- First-Quarter Sales of $291.2 Million
- First-Quarter GAAP Earnings per Share of $0.53 and Non-GAAP Earnings per Share of $0.69
- Updates 2013 Sales Guidance; Reaffirms 2013 EPS Guidance
On a GAAP basis, net income from continuing operations for the first quarter of 2013 was
On a non-GAAP basis, net income from continuing operations was
Mr. Foster continued, "While demand for research models was slower than expected at the beginning of the year, we believe that trends will improve as we progress through 2013. As a result, we continue to expect to achieve our 2013 guidance of 4% to 6% constant-currency sales growth, and non-GAAP earnings per share in a range between
First-Quarter Segment Results
Research Models and Services (RMS)
Net sales for the RMS segment were
In the first quarter of 2013, the RMS segment's GAAP operating margin was 30.3% compared to 32.5% for the first quarter of 2012. On a non-GAAP basis, the operating margin decreased to 31.5% from 33.3% in the first quarter of 2012. The non-GAAP operating margin decline was primarily attributable to lower sales volume for research models.
Preclinical Services (PCS)
First-quarter 2013 net sales from continuing operations for the PCS segment were
In the first quarter of 2013, the PCS segment's GAAP operating margin increased to 7.4% from 4.1% in the first quarter of 2012. On a non-GAAP basis, the operating margin increased to 10.6% from 8.9% in the first quarter of 2012. The non-GAAP operating margin increase was primarily attributable to higher sales of both regulated safety assessment and non-GLP discovery services, as well as a modest improvement in profitability for Biopharmaceutical Services compared to last year's challenging start.
Stock Repurchase Update
During the first quarter of 2013, the Company repurchased approximately 157,000 shares of its common stock for
2013 Guidance
The Company is updating its forward-looking sales guidance to reflect the impact of foreign exchange, which is now expected to reduce reported sales by approximately 1%. The Company is reaffirming its forward-looking earnings per share guidance based on continuing operations for 2013.
| 2013 GUIDANCE (from continuing operations) | REVISED | PRIOR | ||
| Net sales growth, reported | 3.0% – 5.0% | 4.0% – 6.0% | ||
| Negative impact of foreign exchange | Approx. 1% | -- | ||
| Net sales growth, constant currency | 4.0% - 6.0% | 4.0% - 6.0% | ||
| GAAP EPS estimate | $2.45 - $2.55 | $2.45 - $2.55 | ||
| Amortization of intangible assets related to acquisitions | $0.23 | $0.21 | ||
| Operating losses (1) | $0.05 | $0.04 | ||
| Other items (2) | $0.01 | -- | ||
| Convertible debt accounting | $0.11 | $0.10 | ||
| Non-GAAP EPS estimate | $2.80 - $2.90 | $2.80 - $2.90 |
(1) These costs relate primarily to the Company's PCS-Massachusetts facility.
(2) Other items include severance related to cost-savings actions and costs associated with the evaluation of acquisitions.
Webcast
Non-GAAP Reconciliations/Discontinued Operations
The Company reports non-GAAP results in this press release, which exclude certain 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 acquisitions, charges and operating losses attributable to businesses we plan to close, consolidate or divest, severance costs associated with our cost-savings actions, 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. This press release also refers to our sales in both a GAAP and non-GAAP (constant currency) basis. 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. Presenting sales on a constant currency basis allows investors to measure our sales growth net 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.
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 2013 financial performance including sales, earnings per share, and the expected impact of foreign exchange rates; the future demand for drug discovery and development products and services, including our expectations for revenue trends for 2013; 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 spending trends by our customers; 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
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 |
||||||||
|
March 30, |
March 31, |
|||||||
| Total net sales | $ | 291,238 | $ | 285,981 | ||||
| Cost of products sold and services provided | 187,027 | 181,769 | ||||||
| Gross margin | 104,211 | 104,212 | ||||||
| Selling, general and administrative | 57,199 | 55,977 | ||||||
| Amortization of intangibles | 4,249 | 4,495 | ||||||
| Operating income | 42,763 | 43,740 | ||||||
| Interest income (expense) | (8,183 | ) | (8,250 | ) | ||||
