LAB Research Inc. announces 2006 Financial Results - Record revenues of $49.6 million, up 7%. Net earnings up 52%

    LAVAL, QC, March 14 /CNW Telbec/ - LAB Research Inc. (TSX: LRI) ("LAB
Research" or the "Company"), a rapidly growing non-clinical contract research
organization with operations in both North America and Europe, announced today
its fourth quarter and year-end 2006 financial results. To the extent that
this press release contains forward-looking statements, investors are
cautioned that these are based on our current views, and actual outcomes are
not certain.

    2006 Highlights

    - Record revenues at $49.6 million, a 7% increase over 2005.
    - Record net earnings of $4.9 million, increase by 52% over 2005.
    - Record earnings per share of $0.31 per share, a 35% increase over 2005.
    - Adjusted EBITDA of $10.7 million (21.6% margin) represents an increase
      of 17% over 2005 of $9.2 million (19.9% margin).
    - Gross margin percentage increased from 39% in 2005 to 41%.
    - The Canadian operation completed its building expansion in December.
    - On August 3, 2006, LAB Research completed its Initial Public Offering
      ("IPO") of 3,750,000 common shares or gross proceeds of $15 million. As
      part of a concurrent secondary offering, 6,250,000 common shares were
      sold by LAB International Inc. ("LAB International") for gross proceeds
      of $25 million.
    - On September 12, 2006, the underwriters of the IPO exercised the over-
      allotment option for total gross proceeds to LAB International of
      $6 million, bringing its residual ownership in LAB Research to 35.4%.
    - On November 9, 2006, LAB International sold, on a private placement
      basis, 6,392,857 special warrants at a price of $4.05 per special
      warrant for gross proceeds of $25.9 million representing its entire
      residual ownership position. Each special warrant entitled the holder
      thereof to receive from LAB International one common share of LAB
      Research for no additional consideration. As a result of the above
      transactions, LAB International and its affiliates no longer hold any
      of the outstanding shares of LAB Research. In addition, all three LAB
      Research Directors named by LAB International at the time of IPO have
      since resigned from the Board of LAB Research.

    "2006 has been an exciting and rewarding year for all of LAB Research's
employees, shareholders and other stakeholders. In addition to having
succeeded in executing the complete spin-off of LAB Research from our previous
parent, LAB International, we have initiated a $25 million investment campaign
over 2006 and 2007 designed at providing additional capacity throughout our
main facilities to capitalize on the favourable trends in our industry" stated
Mr. Mainville, Chief Executive Officer and President of LAB Research.
    "Having delivered a solid operating performance and completed the Canadian
expansion on time in 2006, we will now focus on delivering continued organic
growth from our existing operations by ensuring the timely completion of our
two European sites expansion in 2007 as well as implementation of other
strategic initiatives aimed at improving our profitability and expanding our
pre-clinical platform. Finally, in order to continue promoting excellence in
our research services, we will keep on attracting talented employees that will
help broaden our service offering as well as maintain and elevate our
scientific standards." added Mr. Mainville.

