UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________
FORM
10-Q
______________
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended: June 30, 2009
Commission
File No. 0-33505
______________
LIFE
SCIENCES RESEARCH, INC.
(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
______________
MARYLAND
(State
of Incorporation)
|
|
52-2340150
(IRS
Employer Identification No.)
|
PO
BOX 2360, METTLERS ROAD,
EAST
MILLSTONE, NEW JERSEY
(Address
of Principal Executive Offices)
|
|
08875-2360
(Zip
Code)
|
Registrant’s
telephone number, including area code:
(732) 649-9961
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such report), and (2) has been subject to such filing
requirements for the past 90 days.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer
|
o
|
(Do
not check if a smaller
|
Accelerated
filer
|
x
|
Non-accelerated
filer
|
o
|
reporting
company)
|
Smaller
reporting company
|
o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
APPLICABLE
ONLY TO CORPORATE ISSUERS:
13,349,095
shares of voting common stock of $0.01 par value as of July 30,
2009
TABLE
OF CONTENTS
PART
I
|
FINANCIAL
INFORMATION
|
Page
|
|
|
|
|
|
Item
1
|
Financial
Statements (Unaudited).
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income for the three and six months ended June
30, 2009 and 2008.
|
4
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets at June 30, 2009 and December 31,
2008.
|
5
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2009 and 2008.
|
6
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements.
|
7
|
|
|
|
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
17
|
|
|
|
|
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
25
|
|
|
|
|
|
Item
4
|
Controls
and Procedures.
|
27
|
|
|
|
|
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
|
|
|
|
|
Item
1
|
Legal
Proceedings.
|
28
|
|
|
|
|
|
Item
1A
|
Risk
Factors.
|
29
|
|
|
|
|
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds.
|
29
|
|
|
|
|
|
Item
3
|
Defaults
Upon Senior Securities.
|
29
|
|
|
|
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders.
|
29
|
|
|
|
|
|
Item
5
|
Other
Information.
|
29
|
|
|
|
|
|
Item
6
|
Exhibits.
|
31
|
|
|
|
|
|
Signatures.
|
32
|
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
Note
Regarding Forward Looking Statements:
This Form
10-Q and other reports filed by Life Sciences Research, Inc. and subsidiaries
(the “Company”) from time to time with the U.S. Securities and
Exchange Commission (the "SEC"), as well as the Company's press releases,
contain or may contain forward-looking statements. The information
provided is based upon beliefs of, and information currently available to, the
Company's management, as well as estimates and assumptions made by the Company's
management. Statements that are not statements of historical fact may
be deemed to be forward-looking statements. Forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "may," "should," "anticipates," "estimates," "expects," "future,"
"intends," "hopes," "plans," or the negative thereof. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause actual results of the Company to vary materially
from historical results or from any future results expressed or implied in such
forward-looking statements.
Any
statements contained in this Form 10-Q that do not describe historical facts,
including without limitation statements concerning expected revenues, earnings,
product introductions and general market conditions, may constitute
forward-looking statements. Any such forward-looking statements
contained herein are based on current expectations, but are subject to a number
of risks and uncertainties that may cause actual results to differ materially
from expectations. The factors that could cause actual future results
to differ materially from current expectations include, but are not limited to,
the following: the Company's ability to raise the financing required to support
the Company's operations; the Company's ability to establish its intended
operations; fluctuations in demand for the Company's products and services; the
Company's ability to manage its growth; the Company's ability to attract
customers; and the ability of the Company to compete successfully in the
future. Any forward-looking statements should be considered in light
of those factors.
The
Company files periodic reports with the SEC, as well as current reports on Form
8-K, proxy or information statements and other reports required of publicly held
reporting companies. The public may read and copy any materials the
Company files with the SEC at the SEC's Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet site that contains
the reports, proxy and information statements, and other information that the
Company files electronically with the SEC, which is available on the Internet at
www.sec.gov. Further information about the Company and its subsidiary
may be found at www.lsrinc.net.
PART I
|
FINANCIAL
INFORMATION
|
|
|
ITEM
1
|
FINANCIAL
STATEMENTS
|
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
|
|
(Dollars
in thousands, except per share data)
|
|
3
months ended June 30
|
|
|
6
months ended June 30
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
$
|
45,250
|
|
|
$
|
64,330
|
|
|
$
|
93,295
|
|
|
$
|
127,557
|
|
Cost
of sales
|
|
|
(33,321
|
)
|
|
|
(43,507
|
)
|
|
|
(67,609
|
)
|
|
|
(86,871
|
)
|
Gross
profit
|
|
|
11,929
|
|
|
|
20,823
|
|
|
|
25,686
|
|
|
|
40,686
|
|
Selling,
general and administrative expenses
|
|
|
(6,428
|
)
|
|
|
(10,796
|
)
|
|
|
(14,294
|
)
|
|
|
(20,995
|
)
|
Acquisition-related
expenses
|
|
|
(1,500
|
)
|
|
|
-
|
|
|
|
(1,500
|
)
|
|
|
-
|
|
Operating
income
|
|
|
4,001
|
|
|
|
10,027
|
|
|
|
9,892
|
|
|
|
19,691
|
|
Interest
income
|
|
|
37
|
|
|
|
133
|
|
|
|
50
|
|
|
|
332
|
|
Interest
income, related parties
|
|
|
110
|
|
|
|
123
|
|
|
|
215
|
|
|
|
247
|
|
Interest
expense
|
|
|
(2,032
|
)
|
|
|
(2,360
|
)
|
|
|
(3,994
|
)
|
|
|
(4,664
|
)
|
Interest
expense, related parties
|
|
|
(732
|
)
|
|
|
(780
|
)
|
|
|
(1,448
|
)
|
|
|
(1,597
|
)
|
Other
income/(expense)
|
|
|
4,386
|
|
|
|
23
|
|
|
|
4,299
|
|
|
|
(37
|
)
|
Income
before income taxes
|
|
|
5,770
|
|
|
|
7,166
|
|
|
|
9,014
|
|
|
|
13,972
|
|
Income
tax benefit
|
|
|
530
|
|
|
|
118
|
|
|
|
950
|
|
|
|
47
|
|
Net
income
|
|
$
|
6,300
|
|
|
$
|
7,284
|
|
|
$
|
9,964
|
|
|
$
|
14,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic
|
|
$
|
0.47
|
|
|
$
|
0.58
|
|
|
$
|
0.75
|
|
|
$
|
1.11
|
|
-Diluted
|
|
$
|
0.44
|
|
|
$
|
0.47
|
|
|
$
|
0.69
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic (000’s)
|
|
|
13,349
|
|
|
|
12,655
|
|
|
|
13,347
|
|
|
|
12,644
|
|
-
Diluted (000’s)
|
|
|
14,443
|
|
|
|
15,559
|
|
|
|
14,452
|
|
|
|
15,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes
to Condensed Consolidated Financial Statements.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Dollars
in thousands, except per share data)
|
|
June
30, 2009
(Unaudited)
|
|
|
December
31, 2008
(Audited)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
39,486
|
|
|
$
|
36,493
|
|
Accounts
receivable, net
|
|
|
24,364
|
|
|
|
19,607
|
|
Unbilled
receivables, net
|
|
|
19,347
|
|
|
|
21,683
|
|
Inventories
|
|
|
2,600
|
|
|
|
2,854
|
|
Prepaid
expenses and other current assets (includes related parties of
$
1,969
and $985 in
200
9
and
2008)
|
|
|
6,290
|
|
|
|
5,031
|
|
Total
current assets
|
|
$
|
92,087
|
|
|
$
|
85,668
|
|
Property,
plant and equipment, net
|
|
|
69,128
|
|
|
|
63,610
|
|
Goodwill
|
|
|
3,126
|
|
|
|
2,684
|
|
Intangible
assets, net
|
|
|
6,072
|
|
|
|
6,449
|
|
Other
assets, related parties
|
|
|
2,488
|
|
|
|
3,074
|
|
Deferred
income taxes
|
|
|
10,693
|
|
|
|
9,713
|
|
Total
assets
|
|
$
|
183,594
|
|
|
$
|
171,198
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
11,791
|
|
|
$
|
12,061
|
|
Accrued
payroll and other benefits
|
|
|
3,597
|
|
|
|
3,882
|
|
Accrued
expenses and other liabilities
|
|
|
25,093
|
|
|
|
25,921
|
|
Short-term
debt