| Other income (expense) | 1,068 | (344 | ) | |||||
| Income from continuing operations before income taxes | 35,648 | 35,146 | ||||||
| Provision for income taxes | 9,722 | 8,676 | ||||||
| Income from continuing operations, net of tax | 25,926 | 26,470 | ||||||
| (Loss) income from discontinued operations, net of tax | (155 | ) | 77 | |||||
| Net income | 25,771 | 26,547 | ||||||
| Net loss (income) from noncontrolling interests | (193 | ) | (108 | ) | ||||
| Net income attributable to common shareowners | $ | 25,578 | $ | 26,439 | ||||
| Earnings per common share | ||||||||
| Basic: | ||||||||
| Continuing operations | $ | 0.54 | $ | 0.55 | ||||
| Discontinued operations | $ | - | $ | - | ||||
| Net | $ | 0.54 | $ | 0.55 | ||||
| Diluted: | ||||||||
| Continuing operations | $ | 0.53 | $ | 0.54 | ||||
| Discontinued operations | $ | - | $ | - | ||||
| Net | $ | 0.53 | $ | 0.54 | ||||
| Weighted average number of common shares outstanding | ||||||||
| Basic | 47,658,995 | 48,254,950 | ||||||
| Diluted | 48,436,049 | 48,771,743 | ||||||
| CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||
| (dollars in thousands) | ||||
|
March 30, |
December 29, |
|||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 100,422 | $ 109,685 | ||
| Trade receivables, net | 213,540 | 203,001 | ||
| Inventories | 84,959 | 88,470 | ||
| Other current assets | 92,993 | 83,601 | ||
| Current assets of discontinued businesses | 705 | 495 | ||
| Total current assets | 492,619 | 485,252 | ||
| Property, plant and equipment, net | 707,053 | 717,020 | ||
| Goodwill, net | 227,082 | 208,609 | ||
| Other intangibles, net | 95,035 | 84,922 | ||
| Deferred tax asset | 29,857 | 38,554 | ||
| Other assets | 48,985 | 48,659 | ||
| Long-term assets of discontinued businesses | 3,177 | 3,328 | ||
| Total assets | $ 1,603,808 | $ 1,586,344 | ||
| Liabilities and Equity | ||||
| Current liabilities | ||||
| Current portion of long-term debt & capital leases | $ 130,851 | $ 139,384 | ||
| Accounts payable | 31,277 | 31,218 | ||
| Accrued compensation | 43,620 | 46,951 | ||
| Deferred revenue | 53,187 | 56,422 | ||
| Accrued liabilities | 48,078 | 45,208 | ||
| Other current liabilities | 21,166 | 21,262 | ||
| Current liabilities of discontinued businesses | 2,633 | 1,802 | ||
| Total current liabilities | 330,812 | 342,247 | ||
| Long-term debt & capital leases | 518,035 | 527,136 | ||
| Other long-term liabilities | 106,969 | 104,966 | ||
| Long-term liabilities of discontinued businesses | 8,126 | 8,795 | ||
| Total liabilities | 963,942 | 983,144 | ||
| Non-controlling interests | 11,587 | 2,395 | ||
| Total equity | 628,279 | 600,805 | ||
| Total liabilities and equity | $ 1,603,808 | $ 1,586,344 | ||
| CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | |||||||||
| SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) | |||||||||
| (dollars in thousands) | |||||||||
|
Three Months Ended |
|||||||||
|
March 30, |
March 31, |
||||||||
| Research Models and Services | |||||||||
| Net sales | $ | 182,489 | $ | 183,152 | |||||
| Gross margin | 80,435 | 82,196 | |||||||
| Gross margin as a % of net sales | 44.1 | % | 44.9 | % | |||||
| Operating income | 55,303 | 59,467 | |||||||
| Operating income as a % of net sales | 30.3 | % | 32.5 | % | |||||
| Depreciation and amortization | 9,873 | 8,942 | |||||||
| Capital expenditures | 4,010 | 12,900 | |||||||
| Preclinical Services | |||||||||
| Net sales | $ | 108,749 | $ | 102,829 | |||||
| Gross margin | 23,776 | 22,016 | |||||||
| Gross margin as a % of net sales | 21.9 | % | 21.4 | % | |||||
| Operating income | 8,060 | 4,174 | |||||||
| Operating income as a % of net sales | 7.4 | % | 4.1 | % | |||||
| Depreciation and amortization | 10,137 | 11,060 | |||||||
| Capital expenditures | 2,418 | 1,212 | |||||||
| Unallocated Corporate Overhead | $ | (20,600 | ) | $ | (19,901 | ) | |||
| Total | |||||||||
| Net sales | $ | 291,238 | $ | 285,981 | |||||
| Gross margin | 104,211 | 104,212 | |||||||
| Gross margin as a % of net sales | 35.8 | % | 36.4 | % | |||||
| Operating income | 42,763 | 43,740 | |||||||
| Operating income as a % of net sales | 14.7 | % | 15.3 | % | |||||
| Depreciation and amortization | 20,010 | 20,002 | |||||||
| Capital expenditures | 6,428 | 14,112 | |||||||
| CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||
| RECONCILIATION OF GAAP TO NON-GAAP | ||||||||
| SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) | ||||||||
| (dollars in thousands) | ||||||||
|
Three Months Ended |
||||||||
|
March 30, |
March 31, |
|||||||
