LAB Research Inc. announces Sixth Consecutive Record Quarterly Revenues - Second Quarter Net Earnings from continuing operations increased by 88%



    LAVAL, QC, Aug. 9 /CNW Telbec/ - LAB Research Inc. ("LRI" or "LAB
Research") (TSX: LRI), a fast-growing international non-clinical contract
research organization, has announced its second quarter 2007 financial
results. As this press release contains forward-looking information, investors
are cautioned that the statements presented are based on current assumptions
and that actual outcomes are uncertain.

    
    First Half 2007 Highlights from continuing operations:

    - Q2 Record revenues of $15 million, representing a 29% increase over
      Q2 2006;
    - Q2 net earnings of $1.6 million, representing a 88% increase over
      Q2 2006;
    - Q2 earnings per share of $0.09, representing a 50% increase over
      Q2 2006;
    - Six month revenues 2007: $28.3 million, compared to $23.0 million in
      2006, representing a 23% increase;
    - Six month earnings 2007: $2.9 million compared to $1.8 million in 2006,
      representing a 64% increase;
    - Six month earnings per share : $0.16 for 2007 compared to $0.12 for
      2006, representing a 33% increase;
    - Purchase of the property in Laval, Canada;
    - Canadian facility operating at full capacity;
    - Denmark expansion completed on time and on budget;
    - San Diego operations ceased on April 30, 2007.

    "Our solid team execution translated into another record revenues and
strong earnings performance for the second quarter 2007", said Luc Mainville,
President and CEO of LAB Research. The series of initiatives implemented over
the last 12 months is now paying off as we focus on growing our core
non-clinical business. With our Canadian expansion recently completed, and now
fully booked, our Denmark expansion ready to operate, capacity soon to be
added in Hungary, and our strong $22 million backlog, we feel very positive
about the perspectives for the remainder of the calendar year." added
Mr. Mainville.

