Charles River to Suspend Operations of Preclinical Services Massachusetts to Balance Global Capacity with Demand
January 11 2010 - 4:01PM
Business Wire
Charles River Laboratories International, Inc. (NYSE: CRL)
announced today that it has decided to suspend operations at its
Preclinical Services (PCS) facility in Shrewsbury, Massachusetts,
by the middle of 2010, when ongoing in-life studies will have been
completed. Charles River intends to resume operations when global
preclinical market conditions improve and the Company requires
additional capacity.
Suspension of operations at the facility is expected to reduce
operating costs by approximately $20 million in 2010, with an
annualized run-rate of approximately $25 million. As a result of
this decision, the Company expects to record charges of
approximately $7 million, primarily in the first quarter of 2010,
for severance and related costs. Both the charges and any losses
associated with the PCS Massachusetts action will be excluded from
non-GAAP results. The Company has not completed its impairment
analysis for the facility at this time. The Company anticipates
that suspension of operations will likely result in some loss of
revenue in 2010, but expects to retain the majority of the business
and provide the services at other PCS sites.
James C. Foster, Chairman, President and Chief Executive Officer
said, “Based on fourth-quarter preclinical business trends
consistent with our expectations and positive early indications for
the first quarter, we continue to believe that the preclinical
market will begin to show some improvement in the second quarter of
2010. However, the extended softness in preclinical market demand
for the last fifteen months has resulted in excess capacity
throughout the contract research industry and in our own global
network of PCS facilities. We have thoroughly evaluated the
anticipated demand and our available capacity, and determined that
the leaner infrastructure will improve our PCS operating margin
while providing us with sufficient capacity to meet the expected
upturn in demand for preclinical services in the biopharmaceutical
industry.”
2009 Guidance
The Company is reaffirming the 2009 sales guidance, and expects
non-GAAP earnings per share to be above the range, which was
previously provided on November 3, 2009. The Company expects to
release its fourth-quarter and full-year 2009 financial results and
provide 2010 financial guidance on Monday, February 8, 2010.
Company to Present at J.P.
Morgan Healthcare Conference
Charles River will present at the J.P. Morgan 28th Annual
Healthcare Conference in San Francisco, California, on Wednesday,
January 13th, at 10:00 a.m. PT (1:00 p.m. ET). Management will
present an overview of Charles River’s strategic focus and business
developments.
A live webcast of the presentation will be available through a
link that will be posted on the Investor Relations section of the
Charles River website at http://ir.criver.com. A webcast replay
will be accessible through the same website approximately three
hours after the presentation and will remain available through
January 27, 2009.
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. Forward-looking
statements include statements in this press release regarding
Charles River’s expectations regarding our projected 2009 sales and
non-GAAP 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 economic and market conditions on our customers; the
impact of specific actions intended to improve overall operating
efficiencies and profitability; the expected impact of the
suspension of PCS Massachusetts operations on the Company, its
product and service offerings and earnings; our intention with
respect to resuming operations of our PCS Massachusetts site; 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: 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,
our Quarterly Report on Form 10-Q as filed on November 4, 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.
This release contains estimates of certain preliminary 2009 (and
indirectly fourth-quarter 2009) financial information. We are
continuing to review our financial and operating results (including
the effects of the decision to suspend the operations of PCS
Massachusetts), and actual results may differ materially from those
contained herein. In particular, the preliminary financial
information could vary from the above estimates based on the final
accounting and/or determination as to whether non-GAAP
characterization is appropriate for certain items.
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 8,000 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.
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