| Research Models and Services | ||||||||
| Net sales | $ | 182,489 | $ | 183,152 | ||||
| Operating income | 55,303 | 59,467 | ||||||
| Operating income as a % of net sales | 30.3 | % | 32.5 | % | ||||
| Add back: | ||||||||
| Amortization of intangible assets related to acquisitions | 1,986 | 1,500 | ||||||
| Severance related to cost-savings actions | 86 | - | ||||||
| Operating losses (2) | 158 | - | ||||||
| Operating income, excluding specified charges (Non-GAAP) | $ | 57,533 | $ | 60,967 | ||||
| Non-GAAP operating income as a % of net sales | 31.5 | % | 33.3 | % | ||||
| Preclinical Services | ||||||||
| Net sales | $ | 108,749 | $ | 102,829 | ||||
| Operating income | 8,060 | 4,174 | ||||||
| Operating income as a % of net sales | 7.4 | % | 4.1 | % | ||||
| Add back: | ||||||||
| Amortization of intangible assets related to acquisitions | 2,262 | 2,996 | ||||||
| Severance related to cost-savings actions | 211 | 911 | ||||||
| Operating losses (2) | 948 | 1,054 | ||||||
| Operating income, excluding specified charges (Non-GAAP) | $ | 11,481 | $ | 9,135 | ||||
| Non-GAAP operating income as a % of net sales | 10.6 | % | 8.9 | % | ||||
| Unallocated Corporate Overhead | $ | (20,600 | ) | $ | (19,901 | ) | ||
| Add back: | ||||||||
| Costs associated with the evaluation of acquisitions | 486 | 232 | ||||||
| Convertible debt accounting | 53 | 53 | ||||||
| Unallocated corporate overhead, excluding specified charges (Non-GAAP) | $ | (20,061 | ) | $ | (19,616 | ) | ||
| Total | ||||||||
| Net sales | $ | 291,238 | $ | 285,981 | ||||
| Operating income | 42,763 | 43,740 | ||||||
| Operating income as a % of net sales | 14.7 | % | 15.3 | % | ||||
| Add back: | ||||||||
| Amortization of intangible assets related to acquisitions | 4,248 | 4,496 | ||||||
| Severance related to cost-savings actions | 297 | 911 | ||||||
| Operating losses (2) | 1,106 | 1,054 | ||||||
| Costs associated with the evaluation of acquisitions | 486 | 232 | ||||||
| Convertible debt accounting | 53 | 53 | ||||||
| Operating income, excluding specified charges (Non-GAAP) | $ | 48,953 | $ | 50,486 | ||||
| Non-GAAP operating income as a % of net sales | 16.8 | % | 17.7 | % | ||||
(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) This item includes operating losses related primarily to the Company's PCS-Massachusetts facility.
| 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 |
||||||||
|
March 30, |
March 31, |
|||||||
| Net income attributable to common shareholders | $ | 25,578 | $ | 26,439 | ||||
| Less: Discontinued operations | 155 | (77 | ) | |||||
| Net income from continuing operations | 25,733 | 26,362 | ||||||
| Add back: | ||||||||
| Amortization of intangible assets related to acquisitions | 4,248 | 4,496 | ||||||
| Severance related to cost-savings actions | 297 | 911 | ||||||
| Operating losses (2) | 1,106 | 1,362 | ||||||
| Costs associated with the evaluation of acquisitions | 486 | 232 | ||||||
| Loss on sale of auction rate securities | - | 712 | ||||||
| Convertible debt accounting, net (3) | 3,813 | 3,497 | ||||||
| Tax effect of items above | (2,457 | ) | (3,659 | ) | ||||
| Net income, excluding specified charges (Non-GAAP) | $ | 33,226 | $ | 33,913 | ||||
| Weighted average shares outstanding - Basic | 47,658,995 | 48,254,950 | ||||||
| Effect of dilutive securities: | ||||||||
| Stock options and contingently issued restricted stock | 777,054 | 516,793 | ||||||
| Weighted average shares outstanding - Diluted | 48,436,049 | 48,771,743 | ||||||
| Basic earnings per share | $ | 0.54 | $ | 0.55 | ||||
| Diluted earnings per share | $ | 0.53 | $ | 0.54 | ||||
| Basic earnings per share, excluding specified charges (Non-GAAP) | $ | 0.70 | $ | 0.70 | ||||
| Diluted earnings per share, excluding specified charges (Non-GAAP) | $ | 0.69 | $ | 0.70 | ||||
(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) This item includes operating losses related primarily to the Company's PCS-Massachusetts facility.
(3) The three months ended
| CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | |||||||||
| RECONCILIATION OF NET SALES GROWTH (YEAR-OVER-YEAR) EXCLUDING THE IMPACT OF FOREIGN EXCHANGE (FX) | |||||||||
| For the Three Months Ended March 30, 2013 | |||||||||
| For the three months ended March 30, 2013: |
Total CRL |
RMS Segment |
PCS Segment |
||||||
| Net sales growth, reported | 1.8 | % | (0.4 | %) | 5.8 | % | |||
| Impact of foreign exchange | (1.0 | %) | (1.4 | %) | (0.2 | %) | |||
| Net sales growth, constant currency | 2.8 | % | 1.0 | % | 6.0 | % | |||
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.