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

March 19, 2004

LSR ANNOUNCES 2003 RESULTS

East Millstone, New Jersey, March 19, 2004 – Life Sciences Research, Inc. ("LSR") announced today that net revenues in the year ended December 31, 2003 were $132.4 million, an increase of 14% on net revenues of $115.7 million for the year ended December 31, 2002.  The underlying increase, after adjusting for the impact of the movement in exchange rates, was 7%.

Operating income before charging other operating expenses for the year ended December 31, 2003 was $6.8 million compared to $4.3 million in the year ended December 31, 2002.  Other operating expenses were $3.5 million in 2003 and $0 in 2002, and mainly comprised of restructuring costs arising from a consolidation of certain duplicate facilities in the UK in order to improve the efficiency of our facilities and staffing. 

Net income for the year ended December 31, 2003 was $3.7 million compared with a net income of $2.7 million the previous year.  This included Other Income of $5.4 million in 2003 and $4.9 million in 2002.  In 2003, Other Income included a gain of $0.6 million associated with the repurchase of $1.4 million principal amount of the Company’s outstanding convertible capital bonds and non-cash foreign exchange transaction gains of $4.8 million on accounting for the Company’s dollar denominated bonds converted into UK pound sterling. Other Income in 2002 included a gain of $1.2 million associated with the repurchase of $2.4 million principal amount of the Company’s outstanding convertible capital bonds, non-cash foreign exchange transaction gains of $5.0 million on accounting for the Company’s dollar denominated bonds converted into UK pound sterling, offset by expenses associated with the US redomiciling Exchange Offer of $1.3 million. Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”), exclusive of the items discussed above, were $14.6 million for full year 2003, or 11.0% of sales, compared to $12.4 million, or 10.7% of sales, for the prior year.  Earnings for the year ended December 31, 2003 were $0.29 per share on a diluted basis, compared with $0.24 in the year ended December 31, 2002.

For the quarter ended December 31, 2003, revenues were $35.1 million, compared to $31.1 million during the same period last year.  Operating income before charging other operating expenses for the quarter ended December 31, 2003 was $2.0 million compared to $1.6 million in the year ended December 31, 2002.  Other operating expenses were $3.8 million in the fourth quarter of 2003 and $0 in the prior year.  These mainly comprised the restructuring costs referred to above.  Net income for the quarter ended December 31, 2003 was $1.8 million compared with a net income of $1.6 million the previous year. Fourth quarter earnings were $0.15 per share on a diluted basis, compared with $0.13 in the quarter ended December 31, 2002.

Net cash provided by operating activities totaled $10.0 million in 2003, compared to cash provided of $14.0 million in 2002. Capital expenditures totaled $8.7 million in 2003 compared with $4.2 million in 2002. Year-end cash and cash equivalents were $17.3 million compared to $14.6 million in the prior year, and total long term debt was $87.5 million, an increase of $3.8 million from December 31, 2002 of $83.7 million.  This increase in long-term debt comprised a $4.0 million increase due to exchange rate movements related to the company’s UK pound sterling based debt, offset by a net repayment of $0.2 million.

New business signings totaled $32.7 million for the fourth quarter of 2003, and $123.7 million for the full year, a decrease of 12% and 8.5% respectively from the prior year, exclusive of the impact of the movement in exchange rates.  2002 saw a rapid growth in business from the Pharmaceutical industry and this business was maintained in 2003.  However there was a decline in the amount of work outsourced from the Agrochemical industry, both on new chemical entities and as registration work under European Directive 91/414/EEC diminished.  At December 31, 2003 backlog (booked-on work) amounted to approximately $93.5 million. Net days sales outstanding were 17 days at year end.

Andrew Baker, LSR’s Chairman and CEO, said “2003 was another year of steady progress for LSR with revenues, operating results and net income higher than 2002.  Cash management continues to be a priority and I am pleased to report that cash balances at the year-end were ahead of last year despite the higher level of investment in new capital projects to strengthen our facilities and capabilities”.

Brian Cass, LSR’s President and Managing Director, said, “Revenue growth continued in the fourth quarter.  New business enquiries remain strong and the fourth quarter saw a recovery in orders from the levels seen in the second and third quarters.  This has also been reflected in a robust order rate in the first two months of 2004”.

Mr. Cass continued “We continue to focus on productivity and cost management and have recently completed a restructuring of our UK facilities to improve the efficiency of our operations, whilst not hampering our near-term capacity for meeting clients’ needs.  These changes will also help us to concentrate our investment going forward”.

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). Information on LSR’s business, recent press releases, and SEC filings can be obtained through its website at www.lsrinc.net.

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 LSR’s Registration Statement on Form S-1, dated July 12, 2002, and the Company’s Form 10-K for the fiscal year ended December 31, 2002, each as filed with the US Securities and Exchange Commission.

