Charles River Laboratories International, Inc. (NYSE: CRL) today
reported its results for the second quarter of 2009. For the
quarter, net sales decreased 12.5% to $308.2 million from $352.1
million in the second quarter of 2008. Sales declined in both the
Research Models and Services (RMS) and Preclinical Services (PCS)
segments, reflecting in part the negative impact of foreign
exchange, as well as softer market demand for the Company’s broad
portfolio of products and services, as pharmaceutical and
biotechnology clients reprioritize their drug development pipelines
and restructure their operations. Foreign currency translation
reduced net sales by 5.1%.
On a GAAP basis, net income for the second quarter of 2009 was
$34.2 million, or $0.52 per diluted share, compared to net income
of $49.1 million, or $0.70 per diluted share, for the second
quarter of 2008.
On a non-GAAP basis, net income was $43.1 million for the second
quarter of 2009, compared to $55.4 million for the same period in
2008, a decrease of 22.1%. Second-quarter diluted earnings per
share on a non-GAAP basis were $0.66, a decrease of 16.5% compared
to $0.79 per share in the second quarter of 2008. Both the GAAP and
non-GAAP results were impacted primarily by lower sales volume,
although the impact was mitigated in the second quarter of 2009 by
a lower share count and cost saving actions implemented in both the
first and second quarters of the year.
James C. Foster, Chairman, President and Chief Executive
Officer, said, “Although continuing softness in demand for both RMS
and PCS impacted our second-quarter sales, pricing, inquiry levels
and bookings have remained relatively stable through the first half
of the year. The cost-saving actions we implemented in the first
quarter, augmented by additional actions in the second quarter,
enabled us to achieve earnings per share higher than we previously
expected. Based on our first-half results and our expectation that
clients will continue to spend carefully through the end of the
year, we now expect 2009 sales to be 7-9% below last year. Despite
the anticipated lower sales, we believe that continuing cost
management will enable us to deliver non-GAAP earnings per share
between $2.35 and $2.47.”
As a result of the additional cost-saving actions implemented in
the second quarter, which included a reduction of performance-based
compensation and benefits, as well as selective headcount
reductions, the Company recorded a charge of $1.7 million, or
approximately $0.02 per share. In total, the first- and
second-quarter actions are expected to result in cost savings of
approximately $25.0 million in 2009, with an annual run-rate of
approximately $30.0 million beginning in 2010.
Mr. Foster continued, “In addition to reporting our
second-quarter results today, we are also announcing two
acquisitions and a partnership that we believe are strategic
opportunities to drive our future growth. We have focused our
efforts on identifying those assets and arrangements which we
believe will position us to offer our clients novel solutions to
the challenges of drug development. Each of these deals brings
unique capabilities to Charles River, which we believe are a
strategic advantage as we endeavor to offer value-added
solutions.”
Second-Quarter Segment
Results
Research Models and Services (RMS)
Sales for the RMS segment were $165.7 million in the second
quarter of 2009, a decrease of 4.1% from $172.8 million in the
second quarter of 2008. Foreign currency translation reduced sales
by 4.6%. Excluding the effect of foreign exchange, RMS sales were
flat as growth of academic accounts offset softer demand from
pharmaceutical and biotechnology clients. Lower sales for the
Consulting & Staffing Services business and the divestiture of
the Vaccine business in Mexico (September 2008) were partially
offset by the acquisitions of MIR (September 2008) and Piedmont
Research Center (May 2009).
Primarily as a result of cost-savings actions and lower
operating expenses in Japan, the 2009 second-quarter GAAP operating
margin increased to 30.7% from 30.2% in the second quarter of 2008.
On a non-GAAP basis, the operating margin was 31.9% compared to
30.9% for the second quarter of 2008.
