LAB Research announces its 2009 first quarter financial results
Company restores positive Adjusted EBITDA and cut losses substantially as
active backlog jumps 25%
www.labresearch.com
Toronto Stock Exchange Symbol: LRI
LAVAL, QC, May 14 /CNW Telbec/ - LAB Research Inc. ("LRI" or "LAB
Research" or the "Company") (TSX: LRI), a global Canadian-based non-clinical
contract research organization, today announced its 2009 first quarter
financial results.
This press release contains forward-looking information, investors are
invited to read the cautionary language contained under the section "Forward
Looking Statements" below. We also use certain non- Generally Accepted
Accounting Principles ("GAAP") measures, including Book to Bill Ratio,
Backlog, Active Backlog, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted net loss and Gross Margin as financial indicators. The Company
believes such measures provide meaningful information on the Company's
performance and operating results. However, readers are cautioned that
non-GAAP measures do not have a standardized meaning under GAAP and they are
thus, unlikely to be comparables to similar measures presented by other
issuers.
2009 First Quarter Financial Highlights
- Revenues of $13.0 million, up 1% compared to $12.8 million in the
last quarter of 2008, but down 16 % compared to $15.4 million in the
first quarter of 2008;
- Adjusted EBITDA of $0.8 million, up $1.8 million compared to the last
quarter of 2008, but down from $2.5 million in the first quarter of
2008;
- Net loss of $1.4 million before foreign exchange loss, down 75% or
$4.4 million from $5.8 million in the last quarter of 2008, and
compared to net earnings of $0.5 million before foreign exchange gain
in the first quarter of 2008;
- Loss per share "basic" was $0.16, compared to a net loss of $0.37 for
the last quarter of 2008 and to earnings per share of $0.03 in the
first quarter of 2008; and
- 25% increase in active backlog from $12.6 million to $16.0 million
between December 31, 2008 and March 31, 2009.
Other 2009 First Quarter and subsequent highlights
- $7.5 million loan secured from Investissement Québec ("IQ");
- Settlement of outstanding sponsor litigation;
- Nomination of new Chairman to the Board of Directors.
"Our first quarter 2009 results have benefited significantly from the
various cost control measures implemented late last year. Our selling, general
and administrative expenses, Gross Margin, EBITDA and Adjusted EBITDA have all
improved when compared to the fourth quarter of 2008 figures. Improvements
come from swift management actions taken in 2008 to adjust our overhead
expenses to match the true activity level and adapt our Company to the
challenging economic climate." said Mr. Luc Mainville, President and CEO of
LAB Research. "Our backlog remains strong with Hungary showing major progress
while our active backlog, which is a direct indicator of projected revenues,
increased by 25% from $12.6 million at December 31, 2008 to $16.0 million at
March 31, 2009." added Mr. Mainville.
2009 First quarter financial results
LAB Research posted revenues of $13.0 million for the first quarter of
2009, up 1.2% compared to the $12.8 million of the fourth quarter of 2008 but,
down 15.8% compared to the $15.4 million generated in the first quarter of
2008.
Our Canadian operations ("LAB Canada") posted revenues of $5.8 million
during the first quarter of 2009, down 7.4% compared to the $6.2 million in
the same 2008 period, and down 3.8% compared to the $6.1 million achieved in
the fourth quarter of 2008. The respective revenue decreases are attributable
to slower than usual study starts.
Our Danish operations ("LAB Denmark") posted revenues of $6.1 million for
the first quarter of 2009, up 7.1% compared to the fourth quarter of 2008, but
down 22.8% compared to the record $7.8 million achieved during the first
quarter of 2008. The revenue decline between the first quarters of 2008 and
2009 is attributable to lower than expected contract sales during the last
quarter of 2008 while the revenue increase between the fourth quarter of 2008
and the first quarter of 2009 is attributable to a better study mix.
Our Hungarian operations ("LAB Hungary") posted revenues of $1.1 million
for the first quarter of 2009, down 21.3% compared to the $1.4 million
generated in the same 2008 period and similar to the revenues generated in the
fourth quarter of 2008. The revenue decrease between the first quarters of
2008 and 2009 is primarily due lower demand for studies typically performed
for pharmaceutical clients. However, our backlog and active backlog have
improved by 25.6% and by 72.0%, respectively since the recertification of the
site in October 2008. This is attributable to increased pharma-like contract
signings coupled with the signing of the new Media Services Japanese agreement
and the new European Business Development platform which have started
translating into the signing of a higher number of new contracts to be
performed in 2009.
