LAB RESEARCH ANNOUNCES ITS 2010 THIRD QUARTER FINANCIAL RESULTS

Company maintains backlog while posting third consecutive quarter with double-digit growth before foreign exchange impact

Strategic Review Process progressing according to schedule

www.labresearch.com
Toronto Stock Exchange Symbol: LRI

LAVAL, QC, Nov. 16 /CNW Telbec/ - LAB Research Inc. ("LAB Research" "LRI" or the "Company") (TSX: LRI), a global Canadian-based non-clinical contract research organization, today announced its 2010 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 outcome may vary.

This press release refers to non-Generally Accepted Accounting Principles ("GAAP") measures, including Earnings before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, Adjusted net loss, Gross margin, Backlog, Active Backlog and Book to Bill ratio as financial performance indicators. The Company believes such measures provide meaningful information on its performance and operating results.  However, readers are cautioned that non-GAAP measures do not have a standardized meaning under GAAP and, thus, are unlikely to be comparable to similar measures presented by other issuers. The backlog represents the value of client contracts for services that have not yet been performed.  Active backlog represents the value of client contracts for services that have not yet been performed but that have been initiated (active). The book to bill ratio refers to the value of signed contracts (excluding any cancellations) in a particular period divided by the net revenue reported during the same period.

2010 Third Quarter Financial Highlights

• Revenue of $13.5 million in 2010, an increase of 3.1 %, compared to $13.1 million in 2009. Using 2009 foreign currency rates, revenue in 2010 would have increased by approximately 14.9% compared to 2009;
• Adjusted EBITDA of $1.2 million in 2010, compared to $0.4 million in 2009. Using 2009 foreign currency rates, Adjusted EBITDA would have been $1.5 million for the quarter, an increase of 315.6% compared to 2009;
• Net loss of $2.6 million in 2010 after $1.5 million of write-offs and non-cash tax provisions, compared to a net loss of $1.7 million in 2009; Loss per share was $0.05 in 2010, compared to loss per share of $0.09 in 2009; 
• Contract backlog stood at $25.7 million as at September 30, 2010, a decrease of 0.2% during the third quarter of 2010, compared to $25.7 million as at June 30, 2010. Contract backlog was 4.2% below the September 2009 level of $26.8 million. Using constant foreign exchange currencies, contract backlog as at September 30, 2010 would have increased by 2.9% compared to our September 2009 backlog and would have decreased by 2.7% compared to June 30, 2010;
• Consolidated third quarter 2010 book-to-bill ratio of 1.13:1 (compared to 1.03:1 in 2009), including 1.24:1, 1.02:1 and 1.05:1 respectively for our Canadian, Danish and Hungarian sites.

2010 Third Quarter Commercial and Subsequent Highlights

• Preferred Provider Agreement signed with leading Japanese client;
• 5 new large pharma added to client list; initial studies placed following successful sites pre-qualification;
• Hungarian site successfully renews its OECD-GLP License;
• Hungarian site enters into a master provider agreement with European's largest Agro-Chemical Company;
• $25.0  million base shelf prospectus filed;
• $10.0 million Equity Line Facility Agreement to increase financial flexibility;
• Versant Partners Inc. and Dundee Capital Markets retained to raise $10.0 million;
• Increase of operating line of credit from main Canadian bank from $2M to $4M;
• Strategic Review Process Initiated to review strategic alternatives available to LAB Research.

"We are pleased to have generated a double-digit growth for a third quarter in a row when adjusting for local currencies fluctuations, as well as a substantial improvement of our profitability. Our performance is gratifying when considering the results announced recently by other publicly traded early-stage comparables." said Mr. Luc Mainville, President and CEO of LAB Research. "The Company's focus on leveraging its expanded service offering is paying off while the cost-control and margin expansion initiatives are contributing to improving our financial results." added Mr. Mainville.   

2010 Third Quarter Financial Results

The market environment for CRO's continued to be very challenging during the third quarter of 2010. Although we have seen signs of progress, benefiting from prior years' expansions and business development initiatives, the financial performance of the Company for 2010 continued to be impacted by the overall reduction in global Research and Development spending for toxicology work and reduced pricing on new business contracted with our clients. This was especially the case for our Canadian site as the North American market experienced significant price competition driven by the large CROs. As a result of this competitive environment, Canadian gross margin decreased from 37.8%, during the third quarter of 2009, to 33.3% for the comparable period in 2010. 

Notwithstanding the Company's reported net loss for 2010, we have seen progress in Canada, Denmark and Hungary.

For the three-month period ended September 30, 2010, total revenue was $13.5 million, an increase of $0.4 million or 3.1% compared to $13.1 million for the equivalent period in 2009. Using constant foreign currencies, total revenue would have stood at $15.0 million for the three-month period ended September 30, 2010, an increase of 14.9% compared to the same period one year ago.

