Life Sciences Research, Inc. (NYSE Arca: LSR) announced today that
revenues for the quarter ended December 31, 2007 were $63.4
million, 20.9% above the revenues for the same period in the prior
year of $52.5 million. Excluding the effect of exchange rate
movements, revenues increased 15.0%. Operating income for the
quarter ended December 31, 2007 was $9.6 million, or 15.1% of
revenues, compared with an operating loss of $5.0 million for the
same period in the prior year. In the fourth quarter of 2006 the
Company incurred Other Operating Expenses of $10.5 million,
predominantly associated with the Company�s NYSE Arca listing,
excluding this charge Non GAAP operating income would have been
$5.5 million or 10.4% of revenues. The Company reported net loss
for the quarter ended December 31, 2007 of $28.8 million compared
with net income of $1.5 million for the quarter ended December 31,
2006. Net loss per common and fully diluted share was $2.28 for the
three months ended December 31, 2007 compared with net income per
common share of $0.12 and per fully diluted share of $0.10 for the
three months ended December 31, 2006. The Company derives
significant benefit from the UK Research and Development Tax Credit
for large companies. In 2008, this will be amended and the relief
will be extended further. As a result the Company does not
anticipate reporting any UK tax liability for the foreseeable
future. The Company has therefore recorded a valuation allowance
expense of $37.4 million to reflect a reversal of the previously
recorded tax provision that recognized the net tax asset associated
with the Company�s UK Net Operating Losses (NOLs) and UK defined
benefit pension plan liability. This changed treatment of the NOL
tax asset does not impact their availability to the Company in the
future, should circumstances change. The net loss in the quarter
ended December 31, 2007 included Other Expense of $2.2 million
which comprised $0.9 million from the non-cash foreign exchange
re-measurement loss on the March 2006 Financing denominated in US
dollars, other exchange losses of $0.2 million, and finance
arrangement fee amortization of $1.1 million. In the same period in
the prior year, Other Income of $1.6 million was comprised of $2.2
million non-cash foreign exchange re-measurement gain pertaining to
the March 2006 Financing denominated in US dollars, other exchange
gains of $0.5 million, offset by finance arrangement fees of $1.1
million. Non GAAP net income was $9.6 million for the quarter ended
December 31, 2007, which represents net income exclusive of the tax
valuation expense of $37.4 million and the non-cash foreign
exchange re-measurement losses described above of approximately
$1.0 million. Non GAAP net income was $9.3 million for the quarter
ended December 31, 2006, which represents net income excluding the
effect of the $10.5 million Other Operating Expenses, and non-cash
foreign exchange re-measurement gains of $2.7 million. On that
basis, Non GAAP net income per Non GAAP diluted share was $0.63 for
the three months ended December 31, 2007 compared with $0.64 for
the three months ended December 31, 2006. Revenues for the year
ended December 31, 2007 of $236.8 million were 23.2% above revenues
for the same period in the prior year of $192.2 million. Excluding
the effect of exchange rate movements, the increase was 15.6%.
