EX-99 5 exhibit99.htm PRESS RELEASE exhibit99.htm
Exhibit 99.1

 
PRESS RELEASE
LIFE SCIENCES RESEARCH, INC.
 
(NYSE Arca:  LSR)
 
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 3, 2008
LSR ANNOUNCES THIRD QUARTER RESULTS

Highlights:
·  
Revenues of $63.6 million, up 10% in constant currency
·  
Operating income of $9.5 million, operating margin of 15.0%
·  
Net income of $2.1 million, or $0.13 per fully diluted share
·  
Non-GAAP diluted EPS, excluding non-cash fx charges, of $0.43

East Millstone, New Jersey, November 3, 2008 – Life Sciences Research, Inc. (NYSE Arca: LSR) announced today revenues and earnings for the three and nine months ended September 30, 2008.

Revenues for the third quarter were $63.6 million, 4.4% above revenues of $60.9 million for the third quarter of 2007.  Excluding the effect of currency exchange, revenues increased 9.8%.  Operating income for the 2008 third quarter was $9.5 million, or 15.0% of revenues, compared with $8.6 million, or 14.1% of revenues for the same period in the prior year.  The quarter included stock based expenses of $0.5 million, or $0.03 per fully diluted share compared with $0.4 million, or $0.03 per fully diluted share in the same quarter last year.  The Company reported net income for the quarter ended September 30, 2008 of $2.1 million or $0.13 per fully diluted share, compared with net income of $5.9 million or $0.39 per fully diluted share for the quarter ended September 30, 2007.

Net income for the third quarter included Other Expense of $5.1 million which was comprised of $5.1 million non-cash foreign exchange re-measurement loss pertaining to the long-term loan denominated in US dollars and finance arrangement fee amortization of $0.5 million for the Company’s 2006 debt financing and its 2007 amendments, offset  by other exchange gains of $0.5 million.  In the 2007 third quarter, net income included Other Income of $0.02 million which was comprised of $0.5 million non-cash foreign exchange re-measurement gain pertaining to the long-term loan denominated in US dollars and other exchange gains of $0.1 million, offset by finance arrangement fee amortization of $0.6 million. Excluding these foreign exchange gains and losses, non-GAAP net income for the current quarter was $6.7 million, or $0.43 per fully diluted share, compared to $5.3 million, or $0.35 per fully diluted share in the same period in the prior year.
Revenues for the nine months ended September 30, 2008 of $191.1 million were 10.2% above revenues of $173.4 million for the comparable prior year period.  Excluding the effect of currency exchange, revenues increased 12.0%.  Operating income for the nine months ended September 30, 2008 was $29.2 million, or 15.3% of revenues, compared with $22.3 million, or 12.9% of revenues for the prior year period.  The 2008 nine month period included stock-based compensation expenses of $1.6 million, or $0.10 per fully diluted share compared with $1.5 million, or $0.10 per fully diluted share in the 2007 nine month period.  The Company reported net income of $16.1 million or $1.04 per fully diluted share for the nine months ended September 30, 2008, compared with net income of $14.8 million or $0.99 per fully diluted share for the same period in 2007.

Net income for the nine months ended September 30, 2008 included Other Expense of $6.1 million which was comprised of $5.1 million from the non-cash foreign exchange re-measurement loss on the long-term loan denominated in US dollars and finance arrangement fee amortization of $1.5 million, offset by other exchange gains of $0.5 million.  In the prior year nine month period, net income included Other Income of $0.3 million which was comprised of $1.7 million non-cash foreign exchange re-measurement gain pertaining to the long-term loan denominated in US dollars and other exchange gains of $0.3 million, offset by finance arrangement fee amortization of $1.7 million. Excluding these foreign exchange gains and losses, non-GAAP net income for the nine months ended September 30, 2008 was $20.8 million, or $1.34 per fully diluted share, compared to $12.8 million, or $0.86 per fully diluted share in the same period in the prior year.