    FINANCIAL RESULTS

    - Continuing operations

    LAB Research posted revenues of $15.0 million for the second quarter of
2007, up by 29.2% from the $11.6 million generated during the same period of
2006, and up by 12.5% from the $13.3 million achieved in the first quarter of
2007. For the six-month period ended June 30, 2007 LAB Research posted
revenues of $28.3 million compared to $23.0 million for the same period of
2006, representing an increase of 23.2%.
    LAB Research Canada posted revenues of $6.4 million for the second quarter
of 2007, compared to $3.5 million for the same period of 2006 and $4.1 million
for the first quarter of 2007, representing increases of 83.5% and 56.2%,
respectively. For the six-month period ended June 30, 2007, LAB Research
Canada posted revenues of $10.4 million, up 35.8% from $7.7 million for the
same period in 2006. The increase in revenues is attributable to the
completion of the extension of its facility in December 2006.
    LAB Research Denmark posted revenues of $6.1 million for the second
quarter of 2007, in line with those generated in the same period in 2006, but
3.0% lower than those posted in the first quarter of 2007 of $6.3 million. The
depreciation of the Danish Kroner by 3.5% compared to the Canadian dollar
explains the negative variance between the first and the second quarters of
2007. LAB Research Denmark continues to operate at close to full capacity and
its performance during the quarter reflected the continued efforts made by
local management to focus on an improved business mix and an optimal
utilization of its existing capacity. For the six-month period ended June 30,
2007, LAB Research Denmark posted revenues of $12.5 million compared to $11.4
for the same period in 2006, representing a net increase of 9.7%,
notwithstanding the devaluation of the Danish Kroner compared to the Canadian
dollar. LAB Research Denmark began expanding its facility in 2006. It was
completed in July 2007.
    LAB Research Hungary posted revenues of $2.5 million for the second
quarter of 2007, 22.5% more than the $2.0 million generated in the same period
of 2006, but 15.1% lower than those posted in the first quarter of 2007 of
$2.9 million. Revenues for the first six months of 2007 stood at $5.4 million,
compared to $3.9 million for the same period of 2006, representing an increase
of 37.6%. The positive variance between the three and six-month periods ended
June 30 2007 and 2006 is due to a better use of the overall site capacity and
the appreciation of the Hungarian forint by 12.9% compared to the Canadian
dollar. The negative variance between the second and the first quarters of
2007 is due to a change in study mix and a depreciation of the Hungarian
forint by 1.9% compared to the Canadian dollar. LAB Research Hungary began
expanding and reconfiguring its facility in January 2007 to better serve the
biotech and pharma sectors. This initiative will provide improved capabilities
and expanded large animal housing capacity by the end of the third quarter of
2007.
    Overall gross margin was 39% for the second quarter of 2007, in line with
that generated in the same period last year and our 2007 year-to-date gross
margin was 38%, compared to 39% 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
building and helped improve our gross margin in Canada. Our gross margin also
improved in Denmark, as a result of tighter control over salaries and improved
study mix. The decrease in LAB Research Hungary's gross margin is due to a
change in study mix, as explained above.
    Selling, general and administrative ("SG&A") expenses were $2.3 million
for the second quarter of 2007, slightly lower than those incurred during the
same period of 2006 of $2.4 million, and represented 15.4% and 20.9% of
revenues. For the six-month period ended June 30, 2007, our SG&A expenses were
$4.6 million, compared to $4.8 million for the same period in 2006,
representing 16.3% and 20.9 % of revenues, respectively. The decrease in SG&A
can be explained by a tight control over expenses and lower sales commissions
due to a stronger new business development group, which is less reliant on
third party consultants.
    EBITDA for the second quarter of 2007 of $3.2 million compared to
$2.0 million as reported for the same period of 2006, representing an increase
of 60.1%. After adjusting for the impact of the Canadian facility
sale-leaseback transaction, our adjusted EBITDA for the second quarter of 2007
amounted to $3.3 million, compared to $2.3 million for the same period of
2006, representing an increase of 46.2%. Our adjusted EBITDA margins for the
second quarter of 2007 and 2006 were 22.2% and 19.6% respectively. Our 2007
year-to-date EBITDA was $5.7 million, compared to $4.3 million for the same
period of 2006, and our adjusted EBITDA was $6.1 million, compared to $4.8
million, representing 21.6% and 21.0% of revenues, respectively. The increased
EBITDA margins is due to the reacquiring of the building in Canada, which
resulted in converting the "lease expense", included in the EBITDA
calculation, before April 17, 2007 into "amortization and interest expense"
excluded from EBITDA calculation. The strong EBITDA performance is also due to
higher revenues generated with fewer SG&A expenses.
    Our amortization expense for the second quarter of 2007 amounted to
$1.0 million, compared to $0.8 million for the same period of 2006. For the
six-month period ended June 30, 2007, it was $1.8 million, compared to
$1.5 million in 2006. The increase is due to additional amortization since the
repurchase of the building in Canada in April 2007.
    Our net interest expense, for the second quarter of 2007, amounted to $0.3
million, compared to $0.1 million for the same period of 2006. For the
six-month period ended June 30, 2007, it was $0.4 million, compared to
$0.3 million. The increase is due, primarily, to the additional debt issued in
connection with the reacquiring of the building in Canada in April 2007.
    Our foreign exchange loss for the second quarter of 2007 amounted to
$0.2 million, compared to a nominal loss for the same period of 2006. For the
six months ended June 30, 2007, the foreign exchange loss was $0.2 million,
compared to a gain of less than $0.1 million. This increase is due to the
strengthening of Canadian dollar over the US dollar during the quarter and not
covered by the forward hedging contracts in place.
    Our provision for income taxes in the second quarter of 2007 and 2006
stood at $0.3 million and $0.2 million, respectively, representing 15.8% and
19.7% of the earnings before income taxes compared to a combined Canadian
federal and Quebec provincial income taxes rate of 32%. For both the six-month
periods ended June 30, 2007 and 2006, our provision for income taxes amounted
to $0.7 million taxes and represented 18.9% and 29.0% of our earnings before
income taxes, respectively, compared to the combined Canadian federal and
Quebec provincial income taxes rate of 32%. For all periods, the variance from
the combined rate is due to adjustments related to lower income taxes rates
enacted in Denmark and Hungary and tax credits not taxable in Canada. During
the second quarter of 2007, Danish tax authorities voted a corporate tax cut
of 3.0%, retroactively to January 1, 2007. The retroactive adjustment on
current taxes and future tax liabilities was booked in the second quarter
creating a positive variance of approximately $0.2 million and representing
12% of the earnings before income taxes.
    Net earnings for the second quarter of 2007 amounted to $1.6 million,
compared to $0.9 million for the same period in 2006, up by 88.2%. Our
year-to-date net earnings were $2.9 million and $1.8 million for 2007 and 2006
respectively, up by 63.6%. This stronger performance is due to improved
results in all our operating units as explained above.
    Our earnings per share for the second quarter of the 2007 amounted to
$0.09 per share on the basis of 18,035,714 shares issued, compared to $0.06
per share for 2006 on the basis of 14,142,857 shares issued. For the
year-to-date 2007, the earnings per share were $0.16 per share on the basis of
18,035,714 shares issued, compared to $0.12 on the basis of 14,142,857 shares
issued for the same period of 2006.

