Charles River Laboratories International, Inc. (NYSE: CRL) today
reported its results for the third quarter of 2011. For the
quarter, net sales from continuing operations were $277.6 million,
an increase of 2.5% from $270.9 million in the third quarter of
2010. Foreign currency translation benefited the reported sales by
3.7%. Sales increased in the Research Models and Services (RMS)
segment, but declined in the Preclinical Services (PCS)
segment.
On a GAAP basis, net income from continuing operations for the
third quarter of 2011 was $18.9 million, or $0.37 per diluted
share, compared to a net loss of $24.2 million, or $0.38 per
diluted share, for the third quarter of 2010. Last year’s
third-quarter GAAP results include the impact of a $30.0 million
fee related to the termination of a proposed acquisition.
On a non-GAAP basis, net income from continuing operations was
$28.7 million for the third quarter of 2011, effectively unchanged
from $28.8 million for the same period in 2010. Third-quarter
diluted earnings per share on a non-GAAP basis were $0.57, an
increase of 23.9% compared to $0.46 per share in the third quarter
of 2010. Higher sales and operating income in the RMS segment were
largely offset by softer performance in the PCS segment. Non-GAAP
earnings per share benefited primarily from the net accretion of
stock repurchases.
James C. Foster, Chairman, President and Chief Executive
Officer, said, “Our third-quarter results, particularly in PCS,
reflect an ongoing trend whereby our clients are focusing on
earlier in vivo biology research at the expense of regulated safety
assessment, including GLP toxicology. Our RMS and PCS businesses
have benefitted from increased demand for non-GLP services,
although the contribution to PCS revenues in the third quarter is
being overshadowed by the continuing decline in demand for GLP
safety assessment, as well as softer demand from mid-tier
pharmaceutical and biotechnology companies as a result of a decline
in available funding.
We believe there are greater opportunities to support our
clients’ requirements for outsourced in vivo biology services, such
as in vivo pharmacology and drug metabolism and pharmacokinetics
(DMPK), which were historically considered core by our clients and
not available to contract research organizations like Charles
River. We believe that partnering with us will enable our clients
to achieve a flexible drug development model at lower cost and
increased efficiency,” Mr. Foster concluded.
The Company reports results from continuing operations, which
excludes results of the Phase I clinical business that was divested
during the second quarter of 2011. The Phase I business is reported
as a discontinued operation.
Third-Quarter Segment
Results
Research Models and Services (RMS)
Net sales for the RMS segment were $171.5 million in the third
quarter of 2011, an increase of 7.7% from $159.3 million in the
third quarter of 2010. Excluding the effect of foreign exchange,
RMS sales increased by 3.1%, primarily driven by higher sales of
Other Products, which includes the In Vitro and Avian businesses,
as well as Research Model Services.
In the third quarter of 2011, the RMS segment’s GAAP operating
margin was 28.3% compared to 26.9% for the third quarter of 2010.
On a non-GAAP basis, the operating margin increased to 29.0% from
28.1% in the third quarter of 2010. The operating margin
improvement was primarily attributable to sales volume leverage, as
well as efficiencies derived from cost-savings actions implemented
in 2010.
Preclinical Services (PCS)
Third-quarter 2011 net sales from continuing operations for the
PCS segment were $106.1 million, a decrease of 4.9% from $111.6
million in the third quarter of 2010. The PCS sales decline was due
primarily to a continuing preponderance of shorter term, less
complex studies in the sales mix, as well as fewer GLP safety
assessment studies. Sales to large biopharmaceutical clients were
stable, but sales to small and mid-tier biopharmaceutical companies
declined. Foreign currency translation benefited the sales growth
rate by 2.4%.
The third-quarter 2011 GAAP operating margin decreased to 3.5%
from 4.6% in the same period in 2010. On a non-GAAP basis, the
operating margin declined to 9.3% from 12.2% in the third quarter
of 2010. The operating margin decline was primarily attributable to
lower sales, which offset the benefits of cost-savings actions
implemented in 2010.
Stock Repurchase Update
During the third quarter of 2011, the Company repurchased
approximately 1.8 million shares for $63.8 million. As of September
24, 2011, Charles River had $141.3 million remaining on its $750
million stock repurchase authorization.