Operating Income for the year ended December 31, 2007 was $31.9
million, or 13.5% of revenues, compared with $9.6 million, or 5.0%
of revenues for the same period in the prior year. Excluding the
$10.5 million charge described above, 2006 Non GAAP Operating
Income was $20.1 million, or 10.4% of revenues. The Company
reported net loss of $14.0 million for the year ended December 31,
2007 compared with $14.9 million for the year ended December 31,
2006. Net loss per common and fully diluted share was $1.10 for the
year ended December 31, 2007 compared with $1.18 for the year ended
December 31, 2006. Net loss for the year ended December 31, 2007
included Other Expense of $1.9 million which comprised finance
arrangement fee amortization of $2.8 million, offset by $0.8
million from the non-cash foreign exchange re-measurement gain
pertaining to the March 2006 Financing denominated in US dollars
and other exchange gains of $0.1 million. In the same period in the
prior year, Other Income of $1.9 million was comprised of $6.2
million from the non-cash foreign exchange re-measurement gain
pertaining to the Convertible Capital Bonds and March 2006
Financing denominated in US dollars and other exchange gains of
$0.7 million, offset by finance arrangement fee amortization of
$5.0 million. Non GAAP net income was $22.5 million for the year
ended December 31, 2007, which represents net income exclusive of
the tax valuation expense of $37.4 million and the non-cash foreign
exchange re-measurement gains described above of $0.9 million. Non
GAAP net income was $9.4 million for the year ended December 31,
2006, which represents net income excluding the effect of the $10.5
million Other Operating Expenses, the loss on deconsolidation of
variable interest entity of $20.7 million, and non-cash foreign
exchange re-measurement gains of $6.9 million. On that basis, Non
GAAP net income per Non GAAP diluted share was $1.50 for the year
ended December 31, 2007 compared with $0.65 for the year ended
December 31, 2006. Cash on hand and short term investments at
December 31, 2007 was $36.2 million compared with $44.1 million at
December 31, 2006. Operating activities generated cash of $47.0
million, of which $3.0 million was due to the reduction in DSOs.
Net days sales outstanding at December 31, 2007 were 13 (21 at
December 31, 2006). This was offset by $26.4 million used in
financing activities, mainly comprising $10.7 million debt
principal repayment, $5.0 million in costs associated with the
August 1, 2007 loan amendment and $10.7 million used to repurchase
stock and warrants. Capital expenditure totaled $4.0 million in the
fourth quarter of 2007, compared to $4.9 million in the fourth
quarter of 2006. Capital expenditure in the year ended December 31,
2007 totaled $16.4 million, compared to $13.1 million in the year
ended December 31, 2006. Long-term debt was $75.4 million at
December 31, 2007, compared with $89.2 million at December 31,
2006. At December 31, 2007 long-term debt predominantly consisted
of the $59.2 million outstanding from the March 2006 Financing and
the $23.3 million of finance leases associated with the June 2005
sale and leaseback, offset by unamortized lender warrant costs, and
the unamortized closing fee associated with the August 1, 2007 loan
amendment. Net new business signings totaled $65.8 million for the
fourth quarter of 2007. This represented a book to bill ratio of
1.04. Net new business signings for the year ended December 31,
2007 were $266.7 million, for a book to bill ratio of 1.13, and an
increase of 14.2% on prior year. At December 31, 2007 backlog
(booked on work) amounted to approximately $190 million. Brian
Cass, LSR�s President and Managing Director commented, �We have
reported record revenues and operating profits for each quarter
this year and I am particularly pleased with this quarter�s 15.1%
operating margin. It has been a great year for our Company. This is
reflected in the operating results we are reporting today and in
the expansion of our staff and capabilities to meet the growing
needs of our customers. Constant currency revenue growth of almost
16% is testament to our ability to attract and retain talented
individuals who our customers want to work with. Our success so
much depends on the dedication and commitment of all our staff and
they have made 2007 a banner year for our Company. � Andrew Baker,
LSR�s Chairman and CEO said, �When our current management team
joined the Company almost 10 years ago, we committed ourselves to
delivering outstanding customer service, scientific quality and
operational excellence. I commend Brian and his team for their
unrelenting focus on these objectives, which are so central to
rebuilding the top and bottom line of our Company. Our goal of
achieving industry standard operating margins met its first
milestone this past quarter and we are confident that we have the
right strategy in place, and the right team, to be even more
successful in future. Our thanks go to the many that have supported
us in this effort.� LSR will hold an investor conference call to
discuss the quarter�s results on February 28, 2008 at 9:00 a.m.