|
|
|
2,400
|
|
|
|
2,596
|
|
Fees
invoiced in advance
|
|
|
29,803
|
|
|
|
27,681
|
|
Total
current liabilities
|
|
$
|
72,684
|
|
|
$
|
72,141
|
|
Long-term
debt, net (includes related parties of
$21,
901
and $21,025 in
200
9
and
2008)
|
|
|
71,982
|
|
|
|
71,943
|
|
Deferred
gain on disposal of US property
|
|
|
8,307
|
|
|
|
8,467
|
|
Pension
liabilities
|
|
|
38,320
|
|
|
|
33,859
|
|
Total
liabilities
|
|
$
|
191,293
|
|
|
$
|
186,410
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Stockholders'
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
June
30, 2009
:
13,349,095
|
|
|
|
|
|
|
|
|
(December
31, 2008: 13,345,495)
|
|
|
133
|
|
|
|
133
|
|
Paid
in capital
|
|
|
90,331
|
|
|
|
89,717
|
|
Accumulated
other comprehensive loss
|
|
|
(48,750
|
)
|
|
|
(45,686
|
)
|
Accumulated
deficit
|
|
|
(49,413
|
)
|
|
|
(59,376
|
)
|
Total
stockholders' deficit
|
|
$
|
(7,699
|
)
|
|
$
|
(15,212
|
)
|
Total
liabilities and stockholders' deficit
|
|
$
|
183,594
|
|
|
$
|
171,198
|
|
See Notes
to Condensed Consolidated Financial Statements.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars
in thousands)
|
|
June
30, 2009
|
|
|
June
30, 2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
9,964
|
|
|
$
|
14,019
|
|
Adjustments
to reconcile net income to net cash provided by/(used in) operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
4,123
|
|
|
|
4,938
|
|
Amortization
of gain on disposal of US property
|
|
|
(160
|
)
|
|
|
(160
|
)
|
Non-cash
compensation expense associated with employee stock compensation
plans
|
|
|
594
|
|
|
|
1,045
|
|
Foreign
exchange (gain)/loss on March 2006 Financing
|
|
|
(5,201
|
)
|
|
|
21
|
|
Foreign
exchange loss on intercompany balances
|
|
|
902
|
|
|
|
16
|
|
Deferred
income tax benefit
|
|
|
(950
|
)
|
|
|
(47
|
)
|
Provision
for losses on accounts receivable
|
|
|
183
|
|
|
|
51
|
|
Amortization
of debt issue and financing costs included in interest
expense
|
|
|
1,674
|
|
|
|
1,947
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable, unbilled receivables and prepaid expenses
|
|
|
879
|
|
|
|
(2,031
|
)
|
Inventories
|
|
|
468
|
|
|
|
(140
|
)
|
Accounts
payable, accrued expenses and other liabilities
|
|
|
(5,163
|
)
|
|
|
(6,013
|
)
|
Fees
invoiced in advance
|
|
|
(1,099
|
)
|
|
|
(5,044
|
)
|
Defined
benefit pension plan liabilities
|
|
|
(407
|
)
|
|
|
(1,952
|
)
|
Net
cash provided by operating activities
|
|
$
|
5,807
|
|
|
$
|
6,650
|
|
|
|
|
|
|
|
|
|
|
Cash
flows used in investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(4,257
|
)
|
|
|
(9,839
|
)
|
Payment
for acquisition
|
|
|
-
|
|
|
|
(1,779
|
)
|
Net
cash used in investing activities
|
|
$
|
(4,257
|
)
|
|
$
|
(11,618
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows used in financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issue of Voting Common Stock
|
|
|
20
|
|
|
|
156
|
|
Repayments
of long-term borrowings
|
|
|
(1,200
|
)
|
|
|
(1,200
|
)
|
Repayments
of short-term borrowings
|
|
|
(73
|
)
|
|
|
(373
|
)
|
Net
cash used in financing activities
|
|
$
|
(1,253
|
)
|
|
$
|
(1,417
|
)
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
2,696
|
|
|
|
252
|
|
Increase/(decrease)
in cash and cash equivalents
|
|
|
2,993
|
|
|
|
(6,133
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
36,493
|
|
|
|
36,223
|
|
Cash
and cash equivalents at end of period
|
|
$
|
39,486
|
|
|
$
|
30,090
|
|
Supplementary
Disclosures:
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
3,755
|
|
|
$
|
4,084
|
|
Income
taxes paid
|
|
$
|
273
|
|
|
$
|
89
|
|
See Notes
to Condensed Consolidated Financial Statements.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
1. THE
COMPANY AND ITS OPERATIONS
Life
Sciences Research, Inc. ("LSR") and subsidiaries (collectively, the "Company")
is a global contract research organization, offering worldwide pre-clinical and
non-clinical testing services for biological safety evaluation research to the
pharmaceutical and biotechnology, as well as the agrochemical and industrial
chemical industries.
On July
8, 2009, the Company entered into the Agreement and Plan of Merger (the “Merger
Agreement”) with Lion Holdings, Inc. (“Parent”) and Lion Merger Corp. (“Lion”),
a wholly owned subsidiary of Parent. Each of Parent and Lion was formed for the
purpose of consummating the transactions contemplated by the Merger Agreement,
and each of such entities is controlled by Andrew Baker, Chairman and CEO of the
Company. The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Lion will merge with and into the
Company (the “Merger”), with the Company continuing as the surviving company and
a wholly owned subsidiary of Parent following the Merger.
A Special
Committee consisting of the Company’s independent directors was charged with
evaluating strategic alternatives for the Company and unanimously recommended
the approval of the Merger. Based upon this recommendation, the Board of
Directors of the Company (with Andrew Baker and Brian Cass abstaining), approved
the Merger and resolved to recommend that LSR stockholders approve the Merger.
The Special Committee was advised by independent counsel and an independent
financial advisor who provided a fairness opinion to the Special
Committee.
The
Merger Agreement provides that, upon consummation of the Merger, each share of
common stock, par value $0.01 per share, of the Company issued and outstanding
immediately prior to the effective time of the Merger, other than shares owned
by Parent, Lion or their affiliates, will be converted into the right to receive
$8.50 in cash. Based upon the latest information available to the Company, Mr.
Baker beneficially owns approximately 18.1% of the shares. No stockholder has
any statutory right to demand and receive payment of the fair value of his, her
or its shares in connection with the Merger.
Consummation
of the Merger is subject to a number of conditions, including without
limitation: (i) the approval of the Merger by (A) the holders of at least a
majority of the outstanding shares entitled to vote on the Merger at a
stockholders’ meeting duly called and held for such purpose and (B) a majority
of the votes cast by holders of outstanding shares entitled to vote on the
Merger at a stockholders’ meeting duly called and held for such purpose,
excluding any votes cast by Parent, Lion, Andrew Baker or any other “interested
party” (as such term is defined in the Merger Agreement); (ii) the absence of
any “company material adverse effect” (as defined in the Merger Agreement); and
(iii) other closing conditions set forth in the Merger Agreement.
Each of
the Company and Parent have the right to terminate the Merger Agreement under
certain circumstances, which may require the payment of a termination
fee.
The
foregoing description is qualified in its entirety by reference to the full text
of the Merger Agreement filed as Exhibit 2.1 to the Company’s Current Report on
Form 8-K filed on July 9, 2009.
2. SIGNIFICANT
ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, these financial statements do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America. The Company has included
all normal recurring adjustments, which are, in the opinion of management,
necessary to give a fair statement of its consolidated financial position,
results of operations and cash flows for the interim periods shown.
The
condensed consolidated financial statements are unaudited and are subject to
such year-end adjustments as may be considered appropriate and should be read in
conjunction with the historical consolidated financial statements of LSR for the
years ended December 31, 2008, 2007 and 2006 included in LSR's Annual Report on
Form 10-K for the fiscal year ended December 31, 2008. The
December 31, 2008 condensed consolidated balance sheet data was derived
from audited financial statements. Operating results for the three
and six months ended June 30, 2009 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2009.
