PRESS RELEASE LIFE SCIENCES RESEARCH, INC.
(Other OTC:LSRI)
PO Box 2360
Mettlers Road
East Millstone, NJ 08875-2360
For Further Information:
Richard Michaelson
Phone: US: (732) 649-9961
e-mail: LifeSciencesResearch@LSRinc.net
November 7, 2006
LSR ANNOUNCES THIRD QUARTER RESULTS
Highlights:
o Revenues of $49.5 million.
o Net Income of $2.7 million, or $0.18 per fully diluted share.
o Net new orders of $58.0 million
East Millstone, New Jersey, November 7, 2006 - Life Sciences Research, Inc.
(Other OTC: LSRI) announced today that revenues for the quarter ended September
30, 2006 were $49.5 million, 13.0% above the revenues for the same period in the
prior year of $43.8 million. Excluding the effect of exchange rate movements,
revenues increased 8.7%. Operating income for the quarter ended September 30,
2006 was $5.7 million, or 11.6% of revenues, compared with $5.7 million, or
13.0% of revenues for the same period in the prior year. The Company reported
net income for the quarter ended September 30, 2006 of $2.7 million compared
with $1.1 million for the quarter ended September 30, 2005. Net income per
common share for the quarter ended September 30, 2006 was $0.21 compared with
$0.09 in the quarter ended September 30, 2005. Net income per fully diluted
share was $0.18 for the current quarter compared to $0.08 in the prior year.
The net income for the three months ended September 30, 2006 included Other
Expenses of $0.9 million which comprised finance arrangement fees of $0.5
million and the non-cash cost of $0.7 million associated with the 100,000
warrants granted in January 2005 for advisory services, offset by $0.3 million
from a non-cash foreign exchange remeasurement gain pertaining to the New
Financing denominated in US dollars. In the same period in the prior year, Other
Expenses of $1.8 million were comprised of finance arrangement fees of $1.2
million, and $0.6 million from the non cash foreign exchange remeasurement loss
pertaining to the Convertible Capital Bonds. Excluding these Other Expenses and
related tax effect, non-GAAP net income for the current quarter was $2.7
million, or $0.19 per fully diluted share, compared to $3.2 million, or $0.22
per fully diluted share in the prior year.
Net days sales outstanding at September 30, 2006 were 15 (21 at September 30,
2005 and 16 at December 31, 2005). Capital expenditure totaled $4.2 million in
the third quarter of 2006, compared to $5.1 million in the third quarter of
2005.
Cash on hand at September 30, 2006 was $38.3 million compared with $15.4 million
at December 31, 2005. The increase in cash on hand was primarily due to the
March 2006 $70 million New Financing Loan which generated net proceeds of
approximately $63 million, of which $46.2 million was used to redeem the
outstanding principal amount of the Convertible Capital Bonds. Long-term debt
was $91.1 million at September 30, 2006 compared with $30.4 million at December
31, 2005. At September 30, 2006 long-term debt predominantly consisted of the
$70 million New Financing Loan and the $22.8 million of finance leases
associated with the sale and leaseback, offset by unamortized lender warrant
costs.
Revenues for the nine months ended September 30, 2006 of $139.8 million were
5.9% above revenues for the same period in the prior year of $132.0 million.
Excluding the effect of exchange rate movements, the increase was 6.9%.
Operating Income for the nine months ended September 30, 2006 was $14.6 million,
or 10.5% of revenues, compared with $16.3 million, or 12.3% of revenues for the
same period in the prior year. The Company reported net income before the
cumulative effect of the accounting change for the nine months ended September
30, 2006 of $4.3 million, compared with $2.0 million for the same period in the
prior year. Net income per fully diluted share before the cumulative effect of
the accounting change for the nine months ended September 30, 2006 was $0.29
compared with $0.14 for the same period in the prior year.
Concurrently with the repayment of the $10 million promissory note that was owed
to the Company by Alconbury Estates from the Sale and Leaseback transaction that
was announced in June 2005, FIN46R consolidation accounting ceased effective
June 30, 2006. As a result, the Company recognized a charge in the period for
the cumulative effect of the accounting change of $20.7 million, of which the
largest charge is associated with the non-cash write-down of the Company's UK
facilities.
The net income before the cumulative effect of the accounting change in the nine
months ended September 30, 2006 included Other Income of $0.4 million which
comprised $4.0 million from the non-cash foreign exchange remeasurement gain
pertaining to the Convertible Capital Bonds and New Financing denominated in US
dollars and other exchange gains of $0.2 million, offset by finance arrangement
fees of $3.1 million primarily reflecting gains of Alconbury Estates, LSR's
landlord, which were consolidated under FIN46 and the non-cash costs of $0.7
million associated with the 100,000 warrants granted in January 2005 for
advisory services. In the same period in the prior year, Other Expenses of $5.2
million were comprised of finance arrangement fees of $1.4 million and $3.8
million of a non-cash foreign exchange remeasurement loss pertaining to the
Convertible Capital Bonds. Excluding these Other Expenses and related tax
effect, non-GAAP net income before the cumulative effect of the accounting
change for the nine months ended September 30, 2006 was $5.0 million, or $0.34
per fully diluted share, compared to $9.4 million, or $0.65 per fully diluted
share in the prior year.