    - Discontinued operations

    On April 30, 2007, we discontinued our vivarium management activities
conducted by LAB US. The activities of LAB US have been classified as
discontinued operations and the results have been reported as a separate
element of income or loss for both current and prior periods, in the
consolidated and combined carve-out statements of operations.
    The closure of LAB US did not result in a significant gain or loss to the
Company. At June 30, 2007, the remaining net assets related to these
operations were not material to the Company's consolidated balance sheet.
    The following represents financial information related to discontinued
operations:

                                  Three months ended        Six months ended
                                             June 30                 June 30
                                    2007        2006        2007        2006
                                   ------      ------      ------      ------
                                       $           $           $           $
    (in thousands of dollars)
    Revenues                         107         735         391       1,174
    Expenses
      Direct costs                    75         299         297         602
      Selling, general and
      administrative                  46         286         142         352
      Amortization of property
       and equipment                   6          15          21          30
      Write-off of property
       and equipment                   5           0           5           0
                                   ------      ------      ------      ------
    Net earnings (loss)              (25)        135         (74)        190
                                   ------      ------      ------      ------
                                   ------      ------      ------      ------


    - Liquidity and Cash Resources

    As at June 30, 2007, our cash position was $5.5 million, compared to
$5.6 million as at March 31, 2007 and $8.5 million as at December 31, 2006.
    For the second quarter of 2007, cash flows used by the operating
activities were nominal compared to less than $0.1 million for the same period
in 2006. For the six-month period ended June 30, 2007, cash flows generated by
the operating activities were $2.0 million compared to $1.1 million for the
same period in 2006. For the year-to-date, the increase in net earnings
explains the positive variance in cash flows from operating activities.
    Cash flows provided by financing activities during the second quarter of
2007 were $19.8 million. During the quarter, we issued long-term debt of
$23.1 million, net of financing fees of $0.3 million and repaid $3.3 million
of long-term debt and capital leases. The issue of long-term debt of
$23.4 million included $17.0 million to finance the Buy-back, $2.5 million to
finance the equipment needed for the expansion in Canada, and $2.0 million and
$1.9 million to finance the building extensions in Hungary and Denmark,
respectively. For the same period of 2006, cash provided by financing
activities was $2.0 million, and mainly included the following: net advances
of $2.4 million from companies under common control and proceeds from bank
facilities of $0.2 million offset by the repayment of long-term debt and
capital leases of $0.6 million. For the six-month period ended June 30, 2007,
cash flows provided by the financing activities amounted to $19.2 million and
included the following: issue of long-term debt of $23.1 million, net of
financing fees, offset by repayment of long-term debt, capital leases and bank
facilities of $3.9 million. For the same period of 2006, our cash flows used
in financing activities amounted to $1.0 and mainly included repayment of
long-term debt, bank facilities and capital leases of $1.5 million as well as
net advances of $0.5 million from companies under common control.
    During the second quarter of 2007, we used $20.0 million in cash flows in
investing activities, compared to $1.4 million for the same period of 2006.
Property and equipment additions during the second quarter of 2007 and 2006
amounted to $20.2 million and $0.7 million, respectively. For the six-month
period ended June 30, 2007 and 2006, we used $24.4 million and $2.2 million of
cash flows in investing activities, respectively. For the six-month period
ended June 30, 2007, major additions to property and equipment in 2007
included: the Buy-back ($13.9 million), the building expansions of the Danish
($3.5 million) and Hungarian ($3.0 million) facilities, $2.2 million in
laboratory equipment including equipment required for the expansion completed
in 2006 in Canada ($1.0 million), and $0.7 million in computer hardware and
software, which was used to implement a new data management system. Due to the
recent extensions of the Canadian and Danish facilities completed in 2006 and
2007, respectively, and the expansions in progress in Hungary, we estimate
that annual replacement or upgrades of capital expenditures will represent 3
to 5% of our revenues.
    We finance part of our property and equipment purchases with long-term
debt. At June 30, 2007 and December 31, 2006, we had $28.0 million and
$8.8 million of long-term debt, respectively. We fund repayments under these
debt agreements from our operating cash flows. The increase in long-term debt
is mainly due to the financing of the Buy-back, as well as the financing of
the building expansions in Denmark and Hungary.
    As at June 30, 2007, our backlog, which represents the value of client
contracts for services that have not yet been performed, amounted to
$22.0 million compared to $21.4 million as at March 31, 2007 and $18.5 million
as at December 31, 2006, representing increases of 2.8% and 18.9%,
respectively. As at June 30, 2007, our backlog represented in excess of 5
months of revenues for LAB Research Canada, 4 months for LAB Research Denmark
and 2 months for LAB Research Hungary, which serves mostly the agro-chemical
markets, where more short-term studies are conducted. This increase is due to
signing contracts in Canada following the opening of the newly expanded
facility.