Consolidation
The
consolidated financial statements incorporate the accounts of LSR and each of
its subsidiaries. All intercompany balances have been eliminated upon
consolidation.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the dates
of the financial statements and the results of operations during the reporting
periods. These also include management estimates in the calculation
of pension liabilities covering discount rates, return on plan assets and other
actuarial assumptions. Although these estimates are based upon
management’s best knowledge of current events and actions, actual results could
differ from those estimates.
Reclassifications
Certain
prior period amounts have been reclassified to conform to current
classifications. The Company reclassified from other expense to interest expense
certain prior period amounts relating to the amortization of finance arrangement
fees. The Company also reclassified from interest income to interest income,
related parties, and from interest expense to interest expense, related parties,
certain prior period amounts relating to interest income and interest expense
arising from transactions with related parties.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheet for cash and cash equivalents,
receivables, accounts payable, accrued expenses and short-term debt approximate
fair value based on the short-term maturity of these instruments.
Recently
Issued Accounting Standards
In April
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS No.
165 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or available to be issued. We adopted SFAS No. 165 for the quarter ending
June 30, 2009. Adoption did not have a material impact on our consolidated
financial statements as of and for the three and six months ended June 30,
2009.
In April
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”). SFAS No. 167 requires a qualitative approach to identifying
a controlling financial interest in a variable interest entity (“VIE”), and
requires ongoing assessment of whether an entity is a VIE and whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. SFAS 167
is effective for annual reporting periods beginning after November 15, 2009. We
are currently evaluating the impact of the pending adoption of SFAS No. 167 on
our consolidated financial statements.
In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”).
SFAS 168 identifies the FASB Accounting Standards Codification as the
authoritative source of generally accepted accounting principles in the United
States. Rules and interpretive releases of the Securities and Exchange
Commission under federal securities laws are also sources of authoritative GAAP
for SEC registrants. SFAS 168 is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. We do not expect
adoption to have a material impact on our consolidated financial
statements.
Effective
January 1, 2009, the Company adopted SFAS No. 141(R), “Business
Combinations – a replacement of FASB Statement No. 141” (“SFAS 141R”). Under
SFAS 141R, an entity is required to recognize the assets acquired,
liabilities assumed, contractual contingencies, and contingent consideration at
their fair value on the acquisition date. It further requires that
acquisition-related costs be recognized separately from the acquisition and
expensed as incurred; that restructuring costs generally be expensed in periods
subsequent to the acquisition date; and that changes in accounting for deferred
tax asset valuation allowances and acquired income tax uncertainties after the
measurement period be recognized as a component of provision for taxes. In
addition, acquired in-process research and development is capitalized as an
intangible asset and amortized over its estimated useful life. For the Company,
SFAS 141R is effective on a prospective basis for all business combinations for
which the acquisition date is on or after January 1, 2009, with the
exception of the accounting for valuation allowances on deferred taxes and
acquired contingencies under SFAS 109. With the adoption of SFAS 141R, any tax
related adjustments associated with acquisitions that closed prior to
January 1, 2009 will be recorded through income tax expense, whereas the
previous accounting treatment would require any adjustment to be recognized
through the purchase price. The adoption of SFAS 141R did not have any impact on
the Company’s consolidated financial statements as of and for the three and six
months ended June 30, 2009.
Effective
January 1, 2009, the Company adopted FASB Staff Position 157-2, “Effective
Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delayed the
effective date of SFAS 157 for all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until the
beginning of the 2009 fiscal year. These include goodwill and other
non-amortizable intangible assets. The adoption of SFAS 157 did not have a
significant impact on the Company’s consolidated financial statements as of and
for the three and six months ended June 30, 2009.
Effective
January 1, 2009, the Company adopted FASB Staff Position No. 142-3,
“Determination of the Useful Life of Intangible Assets ” (“FSP
142-3”). FSP 142-3 amends FASB Statement No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”) to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R and other
U.S. GAAP. The adoption did not have a material impact on the Company’s
consolidated results of operations or financial condition as of and for the
three and six months ended June 30, 2009.
In
December 2008, the FASB issued FASB Staff Position 132(R)-1 (“FSP 132R-1”),
which provides guidance on an employer’s disclosures about plan assets of a
defined benefit pension or other postretirement plan. FSP 132R-1
requires disclosure of investment allocation methodologies and information that
enables users of financial statements to assess the inputs and valuation
techniques used to develop fair value measurements of plan assets in order to
provide users with an understanding of significant concentrations of risk in
plan assets. FSP 132R-1 is effective for years ending after December
15, 2009. FSP 132R-1 requires additional disclosure only and,
therefore, will not impact the Company’s consolidated results of operations or
financial position.
Management
does not believe that any other recently issued, but not yet effective,
accounting standard if currently adopted would have a material effect on the
accompanying financial statements.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
3. SEGMENT
ANALYSIS
The
Company operates within two segments based on geographical markets, the United
Kingdom and the United States, and incurs corporate administrative
expenses. The Company has one continuing activity, Contract Research,
throughout these periods.
Transactions
between segments, which are immaterial, are carried out on an arms-length
basis. Interest income, interest expense and income taxes are also
not reported on an operating segment basis because they are not considered in
the performance evaluation by the Company's chief operating
decision-maker.
The
analysis of the Company's net revenues and operating income by segment for the
three month and six month periods ended June 30, 2009 and June 30, 2008 is as
follows:
|
|
Three
Months ended June 30
|
|
|
Six
months ended June 30
|
|
(Dollars
in thousands)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
|
|
$
|
33,471
|
|
|
$
|
50,949
|
|
|
$
|
69,312
|
|
|
$
|
100,551
|
|
US
|
|
|
11,779
|
|
|
|
13,381
|
|
|
|
23,983
|
|
|
|
27,006
|
|
Corporate
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
45,250
|
|
|
$
|
64,330
|
|
|
$
|
93,295
|
|
|
$
|
127,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK
|
|
$
|
5,586
|
|
|
$
|
10,443
|
|
|
$
|
12,548
|
|
|
$
|
20,322
|
|
US
|
|
|
1,606
|
|
|
|
2,497
|
|
|
|
2,972
|
|
|
|
4,922
|
|
Corporate
|
|
|
(3,191
|
)
|
|
|
(2,913
|
)
|
|
|
(5,628
|
)
|
|
|
(5,553
|
)
|
Interest
expense, net
|
|
|
(2,617
|
)
|
|
|
(2,884
|
)
|
|
|
(5,177
|
)
|
|
|
(5,682
|
)
|
Other
income/(expense)
|
|
|
4,386
|
|
|
|
23
|
|
|
|
4,299
|
|
|
|
(37
|
)
|
|
|
$
|
5,770
|
|
|
$
|
7,166
|
|
|
$
|
9,014
|
|
|
$
|
13,972
|
|
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
4. DEBT
On March
2, 2006, the Company entered into a $70 million loan (the “March 2006
Financing”) under the terms of a Financing Agreement dated March 1, 2006 with a
third party lender. The loan matures on March 1, 2011 and had an
interest rate of LIBOR + 825 basis points (which reduced to LIBOR + 800 basis
points upon the Company meeting certain financial tests). On August
1, 2007 the Company entered into an amendment to the March 2006 Financing in
which the principal amount was reduced to $60 million and the interest rate was
reduced from the reduced rate of LIBOR + 800 basis points to LIBOR + 350 basis
points. On November 30, 2007, the Company entered into a second
amendment to the March 2006 Financing in which certain financial covenants were
modified and consent was given by the lender to permit the Company to complete a
fold-in acquisition. On July 8, 2009, the Company entered into the
Third Amendment and Waiver and Consent (the “Third Amendment”) to the March 2006
Financing which, among other things, provided the consent of the lenders to the
Company’s entry into the Merger Agreement. It also makes the following principal
revisions to the March 2006 Financing: (i) increases the applicable interest
rate under the terms of the Financing Agreement from LIBOR plus 3.50% per annum
to LIBOR plus 5.50% per annum; (ii) revises the covenants regarding Leverage
Ratio and Consolidated EBITDA for the period ending June 30, 2009 to 1.06:1.00
and $41,300,000, respectively; and (iii) revises the covenants regarding
Leverage Ratio and Consolidated EBITDA for the period ending September 30, 2009
to 1.15:1.00 and $37,000,000, respectively. The Third Amendment also provides
that Consolidated EBITDA shall exclude reasonable fees and expenses incurred in
connection with the transactions contemplated by the Merger Agreement to the
extent accrued or actually paid during such period (without duplication) in an
aggregate amount not to exceed $2,000,000. The Third Amendment provides for an
amendment fee of $5 million payable to the lenders; such fee, however, will not
be due if, on or prior to the date that is five months after the amendment
effective date, (i) all obligations under the Financing Agreement are paid in
full; (ii) the Merger is consummated; or (iii) a “superior proposal” (as defined
in the Merger Agreement) is consummated with the prior written consent of the
Required Lenders (which consent shall not be unreasonably
withheld). The original and amended loans have a LIBOR floor set at
425 basis points. LIBOR has fallen below 425 basis points for part of
2008 and for the duration of 2009 through to June 30, 2009, resulting in the
interest rate being fixed at 775 basis points (the LIBOR floor of 425 basis
points plus 350 basis points) for eleven months during 2008 and for the six
months ended June 30, 2009.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
5. RELATED
PARTY TRANSACTIONS
On June
14, 2005, the Company entered into and consummated with Alconbury Estates Inc.