    Financial Results

    LAB Research's revenues for the fourth quarter were $13.2 million up by
22.5% from the same period last year of $10.8 million. For 2006, LAB
Research's revenues totalled $49.6 million and were 7% higher than those of
2005, even though LAB Research was already working at almost full capacity in
2005. The comparative year included the results of operations of Scantox,
Biologisk Laboratorium A/S ("LAB Research Denmark") from January 1, 2005.
    Revenues for the fourth quarter of 2006 for LAB Research North America,
which incorporates our Canadian ("LAB Research Canada") and US ("LAB Research
US") operations, were $4.0 million, in line with those of the corresponding
period of 2005, but higher than the $3.9 million reported in the previous
quarter. For 2006, revenues from LAB Research North America reached
$16.7 million, representing a 10% reduction from last year. 2006 Revenues were
primarily impacted by a series of organizational changes to our scientific and
business development staff to better prepare LAB Research Canada for the next
phase of growth. These changes were completed during the third quarter. Our
results were also negatively influenced by a 6.4% decrease in the value of the
U.S. dollar relative to the Canadian dollar and a higher mix of longer term
studies which led to less than expected study starts. All the latter studies
ended during the fourth quarter of this year. For 2006, in excess of 67% of
LAB Research Canada's revenues were denominated in U.S. dollars. The
49,000 sq. ft. expansion to the existing Canadian facility started in February
2006 and the first studies in the new portion of our facility were initiated
in December. The completion of the expansion coincided with the termination of
a lease providing 21,000 sq. ft. of animal rooms and laboratory capacity. Once
fully operational, we believe the additional capacity will increase the
revenue capacity of the site by 40% as well as provide efficiency gains. LAB
Research US's revenues for the fourth quarter of 2006 were $0.3 million
compared to $0.5 million over the corresponding period in 2005. Revenues for
2006 from LAB Research US totalled $1.8 million compared to $1.6 million, up
by 12% over last year due to an improved utilization of the animal rooms under
    LAB Research Denmark posted revenues of $5.9 million for the last quarter
of the year, an increase of 25% over the same quarter last year of
$4.7 million. LAB Research Denmark revenues for 2006 totalled $23.2 million
representing a 17% increase over last year of $19.8 million. The comparative
period in 2005 included the results of operations of LAB Research Denmark from
January 1, 2005. LAB Research Denmark continues to operate at close to full
capacity and its performance during the year reflects the efforts made by
local management to focus on an improved business mix and better utilization
of its existing capacity. The expansion of this facility has commenced and is
scheduled to be completed in the third quarter of 2007. The performance of LAB
Research Denmark in 2006 has been affected by a 6% decrease of the local
currency compared to the reporting currency.
    For the fourth quarter of 2006, LAB International Research Hungary Centre
LLC ("LAB Research Hungary") revenues totalled $3.3 million, 65% greater than
the same period last year. For 2006, LAB Research Hungary generated revenues
of $9.7 million compared to $7.8 million in 2005, a 25% increase.
Notwithstanding an 11% decrease in the value of the local currency compared to
the reporting currency, the performance of the Hungarian site results from a
continued increase in the utilization of the overall site capacity and
increased inhalation toxicology activity derived from a combination of chronic
and acute studies. Expansion and reconfiguration of the LAB Research Hungary
facility to adapt the site to better serve the biotech and pharma sectors have
started in January 2007 and will provide improved capabilities and capacity by
the third quarter of 2007.
    Overall gross margin, for the last quarter of 2006 reached 43% compared to
35% for the same quarter last year. The gross margins for 2006 and last year
were 41% and 39% respectively. Gross margin for LAB Research Denmark were
better than prior periods due to an improved business mix and better
utilization of its existing capacity while LAB Hungary's gross margins
increased substantially due to higher margins on the inhalation studies as
well as the severe drop of the local currency compared to the Euro which
constitutes the bulk of the revenues. These favourable factors were offset by
additional rent expense relating to the Canadian facility sale-leaseback
transaction representing a 4% negative impact as well as negative impact of
the foreign exchange which continued to affect margins in the Canadian
    Selling, general and administrative ("SG&A") expenses including allocated
costs for 2006 were $10.9 million compared to $8.9 million last year,
representing 22% and 19% of revenues respectively. The increase of
$2.0 million in SG&A expenses is namely due to $0.3 million in severance costs
for the restructuring of LAB Canada prior to taking LAB Research public, to
$0.4 million of provision for bad debts, $0.3 million of increase in
information technology services, $0.2 million increase in lease expense, $0.3
million in additional salaries in business development and administration in
relation with the building expansions taking place in Canada, Denmark and
Hungary. During the fourth quarter of 2006, SG&A expenses were $3.1 million or
23% of revenues compared to $1.4 million or 17% of revenues for the
corresponding period in 2005.
    EBITDA for the fourth quarter of 2006 was $2.9 million, compared to
$2.4 million in the corresponding period in 2005, representing an increase of
24%. After adjusting for the impact of the Laval facility sale-leaseback
transaction and the write-off of property and equipment, Adjusted EBITDA for
the fourth quarter of 2006 was $3.2 million, compared to $2.5 million in the
corresponding period in 2005, representing an increase of 26%. EBITDA for 2006
was $9.7 million, compared to $8.5 million for 2005, representing an increase
of 14%. Adjusted EBITDA for 2006 was $10.7 million, an increase of
$1.5 million or 17% compared to $9.2 million in 2005. Adjusted EBITDA margins
for the fourth quarters of 2006 and 2005 were 24% compared to 23%
respectively. Adjusted EBITDA margins for 2006 were 22% compared to 20% for
the corresponding period of 2005. The increased EBITDA resulted from a higher
gross margin for the quarter and for the year compared to previous period in
addition to higher foreign exchange gains in 2006 compared to 2005.
    Net earnings for 2006 were $4.9 million compared to $3.2 million in the
corresponding period in 2005, representing an increase of 52%. The improved
results of LAB Research Denmark and LAB Research Hungary have compensated the
lower profitability of the North America operations. Net earnings for the last
quarter of 2006 were $2.0 million compared to $1.1 million in the
corresponding period in 2005.
    Our cash position was $8.5 million as at December 31, 2006 compared to
$3.7 million as at December 31, 2005. Prior to the IPO, cash surpluses
generated by LAB Research have, historically, been used, in part, to fund LAB
International's drug development activities. Since the IPO, all funds
generated by our business are retained to pursue the development of the
pre-clinical research business.
    For the year ended December 31, 2006, cash flow generated by the operating
activities was $7.9 million compared to $7.7 million in 2005.
    Cash flow from financing activities for 2006 was $10.4 million and
comprised $13.1 million net proceeds from the IPO less $2.8 million of net
debt and loan repayments. We finance part of our property and equipment
purchases with long-term debt. At December 31, 2006 and December 31, 2005, we
had $8.8 million and $10.4 million of long-term debt, respectively. We fund
repayments under these debt agreements from operating cash flows.
    We used $13.8 million and $8.2 million of cash for investing activities
during the years 2006 and 2005 respectively. During the last quarter of 2006,
LAB Research paid the advances outstanding to LAB International and its
affiliates. The 2006 amount includes $8.5 million of costs incurred for the
Canadian facility to be reimbursed by the landlord. The 2005 amounts include
cash used for the acquisition of LAB Research Denmark in the amount of
$5.7 million. Additions to property and equipment in the year 2006 totalled
$6.1 million compared to $2.5 million in 2005. In 2006, fixed assets additions
were primarily for improvements and building expansion of the facility in
Denmark (approximately $2.5 million), improvements to the LAB Research
Canada's facilities (approximately $1.3 million), approximately $2.0 million
in laboratory equipment including those required for the expansion in Canada,
and approximately $0.3 million computer hardware and software relating to the
implementation of a new data management system.

