LAB Research announces its 2009 third quarter financial results

    
    LAB Canada and LAB Hungary's revenues up by 21% and 52% compared to 2008

    Closing of the Rights Offering to facilitate return to profitability by
                         restoring commercial support

    www.labresearch.com
    Toronto Stock Exchange Symbol: LRI
    

LAVAL, QC, Nov. 12 /CNW Telbec/ - LAB Research Inc. ("LAB Research" or the "Company") (TSX: LRI), a global Canadian-based non-clinical contract research organization, today announced its 2009 third 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 outcomes 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, 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 Third Quarter Financial Highlights

    - Revenues of $13.1 million, down 6% compared to $13.9 million in the
      second quarter of 2009, and down 7% compared to $14.1 million in the
      third quarter of 2008;
    - LAB Canada and LAB Hungary revenues up 21% and 52% respectively offset
      by a decrease of 24% for LAB Denmark, compared to same period in 2008;
    - Adjusted EBITDA of $0.3 million, down $1.0 million compared to $1.3
      million in the second quarter of 2009 and down $0.4 million compared to
      the third quarter of 2008;
    - Net loss of $1.7 million of which $1.2 million was from LAB Denmark,
      down $2.0 compared to net earnings of $0.3 million in the second
      quarter of 2009, and $0.5 million lower compared to net loss of $1.2
      million in the third quarter of 2008;
    - Loss per share was $0.09, compared to earnings per share of $0.02 for
      the second quarter of 2009 and a net loss per share of $0.06 for the
      third quarter of 2008;
    - 14% increase in request for quotations in the third quarter of 2009
      compared to second quarter of 2009; and
    - Backlog and active backlog as at September 30, 2009 at $28.1 million
      and $11.5 million respectively, compared to $26.8 million and $11.8
      million respectively as at June 30, 2009.

    Other 2009 Third Quarter and Subsequent Highlights

    - Closing of a $14.2 million Rights Offering;
    - Company renegotiates its Canadian banking facilities;
    - Company entered into 3 new master services agreements with global
      industry leaders;
    - Korean market coverage extension through a new exclusive agency
      agreement;
    - Nomination of new President for the Canadian site; and
    - Backlog at October 31, 2009 at $30.8 million, up $4 million or 15%
      compared to September 30, 2009.
    

"Our Canadian and Hungarian site revenues continue to grow as a result of the successful implementation of new business development initiatives, launch of new value added specialized services and addition of capacity following completion of our expansion program. While our Danish site's results remained under pressure during the quarter in the context of the severe global economic downturn and stiffer competition from UK-based Contract Research Organizations ("CRO") benefiting from a weaker currency, the noticeable increase in request for proposal activity and contract signings currently taking place will undoubtedly translate into higher revenues in Denmark for the fourth quarter of 2009. As a result of our continued commitment to building the highest quality, flexible mid-size full service alternative to larger organizations, and having successfully regained commercial support, we are now well positioned to capitalize on all significant market opportunities" said Mr. Luc Mainville, President and CEO of LAB Research.

2009 Third Quarter Financial Results

LAB Research posted revenues of $13.1 million for the third quarter of 2009, down 6% compared to the $13.9 million in the second quarter of 2009, and down 7% compared to the $14.1 million generated in the third quarter of 2008. The decrease in overall revenues between the third and second quarters of 2009 is a direct result of the global economic downturn which particularly affected our Danish subsidiary ("LAB Denmark").

Our Canadian non-clinical operations ("LAB Canada") posted revenues of $7.0 million during the third quarter of 2009, up 2.8% compared to the $6.8 million achieved in the second quarter of 2009, and up 20.7% compared to the $5.8 million achieved in the third quarter of 2008. The increase in revenue is a result of the implementation of new business development initiatives following the completion of the building extension in December 2008.

LAB Denmark posted revenues of $4.2 million for the third quarter of 2009, down 24.4% compared to the $5.6 million generated in the second quarter of 2009 and down 40.5% compared to the $7.1 million achieved during the third quarter of 2008. The revenue declines are attributable to lower than expected contract signings in the last quarter of 2008 and first half of 2009 due to the global economic downturn and to stronger competition from UK based CROs benefiting from a weaker currency compared to the Euro and Danish kroner. However, the increase in request for proposal activity during the last few months should translate into higher revenues for the fourth quarter of 2009.

