LAB Research Inc. announces third quarter 2007 financial results



    
                       Consolidated revenues up by 19%
                   European expansions completed as Company
                           strengthens management
    

    LAVAL, Nov. 8 /CNW Telbec/ - LAB Research Inc. ("LRI" or "LAB Research")
(TSX: LRI), a Canadian-based global non-clinical contract research
organization, is pleased to announce its third quarter 2007 financial results.
As this press release contains forward-looking information, investors are
cautioned that the statements are based on current assumptions and that actual
outcomes are uncertain.

    Third Quarter 2007 highlights from continuing operations:

    
    - Q3 consolidated revenues reached $14.1 million, up 19%, compared to the
      same period of 2006;
    - Q3 adjusted EBITDA amounted to $2.8 million, up 16%, compared to
      $2.4 million in 2006;
    - Q3 net earnings were $1.0 million in line with those of 2006;
    - Nine months consolidated revenues reached $42.4 millions, up 22%,
      compared to the same period of 2006;
    - Nine months adjusted EBITDA amounted to $8.9 million, up 23%, compared
      to $7.2 million in 2006;
    - Nine months net earnings were $3.9 million, up 40%, compared to
      $2.8 million in 2006;
    - LAB Research Canada's revenues up 95% compared to last year;
    - Announced plans to more than double Canadian facility before end
      of 2008;
    - Completed expansion of the two European sites; and
    - Hired Mr. Christopher Banks as new Managing Director in Hungary.

    "During the quarter, we have continued to execute on our organic growth
strategies and announced further initiatives regarding staff and facilities
that will contribute to our continued success" said Mr. Luc Mainville,
President and CEO of LAB Research. "We are swiftly addressing short-term
operational challenges while maintaining our pace to deliver above market
annual growth performance in 2007."
    "The Canadian operations have contributed a strong 95% increase in
revenues less than a year after completing the last expansion. We are making
great strides in filling up newly created capacity in Denmark and initiating
significant expansion in Canada", commented M. Mainville. "A number of study
postponements and cancellations impacted our revenues during the third quarter
in Hungary. We anticipate that our major expansion in Hungary, together with
the addition of seasoned CRO executives to our current management team, will
show positive results before year-end."

    CONFERENCE CALL AND WEBCAST

    LRI will host a conference call at 10:00 a.m., today, Thursday,
November 8, 2007. Interested parties may also access the conference call by
webcast at www.labresearch.com or www.cnw.ca.
    The telephone number to access the conference call is 416-915-5761 or
1-800-588-4942. A replay of the call will be available until November 16,
2007. The telephone numbers to access the replay are 416-640-1917 and
1-877-289-8525 with code number 21252639#.

