LAB Research announces its 2009 second quarter financial results



    
       Effective operational and cost controls initiatives help restore
                                profitability

        Restructuring of the Canadian bank facilities and $23 million
         financing initiatives help strengthen the financial position

    www.labresearch.com
    Toronto Stock Exchange Symbol: LRI
    

    LAVAL, QC, Aug. 14 /CNW Telbec/ - LAB Research Inc. ("LRI", "LAB" or "LAB
Research" or the "Company") (TSX: LRI), a global Canadian-based non-clinical
contract research organization, today announced its 2009 second quarter
financial results.
    This press release contains forward-looking information; investors are
cautioned that the statements are based on current information and assumptions
and that actual outcome may vary.
    This press release refers to non-Generally Accepted Accounting Principles
("GAAP") measures, including Earnings before Interest, Income Taxes,
Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, Gross margin,
Backlog, Active Backlog and Book to Bill ratio 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. The backlog represents the value of client contracts for services
that have not yet been performed. Active backlog represents the value of
client contracts for services that have not yet been performed but that have
been initiated (active). The book to bill ratio refers to the value of signed
contracts (excluding any cancellations) in a particular period divided by the
net revenue reported during the same period.

    2009 Second Quarter Financial Highlights

    
    - Revenues of $13.9 million, up 7% compared to $ 13.0 million in the
      first quarter of 2009, but down 14 % compared to $16.1 million in the
      second quarter of 2008;
    - EBITDA of $2.4 million, up $3.1 million compared to the first quarter
      of 2009 and up $6.3 million compared to the last quarter of 2008 but
      down 19 % compared to $3.0 million in the second quarter of 2008;
    - Adjusted EBITDA of $1.3 million, up $0.6 million compared to
      $0.8 million in the first quarter of 2009 and up $2.3 million compared
      to the last quarter of 2008, but down from $2.4 million in the second
      quarter of 2008;
    - Net earnings of $0.3 million, up $3.3 million from a loss of $3.0
      million in the first quarter of 2009 and up $7.0 million from the last
      quarter of 2008 but down $0.4 million compared to net earnings of
      $0.7 million in the second quarter of 2008;
    - Earnings per share "basic" was $0.02, compared to a net loss per share
      of $0.16 for the first quarter of 2009 and a net loss per share of
      $0.37 for the last quarter of 2008 and to earnings per share of $0.04
      in the second quarter of 2008; and
    - Changes in sponsors outsourcing practices and market concerns led to a
      19% decrease in backlog from $34.5 million to $28.0 million and 26%
      decrease in active backlog from $16.0 million to $11.8 million between
      March 31, 2009 and June 30, 2009, respectively.
    

    Other 2009 Second Quarter and subsequent highlights

    
    - Company receives $5.0 million residual loan from Investissement Québec;
    - Company renegotiates the Canadian banking facilities;
    - $15.6 million Rights Offering preliminary prospectus filed; and
    - $7.5 million Rights Offering commitment from Solidarity Fund QFL
      secured.
    

    "Our second quarter 2009 performance continues to demonstrate the early
benefits of market expansion initiatives and cost-control measures implemented
over the previous quarters, with additional cost savings still to be expected
in the months ahead. At the start of the year, LRI's management committed to
swiftly address issues that were affecting both the capital and commercial
market perception of our Company. We are proud to have delivered on this
commitment. It is important to note that the Company has delivered a good
performance notwithstanding the negative perception regarding its liquidity
levels and banking relationship in Canada. Clearly, the performance of the
Canadian operations has facilitated the renegotiation of our Canadian banking
facilities. The return to profitability of LRI, and continued progress made in
Hungary will undoubtedly send a strong and positive signal to both our clients
and financial markets regarding the financial health of our Company." said Mr.
Luc Mainville, President and CEO of LAB Research.