Preclinical Services (PCS)
Second-quarter 2009 net sales for the PCS segment were $142.5
million, a decrease of 20.5% from $179.3 million in the second
quarter of 2008. The PCS sales decline was due primarily to slower
market demand from both pharmaceutical and biotechnology companies,
and the negative effect of foreign currency translation, which
reduced sales by 5.6%. The sales decline was partially offset by
the acquisition of NewLab BioQuality AG (September 2008).
As expected, lower capacity utilization, pricing pressure and
costs associated with the start-up of new facilities in China and
Canada, partially offset by cost-savings actions, resulted in lower
operating margins for the PCS segment. The 2009 second-quarter GAAP
operating margin declined to 11.5% from 16.1% in the second quarter
of 2008. On a non-GAAP basis, the operating margin declined to
17.2% from 21.2% in the second quarter of 2008.
Six-Month
Results
For the first six months of 2009, net sales decreased by 11.6%
to $609.7 million, from $689.8 million in the same period in 2008.
Foreign exchange decreased net sales by 5.2%.
On a GAAP basis, net income was $59.6 million, or $0.91 per
diluted share, for the first half of 2009, compared to $93.2
million, or $1.32 per diluted share, for the same period in
2008.
On a non-GAAP basis, net income for the first six months of 2009
was $81.3 million, or $1.24 per diluted share, compared to $106.2
million, or $1.51 per diluted share, for the same period in
2008.
Research Models and Services (RMS)
For the first six months of 2009, RMS net sales were $327.2
million, a decrease of 4.2% from first-half 2008 net sales of
$341.4 million, with foreign exchange contributing 4.4% to the
decline. The RMS segment’s GAAP operating margin was 30.1% in the
first half of 2009, compared to 31.6% for the year-ago period. On a
non-GAAP basis, the operating margin was 31.7% compared to 32.1% in
the first six months of 2008.
Preclinical Services (PCS)
For the first six months of 2009, PCS net sales were $282.5
million, a decrease of 18.9% over first-half 2008 net sales of
$348.4 million, with foreign exchange accounting for 6.0% of the
decline. On a GAAP basis, the PCS segment operating margin was 9.5%
in the first half of 2009, compared to 15.0% in the year-ago
period. On a non-GAAP basis, the operating margin was 16.4% in the
first half of 2009 compared to 19.8% for the same period in
2008.
Items Excluded from Non-GAAP
Results
Items excluded from non-GAAP results in the second quarter of
2009 and 2008 are as follows:
($ in millions) 2Q09 2Q08
Amortization of intangible assets $7.2 $7.6 Severance
related to cost-saving actions 1.7 -- Impairment and
other charges (1) 0.2 2.8 Operating losses for PCS
Arkansas and clinical Phase I Scotland 1.1 -- SFAS
No. 141(R) (Costs associated with evaluation of acquisitions)
0.4 -- U.S. pension curtailment --
(3.3) FSP No. APB 14-1 (Convertible debt accounting) 2.7
2.0
(1) In the second quarter of 2009, these items were related
primarily to costs associated with the Company’s divestiture of its
clinical Phase I business in Scotland on May 15, 2009. In the
second quarter of 2008, these items were related primarily to
Company’s disposition of its legacy PCS facility in Worcester,
Massachusetts, as well as an asset impairment related to the
divestiture of the Company’s Vaccine business in Mexico.
Items excluded from non-GAAP results in the first half of 2009
and 2008 are as follows:
($ in millions) 1H09 1H08
Amortization of intangible assets $13.4 $15.2
Severance related to cost-saving actions 8.8 --
Impairment and other charges (1) 1.8 3.5 Operating
losses for PCS Arkansas and clinical Phase I Scotland 2.7
-- SFAS No. 141(R) (Costs associated with evaluation of
acquisitions) 0.6 -- U.S. pension curtailment
-- (3.3) FSP No. APB 14-1 (Convertible debt accounting)
5.1 3.7
(1) In the first half of 2009, these items were related
primarily to an asset impairment charge and costs associated with
the Company’s divestiture of its clinical Phase I business in
Scotland and additional miscellaneous expenses. In the first half
of 2008, these items were related primarily to Company’s
disposition of its legacy PCS facility in Worcester, Massachusetts,
as well as an asset impairment related to the divestiture of the
Company’s Vaccine business in Mexico.
