LAB Research announces its 2010 first quarter financial results

    
                      Request for proposal activity up 110%

      First quarter revenue increase of 8.3% year-over-year (15% using 2009
                                 currency rates)

    WWW.LABRESEARCH.COM
    TORONTO STOCK EXCHANGE SYMBOL: LRI
    

LAVAL, QC, May 17 /CNW Telbec/ - LAB Research Inc. ("LAB Research" "LRI" or the "Company") (TSX: LRI), a global Canadian-based non-clinical contract research organization, today announced its 2010 first 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, Adjusted net loss, 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, 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.

2010 First Quarter Financial Highlights

    
    - Revenues of $14.1 million, up 8.3% compared to $12.9 million in 2009.
      Using 2009 currency rates, revenues in 2010 would have increased by
      approximately 15% compared to 2009;
    - Adjusted EBITDA of $0.6 million compared to $0.8 million in 2009;
    - Net loss of $2.7 million including a non-cash tax provision of
      $0.9 million, compared to $3.0 million in 2009 with no tax provisions;
    - Net loss per share of $0.05 compared to $0.16 per share in 2009;
    - Consolidated 2009 Book to Bill ratio of 0.84:1 (compared to 0.6:1 in
      2009), including 0.72:1 for Canada, 0.80:1 for Denmark and 1.32:1 for
      Hungary;
    - Due to a strong Canadian dollar, 15% decrease in backlog during the
      first quarter at $30.0 million, compared to $35.3 million as at
      December 31, 2009. 13% decrease in backlog at $30.0 million, compared
      to $34.5 million as at March 31, 2009.
    

Other 2010 First Quarter and subsequent Highlights

    
    - New services and new clients drive greater portion of contracts wins in
      2010;
    - 110% increase in request for proposal activity in the first quarter of
      2010 compared to last year;
    - Cash flows from operation of $1.9 million vs. ($2.4 million) in 2009;
      representing a $4.3 million improvement;
    - Completion of R&D program involving world-premiere real time cardio-
      pulmonary monitoring; and
    - Series of senior executive changes and scientific staff additions
    

"The double-digit growth of the first quarter, when adjusted for local currencies, was achieved despite a still very challenging CRO's market environment. This clearly indicates early signs of market recovery. Our profitability and overall financial performance continue to be impacted by the reduction in global R&D spending, difficult pricing environment and recently by the strengthening of the Canadian dollar over most other major currencies. However, we have also started to benefit from the successful implementation of all our cost control, business development, expansions and increasing service offering initiatives as evidenced by the recent progresses. All our sites have evidenced increased activity over the last few months. This has translated for our first quarter of 2010 into a material year-over-year increase in revenues at our Hungarian operations, an increase in revenues when adjusted for local currencies at our Danish operations and higher revenues at our Canadian operations." said Mr. Luc Mainville, President and CEO of LAB Research.

2010 First Quarter Financial Results

LAB Research posted revenues of $14.1 million for the first quarter of 2010, up 8.3% compared to the $12.9 million in the first quarter of 2009, and up 5.5% compared to the $13.3 million generated in the fourth quarter of 2009.

Our Canadian pre-clinical operations ("LAB Canada") posted revenues of $6.3 million during the first quarter of 2010, up 7.4% compared to the $5.9 million achieved in the first quarter of 2009, and up 14.5% compared to the $5.5 million achieved in the fourth quarter of 2009. The increase is mainly attributable to higher contract signings in the latter part of 2009 following the closing of the Company's Rights Offering which occurred on September 30, 2009.

Our Danish subsidiary ("LAB Denmark") posted revenues of $5.9 million for the first quarter of 2010, down 3% compared to the $6.0 million for the first quarter of 2009, and similar to the $5.9 million achieved during the fourth quarter of 2009. Despite soft market conditions, the request for proposal activity from new and non-UK based clients has increased significantly during the last few months in part due to our expanded service offering and continued branding efforts. The latter translated into higher contract signings and revenues for the last quarter of 2009 and first quarter of 2010. In domestic currencies, revenues in Denmark increased 10.9% during the first quarter of 2010 compared to the same period of 2009.

Our Hungarian subsidiary ("LAB Hungary") posted revenues of $1.9 million for the first quarter of 2010, an increase of 71.6% compared to the $1.1 million achieved during the first quarter of 2009 and similar to those generated during the fourth quarter of 2009. The revenue increase is due to more contract signings from Japanese clients, the positive impact of our new business development platform and the expansion of the biotech/pharma clientele following the site GLP-recertification in late 2008.