    2009 second quarter financial results

    LAB Research posted revenues of $13.9 million for the second quarter of
2009, up 7% compared to the $13.0 million in the first quarter of 2009 but,
down 14% compared to the $16.1 million generated in the second quarter of
2008. The increase in overall revenues between the second and first quarters
of 2009 is a direct result of the expansion in Canada and the recovery of our
Hungarian site ("LAB Hungary"). The decrease between the second quarters 2009
and 2008 is a result of the global economic downturn and challenging financial
environment.
    Our Canadian site ("LAB Canada") posted revenues of $6.8 million during
the second quarter of 2009, up 16% compared to the $5.8 million achieved in
the first quarter of 2009, and down 3% compared to the $7.0 million achieved
in the second quarter of 2008. The increase in revenue is a result of numerous
studies previously delayed which started in the second quarter of 2009.
    Our Danish site ("LAB Denmark") posted revenues of $5.6 million for the
second quarter of 2009, down 8% compared to the $6.1 million generated in the
first quarter of 2009 and down 29% compared to the $7.8 million achieved
during the second quarter of 2008. The revenue declines are attributable to
lower than expected contract signings in the last quarter of 2008 and first
quarter of 2009 and to stronger competition from UK based Contract Research
Organizations (CRO) benefiting from a weaker currency compared to the Euro and
Danish kroner.
    LAB Hungary posted revenues of $1.5 million for the second quarter of
2009, up 39% compared to the $1.1 million generated in the first quarter of
2009, and up 20 % compared to the $1.3 million achieved in the second quarter
of 2008. The revenue increase is attributable to higher contract signings from
Japanese clients as a result of the Media Services agreement, our Business
Development platform and site recertification that occurred in late 2008.
    The Company's gross margin was 30% for the second quarter of 2009
compared to 26% in the first quarter of 2009 and 33% for the second quarter of
2008. The gross margin of LAB Canada and LAB Hungary increased between the
second and first quarter of 2009 as a result of higher revenues even though
the environment was highly competitive. The gross margin of LAB Denmark
decreased due to lower revenues as explained above.
    Selling, general and administrative expenses have remained stable at $2.6
million for the second quarter of 2009, compared to $2.5 million in the first
quarter of 2009 and $2.7 million for the second quarter of 2008, representing
19% of revenues for the first and second quarters of 2009 and 17% of the 2008
second quarter revenues.
    EBITDA stood at $2.4 million positive for the second quarter of 2009
compared to $0.7 million negative for the first quarter of 2009, a $3.1
million improvement, and compared to $3.0 million positive for the second
quarter of 2008. Our Adjusted EBITDA, excluding foreign exchange and
restructuring charges, amounted to $1.3 million compared to $0.8 million for
the first quarter of 2009 and $2.4 million for the second quarter of 2008,
representing 10%, 6% and 15% of revenues, respectively. The improvements in
Canada and Hungary are attributable to revenue increases while the decrease in
Denmark is due to lower revenues.
    Our amortization expense was $1.6 million for the second quarter of 2009,
compared to $1.3 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 $0.6 million for the second quarter of 2009,
which is consistent with the same 2008 period. While the debt level
substantially increased between 2009 and 2008, the interest rates decreased
keeping the interest expense to a similar level.
    We recognized a foreign exchange gain of $1.1 million compared to a gain
of $0.6 million for the same 2008 period. The increase in foreign exchange
gain occurred mainly in Hungary where the Hungarian forint appreciated
relative to the Euro.
    The provision for income taxes stood at $0.1 million recovery for the
second quarter of 2009, compared to a $0.3 million expense for the same 2008
period.
    The net earnings for the second quarter of 2009 amounted to $0.3 million
compared to a net loss of $3.0 million in the first quarter of 2009 and net
earnings of $0.7 million for the second quarter of 2008. The earnings per
share amounted to $0.02 ($0.02 per share on a diluted basis) on the basis of
18,089,360 weighted average shares outstanding compared to earnings per share
of $0.04 ($0.04 per share on a diluted basis) for the same 2008 period on the
basis of 18,062,526 weighted average shares outstanding (basic) and a loss per
share of $0.16 ($0.16 per share on a diluted basis) for the first quarter of
2009 on the basis of 18,087,720 weighted average shares outstanding (basic).
    As at June 30, 2009, the Company was in an overdraft bank position of
$1.1 million, compared to $1.4 million as at March 31, 2009 and to a cash
position of $0.1 million as at December 31, 2008. The proceeds from the
Investissement Québec loan and the Rights Offering will strengthen our
liquidity situation and combined with our improving operational results will
support the Company in meeting its financial obligations.
    As at June 30, 2009, our backlog stood at $28.0 million compared to $34.5
million as at March 31, 2009, still representing based on the first half of
2009 average revenues, approximately 6 months of revenues for LAB Canada, 5
months for LAB Denmark and 13 months for LAB Hungary. Despite strong contract
quotation activity, the active backlog decreased from $16.0 million to $11.8
million due to lower conversion rates linked to changes in sponsors
outsourcing practices and negative perceptions regarding the Canadian banking
relationship and the liquidity position of the Company.

