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,
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
2009 Third Quarter Financial Results
LAB Research posted revenues of
Our Canadian non-clinical operations ("LAB
LAB
Our Hungarian subsidiary ("LAB
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
Selling, general and administrative ("SG&A") expenses stood at
EBITDA stood at
Our amortization expense was
Our net interest expense was
We recognized a foreign exchange gain of
The provision for income taxes stood at
The net loss for the third quarter of 2009 amounted to
As at
As at
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
"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
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
LAB Research's shares trade on The
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)
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September 30, December 31,
2009 2008
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(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
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$ 115,462 $ 115,578
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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
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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
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80,131 65,028
Accumulated other comprehensive (loss) income (339) 682
Deficit (40,424) (35,474)
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39,368 30,236
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$ 115,462 $ 115,578
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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)
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15,014 15,527 44,765 45,234
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(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
-------------------------------------------------------------------------
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(Loss) earnings per
share:
Basic $ (0.09) $ (0.06) $ (0.24) $ 0.01
Diluted (0.09) (0.06) (0.24) 0.01
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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
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Diluted 18,841,999 18,081,935 18,342,456 18,305,335
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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
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(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
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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
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Cash and cash
equivalents, end of
period $ 5,888 $ 935 $ 5,888 $ 935
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%SEDAR: 00023798EF
For further information: Luc Mainville, Chief Executive Officer, (450) 973-2240 (ext. 1206), [email protected]; Frédéric Dumais, Partner, Jasmin-Dumais Financial Communications, (514) 862-1251, [email protected]; www.labresearch.com
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