Our Hungarian subsidiary ("LAB Hungary") posted revenues of $1.9 million for the third quarter of 2009, up 22.9% compared to the $1.5 million generated in the second quarter of 2009, and up 52.2 % compared to the $1.2 million achieved in the third quarter of 2008. The revenue increase is due to more 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 28.3% for the third quarter of 2009 compared to 29.5% in the second quarter of 2009 and 25.2% for the third quarter of 2008. The gross margin of LAB Hungary increased in the third quarter of 2009 compared to both the second quarter of 2009 and third quarter of 2008 as a result of significantly higher revenues. The gross margin of LAB Canada decreased from 41.0% to 38.8% between the second and third quarters of 2009 but increased from 28.9% to 38.8% between the third quarters of 2008 and 2009. The gross margin of LAB Denmark decreased due to lower revenues as explained above. Management is hopeful that all three sites will positively contribute to profitability in the coming quarter.

Selling, general and administrative ("SG&A") expenses stood at $3.3 million for the third quarter of 2009, compared to $2.6 million in the second quarter of 2009 and $2.7 million for the third quarter of 2008, representing 25.1%, 19.1% and 19.3% of revenues respectively. The increase between the second and third quarters of 2009 is attributable to $0.3 million of bad debt, $0.3 million of recruiting and professional fees in relation to the implementation of the International Financial Reporting Standards. The SG&A expenses for the second quarter of 2009 were also decreased by a non-recurrent recovery of capital tax of $0.2 million.

EBITDA stood at $0.5 million for the third quarter of 2009 compared to $2.4 million for the second quarter of 2009, and compared to $0.6 million for the third quarter of 2008. Our Adjusted EBITDA, excluding foreign exchange and restructuring charges, amounted to $0.3 million compared to $1.3 million for the second quarter of 2009 and $0.7 million for the third quarter of 2008, representing 2.5%, 6.0% and 5.2% of revenues respectively. The negative variance between the second and third quarters of 2009 is mainly attributable to a decrease in Denmark from a positive 2.9% Adjusted EBITDA to a negative 14.9% due to much lower sales and a $0.3 million bad debt expense.

Our amortization expense was $1.7 million for the third quarter of 2009, compared to $1.4 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 $0.8 million for the third quarter of 2009 compared to $0.6 million for the same 2008 period. The negative variance is attributable to the Canadian debt increase.

We recognized a foreign exchange gain of $0.1 million compared to a loss of $0.1 million for the same 2008 period and compared to a gain of $1.1 million in the second quarter of 2009. The increase in foreign exchange gain between the third quarters of 2008 and 2009 occurred mainly in Hungary where the Hungarian forint appreciated relative to the Euro.

The provision for income taxes stood at $0.3 million recovery for the third quarter of 2009 and in line with the same 2008 period.

The net loss for the third quarter of 2009 amounted to $1.7 million compared to net earnings of $0.3 million in the second quarter of 2009 and a net loss of $1.2 million for the third quarter of 2008. The net loss per share amounted to $0.09 basic and diluted on the basis of 18,841,999 weighted average shares outstanding compared to a loss per share of $0.06 basic and diluted for the same 2008 period on the basis of 18,081,935 weighted average shares outstanding and earnings per share of $0.02 basic and diluted for the second quarter of 2009 on the basis of 18,176,019 weighted average shares outstanding.

As at September 30, 2009, the Company's cash position was $5.9 million, compared to $0.1 million as at December 31, 2008, and compared to a bank overdraft position of $1.0 million as at June 30, 2009. The net proceeds of $13.6 million from the Rights Offering helped restore the cash position, as well as reimbursing $5.0 million of capital on our Canadian long-term debt.

As at September 30, 2009, our backlog stood at $26.8 million compared to $28.1 million as at June 30, 2009, still representing approximately 5 months of revenues for LAB Canada and LAB Denmark and 12 months for LAB Hungary, based on the first nine months of 2009 average revenues. Despite strong contract quotation activity, the active backlog decreased from $11.8 million to $11.5 million due to lower conversion rates linked to changes in sponsors outsourcing practices and the lower average value of the contracts signed in a highly competitive market.