    FINANCIAL RESULTS

    - Continuing operations

    LAB Research posted revenues of $14.1 million for the third quarter of
2007, up 18.7%, compared to the $11.9 million generated during the same period
of 2006, but down 5.6%, compared to the $15.0 million achieved in the second
quarter of 2007. For the nine-month period ended September 30, 2007, LAB
Research posted revenues of $42.4 million compared to $34.9 million for the
same period of 2006, representing an increase of 21.7%. While LAB Research
Canada and LAB Research Denmark once again delivered a strong revenue
performance, LAB Hungary was hit by a series of study cancellations and
postponements, which had a major impact on the quarterly performance of the
Company. We have proceeded with a series of managerial changes to capitalize
on the recent completion of our new dog facility in Hungary, which is one of
Europe's largest large animal vivarium.
    LAB Research Canada posted revenues of $6.8 million for the third quarter
of 2007, compared to $3.5 million for the same period of 2006 and $6.4 million
for the second quarter of 2007, representing increases of 94.8% and 7.0%,
respectively. For the nine-month period ended September 30, 2007, LAB Research
Canada posted revenues of $17.2 million, up 54.2% from $11.2 million for the
same period in 2006. This revenue increase is attributable to optimizing the
use of our site capacity following the December 2006 expansion as well as a
better study mix following the 2006 reorganization of our business development
and scientific staff.
    LAB Research Denmark posted revenues of $5.9 million for the third quarter
of 2007, in line with those achieved in the same period of 2006, but 3.7 %
lower than the $6.1 million generated in the second quarter of 2007. LAB
Research Denmark completed its new 21,000 square foot facility expansion
project in July 2007. We generated $0.6 million of revenues in the new
facility in the third quarter of 2007 and expect to reach maximum utilization
in the coming months, ahead of our previous estimates. During the same period,
we had to adapt to new European standards requiring 40% more square feet per
dog housed in the facility, thereby, generated less revenues per square foot
than we did in prior periods in the rest of the facility.
    LAB Research Hungary posted revenues of $1.4 million for the third quarter
of 2007, 43.4% less than the $2.5 million generated in the same period of
2006, and 42.8 % less than the $2.5 million posted in the second quarter of
2007. Revenues for the first nine months of 2007 stood at $6.8 million,
compared to $6.4 million for the same period of 2006, representing an increase
of 6.0%. The negative variance between the three-month period ended
September 30, 2007 and September 30, 2006 was due to a different mix of
studies, which did not include high value chronic and/or inhalation studies as
we had last year, and also to a series of study cancellations and
postponements.
    Overall, our gross margin, which refers to revenues less direct costs
(excluding depreciation expense of assets used in our direct operations), was
35.5% for the third quarter of 2007, lower than the 40.9% generated in the
same period of 2006. Our 2007 year-to-date gross margin was 37.3%, compared to
40.0% for the same period in 2006. The "lease expense", which was included in
our direct costs prior to April 17, 2007, was replaced with "amortization and
interest expenses" after we acquired the Canadian facility and helped improve
our gross margin in Canada. Higher revenues generated during the third quarter
2007 (compared to 2006) also helped improve our Canadian gross margin which
went from 28.3% to 43.8%. Our gross margin in Denmark declined, as
anticipated, due to the hiring and training of new staff to prepare for the
additional activities to be generated from the building extension. Our gross
margin also decreased in Hungary, due to lower revenues.
    Our selling, general and administrative ("SG&A") expenses were
$2.1 million for the third quarter of 2007, lower than the $2.5 million
incurred during the same period of 2006, representing 15.2% and 21.1% of our
revenues, respectively. For the nine-month period ended September 30, 2007,
our SG&A expenses were $6.8 million, compared to $7.3 million for the same
period of 2006, representing 15.9% and 21.0 % of our revenues, respectively.
For the three-month and nine-month periods ended September 30, 2006, our SG&A
expenses included allocated costs of $0.1 million and $0.7 million,
respectively. This decline in SG&A expenses, between 2007 and 2006 for both
periods reported, can be explained by a $0.2 million bad debt recovery in
Denmark, offset by a $0.2 million termination fee in relation to the early
termination of the information technology service contract in Canada, lower
sales commissions due to our stronger new business development group in
Canada, which is now less reliant on third party consultants, and a tighter
control over expenses incurred at all our sites.
    Our EBITDA, which refers to net earnings before income taxes, net interest
and amortization, for the third quarter of 2007 was $2.8 million compared to
$2.1 million for the same period of 2006, representing an increase of 29.7%.
Our adjusted EBITDA, which refers to our EBITDA plus lease expense on the
Canadian facility as a result of the sale-leaseback transaction, for the third
quarter of 2007, amounted to $2.8 million, compared to $2.4 million for the
same period of 2006, representing an increase of 15.5%. Our adjusted EBITDA
margins for the third quarter of 2007 and 2006 were 19.5% and 20.0%
respectively. Our 2007 year-to-date EBITDA was $8.5 million, compared to
$6.4 million for the same period of 2006, while our adjusted EBITDA, for the
same period, was $8.9 million, compared to $7.2 million, representing 20.9%
and 20.7% of revenues, respectively. The increase in the year-to-date adjusted
EBITDA margins were due to reacquiring the building in Canada, which resulted
in converting the "lease expense", included in the EBITDA calculation, before
April 17, 2007 into "amortization and interest expenses" excluded from EBITDA
calculation after such date, and to lower SG&A expenses. The slight decline in
our adjusted EBITDA margin for the quarter ended September 30, 2007, is due to
the lower gross margin, as previously explained.
    Our net earnings for the third quarter of 2007 amounted to $1.0 million,
in line with those generated during the same period of 2006. Our year-to-date
net earnings for 2007 were $3.9 million, up 39.6%, compared to $2.8 million
for the same period of 2006. This stronger performance was due to LAB Research
Canada's improved results despite a $0.2 million penalty in relation to the
early termination of the information technology services contract in Canada.
    Our earnings per share for the third quarter of the 2007 amounted to $0.06
per share on the basis of 18,036,520 weighted average shares outstanding,
notwithstanding the $0.01 per share negative impact of the cancellation fee
due to the early termination of the information technology agreement in
Canada, compared to $0.06 per share for 2006 on the basis of 16,639,363
weighted average shares outstanding. For the nine-month period ended September
30, 2007, the earnings per share from continuing operations were $0.22 per
share ($0.21 on a diluted basis) on the basis of 18,035,897 weighted average
shares outstanding, compared to $0.19 ($0.19 on a diluted basis) on the basis
of 14,772,112 weighted average shares outstanding for the same period of 2006.