2009 Guidance
The Company is updating its forward-looking guidance for 2009,
which was originally provided on February 9, 2009. This guidance
now assumes stable to slightly higher net sales for the Company in
the second half of 2009 compared to the first half of the year, as
spending by our pharmaceutical and biotechnology clients continues
to be measured. The sales guidance includes the negative impact of
foreign exchange, which is now expected to reduce sales by
approximately 3.0-3.5% compared to 2008.
2009 GUIDANCE REVISED PRIOR Net
sales (7)% - (9)% (2)% - (7)% GAAP EPS estimate $1.78
- $1.90 $1.86 - $2.16 Amortization of intangible assets $0.28 $0.27
Severance related to cost-saving actions $0.10 $0.08 Impairment and
other charges $0.02 $0.02 Operating losses for PCS Arkansas and
clinical Phase I Scotland $0.04 $0.04 SFAS No. 141(R) (Costs
associated with evaluation of acquisitions) $0.01 -- FSP No. APB
14-1 (Convertible debt accounting) $0.12 $0.11 Non-GAAP EPS
estimate $2.35 - $2.47 $2.30 - $2.60
Announcing Acquisitions and
Strategic Partnership
As our clients continue to change their drug discovery and
development models, increasingly using outsourcing as a means by
which to improve efficiency and throughput, Charles River is
identifying opportunities to better support our clients through a
broader portfolio of essential products and services. The following
strategic acquisitions and partnership are expanding our ability to
capitalize on market opportunities now and in the future, as we
position the Company to increasingly add value to our clients’ drug
development efforts.
Cerebricon Ltd.
Charles River today announced the closing of the acquisition of
Cerebricon Ltd. for approximately $9.0 million in cash. Based in
Kuopio, Finland, Cerebricon provides discovery services for
therapeutic products for treatment of diseases of the central
nervous system (CNS), supported by in vivo imaging capabilities.
The acquisition is expected to be neutral to both GAAP and non-GAAP
earnings per share in 2009.
Cerebricon will join Charles River Discovery and Imaging
Services (DIS), a business which has been strategically expanded
through the acquisitions of MIR and Piedmont Research Center. As a
result of these acquisitions, we have established ourselves as a
market-leading provider of non-GLP (Good Laboratory Practice)
pharmacology and in vivo imaging services for the evaluation of
compound efficacy. Our therapeutic areas of expertise include
oncology, cardiovascular, metabolism, inflammation and now CNS,
which represent five of the largest areas of biopharmaceutical
research and development. We believe that in vivo discovery is a
strategic growth avenue, and that our premier platform will
continue to attract outsourced services from pharmaceutical and
biotechnology partners.
Systems Pathology Company, LLC
Charles River announced today that it has signed an agreement to
acquire Systems Pathology Company, LLC (SPC), a pathology-based
software company developing the Computer Assisted Pathology System
(CAPS™), which is expected to be the next generation of automated
digital imaging software tools to augment traditional toxicologic
pathology practices. SPC is focused on developing state-of-the-art
analytical imaging technologies to automate the labor-intensive
tissue evaluation process, which is a significant component of
standard preclinical studies. The strategic benefits of the CAPS™
platform are to enhance through automation, the objectivity,
accuracy, consistency and throughput of traditional toxicologic
pathology workflow. By automating the routine aspects of tissue
evaluation, CAPS™ is expected to increase efficiency by allowing
pathologists to focus on the higher-value decision making, thereby
shortening the time to report initiation. A number of large global
pharmaceutical clients are participating in the product development
phase, which we believe provides important scientific input to the
validation process.
