WILMINGTON, Mass.--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2012. For the quarter, net sales from continuing operations were $278.7 million, an increase of 0.4% from $277.6 million in the third quarter of 2011. Excluding foreign currency translation, which reduced reported sales by 3.2%, third-quarter 2012 sales increased by 3.6%. On a segment basis, sales increased in the Preclinical Services (PCS) segment, but declined in the Research Models and Services (RMS) segment due primarily to foreign currency translation.
On a GAAP basis, net income from continuing operations for the third quarter of 2012 was $22.4 million, or $0.46 per diluted share, compared to $18.9 million, or $0.37 per diluted share, for the third quarter of 2011.
On a non-GAAP basis, net income from continuing operations was $31.2 million for the third quarter of 2012, an increase of 8.7% from $28.7 million for the same period in 2011. Third-quarter 2012 diluted earnings per share on a non-GAAP basis were $0.65, an increase of 14.0% compared to $0.57 per share in the third quarter of 2011. Non-GAAP earnings per share benefited primarily from an improvement in the PCS operating margin and stock repurchases.
James C. Foster, Chairman, President and Chief Executive Officer, said, "We are experiencing a pivotal moment in time when global biopharmaceutical companies are reinventing the drug discovery and development model. As our clients grapple with the logistics of how and what to outsource, we are extremely well positioned to assist them in the decision-making process, and to be the strategic partner of choice when they do outsource. We have prepared ourselves for this moment by focusing on scientific excellence, operating efficiency, and information technology platforms, and are utilizing our broad, early-stage portfolio and all of our capabilities in innovative working arrangements that suit our clients' individual needs."
"We believe this approach has enabled us to take market share in a highly competitive environment, such as our recently announced partnership with AstraZeneca. We are enhancing our position with strategic targeted acquisitions which expand our capabilities, such as Accugenix, or our global reach, as with our planned majority acquisition of Vital River. This furthers our goal to increase the value proposition we can offer to clients, as a premier provider of essential early-stage drug research products and services."
The Company reports results from continuing operations, which excludes results of the Phase I clinical business that was divested in 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 $166.5 million in the third quarter of 2012, a decrease of 2.9% from $171.5 million in the third quarter of 2011. Excluding foreign exchange, which reduced reported sales by 4.1%, RMS sales increased by 1.2% due to continued strong sales growth for Other Products, which includes the Endotoxin and Microbial Detection (formerly In Vitro) and Avian Vaccine businesses. This was largely offset by softness in the research models business, particularly for large models.
In the third quarter of 2012, the RMS segment's GAAP operating margin was 26.1% compared to 28.3% for the third quarter of 2011. On a non-GAAP basis, the operating margin increased to 29.3% from 29.0% in the third quarter of 2011. The non-GAAP operating margin improvement was primarily attributable to leverage from higher sales of Other Products, as well as the benefits of ongoing efficiency initiatives.
Preclinical Services (PCS)
Third-quarter 2012 net sales from continuing operations for the PCS segment were $112.2 million, an increase of 5.7% from $106.1 million in the third quarter of 2011. Foreign currency translation reduced reported sales by 1.8%. Excluding foreign exchange, constant-currency sales growth of 7.5% was primarily driven by increased demand for both regulated safety assessment and non-GLP discovery services.
In the third quarter of 2012, the PCS segment's GAAP operating margin increased to 9.8% from 3.5% in the third quarter of 2011. On a non-GAAP basis, the operating margin increased to 13.0% from 9.3% in the third quarter of 2011. The non-GAAP operating margin increase was primarily attributable to improved capacity utilization as a result of the higher sales volume.
Stock Repurchase Update
During the third quarter of 2012, the Company repurchased approximately 416,000 shares for $15.0 million. As of September 29, 2012, Charles River had $73.5 million remaining on its $750 million stock repurchase authorization.
Nine-Month Results
For the first nine months of 2012, net sales decreased by 0.3% to $849.4 million from $851.7 million in the same period in 2011. Foreign currency translation reduced reported sales by 2.4%.
On a GAAP basis, net income from continuing operations for the first nine months of 2012 was $79.4 million, or $1.63 per diluted share, compared to $88.4 million, or $1.69 per diluted share, for the same period in 2011.
On a non-GAAP basis, net income from continuing operations for the first nine months of 2012 was $101.5 million, or $2.09 per diluted share, compared to $97.8 million, or $1.87 per diluted share, for the same period in 2011.
Research Models and Services (RMS)
For the first nine months of 2012, RMS net sales were $523.2 million, essentially unchanged from $523.0 million for the same period in 2011. Foreign currency translation reduced reported sales by 2.9%. On a GAAP basis, the RMS segment operating margin was 30.3% for the first nine months of 2012, compared to 29.8% for the prior-year period. On a non-GAAP basis, the operating margin was 31.9% for the first nine months of 2012, compared to 31.0% for the same period in 2011.
Preclinical Services (PCS)
For the first nine months of 2012, PCS net sales were $326.1 million, a decrease of 0.8% from $328.7 million in the same period in 2011. Foreign currency translation reduced reported sales by 1.6%. On a GAAP basis, the PCS segment operating margin was 8.0% for the first nine months of 2012, compared to 6.3% for the prior-year period. On a non-GAAP basis, the operating margin was 11.7% for the first nine months of 2012, compared to 12.5% for the same period in 2011.