– Third-Quarter Revenue of $464.2 Million
–
– Third-Quarter GAAP EPS of $1.09 and
Non-GAAP EPS of $1.30 –
– Updates 2017 Guidance –
Charles River Laboratories International, Inc. (NYSE: CRL) today
reported its results for the third quarter of 2017. Revenue from
continuing operations was $464.2 million, an increase of 9.0% from
$425.7 million in the third quarter of 2016. Revenue growth was
driven primarily by the Discovery and Safety Assessment and
Manufacturing Support segments.
The acquisitions of Agilux Laboratories and Brains On-Line
contributed 2.7% to consolidated third-quarter revenue growth, both
on a reported basis and in constant currency. The February 2017
divestiture of the Contract Development and Manufacturing (CDMO)
business reduced reported revenue growth by 1.0%. The impact of
foreign currency translation benefited reported revenue growth by
1.0%. Excluding the effect of these items, organic revenue growth
was 6.3%.
On a GAAP basis, third-quarter net income from continuing
operations attributable to common shareholders was $52.5 million,
an increase of 40.4% from $37.4 million for the same period in
2016. Third-quarter diluted earnings per share on a GAAP basis were
$1.09, an increase of 39.7% from $0.78 for the third quarter of
2016. The GAAP earnings per share increase was primarily driven by
higher revenue and lower acquisition- and integration-related costs
in the third quarter of 2017.
On a non-GAAP basis, net income from continuing operations was
$62.9 million for the third quarter of 2017, an increase of 10.9%
from $56.7 million for the same period in 2016. Third-quarter
diluted earnings per share on a non-GAAP basis were $1.30, an
increase of 10.2% from $1.18 per share for the third quarter of
2016. The non-GAAP earnings per share increase was primarily driven
by higher revenue, partially offset by a lower operating margin in
the Research Models and Services segment.
An excess tax benefit associated with stock compensation
contributed $0.02 to both GAAP and non-GAAP earnings per share in
the third quarter of 2017; and a gain from the Company’s venture
capital investments contributed $0.07 per share, compared to a
nominal gain for the same period in 2016.
James C. Foster, Chairman, President and Chief Executive
Officer, said, “We are pleased that Microbial Solutions, Biologics,
Safety Assessment, and RMS China delivered strong performances in
the third quarter, resulting in reported and organic revenue growth
of 9.0% and 6.3%, respectively. We firmly believe that these
businesses will continue to be important drivers of future growth.
Demand for our products and services is robust and we continue to
gain market share, which supports our expectation for revenue and
earnings per share growth in 2017.”
“We remain enthusiastic about the outlook for our businesses,
and continue to invest in our growth, through strategic
acquisitions, facility expansions, and additional staffing. We
believe these investments are imperative to maintain and enhance
our position as the premier early-stage CRO, to continue to
differentiate Charles River from the competition, and to support
our future growth,” Mr. Foster concluded.
Third-Quarter Segment
Results
Research Models and Services (RMS)
Revenue for the RMS segment was $122.0 million in the third
quarter of 2017, an increase of 0.9% from $120.9 million in the
third quarter of 2016. Organic revenue growth was 0.4%, driven
primarily by higher revenue for research models in China and the
Insourcing Solutions and Genetically Engineered Models and Services
(GEMS) businesses. These increases were largely offset by lower
revenue for research models outside of China and the Research
Animal Diagnostic Services (RADS) business.
In the third quarter of 2017, the RMS segment’s GAAP operating
margin decreased to 25.2% from 25.8% in the third quarter of 2016.
On a non-GAAP basis, the operating margin decreased to 25.5% from
27.3% in the third quarter of 2016. The GAAP and non-GAAP operating
margin declines were primarily driven by the research models
business.
Discovery and Safety Assessment (DSA)
Revenue from continuing operations for the DSA segment was
$246.9 million in the third quarter of 2017, an increase of 14.4%
from $215.8 million in the third quarter of 2016. The acquisitions
of Agilux Laboratories and Brains On-Line contributed 5.4% to DSA
revenue growth. Organic revenue growth of 8.1% was primarily driven
by the Safety Assessment business. The DSA revenue increase was
driven primarily by demand from mid-tier biotechnology clients.
In the third quarter of 2017, the DSA segment’s GAAP operating
margin increased to 18.9% from 14.5% in the third quarter of 2016.