SPC will be acquired for an initial payment of approximately
$24.0 million, with future contingent payments based on the
achievement of certain undisclosed milestones. The transaction is
expected to be dilutive to 2009 earnings per share by approximately
$0.02 on both a GAAP and non-GAAP basis. The transaction is
expected to close by the end of August 2009, subject to customary
closing conditions.
Partnership with MPM Capital
Charles River announced today that it has partnered with MPM
Capital, a dedicated life science venture capital firm that has
invested $1.9 billion in 109 companies over the past eleven years,
in an innovative initiative targeted at advancing underfunded
compounds with therapeutic promise to proof of concept as quickly
and efficiently as possible. As part of this new program, with
scientific input from Charles River, MPM will focus on identifying
promising preclinical compounds from biopharmaceutical companies,
and lead the investor syndicates that would spin out those assets.
Leveraging its core competencies, Charles River will have exclusive
rights to provide contract research services for discovery and
preclinical services to advance these compounds through the
milestones necessary for an IND (Investigational New Drug) filing
with the Food and Drug Administration (FDA), and first-in-human
safety testing through its Phase I clinic in Tacoma, Washington.
Where appropriate, Charles River will also provide services to
MPM’s current portfolio companies for their preclinical work.
Partnering with MPM offers Charles River the opportunity to
establish itself as a provider of choice for a unique client group
which is emerging as biopharmaceutical companies are increasingly
rationalizing and reprioritizing their development pipelines. This
innovative initiative provides them an avenue to develop
therapeutic compounds, employing a virtual infrastructure backed by
Charles River’s extensive discovery and preclinical services
capabilities, thereby accelerating the drug development process in
a cost efficient manner.
Webcast
Charles River Laboratories has scheduled a live webcast on
Wednesday, August 5, at 8:30 a.m. ET to discuss matters relating to
this press release. To participate, please go to ir.criver.com and
select the webcast link. You can also find the associated slide
presentation and reconciliations of non-GAAP financial measures to
comparable GAAP financial measures on the website.
Use of Non-GAAP Financial
Measures
This press release contains non-GAAP financial measures, such as
non-GAAP earnings per diluted share, which exclude amortization of
intangible assets and other charges related to our acquisitions,
charges related to the dispositions of our clinical Phase I
business in Scotland and our legacy preclinical facility in
Worcester, Massachusetts, expenses associated with evaluating
acquisitions, the gain on the curtailment of our U.S. defined
benefit plan in 2008, operating losses attributable to our
businesses we plan to close or divest, severance costs associated
with our 2009 first- and second-quarter cost-saving actions, and
the additional interest recorded as a result of the adoption of FSP
No. APB 14-1. We exclude these items from the non-GAAP financial
measures because they are outside our normal operations. There are
limitations in using non-GAAP financial measures, as they are not
prepared in accordance with generally accepted accounting
principles, and may be different than non-GAAP financial measures
used by other companies. In particular, we believe that the
inclusion of supplementary non-GAAP financial measures in this
press release helps investors to gain a meaningful understanding of
our core operating results and future prospects without the effect
of these often-one-time charges, and is consistent with how
management measures and forecasts the Company's performance,
especially when comparing such results to prior periods or
forecasts. We believe that the financial impact of our acquisitions
(and in certain cases, the evaluation of such acquisitions, whether
or not ultimately consummated) is often large relative to our
overall financial performance, which can adversely affect the
comparability of our results on a period-to-period basis. In
addition, certain activities, such as business acquisitions, happen
infrequently and the underlying costs associated with such
activities do not recur on a regular basis. Non-GAAP results also
allow investors to compare the Company’s operations against the
financial results of other companies in the industry who similarly
provide non-GAAP results. The non-GAAP financial measures included
in this press release are not meant to be considered superior to or
a substitute for results of operations prepared in accordance with
GAAP. The Company intends to continue to assess the potential value
of reporting non-GAAP results consistent with applicable rules and
regulations. Reconciliations of the non-GAAP financial measures
used in this press release to the most directly comparable GAAP
financial measures are set forth in the text of this press release,
and can also be found on the Company’s website at
ir.criver.com.