Cash and short-term investments as of September 30, 2008 were $30.2 million compared with $36.2 million as of December 31, 2007.  Net days sales outstanding at September 30, 2008 were 28 compared with 13 at December 31, 2007.  Capital expenditure totaled $4.1 million in the third quarter of 2008, compared with $3.7 million in the third quarter of 2007.  Capital expenditure for the first nine months of 2008 totaled $13.9 million, compared with $12.4 million in the first nine months of 2007.

Net new orders totaled $57.6 million for the third quarter of 2008, which represented a book to bill ratio of 0.91 for the quarter.  This figure was negatively impacted primarily by 2 customers each deciding not to pursue the development of a compound due to adverse findings in other studies. Those studies already placed with us for those compounds had not yet started.  Net new orders totaled $199.3 million for the first nine months of 2008, representing a YTD book to bill ratio of 1.04.  At September 30, 2008 backlog (booked on work) amounted to approximately $180 million, reflecting currency exchange rates as of September 30, 2008.

Brian Cass, LSR’s President and Managing Director commented, “Revenue growth of almost 10% on a constant currency basis, and operating margins of 15%, continues our achievement of the objectives we have been working toward.  However, what I have been most pleased about this quarter is the strengthening of our relationship with some of the top pharmaceutical companies. These are relationships built on respect and teamwork, both of which are required as we each drive value for our companies in the search for new medicines for patients. Likely there will be some challenges and some opportunities along the way, but our focus on great science, operational excellence and customer service, supported by our culture of prudent financial management, position us well to succeed in this environment; in essence these are the well tested strengths of LSR and have been the basis for our success this past decade.”

Andrew Baker, LSR’s Chairman and CEO said, “The turmoil in world markets and the recent investor sentiment of concern about our industry creates uncertainty and humbles us all.  Still, the opportunity for industry leaders like LSR to forge ahead with innovation and efficiencies is excellent.  We serve a customer base that is committed to bringing new drugs to market.  They are eager to advance promising pipelines, and whether the development of those molecules happens in small or large companies, that development will require the regulatory safety testing that LSR provides.  Doubtless each of those companies will respond to their challenges in their own way but most observers agree that these challenges are likely to strengthen the outsourcing trend that’s been growing through more strategic relationships with companies like LSR.  In so doing, we look forward to providing ever greater value to our customers, and in the process, creating value for our shareholders.”

Conference Call
LSR will hold an investor conference call to discuss the quarter’s results on Tuesday, November 4, 2008 at 9:00 a.m. Eastern Time.  Listeners can access the call by dialing (210) 234-0017. The pass code for the call is 3316789.  We suggest calling five minutes prior to the scheduled call.

About Life Sciences Research
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).

Forward Looking Statements
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, 2007, 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
September 30
   
Nine months ended
September 30
 
             
(Dollars in thousands, except per share data)
 
2008
   
2007
   
2008
   
2007
 
                         
Net revenues
  $ 63,560     $ 60,874     $ 191,117     $ 173,362  
Cost of sales
    (44,643 )     (42,525 )     (131,514 )     (123,219 )
Gross profit
    18,917       18,349       59,603       50,143  
Selling, general and administrative expenses
    (9,374 )     (9,777 )     (30,369 )     (27,826 )
Operating income
    9,543       8,572       29,234       22,317  
Interest income
    239       506       818       1,691  
Interest expense
    (2,494 )     (3,039 )     (7,822 )     (9,981 )
Other (expense)/income
    (5,100 )     15       (6,070 )     284  
Income before income taxes
    2,188       6,054       16,160       14,311  
Income tax (expense)/benefit
    (120 )     (185 )     (73 )     521  
Net income
  $ 2,068     $ 5,869     $ 16,087     $ 14,832  
                                 
Income per share
                               
-Basic
  $ 0.16     $ 0.47     $ 1.27     $ 1.17  
-Diluted
  $ 0.13     $ 0.39     $ 1.04     $ 0.99  


Weighted average number of common stock
                       
- Basic     (000’s)
    12,679       12,614       12,656       12,723  
- Diluted  (000’s)
    15,625       14,965       15,489       14,952  




Life Sciences Research Inc. and Subsidiaries
Condensed Consolidated Balance Sheets



(Dollars in thousands except per share data)
 
September 30,
   
December 31,
 
   
2008
   
2007
 
ASSETS
 
(Unaudited)
   