The GAAP operating margin increase was due primarily to lower
acquisition- and integration-related costs. On a non-GAAP basis,
the operating margin decreased to 22.4% from 22.7% in the third
quarter of 2016. Foreign exchange reduced the DSA operating margin
by approximately 30 basis points.
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was $95.3 million in the
third quarter of 2017, an increase of 7.1% from $89.0 million in
the third quarter of 2016. The divestiture of the CDMO business
reduced Manufacturing revenue growth by 4.7% in the third quarter
of 2017. Organic revenue growth was 10.0%, driven by strong
performances from the Microbial Solutions and Biologics Testing
Solutions businesses.
In the third quarter of 2017, the Manufacturing segment’s GAAP
operating margin increased to 33.5% from 30.0% in the third quarter
of 2016. On a non-GAAP basis, the operating margin increased to
36.5% from 33.8% in the third quarter of 2016. The GAAP and
non-GAAP operating margin improvements were driven primarily by the
Microbial Solutions business.
Stock Repurchase Update
During the third quarter of 2017, the Company repurchased
350,000 shares for a total of $36.0 million. As of September 30,
2017, the Company had $129.1 million available on its authorized
stock repurchase program.
Updates 2017 Guidance
The Company is updating its revenue growth and earnings per
share guidance, which was previously provided on August 9, 2017, to
reflect its third-quarter performance and expectations for the
fourth quarter of 2017.
In view of the Company’s long-term expectation for
low-single-digit revenue growth in the RMS segment, we have
committed to a plan to close our research model production site in
Maryland in order to improve the segment’s operating efficiency.
The revised GAAP earnings per share guidance reflects anticipated
charges associated with the planned closure. In the fourth quarter
of 2017, the Company expects to record asset impairment and related
charges associated with the closure of $16.0 to $20.0 million, or
$0.20 to $0.25 per share, which will be excluded from non-GAAP
results and are primarily non-cash.
Based on information concerning the performance of one of our
venture capital investments, we have included a $0.02 gain in the
fourth quarter of 2017.
2017 GUIDANCE (from continuing operations)
REVISED
PRIOR
Revenue growth, reported 9.75% - 10.5%
8.5% - 10.0% Less: Contribution from acquisitions (1) (~5.5% -
6.0%) (~5.0% - 6.0%) Add: Effect of CDMO divestiture ~1.0% ~1.0%
Add: Negative effect of 53rd week in 2016 ~1.5% ~1.5% Add: Negative
effect of foreign exchange NM ~1.0%
Revenue growth, organic (2) 6.5% - 7.25%
7.0% - 8.5% GAAP EPS estimate $3.95 - $4.05 $4.18 - $4.33
Amortization of intangible assets ~$0.61 ~$0.58 Charges related to
global efficiency initiatives (3) ~$0.25 - $0.30 ~$0.02
Acquisition/divestiture-related adjustments (4) ~$0.09 ~$0.07 Net
impact of CDMO divestiture (5) ~$0.15
~$0.15 Non-GAAP EPS estimate $5.08 - $5.18
$5.00 - $5.15
Footnotes to Guidance Table
(1) The contribution from acquisitions reflects only completed
acquisitions.(2) Organic revenue growth is defined as reported
revenue growth adjusted for acquisitions, the divestiture of the
CDMO business, the 53rd week, and foreign currency translation.(3)
These charges relate primarily to the Company’s planned efficiency
initiatives including the closure of the Maryland research model
production site. These charges include asset impairments,
severance, site consolidation costs, and accelerated depreciation.
Other projects in support of the global productivity and efficiency
initiatives are expected, but these charges reflect only the
decisions that have already been finalized.(4) These adjustments
are related to the evaluation and integration of acquisitions and
the divestiture of the CDMO business, and primarily include
transaction, advisory, and certain third-party integration costs,
as well as certain costs associated with acquisition-related
efficiency initiatives.(5) These adjustments include the
preliminary net gain and tax impact related to the divestiture of
the CDMO business.
Webcast
Charles River has scheduled a live webcast on Thursday, November
9, 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 GAAP financial measures to non-GAAP
financial measures on the website.
Jefferies London Healthcare Conference
Presentation
Charles River will present at the Jefferies 2017 London
Healthcare Conference in London, England, on Thursday, November 16,
at 10:40 a.m. GMT (5:40 a.m. EST). Management will provide 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 ir.criver.com. A webcast replay will be
accessible through the same website shortly after the presentation
and will remain available for approximately two weeks.