The Company's gross margin was 26.0% for the first quarter of 2009
compared to 32.8% for the same period in 2008 and 22.2 % in the fourth quarter
of 2008. The gross margin of all operating units decreased between the first
quarters of 2009 and 2008 as a direct consequence of the lower selling prices
in this recent competitive environment and the high proportion of fixed costs.
However, the gross margin increased in Denmark and Hungary between the fourth
quarter of 2008 and the first quarter of 2009 following the restructuring and
the layoffs performed in the second half of 2008 but it decreased in Canada
due to the additional fixed costs related to the building expansion completed
late 2008. Cost control measures implemented over the last 6 months were
necessary to re-align our expense level to a much lower than anticipated
activity level.
Selling, general and administrative expenses ("SG&A") were $2.5 million
for the first quarter of 2009, compared to $2.4 million for the same 2008
period, representing 19.2% and 15.8% of our revenues respectively. The control
of our SG&A expenses shows our commitment to provide maximum financial
benefits from operational scale-ups and should prove to be very profitable in
coming periods when contract signings pick up again.
Earnings before Interest, Income Taxes, Depreciation and Amortization
("EBITDA") for the first quarter of 2009 stood at negative $0.7 million,
compared to positive $2.6 million for the same 2008 period and negative $3.9
million for the fourth quarter of 2008. Our Adjusted EBITDA, excluding a
foreign exchange loss amounted to positive $0.8 million compared to positive
$2.5 million for the same 2008 period and negative $0.9 million for the fourth
quarter of 2008 excluding foreign exchange loss, restructuration charges and
settlement of lawsuit, representing 6.0%, 16.5% and (7.4%) of revenues,
respectively. The Adjusted EBITDA margins increased in Hungary between the
first quarters of 2008 and 2009 while margins reduced in Canada and Denmark as
increased expansion-related fixed costs have not been offset by increased
revenues. The Adjusted EBITDA increased between the fourth quarter of 2008 and
the first quarter of 2009 by 17.2% in Canada (from positive $1.0 million to
positive $1.2 million), 1,336.2% in Denmark (from negative $0.05 million to
positive $0.6 million) and 57.8% in Hungary (from negative $0.9 million to
negative $0.4 million). The improvements are attributable mainly to the cost
control measures and lay offs implemented in late 2008.
Our amortization expense was $1.6 million for the first quarter of 2009,
compared to $1.2 million for the same 2008 period. This increase is due to
additional amortization charges resulting from the completion of the Canadian
building expansion project in 2008.
Our net interest expense was $0.7 million for the first quarter of 2009,
compared to $0.5 million for the same 2008 period. This increase is primarily
due to the additional debt incurred in connection with the building expansions
in Canada and in Denmark.
We recognized a foreign exchange loss of $1.5 million for the first
quarter of 2009, compared to a nominal gain for the same 2008 period. The
increase in foreign exchange expense occurred mainly in Hungary where the
Hungarian forint depreciated relative to the Euro.
The net loss for the first quarter of 2009 amounted to $3.0 million
compared to net earnings of $0.5 million for the same 2008 period and to
adjusted net loss (net loss excluding restructuring charges, settlement of
lawsuit and write-off of deferred financing fees) of $4.4 million for the
fourth quarter of 2008. The loss per share amounted to $0.16 ($0.16 per share
on a diluted basis) on the basis of 18,087,720 weighted average shares
outstanding (basic) compared to earnings per share of $0.03 ($0.03 per share
on a diluted basis) for the same 2008 period on the basis of 18,050,714
weighted average shares outstanding (basic).
As at March 31, 2009, the Company was in an overdraft bank position of
$1.4 million, compared to a cash position of $0.1 million as at December 31,
2008. The $7.5 million loan secured in April 2009 and the combination of this
loan with a hold on new expansion related capital expenditures and improvement
in each of our site's profitability will improve the cash situation and help
the Company meet its financial obligations of the coming year.
Even though the Company secured $7.5 million with IQ in April 2009, the
readers should be cautioned about the appropriateness of the use of the going
concern assumption because the Company incurred losses of $3.0 and $6.6
million for the three months ended March 31, 2009 and the year ended December
31, 2008, respectively. In addition, as at March 31, 2009, LAB Canada was not
in compliance with its bank financial ratio covenants on its building and
equipment loans. Considering the bank's right to demand repayment of the
loans, these loans were classified as current liabilities. Therefore, as at
March 31, 2009, the current liabilities of the Company exceeded current assets
by $45.3 million and the Company had capital commitments of $2.5 million. The
Canadian bank has not called the loans but if it exercises its right, the
Company will have to raise sufficient equity to meet its obligations. The
Company is actively negotiating with its Canadian banker.