    About LAB Research Inc.

    LAB Research is a 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)

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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Assets

    Current assets:
      Cash                                            $  5,467      $  8,516
      Accounts and other receivables                    10,791        16,661
      Work in progress                                   2,964         2,209
      Income taxes receivable                              832           268
      Prepaid expenses                                     881         1,104
    -------------------------------------------------------------------------
                                                        20,935        28,758

    Property and equipment                              53,388        24,784
    Intangible assets                                    2,329         2,748
    Other assets                                           433         2,119
    Future income taxes                                  6,613         6,026
    -------------------------------------------------------------------------
                                                      $ 83,695      $ 64,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities:
      Bank loan                                       $      -      $    223
      Accounts payable and accrued liabilities           9,687         9,916
      Holdback payable                                      78           913
      Deferred revenue                                   7,869         6,194
      Current portion of long-term debt                  1,566         1,230
      Deferred gain on sale of property                      -            84
      Future income taxes                                  189           745
    -------------------------------------------------------------------------
                                                        19,389        19,305

    Deferred rent liability                                  -           253
    Deferred gain on sale of property                        -         1,501
    Long-term debt                                      26,410         7,586
    Future income taxes                                  2,995         2,847
    Shareholders' equity:
      Share capital                                     63,672        63,672
      Additional paid-in capital                           407           181
      Accumulated other comprehensive loss                (978)         (263)
      Deficit                                          (28,200)      (30,647)
    -------------------------------------------------------------------------
                                                        34,901        32,943
    -------------------------------------------------------------------------
                                                      $ 83,695      $ 64,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        Three months              Six months
                                       ended June 30,          ended June 30,
                                ---------------------   ---------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Revenues                    $ 14,973    $ 11,590    $ 28,288    $ 22,958

    Expenses:
      Direct costs                 9,166       7,115      17,489      13,893
      Selling, general
       and administrative          2,300       2,427       4,610       4,795
      Stock-based
       compensation                  113          15         226          35
      Amortization of
       property and
       equipment                     838         674       1,528       1,293
      Amortization of
       intangible assets             130         125         265         246
      Interest, net                  338         147         409         290
      Write-off of
       property and
       equipment                       3          10          17          12
      Foreign exchange               166           9         205         (77)
    -------------------------------------------------------------------------
                                  13,054      10,522      24,749      20,487
    -------------------------------------------------------------------------

    Earnings before
     income taxes                  1,919       1,068       3,539       2,471
    Provision for
     income taxes                    304         210         668         716
    -------------------------------------------------------------------------

    Net earnings from
     continuing operations         1,615         858       2,871       1,755
    Net (loss) earnings
     from discontinued
     operations                      (25)        135         (74)        190
    -------------------------------------------------------------------------
    Net earnings                $  1,590    $    993    $  2,797    $  1,945
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share:
      Basic:
        Continuing
         operations             $   0.09    $   0.06    $   0.16    $   0.12
        Discontinued
         operations                    -        0.01           -        0.02
      -----------------------------------------------------------------------
                                $   0.09    $   0.07    $   0.16    $   0.14
      -----------------------------------------------------------------------
      Diluted:
        Continuing operations   $   0.09    $   0.06    $   0.16    $   0.12
        Discontinued
         operations                    -        0.01       (0.01)       0.02
      -----------------------------------------------------------------------
                                $   0.09    $   0.07    $   0.15    $   0.14
      -----------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted average number
     of outstanding shares:
      Basic                   18,035,714  14,142,857  18,035,714  14,142,857
      Effect of dilutive
       options                   352,159           -     233,664           -
    -------------------------------------------------------------------------
      Diluted                 18,387,873  14,142,857  18,269,378  14,142,857
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