Capital expenditure totaled $8.2 million in the first nine months of 2006,
compared to $12.1 million in the first nine months of 2005.
Net new business signings totaled $58.0 million for the third quarter of 2006.
This represented an increase of 38% from the third quarter orders in 2005. Net
new business signings for the nine months ended September 30, 2006 were $165.5
million, an increase of 21% on the nine months ended September 2005. At
September 30, 2006 backlog (booked on work) amounted to approximately $152
million.
Brian Cass, LSR's President and Managing Director commented, "It is very
pleasing to see record levels of orders, revenues, operating profit and backlog
all being reported this quarter. Net orders of $58.0 million were an increase of
38% on the same quarter last year. On a constant currency basis year over year
growth in orders was 34%, within which our pharmaceutical business growth
accelerated to 36%. These increases reflect our ongoing success in building this
business, particularly with the top global pharmaceutical companies, and the
continuing strength and growth of the outsourcing market place."
"Our strong orders performance throughout 2006 to date has driven the 12 month
trailing book to bill ratio to a satisfying 1.18 and produced backlog growth 32%
year over year to a record level of $152 million, both of which are positive
indicators of future revenue and profit growth."
He added, "Our continuing focus on scientific and service excellence has been
further enhanced this year with the launch of a global, seamlessly integrated
suite of IT solutions for automated data capture and reporting, and providing
customers direct access to information via dedicated extranet portals. This
further strengthens our position as a premium quality, global research
organization with a broad, and growing, portfolio of customers."
LSR will hold an investor conference call to discuss the quarter's results on
November 8, 2006 at 9:00 a.m. Eastern Time. That call can be listened to by
dialing (210) 234-0015 pass code 2089115. We suggest calling five minutes prior
to the scheduled call.
Life Sciences Research, Inc. is a global contract research organization
providing product development services to the pharmaceutical, agrochemical and
biotechnology industries. LSR brings leading technology and capability to
support its clients in non-clinical safety testing of new compounds in early
stage development and assessment. The purpose of this work is to identify risks
to humans, animals or the environment resulting from the use or manufacture of a
wide range of chemicals which are essential components of LSR's clients'
products. The Company's services are designed to meet the regulatory
requirements of governments around the world. LSR operates research facilities
in the United States (the Princeton Research Center, New Jersey) and the United
Kingdom (Huntingdon and Eye, England).
This announcement contains statements that may be forward-looking as defined by
the Private Securities Litigation Reform Act of 1995. These statements are based
largely on LSR's expectations and are subject to a number of risks and
uncertainties, certain of which are beyond LSR's control, as more fully
described in the Company's SEC filings, including its Form 10-K for the fiscal
year ended December 31, 2005, as filed with the US Securities and Exchange
Commission.
- tables to follow -
Life Sciences Research Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
Three months ended Nine months ended
September 30 September 30
(Dollars in thousands, except per share data) 2006 2005 2006 2005
Revenues $49,460 $43,758 $139,766 $131,993
Cost of sales (36,388) (31,673) (103,271) (95,214)
------------- ------------ ------------- -----------
Gross profit 13,072 12,085 36,495 36,779
Selling, general and administrative expenses (7,334) (6,410) (21,886) (20,496)
------------- ------------ ------------- -----------
Operating income 5,738 5,675 14,609 16,283
Interest income 437 21 968 66
Interest expense (3,162) (2,138) (10,057) (5,855)
Other (expense) / income (913) (1,760) 350 (5,195)
------------- ------------ ------------- -----------
Income before income taxes 2,100 1,798 5,870 5,299
Income tax benefit / (expense) 579 (649) (1,584) (3,288)
------------- ------------ ------------- -----------
Income before cumulative effect of accounting
change $2,679 $1,149 $4,286 2,011
Cumulative effect of accounting change (net of
income tax benefit of $22,218) - - (20,656) -
------------- ------------ ------------- -----------
Net income / (loss) $2,679 $1,149 $(16,370) $2,011
------------- ------------ ------------- -----------
Basic income / (loss) per share
Income / (loss) before cumulative effect of
accounting change $0.21 $0.09 $0.34 $0.16
Cumulative effect of accounting change - - (1.64) -
------------- ------------ ------------- -----------
Basic income / (loss) per share $0.21 $0.09 $(1.30) $0.16
------------- ------------ ------------- -----------
Diluted income / (loss) per share:
Income / (loss) before cumulative effect of
accounting change $0.18 $0.08 $0.29 $0.14
Cumulative effect of accounting change - - (1.42) -