2009 Outlook

During the first nine months of 2009, the Company had to address the economic downturn, excess capacity in our sector, the financial covenants issue with our Canadian lender and limited liquidities. All these factors 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 restructuring of its European operations and implementation of cost control measures in all operating units to rapidly improve its financial performance; 2) a restructuring of its Canadian debt facilities following the closing of the Rights Offering; 3) securing a $7.5 million loan with a government agency; 4) the closing of a $14.2 million Rights Offering; and 5) the doubling the number of business development professionals actively promoting our expanded service offering and capacity. Management believes that all these actions will drive improved financial performance and help regain the support of both the capital and commercial markets. The Company appreciates that the Rights Offering has caused a significant dilution to shareholders who decided not to participate. However, we believe the Rights Offering was 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.

"Having successfully addressed current issues impacting the perception of the commercial and financial market towards our Company, we are confident in our ability to meet our growth objectives over the coming quarters. We also remain committed to deliver profitability at all our sites in the near future" 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.

    
                                PRESS RELEASE

                                 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 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 September 30, 2009 and
2008, and June 30, 2009 and for the nine-month periods ended September 30,
2009 and 2008.

                                     Three months ended     Nine months ended
                                 -------------------------- -----------------
                                    September 30    June 30    September 30
                                 ----------------- -------- -----------------
                                    2009     2008     2009     2009     2008
                                 -------- -------- -------- -------- --------
    (in thousands of dollars)          $        $        $        $        $
    Net (loss) earnings           (1,696)  (1,171)     316   (4,341)     124
    Adjustments for:
      Income taxes (recovery)       (254)    (246)    (148)    (488)     301
      Interest expense on
       long-term debt                753      622      641    2,107    1,775
      Amortization                 1,661    1,378    1,592    4,851    3,916
                                 -------- -------- -------- -------- --------
    EBITDA                           464      583    2,401    2,129    6,116
    Foreign exchange                (131)     130   (1,070)     311     (489)
    Restructuring charges              -       17        -        -       64
                                 -------- -------- -------- -------- --------
    Adjusted EBITDA                  333      730    1,331    2,440    5,691
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------
    Adjusted EBITDA margin %         2.5%     5.2%     6.0%     6.1%    12.5%
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------

    (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 September 30, 2009 and 2008, and June 30, 2009 and the nine-month
periods ended September 30, 2009 and 2008.

                                     Three months ended     Nine months ended
                                 -------------------------- -----------------
                                    September 30    June 30    September 30
                                 ----------------- -------- -----------------
                                    2009     2008     2009     2009     2008
                                 -------- -------- -------- -------- --------
                                       $        $        $        $        $
    (in thousands of dollars)

    Revenues                      13,064   14,110   13,885   39,936   45,659
    Direct costs                   9,363   10,552    9,790   28,758   31,799
                                 -------- -------- -------- -------- --------
    Gross margin                   3,701    3,558    4,095   11,178   13,860
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------

    Gross margin %                  28.3%    25.2%    29.5%    28.0%    30.4%
                                 -------- -------- -------- -------- --------
                                 -------- -------- -------- -------- --------


    LAB RESEARCH INC.
    Consolidated Balance Sheets
    (Unaudited)

    September 30, 2009 and December 31, 2008
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                  September 30,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
                                                                    (audited)
    Assets

    Current assets:
      Cash and cash equivalents                    $     5,888   $       102
      Accounts and other receivables                     6,994        10,011
      Work in progress                                   2,900         3,511
      Income taxes receivable                            3,077         1,473
      Prepaid expenses                                   1,803         1,410
      Future income taxes                                3,128         3,083
      -----------------------------------------------------------------------
                                                        23,790        19,590

    Property and equipment                              78,589        85,607
    Intangible assets                                    1,288         1,845
    Other assets                                        10,187         6,916
    Future income taxes                                  1,608         1,620
    -------------------------------------------------------------------------
                                                   $   115,462   $   115,578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities     $    10,436   $    14,343
      Holdback payable                                       -         1,750
      Deferred revenue                                   6,994         9,180
      Current portion of long-term debt                  3,352        39,416
      Future income taxes                                  664           720
      -----------------------------------------------------------------------
                                                        21,446        65,409

    Other debt                                               -           140
    Deferred gain on sale of equipment                      48             -
    Long-term debt                                      52,347        17,264
    Future income taxes                                  2,253         2,529
    Shareholders' equity:
      Share capital                                     78,156        63,951
      Warrants                                             575             -
      Additional paid-in capital                         1,400         1,077
      -----------------------------------------------------------------------
                                                        80,131        65,028

      Accumulated other comprehensive (loss) income       (339)          682
      Deficit                                          (40,424)      (35,474)
      -----------------------------------------------------------------------
                                                        39,368        30,236