    Period ended June 30, 2007
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        Three months              Six months
                                       ended June 30,          ended June 30,
                                ---------   ---------   ---------   ---------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Net earnings                $  1,590    $    993    $  2,797    $  1,945
    Unrealized (loss) gain
     on available-for-sale
     financial assets                 (8)          -           6           -
    Foreign exchange
     adjustment on
     self-sustaining
     foreign operations            (880)        (123)       (713)       (20)
    -------------------------------------------------------------------------
    Comprehensive earnings      $   702     $    870    $  2,090    $  2,090
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    LAB RESEARCH INC.
    Consolidated and Combined Carve-Out Statements of Shareholders' Equity
    (Unaudited)

    Period ended June 30, 2007
    (in thousands of Canadian dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                             Accumulated
                                                   other
                                    Additional    compre-
                               Share   paid-in   hensive
                             capital   capital      loss   Deficit     Total
    -------------------------------------------------------------------------

    Balance,
     December 31, 2006      $ 63,672  $    181  $   (263) $(30,647)  $ 32,943
    Changes in accounting
     policies                      -         -        (8)     (350)     (358)
    Net earnings                   -         -         -     2,797     2,797
    Foreign exchange
     adjustment on
     self-sustaining
     foreign operations            -         -      (713)        -      (713)
    Stock-based
     compensation                  -       226         -         -       226
    Unrealized gain
     on available-for-sale
     assets                        -         -         6         -         6
    -------------------------------------------------------------------------

    Balance,
     June 30, 2007          $ 63,672  $    407  $   (978) $(28,200) $ 34,901
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                        Three months              Six months
                                       ended June 30,          ended June 30,
                                ---------------------   ---------------------
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Cash flows from operating
     activities:
      Net earnings from
       continuing operations    $  1,615    $    858    $  2,871    $  1,755
      Adjustments for:
        Amortization of
         property and equipment      838         674       1,528       1,293
        Write-off of property
         and equipment                 3          10          17          12
        Amortization of
         intangible assets           130         125         265         246
        Amortization of deferred
         financing fees                -          10           -          19
        Unrealized gain on
         foreign exchange            (30)          -         (10)          -
        Unrealized interest
         income                       56           -          21           -
        Stock-based compensation     113          15         226          35
        Amortization of deferred
         gain of property             (8)        (32)        (21)        (55)
        Deferred rent liability       18          54          72         107
        Future income taxes         (344)       (867)     (1,017)       (998)
      Net changes in operating
       assets and liabilities     (2,408)       (925)     (1,946)     (1,353)
    -------------------------------------------------------------------------
                                     (17)        (78)      2,006       1,061
    Cash flows from financing
     activities:
      Proceeds from issuance
       of long-term debt          23,437           -      23,437           -
      Repayment of long-term
       debt                       (3,138)       (310)     (3,356)       (656)
      Repayment of capital
       leases                       (138)       (263)       (289)       (612)
      Financing fees                (337)          -        (337)          -
      Net advances from
       companies under
       common control                  -       2,409           -         475
      Proceeds from bank
       loan                            -         224           -           -
      Repayments under bank
       credit facilities               -           -        (223)       (209)
    -------------------------------------------------------------------------
                                  19,824       2,060      19,232      (1,002)

    Cash flows from investing
     activities:
      Cash held in escrow            500           -           -           -
      Payment of holdback
       payable                       (34)          -        (835)          -
      Additions to property
       and equipment             (20,230)       (708)    (23,340)     (1,455)
      Proceeds from disposal
       of property and
       equipment                      69           -          86           -
      Loan receivable               (300)          -        (300)          -
      Other assets                    27        (698)         19        (733)
    -------------------------------------------------------------------------
                                 (19,968)     (1,406)    (24,370)     (2,188)

    Effect of exchange
     rate changes on cash           (105)        673         (92)        681
    -------------------------------------------------------------------------

    Net (decrease) increase
      in cash from continuing
      operations                    (266)      1,249      (3,224)     (1,448)

    Net cash from operations
     provided by discontinued
     operations                       97         106         175         227
    -------------------------------------------------------------------------

    Net (decrease) increase
     in cash                        (169)      1,355      (3,049)     (1,221)

    Cash, beginning of period      5,636       1,151       8,516       3,727
    -------------------------------------------------------------------------

    Cash, end of period         $  5,467    $  2,506    $  5,467    $  2,506
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




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

Organization Profile

LAB RESEARCH INC.

More on this organization


Custom Packages

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

Start today.

CNW Membership

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

Learn about CNW services

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