    Subsequent event

    On March 8, 2007, LAB Research announced it had entered into an agreement
to purchase the property it occupies in Laval, Canada. The purchase price for
the property is $23 million subject to normal closing adjustments. Of this
amount, $10 million will be deducted from the purchase price for amounts owing

    About LAB Research Inc.

    LAB Research is a non-clinical contract research organization (CRO) that
provides contract research services to the pharmaceutical, biotechnology and
agro-chemical market. LAB Research supports the development of its customers'
products from four state-of-the-art facilities located in Canada, the United
States, Denmark and Hungary. LAB Research's shares trade on the TSX under the
symbol "LRI" with 18.0 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.

    Consolidated and Combined Carve-Out Balance Sheets

    December 31, 2006 and 2005
    (in thousands of Canadian dollars)
                                                            2006        2005


    Current assets:
      Cash                                             $   8,516   $   3,727
      Accounts and other receivables                      16,661       6,923
      Work in progress                                     2,209       2,314
      Income taxes receivable                                268           -
      Prepaid expenses                                     1,104         862
                                                          28,758      13,826

    Property and equipment                                24,784      17,937
    Intangible assets                                      2,748       2,944
    Other assets                                           2,119       1,745
    Future income taxes                                    6,026         578
                                                       $  64,435   $  37,030

    Liabilities and Shareholders' Equity and LAB International's
     Net Investment

    Current liabilities:
    Bank loan                                          $     223   $     432
      Accounts payable and accrued liabilities             9,916       7,165
      Holdback payable                                       913           -
      Income taxes payable                                     -       1,573
      Deferred revenue                                     6,194       4,673
      Current portion of long-term debt                    1,230       2,320
      Deferred gain on sale of property                       84          68
      Future income taxes                                    745         517
      Advances from companies under common control             -       2,897
                                                          19,305      19,645