and subsidiaries (collectively “Alconbury”) a sale/leaseback transaction (the
"Sale/Leaseback Transaction"), in which the Company sold to Alconbury its
three properties (two in the UK, one in the US) for an aggregate
consideration of $40 million and immediately leased back the properties under 30
year leases with an aggregate annual rental payment of approximately $5
million. Alconbury was newly formed in June 2005 and controlled by
LSR’s Chairman and CEO, Andrew Baker. Since the Sale/Leaseback
Transaction was with a related party (Mr. Baker, LSR’s Chairman and CEO and the
controlling owner of Alconbury), an Independent Committee of LSR’s Board of
Directors was formed to analyze and consider the proposed Sale/Leaseback
Transaction. The Company agreed to pay the expenses incurred by
Alconbury in the Sale/Leaseback Transaction of $4.9 million, subject to
Alconbury's obligation to reimburse those expenses in the future in five annual
20% installments beginning in June 2008. Alconbury paid the Company
approximately $1 million of those expenses in June 2008 in the first such
installment. The June 2009 second installment has not yet been
received by the Company.
On July
8, 2009, the Company entered into the Merger Agreement with Parent and
Lion. Each of Parent and Lion is controlled by Andrew Baker, the
Company’s Chairman and CEO.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
6. COMMITMENTS
The
Compensation Committee approved and adopted at its December 6, 2006 meeting the
2007 Long Term Incentive Plan (the “2007 LTIP”), which provides for awards of
cash compensation to executive officers and other members of the senior
management team if certain performance goals are achieved during the 2007-2010
performance period. The Compensation Committee established a 16%
operating margin percentage to be achieved over any four consecutive quarters
during such performance period that would trigger such awards. The
aggregate amount payable to all participants under the 2007 LTIP if the
threshold performance level is achieved is approximately $5
million.
At a
joint meeting on June 3, 2009 of the Board of Directors and Compensation
Committee (the “Committee”) of Life Sciences Research, Inc., the Company, the
Committee and the Board, (with the two management directors, Mr. Baker and Mr.
Cass, abstaining from the Board vote) approved certain amendments to the 2007
LTIP:
1.
|
In
the event there is a change in control of the Company on or before
December 31, 2010, then:
|
·
|
The
2007 LTIP matures immediately upon the change in control and the target
performance level is deemed
achieved
|
·
|
Payout
to participants in the 2007 LTIP is based on the individual gross salaries
(prior to the 6% reduction in salaries now in force) current at the time
of the change in control
|
·
|
Payout
to participants in the 2007 LTIP is made at the levels prescribed for
having fully achieved the 16% operating profit percentage LTIP target (the
“LTIP Target”)
|
·
|
Payout
is made within 30 days after the date of the change in
control
|
·
|
The
2007 LTIP payout amount to be included in a participant’s total
compensation or base salary for purposes of calculating employment
termination payments following a change in control under employment
agreement or other applicable change in control provisions is limited to
one third of the individual recipient’s LTIP
payout
|
·
|
There
will be a modified cutback of LTIP payouts to comply with US tax code
Section 280G limits for those, if any, to whom Section 280G
applies
|
2.
|
In
the event there is not a change in control of the Company on or before
December 31, 2010:
|
·
|
The
plan matures at December 31, 2010
|
·
|
Payout
to participants in the 2007 LTIP is calculated based on the operating
profit percentage achieved in the best 4 consecutive quarters during the
plan period (January 1, 2007 through December 31, 2010) (the “Best
OP%”)
|
·
|
Payout
is prorated to the original LTIP Target. That payout will be equal to the
percentage which the Best OP% bears to the LTIP Target; 100% will be paid
if the LTIP Target is achieved over any 4 consecutive
quarters.
|
·
|
Payout
is based on the individual gross salaries (prior to the 6% reduction now
in force) current at the time of
maturity
|
·
|
Payout
is made within 30 days after the earlier of (i) achieving the LTIP Target
or (ii) March 31, 2011 if the LTIP Target is not fully achieved by
December 31, 2010, in which case the payout would be based on the pro rata
percentage of the Best OP% to the LTIP
Target
|
The
aggregate amount payable to all participants under the 2007 LTIP in the event of
a change of control of the Company or full achievement of the LTIP Target is
approximately $4.89 million. The potential payments under the LTIP in the event
of a change of control of the Company or full achievement of the LTIP Target for
each of the executive officers is as follows:
Andrew
Baker, Chairman and CEO*
|
$1,147,000
|
Brian
Cass, President and Managing Director*
|
$1,147,000
|
Richard
Michaelson, CFO
|
$560,000
|
Julian
Griffiths, Director of Operations*
|
$496,000
|
Mark
Bibi, Secretary and General Counsel
|
$420,000
|
* Payments
to Messrs. Baker, Cass and Griffiths are made in UK pounds sterling. For
purposes of estimating these payments in US dollars, an exchange rate of £1.00 =
$1.55 has been used, the average exchange rate during the second quarter of
2009.
The
employment or service agreements for each of Messrs. Baker, Cass, Michaelson,
Griffiths and Bibi were amended as of June 3, 2009 to reflect the 2007 LTIP
change of control provisions described above.
Management
has been ratably accruing, as compensation expense, an amount equal to the
estimated cash bonus that would be payable over the performance period during
which the specified performance goals are achieved. Management will
re-evaluate this estimate periodically throughout the performance period and, if
applicable, will adjust the estimate accordingly.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2009 and 2008
(Unaudited)
7. CONTINGENCIES
On or
about March 9, 2009, a purported class action lawsuit, Berger v. Life Sciences
Research, et. al., was filed in Superior Court of New Jersey, Chancery Division,
Somerset County, naming as defendants the Company and each director of the
Company. The complaint alleges, among other things, that the directors breached
their fiduciary duties with respect to the March 3, 2009 non-binding proposal
made by Andrew Baker to acquire all of the outstanding shares of the Company for
$7.50 per share.
On July
13, 2009, a First Amended Complaint was filed in the Berger Lawsuit which
alleges, among other things, that the directors breached their fiduciary duties
with respect to the Merger; that Baker controls LSR and its directors; that the
merger price constitutes inadequate consideration; and that certain terms of the
merger agreement unfairly benefit Mr. Baker at the expense of the other
stockholders, including the absence of appraisal rights, accelerated vesting of
restricted stock, restrictions on the solicitation of negotiations with respect
to third party proposals, and termination fees. The First Amended Complaint
further alleges that the directors were motivated to accept Baker’s offer
because of concerns that a public dispute with Baker would draw unwanted
attention from animal rights activists. The First Amended Complaint seeks
unspecified damages and other relief. The Company will appropriately defend
itself in response to the Berger Lawsuit.
In
addition, on or about July 17, 2009, a second purported class action lawsuit,
captioned Ramaiah v. Baker et. al., was filed in Superior Court of New Jersey,
Chancery Division, Somerset County, naming as defendants the Company, each
director of the Company and Lion. The complaint alleges, among other
things, that the Board breached its fiduciary duties in connection with the
Merger by agreeing to sell the Company for an unfair price pursuant to an unfair
process and that the merger agreement contains preclusive deal protection
provisions by virtue of its “no shop” and “standstill” clauses and termination
fees. This complaint seeks unspecified damages and other relief. The Company
will appropriately defend itself in response to this lawsuit.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
ITEM
2
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion of the financial condition and results of operations of
Life Sciences Research, Inc (“LSR”) and Subsidiaries (collectively, “the
Company”) should be read together with the financial statements and related
notes, which are included elsewhere in this Quarterly Report on Form
10-Q. This discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties. The
Company’s actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth in more detail in its 2008 Annual Report on Form 10-K. The
Company undertakes no obligation to update any information in its
forward-looking statements.