Nine-Month Results
For the first nine months of 2011, net sales were effectively
unchanged at $851.7 million from $851.8 million for the same period
in 2010. Foreign currency translation benefited net sales growth by
2.9%.
On a GAAP basis, net income from continuing operations for the
first nine months of 2011 was $88.4 million, or $1.69 per diluted
share, compared to $8.3 million, or $0.14 per diluted share, for
the same period in 2010.
On a non-GAAP basis, net income from continuing operations for
first nine months of 2011 was $97.8 million, or $1.87 per diluted
share, compared to $91.1 million, or $1.40 per diluted share, for
the same period in 2010.
Research Models and Services (RMS)
For the first nine months of 2011, RMS net sales were $523.0
million, an increase of 4.9% from $498.6 million in the same period
in 2010. Foreign currency translation benefited net sales growth by
3.5%. On a GAAP basis, the RMS segment operating margin was 29.8%
for the first nine months of 2011, compared to 28.1% for the
prior-year period. On a non-GAAP basis, the operating margin was
31.0% for the first nine months of 2011, compared to 29.2% for the
same period in 2010.
Preclinical Services (PCS)
For the first nine months of 2011, PCS net sales were $328.7
million, a decrease of 6.9% from $353.2 million for the same period
in 2010. Foreign currency translation benefited net sales growth by
2.1%. On a GAAP basis, the PCS segment operating margin was 6.3%
for the first nine months of 2011, compared to 3.4% for the
prior-year period. On a non-GAAP basis, the operating margin was
12.5% for the first nine months of 2011, compared to 11.8% for the
same period in 2010.
Items Excluded from Non-GAAP
Results
Items excluded from non-GAAP results in the third quarter of
2011 and 2010 were as follows:
($ in millions) 3Q11
3Q10 Amortization of intangible assets
$5.3 $6.0 Severance related to cost-savings actions
(0.1) 0.8 Impairment and other items (1)
(0.1) 0.4 Adjustment of contingent
consideration related to acquisitions --
(2.9) Operating losses for PCS China, Massachusetts and
Arkansas 2.8 3.8 Costs associated with
evaluation of acquisitions 0.2 (0.3)
Acquisition agreement termination fee --
30.0 Write-off of deferred financing costs related to
amended credit agreement 1.5 4.5 Fees
and tax costs associated with corporate subsidiary restructuring
and repatriation 0.5 13.0 Convertible
debt accounting 3.5 3.3
(1) In the third quarter of 2011, these items were related
primarily to a gain related to the disposition of an RMS facility
in Europe and costs to exit a corporate leased facility. In the
third quarter of 2010, these items were related primarily to an
asset impairment associated with the Company’s planned disposition
of its PCS facility in Arkansas.
Items excluded from non-GAAP results in the first nine months of
2011 and 2010 were as follows:
($ in millions) YTD11
YTD10 Amortization of intangible assets $16.5
$18.2 Severance related to cost-savings actions
1.3 5.6 Impairment and other items (1)
0.8 1.3 Adjustment of contingent consideration related to
acquisitions (1.2) (2.9) Operating losses for
PCS China, Massachusetts and Arkansas 8.3 10.7
Costs associated with evaluation of acquisitions 0.2
8.1 Acquisition agreement termination fee --
30.0 Gain on settlement of life insurance policy
(7.7) -- Write-off of deferred financing costs
related to amended credit agreement 1.5 4.5
Fees and tax costs associated with corporate subsidiary
restructuring and repatriation 1.5 15.7
Convertible debt accounting 10.2 9.6 Tax
benefit related to disposition of Phase I clinical business
(11.1) --
(1) In the first nine months of 2011, these items were related
primarily to an asset impairment associated with the Company’s RMS
large model operations and gains related to dispositions of RMS
facilities in Michigan and Europe, as well as exiting a defined
benefit plan in RMS Japan and costs to exit a corporate leased
facility. In the first nine months of 2010, these items were
related primarily to an asset impairment associated with the
Company’s planned disposition of its PCS facility in Arkansas.
2011 Guidance
The Company is updating its forward-looking guidance based on
continuing operations for 2011, which was last updated on August 2,
2011. The Company has reaffirmed its 2011 sales guidance, which
assumes a moderate sequential increase in RMS sales and flat
sequential PCS sales for the fourth quarter of 2011. Foreign
currency translation is now expected to benefit 2011 sales growth
by approximately 2.5% compared to 2010.