Revenue in Canada was $6.7 million for the third quarter of 2010, compared to $7.1 million in the same period one year ago. This represents a decrease of 6.7 % or $0.5 million. Using constant foreign exchange currencies, revenue in Canada would have stood at $6.9 million during the third quarter of 2010, a decrease of 3.0% compared to the same period one year ago. This decrease was mainly attributable to slower demand for preclinical services in North America as well as continued pricing pressure. Contract signings increased by approximately 16.2% during the first nine months of 2010 compared to the same period one year ago.

Revenue in Denmark was $4.7 million for the third quarter of 2010, compared to $4.3 million in the same period one year ago. The slight increase in revenue is attributable to higher signings of short-term studies during the quarter offset by a much stronger Canadian against the Danish Kroner. In domestic currencies, revenue in Denmark increased by 28.0% during the third quarter of 2010 compared to the same period one year ago. Despite weak market conditions, the request for proposal activity has increased significantly during 2010 resulting in higher contract signings and revenue for the year. Contracts signings increased by approximately 14.1% during the first nine months of 2010 compared to the same period one year ago.

Revenue in Hungary was $2.1 million for the third quarter of 2010 compared to $1.7 million in the same period one year ago. This represents an increase of 29.2% or $0.5 million. In domestic currencies, revenue in Hungary increased by 56.7% during the third quarter of 2010 compared to the same period one year ago. The increase was mainly driven by the strong performance of our Japanese market, the positive impact of our new business development platform and the expansion of our biotech/pharma clientele following the recertification of our site in late 2008. 

On a consolidated basis, for the third quarter of 2010, gross margin was 29.4 % of revenue compared to 28.3 % of revenue in the third quarter of 2009. In Hungary, gross margin increased from 30.5% in the third quarter of 2009 to 31.0% in the third quarter of 2010 due to higher revenue. In Denmark, gross margin also increased, from 10.7% in the third quarter of 2009 to 22.2% in the third quarter of 2010. Higher revenue and cost control initiatives mainly explain the performance of our site in Denmark. These increases were offset by a decrease in gross margin in Canada, from 37.8% during the third quarter of 2009 to 33.3% for the corresponding period in 2010. The decrease was mainly due to the continuing impact of lower pricing in North America during the year and a stronger Canadian dollar. We expect the North American market to continue to be impacted by a difficult pricing environment for the remainder of 2010.

On a consolidated basis, selling, general and administrative ("SG&A") expenses stood at $2.6 million for the third quarter of 2010 compared to $3.2 million for the same period in 2009, representing 19.2% and 24.8 % of revenue, respectively. Cost savings actions initiated in the Canadian and Danish sites as well as a stronger Canadian dollar mainly explain the decrease in SG&A.  

On a consolidated basis, EBITDA was $1.4 million for the third quarter of 2010, compared to $0.5 million for the same period in 2009. Adjusted EBITDA, which excludes foreign exchange, amounted to $1.2 million and $0.4 million representing 9.2 % and 2.8 % of revenue for the third quarters of 2010 and 2009, respectively. The year-over-year EBITDA variance was mainly attributable to higher revenue and cost savings initiatives.

Write-off of deferred financing fees of $0.7 million recorded during the quarter (nil in 2009) as a result of the reclassification of Canadian loans as current liabilities.

Amortization expense amounted to $1.7 million for the third quarter of 2010 on a consolidated basis, compared to $1.7 million for the same period in 2009. 

On a consolidated basis, net interest expense amounted to $0.8 million for the third quarter of 2010 compared to $0.8 million for the same period in 2009. 

On a consolidated basis, foreign exchange gain for the third quarter of 2010 amounted to $0.1 million, basically flat compared to the corresponding period in 2009.  

Income tax expense was $0.8 million for the third quarter of 2010 compared to an income tax recovery of $0.3 million for the same period in 2009. The Company has recorded an income tax provision of $1.0 million in Canada during the third quarter of 2010 related to the taxable position of the Canadian entity. However LAB has recorded Federal investment tax credits of approximately $10.3 million and has approximately $85.0 million of tax shelters related to research and development expenses in Canada, a portion of which will be applied against income taxes otherwise payable for the year. Therefore, LAB is not expected to pay any cash taxes for the foreseeable future. The tax rate used to establish the income tax expense is the applicable estimated effective rate for each entity of the Company.

Net loss for the third quarter of 2010 amounted to $2.6 million, compared to a net loss of $1.7 million for the same period in 2009. Loss per share for the third quarter of 2010 amounted to $0.05 on the basis of 52,711,417 weighted average shares outstanding, compared to a loss per share of $0.09 for the same period in 2009, on the basis of 18,841,999 weighted average shares outstanding. The closing of the Rights Offering at the end of September 2009, which resulted in the issuance of 34.6 million shares, increased the weighted average number of shares outstanding in 2010, compared to the same period in 2009.