    - Liquidity and Cash Resources

    As at September 30, 2007, our net cash position was $4.6 million, compared
to $5.5 million as at June 30, 2007 and $8.3 million as at December 31, 2006.
    For the third quarter of 2007, cash flows from our operating activities
were $1.2 million, compared to $0.8 million for the same period of 2006. For
the nine-month period ended September 30, 2007, cash flows generated by our
operating activities were $3.2 million, compared to $5.8 million for the same
period of 2006. The variances in the net changes in operating assets and
liabilities explains mainly the increase/decrease in cash flows from operating
activities for the three and nine-month periods ended September 30, 2007 and
2006.
    Our cash flows from financing activities during the third quarter of 2007
amounted to $5.3 million. During the quarter, we issued long-term debt of
$3.2 million and repaid $0.4 million in long-term debt and capital leases. The
long-term debt issue pertained to financing our building expansion in Hungary.
For the same period of 2006, our cash flows from financing activities was
$12.0 million. For the nine-month period ended September 30, 2007, cash flows
from the financing activities amounted to $24.5 million and included the
following: issue of long-term debt of $26.7 million, net of financing fees of
$0.3 million, offset by repayment of long-term debt, capital leases as well as
bank facilities of $4.3 million. For the same period of 2006, our cash flows
from financing activities amounted to $10.5 million.
    During the third quarter of 2007, we used $5.0 million in cash flows from
investing activities, compared to $1.9 million for the same period of 2006.
Property and equipment additions, during the third quarter of 2007 and 2006,
amounted to $5.1 million and $1.2 million, respectively. For the nine-month
period ended September 30, 2007 and 2006, we used $29.3 million and
$7.5 million of cash flows from investing activities, respectively.
    As at September 30, 2007, our backlog (representing the value of client
contracts for services that have not yet been performed) rose to a
record-breaking value of $22.8 million compared to $22.0 million as at June
30, 2007 and $18.5 million as at December 31, 2006, representing increases of
3.6% and 23.2%, respectively.

    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 TSX under the symbol "LRI", with 18.0 million
shares outstanding.


    LAB RESEARCH INC.
    Consolidated Balance Sheets
    (Unaudited)

    September 30, 2007 and December 31, 2006
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  September 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Assets

    Current assets:
      Cash                                           $   7,119     $   8,516
      Accounts and other receivables                    10,265        16,661
      Work in progress                                   2,529         2,209
      Income taxes receivable                            1,594           268
      Prepaid expenses                                   1,332         1,104
    -------------------------------------------------------------------------
                                                        22,839        28,758

    Property and equipment                              56,665        24,784
    Intangible assets                                    2,163         2,748
    Other assets                                           474         2,119
    Future income taxes                                  6,755         6,026
    -------------------------------------------------------------------------
                                                     $  88,896     $  64,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank indebtedness                              $   2,473     $       -
      Bank loan                                              -           223
      Accounts payable and accrued liabilities           9,738         9,916
      Holdback payable                                      78           913
      Deferred revenue                                   7,099         6,194
      Current portion of long-term debt                  1,808         1,230
      Deferred gain on sale of property                      -            84
      Future income taxes                                  187           745
    -------------------------------------------------------------------------
                                                        21,383        19,305

    Deferred rent liability                                  -           253
    Deferred gain on sale of property                        -         1,501
    Long-term debt                                      28,761         7,586
    Future income taxes                                  2,959         2,847
    Shareholders' equity:
      Share capital                                     63,699        63,672
      Additional paid-in capital                           550           181
      Accumulated other comprehensive loss              (1,272)         (263)
      Deficit                                          (27,184)      (30,647)
    -------------------------------------------------------------------------
                                                        35,793        32,943

    -------------------------------------------------------------------------
                                                     $  88,896     $  64,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    LAB RESEARCH INC.
    Consolidated and Combined Carve-Out Statements of Earnings
    (Unaudited)

    Periods ended September 30, 2007 and 2006
    (in thousands of Canadian dollars, except per share data)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        Three months             Nine months
                                  ended September 30,     ended September 30,
                                  ------------------      ------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenues                   $  14,138   $  11,906   $  42,426   $  34,864

    Expenses:
      Direct costs                 9,123       7,034      26,612      20,927
      Selling, general and
       administrative              2,145       2,510       6,755       7,317
      Stock-based compensation       150         126         376         161
      Amortization of property
       and equipment                 952         557       2,480       1,850
      Amortization of
       intangible assets             127         125         392         371
      Interest, net                  376          64         785         354
      Write-off of property
       and equipment                   -           -          17           -
      Foreign exchange               (31)        116         174          39
    -------------------------------------------------------------------------
                                  12,842      10,532      37,591      31,019