Caution Concerning
Forward-Looking Statements
This news release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may be identified by the use of words
such as “anticipate,” “believe,” “expect,” “will,” “may,”
“estimate,” “plan,” “outlook,” and “project” and other similar
expressions that predict or indicate future events or trends or
that are not statements of historical matters. These statements
also include statements regarding our projected 2009 sales and
earnings; the future demand for drug discovery and development
products and services (particularly in light of the challenging
economic environment), including the outsourcing of these services
and present spending trends by our customers; the impact of
specific actions intended to improve overall operating efficiencies
and profitability; the timing of the opening of new and expanded
facilities by us and our competitors; the intended acquisition of
SPC; Charles River’s expectations with respect to the impact of SPC
and Cerebricon on the Company, its service offerings, and earnings;
Charles River’s expectations with respect to the partnership with
MPM Capital, including any additional service revenue that may be
generated; our future stock purchase activities; future cost
reduction activities by our customers; and Charles River’s future
performance as delineated in our forward-looking guidance, and
particularly our expectations with respect to sales growth and
foreign exchange impact. In addition, these statements include the
availability of funding for our customers and the impact of
economic and market conditions on them generally, and the
anticipated strength of our balance sheet, the effects of our
first- and second-quarter 2009 cost-saving actions and other
actions designed to manage expenses, operating costs and capital
spending, and to streamline efficiency, and the ability of the
Company to withstand the current market conditions. Forward-looking
statements are based on Charles River’s current expectations and
beliefs, and involve a number of risks and uncertainties that are
difficult to predict and that could cause actual results to differ
materially from those stated or implied by the forward-looking
statements. Those risks and uncertainties include, but are not
limited to: the ability to successfully integrate the acquisition
of the business and assets of Piedmont Research Center, LLC,
Cerebricon and SPC; the ability to successfully develop and
commercialize SPC’s technology platform; a decrease in research and
development spending, a decrease in the level of outsourced
services, or other cost reduction actions by our customers; the
ability to convert backlog to sales; special interest groups;
contaminations; industry trends; new displacement technologies;
USDA and FDA regulations; changes in law; continued availability of
products and supplies; loss of key personnel; interest rate and
foreign currency exchange rate fluctuations; changes in tax
regulation and laws; changes in generally accepted accounting
principles; and any changes in business, political, or economic
conditions due to the threat of future terrorist activity in the
U.S. and other parts of the world, and related U.S. military action
overseas. A further description of these risks, uncertainties, and
other matters can be found in the Risk Factors detailed in Charles
River's Annual Report on Form 10-K as filed on February 23, 2009,
as well as other filings we make with the Securities and Exchange
Commission. Because forward-looking statements involve risks and
uncertainties, actual results and events may differ materially from
results and events currently expected by Charles River, and Charles
River assumes no obligation and expressly disclaims any duty to
update information contained in this news release except as
required by law.