2010 Outlook and Strategic Review Process

"We anticipate the overall market environment to remain challenging for the balance of 2010. However, we expect to continue making market share gains through the continuous promotion of our new services, increased scientific expertise and capabilities. Our Strategic Review Process is progressing as scheduled and is expected to created opportunities for LAB Research to restructure its capital structure and eliminate clients' concerns regarding our long term viability. The Company cautions shareholders that there is no certainty that any proposal received will be implemented. We remain unequivocally dedicated to the continuous sequential improvement of our respective sites as well as consolidated financial performance." stated Mr. Luc Mainville, President and CEO of LAB Research.

Forward-Looking Statements

Certain statements in this document are forward looking and prospective. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. Readers of this document are cautioned not to place undue reliance on our forward-looking statements as a number of factors could cause future results, conditions, actions, or events to differ materially from the operating target, expectations, estimates, or intentions expressed in the forward-looking statements. For additional information on these and other factors, see the reports filed by LAB Research with Canadian securities regulators.

Forward-looking statements reflect our current views with respect to future events and are based upon what we believe are reasonable assumptions and subject to risks and uncertainties. These forward-looking statements represent our estimates and assumptions only as at the date of this document. We undertake no obligation and do not intend to update or revise these forward-looking statements, unless required by law.

About LAB Research Inc.:

LAB Research is a Canadian global non-clinical contract research organization that provides contract research services to the pharmaceutical, biotechnology, agro-chemical, petro-chemical and industrial markets. LAB Research supports the development of its customers' products from three state-of-the-art facilities located in Canada, Denmark and Hungary.

LAB Research's shares trade on The Toronto Stock Exchange ("TSX") under the symbol "LRI", with 52.7 million shares outstanding.

This news release contains certain forward-looking statements that reflect the current views and/or expectations of LAB Research Inc. with respect to its performance, business and future events. Such statements are subject to a number of risks, uncertainties and assumptions. Actual results and events may vary significantly.

APPENDIX 1

Non-GAAP Measures

We use certain non-GAAP measures, including Book to Bill ratio, Backlog, Active Backlog, Earnings before Interest, Income Taxes, Depreciation and Amortization ("EBITDA"), Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted net loss, Adjusted net loss per share and Gross margin as financial performance indicators. The Company believes such measures provide meaningful information on its performance and operating results. However, readers are cautioned that non-GAAP measures do not have a standardized meaning under GAAP and, thus, they are unlikely to be comparable to similar measures presented by other issuers.

(a)     EBITDA

The following table reconciles our net loss to EBITDA and to Adjusted EBITDA for the three-month and nine-month periods ended September 30, 2010 and 2009.

		Three months ended				Nine months ended
		September 30,				September 30,
		2010		2009		2010		2009
(in thousands of dollars)		$		$		$		$
Net loss for the period		(2 644)		(1 696)		(7 136)		(4 341)
Adjustments for:
	Income taxes (recovery)	834		(254)		2 495		(488)
	Interest, net	759		753		2 153		2 107
	Amortization & write-off of financing fees	2 402		1 700		5 798		4 908
EBITDA		1 351		503		3 310		2 186
Foreign exchange		(107)		(131)		410		311
Adjusted EBITDA		1 244		372		3 720		2 497
Adjusted EBITDA margin		9,2%		2,8%		8,7%		6,3%

(b) Gross margin

Gross margin refers to revenues less direct costs.  Direct costs do not include depreciation expense of assets used in our direct operations.

The following table presents our gross margins by reporting periods.

		Three months ended				Nine months ended
		September 30,				September 30,
		2010		2009		2010		2009
		$		$		$		$
(in thousands of dollars)
Revenues		13 471		13 064		42 733		39 936
Direct costs		9 513		9 363		30 346		28 758
Gross margin		3 958		3 701		12 387		11 178
Gross margin %		29,4%		28,3%		29,0%		28,0%

LAB RESEARCH INC.
Consolidated Balance Sheets
September 30, 2010 and December 31, 2009
(in thousands of Canadian dollars)      

