LAVAL, QC, Nov. 7 /PRNewswire-FirstCall/ - LAB Research Inc. (“LRI” or “LAB Research”) a rapidly growing non-clinical contract research organization, announced today financial results for the third quarter ended September 30, 2006. All numbers are in Canadian dollars.
Highlights: - On August 3, 2006, LRI completed its Initial Public Offering and issued 3,750,000 common shares for aggregate gross proceeds of $15 million. As part of the IPO, LAB International (“LAB” or the Parent”) sold 7,750,000 common shares representing gross proceeds of $31 million including the over-allotment. - Expansion plans for Canadian and European operations progressing as planned will provide increased revenue generating capacity before year-end. - Net earnings for the first nine months of 2006 were up 37% at $3.0 million compared to $2.2 million in the corresponding period in 2005. - For the third quarter of 2006, revenues were $12.3 million, compared with $12.1 million reported in the third quarter of 2005. Year-to-date revenues were $36.5 million, an increase of 3% over 2005.
“We are pleased to report a strong third quarter that confirms the financial and operational strength of the Company”, said Luc Mainville, President and Chief Executive Officer of LAB Research. “With these results and the fact that we now operate as a stand-alone entity, we are in a favourable position to move forward and implement our growth strategy, added Mr. Mainville.
“Moreover, our expansion plans for our three main locations are on track and the Canadian site will be completed as planned later this month, adding close to 20% capacity to our global capabilities. Those expansions will allow LRI to meet the strong demand for our global services and expand its service offering to better serve and retain our increasing customer base” stated Mr. Mainville.
For the third quarter, the stronger results of our Danish and Hungarian subsidiaries, LAB Denmark and LAB Hungary, compensated for the lower profitability of our North American operations which has been impacted by the continued strength of the Canadian dollar as well as the reorganization of the Canadian subsidiary completed during the past quarter. Net earnings for the third quarter of 2006 were $1.0 million compared to $1.3 million in the corresponding period in 2005 but in line with LRI’s expectations.
Before adjusting for the impact of the sale-leaseback transaction on the Canadian facility, EBITDA for the first nine months of 2006 was $6.7 million, compared to $6.2 million in the corresponding period in 2005, representing an increase of 9%. Adjusted EBITDA for the first nine months of 2006 was $7.5 million, up 12% compared to the $6.7 million results for the corresponding period in 2005. EBITDA for the third quarter of 2006 was $2.2 million, compared to $2.8 million in the corresponding period in 2005, representing a decrease of 22%. After adjusting for the impact of the sale-lease back, Adjusted EBITDA was $2.5 million, up 2% compared to the previous quarter but down from the $2.8 million recorded in the corresponding period of 2005. Adjusted EBITDA margin for the third quarter of 2006 was 20% compared to 23% last year and Adjusted EBITDA margin for the first nine months of 2006 was 21% compared to 19% for the corresponding period in 2005. Third quarter EBITDA results were impacted by the reorganization of the Canadian operations completed earlier in the year, negative impact of the strong Canadian currency as well as stock-based compensation costs derived from the issuance of options to senior management at the time of the IPO.
Overall gross margin for the third quarter of 2006 reached 41% compared to 40% for the previous quarter and 45% for the third quarter last year. The gross margin for the first nine months of 2006 and 2005 was 40%. LAB Research also had to absorb additional rent expenses relating to the Canadian facility sale-leaseback transaction since November 1, 2005 representing a 2% impact, and a negative impact of the foreign exchange which continued to affect margins in the Canadian operations. Gross margin for LAB Denmark were in line with prior periods while LAB Hungary’s gross margins were strong due to a higher proportion of inhalation toxicology studies as well as the positive impact of the weakening local currency compared to the Euro which constitutes the bulk of the revenues for the site.
Selling, general and administrative expenses for the first nine months of the year and last year represented 21% of revenues. These results included allocated costs and severance costs for the restructuring of LAB Research prior to taking the company public. During the third quarter of 2006, SG&A expenses were in line with 2005 at 21% of revenues.
Amortization expense and interest expenses in 2006 both decreased compared to corresponding periods in 2005 following the sale and leaseback transaction on the Canadian operation last year. Amortization for the third quarter of 2006 was at $0.7 million compared to $0.8 million. For the first nine months of the year, amortization expenses totalled $2.3 million compared to $2.5 million for the corresponding period in 2005. Interest expense for the third quarter of 2006 was $0.1 million compared to $0.3 million in the corresponding period in 2005. For the period of nine months in 2006, interest expense was $0.4 million compared to $0.7 million for the corresponding period last year.