OVERVIEW
OF THE COMPANY'S BUSINESS
The
Company provides pre-clinical and non-clinical biological safety evaluation
research services to most of the world’s leading pharmaceutical and
biotechnology companies, as well as many agrochemical and industrial chemical
companies. The purpose of this safety evaluation 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 the Company’s
clients' products. The Company’s services are designed to meet the
regulatory requirements of governments around the world.
The
Company’s aim is to develop its business within these markets, principally in
the pharmaceutical sector, and through organic growth. A number of
the larger pharmaceutical companies are going through mergers and acquisitions,
or reprioritizing their research and development functions, and as a result
there has been a short term decrease in outsourced projects. It is expected that
this pharmaceutical development market will return in the medium term and that
the Company will benefit from improving drug pipelines across the industry. In
addition there is a growing trend towards greater outsourcing as clients focus
more internal resources on research and increasingly look to variabilize their
development costs.
On July
8, 2009, the Company entered into the Merger Agreement with Parent and Lion, a
wholly owned subsidiary of Parent. Each of Parent and Lion was formed for the
purpose of consummating the transactions contemplated by the Merger Agreement,
and each of such entities is controlled by Andrew Baker, Chairman and CEO of the
Company. The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Lion will merge with and into the
Company (the “Merger”), with the Company continuing as the surviving company and
a wholly owned subsidiary of Parent following the Merger.
A Special
Committee consisting of the Company’s independent directors was charged with
evaluating strategic alternatives for the Company and unanimously recommended
the approval of the Merger. Based upon this recommendation, the Board of
Directors of the Company (with Andrew Baker and Brian Cass abstaining), approved
the Merger and resolved to recommend that LSR stockholders approve the Merger.
The Special Committee was advised by independent counsel and an independent
financial advisor who provided a fairness opinion to the Special
Committee.
The
Merger Agreement provides that, upon consummation of the Merger, each share of
common stock, par value $0.01 per share, of the Company issued and outstanding
immediately prior to the effective time of the Merger, other than Shares owned
by Parent, Lion or their affiliates, will be converted into the right to receive
$8.50 in cash. Based upon the latest information available to the Company, Mr.
Baker beneficially owns approximately 17.5% of the Shares. No stockholder has
any statutory right to demand and receive payment of the fair value of his, her
or its Shares in connection with the Merger.
Consummation
of the Merger is subject to a number of conditions, including without
limitation: (i) the approval of the Merger by (A) the holders of at least a
majority of the outstanding Shares entitled to vote on the Merger at a
stockholders’ meeting duly called and held for such purpose and (B) a majority
of the votes cast by holders of outstanding Shares entitled to vote on the
Merger at a stockholders’ meeting duly called and held for such purpose,
excluding any votes cast by Parent, Lion, Andrew Baker or any other “interested
party” (as such term is defined in the Merger Agreement); (ii) the absence of
any “company material adverse effect” (as defined in the Merger Agreement); and
(iii) other closing conditions set forth in the Merger Agreement.
Each of
the Company and Parent have the right to terminate the Merger Agreement under
certain circumstances, which may require the payment of a termination
fee.
The
foregoing description is qualified in its entirety by reference to the full text
of the Merger Agreement filed as Exhibit 2.1 to the Company’s Current Report on
Form 8-K filed on July 9, 2009.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
The
following discussion and analysis of the Company’s financial condition and
operating results is based on the Company’s financial statements. The
preparation of this Quarterly Report requires the Company to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the Company’s
financial statements, and the reported amount of revenue and expenses during the
reporting period. Actual results may differ from those estimates and
assumptions. See “Notes to Unaudited Condensed Financial Statements”
in Part I of this Quarterly Report for a presentation of the Company’s
significant accounting policies. No changes have been made to the
Company’s critical accounting policies and estimates disclosed in its 2008
Annual Report on Form 10-K.
RESULTS
OF OPERATIONS
Three
months ended June 30, 2009 compared with three months ended June 30,
2008.
The
Company is continuing to experience what it expects is a near term softness in
demand driven by a number of factors, including reorganizations and
reprioritizations within pharmaceutical industry customers, and contraction in
spending by biotechnology customers who are facing a challenging financing
environment. This impacted orders in the second quarter of 2009 with
the result that orders for the quarter ended June 30, 2009 were $44.7 million, a
25% decrease on orders for the quarter ended June 30, 2008 at constant exchange
rates. This reduction in orders, following on from a reduction in
orders in the first quarter of 2009, together with a significant weakening of
the British Pound against the US dollar since the first half of 2008, reduced
revenues in the second quarter of 2009 compared to the second quarter of
2008.
Net
revenues for the three months ended June 30, 2009 were $45.3 million, a decrease
of 29.7% on net revenues of $64.3 million for the three months ended June 30,
2008. The underlying decrease, after adjusting for the impact of the
movement in exchange rates was 15.5%; with the UK showing a 16.5% decrease and
the US a 12.0% decrease.
Cost of
sales for the three months ended June 30, 2009 were $33.3 million (73.6% of
revenue), a decrease of 23.4% on cost of sales of $43.5 million (67.6% of
revenue) for the three months ended June 30, 2008. The underlying
decrease, after adjusting for the impact of the movement in exchange rates was
8.1% with the UK showing an 8.7% decrease and the US a 5.7%
decrease. The increase in cost of sales as a % of revenue was due to
an increase of 70 basis points in salary costs as a % of revenue, an increase of
180 basis points in direct study costs as a % of revenue, and a 330 basis points
increase in overhead costs as a % of revenues. The increases in labor
and overhead costs as a % of revenues were due to a reduction in capacity
utilization consequent upon the decline in revenue. In the case of labor this
was offset by a reduction in salaries and related costs effective April 1, 2009,
while the increase in overhead costs as a % of revenues also reflected higher
utility costs. The increase in direct study costs as a % of revenues was due to
a change in the mix of business.
Selling,
general and administrative expenses (“SG&A”) decreased by 40.5% to $6.4
million for the three months ended June 30, 2009 from $10.8 million in the
corresponding period in 2008. The underlying decrease, after
adjusting for the impact of the movement in exchange rates was
30.1%. The decrease was due to lower incentive expenses and
professional fees.
Acquisition-related
expenses in the three months ended June 30, 2009 were $1.5 million. These
represented costs associated with the Merger, and were comprised predominantly
of professional fees.
Net
interest expense decreased by 10.7% to $2.6 million for the three months ended
June 30, 2009 from $2.9 million for the three months ended June 30,
2008.
Other
income of $4.4 million for the three months ended June 30, 2009 comprised $5.3
million from the non-cash foreign exchange re-measurement gain on the March 2006
Financing denominated in US dollars (the functional currency of the subsidiary
that holds the loan is UK sterling), offset by other exchange losses of $0.9
million. In the three months ended June 30, 2008 other income of $23
thousand comprised a non-cash foreign exchange re-measurement gain on the March
2006 Financing denominated in US dollars (the functional currency of the
subsidiary that holds the loan is UK sterling) of $29 thousand offset by other
exchange losses of $6 thousand.
Income
tax benefit for the three months ended June 30, 2009 was $0.5 million.
This reflects a tax benefit arising in the US, which the Company expects to
utilize during the course of 2009. The income tax benefit for the
three months ended June 30, 2008 was $0.1 million. Net operating losses
are $99.5 million at June 30, 2009, with net operating losses in the US of $17.3
million and net operating losses in the UK of $82.2 million.
Net
income for the three months ended June 30, 2009 was $6.3 million compared with
net income of $7.3 million for the three months ended June 30,
2008. The decrease in net income of $1.0 million is due to a $6.0
million decrease in operating income, offset by an increase in other income of
$4.4 million, a decrease in the net interest expense of $0.3 million and an
increase in the income tax benefit of $0.3 million.
