For further information:
Richard Michaelson
Phone US:  (732) 649-9961
e-mail:  LifeSciencesResearch@LSRinc.net

August 5, 2004

LSR ANNOUNCES SECOND QUARTER RESULTS

East Millstone, New Jersey, August 5, 2004 – Life Sciences Research, Inc. (OTCBB: LSRI) announced today that revenues for the quarter ended June 30, 2004 were $38.3 million, operating profit was $4.0 million, or 10.4% of revenues, and EBITDA excluding foreign exchange remeasurement gains associated with the Company’s Bonds was $6.3 million, or 16.4% of revenues.  Each of these represents an improvement on the quarter ended March 31, 2004 which in turn were at the highest level for five years when announced.

Revenues for the quarter were 17.3% above the revenues for the same period in the prior year of $32.7 million. Excluding the effect of exchange rate movements, the increase was 7.6%.  The Company reported net income for the quarter ended June 30, 2004 of $1.2 million, compared with $1.9 million for the quarter ended June 30, 2003.   Net income per common share for the quarter ended June 30, 2004 was $0.10 compared with $0.16 in the quarter ended June 30, 2003.

The net income in the three months ended June 30, 2004 included Other Expenses of $0.6 million reflecting a non-cash foreign exchange remeasurement loss pertaining to the Convertible Capital Bonds. In the three months ended June 30, 2003, Other Income of $2.2 million comprised a non-cash foreign exchange remeasurement gain of $2.0 million pertaining to the Convertible Capital Bonds, and a $0.2 million gain on the repurchase of Capital Bonds. Excluding these non cash items, net income for the current quarter was $1.6 million, or $0.13 per common share, compared to $0.3 million, or $0.03 per common share in the prior year, and Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $6.3 million for the second quarter of 2004, or 16.4% of revenues, compared with $3.8 million, or 11.7% of revenues, for the same period in the prior year.

Net cash generated by operating activities totaled $2.3 million in the second quarter of 2004 (compared with $1.7 million in second quarter 2003), after using $2.5 million in increased working capital ($0.8 million in 2003). Net days sales outstanding were 22 days at June 30, 2004, compared with 17 days at June 30, 2003.  Capital expenditure totaled $2.3 million in the second quarter of 2004.

Revenues for the six months ended June 30, 2004 at $75.6 million were 17.0% above revenues for the same period last year of $64.6 million.  Excluding the effect of exchange rate movements, the increase was 6.2%.  Operating Income for that period was $6.3 million, or 8.4%, compared to $3.3 million, or 5.1% in the prior year. The Company reported net income for the six months ended June 30, 2004 of $2.6 million, compared with $1.5 million in the same period last year.  Net income per common share for the six months ended June 30, 2004 was $0.22 compared with $0.13 in the same period last year.

The net income in the six months ended June 30, 2004 included Other Income of $0.7 million reflecting a non-cash foreign exchange remeasurement gain pertaining to the Convertible Capital Bonds.  In the six months ended June 30, 2003, Other Income of $1.7 million comprised a non-cash foreign exchange remeasurement gain of $1.1 million pertaining to the Convertible Capital Bonds and $0.6 million gain on the repurchase of Capital Bonds.  Excluding Other Income net income for the first six months of 2004 was $2.1 million or $0.17 per common share, compared with $0.3 million or $0.02 per common share in the prior year and EBITDA was $10.9 million, or 14.5% of revenues, compared with $7.6 million, or 11.7% of revenues, in the same period of 2003.

Net cash generated by operating activities in the first half of 2004 was $3.7 million (2003 $1.4 million) after using $4.2 million in increased working capital ($3.4 million in 2003).  Capital expenditure in the first half of 2004 totaled $4.6 million.

Cash on hand at June 30, 2004 was $15.1 million ($17.3 million at December 31, 2003). Long-term debt was $87.6 million at June 30, 2004 the same as at December 31, 2003.

Andrew Baker, LSR’s Chairman and CEO said, “Exceeding 10% operating profit this quarter is a significant milestone for LSR, helped not only by the positive industry trends, but by the focus and commitment that management and staff have shown to customer service and expense management. As both the political and business climate has improved for LSR, we are excited about the prospects both for continued growth and the return over the coming quarters and years to the more robust operating margins that our company and peers have historically enjoyed.”

Brian Cass, LSR’s President and Managing Director said, “The second quarter saw a substantial growth in orders over the second quarter of 2003 with the result that orders for the first half of the year were at record levels.  Overall they were 28% up on last year with a strong contribution from the pharmaceutical industry which was 41% ahead of last year.  This growth in orders has increased backlog and is supporting the continued growth in revenues.”