Foreign exchange loss for the third quarter of 2006 was $0.1 million compared to a minor recovery for the same period in 2005. For the first nine-month period of 2006, the foreign exchange loss was nominal compared to a gain of $0.1 million in 2005. The company had significant exposure to U.S. dollars during these periods, for that reason it exercised forward exchange contracts to mitigate its exposure to foreign exchange fluctuations. Also, our results were negatively impacted by the decrease of the Hungarian forint to Euros, the currency in which we are assuming the long-term debt in Hungary. For the YTD period up to September 30, 2006, approximately 92% (86% in 2005) of our revenues were billed in currencies other than the reporting currency (primarily (euro)'s, US$), while approximately 71% (69% in 2005) of direct costs were incurred in similar non-reporting currencies.
Provision for income taxes for the third quarter of 2006 and 2005 were at $0.3 million and $0.5 million while provision for income taxes for the first nine-months of 2006 and 2005 were $1.1 million and $0.8 million respectively.
Conference Call
LRI will host a conference call at 10:00 a.m., on Tuesday November 7, 2006. Interested parties may also access the conference call by webcast at www.labresearch.com or www.cnw.ca.
The telephone number to access the conference call is 1-800-733-7571. A replay of the call will be available until November 14, 2006. The telephone numbers to access the replay are 416-640-1917 and 1-877-289-8525 with code number 21208651(pound key).
About LAB Research Inc.
LAB Research is a non-clinical contract research organization (CRO) that provides contract research services primarily to the pharmaceutical and biotechnology industries. LAB Research supports the development of its customers’ products from its state-of-the-art facilities located in Canada, the United States, Denmark and Hungary.
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.
LAB RESEARCH INC. Consolidated and Combined Carve-Out Balance Sheets (Unaudited) September 30, 2006 and December 31, 2005 (in thousands of Canadian dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- December September 30, 31, 2006 2005 ------------------------------------------------------------------------- (Audited) Assets Current assets: Cash $ 12,466 $ 3,727 Accounts and other receivables 13,516 6,923 Work in progress 1,631 2,314 Prepaid expenses 1,382 862 Advances to companies under common control (note 8) 4 - ----------------------------------------------------------------------- 28,999 13,826 Property and equipment 19,283 17,937 Intangible assets 2,659 2,944 Other assets (note 3) 1,801 1,745 Future income taxes 479 578 ------------------------------------------------------------------------ $ 53,221 $ 37,030 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Liabilities and Shareholders’ Equity and LAB International’s Net Investment Current liabilities: Bank loan $ 223 $ 432 Accounts payable and accrued liabilities 7,350 7,165 Income taxes payable 80 1,573 Deferred revenue 5,722 4,673 Current portion of long-term debt (note 4) 2,262 2,320 Deferred gain on sale of property 84 68 Future income taxes 174 517 Advances from companies under common control (note 8) - 2,897 ----------------------------------------------------------------------- 15,895 19,645 Deferred rent liability 198 37 Deferred gain on sale of property 1,513 1,603 Long-term debt (note 4) 6,468 8,049 Future income taxes 2,249 1,821 Shareholders’ equity and LAB International’s net investment: Share capital (note 5 (a)) 63,672 - Additional paid in capital 126 - Cumulative translation adjustment (1,386) (1,462) Deficit (35,514) - Segment equity - 7,337 ----------------------------------------------------------------------- 26,898 5,875 Subsequent event (note 10) ------------------------------------------------------------------------- $ 53,221 $ 37,030 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LAB RESEARCH INC. Consolidated and Combined Carve-Out Balance Sheets (Unaudited) September 30, 2006 and December 31, 2005 (in thousands of Canadian dollars) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months Nine months ended September 30, ended September 30, ----------------------- ------------------------ 2006 2005 2006 2005 ------------------------------------------------------------------------- Revenues $ 12,319 $ 12,087 $ 36,451 $ 35,462 Expenses: Direct costs 7,246 6,692 21,741 21,224 Selling, general and administrative 2,612 2,531 7,771 7,515 Stock-based compensation 126 47 161 96 Amortization of property and equipment 572 635 1,895 2,142 Amortization of intangible assets 125 119 371 317 Write-off of property and equipment - - - 518 Interest on long-term debt 142 279 432 728 Foreign exchange 116 (20) 39 (71) ----------------------------------------------------------------------- 10,939 10,283 32,410 32,469 ------------------------------------------------------------------------- Earnings before income taxes 1,380 1,804 4,041 2,993 Provision for income taxes 343 495 1,059 814 ------------------------------------------------------------------------- Net earnings $ 1,037 $ 1,309 $ 2,982 $ 2,179 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share: Basic $ 0.06 $ 0.09 $ 0.20 $ 0.15 Diluted 0.06 0.09 0.20 0.15 Weighted average number of shares outstanding: Basic 16,639,363 14,142,857 14,772,112 14,142,857 Effect of dilutive options and warrants - - - - ------------------------------------------------------------------------- Diluted 16,639,363 14,142,857 14,772,112 14,142,857 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Summary of the Results by Business Segment:
Summarized financial information by business segment for the three and nine-month periods ended September 30, 2006 are presented below.