The Company’s guidance includes the effect of the addition of a
53rd week this year. The 53rd week is characterized by light sales
but normal costs, which in addition to normal seasonality, is
expected to pressure the segment operating margins in the fourth
quarter.
2011 GUIDANCE (from continuing operations)
REVISED PRIOR Net sales growth
Slightly Higher Slightly Higher GAAP EPS
estimate $2.03-$2.08 $2.11 - $2.21
Amortization of intangible assets $0.29 $0.29 Severance costs and
operating losses (1) $0.20 $0.13 Impairment and other items (2)
$0.02 $0.02 Convertible debt accounting $0.18 $0.18 Gain on
settlement of life insurance policy ($0.14) ($0.14) Write-off of
deferred financing costs related to amended credit agreement $0.03
-- Tax benefit related to disposition of Phase I clinical business
($0.21) ($0.21) Non-GAAP EPS estimate
$2.40-$2.45 $2.38 - $2.48
(1) These items include severance costs associated with the
Company’s fourth-quarter 2010 and 2011 actions, as well as
operating losses primarily attributable to the suspension of
operations at its PCS facility in Massachusetts and the closure of
its PCS facility in China.
(2) These items were related primarily to: (i) an asset
impairment associated with the Company’s RMS large model
operations; (ii) costs associated with corporate legal entity
restructuring; (iii) exiting a defined benefit plan in RMS Japan;
(iv) an adjustment of contingent consideration related to
acquisitions; (v) costs associated with evaluation of acquisitions;
(vi) gains related to the dispositions of RMS facilities in
Michigan and Europe; and (vii) costs to exit a corporate leased
facility.
Webcast
Charles River Laboratories has scheduled a live webcast on
Wednesday, November 2, 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 the amortization
of intangible assets and other charges related to our acquisitions,
expenses associated with evaluating acquisitions, charges and
operating losses attributable to our businesses we plan to close or
divest, severance costs associated with our cost-savings actions,
taxes associated with the disposition of our Phase I clinical
business, adjustments related to contingent consideration related
to our acquisitions, a gain recognized upon the settlement of a
life insurance policy of a former officer, fees and taxes
associated with corporate subsidiary restructuring and
repatriation, and the additional interest recorded as a result of
the adoption in 2009 of an accounting standard related to our
convertible debt accounting which increased interest and
depreciation expense. 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 press 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 2011 financial
performance including sales and earnings per share; the future
demand for drug discovery and development products and services
(particularly in light of the challenging economic environment);
including our expectations for revenue trends for the remainder of
2011; the development and performance of our services and products,
including the impact this can have on our clients’ drug development
models; market and industry conditions including the outsourcing of
these services and present spending trends by our customers; the
impact of specific actions intended to more accurately align our
infrastructure to the current operating environment, and to improve
overall operating efficiencies and profitability; and Charles
River’s future performance as delineated in our forward-looking
guidance, and particularly our expectations with respect to sales
and foreign exchange impact. 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 businesses we acquire; the ability to
execute our cost-savings actions on an effective and timely basis
(including divestitures and site closures); the timing and
magnitude of our share repurchases; negative trends in research and
development spending, negative trends 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, 2011,
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 dedicated employees are focused on