Mr. Cass added, “When we announced our results for the first quarter we indicated that we expected to see the impact of the restructuring of our UK facilities being felt during the second quarter. That indeed proved to be the case. This action played a significant role in allowing us to reduce our total costs in the second quarter by $0.6 million while at the same time growing revenues by $1 million.”

LSR will hold an investor conference call to discuss the quarter’s results on Friday morning, August 6, 2004 at 9:00 Eastern time.  That call can be listened to by dialing (888) 730-9141 (within U.S.) or (517) 308-9012 (outside U.S.); pass code 58804.  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 USA’s 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, 2003, as filed with the US Securities and Exchange Commission.

– tables to follow –

 
Life Sciences Research Inc.
Statement of Operations
Unaudited

 


Three months ended
June 30

 


Six months ended
June 30

 

 

 

 

(Dollars in thousands, except per share data)

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

Net revenues

$38,315

 

$32,663

 

$75,551

 

$64,564

Cost of revenues

(28,111)

 

(25,442)

 

(57,546)

 

(50,815)

Gross profit

10,204

 

7,221

 

18,005

 

13,749

Selling, general and administrative expenses

(6,201)

 

(5,395)

 

(11,686)

 

(10,316)

Other operating expenses

-

 

(132)

 

-

 

(132)

Operating income

4,003

 

1,694

 

6,319

 

3,301

Interest income

14

 

23

 

28

 

39

Interest expense

(1,593)

 

(1,444)

 

(3,169)

 

(3,152)

Other income/(expense)

(625)

 

2,179

 

730

 

1,729

Income before income taxes

1,799

 

2,452

 

3,908

 

1,917

Income tax expense

(597)

 

(592)

 

(1,313)

 

(415)

Net income

$1,202

 

$1,860

 

$2,595

 

$1,502

 

 

 

 

 

 

 

 

Income per common share

 

 

 

 

 

 

 

- Basic

$0.10

 

$0.16

 

$0.22

 

$0.13

- Diluted

$0.10

 

$0.15

 

$0.21

 

$0.12

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

- Basic     (000's)

12,050

 

11,932

 

12,045

 

11,932

- Diluted  (000's)

12,346

 

12,244

 

12,554

 

12,332


Life Sciences Research Inc.

Balance Sheet

(Dollars in thousands, except per share data)

June 30,

 

December 31,

 

2004

 

2003

ASSETS

Unaudited

 

Audited

Current assets:

 

 

 

Cash and cash equivalents

$15,135

 

$17,271

Accounts receivable, net of allowance of $546 and $561
in 2004 and 2003 respectively

  23,360

 

  17,515

Unbilled receivables

13,485

 

8,246

Inventories

1,771

 

1,901

Prepaid expenses and other current assets

3,573

 

4,610

Total current assets

57,324

 

49,543

 

 

 

 

Property and equipment, net

103,000

 

101,547

Goodwill

847

 

832

Unamortized Capital Bonds issue costs

345

 

429

Deferred income taxes

3,521

 

3,922

Total assets

$165,037

 

$156,273

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)

 

 

Current liabilities:

 

 

 

Accounts payable

$10,124

 

$12,508

Accrued payroll and other benefits

2,525

 

4,152

Accrued expenses and other liabilities

17,478

 

13,695

Short term debt

263

 

338

Fees invoiced in advance

28,638

 

22,761

Total current liabilities

59,028

 

53,454

 

 

 

 

Long-term debt

87,649

 

87,560

Pension liabilities

22,097

 

21,414

Deferred income taxes

3,237

 

2,291

Total liabilities

172,011

 

164,719

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity/(deficit)

 

 

 

Voting Common Stock, $0.01 par value.  Authorized 50,000,000

 

 

Issued and outstanding at June 30, 2004: 12,049,534 (December 31, 2003: 12,034,883)

 

120

 

 

120

Non-Voting Common Stock, $0.01 par value.  Authorized 5,000,000               

 

 

Issued and outstanding: None

-

 

-

Preferred Stock, $0.01 par value.  Authorized 5,000,000

 

 

 

Issued and outstanding: None

-

 

-

Paid in capital

75,123

 

75,101

Less: Promissory notes for the issuance of common stock

(643)

 

(661)

Accumulated comprehensive loss

(24,136)

 

(22,973)

Accumulated deficit

(57,438)

 

(60,033)

Total shareholders' equity /(deficit)

(6,974)

 

(8,446)

Total liabilities and shareholders' equity /(deficit)

$165,037

 

$156,273

 

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