This press release includes supplemental financial information that may contain references to non-GAAP financial measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental financial information to our generally accepted accounting principles (GAAP) information follows. We present this non-GAAP supplemental financial information because we believe it is of interest to the investment community and provides additional meaningful methods of evaluating certain aspects of the Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP basis. This supplemental financial information should be viewed in addition to, not in lieu of, the Company’s consolidated statements of operations for the three and twelve-month periods ended December 31, 2003 and 2002.

         tables to follow –


 

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Life Sciences Research Inc. and Subsidiaries

Consolidated Statements of Operations

Dollars in (000's), except per share amounts

 

Quarter ended December 31,

 

Year Ended December 31,

 

2003

 

2002

 

2003

 

2002

 

 

 

 

 

 

 

 

Revenues

$35,147

 

$31,066

 

$132,434

 

$115,742

Cost of sales

(27,819)

 

(24,515)

 

(104,798)

 

(93,403)

Gross profit

7,328

 

6,551

 

27,636

 

22,339

Selling and administrative expenses

(5,362)

 

(4,911)

 

(20,887)

 

(18,075)

Other operating expense

(3,777)

 

-

 

(3,522)

 

-

Operating (loss)/ income

(1,811)

 

1,640

 

3,247

 

4,264

Interest income

45

 

13

 

94

 

66

Interest expense

(1,468)

 

(1,631)

 

(6,084)

 

(6,304)

Other income

3,325

 

2,557

 

5,362

 

4,922

Income before income taxes

91

 

2,579

 

2,619

 

2,948

Income tax benefit/(expense)

1,739

 

(985)

 

1,109

 

(251)

Net income

$1,830

 

$1,594

 

$3,728

 

$2,697

 

 

 

 

 

 

 

 

Income per share

 

 

 

 

 

 

 

 -basic

$0.15

 

$0.13

 

$0.31

 

$0.25

 -diluted

$0.15

 

$0.13

 

$0.29

 

$0.24

 

 

 

 

 

 

 

 

Weighted average number of common stock outstanding

 

 

 

 

 

 

 

 -basic

12,033,196

 

11,932,338

 

11,957,760

 

10,678,890

 -diluted

12,187,082

 

12,077,285

 

12,699,576

 

11,083,416

 

 

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Life Sciences Research Inc. and Subsidiaries

Consolidated Balance Sheets

Dollars in (000's), except per share amounts

 

December 31,

ASSETS

2003

 

2002

Current assets:

 

 

 

Cash and cash equivalents

$17,271

 

$14,644

Accounts receivable, net of allowance of $561 and $287 in 2003 and 2002

 

 

 

  respectively

17,515

 

20,176

Unbilled receivables

8,246

 

9,108

Inventories

1,901

 

1,556

Prepaid expenses and other current assets

4,610

 

3,075

Total current assets

$49,543

 

$48,559

Property and equipment, net

101,547

 

94,574

Goodwill

832

 

-

Investments

-

 

248

Unamortized capital bonds issue costs

429

 

563

Deferred income taxes

3,922

 

4,466

Total assets

$156,273

 

$148,410

LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)

 

 

 

Current liabilities:

 

 

 

Accounts payable

$12,508

 

$8,574

Accrued payroll and other benefits

4,152

 

1,773

Accrued expenses and other liabilities

14,033

 

12,990

Fees invoiced in advance

22,761

 

26,066

Total current liabilities

$53,454

 

$49,403

Long-term debt

87,560

 

83,717

Related party loans

-

 

358

Pension liabilities

21,414

 

17,712

Deferred income taxes

2,291

 

5,024

Total liabilities

$164,719

 

$156,214

Commitments and contingencies

 

 

 

Shareholders' equity/(deficit)

 

 

 

Common Stock, issued and outstanding 12/ 31/03: 12,034,883 (12/31/02: 11,932,338)

120

 

119

Paid in capital

75,101

 

75,098

Less: Promissory notes for issuance of common stock

(661)

 

(684)

Accumulated comprehensive loss

(22,973)

 

(18,576)

Accumulated deficit

(60,033)

 

(63,761)

Total shareholders' (deficit)

$(8,446)

 

$(7,804)

Total liabilities and shareholders' equity/(deficit)

$156,273

 

$148,410

 

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Life Sciences Research Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Dollars in (000's)

 

Year Ended December 31,

 

2003

 

2002

Cash flows from operating activities:

 

 

 

Net income/(loss)

$3,728

 

$2,697

Adjustments to reconcile net income/(loss) to net cash from operating activities

 

 

 

Depreciation

11,334

 

8,108

Foreign exchange (gain)/loss on Capital Bonds

(4,760)

 

(4,977)

Deferred income taxes/(benefits)

(1,234)

 

188

Gain on repurchase of Capital Bonds

(602)

 

(1,191)

Share of profit on acquisition

(208)

 

-

Provision for losses on accounts receivable

244

 

123

Amortization of capital bonds issue costs

165

 

191

Amortization of warrants

290

 

156

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, unbilled receivables and prepaid expenses

5,063

 

4,605

Inventories

(157)

 

(127)

Accounts payable, accrued expenses and other liabilities

2,048

 

(1,728)

Fees invoiced in advance

(5,972)

 

5,988

Net cash provided by/(used in) operating activities

$9,939

 

$14,033

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property, plant and equipment

(8,716)

 

(4,177)

Cash acquired with subsidiary

1,893

 

-

Net cash used in investing activities

$(6,823)

 

$(4,177)

 

 

 

 

Cash flows from financing activities:

 

 

 

Proceeds from issue of common shares

4

 

6,039

Proceeds from issue of Promissory Notes

23

 

-

Proceeds from long-term borrowings

444

 

334

Repayments of long-term borrowings

(1,328)

 

(4,627)

Repayments of short term borrowings

(253)

 

-

Net cash provided by financing activities

$(1,110)

 

$1,746

Effect of exchange rate changes on cash and cash equivalents

621

 

802

Increase/(decrease) in cash and cash equivalents

2,627

 

12,404

Cash and cash equivalents at beginning of year

14,644

 

2,240

Cash and cash equivalents at end of year

$17,271

 

$14,644

Supplementary disclosures:

 

 

 

Interest paid

$(5,544)

 

$(6,110)

 

 

 

 

Non-cash transactions:

 

 

 

Conversion of debt to equity

$-

 

$2,400

Issuance of common stocks for promissory notes

$-

 

$684

 

 

 

 

 

 

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