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:

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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LAB RESEARCH INC.

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