    2009 Outlook

    During the last nine months, the Company had to address the economic
downturn, excess capacity in our sector, the financial covenants issue with
our Canadian banker and our limited liquidities, all of which negatively
impacted our ability to maintain our historical level of contract sales. In
response to these events, the Company reacted proactively by proceeding with
1) a restructuration of its European operations and implemented cost costing
measures in all operating units to rapidly improve its financial performance;
2) restructured its Canadian debt facilities, subject to the closing of the
Rights Offering; 3) secured a $7.5 million loan with a government agency; 4)
filed a prospectus for a Right Offering which, if fully subscribed, could
raise up to $15.6 million; 5) doubled the number of business development
professionals actively promoting our expanded services offering and capacity;
and 6) subject to certain conditions, secured a $7.5 million firm commitment
for the Rights Offering. Management believes that all these actions will
facilitate improved financial performance and help regain both the capital and
commercial markets support. The Company appreciates that the Rights Offering
will cause a significant dilution to shareholders who decide not to
participate. However, we believe the Rights Offering is the best solution to
protect shareholders' interest and to raise the required level of capital to
re-position LAB Research for many years of successful growth.
    "The renegotiation of our Canadian banking facilities coupled with the
closing of the Rights Offering will strengthen our balance sheet and
resolutely address concerns from our clients and investors regarding the
financial health of the Company. We are better positioned to meet our growth
objectives despite the prevailing market conditions." stated 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 and Gross margin
    

    We use certain non-GAAP measures, including Book to Bill ratio, Backlog,
Active Backlog, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin 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-month periods ended June 30, 2009 and 2008,
and March 31, 2009 and for the six-month periods ended June 30, 2009 and 2008.

    

                                     Three months ended      Six months ended
                             ----------------------------- ------------------
                                    June 30       March 31       June 30
                             ----------------------------- ------------------
                                2009      2008      2009      2009      2008
                             --------  --------  --------  --------  --------
    (in thousands of dollars)     $         $         $         $         $

    Net (loss) earnings          316       748    (2,961)   (2,645)    1,295
    Adjustments for:
      Income taxes (recovery)   (148)      332       (86)     (234)      547
      Interest expense on
       long-term debt            641       573       713     1,354     1,153
      Amortization             1,592     1,303     1,598     3,190     2,538
                             --------   --------   -------   -------  -------
    EBITDA                     2,401     2,956      (736)    1,665     5,533
    Foreign exchange          (1,070)     (586)    1,512       442      (619)
    Restructuring charges          -        47         -         -        47
                             --------   --------   -------   -------  -------
    Adjusted EBITDA            1,331     2,417       776     2,107     4,961
                             --------   --------   -------   -------  -------
                             --------   --------   -------   -------  -------
    Adjusted EBITDA margin %     9.6%     15.0%      6.0%      7.8%     15.7%
                             --------   --------   -------   -------  -------
    

    (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 three-month periods
ended June 30, 2009 and 2008, and March 31, 2009 and the six-month periods
ended June 30, 2009 and 2008.

    
                                     Three months ended      Six months ended
                             ----------------------------- ------------------
                                    June 30       March 31       June 30
                             ----------------------------- ------------------
                                2009      2008      2009      2009      2008
                             --------  --------  --------  --------  --------
    (in thousands of dollars)     $         $         $         $         $

    Revenues                  13,885    16,120    12,987    26,872    31,549
    Direct costs               9,790    10,882     9,605    19,395    21,247
                             --------  --------  --------  --------  --------
    Gross margin               4,095     5,238     3,382     7,477    10,302
                             --------  --------  --------  --------  --------
                             --------  --------  --------  --------  --------

    Gross margin %              29.5%     32.5%     26.0%     27.8%     32.7%
                             --------  --------  --------  --------  --------
                             --------  --------  --------  --------  --------


    LAB RESEARCH INC.
    Consolidated Balance Sheets
    (Unaudited)

    June 30, 2009 and December 31, 2008
    (in thousands of Canadian dollars)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
                                                                    (audited)
    Assets

    Current assets:
      Cash and cash equivalents                    $         -   $       102
      Accounts and other receivables                     6,969        10,011
      Work in progress                                   3,161         3,511
      Income taxes receivable                            2,520         1,473
      Prepaid expenses                                   1,336         1,410
      Future income taxes                                3,128         3,083
      -----------------------------------------------------------------------
                                                        17,114        19,590

    Property and equipment                              80,904        85,607
    Intangible assets                                    1,484         1,845
    Other assets                                         8,918         6,916
    Future income taxes                                  1,609         1,620
    -------------------------------------------------------------------------
                                                   $   110,029   $   115,578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank overdraft                               $     1,051   $         -
      Accounts payable and accrued liabilities          10,502        13,493
      Building expansions related accounts payable         639           850
      Holdback payable                                   1,750         1,750
      Deferred revenue                                   7,978         9,180
      Current portion of long-term debt                 38,708        39,416
      Deferred gain on sale of equipment                    13             -
      Future income taxes                                  691           720
      -----------------------------------------------------------------------
                                                        61,332        65,409