providing clients with exactly what they need to improve and
expedite the discovery, early-stage development 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 Nine Months Ended
September 24,2011
September 25,2010
September 24,2011
September 25,2010
Total net sales $ 277,579 $ 270,885 $ 851,685 $ 851,764 Cost
of products sold and services provided
184,863
180,385
550,011 560,309
Gross margin 92,716 90,500 301,674 291,455 Selling, general and
administrative 50,345 48,005 152,561 176,562 Termination fee -
30,000 - 30,000 Amortization of intangibles
5,277 6,027
16,454 18,246
Operating income 37,094 6,468 132,659 66,647 Interest income
(expense) (11,806 ) (12,398 ) (31,559 ) (24,896 ) Other income
(expense)
(747 )
(1,648 ) (1,092
) (2,850 ) Income
(loss) from continuing operations before income taxes 24,541 (7,578
) 100,008 38,901 Provision (benefit) for income taxes
5,630 16,670
11,564 30,577 Income
(loss) from continuing operations, net of tax 18,911 (24,248 )
88,444 8,324 Discontinued operations, net of tax
(18 ) (986
) (5,695 )
(2,463 ) Net income (loss) 18,893 (25,234
) 82,749 5,861 Noncontrolling interests
(95
) 293
(298 ) 1,034
Net income (loss) attributable to common shareowners
$
18,798 $ (24,941
) $ 82,451
$ 6,895 Earnings (loss) per
common share Basic: Continuing operations $ 0.38 $ (0.38 ) $ 1.71 $
0.15 Discontinued operations $ - $ (0.02 ) $ (0.11 ) $ (0.04 ) Net
$ 0.38 $ (0.40 ) $ 1.60 $ 0.11 Diluted: Continuing operations $
0.37 $ (0.38 ) $ 1.69 $ 0.14 Discontinued operations $ - $ (0.02 )
$ (0.11 ) $ (0.04 ) Net $ 0.37 $ (0.40 ) $ 1.58 $ 0.11
Weighted average number of common shares outstanding Basic
50,084,850 62,597,055 51,671,559 64,344,970 Diluted 50,533,747
62,597,055 52,238,427 64,894,825
CHARLES RIVER
LABORATORIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (UNAUDITED) (dollars in thousands)
September 24,2011
December 25,2010
Assets Current assets Cash and cash equivalents $ 81,220 $
179,160 Trade receivables, net 202,379 192,972 Inventories 94,391
100,297 Other current assets 78,339 76,603 Current assets of
discontinued businesses
-
3,862 Total current assets 456,329 552,894 Property,
plant and equipment, net 728,887 752,657 Goodwill, net 199,799
198,438 Other intangibles, net 105,941 121,236 Deferred tax asset
37,364 45,003 Other assets 55,932 62,323 Long-term assets of
discontinued businesses
1,121
822 Total assets
$ 1,585,373
$ 1,733,373 Liabilities and
Equity Current liabilities Current portion of long-term debt
& capital leases $ 19,838 $ 30,582 Accounts payable 34,622
30,627 Accrued compensation 44,139 48,918 Deferred revenue 54,570
66,905 Accrued liabilities 56,565 59,369 Other current liabilities
12,979 20,095 Current liabilities of discontinued businesses
1,129 3,284 Total current
liabilities 223,842 259,780 Long-term debt & capital leases
720,483 670,270 Other long-term liabilities 97,089 114,596
Long-term liabilities of discontinued businesses
2,590 - Total liabilities
1,044,004 1,044,646
Non-controlling interests 1,658 1,304 Total equity
541,369 688,727 Total liabilities
and equity
$ 1,585,373 $
1,733,373 CHARLES RIVER LABORATORIES
INTERNATIONAL, INC. SELECTED BUSINESS SEGMENT INFORMATION
(UNAUDITED) (dollars in thousands)
Three Months Ended
Nine Months Ended
September 24,2011
September 25,2010
September 24,2011
September 25,2010
Research Models and Services Net sales $ 171,471 $ 159,259 $
523,005 $ 498,604 Gross margin 70,514 64,383 222,660 210,008 Gross
margin as a % of net sales 41.1 % 40.4 % 42.6 % 42.1 % Operating
income 48,534 42,817 155,967 140,059 Operating income as a % of net
sales 28.3 % 26.9 % 29.8 % 28.1 % Depreciation and amortization
9,327 9,422 27,914 27,954 Capital expenditures 5,789 4,622 14,202
15,827
Preclinical Services Net sales $ 106,108 $
111,626 $ 328,680 $ 353,160 Gross margin 22,202 26,117 79,014
81,447 Gross margin as a % of net sales 20.9 % 23.4 % 24.0 % 23.1 %
Operating income 3,663 5,178 20,844 12,116 Operating income as a %