About Charles River
Accelerating Drug Development. Exactly. Charles River provides
essential products and services to help pharmaceutical and
biotechnology companies, government agencies and leading academic
institutions around the globe accelerate their research and drug
development efforts. Our approximately 8,500 employees worldwide
are focused on providing clients with exactly what they need to
improve and expedite the discovery, development through
first-in-human evaluation, and safe manufacture of new therapies
for the patients who need them. To learn more about our unique
portfolio and breadth of services, visit www.criver.com.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (dollars in
thousands, except for per share data) Three
Months Ended Six Months Ended
June 27,
2009
June 28,
2008
June 27,
2009
June 28,
2008
Total net sales $ 308,159 $ 352,134 $ 609,685 $ 689,819 Cost
of products sold and services provided
193,696
214,147
387,002 421,455
Gross margin 114,463 137,987 222,683 268,364 Selling, general and
administrative 56,582 61,079 118,760 120,399 Amortization of
intangibles
7,219
7,600 13,368
15,171 Operating income 50,662 69,308 90,555
132,794 Interest income (expense) (4,942 ) (3,145 ) (9,546 ) (5,555
) Other income (expense)
1,565
(267 ) 1,303
(1,104 ) Income before income
taxes and noncontrolling interests 47,285 65,896 82,312 126,135
Provision for income taxes
13,630
17,088 23,788
33,271 Net income 33,655 48,808 58,524 92,864
Noncontrolling interests
499
258 1,035
341 Net income attributable to common
shareholders
$ 34,154
$ 49,066 $
59,559 $ 93,205
Earnings per common share Basic $ 0.53 $ 0.73 $ 0.91
$ 1.38 Diluted $ 0.52 $ 0.70 $ 0.91 $ 1.32 Weighted average
number of common shares outstanding Basic 65,046,023 67,328,432
65,467,929 67,416,639 Diluted 65,222,498 70,363,643 65,615,498
70,464,092
CHARLES RIVER LABORATORIES INTERNATIONAL,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
June 27, 2009
December 27,
2008
Assets Current assets Cash and cash equivalents $ 154,806 $
243,592 Trade receivables, net 209,888 210,214 Inventories 96,403
96,882 Other current assets
108,608
67,451 Total current assets 569,705 618,139 Property,
plant and equipment, net 857,517 837,246 Goodwill, net 478,814
457,578 Other intangibles, net 153,368 136,100 Deferred tax asset
33,277 37,348 Other assets
60,937
55,002 Total assets
$
2,153,618 $ 2,141,413
Liabilities and Shareholders’ Equity Current liabilities
Current portion of long-term debt & capital leases $ 35,404 $
35,452 Accounts payable 36,568 40,517 Accrued compensation 51,393
54,870 Deferred revenue 74,930 86,707 Accrued liabilities 50,370
60,741 Other current liabilities
20,980
22,711 Total current liabilities 269,645 300,998
Long-term debt & capital leases 486,487 479,880 Other long-term
liabilities
114,530 118,827
Total liabilities
870,662
899,705 Total shareholders’ equity
1,282,956 1,241,708 Total
liabilities and shareholders’ equity
$
2,153,618 $ 2,141,413
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SELECTED
BUSINESS SEGMENT INFORMATION (UNAUDITED) (dollars in
thousands) Three Months
Ended Six Months Ended June
27,
2009
June 28,
2008
June 27,
2009
June 28,
2008
Research Models and Services Net sales $ 165,682 $ 172,848 $
327,172 $ 341,444 Gross margin 71,206 76,429 139,519 152,685 Gross
margin as a % of net sales 43.0 % 44.2 % 42.6 % 44.7 % Operating
income 50,894 52,199 98,338 108,012 Operating income as a % of net
sales 30.7 % 30.2 % 30.1 % 31.6 % Depreciation and amortization
8,049 7,024 15,722 13,690 Capital expenditures 6,307 23,898 13,931
34,507
Preclinical Services Net sales $ 142,477 $
179,286 $ 282,513 $ 348,375 Gross margin 43,257 61,558 83,164
115,679 Gross margin as a % of net sales 30.4 % 34.3 % 29.4 % 33.2
% Operating income 16,336 28,849 26,882 52,117 Operating income as