Non-GAAP Reconciliations/Discontinued
Operations
The Company reports non-GAAP results in this press release,
which exclude often one-time charges and other items that are
outside of normal operations. A reconciliation of GAAP to non-GAAP
results is provided in the schedules at the end of this press
release. In addition, the Company reports results from continuing
operations, which exclude results of the Phase I clinical business
that was divested in 2011. The Phase I business is reported as a
discontinued operation.
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 and integrating
acquisitions and divestitures, as well as fair value adjustments
associated with contingent consideration; charges, gains, and
losses attributable to businesses or properties we plan to close,
consolidate, or divest; severance and other costs associated with
our efficiency initiatives; gain on and tax effect of the
divestiture of the CDMO business; and costs related to a U.S.
government billing adjustment and related expenses. This press
release also refers to our revenue in both a GAAP and non-GAAP
basis: “constant currency,” which we define as reported revenue
growth adjusted for the impact of foreign currency translation, and
“organic revenue growth,” which we define as reported revenue
growth adjusted for foreign currency translation, acquisitions, the
divestiture, and the 53rd week. 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 divestitures (and in certain cases, the evaluation
of such acquisitions and divestitures, 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 and their underlying associated costs, such as business
acquisitions, generally occur periodically but on an unpredictable
basis. We calculate non-GAAP integration costs to include
third-party integration costs incurred post-acquisition. Presenting
revenue on a constant-currency basis allows investors to measure
our revenue growth exclusive of foreign currency exchange
fluctuations more clearly. 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 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,” “intend,” “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 the projected future
financial performance of Charles River and our specific businesses,
including revenue (on both a reported, constant-currency, and
organic growth basis), operating margins, earnings per share, the
expected impact of foreign exchange rates, and the expected benefit
of our life science venture capital investments; the future demand
for drug discovery and development products and services, including
our expectations for future revenue trends; our expectations with
respect to the impact of acquisitions on the Company, our service
offerings, client perception, strategic relationships, revenue,
revenue growth rates, and earnings; the development and performance
of our services and products; market and industry conditions
including the outsourcing of services and spending trends by our
clients; the potential outcome of and impact to our business and
financial operations due to litigation and legal proceedings; and
Charles River’s future performance as delineated in our
forward-looking guidance, and particularly our expectations with
respect to revenue, the impact of foreign exchange, and enhanced
efficiency initiatives. 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 efficiency initiatives on an effective and timely basis
(including divestitures and site closures, such as our Maryland
research model production site); 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 clients; the ability to convert
backlog to revenue; 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 (including the impact of Brexit);
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 14, 2017, 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
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.
SCHEDULE 1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except for per share data) Three
Months Ended Nine Months Ended September 30, 2017
September 24, 2016 September 30, 2017 September
24, 2016 Total revenue $ 464,232 $ 425,720 $ 1,379,124 $
1,214,643 Cost of revenue (excluding amortization of intangible
assets) 287,028 269,450 844,559 747,858 Selling, general and
administrative 92,863 85,650 278,886 269,067 Amortization of
intangible assets 10,357 11,825
30,913 29,390 Operating income 73,984 58,795
224,766 168,328 Interest income 134 523 497 1,008 Interest expense
(7,667 ) (7,079 ) (22,053 ) (20,199 ) Other income (expense), net
6,488 1,017 24,692
10,059 Income from continuing operations, before income
taxes 72,939 53,256 227,902 159,196 Provision for income taxes