The Company's gross margin was 25.7% for the first quarter of 2010 compared to 26.0% for the first quarter of 2009 and 23.9% for the fourth quarter of 2009. The gross margin of LAB Hungary increased from (5.3%) in the first quarter of 2009 to 28.4% in the first quarter of 2010 due to higher revenues. For the same periods, the gross margin of LAB Denmark increased from 24.4% to 25.3% due to higher revenues and cost control initiatives. These increases were offset by a decrease in gross margin of LAB Canada from 33.4% during the first quarter of 2009 to 24.9% for the first quarter of 2010. The decrease is due to lower revenues linked to the mid-year 2009 industry-wide adverse price environment. Management expects to see margins recover in 2010 as a result of continued cost control initiatives, senior management restructuring, the launch of new high-margin services and a more favourable pricing environment.

Selling, general and administrative ("SG&A") expenses stood at $2.9 million for the first quarter of 2010 compared to $2.5 million for the same period of 2009, representing 20.4% and 19.2% of our revenues respectively. The increase in SG&A expenses is due to international business development initiatives and higher professional fees.

EBITDA stood at $0.5 million for the first quarter of 2010 compared to ($0.7 million) for the first quarter of 2009. Our Adjusted EBITDA, excluding foreign exchange, restructuring charges and settlement of lawsuit expenses, amounted to $0.6 million and $0.8 million representing 3.6% and 6.0% of revenue for the first quarters of 2010 and 2009 respectively. The year-over-year variance is mainly attributable to lower gross margin and higher SG&A expenses.

Our amortization expense was $1.7 million for the first quarter of 2010, compared to $1.6 million for the same 2009 period. This increase is due to additional amortization of deferred financing fees following the closing of a series of financings in 2009 aimed at strengthening the Company's balance sheet.

Our net interest expense was $0.6 million for the first quarter of 2010 compared to $0.7 million for the same 2009 period. The positive variance of $0.1 million is attributable to a lower average long-term debt for 2010 compared to 2009 offset by higher borrowing costs.

We recognized a nominal foreign exchange loss for the first quarter of 2010, compared to a loss of $1.5 million for the same 2009 period. In 2009, the foreign exchange loss occurred mainly in Hungary where the Euro appreciated significantly against the Hungarian Florint.

Income tax expense was $0.9 million for the first quarter of 2010, compared to an income tax recovery of $0.1 million in the same period of 2009.

The net loss for the first quarter of 2010 amounted to $2.7 million compared to $3.0 million in the same 2009 period. Our loss per share for the first quarter of 2010 amounted to $0.05 on the basis of 52,710,750 weighted average shares outstanding compared to a loss per share of $0.16 for the same 2009 period on the basis of 18,089,960 weighted average shares outstanding. The increase of the number of shares outstanding was triggered by the issuance of 34.6 million shares related to the Rights Offering.

As at March 31, 2010, the Company's net cash position was $1.8 million, compared to $0.5 million as at December 31, 2009.

As at March 31, 2010, our backlog stood at $30.0 million compared to $35.3 million as at December 31, 2009, a 15.0% decrease. On a year-over-year basis, the backlog decreased by $4.5 million or 13%.

2010 Outlook

"Having added all the required services, staff and capacity to attract the broadest range of recurrent spending sponsors, we believe to be perfectly positioned to take full advantage of the improving overall market conditions. We look forward to reporting on our progress over the coming quarters." 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 52.7 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.

    
                                 APPENDIX 1
    

Non-GAAP Measures

We use certain non-GAAP measures, including Book to Bill ratio, Backlog, Active Backlog, Earnings before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net loss, Adjusted net loss per share 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 to EBITDA and to Adjusted EBITDA for the three-month periods ended March 31, 2010 and 2009.

    
                                                       Three months ended
                                                   --------------------------
                                                            March 31,
                                                   --------------------------
                                                          2010          2009
                                                   ------------  ------------
    (in thousands of dollars)                                $             $

    Net loss for the period                             (2,725)       (2,961)
    Adjustments for:
      Income taxes                                         887           (86)
      Interest, net                                        641           713
      Amortization                                       1,734         1,599
                                                   ------------  ------------
    EBITDA                                                 537          (735)
    Foreign exchange                                        73         1,512
                                                   ------------  ------------
    Adjusted EBITDA                                        610           777
                                                   ------------  ------------
                                                   ------------  ------------
    Adjusted EBITDA margin                                 4.3%          6.0%
                                                   ------------  ------------
                                                   ------------  ------------
    

(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 by reporting periods.