a % of net sales 11.5 % 16.1 % 9.5 % 15.0 % Depreciation and
amortization 14,851 16,012 29,148 31,693 Capital expenditures
14,130 41,055 31,131 71,076
Unallocated Corporate
Overhead $ (16,568 ) $ (11,740 ) $ (34,665 ) $ (27,335 )
Total Net sales $ 308,159 $ 352,134 $ 609,685 $
689,819 Gross margin 114,463 137,987 222,683 268,364 Gross margin
as a % of net sales 37.1 % 39.2 % 36.5 % 38.9 % Operating income
50,662 69,308 90,555 132,794 Operating income as a % of net sales
16.4 % 19.7 % 14.9 % 19.3 % Depreciation and amortization 22,900
23,036 44,870 45,383 Capital expenditures 20,437 64,953 45,062
105,583
CHARLES RIVER LABORATORIES INTERNATIONAL,
INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED
BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in
thousands) Three Months
Ended Six Months Ended June
27,
2009
June 28,
2008
June 27,
2009
June 28,
2008
Research Models and Services Net sales $ 165,682 $ 172,848 $
327,172 $ 341,444 Operating income 50,894 52,199 98,338 108,012
Operating income as a % of net sales 30.7 % 30.2 % 30.1 % 31.6 %
Add back: Amortization related to acquisitions 1,745 594 2,632
1,128 Severance 139 - 2,848 - Impairment and other charges
(2) - 634
- 634
Operating income, excluding specified charges (Non-GAAP) $ 52,778 $
53,427 $ 103,818 $ 109,774 Non-GAAP operating income as a % of net
sales 31.9 % 30.9 % 31.7 % 32.1 %
Preclinical
Services Net sales $ 142,477 $ 179,286 $ 282,513 $ 348,375
Operating income 16,336 28,849 26,882 52,117 Operating income as a
% of net sales 11.5 % 16.1 % 9.5 % 15.0 % Add back: Amortization
related to acquisitions 5,474 7,006 10,735 14,043 Severance 1,535 -
4,311 - Impairment and other charges
(2) 85 2,187 1,612
2,873 Operating losses for PCS Arkansas and Phase 1 Scotland
1,139 -
2,682 - Operating
income, excluding specified charges (Non-GAAP) $ 24,569 $ 38,042 $
46,222 $ 69,033 Non-GAAP operating income as a % of net sales 17.2
% 21.2 % 16.4 % 19.8 %
Unallocated Corporate
Overhead $ (16,568 ) $ (11,740 ) $ (34,665 ) $ (27,335 ) Add
back: Severance 5 - 1,653 - Impairment and other charges
(2)
86 - 183 - SFAS No. 141(R) (costs associated with the evaluation of
acquisitions) 410 - 639 - U.S. pension curtailment - (3,276 ) -
(3,276 ) FSP No. APB 14-1 (convertible debt accounting)
(3)
53 15
97 29 Unallocated
corporate overhead, excluding specified charges (Non-GAAP) $
(16,014 ) $ (15,001 ) $ (32,093 ) $ (30,582 )
Total Net sales $ 308,159 $ 352,134 $ 609,685 $ 689,819
Operating income 50,662 69,308 90,555 132,794 Operating income as a
% of net sales 16.4 % 19.7 % 14.9 % 19.3 % Add back: Amortization
related to acquisitions 7,219 7,600 13,367 15,171 Severance 1,679 -
8,812 - Impairment and other charges
(2) 171 2,821 1,795
3,507 Operating losses for PCS Arkansas and Phase 1 Scotland 1,139
- 2,682 - SFAS No. 141(R) (costs associated with the evaluation of
acquisitions) 410 - 639 - U.S. pension curtailment - (3,276 ) -
(3,276 ) FSP No. APB 14-1 (convertible debt accounting)
(3)
53 15
97 29 Operating
income, excluding specified charges (Non-GAAP) $ 61,333 $ 76,468 $
117,947 $ 148,225 Non-GAAP operating income as a % of net sales
19.9 % 21.7 % 19.3 % 21.5 %
(1 )
Charles River management believes that supplementary non-GAAP
financial measures provide useful information to allow investors to
gain a meaningful understanding of our core operating results and
future prospects, without the effect of one-time charges,
consistent with the manner in which management measures and
forecasts the Company’s performance. The supplementary non-GAAP
financial measures included are not meant to be considered superior
to, or a substitute for results of operations prepared in
accordance with GAAP. The Company intends to continue to assess the
potential value of reporting non-GAAP results consistent with
applicable rules and regulations.