Eastern Time. That call can be listened to by dialing (210)
234-0017 pass code 3316789. 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,
2006, as filed with the US Securities and Exchange Commission. Life
Sciences Research Inc. and Subsidiaries Condensed Consolidated
Statements of Operations � � � Three months ended December 31 � �
Year ended December 31 � (Dollars in thousands, except per share
data) 2007 � 2006 2007 � 2006 � Net revenues $ 63,438 $ 52,451 $
236,800 $ 192,217 Cost of sales � (42,571 ) � (39,430 ) � (165,790
) � (142,701 ) Gross profit 20,867 13,021 71,010 49,516 Selling,
general and administrative expenses (11,309 ) (7,561 ) (39,135 )
(29,447 ) Other operating expenses � - � � (10,497 ) � - � �
(10,497 ) Operating income / (loss) 9,558 (5,037 ) 31,875 9,572
Interest income 480 543 2,171 1,511 Interest expense (2,950 )
(4,021 ) (12,931 ) (14,078 ) Other (expense) / income � (2,179 ) �
1,573 � � (1,895 ) � 1,923 � Income / (loss) before income taxes
4,909 (6,942 ) 19,220 (1,072 ) Income tax (expense) / benefit �
(33,715 ) � 8,440 � � (33,194 ) � 6,856 � (Loss) / income before
loss on deconsolidation of variable interest entity $ (28,806 ) $
1,498 $ (13,974 ) $ 5,784 Loss on deconsolidation of variable
interest entity (net of income tax benefit of $22,218) � - � � - �
� - � � (20,656 ) Net (loss) / income $ (28,806 ) $ 1,498 � $
(13,974 ) $ (14,872 ) � Basic (loss) / income per share (Loss) /
income before loss on deconsolidation of variable interest entity $
(2.28 ) $ 0.12 $ (1.10 ) $ 0.46 Loss on deconsolidation of variable
interest entity � - � � - � � - � � (1.64 ) Basic (loss) / income
per share $ (2.28 ) $ 0.12 � $ (1.10 ) $ (1.18 ) � Diluted (loss) /
income per share: (Loss) / income before loss on deconsolidation of
variable interest entity $ (2.28 ) $ 0.10 $ (1.10 ) $ 0.46 Loss on
deconsolidation of variable interest entity � - � � - � � - � �
(1.64 ) Diluted (loss) / income per share $ (2.28 ) $ 0.10 � $
(1.10 ) $ (1.18 ) Weighted average number of common stock - Basic
(000�s) 12,624 12,693 12,698 12,644 - Diluted (000�s) 12,624 14,560
12,698 12,644 � Diluted loss per share is equal to basic loss per
share for the three months ended December 31, 2007 and for the
years ended December 31, 2007 and 2006, as the exercise of warrants
and share options are excluded from the computation of diluted loss
per share, as the effect is anti-dilutive. � Weighted average
number of diluted common stock 12,624 14,560 12,698 12,644 Warrants
and stock options excluded from computation of diluted loss per
share � 2,655 � � - � � 2,278 � � 1,873 � Non GAAP diluted common
stock � 15,279 � � 14,560 � � 14,976 � � 14,517 � Life Sciences
Research Inc. and Subsidiaries Condensed Consolidated Balance
Sheets � (Dollars in thousands, except per share data) � Year ended
December 31 ASSETS 2007 � 2006 Current assets: Cash and cash
equivalents $ 32,304 $ 44,088 Short term investments 3,919 -
Accounts receivable, net of allowance of $717 and $691 in 2007 and
2006, respectively 30,116 38,677 Unbilled receivables 25,935 17,459
Inventories 2,530 1,962 Prepaid expenses and other current assets �
9,270 � � 10,339 � Total current assets $ 104,074 � $ 112,525 �
Property and equipment, net 70,994 63,630 Goodwill 7,268 1,520
Other assets 8,382 10,341 Deferred income taxes � 10,865 � � 42,563
� Total assets $ 201,583 � $ 230,579 � LIABILITIES AND
STOCKHOLDERS' EQUITY/(DEFICIT) Current liabilities: Accounts
payable $ 15,477 $ 16,973 Accrued payroll and other benefits 6,644