Net
income per outstanding common share for the three months ended June 30, 2009 was
47 cents, compared to 58 cents income in the three months ended June 30, 2008,
on the weighted average common shares outstanding of 13,349,055 and 12,655,038
respectively. Net income per fully diluted share for the three months
ended June 30, 2009 was 44 cents, compared to 47 cents in the three months ended
June 30 2008, on the weighted average fully diluted common shares outstanding of
14,443,061 and 15,559,193 respectively.
Six
months ended June 30, 2009 compared with six months ended June 30,
2008.
The
Company is continuing to experience what it expects is a near term softness in
demand driven by a number of factors, including reorganizations and
reprioritizations within pharmaceutical industry customers, and contraction in
spending by biotechnology customers who are facing a challenging financing
environment. This impacted orders in the first six months of 2009
with the result that orders for the six months ended June 30, 2009 were $85.4
million, a 26% decrease on orders for the six months ended June 30, 2008 at
constant exchange rates. This reduction in orders, following on from
a reduction in orders in the second half of 2008 and a significant weakening of
the British Pound against the US dollar since the first half of 2008, reduced
revenues in the first six months of 2009 compared to the first six months of
2008.
Net
revenues for the six months ended June 30, 2009 were $93.3 million, a decrease
of 26.9% on net revenues of $127.6 million for the six months ended June 30,
2008. The underlying decrease, after adjusting for the impact of the
movement in exchange rates was 9.1%; with the UK showing an 8.6% decrease and
the US an 11.2% decrease.
Cost of
sales for the six months ended June 30, 2009 were $67.6 million (72.5% of
revenue), a decrease of 22.2% on cost of sales of $86.9 million (68.1% of
revenue) for the six months ended June 30, 2008. The underlying
decrease, after adjusting for the impact of the movement in exchange rates was
3.7% with the UK showing a 3.7% decrease and the US a 3.3%
decrease. The increase in cost of sales as a % of revenue was due to
an increase of 120 basis points in salary costs as a % of revenue, an increase
of 90 basis points in direct study costs as a % of revenue, and a 200 basis
points increase in overhead costs as a % of revenues The
increases in labor and overhead costs as a % of revenues were due to a reduction
in capacity utilization consequent upon the decline in revenue. In the case of
labor this was offset by a reduction in salaries and related costs effective
April 1, 2009, while the increase in overhead costs as a % of revenues also
reflected higher utility costs. The increase in direct study costs as a % of
revenues was due to a change in the mix of business.
Selling,
general and administrative expenses (SG&A) decreased by 31.9% to $14.3
million for the six months ended June 30, 2009 from $21.0 million in the
corresponding period in 2008. The underlying decrease, after
adjusting for the impact of the movement in exchange rates was
18.3%. The decrease was due to lower incentive expenses and
professional fees.
Acquisition-related
expenses in the six months ended June 30, 2009 were $1.5 million. These
represented costs associated with the Merger, and were comprised predominantly
of professional fees.
Net
interest expense decreased by 8.9% to $5.2 million for the six months ended June
30, 2009 from $5.7 million for the six months ended June 30, 2008.
Other
income of $4.3 million for the six months ended June 30, 2009 comprised $5.2
million from the non-cash foreign exchange re-measurement expense on the March
2006 Financing denominated in US dollars (the functional currency of the
subsidiary that holds the loan is UK sterling), offset by other exchange losses
of $0.9 million. In the six months ended June 30, 2008 other expense
of $37 thousand comprised a non-cash foreign exchange re-measurement loss on the
March 2006 Financing denominated in US dollars (the functional currency of the
subsidiary that holds the loan is UK sterling) of $21 thousand and other
exchange losses of $16 thousand.
Income
tax benefit for the six months ended June 30, 2009 was $1.0 million. This
reflects a tax benefit arising in the US, which the Company expects to utilize
during the course of 2009. The income tax benefit for the six months
ended June 30, 2008 was $0.1 million.
Net
income for the six months ended June 30, 2009 was $10.0 million compared with
net income of $14.0 million for the six months ended June 30,
2008. The decrease in net income of $4.0 million is due to a $9.8
million decrease in operating income, offset by an increase in other income of
$4.3 million, a decrease in the net interest expense of $0.5 million and an
increase in the income tax benefit of $1.0 million.
Net
income per outstanding common share for the six months ended June 30, 2009 was
75 cents, compared to $1.11 income in the six months ended June 30, 2008, on the
weighted average common shares outstanding of 13,347,991 and 12,644,034
respectively. Net income per fully diluted share for the six months
ended June 30, 2009 was 69 cents, compared to 91 cents in the six months ended
June 30, 2008, on the weighted average fully diluted common shares outstanding
of 14,451,822 and 15,480,308 respectively.
LIQUIDITY
& CAPITAL RESOURCES
Cash
and Cash Equivalents
Cash and
cash equivalents at June 30, 2009 were $39.5 million and were held in accounts
denominated in the following currencies:
Currency
|
|
June
30, 2009
|
|
(Amounts
in USD Equivalents)
|
|
$
|
000
|
|
|
|
|
|
|
Dollar
|
|
|
23,910
|
|
Sterling
|
|
|
10,967
|
|
Euro
|
|
|
949
|
|
Yen
|
|
|
3,660
|
|
|
|
|
39,486
|
|
The
Company retains sufficient working capital in the appropriate currencies to meet
its local short term requirements. These local currency balances are
normally funded by the collection of similar currency accounts
receivables. Excess cash is converted into US Dollars and held on
deposit to act as an economic hedge against the Company’s US Dollar denominated
debt.
The
Company has approximately $78 million of outstanding debt. $56 million of this
debt relates to the March 2006 Financing, and is repayable on March 1,
2011. In addition, the Company has a long term lease of $22 million
arising on the sale and leaseback deal (Alconbury) which is classed as long-term
debt.
The
Company’s expected primary cash needs on both a short-term and a long-term basis
are for capital expenditures, expansion of services, possible future
acquisitions, geographic expansion, working capital and other general corporate
purposes, including possible share repurchases.
As of
June 30, 2009, the Company had a working capital surplus of $19.4 million, and
the Company believes that projected cash flow from operations will satisfy its
contemplated cash requirements for at least the next 12 months.
Net days
sales outstanding (“DSO”) at June 30, 2009 were 26 days, a decrease from 30 days
at December 31, 2008 (21 days at June 30, 2008). DSO is calculated as
a sum of accounts receivable, unbilled receivables and fees in advance over
total net revenue. The impact on liquidity from a one-day change in
DSO is approximately $542,000.
During
the six months ended June 30, 2009, the Company’s operating activities generated
net cash of $5.8 million. The change in net operating assets and liabilities
used $5.3 million, mainly caused by the decrease in accounts payable, accrued
expenses and other liabilities, which used $6.3 million, offset by the decrease
in DSO which generated $1.6 million.
Investing
activities for the six months ended June 30, 2009 used $4.3 million, as a result
of capital expenditures.
Financing
activities for the six months ended June 30, 2009 used $1.2 million, due
to capital repayments of the March 2006 Financing.
The
effect of exchange rate movements on cash for the six months ended June 30, 2009
was an increase of $2.7 million.
The
Company’s cash balances increased by $3.0 million during the six months ended
June 30, 2009.
OFF-BALANCE
SHEET ARRANGEMENTS
As of
June 30, 2009, the Company did not engage in any off-balance sheet arrangements
as defined in Item 303 (a) (4) of Regulation S-K under the Securities Act of
1933, as amended, that have, or are likely to have, a material current or future
effect on its consolidated financial position or results of
operations.
Recently
Issued Accounting Standards
In April
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS No.
165 establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or available to be issued. We adopted SFAS No. 165 for the quarter ending
June 30, 2009. Adoption did not have a material impact on our consolidated
financial statements as of and for the three and six months ended June 30,
2009.
In April
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R)” (“SFAS 167”). SFAS No. 167 requires a qualitative approach to identifying
a controlling financial interest in a variable interest entity (“VIE”), and
requires ongoing assessment of whether an entity is a VIE and whether an
interest in a VIE makes the holder the primary beneficiary of the VIE. SFAS 167
is effective for annual reporting periods beginning after November 15, 2009. We
are currently evaluating the impact of the pending adoption of SFAS No. 167 on
our consolidated financial statements.
