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

October 28, 2004

LSR ANNOUNCES THIRD QUARTER RESULTS OF $0.15 EPS

East Millstone, New Jersey, October 28, 2004 – Life Sciences Research, Inc. (OTCBB: LSRI) announced today that revenues for the quarter ended September 30, 2004 were $40.9 million, operating income was $4.5 million, or 11.1% of revenues, and EBITDA excluding foreign exchange remeasurement gains associated with the Company’s Bonds was $7.0 million, or 17.0% of revenues, each a five-year record high and an improvement on the quarter ended June 30, 2004.

Revenues for the quarter were 24.9% 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 13.4%.  The Company reported net income for the quarter ended September 30, 2004 of $1.8 million, compared with $0.4 million for the quarter ended September 30, 2003.   Net income per common share for the quarter ended September 30, 2004 was $0.15 compared with $0.03 in the quarter ended September 30, 2003.

The net income in the three months ended September 30, 2004 included Other Expenses of $0.1 million reflecting a non-cash foreign exchange remeasurement loss pertaining to the Convertible Capital Bonds. In the three months ended September 30, 2003, Other Income of $0.3 million comprised a non-cash foreign exchange remeasurement gain pertaining to the Convertible Capital Bonds.  Excluding these non cash items and related tax effect, net income for the current quarter was $1.9 million, or $0.15 per common share, compared to $0.2 million, or $0.02 per common share in the prior year, and Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was $7.0 million for the third quarter of 2004, or 17.0% of revenues, compared with $3.9 million, or 11.9% of revenues, for the same period in the prior year.

Net cash generated by operating activities totaled $8.2 million in the third quarter of 2004 (compared with a use of funds of $0.2 million in third quarter 2003), after generating $2.9 million from a reduction in working capital (use of $2.4 million from an increase in working capital in 2003).  Capital expenditure totaled $2.4 million in the third quarter of 2004.

Revenues for the nine months ended September 30, 2004 of $116.4 million were 19.7% above revenues for the same period last year of $97.3 million.  Excluding the effect of exchange rate movements, the increase was 8.6%.  Operating Income for that period was $10.8 million, or 9.3% of revenues compared to $5.1 million, or 5.2% of revenues in the prior year. The Company reported net income for the nine months ended September 30, 2004 of $4.4 million, compared with $1.9 million in the same period last year.  Net income per common share for the nine months ended September 30, 2004 was $0.36 compared with $0.16 in the same period last year.

The net income in the nine months ended September 30, 2004 included Other Income of $0.6 million reflecting a non-cash foreign exchange remeasurement gain pertaining to the Convertible Capital Bonds.  In the nine months ended September 30, 2003, Other Income of $2.0 million comprised a non-cash foreign exchange remeasurement gain of $1.4 million pertaining to the Convertible Capital Bonds and a $0.6 million gain on the repurchase of Capital Bonds.  Excluding these non cash items and related tax effect, net income for the first nine months of 2004 was $4.0 million or $0.33 per common share, compared with $0.5 million or $0.04 per common share in the prior year and EBITDA was $17.9 million, or 15.4% of revenues, compared with $11.5 million, or 11.8% of revenues, in the same period of 2003.

Net cash generated by operating activities in the first nine months of 2004 was $12.0 million (2003 $1.3 million) after using $1.4 million in increased working capital ($5.7 million in 2003).  Capital expenditure in the first nine months of 2004 totaled $7.0 million ($5.7 million in 2003).

Cash on hand at September 30, 2004 was $20.8 million ($17.3 million at December 31, 2003). Long-term debt was $87.4 million at September 30, 2004 compared with $87.6 at December 31, 2003, the reduction mainly due to exchange rate movements.

Andrew Baker, LSR’s Chairman and CEO said, “ My thanks to our management and staff for another milestone quarter.  This was our 15th consecutive quarter of revenue growth and this quarter’s 11% operating profit moves us a step closer to our target of industry-level margins. With strong invoicing and collections we ended the quarter with over $20 million of cash, and we continue to invest in our facilities and equipment, including upgrades of our data collection and reporting systems.”  