    -------------------------------------------------------------------------
                                                   $   115,462   $   115,578
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB RESEARCH INC.
    Consolidated Statements of Earnings
    (Unaudited)

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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   Three months               Nine months
                                      ended                      ended
                                   September 30,              September 30,
                               ----------------------- ----------------------
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------

    Revenues              $    13,064   $   14,110   $   39,936   $   45,659

    Expenses:
      Direct costs              9,363       10,552       28,758       31,799
      Selling, general
       and administrative       3,273        2,730        8,415        7,887
      Restructuring
       charges                      -           17            -           64
      Stock-based
       compensation                95          113          323          344
      Amortization of
       property and
       equipment                1,523        1,241        4,430        3,508
      Amortization of
       intangible assets          138          137          421          408
      Interest, net               753          607        2,107        1,713
      Foreign exchange
       (gain) loss               (131)         130          311         (489)
      -----------------------------------------------------------------------
                               15,014       15,527       44,765       45,234
    -------------------------------------------------------------------------
    (Loss) earnings before
      income taxes             (1,950)      (1,417)      (4,829)         425
    (Recovery) provision
      for income taxes           (254)        (246)        (488)         301
    -------------------------------------------------------------------------
    Net (loss) earnings   $    (1,696)  $   (1,171)  $   (4,341)  $      124
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (Loss) earnings per
     share:
      Basic               $     (0.09)  $    (0.06)  $    (0.24)  $     0.01
      Diluted                   (0.09)       (0.06)       (0.24)        0.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average
     number of
     outstanding shares:
      Basic                18,841,999   18,081,935   18,342,456   18,050,117
      Effect of dilutive
       options                      -            -            -      255,238
    -------------------------------------------------------------------------
      Diluted              18,841,999   18,081,935   18,342,456   18,305,335
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   Three months               Nine months
                                      ended                      ended
                                   September 30,              September 30,
                               ----------------------- ----------------------
                                 2009         2008         2009         2008
    -------------------------------------------------- ----------------------
    Cash flows (used in)
     from operating
     activities:
      Net (loss) earnings $    (1,696)  $   (1,171)  $   (4,341)  $      124
      Adjustments for:
        Amortization of
         property and
         equipment              1,523        1,241        4,430        3,508
        Amortization of
         intangible assets        138          137          421          408
        Unrealized gain on
         foreign exchange        (116)        (117)        (185)        (264)
        Stock-based
         compensation              95          113          323          344
        Future income
         taxes                    (37)          49         (112)        (199)
        Other                      35           20           81           34
      Net changes in
       non-cash
       balances related
       to operations           (3,283)         (48)      (6,819)      (2,791)
    -------------------------------------------------------------------------
                               (3,341)         224       (6,202)       1,164

    Cash flows (used in)
     from financing
     activities:
      Proceeds from
       issuance of shares      14,195           66       14,205          155
      Share issue costs          (609)           -         (609)           -
      Proceeds from the
       sale and leaseback
       of equipment                 -            -        1,188            -
      Proceeds from
       issuance of long-
       term debt                4,217        4,786        6,556       16,144
      Repayment of long-
       term debt               (5,575)        (527)      (6,968)      (1,587)
      Repayment of
       capital leases            (144)        (221)        (476)        (512)
      Payment of bank
       indebtedness            (1,051)           -            -            -
    -------------------------------------------------------------------------
                               11,033        4,104       13,896       14,200

    Cash flows (used in)
     from investing
     activities:
      Payment of holdback
       payable                 (1,750)           -       (1,750)           -
      Additions to
       property and
       equipment                 (466)      (8,258)      (2,103)     (21,333)
      Proceeds from a
       grant                        -            -        1,490            -
      Other                       305           46          195           39
    -------------------------------------------------------------------------
                               (1,911)      (8,212)      (2,168)     (21,294)

    Effect of exchange
     rate changes on cash
     and cash equivalents
     denominated in
     foreign currencies           107          308          260           40
    -------------------------------------------------------------------------
    Net increase (decrease)
     in cash and cash
     equivalents                5,888       (3,576)       5,786       (5,890)

    Cash and cash
     equivalents,
     beginning of period            -        4,511          102        6,825
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                $    5,888   $      935   $    5,888   $      935
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

%SEDAR: 00023798EF

SOURCE LAB RESEARCH INC.

For further information: For further information: 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; www.labresearch.com

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