of net sales 3.5 % 4.6 % 6.3 % 3.4 % Depreciation and amortization
11,840 14,063 36,334 42,036 Capital expenditures 2,433 4,505 7,470
11,025
Unallocated Corporate Overhead $
(15,103 ) $ (41,527 ) $ (44,152 ) $ (85,528 )
Total Net sales $ 277,579 $ 270,885 $ 851,685 $ 851,764
Gross margin 92,716 90,500 301,674 291,455 Gross margin as a % of
net sales 33.4 % 33.4 % 35.4 % 34.2 % Operating income 37,094 6,468
132,659 66,647 Operating income as a % of net sales 13.4 % 2.4 %
15.6 % 7.8 % Depreciation and amortization 21,167 23,485 64,248
69,990 Capital expenditures 8,222 9,127 21,672 26,852
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS
SEGMENT INFORMATION (UNAUDITED) (1) (dollars in
thousands)
Three Months Ended Nine Months
Ended
September 24,2011
September 25,2010
September 24,2011
September 25,2010
Research Models and Services Net sales $ 171,471 $ 159,259 $
523,005 $ 498,604 Operating income 48,534 42,817 155,967 140,059
Operating income as a % of net sales 28.3 % 26.9 % 29.8 % 28.1 %
Add back: Amortization related to acquisitions 1,586 1,801 4,992
5,525 Severance related to cost-savings actions 2 191 444 191
Impairment and other items
(2) (372
) - 569
- Operating income, excluding
specified charges (Non-GAAP) $ 49,750 $ 44,809 $ 161,972 $ 145,775
Non-GAAP operating income as a % of net sales 29.0 % 28.1 % 31.0 %
29.2 %
Preclinical Services Net sales $ 106,108 $
111,626 $ 328,680 $ 353,160 Operating income 3,663 5,178 20,844
12,116 Operating income as a % of net sales 3.5 % 4.6 % 6.3 % 3.4 %
Add back: Amortization related to acquisitions 3,691 4,226 11,462
12,721 Severance related to cost-savings actions (5 ) 94 979 4,868
Impairment and other items
(2) - 403 - 1,348 Operating
losses for PCS China, PCS Massachusetts and PCS Arkansas
2,571 3,772
7,877 10,725
Operating income, excluding specified charges (Non-GAAP) $ 9,920 $
13,673 $ 41,162 $ 41,778 Non-GAAP operating income as a % of net
sales 9.3 % 12.2 % 12.5 % 11.8 %
Unallocated
Corporate Overhead $ (15,103 ) $ (41,527 ) $ (44,152 ) $
(85,528 ) Add back: Severance related to cost-savings actions (72 )
471 (106 ) 512 Impairment and other items
(2) 268 - 268 -
Adjustment of contingent consideration related to acquisitions -
(2,930 ) (1,206 ) (2,930 ) Costs related to PCS China 265 - 406 -
Costs associated with the evaluation of acquisitions 150 (810 ) 150
6,587 Acquisition agreement termination fee - 30,000 - 30,000
Repatriation fees - 393 - 393 Gain on settlement of life insurance
policy - - (7,710 ) - Costs associated with corporate legal entity
restructuring (198 ) - 785 - Convertible debt accounting
(3)
53 53
160 160 Unallocated
corporate overhead, excluding specified charges (Non-GAAP) $
(14,637 ) $ (14,350 ) $ (51,405 ) $ (50,806 )
Total Net sales $ 277,579 $ 270,885 $ 851,685 $ 851,764
Operating income 37,094 6,468 132,659 66,647 Operating income as a
% of net sales 13.4 % 2.4 % 15.6 % 7.8 % Add back: Amortization
related to acquisitions 5,277 6,027 16,454 18,246 Severance related
to cost-savings actions (75 ) 756 1,317 5,571 Adjustment of
contingent consideration related to acquisitions - (2,930 ) (1,206
) (2,930 ) Goodwill impairment - - - - Impairment and other items
(2) (104 ) 403 837 1,348 Operating losses for PCS China, PCS
Massachusetts and PCS Arkansas 2,571 3,772 7,877 10,725 Costs
related to PCS China 265 - 406 - Costs associated with the
evaluation of acquisitions 150 (810 ) 150 6,587 Acquisition
agreement termination fee - 30,000 - 30,000 Repatriation fees - 393
- 393 Gain on settlement of life insurance policy - - (7,710 ) -
Costs associated with corporate legal entity restructuring (198 ) -
785 - Convertible debt accounting
(3) 53
53 160
160 Operating income, excluding
specified charges (Non-GAAP) $ 45,033 $ 44,132 $ 151,729 $ 136,747
Non-GAAP operating income as a % of net sales 16.2 % 16.3 % 17.8 %
16.1 %
(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 and other items which are outside our
normal operations, 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, regulations and guidance.