    
                                                       Three months ended
                                                   --------------------------
                                                            March 31,
                                                   --------------------------
                                                          2010          2009
                                                   ------------  ------------
                                                             $             $
    (in thousands of dollars)

    Revenues                                            14,063        12,987
    Direct costs                                        10,450         9,605
                                                   ------------  ------------
    Gross margin                                         3,613         3,382
                                                   ------------  ------------
                                                   ------------  ------------

    Gross margin %                                        25.7%         26.0%
                                                   ------------  ------------
                                                   ------------  ------------


    LAB Research Inc.
    Consolidated Balance Sheets
    March 31, 2010 and December 31, 2009
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                         As at         As at
                                                      March 31,  December 31,
                                                          2010          2009
                                                    (Unaudited)     (Audited)
                                                             $             $
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                          1,763         1,031
      Accounts and other receivables                     7,045         9,534
      Work in progress                                   3,123         3,399
      Income taxes receivable                            2,357         3,329
      Prepaid expenses                                   1,598         1,971
      Future income taxes                                  366           108
      -----------------------------------------------------------------------
                                                        16,252        19,372

    Property and equipment                              72,035        75,658
    Intangible assets                                    3,348         3,759
    Other assets                                        10,645        10,645
    Future income taxes                                  3,375         3,375
    -------------------------------------------------------------------------
                                                       105,655       112,809
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities:
      Bank indebtedness                                      -           499
      Accounts payable and accrued liabilities          11,118        11,915
      Deferred revenue                                   7,899         8,709
      Current portion of long-term debt                  7,294         3,593
      Future income taxes                                  588           356
      -----------------------------------------------------------------------
                                                        26,899        25,072
    Long-term debt                                      45,696        51,110
    Other long-term liabilities                             36            43
    Future income taxes                                  3,458         3,670
    -------------------------------------------------------------------------
                                                        76,089        79,895
    -------------------------------------------------------------------------

    SHAREHOLDERS' EQUITY:
      Share capital                                     78,156        78,156
      Warrants                                             575           575
      Additional paid-in capital                         1,674         1,545

      Accumulated other comprehensive loss              (1,513)         (761)
      Deficit                                          (49,326)      (46,601)
      -----------------------------------------------------------------------
                                                       (50,839)      (47,362)
    -------------------------------------------------------------------------
                                                        29,566        32,914
    -------------------------------------------------------------------------
                                                       105,655       112,809
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB Research Inc.
    Consolidated Statements of loss
    For the three months ended March 31, 2010 and 2009
    (in thousands of Canadian dollars, except per share data)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2010          2009
                                                             $             $
    -------------------------------------------------------------------------

    Revenue                                             14,063        12,987
    -------------------------------------------------------------------------

    Operating expenses:
      Direct costs                                      10,450         9,605
      Selling, general and administrative                2,874         2,492
      Stock-based compensation                             129           113
      Amortization of property and equipment             1,375         1,392
      Amortization of intangible assets                    260           206
      Amortization of deferred financing fees               99             1
      Interest, net                                        641           713
      Foreign exchange loss                                 73         1,512
    -------------------------------------------------------------------------
                                                        15,901        16,034
    -------------------------------------------------------------------------
    Loss from operations before income taxes            (1,838)       (3,047)

    Income taxes (recovery):
      Current                                              923           (48)
      Future                                               (36)          (38)
    -------------------------------------------------------------------------
                                                           887           (86)
    -------------------------------------------------------------------------

    Net loss for the period                             (2,725)       (2,961)
    -------------------------------------------------------------------------
    Loss per share:
      Basic and diluted                                  (0.05)        (0.16)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB Research Inc.
    Consolidated Statements of Cash Flows
    For the three months ended March 31, 2010 and 2009
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                          2010          2009
                                                             $             $
    -------------------------------------------------------------------------

    Operating activities:
      Net loss for the period                           (2,725)       (2,961)
        Adjustments for:
        Amortization of property and equipment           1,375         1,392
        Amortization of intangible assets                  260           206
        Investment tax credits                               -          (970)
        Foreign exchange gain                              (35)          441
        Stock-based compensation                           129           113
        Future income taxes                                (36)          (38)
        Amortization of deferred financing fees             99             1
        Accretion of interest                               (6)           (6)
        Other                                               18            17
      Net change in non-cash working capital items       2,843          (622)
      -----------------------------------------------------------------------
                                                         1,922        (2,427)
    Financing activities:
      Proceeds from issuance of shares                       -            10
      Proceed from issuance of capital leases                -         1,188
      Proceeds from issuance of long-term debt, net
       of cost                                              90            57
      Repayment of long-term debt                         (419)         (823)
      Repayment of capital leases                          (85)         (176)
      Increase (decrease) in bank indebtedness            (499)        1,412
      -----------------------------------------------------------------------
                                                          (913)        1,668
    Investing activities:
      Additions to property and equipment, net of grant   (156)         (168)
      Additions to intangible assets                       (46)            -
      Other                                                  -           (32)
    -------------------------------------------------------------------------
                                                          (202)         (200)

    Effect of foreign exchange rate changes on cash and
     cash equivalents                                      (75)          857
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash equivalents       732          (102)
    Cash and cash equivalents, beginning of period       1,031           102
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period             1,763             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00023798EF

SOURCE LAB RESEARCH INC.

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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