19,945 15,565 73,272
48,385 Income from continuing operations, net of
income taxes 52,994 37,691 154,630 110,811 Income (Loss) from
discontinued operations, net of income taxes (39 )
342 (114 ) 328 Net income 52,955 38,033
154,516 111,139 Less: Net income attributable to noncontrolling
interests 481 298 1,312
1,054 Net income attributable to common shareholders
$ 52,474 $ 37,735 $ 153,204 $ 110,085
Earnings (loss) per common share Basic: Continuing
operations attributable to common shareholders $ 1.11 $ 0.79 $ 3.23
$ 2.34 Discontinued operations $ — $ 0.01 $ — $ — Net income
attributable to common shareholders $ 1.11 $ 0.80 $ 3.22 $ 2.34
Diluted: Continuing operations attributable to common shareholders
$ 1.09 $ 0.78 $ 3.17 $ 2.29 Discontinued operations $ — $ 0.01 $ —
$ 0.01 Net income attributable to common shareholders $ 1.08 $ 0.79
$ 3.16 $ 2.30 Weighted average number of common shares
outstanding Basic 47,451 47,160 47,530 46,954 Diluted 48,390 48,034
48,440 47,838
CHARLES RIVER LABORATORIES INTERNATIONAL,
INC. SCHEDULE 2 CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)
September 30, 2017 December 31, 2016
Assets Current assets: Cash and cash equivalents $ 123,618 $
117,626 Trade receivables, net 422,335 364,050 Inventories 107,372
95,833 Prepaid assets 42,695 34,315 Other current assets
86,358 45,008 Total current assets 782,378 656,832 Property,
plant and equipment, net 767,192 755,827 Goodwill 800,247 787,517
Client relationships, net 304,382 320,157 Other intangible assets,
net 71,065 74,291 Deferred tax asset 30,856 28,746 Other assets
109,798 88,430 Total assets $ 2,865,918 $ 2,711,800
Liabilities, Redeemable Noncontrolling Interest and
Equity Current liabilities: Current portion of long-term debt
and capital leases $ 27,090 $ 27,313 Accounts payable 66,232 68,485
Accrued compensation 86,402 93,471 Deferred revenue 108,984 127,731
Accrued liabilities 91,783 84,470 Other current liabilities 33,614
26,500 Current liabilities of discontinued operations 1,650
1,623 Total current liabilities 415,755 429,593 Long-term
debt, net and capital leases 1,155,998 1,207,696 Deferred tax
liabilities 81,783 55,717 Other long-term liabilities 167,493
159,239 Long-term liabilities of discontinued operations
4,395 5,771 Total liabilities 1,825,424 1,858,016 Redeemable
noncontrolling interest 15,785 14,659 Total equity attributable to
common shareholders 1,021,513 836,768 Noncontrolling interests
3,196 2,357 Total liabilities, redeemable
noncontrolling interest and equity $ 2,865,918 $ 2,711,800
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 3
RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS
SEGMENT INFORMATION (UNAUDITED)(1) (in thousands,
except percentages) Three Months Ended Nine
Months Ended September 30, 2017 September 24,
2016 September 30, 2017 September 24, 2016
Research Models and Services Revenue $ 122,020 $ 120,928 $
373,183 $ 369,325 Operating income 30,726 31,224 102,016 103,055
Operating income as a % of revenue 25.2 % 25.8 % 27.3 % 27.9 % Add
back: Amortization related to acquisitions 433 592 1,238 1,776
Severance — 618 — 618 Government billing adjustment and related
expenses — 505 150 634 Site consolidation costs, impairments and
other items — 69 —
207 Total non-GAAP adjustments to operating income $ 433
$ 1,784 $ 1,388 $ 3,235 Operating
income, excluding non-GAAP adjustments $ 31,159 $ 33,008 $ 103,404
$ 106,290 Non-GAAP operating income as a % of revenue 25.5 % 27.3 %
27.7 % 28.8 % Depreciation and amortization $ 5,272 $ 5,245
$ 15,309 $ 15,613 Capital expenditures $ 6,762 $ 2,532 $ 13,769 $
5,966
Discovery and Safety Assessment Revenue $
246,946 $ 215,817 $ 726,796 $ 594,859 Operating income 46,616
31,303 136,966 94,514 Operating income as a % of revenue 18.9 %
14.5 % 18.8 % 15.9 % Add back: Amortization related to acquisitions
7,602 8,583 22,107 19,068 Severance 84 3,367 356 7,487 Acquisition
related adjustments (2) 776 677 2,303 4,317 Site consolidation
costs, impairments and other items 276 5,125
835 7,279 Total non-GAAP
adjustments to operating income $ 8,738 $ 17,752 $
25,601 $ 38,151 Operating income, excluding non-GAAP
adjustments $ 55,354 $ 49,055 $ 162,567 $ 132,665 Non-GAAP
operating income as a % of revenue 22.4 % 22.7 % 22.4 % 22.3 %
Depreciation and amortization $ 20,333 $ 20,671 $ 58,667 $
51,228 Capital expenditures $ 10,127 $ 4,509 $ 25,552 $ 13,860
Manufacturing Support Revenue $ 95,266 $ 88,975 $
279,145 $ 250,459 Operating income 31,923 26,711 87,565 73,447
Operating income as a % of revenue 33.5 % 30.0 % 31.4 % 29.3 % Add
back: Amortization related to acquisitions 2,322 2,888 7,568 9,367