(2) The
three and nine months ended September 24, 2011 includes a gain on
the disposition of an RMS facility in Europe and costs to exit a
leased corporate facility. In addition, the nine months ended
September 24, 2011 includes an asset impairment associated with the
Company's RMS large model operations, a gain on the disposition of
an RMS Discovery Services facility in Michigan, and costs
associated with exiting a defined benefit plan in RMS Japan. The
three and nine months ended September 25, 2010 included items
related primarily to an asset impairment associated with the
Company's planned disposition of its PCS facility in Arkansas.
(3) Includes the impact of convertible debt
accounting adopted at the beginning of 2009, 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 Nine Months
Ended
September 24,2011
September 25,2010
September 24,2011
September 25,2010
Net income (loss) attributable to common shareholders $
18,798 $ (24,941 ) $ 82,451 $ 6,895 Less: Discontinued operations
18 986
5,695 2,463 Net
income (loss) from continuing operations 18,816 (23,955 ) 88,146
9,358 Add back: Amortization related to acquisitions 5,277 6,027
16,454 18,246 Severance related to cost-savings actions (75 ) 756
1,317 5,571 Impairment and other items
(2) (104 ) 403 837
1,348 Adjustment of contingent consideration related to
acquisitions - (2,930 ) (1,206 ) (2,930 ) Operating losses for PCS
China, PCS Massachusetts and PCS Arkansas 2,836 3,772 8,283 10,725
Costs associated with the evaluation of acquisitions 150 (293 ) 150
8,137 Acquisition agreement termination fee - 30,000 - 30,000 Gain
on settlement of life insurance policy - - (7,710 ) - Write-off of
deferred financing costs related to amended credit agreement 1,450
4,542 1,450 4,542 Fees and tax costs associated with corporate
subsidiary restructuring and repatriation 509 12,999 1,492 15,689
Convertible debt accounting, net
(3) 3,496 3,333 10,216
9,615 Tax benefit from disposition of Phase I clinical business - -
(11,111 ) - Tax effect
(3,647 )
(5,819 )
(10,548 ) (19,218
) Net income, excluding specified charges (Non-GAAP)
$ 28,708 $
28,835 $ 97,770
$ 91,083
Weighted average shares outstanding - Basic 50,084,850 62,597,055
51,671,559 64,344,970 Effect of dilutive securities: Stock options
and contingently issued restricted stock
448,897 321,343
566,868 549,855
Weighted average shares outstanding - Diluted
50,533,747 62,918,398
52,238,427
64,894,825 Basic earnings (loss) per
share $ 0.38 $ (0.40 ) $ 1.60 $ 0.11 Diluted earnings (loss) per
share $ 0.37 $ (0.40 ) $ 1.58 $ 0.11 Basic earnings per
share, excluding specified charges (Non-GAAP) $ 0.57 $ 0.46 $ 1.89
$ 1.42 Diluted earnings per share, excluding specified charges
(Non-GAAP) $ 0.57 $ 0.46 $ 1.87 $ 1.40
(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 and other items
which are outside our normal operations, 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, regulations and
guidance.
(2) The three and nine months ended
September 24, 2011 includes a gain on the disposition of an RMS
facility in Europe and costs to exit a leased corporate facility.
In addition, the nine months ended September 24, 2011 includes an
asset impairment associated with the Company's RMS large model
operations, a gain on the disposition of an RMS Discovery Services
facility in Michigan, and costs associated with exiting a defined
benefit plan in RMS Japan. The three and nine months ended
September 25, 2010 included items related primarily to an asset
impairment associated with the Company's planned disposition of its
PCS facility in Arkansas.
(3) The three and nine
months ended September 24, 2011 include the impact of convertible
debt accounting adopted at the beginning of 2009, which increased
interest expense by $3,443 and $10,056 and depreciation expense by
$53 and $160, respectively. The three and nine months ended
September 25, 2010 include the impact of convertible debt
accounting which increased interest expense by $3,280 and $9,455
and depreciation expense by $53 and $160, respectively.
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