Three Months Ended September 30 2006 ------------------------------------- LAB North LAB LAB America Denmark Hungary TOTAL --------- ------- ------- -------- (in thousands of dollars, except per $ $ $ $ share data) Revenues 3,902 5,907 2,510 12,319 Direct Costs 2,712 3,553 981 7,246 Selling, general and administrative 1,042 948 622 2,612 Stock-based compensation 108 12 6 126 Amortization 181 360 156 697 Interest on long-term debt 52 60 30 142 Foreign exchange (10) 18 108 116 Income taxes (50) 284 109 343 --------- ------- ------- -------- Net earnings (133) 672 498 1,037 --------- ------- ------- -------- EBITDA 50 1,376 793 2,219 --------- ------- ------- -------- --------- ------- ------- -------- Adjusted EBITDA 311 1,376 793 2,480 --------- ------- ------- -------- --------- ------- ------- -------- EPS 0.06 -------- -------- Diluted EPS 0.06 -------- -------- 2005 ------------------------------------ Variation LAB North LAB LAB ----------------- America Denmark Hungary TOTAL $ % --------- ------- ------- ------- ------- -------- (in thousands of dollars, except $ $ $ $ per share data) Revenues 5,237 4,584 2,266 12,087 232 1.9% Direct Costs 2,495 2,923 1,274 6,692 (554) -8.3% Selling, general and administrative 1,136 897 498 2,531 (81) -3.2% Stock-based compensation 43 4 - 47 (79) -168.1% Amortization 201 424 129 754 57 7.6% Interest on long-term debt 85 212 (18) 279 137 49.1% Foreign exchange (105) (12) 97 (20) (136) 680.0% Income taxes 436 (15) 74 495 152 30.7% --------- ------- ------- ------- ------- -------- Net earnings 946 151 212 1,309 (272) -20.8% --------- ------- ------- ------- ------- -------- EBITDA 1,668 772 397 2,837 (618) -21.8% --------- ------- ------- ------- ------- -------- --------- ------- ------- ------- ------- -------- Adjusted EBITDA 1,668 772 397 2,837 (357) -12.6% --------- ------- ------- ------- ------- -------- --------- ------- ------- ------- ------- -------- EPS 0.09 ------- ------- Diluted EPS 0.09 ------- ------- Nine months Ended September 30 2006 ------------------------------------- LAB North LAB LAB America Denmark Hungary TOTAL --------- ------- ------- -------- (in thousands of dollars except $ $ $ $ per share data) Revenues 12,751 17,257 6,443 36,451 Direct Costs 7,679 10,953 3,109 21,741 Selling, general and administrative 3,463 2,741 1,567 7,771 Stock-based compensation 136 19 6 161 Amortization 615 1,199 452 2,266 Write-off of property and equipment - - - - Interest on long-term debt 156 182 94 432 Foreign exchange (15) (46) 100 39 Income taxes 167 661 231 1,059 --------- ------- ------- -------- Net earnings 550 1,548 884 2,982 --------- ------- ------- -------- EBITDA 1,488 3,590 1,661 6,739 --------- ------- ------- -------- --------- ------- ------- -------- Adjusted EBITDA 2,271 3,590 1,661 7,522 --------- ------- ------- -------- --------- ------- ------- -------- EPS 0.20 -------- -------- Diluted EPS 0.20 -------- -------- 2005 ------------------------------------ Variation LAB North LAB LAB ----------------- America Denmark Hungary TOTAL $ % --------- ------- ------- ------- ------- -------- (in thousands of dollars except $ $ $ $ per share data) Revenues 14,558 15,108 5,796 35,462 989 2.8% Direct Costs 7,716 10,163 3,345 21,224 (517) -2.4% Selling, general and administrative 3,202 2,863 1,450 7,515 (256) -3.4% Stock-based compensation 71 6 19 96 (65) -67.7% Amortization 694 1,371 394 2,459 193 7.8% Write-off of property and equipment - 518 - 518 518 100.0% Interest on long-term debt 255 374 99 728 296 40.7% Foreign exchange (93) 42 (20) (71) (110) 154.9% Income taxes 699 34 81 814 (245) -30.1% --------- ------- ------- ------- ------- -------- Net earnings 2,014 (263) 428 2,179 1,175 53.9% --------- ------- ------- ------- ------- -------- EBITDA 3,662 1,516 1,002 6,180 559 9.0% --------- ------- ------- ------- ------- -------- --------- ------- ------- ------- ------- -------- Adjusted EBITDA 3,662 2,034 1,002 6,698 824 12.3% --------- ------- ------- ------- ------- -------- --------- ------- ------- ------- ------- -------- EPS 0.15 ------- ------- Diluted EPS 0.15 ------- -------
LAB RESEARCH INC.
CONTACT: LAB Research Inc.: Luc Mainville, President and CEO, (450)973-2240, ext.: 1206, mainvillel@labresearch.com, www.labresearch.com;Echoes Financial Network Inc.: Dominic Sicotte, (514) 842-9551, ext.: 101,(866) 633-9551, dsicotte@echoesfinancial.com, www.echoesfinancial.com