Severance (3) 552 30 1,620 30 Acquisition related adjustments (2) —
469 26 1,146 Site consolidation costs, impairments and other items
— — — 301
Total non-GAAP adjustments to operating income $ 2,874 $
3,387 $ 9,214 $ 10,844 Operating income,
excluding non-GAAP adjustments $ 34,797 $ 30,098 $ 96,779 $ 84,291
Non-GAAP operating income as a % of revenue 36.5 % 33.8 % 34.7 %
33.7 % Depreciation and amortization $ 5,572 $ 6,181 $
17,321 $ 18,682 Capital expenditures $ 2,879 $ 1,862 $ 7,111 $
8,247
Unallocated Corporate Overhead $ (35,281 ) $
(30,443 ) $ (101,781 ) $ (102,688 ) Add back: Acquisition related
adjustments (2) 1,326 2,033
2,539 13,056 Total non-GAAP adjustments to
operating expense $ 1,326 $ 2,033 $ 2,539 $
13,056 Unallocated corporate overhead, excluding non-GAAP
adjustments $ (33,955 ) $ (28,410 ) $ (99,242 ) $ (89,632 )
Total Revenue $ 464,232 $ 425,720 $ 1,379,124 $ 1,214,643
Operating income $ 73,984 $ 58,795 $ 224,766 $ 168,328 Operating
income as a % of revenue 15.9 % 13.8 % 16.3 % 13.9 % Add back:
Amortization related to acquisitions 10,357 12,063 30,913 30,211
Severance 636 4,015 1,976 8,135 Acquisition related adjustments (2)
2,102 3,179 4,868 18,519 Government billing adjustment and related
expenses — 505 150 634 Site consolidation costs, impairments and
other items 276 5,194 835
7,787 Total non-GAAP adjustments to operating income
$ 13,371 $ 24,956 $ 38,742 $ 65,286
Operating income, excluding non-GAAP adjustments $ 87,355 $ 83,751
$ 263,508 $ 233,614 Non-GAAP operating income as a % of revenue
18.8 % 19.7 % 19.1 % 19.2 % Depreciation and amortization $
33,465 $ 34,108 $ 97,675 $ 91,116 Capital expenditures $ 22,011 $
9,568 $ 53,928 $ 29,609
(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 often-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 U.S. GAAP. The Company
intends to continue to assess the potential value of reporting
non-GAAP results consistent with applicable rules, regulations and
guidance.
(2) These adjustments are related to the
evaluation and integration of acquisitions, which primarily include
transaction, third-party integration, and certain compensation
costs, and fair value adjustments associated with contingent
consideration.
(3) This adjustment relates to
transition costs associated with the divestiture of the CDMO
business.
CHARLES RIVER LABORATORIES INTERNATIONAL,
INC.
SCHEDULE 4 RECONCILIATION OF GAAP EARNINGS TO NON-GAAP
EARNINGS (UNAUDITED)(1) (in thousands, except per
share data) Three Months Ended Nine Months
Ended September 30, 2017 September 24, 2016
September 30, 2017 September 24, 2016 Net
income attributable to common shareholders $ 52,474 $ 37,735 $
153,204 $ 110,085 Less: Income (loss) from discontinued operations,
net of income taxes (39 ) 342 (114 )
328 Net income from continuing operations
attributable to common shareholders 52,513 37,393 153,318 109,757
Add back: Non-GAAP adjustments to operating income (Refer to
Schedule 3) 13,371 24,956 38,742 65,286 Gain on divestiture of CDMO
business — — (10,577 ) — Write-off of deferred financing costs and
fees related to debt financing — (462 ) — 987 Acquisition related
adjustments (2) — 815 — 815 Reversal of an indemnification asset
associated with acquisition and corresponding interest (3) — 54 —
54 Tax effect of non-GAAP adjustments: Tax effect from divestiture
of CDMO business — — 18,005 — Tax effect of the remaining non-GAAP
adjustments (3,003 ) (6,057 ) (11,702 )
(16,306 ) Net income from continuing operations attributable to
common shareholders, excluding non-GAAP adjustments $ 62,881
$ 56,699 $ 187,786 $ 160,593 Weighted
average shares outstanding - Basic 47,451 47,160 47,530 46,954
Effect of dilutive securities: Stock options, restricted stock
units, performance share units and restricted stock 939
874 910 884
Weighted average shares outstanding - Diluted 48,390
48,034 48,440 47,838
Earnings per share from continuing operations attributable
to common shareholders Basic $ 1.11 $ 0.79 $ 3.23 $ 2.34 Diluted $
1.09 $ 0.78 $ 3.17 $ 2.29 Basic, excluding non-GAAP
adjustments $ 1.33 $ 1.20 $ 3.95 $ 3.42 Diluted, excluding non-GAAP
adjustments $ 1.30 $ 1.18 $ 3.88 $ 3.36
(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 often-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 U.S. 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 amount represents a
$1.5 million charge recorded in connection with the modification of
the option to purchase the remaining 13% equity interest in Vital
River, partially offset by a $0.7 million gain on remeasurement of
previously held equity interest in an entity acquired in a step
acquisition.