(Audited)
 
Current assets:
           
Cash and cash equivalents
  $ 30,158     $ 32,304  
Short-term investments
    -       3,919  
Accounts receivable, net
    31,348       30,116  
Unbilled receivables, net
    24,942       25,935  
Inventories
    3,196       2,530  
Prepaid expenses and other current assets
    9,711       9,270  
Total current assets
  $ 99,355     $ 104,074  
                 
Property and equipment, net
    72,185       70,994  
Goodwill
    6,572       7,268  
Other assets
    6,294       8,382  
Deferred income taxes
    10,754       10,865  
Total assets
  $ 195,160     $ 201,583  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)
         
Current liabilities:
               
Accounts payable
  $ 13,122     $ 15,477  
Accrued payroll and other benefits
    6,815       6,644  
Accrued expenses and other liabilities
    27,257       33,086  
Short-term debt
    220       618  
Fees invoiced in advance
    37,532       47,347  
Total current liabilities
  $ 84,946     $ 103,172  
                 
Long-term debt, net
    75,202       75,429  
Deferred gain on disposal of US property
    8,547       8,787  
Pension liabilities
    35,925       43,522  
Total liabilities
  $ 204,620     $ 230,910  
                 
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, 2008: 12,724,581 (December 31, 2007: 12,626,498)
    127       126  
Paid in capital
    88,364       87,216  
Accumulated other comprehensive loss
    (44,244 )     (46,875 )
Accumulated deficit
    (53,707 )     (69,794 )
Total stockholders’ deficit
    (9,460 )     (29,327 )
Total liabilities and stockholders’ deficit
  $ 195,160     $ 201,583  





Life Sciences Research Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited


   
Nine months ended September 30
 
(Dollars in thousands)
 
2008
   
2007
 
             
Cash flows from operating activities:
           
Net income
  $ 16,087     $ 14,832  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    7,410       7,010  
Amortization of gain on disposal of US property
    (241 )     (240 )
Non-cash compensation expense associated with employee stock compensation plans
    1,579       1,451  
Foreign exchange loss/(gain) on March 2006 Financing
    4,041       (1,660 )
Foreign exchange loss/(gain) on intercompany balances
    16       (345 )
Deferred income tax benefit
    73       (521 )
Provision for losses on accounts receivable
    272       (99 )
Interest expense related to the amortization of debt issue costs
    1,513       1,046  
Amortization of financing costs
    1,404       1,719  
                 
Changes in operating assets and liabilities:
               
Accounts receivable, unbilled receivables and prepaid expenses
    (7,915 )     (1,388 )
Inventories
    (928 )     70  
Accounts payable, accrued expenses and other liabilities
    (1,050 )     (2,316 )
Fees invoiced in advance
    (5,647 )     11,282  
Net cash provided by operating activities
  $ 16,614     $ 30,841  
                 
Cash flows used in investing activities:
               
Purchase of property, plant and equipment
    (13,947 )     (12,415 )
Sale of property, plant and equipment
    -       17  
Payment for acquisition
    (1,779 )     -  
Sale of short-term investments
    3,919       -  
Net cash used in investing activities
  $ (11,807 )   $ (12,398 )
                 
Cash flows used in financing activities:
               
Proceeds from issuance of Voting Common Stock
    571       203  
Increase in deferred finance/other assets
    -       (4,800 )
Repurchase of Voting Common Stock
    -       (4,000 )
Repurchase of warrants
    (1,000 )     (6,694 )
Repayments of long-term borrowings
    (1,542 )     (10,129 )
Repayments of short-term borrowings
    (496 )     (666 )
Net cash used in financing activities
  $ (2,467 )   $ (26,086 )
                 
Effect of exchange rate changes on cash and cash equivalents
    (4,486 )     777  
Decrease in cash and cash equivalents
    (2,146 )     (6,866 )
Cash and cash equivalents at beginning of period
    32,304       44,088  
Cash and cash equivalents at end of period
  $ 30,158     $ 37,222  
                 
Supplementary Disclosures
               
Interest paid
  $ 6,055     $ 8,117  
Taxes paid
  $ 149     $ 328