------------- ------------ ------------- -----------
Diluted income / (loss) per share $0.18 $0.08 $(1.13) $0.14
------------- ------------ ------------- -----------
Weighted average number of common stock
- - Basic (000's) 12,669 12,542 12,627 12,506
- - Diluted (000's) 14,534 14,601 14,506 14,521
Life Sciences Research Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands) September 30, December 31,
2006 2005
ASSETS Unaudited Audited
Current assets:
Cash and cash equivalents $38,315 $15,420
Accounts receivable, net of allowance of $768 and $618 in
2006 and 2005 respectively 30,519 26,810
Unbilled receivables 16,360 11,981
Inventories 2,354 1,992
Prepaid expenses and other current assets 12,263 7,062
------------------ ----------------
Total current assets 99,811 63,265
Property and equipment, net 59,169 105,605
Goodwill 1,445 1,195
Other assets 9,195 901
Unamortized capital bonds issue costs - 70
Deferred income taxes 35,259 13,333
------------------ ----------------
Total assets $204,879 $184,369
------------------ ----------------
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Current liabilities:
Accounts payable $15,018 $15,742
Accrued payroll and other benefits 3,647 3,655
Accrued expenses and other liabilities 14,200 15,862
Pension liabilities 5,044 4,635
Short-term debt 706 46,946
Fees invoiced in advance 38,214 32,920
------------------ ----------------
Total current liabilities 76,829 119,760
Long-term debt 91,131 30,430
Deferred gain on disposal of US property 9,187 -
Pension liabilities, less short-term portion 53,038 48,747
------------------ ----------------
Total liabilities $230,185 $198,937
------------------ ----------------
Commitments and contingencies
Stockholders' equity/(deficit)
Preferred Stock, $0.01 par value. Authorized 5,000,000
Issued and outstanding: None - -
Non-Voting Common Stock, $0.01 par value. Authorized 5,000,000
Issued and outstanding: None - -
Voting Common Stock, $0.01 par value. Authorized 50,000,000
Issued and outstanding at September 30, 2006: 12,670,020
(December 31, 2005: 12,553,251) 127 126
Paid in capital 82,249 75,848
Less: Promissory notes for the issuance of common stock (44) (205)
Accumulated other comprehensive loss (50,320) (49,389)
Accumulated deficit (57,318) (40,948)
------------------ ----------------
Total stockholders' equity /(deficit) (25,306) (14,568)
------------------ ----------------
Total liabilities and stockholders' equity /(deficit) $204,879 $184,369
------------------ ----------------
<FN>
See Notes to Condensed Consolidated Financial Statements
</FN>
Life Sciences Research Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
Nine months ended September 30
(Dollars in thousands) 2006 2005
Cash flows from operating activities:
Net (loss)/income $(16,370) $2,011
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 7,221 7,229
Amortisation of gain on disposal of US property (81) -
Non-cash compensation expense associated with employee stock
compensation plans 407 -
Cumulative effect of accounting change 42,874 -
Foreign exchange (gain)/loss on Capital Bonds and New Financing (4,005) 3,765
Foreign exchange gain on intercompany balances (203) -
Deferred income tax (benefit)/expense (20,635) 3,288
Provision for losses on accounts receivable 150 79
Amortization of warrants 1,048 260
Amortization of Capital Bonds issue costs 70 137
Amortization of Financing Costs 3,116 1,420
Changes in operating assets and liabilities:
Accounts receivable, unbilled receivables and prepaid expenses 1,183 (13,880)
Inventories (211) 131
Accounts payable, accrued expenses and other liabilities (4,712) 2,063
Fees invoiced in advance 2,380 (2,876)
----------------- ----------------
Net cash provided by operating activities $12,232 $3,627
----------------- ----------------
Cash flows used in investing activities:
Purchase of property and equipment (8,152) (12,084)
Sale of property, plant and equipment 6 -
----------------- ----------------
Net cash used in investing activities $(8,146) $(12,084)
----------------- ----------------
Cash flows provided by/(used in) financing activities:
Proceeds from issuance of Voting Common Stock 5,345 629
Proceeds from long-term borrowings 70,000 30,000
Increase in deferred finance/other assets (8,145) -
Repayments of long-term borrowings (71) (41,106)
Repayments of short-term borrowings (46,553) (684)
----------------- ----------------
Net cash provided by/(used in) financing activities $20,576 $(11,161)
----------------- ----------------
Effect of exchange rate changes on cash and cash equivalents (1,767) (1,562)
----------------- ----------------
Increase/(decrease) in cash and cash equivalents 22,895 (21,180)
Cash and cash equivalents at beginning of period 15,420 33,341
----------------- ----------------
Cash and cash equivalents at end of period $38,315 $12,161
----------------- ----------------
Supplementary Disclosures
Interest paid in the period $8,127 $5,392
Taxes paid in the period
Japan $123 $18
US $333 $298
Supplementary Disclosures of non-cash financing activity:
Issuance of warrants to lender $2,528 -
Issuance of warrants to financial advisor $1,749 -