2009 Outlook
"The first quarter has set the stage for the rest of 2009. Our commercial
efforts will benefit from our stronger cash position and the elimination of
the litigation. We have improved our liquidity situation through the recently
secured $7.5 million loan from IQ and show strong improvements in our
respective sites profitability and overall activity. As our cost-cutting
initiatives continue to show their benefits and our active backlog returns
closer to historical levels, we believe that the coming quarters will
demonstrate further improvements in our profitability and liquidities."
mentioned Mr. Luc Mainville, President and CEO of LAB Research.
Forward-Looking Statements
Certain statements in this document are forward looking and prospective.
By their nature, forward-looking statements require us to make assumptions and
are subject to inherent risks and uncertainties. There is significant risk
that predictions and other forward-looking statements will not prove to be
accurate. Readers of this document are cautioned not to place undue reliance
on our forward-looking statements as a number of factors could cause future
results, conditions, actions, or events to differ materially from the
operating target, expectations, estimates, or intentions expressed in the
forward-looking statements. For additional information on these and other
factors, see the reports filed by LAB Research with Canadian securities
regulators.
Forward-looking statements reflect our current views with respect to
future events and are based upon what we believe are reasonable assumptions
and subject to risks and uncertainties. These forward-looking statements
represent our estimates and assumptions only as at the date of this document.
We undertake no obligation and do not intend to update or revise these
forward-looking statements, unless required by law.
About LAB Research Inc.:
LAB Research is a Canadian global non-clinical contract research
organization that provides contract research services to the pharmaceutical,
biotechnology, agro-chemical, petro-chemical and industrial markets. LAB
Research supports the development of its customers' products from three
state-of-the-art facilities located in Canada, Denmark and Hungary.
LAB Research's shares trade on The Toronto Stock Exchange ("TSX") under
the symbol "LRI", with 18.1 million shares outstanding.
This news release contains certain forward-looking statements that reflect
the current views and/or expectations of LAB Research Inc. with respect to its
performance, business and future events. Such statements are subject to a
number of risks, uncertainties and assumptions. Actual results and events may
vary significantly.
Non-GAAP Measures - Book to Bill ratio, Backlog, Active Backlog, Earnings
before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"),
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net loss and Gross
margin
We use certain non-GAAP measures, including Book to Bill ratio, Backlog,
Active Backlog, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net
loss, and Gross margin as financial performance indicators. The Company
believes such measures provide meaningful information on its performance and
operating results. However, readers are cautioned that non-GAAP measures do
not have a standardized meaning under GAAP and, thus, they are unlikely to be
comparable to similar measures presented by other issuers.
(a) EBITDA
The following table reconciles our net (loss) earnings to our EBITDA and
our Adjusted EBITDA for the three-months periods ended March 31, 2009 and 2008
and December 31, 2008.
Three months
ended
---------------------------
March December
31 31
----------------- --------
2009 2008 2008
------- ------- --------
(in thousands of dollars) $ $ $
Net (loss) earnings (2,961) 547 (6,723)
Adjustments for:
Income taxes (Recovery) (86) 215 (259)
Interest expense on long-term debt 713 580 1,421
Amortization 1,598 1,235 1,620
------- ------- --------
EBITDA (736) 2,577 (3,941)
Foreign exchange 1,512 (33) 887
Restructuring charges - - 1,032
Settlement of lawsuit - - 1,075
------- ------- --------
Adjusted EBITDA 776 2,544 (947)
------- ------- --------
------- ------- --------
Adjusted EBITDA margin % 6.0% 16.5% -7.4%
------- ------- --------
------- ------- --------
(b) Gross margin
Gross margin refers to revenues less direct costs. Direct costs do not
include depreciation expense of assets used in our direct operations.
The following table presents our gross margins for the three-months
periods ended March 31, 2009 and 2008 and December 31, 2008.
Three months
ended
---------------------------
March December
31 31
----------------- --------
2009 2008 2008
------- ------- --------
(in thousands of dollars) $ $ $
Revenues 12,987 15,429 12,839
Direct costs 9,605 10,365 9,984
------- ------- --------
Gross margin 3,382 5,064 2,855
------- ------- --------
------- ------- --------
Gross margin% 26.0% 32.8% 22.2%
------- ------- --------
------- ------- --------
LAB RESEARCH INC.
