know, there is no major changes. I mean as you areaware, we've got a couple of good competitors out in the marketplace. Theycontinue to be good competitors in the marketplace. But I don't think we'veseen any behavior that would indicate change from what we have experienced inthe past history.

Bill Saxelby - Presidentand Chief Executive Officer

Greg, I would add to that. I would not say that we've seenany real significant changes this year.

Greg Halter - Great Lakes Review

Okay, Bill. Thanks. And I know you made the comment about noincrease in price domestically in '07. I just wonder what the outlook lookslike in that regard going forward. Is that something you are looking to forgoas you do some of these other things you have been working on or what are yourthoughts there?

Bill Saxelby -President and Chief Executive Officer

Well, actually, Greg, just a comment there. I mean this iskind of -- this is actually the second year in a row that we've made thedecision not to consciously raise price. Although, we did see -- if youremember, we did see some benefit in '05 price increase that we saw, a partialyear impact in '06. There is no planned -- or in '07. Excuse me. But there isno planned increase this year.

Now, I will be candid and say that we are obviouslyevaluating our own increased costs that we have, be it -- there is an exampleof fuel surcharges, et cetera. But we've been able to increase our marginswhile also managing those costs. And again, what we are trying to really focusthe organization on is to be able to position ourselves for organic growth asopposed to growing the business, which we have historically been doing on alarge strength of pricing increases.

So, that thing that we would not rule out any priceincreases, as we start to look at supplier vendor management, but that is weplanned a wholesale across the board price increase this year.

Greg Halter - Great Lakes Review

Okay. You mean no wholesale price increase across the -- forthe year, correct?

Bill Saxelby -President and Chief Executive Officer

Correct.

Greg Halter - Great Lakes Review

Okay. And then just one last technical item on that. Whatwas your capital spending for '07 and your depreciation and amortization?

Jon Singer - SeniorVice President and Chief Financial Officer

CapEx was $7.4 million total and D&A was $7.7 million.

Greg Halter - Great Lakes Review

All right. Great. Thank you very much.

Jon Singer - SeniorVice President and Chief Financial Officer

And just -- and international was 22%.

Greg Halter - Great Lakes Review

Okay. Thank you very much.

Operator

Thank you. The next question comes from the line of [TomLamb with Weybosset Research]. Please go ahead.

Tom Lamb - WeybossetResearch

Good afternoon, gentlemen. Could you, to the extent you can,maybe tell us how far along you are with exploring the military sales optionand what sort of your technologies, perhaps - give us a sense of where you areon that and --?

Bill Saxelby - President and Chief Executive Officer

Sure, Tom. Bill Saxelby.I would say that the way to characterize this first of all is we've hadsome very significant adoption of our OSL technology in a couple of othercountries candidly from the military perspective, and the company has had along-standing experience with the US military.

I think to really go into that in much more detail wouldprobably not be appropriate, but what I would say is, is that that we'reexploring the opportunity to take a look at transitioning different parts ofthe military to our OSL proprietary technology. And I think we probably wouldwant to leave it really kind of at that.

Tom Lamb - WeybossetResearch

I understand. And you may have mentioned this, but whatimpact did foreign exchange have on your revenues and maybe net income?

Jon Singer - SeniorVice President and Chief Financial Officer

It contributed about $1.3 million to the revenue growth. Andon the operating income side, you know, it would essentially has the sameimpact on revenues as it does on cost. And so, it just dropped down at aboutthe same ratio.

Tom Lamb - WeybossetResearch

Okay. Well, great year. And we are looking forward to agreat year in '08 too.

Bill Saxelby - President and Chief Executive Officer

Thanks very much, Tom. We appreciate your support.

Tom Lamb - WeybossetResearch

You are welcome.

Operator

Thank you. And we have a follow-up question from Stephen O'Neil.Please go ahead.

Stephen O'Neil -- Hilliard Lyons

Hilliard. I neglected to ask ifyou could break down the other income into the Nagase-Landauer equity income and infrastructure.

Jon Singer - SeniorVice President and Chief Financial Officer

Yes, I can.

Bill Saxelby - President and Chief Executive Officer

Yeah, that's right in --.

Stephen O'Neil -- Hilliard Lyons

For the current fourth quarter and for the year-ago quarter.

Jon Singer - Senior VicePresident and Chief Financial Officer

Yeah, it's above.

Stephen O'Neil -- Hilliard Lyons

You or myself?

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah. The equity earnings was $1.4 million. So, the interestin other income then was about $800,000 for the year. And then, in the quarter,the equity earnings was 301 and the interest in other was about 225.

Stephen O'Neil -- Hilliard Lyons

And the year-ago figures?

Jon Singer - SeniorVice President and Chief Financial Officer

The year ago, it was --.

Stephen O'Neil -- Hilliard Lyons

Looking it up.

Jon Singer - SeniorVice President and Chief Financial Officer

Yeah, for the quarter, equity earnings a year ago was 42.

Stephen O'Neil -- Hilliard Lyons

Okay.

Jon Singer - SeniorVice President and Chief Financial Officer

Yes, because we had -- as I indicated in the script, we hada balance sheet reconciliation adjustment that we got hit with right at the endof last year. It was about $227,000.

Stephen O'Neil -- Hilliard Lyons

Great. Thank you very much.

Operator

Thank you. Ladies and gentlemen if there are any additionalquestion, please press "*, 1." at this time. As a reminder, if you'reon a speakerphone, you'll need to pick up a handset before pressing "*1".

Bill Saxelby -President and Chief Executive Officer

Okay. Operator, if there are no further questions, we'llfollow to wrap.

Operator

Okay. There are no further questions.

Bill Saxelby -President and Chief Executive Officer

Great. We look forward to speaking with everybody in thenext quarter. Thanks for your interest.

Operator

Thank you, ladies and gentlemen. That concludes today'sconference call. If you'd like to listen to a replay of today's call, pleasedial 303-590-3000 or 800-405-2236, enter the passcode, 11102874. Once again,that is 303-590-3000 or 800-405-2236, enter the passcode, 11102874.

Thank you for your participation. You may now disconnect.

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Source: Landauer, Inc F4Q07 (Qtr End 09/30/07) Earnings Call Transcript
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