In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”).
SFAS 168 identifies the FASB Accounting Standards Codification as the
authoritative source of generally accepted accounting principles in the United
States. Rules and interpretive releases of the Securities and Exchange
Commission under federal securities laws are also sources of authoritative GAAP
for SEC registrants. SFAS 168 is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. We do not expect
adoption to have a material impact on our consolidated financial
statements.
Effective
January 1, 2009, the Company adopted SFAS No. 141(R), “Business
Combinations – a replacement of FASB Statement No. 141” (“SFAS 141R”). Under
SFAS 141R, an entity is required to recognize the assets acquired,
liabilities assumed, contractual contingencies, and contingent consideration at
their fair value on the acquisition date. It further requires that
acquisition-related costs be recognized separately from the acquisition and
expensed as incurred; that restructuring costs generally be expensed in periods
subsequent to the acquisition date; and that changes in accounting for deferred
tax asset valuation allowances and acquired income tax uncertainties after the
measurement period be recognized as a component of provision for taxes. In
addition, acquired in-process research and development is capitalized as an
intangible asset and amortized over its estimated useful life. For the Company,
SFAS 141R is effective on a prospective basis for all business combinations for
which the acquisition date is on or after January 1, 2009, with the
exception of the accounting for valuation allowances on deferred taxes and
acquired contingencies under SFAS 109. With the adoption of SFAS 141R, any tax
related adjustments associated with acquisitions that closed prior to
January 1, 2009 will be recorded through income tax expense, whereas the
previous accounting treatment would require any adjustment to be recognized
through the purchase price. The adoption of SFAS 141R did not have any impact on
the Company’s consolidated financial statements as of and for the three and six
months ended June 30, 2009.
Effective
January 1, 2009, the Company adopted FASB Staff Position 157-2, “Effective
Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delayed the
effective date of SFAS 157 for all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until the
beginning of the 2009 fiscal year. These include goodwill and other
non-amortizable intangible assets. The adoption of SFAS 157 did not have a
significant impact on the Company’s consolidated financial statements as of and
for the three and six months ended June 30, 2009.
Effective
January 1, 2009, the Company adopted FASB Staff Position No. 142-3,
“Determination of the Useful Life of Intangible Assets” (“FSP
142-3”). FSP 142-3 amends FASB Statement No. 142, “Goodwill and Other
Intangible Assets” (“SFAS 142”) to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141R and other
U.S. GAAP. The adoption did not have a material impact on the Company’s
consolidated results of operations or financial condition as of and for the
three and six months ended June 30, 2009.
In
December 2008, the FASB issued FASB Staff Position 132(R)-1 (“FSP 132R-1”),
which provides guidance on an employer’s disclosures about plan assets of a
defined benefit pension or other postretirement plan. FSP 132R-1
requires disclosure of investment allocation methodologies and information that
enables users of financial statements to assess the inputs and valuation
techniques used to develop fair value measurements of plan assets in order to
provide users with an understanding of significant concentrations of risk in
plan assets. FSP 132R-1 is effective for years ending after December
15, 2009. FSP 132R-1 requires additional disclosure only and,
therefore, will not impact the Company’s consolidated results of operations or
financial position.
Management
does not believe that any other recently issued, but not yet effective,
accounting standard if currently adopted would have a material effect on the
accompanying financial statements.
LIFE
SCIENCES RESEARCH, INC. AND
SUBSIDIARIES
ITEM
3
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
LSR is
subject to market risks arising from changes in interest rates and foreign
currency exchange rates.
Exchange
Rate Risk
The
consolidated financial statements of LSR are denominated in US
dollars. Changes in exchange rates between the UK pound sterling and
the US dollar will affect the translation of the UK subsidiary's financial
results into US dollars for the purposes of reporting the consolidated financial
results. The process by which each foreign subsidiary's financial
results are translated into US dollars is as follows: income statement accounts
are translated at average exchange rates for the period; balance sheet asset and
liability accounts are translated at end of period exchange rates; and capital
accounts are translated at historical exchange rates and retained earnings are
translated at weighted average of historical rates. Translation of
the balance sheet in this manner affects the stockholders' equity account,
referred to as the accumulated other comprehensive loss. Management
has decided not to hedge against the impact of exposures giving rise to these
translation adjustments as such hedges may impact upon the Company's cash flow
compared to the translation adjustments which do not affect cash flow in the
medium term.
The
Company operates on a worldwide basis and generally invoices its clients in the
currency of the country in which it operates. Thus, for the most
part, exposure to exchange rate fluctuations is limited as sales are denominated
in the same currency as costs. Trading exposures to currency
fluctuations do occur as a result of certain sales contracts, performed in the
UK for US clients, which are denominated in US dollars and contribute
approximately 4% of total net revenues. Management has decided not to
hedge against this exposure.
Also,
exchange rate fluctuations may have an impact on the relative price
competitiveness of the Company vis á vis competitors who trade in currencies
other than sterling or dollars.
The
Company has debt denominated in US dollars, whereas the Company’s functional
currency is the UK pound sterling, which results in the Company recording other
income/expense associated with US dollars debt as a function of relative changes
in foreign exchange rates. The Company is unable to predict whether
it will experience future gains or future losses from such exchange-related
risks on the debt. To manage the volatility relating to these
exposures, from time to time, the Company might enter into certain derivative
transactions. The Company holds and issues derivative financial
instruments for economic hedging purposes only. There were no
derivative financial instruments in place at June 30, 2009.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
Exchange
rates for translating sterling into US dollars were as follows:
|
At
December 31
|
At
June 30
|
3
months to June 30
Average
rate
(1)
|
6
months to June 30
Average
rate
(1)
|
2007
|
1.9906
|
2.0064
|
1.9858
|
1.9694
|
2008
|
1.4378
|
1.9902
|
1.9719
|
1.9752
|
2009
|
-
|
1.6469
|
1.5506
|
1.4937
|
(1)
|
Based
on the average of the exchange rates on each day of each month during the
period.
|
On July
30, 2009 the noon buying rate for sterling was £1.00 = $1.6502.
The
Company has not experienced difficulty in transferring funds to and receiving
funds remitted from those countries outside the US or UK in which it operates
and management expects this situation to continue.
The
following table summarizes the financial instruments denominated in currencies
other than the US dollar held by LSR and its subsidiaries as of June 30,
2009:
|
|
Expected
Maturity Date
|
|
|
2009
|
2010
|
2011
|
2012
|
2013
|
There
after
|
Total
|
Fair
Value
|
(In
US Dollars, amounts in thousands)
|
|
|
|
|
|
|
|
|
Cash
|
-
Pound Sterling
|
10,967
|
-
|
-
|
-
|
-
|
-
|
10,967
|
10,967
|
|
-
Euro
|
949
|
-
|
-
|
-
|
-
|
-
|
949
|
949
|
|
-
Japanese Yen
|
3,660
|
-
|
-
|
-
|
-
|
-
|
3,660
|
3,660
|
Accounts
receivable
|
-
Pound Sterling
|
18,192
|
-
|
-
|
-
|
-
|
-
|
18,192
|
18,192
|
|
-
Euro
|
1,648
|
-
|
-
|
-
|
-
|
-
|
1,648
|
1,648
|
|
-
Japanese Yen
|
1,931
|
-
|
-
|
-
|
-
|
-
|
1,931
|
1,931
|
Capital
leases
|
-
Pound Sterling
|
-
|
-
|
-
|
-
|
-
|
6,901
|
6,901
|
6,901
|
LIBOR
In the
three and six months ended June 30, 2009, if LIBOR had been above 4.25%, the
floor stipulated in the Company's Amended March 2006 Financing, a 1% change in
LIBOR would have resulted in a fluctuation in interest expense of $140,000 and
$280,000 respectively. Below 4.25%, fluctuations in LIBOR do not
result in a change in interest expense.
Revenue
For the
three and six months ended June 30, 2009, approximately 70% of the Company’s net
revenues were from outside the US.