    -------------------------------------------------------------------------
    Earnings before
     income taxes                  1,296       1,374       4,835       3,845

    Provision for
     income taxes                    278         343         946       1,059
    -------------------------------------------------------------------------

    Net earnings from
     continuing operations         1,018       1,031       3,889       2,786
    Net (loss) earnings
     from discontinued
     operations                       (2)          6         (76)        196
    -------------------------------------------------------------------------
    Net earnings               $   1,016   $   1,037   $   3,813   $   2,982
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share:
      Basic:
        Continuing
         operations            $    0.06   $    0.06   $    0.22   $    0.19
        Discontinued
         operations                    -           -       (0.01)       0.01
      -----------------------------------------------------------------------
                               $    0.06   $    0.06   $    0.21   $    0.20
      -----------------------------------------------------------------------
      Diluted:
        Continuing
         operations            $    0.06   $    0.06   $    0.21   $    0.19
        Discontinued
         operations                (0.01)          -           -        0.01
      -----------------------------------------------------------------------
                               $    0.05   $    0.06   $    0.21   $    0.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of outstanding shares:
      Basic                   18,036,520  16,639,363  18,035,897  14,772,112
      Effect of dilutive
       options                   462,491           -     232,455           -
    -------------------------------------------------------------------------
      Diluted                 18,499,011  16,639,363  18,268,352  14,772,112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    LAB RESEARCH INC.
    Consolidated and Combined Carve-Out Statements of Cash Flows
    (Unaudited)

    Periods ended September 30, 2007 and 2006
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        Three months             Nine months
                                  ended September 30,     ended September 30,
                                  ------------------      ------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Cash flows from
     operating activities:
      Net earnings from
       continuing operations   $   1,018   $   1,031   $   3,889   $   2,786
      Adjustments for:
        Amortization of
         property and
         equipment                   952         557       2,480       1,850
        Amortization
         of intangible
         assets                      127         125         392         371
        Unrealized gain
        on foreign exchange           30         155          20         155
        Stock-based
         compensation                150         126         376         161
        Amortization
         of deferred gain
         of property                   -         (19)        (21)        (74)
        Deferred rent
         liability                     -          54          72         161
        Future income taxes         (134)         19      (1,151)       (979)
        Other                         10           7          48          26
    Net changes in operating
     assets and liabilities         (961)     (1,268)     (2,907)      1,349
    -------------------------------------------------------------------------
                                   1,192         787       3,198       5,806
    Cash flows from
     financing activities:
      Proceeds from issuance
       of common shares               20      15,000          20      15,000
      Share issue costs                -      (1,697)          -      (1,697)
      Proceeds from issuance
       of long-term debt           3,224          68      26,661          68
      Repayment of long-
       term debt                    (280)       (901)     (3,636)     (1,557)
      Repayment of
       capital leases               (130)       (326)       (419)       (938)
      Financing fees                   -           -        (337)          -
      Changes in net
       assets not
       transferred to
       LAB Canada                      -         200           -        (306)
      Net advances (to)
      from companies under
      common control                   -        (364)          -         111
      Proceeds from bank
       facilities                  2,473         223       2,473         223
      Repayments under bank
       credit facilities               -        (223)       (223)       (432)
    -------------------------------------------------------------------------
                                   5,307      11,980      24,539      10,472
    Cash flows from
     investing activities:
      Payment of holdback
       payable                         -           -        (835)          -
      Additions to property
       and equipment              (5,087)     (1,185)    (28,427)     (2,640)
      Costs incurred for
       the Canadian expansion
       to be reimbursed by
       the landlord                    -      (1,321)          -      (4,785)
      Loan receivable                  -           -        (300)          -
      Other                          129         656         234         (65)
    -------------------------------------------------------------------------
                                  (4,958)     (1,850)    (29,328)     (7,490)
    Effect of exchange
     rate changes on cash            106        (671)         14          10
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash from continuing
     operations                    1,647      10,246      (1,577)      8,798
    Net cash from operations
     provided by discontinued
     operations                        5        (286)        180         (59)
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash                       1,652       9,960      (1,397)      8,739
    Cash, beginning
     of period                     5,467       2,506       8,516       3,727
    -------------------------------------------------------------------------
    Cash, end of period        $   7,119   $  12,466   $   7,119   $  12,466
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    
    %SEDAR: 00023798EF




For further information:

For further information: LAB Research Inc.: Luc Mainville, Chief
Executive Officer, (450) 973-2240, Ext. 1206, mainvillel@labresearch.com;
Media and Investor: Echoes Financial Network Inc.: Dominic Sicotte, (866)
633-9551, (514) 842-9551, dsicotte@echoesfinancial.com

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LAB RESEARCH INC.

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