9,743 Accrued expenses and other liabilities 33,086 17,721
Short-term debt 618 889 Fees invoiced in advance � 47,347 � �
44,435 � Total current liabilities $ 103,172 � $ 89,761 � Long-term
debt 75,429 89,151 Deferred gain on disposal of US property 8,787
9,107 Pension liabilities � 43,522 � � 47,652 � Total liabilities $
230,910 � $ 235,671 � 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 December 31, 2007:
12,626,498 (December 31, 2006: 12,775,120) 126 128 Paid in capital
87,216 � 95,762 � Accumulated other comprehensive loss (46,875 )
(45,162 ) Accumulated deficit � (69,794 ) � (55,820 ) Total
stockholders' equity/(deficit) $ (29,327 ) $ (5,092 ) Total
liabilities and stockholders' equity/(deficit) $ 201,583 � $
230,579 � Life Sciences Research Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows � (Dollars in thousands) Year
ended December 31 2007 � 2006 Cash flows from operating activities:
Net loss $ (13,974 ) $ (14,872 ) Adjustments to reconcile net loss
to net cash provided by operating activities Depreciation and
amortization 9,519 9,514 Amortization of gain on disposal of US
property (320 ) (161 ) Non-cash compensation expense associated
with employee stock compensation plans 1,908 2,441 Loss on
deconsolidation of variable interest entity - 42,874 Foreign
exchange gain on March 2006 Financing and Capital Bonds (770 )
(6,210 ) Foreign exchange gain on intercompany balances (169 ) (692
) Deferred income tax expense/(benefit) 33,194 (29,074 ) Provision
for losses on accounts receivable 26 73 Amortization of Capital
Bonds issue costs - 70 Interest expense related to amortization of
debt issue costs 1,789 861 Amortization of financing costs 2,134
3,879 Amortization of warrants - 9,265 Changes in operating assets
and liabilities: Accounts receivable, unbilled receivables and
prepaid expenses 2,607 (3,540 ) Inventories (522 ) 301 Accounts
payable, accrued expenses and other liabilities 9,775 5,692 Fees
invoiced in advance � 1,795 � � 7,028 � Net cash provided by
operating activities $ 46,992 � $ 27,449 � � Cash flows (used
in)/provided by investing activities: Purchase of property, plant
and equipment (16,439 ) (13,093 ) Sale of property, plant and
equipment 17 6 Payment for acquisition, net of cash acquired (4,340
) - Purchase of short term investments � (3,919 ) � - � Net cash
used in investing activities $ (24,681 ) $ (13,087 ) � Cash flows
(used in)/provided by financing activities: Proceeds from issue of
Voting Common Stock 238 648 Proceeds from long-term borrowings -
70,000 Repurchase of Voting Common Stock (4,000 ) - Repurchase of
warrants (6,694 ) - Increase in other assets - (8,145 ) Increase in
deferred finance (4,300 ) - Repayments of long-term borrowings
(10,729 ) (71 ) Repayments of short term borrowings � (904 ) �
(46,871 ) Net cash used in financing activities $ (26,389 ) $
15,561 � � Effect of exchange rate changes on cash and cash
equivalents � (7,706 ) � (1,255 ) (Decrease)/increase in cash and
cash equivalents (11,784 ) 28,668 Cash and cash equivalents at
beginning of year � 44,088 � � 15,420 � Cash and cash equivalents
at end of year $ 32,304 � $ 44,088 � Supplementary Disclosures:
Interest paid $ 11,609 $ 10,572 Taxes paid $ 307 $ 142 �
Supplementary disclosures of non-cash investing and financing
activity: Increase in accrued liabilities for acquisition-related
commitments $ 1,769 $ - Issuance of warrants to lender $ - $ 5,281
Issuance of warrants to financial advisor $ - $ 3,278
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