See
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
ITEM
4
|
CONTROLS
AND PROCEDURES
|
As of
June 30, 2009 an evaluation was carried out, under the supervision and with the
participation of management, including the Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures pursuant to Exchange Act Rule
13a-15. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective as of the quarter ended June 30, 2009 in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in its periodic SEC
filings. During the quarter ended June 30, 2009 there were no
significant changes in internal controls or in other factors that have
materially affected, or are reasonably likely to materially affect, internal
controls over financial reporting.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
PART
II
OTHER INFORMATION
The
Company is party to certain legal actions arising out of the normal course of
its business. In management's opinion, none of these actions will
have a material effect on the Company's operations, financial condition or
liquidity. No form of proceedings has been brought, instigated or is known to be
contemplated against the Company by any governmental agency.
In
addition, on or about March 9, 2009, a purported class action lawsuit, Berger v.
Life Sciences Research, et. al., was filed in Superior Court of New Jersey,
Chancery Division, Somerset County, naming as defendants the Company and each
director of the Company. The complaint alleges, among other things, that
the directors breached their fiduciary duties with respect to the March 3, 2009
non-binding proposal made by Andrew Baker to acquire all of the outstanding
shares of the Company for $7.50 per share.
On July
8, 2009, the Company entered into the Merger Agreement with Parent and Lion, an
entity controlled by Andrew Baker, pursuant to which the Company will be
acquired for $8.50 per share and be taken private, subject to certain
conditions, including stockholder approval.
On July
13, 2009, a First Amended Complaint was filed in the Berger Lawsuit which
alleges, among other things, that the directors breached their fiduciary duties
with respect to the Merger; that Baker controls LSR and its directors; that the
merger price constitutes inadequate consideration; and that certain terms of the
merger agreement unfairly benefit Mr. Baker at the expense of the other
stockholders, including the absence of appraisal rights, accelerated vesting of
restricted stock, restrictions on the solicitation of negotiations with respect
to third party proposals, and termination fees. The First Amended Complaint
further alleges that the directors were motivated to accept Baker’s offer
because of concerns that a public dispute with Baker would draw unwanted
attention from animal rights activists. The First Amended Complaint seeks
unspecified damages and other relief. The Company will appropriately respond to
the Berger Lawsuit.
In
addition, on or about July 17, 2009, a second purported class action lawsuit,
captioned Ramaiah v. Baker et. al., was filed in Superior Court of New Jersey,
Chancery Division, Somerset County, naming as defendants the Company, each
director of the Company and Lion. The complaint alleges, among other
things, that the Board breached its fiduciary duties in connection with the
Merger by agreeing to sell the Company for an unfair price pursuant to an unfair
process and that the merger agreement contains preclusive deal protection
provisions by virtue of its “no shop” and “standstill” clauses and termination
fees. This complaint seeks unspecified damages and other relief. The Company
will appropriately respond to this lawsuit.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
The
Company’s business is subject to a number of risks and uncertainties, which are
discussed in detail in Part I, Item 1A of its 2008 Annual Report on Form
10-K. There were no material changes to the Company’s risk factors
during the period covered by this Quarterly Report on Form 10-Q.
ITEM
2
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
Not
applicable.
ITEM
3
|
DEFAULTS
UPON SENIOR SECURITIES
|
Not
applicable.
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
|
(a)
|
The
2009 Annual Meeting of Stockholders of the Company (the “Annual Meeting”)
was held on May 21, 2009.
|
|
(b)
|
See
item 4 (c)(i) below.
|
|
(c)
|
The
following matter was voted on at the Annual
Meeting:
|
|
(i)
|
The
election of its 5 directors to serve until the next annual meeting of
stockholders and the election and qualification of their respective
successors:
|
Director Name
|
For
|
Withhold
|
|
|
|
Andrew
Baker
|
10,349,558
|
243,387
|
Gabor
Balthazar
|
10,067,356
|
525,589
|
Brian
Cass
|
10,352,966
|
239,979
|
Afonso
Junqueiras
|
10,097,145
|
495,800
|
Yaya
Sesay
|
10,115,716
|
477,229
|
On July
8, 2009, the Company entered into the Merger Agreement with Parent and Lion, a
wholly owned subsidiary of Parent. Each of Parent and Lion was formed for the
purpose of consummating the transactions contemplated by the Merger Agreement,
and each of such entities is controlled by Andrew Baker, Chairman and CEO of the
Company. The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement, Lion will merge with and into the
Company (the “Merger”), with the Company continuing as the surviving company and
a wholly owned subsidiary of Parent following the Merger.
A Special
Committee consisting of the Company’s independent directors was charged with
evaluating strategic alternatives for the Company and unanimously recommended
the approval of the Merger. Based upon this recommendation, the Board of
Directors of the Company (with Andrew Baker and Brian Cass abstaining), approved
the Merger and resolved to recommend that LSR stockholders approve the Merger.
The Special Committee was advised by independent counsel and an independent
financial advisor who provided a fairness opinion to the Special
Committee.
The
Merger Agreement provides that, upon consummation of the Merger, each share of
common stock, par value $0.01 per share, of the Company (the “Shares”) issued
and outstanding immediately prior to the effective time of the Merger (the
“Effective Time”), other than Shares owned by Parent, Lion or their affiliates,
will be converted into the right to receive $8.50 in cash (“Per Share Merger
Consideration”). Based upon the latest information available to the Company, Mr.
Baker beneficially owns approximately 17.5% of the Shares. No stockholder has
any statutory right to demand and receive payment of the fair value of his, her
or its Shares in connection with the Merger.
Consummation
of the Merger is subject to a number of conditions, including without
limitation: (i) the approval of the Merger by (A) the holders of at least a
majority of the outstanding Shares entitled to vote on the Merger at a
stockholders’ meeting duly called and held for such purpose and (B) a majority
of the votes cast by holders of outstanding Shares entitled to vote on the
Merger at a stockholders’ meeting duly called and held for such purpose,
excluding any votes cast by Parent, Lion, Andrew Baker or any other “interested
party” (as such term is defined in the Merger Agreement); (ii) the absence of
any “company material adverse effect” (as defined in the Merger Agreement); and
(iii) other closing conditions set forth in the Merger Agreement.
Each of
the Company and Parent have the right to terminate the Merger Agreement under
certain circumstances, which may require the payment of a termination
fee.
The
foregoing description is qualified in its entirety by reference to the full text
of the Merger Agreement filed as Exhibit 2.1 to the Company’s Current Report on
Form 8-K filed on July 9, 2009.
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
Exhibit
2.1
|
Agreement
and Plan of Merger, dated as of July 8, 2009, among Life Sciences
Research, Inc., Lion Holdings, Inc. and Lion Merger Corp. (Incorporated by
Reference to Current Report on Form 8-K, dated July 9,
2009)
|
Exhibit
10.1
|
Amendment
No. 3, dated as of June 3, 2009, to Management Services Agreement between
Life Sciences Research, Inc. and Focused Healthcare
Partners
|
Exhibit
10.2
|
Amendment
No. 2, dated as of June 3, 2009, to Service Agreement between Huntingdon
Life Sciences Limited and Brian Cass
|
Exhibit
10.3
|
Amendment
No. 2, dated as of June 3, 3009, to Service Agreement between Huntingdon
Life Sciences Limited and Julian Griffiths
|
Exhibit
10.4
|
Amendment
No. 2, dated as of June 3, 2009 to Service Agreement between
Huntingdon Life Sciences Inc. and Richard
Michaelson
|
Exhibit
10.5
|
Amendment
No. 2, dated as of June 3, 2009, to Service Agreement between Huntingdon
Life Sciences Inc. and Mark Bibi
|
Exhibit
31.1
|
Rule
13a-14(a) Certification of the Chief Executive Officer
|
Exhibit
31.2
|
Rule
13a-14(a) Certification of the Chief Financial Officer
|
Exhibit
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of the Chief Executive
Officer and Chief Financial Officer
|
Exhibit
99.1
|
Press
Release, dated July 30, 2009 announcing the second quarter earnings
results for 2009
|
LIFE
SCIENCES RESEARCH, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Life
Sciences Research Inc.
(Registrant)
By:
|
/s/ Andrew Baker
|
Name:
|
Andrew
Baker
|
Title:
|
Chairman
and Chief Executive Officer – Principal Executive
Officer
|
Date:
|
August
3, 2009
|
|
|
|
|
By:
|
/s/ Richard Michaelson
|
Name:
|
Richard
Michaelson
|
Title:
|
Chief
Financial Officer – Principal Financial and Accounting
Officer
|
Date:
|
August
3, 2009
|
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