Brian Cass, LSR’s President and Managing Director said, “Our third quarter results were a reflection of strong demand in our industry, the success that LSR is having in winning new studies, and our attention to continuous improvement in our operating performance.  Commitment to customer service has helped us achieve another quarter of excellent orders, 44% ahead of last year for the Group, and an all time record high for our UK laboratories. Looking forward we continue to see strong demand from our pharmaceutical and biotech clients, and particularly from some of the world’s leading drug development companies as they invest in growth of their early stage pipelines. These order and demand levels are now translating into attractive revenue growth and provide us with optimism as we look into future years.

LSR will hold an investor conference call to discuss the quarter’s results on Friday morning, October 29, 2004 at 10:00 Eastern time.  That call can be listened to by dialing (210) 839-8725 (within U.S.) or (001) 210-839-8725 (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 –

 

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Life Sciences Research,Inc.

Statement of Operations
Unaudited

 

Three months ended September 30

 

Nine months ended September 30

 

 

 

 

(Dollars in thousands, except per share data)

2004

 

2003

 

2004

 

2003

 

 

 

 

 

 

 

 

Net revenues

$40,855

 

$32,723

 

$116,406

 

$97,287

Cost of revenues

(29,674)

 

(26,164)

 

(87,220)

 

(76,979)

Gross profit

11,181

 

6,559

 

29,186

 

20,308

Selling, general and administrative expenses

(6,659)

 

(5,189)

 

(18,345)

 

(15,505)

Other operating expenses

-

 

387

 

-

 

255

Operating income

4,522

 

1,757

 

10,841

 

5,058

Interest income

13

 

10

 

41

 

49

Interest expense

(1,689)

 

(1,464)

 

(4,858)

 

(4,616)

Other (expense)/income

(105)

 

308

 

625

 

2,037

Income before income taxes

2,741

 

611

 

6,649

 

2,528

Income tax expense

(945)

 

(215)

 

(2,261)

 

(630)

Net income

$1,796

 

$396

 

$4,388

 

$1,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share

 

 

 

 

 

 

 

- Basic

$0.15

 

$0.03

 

$0.36

 

$0.16

- Diluted

$0.13

 

$0.03

 

$0.33

 

$0.15

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

- Basic     (000's)

12,166

 

11,932

 

12,085

 

11,932

- Diluted  (000's)

13,914

 

12,271

 

13,369

 

12,920

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Life Sciences Research, Inc.

Balance Sheet

(Dollars in thousands, except per share data)

September 30,

 

December 31,

 

2004

 

2003

ASSETS

Unaudited

 

Audited

Current assets:

 

 

 

Cash and cash equivalents

$20,801

 

$17,271

Accounts receivable, net of allowance of $576 and $561 in 2004 and 2003 respectively

  27,672

 

  17,515

Unbilled receivables

11,972

 

8,246

Inventories

1,858

 

1,901

Prepaid expenses and other current assets

3,761

 

4,610

Total current assets

66,064

 

49,543

 

 

 

 

Property and equipment, net

102,766

 

101,547

Goodwill

843

 

832

Unamortized Capital Bonds issue costs

299

 

429

Deferred income taxes

3,140

 

3,922

Total assets

$173,112

 

$156,273

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)

 

 

Current liabilities:

 

 

 

Accounts payable

$9,499

 

$12,508

Accrued payroll and other benefits

4,859

 

4,152

Accrued expenses and other liabilities

19,531

 

13,695

Short term debt

269

 

338

Fees invoiced in advance

31,006

 

22,761

Total current liabilities

65,164

 

53,454

 

 

 

 

Long-term debt

87,350

 

87,560

Pension liabilities

21,793

 

21,414

Deferred income taxes

3,786

 

2,291

Total liabilities

178,093

 

164,719

 

 

 

 

Commitments and contingencies

-

 

-

 

 

 

 

Shareholders’ equity/(deficit)

 

 

 

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

 

 

Issued and outstanding at September 30, 2004: 12,272,929 (December 31, 2003: 12,034,883)

 

123

 

 

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

75,257

 

75,101

Less: Promissory notes for the issuance of 
common stock

(627)

 

(661)

Accumulated comprehensive loss

(24,089)

 

(22,973)

Accumulated deficit

(55,645)

 

(60,033)

Total shareholders’ equity /(deficit)

(4,981)

 

(8,446)

Total liabilities and shareholders’ equity /(deficit)

$173,112

 

$156,273

 

 

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