(2 ) 2009 includes
an asset impairment and costs due to the sale of our clinical Phase
I business in Scotland, as well as additional miscellaneous costs.
2008 includes the disposition of the Company's Preclinical Services
facility in Worcester, Massachusetts, as well as an asset
impairment related to the divestiture of the Company's Vaccine
business in Mexico.
(3 ) 2009 and 2008 include the
impact of FSP No. APB 14-1 for convertible debt accounting, which
increased depreciation expense.
CHARLES RIVER
LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP
EARNINGS TO NON-GAAP EARNINGS (1) (dollars in thousands,
except for per share data) Three
Months Ended Six Months Ended
June 27,
2009
June 28,
2008
June 27,
2009
June 28,
2008
Net income attributable to common shareholders $ 34,154 $
49,066 $ 59,559 $ 93,205 Add back:
Amortization related to acquisitions 7,219 7,600 13,367 15,171
Severance 1,679 - 8,812 - Impairment and other charges
(2)
171 2,821 1,795 3,507 Operating losses for PCS Arkansas and Phase 1
Scotland 1,139 - 2,682 - SFAS No. 141(R) (costs associated with the
evaluation of acquisitions) 410 - 639 - U.S. pension curtailment -
(3,276 ) - (3,276 ) FSP No. APB 14-1 (convertible debt accounting
), net
(3) 2,688 1,953 5,085 3,711 Tax effect
(4,331 ) (2,794
) (10,620 )
(6,142 ) Net income, excluding specified
charges (Non-GAAP)
$ 43,129
$ 55,370 $
81,319 $ 106,176
Weighted average shares outstanding - Basic
65,046,023 67,328,432 65,467,929 67,416,639 Effect of dilutive
securities: 2.25% senior convertible debentures - 1,454,072 -
1,438,261 Stock options and contingently issued restricted stock
173,182 1,271,120 144,342 1,318,566 Warrants
3,293 310,019
3,227 290,626
Weighted average shares outstanding - Diluted
65,222,498 70,363,643
65,615,498
70,464,092 Basic earnings per share $
0.53 $ 0.73 $ 0.91 $ 1.38 Diluted earnings per share $ 0.52 $ 0.70
$ 0.91 $ 1.32 Basic earnings per share, excluding specified
charges (Non-GAAP) $ 0.66 $ 0.82 $ 1.24 $ 1.57 Diluted earnings per
share, excluding specified charges (Non-GAAP) $ 0.66 $ 0.79 $ 1.24
$ 1.51
(1 ) Charles River management
believes that supplementary non-GAAP financial measures provide
useful information to allow investors to gain a meaningful
understanding of our core operating results and future prospects,
without the effect of one-time charges, consistent with the manner
in which management measures and forecasts the Company’s
performance. The supplementary non-GAAP financial measures included
are not meant to be considered superior to, or a substitute for
results of operations prepared in accordance with GAAP. The Company
intends to continue to assess the potential value of reporting
non-GAAP results consistent with applicable rules and regulations.
(2 ) 2009 includes an asset impairment and costs due
to the sale of our clinical Phase I business in Scotland, as well
as additional miscellaneous costs. 2008 includes the disposition of
the Company's Preclinical Services facility in Worcester,
Massachusetts, as well as an asset impairment related to the
divestiture of the Company's Vaccine business in Mexico.
(3
) The three and six months ended June 27, 2009 include the
impact of FSP No. APB 14-1 for convertible debt accounting, which
increased interest expense by $2,906 and $5,766, capitalized
interest by $271 and $778 and depreciation expense by $53 and $97,
respectively. The three and six months ended June 28, 2008 have
been restated to include the impact of FSP No. APB 14-1, which
increased interest expense by $2,713 and $5,383, capitalized
interest by $776 and $1,702 and depreciation expense by $15 and
$29, respectively.
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