(3) These amounts represent the reversal
of an uncertain tax position and an offsetting indemnification
asset primarily related to the acquisition of BioFocus.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 5
RECONCILIATION OF GAAP REVENUE GROWTH TO NON-GAAP REVENUE
GROWTH, ORGANIC (UNAUDITED) (1) For the
three months ended September 30, 2017 Total CRL RMS
Segment DSA Segment MS Segment Revenue
growth, reported 9.0 % 0.9 % 14.4 % 7.1 % (Increase) Decrease due
to foreign exchange (1.0 )% (0.5 )% (0.9 )% (1.8 )% Contribution
from acquisitions (2) (2.7 )% — % (5.4 )% — % Impact of CDMO
divestiture (3) 1.0 % — % — % 4.7 %
Non-GAAP revenue growth,
organic (4) 6.3 % 0.4 %
8.1 % 10.0 % For the nine
months ended September 30, 2017 Total CRL RMS
Segment DSA Segment MS Segment Revenue
growth, reported 13.5 % 1.0 % 22.2 % 11.5 % (Increase) Decrease due
to foreign exchange 1.0 % 1.1 % 1.1 % 0.4 % Contribution from
acquisitions (2) (8.1 )% — % (15.6 )% (2.1 )% Impact of CDMO
divestiture (3) 0.7 % — % — % 3.4 %
Non-GAAP revenue growth,
organic (4) 7.1 % 2.1 %
7.7 % 13.2 % (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 often-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 U.S. 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 contribution from
acquisitions reflects only completed acquisitions.
(3) The CDMO business, which was acquired as part of WIL
Research on April 4, 2016, was divested on February 10, 2017. This
adjustment represents the revenue from the CDMO business for all
applicable periods in 2017 and 2016.
(4) Organic
revenue growth is defined as reported revenue growth adjusted for
acquisitions, the divestiture of the CDMO business, and foreign
exchange.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands) Nine Months Ended September
30, 2017 September 24, 2016 Cash flows relating
to operating activities $ 193,838 $ 198,252 Cash flows relating to
investing activities (39,759 ) (617,669 ) Cash flows relating to
financing activities (155,466 ) 404,682 Cash flows used in
discontinued operations (1,489 ) (1,434 ) Effect of exchange rate
changes on cash, cash equivalents, and restricted cash 9,135
4,325 Net change in cash, cash equivalents,
and restricted cash 6,259 (11,844 ) Cash, cash equivalents, and
restricted cash, beginning of period (1) 119,894
119,963 Cash, cash equivalents, and restricted cash,
end of period (2) $ 126,153 $ 108,119
(1) Includes restricted cash of $2.3 million and $2.0
million as of December 31, 2016 and December 26, 2015,
respectively, which are reported in current and long-term other
assets within the unaudited condensed consolidated balance sheets.
(2) Includes restricted cash balances of $2.5 million
and $2.4 million as of September 30, 2017 and September 24, 2016,
respectively, which are reported in current and long-term other
assets within the unaudited condensed consolidated balance sheets.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171109005336/en/
Charles River Laboratories International, Inc.Investor
Contact:Susan E. Hardy, 781-222-6190Corporate Vice President,
Investor Relationssusan.hardy@crl.comorMedia Contact:Amy
Cianciaruso, 781-222-6168Corporate Vice President, Public
Relationsamy.cianciaruso@crl.com
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