		As at  September 30, 2010 (Unaudited) $	As at  December 31, 2009  (Audited)  $
Assets
	Current assets:
	Cash and cash equivalents	375	1,031
	Accounts and other receivables	7,965	9,534
	Work in progress	4,142	3,399
	Income taxes receivable	2,518	3,329
	Prepaid expenses	1,960	1,971
	Future income taxes	108	108
		17,068	19,372
Property and equipment		70,752	75,658
Intangible assets		2,920	3,759
Other assets		10,645	10,645
Future income taxes		3,375	3,375
		104,760	112,809
Liabilities
Current liabilities:
	Bank indebtedness	3,048	499
	Accounts payable and accrued liabilities	13,526	11,915
	Deferred revenue	6,537	8,709
	Current portion of long-term debt	39,780	3,593
	Future income taxes	335	356
		63,226	25,072
Long-term debt		12,661	51,110
Other long-term liabilities		31	43
Future income taxes		3,422	3,670
		79,340	79,895
Shareholders' equity:
	Share capital	78,156	78,156
	Warrants	575	575
	Additional paid-in capital	1,930	1,545
	Accumulated other comprehensive loss	(1,504)	(761)
	Deficit	(53,737)	(46,601)
		(55,241)	(47,362)
		25,420	32,914
		104,760	112,809

LAB RESEARCH INC.
Consolidated Statements of loss
For the periods ended September 30, 2010 and 2009
(in thousands of Canadian dollars, except per share data) (Unaudited)

		Three months ended September 30,			Nine months ended September 30,
		2010 $	2009 $		2010 $	2009 $
Revenue		13,471	13,064		42,733	39,936
Operating expenses:
	Direct costs	9,513	9,363		30,346	28,758
	Selling, general and administrative	2,582	3,234		8,282	8,358
	Stock-based compensation	132	95		385	323
	Amortization of property and equipment	1,297	1,523		3,955	4,430
	Amortization of intangible assets	267	138		766	421
	Amortization of deferred financing fees	151	39		390	57
	Write-off of deferred financing fees	687	-		687	-
	Interest, net	759	753		2,153	2,107
	Foreign exchange loss (gain)	(107)	(131)		410	311
		15,281	15,014		47,374	44,765
Loss from operations before income taxes		(1,810)	(1,950)		(4,641)	(4,829)
Income taxes (recovery):
	Current	867	(217)		2,596	(376)
	Future	(33)	(37)		(101)	(112)
		834	(254)		2,495	(488)
Net loss for the period		(2,644)	(1,696)		(7,136)	(4,341)
Loss per share:
	Basic and diluted	(0.05)	(0.09)		(0.14)	(0.24)

LAB Research Inc.
Consolidated Statements of Cash Flows
For the periods ended September 30, 2010 and 2009
(in thousands of Canadian dollars) (Unaudited)

			Three months ended September 30,				Nine months ended September 30,
			2010 $		2009 $		2010 $		2009  $
Operating activities:
	Net loss for the period		(2,644)		(1,696)		(7,136)		(4,341)
	Adjustments for:
		Amortization of property and equipment	1,297		1,523		3,955		4,430
		Amortization of intangible assets	267		138		766		421
		Investment tax credits	(23)		(116)		71		(185)
		Foreign exchange loss (gain)	132		95		385		323
		Stock-based compensation	(33)		(37)		(101)		(112)
		Future income taxes	151		39		390		57
		Amortization of deferred financing fees	687		-		687		-
		Accretion of interest	(5)		(4)		(16)		(17)
		Other	20		-		56		41
	Net change in non-cash working capital items		919		(3,283)		1,499		(6,819)
			768		(3,341)		556		(6,202)
Financing activities:
		Proceeds from issuance of shares	-		14,195		-		14,205
		Share issue costs	-		(609)		-		(609)
		Proceeds from the sale and leaseback of equipment	-		-		-		1,188
		Deferred financing fees	(80)		(647)		(166)		(1,099)
		Proceeds from issuance of long-term debt	-		4,864		111		7,655
		Repayment of long-term debt	(721)		(5,575)		(1,975)		(6,968)
		Repayment of capital leases	(58)		(144)		(212)		(476)
		Increase (decrease) in bank indebtedness	983		(1,051)		2,549		-
			124		11,033		307		13,896
Investing activities:
		Payment of holdback payable	-		(1,750)		-		(1,750)
		Additions to property and equipment, net of grant	(412)		(466)		(1,304)		(613)
		Additions to intangible assets	(32)		-		(132)		-
		Other	-		305		-		195
			(444)		(1,911)		(1,436)		(2,168)
		Effect of foreign exchange rate changes on cash and cash equivalents	(182)		107		(83)		260
Increase (decrease) in cash and cash equivalents			266		5,888		(656)		5,786
Cash and cash equivalents, beginning of period			109		-		1,031		102
Cash and cash equivalents, end of period			375		5,888		375		5,888

%SEDAR: 00023798E

For further information:

For further information visit LAB Research's website at www.labresearch.com, or contact:

Renmark Financial Communications Inc.
Christine Stewart: [email protected]
Barbara Komorowski: [email protected]
Tel.: [phone] or [phone]