Consolidated Balance Sheets
(Unaudited)
March 31, 2009 and December 31, 2008
(in thousands of Canadian dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
March 31, December 31,
2009 2008
-------------------------------------------------------------------------
(audited)
Assets
Current assets:
Cash and cash equivalents $ - $ 102
Accounts and other receivables 8,737 10,011
Work in progress 3,339 3,511
Income taxes receivable 2,050 1,473
Prepaid expenses 1,500 1,410
Future income taxes 3,128 3,083
-----------------------------------------------------------------------
18,754 19,590
Property and equipment 82,062 85,607
Intangible assets 1,672 1,845
Other assets 7,911 6,916
Future income taxes 1,567 1,620
-------------------------------------------------------------------------
$ 111,966 $ 115,578
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft $ 1,412 $ -
Accounts payable and accrued liabilities 10,774 13,493
Building expansions related accounts
payable 967 850
Holdback payable 1,750 1,750
Deferred revenue 9,835 9,180
Current portion of long-term debt 38,556 39,416
Deferred gain on sale of equipment 14 -
Future income taxes 710 720
-----------------------------------------------------------------------
64,018 65,409
Other debt - 140
Deferred gain on sale of equipment 55 -
Long-term debt 18,299 17,264
Future income taxes 2,463 2,529
Shareholders' equity:
Share capital 63,961 63,951
Warrants 140 -
Additional paid-in capital 1,190 1,077
Accumulated other comprehensive gain (loss) 275 682
Deficit (38,435) (35,474)
-----------------------------------------------------------------------
(38,160) (34,792)
-----------------------------------------------------------------------
27,131 30,236
-------------------------------------------------------------------------
$ 111,966 $ 115,578
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LAB RESEARCH INC.
Consolidated Statements of Earnings
(Unaudited)
Three-month periods ended March 31, 2009 and 2008
(in thousands of Canadian dollars, except per share and share data)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Revenues $ 12,987 $ 15,429
Expenses:
Direct costs 9,605 10,365
Selling, general and administrative 2,493 2,439
Stock-based compensation 113 117
Amortization of property and equipment 1,455 1,103
Amortization of intangible assets 143 132
Interest, net 713 544
Foreign exchange 1,512 (33)
-------------------------------------------------------------------------
16,034 14,667
-------------------------------------------------------------------------
(Loss) earnings before income taxes (3,047) 762
(Recovery) provision for income taxes (86) 215
-------------------------------------------------------------------------
Net (loss) earnings $ (2,961) $ 547
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Loss) earnings per share:
Basic $ (0.16) $ 0.03
Diluted (0.16) 0.03
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of outstanding
shares:
Basic 18,087,720 18,050,714
Effect of dilutive options - 395,144
-------------------------------------------------------------------------
Diluted 18,087,720 18,445,858
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LAB RESEARCH INC.
Consolidated Statements of Cash Flows
(Unaudited)
Three-month periods ended March 31, 2009 and 2008
(in thousands of Canadian dollars)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Cash flows (used in) from
operating activities:
Net (loss) earnings $ (2,961) $ 547
Adjustments for:
Amortization of property and equipment 1,455 1,103
Amortization of intangible assets 143 132
Unrealized loss (gain) on foreign
exchange 441 (20)
Stock-based compensation 113 117
Future income taxes (38) (104)
Other 18 9
Net changes in non-cash balances related
to operations (1,592) (1,295)
-----------------------------------------------------------------------
(2,421) 489
Cash flows (used in) from
financing activities:
Proceeds from issuance of shares 10 -
Proceeds from the sale and leaseback
of equipment 1,188 -
Proceeds from issuance of long-term debt 51 53
Repayment of long-term debt (823) (420)
Repayment of capital leases (176) (126)
Increase in bank overdraft 1,412 -
-------------------------------------------------------------------------
1,662 (493)
Cash flows (used in) from
investing activities:
Additions to property and equipment (1,168) (3,366)
Proceeds from a grant 1,000 -
Other (32) (14)
-----------------------------------------------------------------------
(200) (3,380)
Effect of exchange rate changes on cash
and cash equivalents denominated in
foreign currencies 857 210
-------------------------------------------------------------------------
Net decrease in cash and cash equivalents (102) (3,174)
Cash and cash equivalents,
beginning of period 102 6,825
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ - $ 3,651
-------------------------------------------------------------------------
-------------------------------------------------------------------------
%SEDAR: 00023798EF
For further information: visit LAB Research's website at
www.labresearch.com, or contact: Luc Mainville, Chief Executive Officer, (450)
973-2240 (ext. 1206), mainvillel@labresearch.com; Frédéric Dumais, Partner,
Jasmin-Dumais Financial Communications, (514) 862-1251, fred@comjamais.com
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