    Other debt                                               -           140
    Deferred gain on sale of equipment                      53             -
    Long-term debt                                      18,971        17,264
    Future income taxes                                  2,381         2,529
    Shareholders' equity:
      Share capital                                     63,961        63,951
      Warrants                                             331             -
      Additional paid-in capital                         1,305         1,077
      -----------------------------------------------------------------------
                                                        65,597        65,028

      Accumulated other comprehensive income                27           682
      Deficit                                          (38,332)      (35,474)
      -----------------------------------------------------------------------
                                                        27,292        30,236
    -------------------------------------------------------------------------
                                                   $   110,029   $   115,578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB RESEARCH INC.
    Consolidated Statements of Earnings
    (Unaudited)

    Periods ended June 30, 2009 and 2008
    (in thousands of Canadian dollars, except per share and share data)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   Three months               Six months
                                   ended June 30,            ended June 30,
                               ----------------------- ----------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Revenues              $    13,885   $   16,120   $   26,872   $   31,549

    Expenses:
      Direct costs              9,790       10,882       19,395       21,247
      Selling, general
       and administrative       2,649        2,718        5,142        5,157
      Restructuring
       charges                      -           47            -           47
      Stock-based
       compensation               115          114          228          231
      Amortization of
       property and
       equipment                1,452        1,164        2,907        2,267
      Amortization of
       intangible assets          140          139          283          271
      Interest, net               641          562        1,354        1,106
      Foreign exchange         (1,070)        (586)         442         (619)
      -----------------------------------------------------------------------
                               13,717       15,040       29,751       29,707
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                 168        1,080       (2,879)       1,842
    (Recovery) provision
     for income taxes            (148)         332         (234)         547
    -------------------------------------------------------------------------
    Net earnings (loss)   $       316   $      748   $   (2,645)  $    1,295
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings (loss) per
     share:
      Basic               $      0.02   $     0.04   $    (0.15)  $     0.07
      Diluted                    0.02         0.04        (0.15)        0.07
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average
     number of
     outstanding shares:
      Basic                18,089,360   18,062,526   18,088,545   18,056,615
      Effect of dilutive
       options                 86,659      415,237            -      412,704
    -------------------------------------------------------------------------
      Diluted              18,176,019   18,477,763   18,088,545   18,469,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB RESEARCH INC.
    Consolidated Statements of Cash Flows
    (Unaudited)

    Periods ended June 30, 2009 and 2008
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   Three months               Six months
                                   ended June 30,            ended June 30,
                               ----------------------- ----------------------
                                 2009         2008         2009         2008
    -------------------------------------------------- ----------------------

    Cash flows (used in)
     from operating
     activities:
      Net earnings (loss) $       316   $      748   $   (2,645)  $    1,295
      Adjustments for:
        Amortization of
         property and
         equipment              1,452        1,164        2,907        2,267
        Amortization of
         intangible
         assets                   140          139          283          271
        Unrealized gain
         on foreign
         exchange                (510)        (127)         (69)        (147)
        Stock-based
         compensation             115          114          228          231
        Future income
         taxes                    (37)        (144)         (75)        (248)
        Other                      28            5           46           14
      Net changes in
       non-cash
       balances related
       to operations           (1,944)      (1,448)      (3,536)      (2,743)
    -------------------------------------------------------------------------
                                 (440)         451       (2,861)         940
    Cash flows (used in)
     from financing
     activities:
      Proceeds from
       issuance of shares           -           89           10           89
      Proceeds from the
       sale and leaseback
       of equipment                 -            -        1,188            -
      Proceeds from
       issuance of long-
       term debt                2,288       11,305        2,339       11,358
      Repayment of long-
       term debt                 (562)        (640)      (1,385)      (1,060)
      Repayment of capital
       leases                    (164)        (165)        (340)        (291)
      Increase (decrease)
       in bank overdraft         (361)           -        1,051            -
    -------------------------------------------------------------------------
                                1,201       10,589        2,863       10,096
    Cash flows (used in)
     from investing
     activities:
      Payment of holdback
       payable                      -          (59)           -          (59)
      Additions to property
       and equipment             (469)      (9,650)      (1,637)     (13,016)
      Proceeds from a grant       490            -        1,490            -
      Other                       (78)           7         (110)          (7)
    -------------------------------------------------------------------------
                                  (57)      (9,702)        (257)     (13,082)

    Effect of exchange
     rate changes on
     cash and cash
     equivalents
     denominated in
     foreign currencies          (704)        (478)         153         (268)
    -------------------------------------------------------------------------
    Net increase
     (decrease) in cash
     and cash equivalents           -          860         (102)      (2,314)

    Cash and cash
     equivalents,
     beginning of period            -        3,651          102        6,825
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period               $         -   $ 4,511      $        -   $    4,511
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    
    %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

Organization Profile

LAB RESEARCH INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890