    Deferred rent liability                                  253          37
    Deferred gain on sale of property                      1,501       1,603
    Long-term debt                                         7,586       8,049
    Future income taxes                                    2,847       1,821

    Shareholders' equity and LAB International's
     net investment:
      Share capital                                       63,672           -
      Additional paid-in capital                             181           -
      Cumulative translation adjustment                     (263)     (1,462)
      Segment equity                                           -       7,337
      Deficit                                            (30,647)          -
                                                          32,943       5,875
    Commitments and contingencies
    Subsequent events
                                                       $  64,435   $  37,030

    Consolidated and Combined Carve-Out Statement of Earnings

    December 31, 2006 and 2005
    (in thousands of Canadian dollars, except per share data)
                                                            2006        2005

    Revenues                                           $  49,633   $  46,224

      Direct costs                                        29,272      28,271
      Selling, general and administrative                 10,855       8,880
      Stock-based compensation                               216         128
      Amortization of property and equipment               2,310       2,741
      Amortization of intangible assets                      501         484
      Interest on long-term debt                             562         804
      Write-off of property and equipment                      3         574
      Foreign exchange                                      (386)       (118)
                                                          43,333      41,764

    Earnings before income taxes                           6,300       4,460

    Provision for income taxes                             1,365       1,213

    Net earnings                                       $   4,935   $   3,247

    Earnings per share:
      Basic                                            $    0.31   $    0.23
      Diluted                                               0.31        0.23

    Consolidated and Combined Carve-Out Statements of Cash Flows

    Years ended December 31, 2006 and 2005
    (in thousands of Canadian dollars)
                                                            2006        2005

    Cash flows from operating activities:
      Net earnings                                     $   4,935   $   3,247
      Adjustments for:
      Amortization of property and equipment               2,310       2,741
      Write-off of property and equipment                      3         574
      Amortization of intangible assets                      501         484
      Amortization of deferred financing fees                 38           6
      Unrealized gain on foreign exchange                    (98)          -
      Stock-based compensation                               216         128
      Amortization of deferred gain of property              (86)        (12)
      Deferred rent liability                                216           -
      Future income taxes                                 (1,823)     (2,064)
      Net changes in operating assets
       and liabilities                                     1,456       2,543
                                                           7,668       7,647
    Cash flows from financing activities:
      Proceeds from issuance of common shares             15,000           -
      Share issue costs                                   (1,850)          -
      Proceeds from sale-leaseback                             -       6,250
      Fees on sale-leaseback transaction                       -        (303)
      Proceeds from issuance of long-term debt                62         960
      Proceeds from issuance of capital lease                123           -
      Repayment of long-term debt                         (2,276)     (5,356)
      Repayment of capital leases                           (703)       (364)
      Net advances from companies under common control    (2,897)      1,157
      Changes in net assets not transferred by
       LAB Canada                                          3,339        (478)
      Proceeds from bank loan                                223         432
      Repayments under bank credit facilities               (432)        (53)
                                                          10,589       2,245
    Cash flows from investing activities:
      Business acquisitions, net of cash acquired              -      (5,732)
      Payment of holdback payable                              -         (65)
      Additions to property and equipment                 (6,122)     (2,498)
      Proceeds from disposal of property and equipment       165           -
      Costs incurred for the Canadian expansion to be
       reimbursed by the landlord                         (8,500)          -
      Other assets                                           691          67
                                                         (13,766)     (8,228)

    Net increase in cash                                   4,491       1,664
    Cash, beginning of year                                3,727       2,175
    Effect of exchange rate changes                          298        (112)
    Cash, end of year                                  $   8,516   $   3,727
    %SEDAR: 00023798EF

For further information:

For further information: LAB Research Inc.: Luc Mainville, President and
CEO, (450) 973-2240, ext.: 1206,,; Echoes Financial Network Inc.: Dominic Sicotte, (514)
842-9551, ext.: 101, (866) 633-9551,,

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