Charles River Laboratories Announces Fourth-Quarter and Full-Year 2013 Results from Continuing Operations and Provides 2014 Guidance

– Fourth-Quarter Sales of $289.2 Million and Full-Year 2013 Sales of $1.17 Billion –

– Fourth-Quarter GAAP Earnings per Share of $0.40 and Non-GAAP Earnings per Share of $0.73 –

– Full-Year GAAP Earnings per Share of $2.15 and Non-GAAP Earnings per Share of $2.93 –

– 2014 Guidance Includes Sales Growth of 3%-5%, Non-GAAP EPS of $3.00-$3.10, and GAAP EPS of $2.68-$2.78 –

WILMINGTON, Mass.--()--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2013 and provided guidance for 2014. For the quarter, net sales from continuing operations were $289.2 million, an increase of 3.2% from $280.1 million in the fourth quarter of 2012. Foreign currency translation reduced sales by 0.5%. Sales growth was driven primarily by the Preclinical Services (PCS) segment.

On a GAAP basis, net income from continuing operations for the fourth quarter of 2013 was $19.5 million, or $0.40 per diluted share, compared to $22.7 million, or $0.47 per diluted share, for the fourth quarter of 2012.

On a non-GAAP basis, net income from continuing operations was $35.1 million for the fourth quarter of 2013, an increase of 13.1% from $31.0 million for the same period in 2012. Fourth-quarter diluted earnings per share on a non-GAAP basis were $0.73, an increase of 14.1% compared to $0.64 per share in the fourth quarter of 2012. The primary driver of this increase was higher sales and operating income in the PCS segment.

James C. Foster, Chairman, President and Chief Executive Officer, said, "Over the past several years, we focused on targeted initiatives that were designed to position Charles River as the preferred provider for early-stage drug development: Broadening our unique portfolio, enhancing our scientific expertise, providing outstanding client service, and driving operating efficiencies. The benefit of these initiatives, and our willingness to structure strategic partnerships designed to meet the individual needs of our clients, is enabling us to win market share and drive sales and earnings growth.

We view 2014 as a year of continuing progress, with sales growth in a range of 3% to 5%, operating margin improvement, and non-GAAP earnings per share in a range of $3.00 to $3.10."

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Net sales for the RMS segment were $172.3 million in the fourth quarter of 2013, an increase of 0.2% from $171.8 million in the fourth quarter of 2012. Excluding foreign exchange, which reduced reported sales by 0.8%, RMS sales increased by 1.0%. Higher sales were driven primarily by the Vital River acquisition and growth in the Endotoxin and Microbial Detection (EMD) business, partially offset by lower legacy sales of research models.

In the fourth quarter of 2013, the RMS segment's GAAP operating margin was 21.0% compared to 25.6% for the fourth quarter of 2012. On a non-GAAP basis, the operating margin decreased slightly to 27.1% from 27.3% in the fourth quarter of 2012. The non-GAAP operating margin reflected lower sales and profitability for legacy research models, partially offset by sales and margin improvement in the EMD business and a strong performance by Vital River.

Preclinical Services (PCS)

Fourth-quarter 2013 net sales from continuing operations for the PCS segment were $117.0 million, an increase of 8.0% from $108.3 million in the fourth quarter of 2012. Foreign currency translation reduced reported sales by 0.2%. PCS sales growth was led by robust demand from mid-tier biotechnology clients, as well as continued growth in the Company's global key accounts, which include the world's leading biopharmaceutical companies.

In the fourth quarter of 2013, the PCS segment's GAAP operating margin decreased to 5.5% from 8.0% in the fourth quarter of 2012. On a non-GAAP basis, the operating margin increased to 15.3% from 12.1% in the fourth quarter of 2012. The non-GAAP operating margin improvement was due primarily to increased study volume, favorable study mix and improved operating efficiency. In addition, the PCS non-GAAP operating margin benefited from a 2013 tax law change in the United Kingdom that resulted in reclassification of research and development tax credits to segment operating income. This benefitted the non-GAAP operating margin by approximately 90 basis points in the fourth quarter of 2013.

Stock Repurchase Update

During the fourth quarter of 2013, the Company repurchased approximately 1.5 million shares for $77.2 million. As of December 28, 2013, Charles River had $139.1 million remaining on its $1.0 billion stock repurchase authorization.

Full-Year Results

For 2013, net sales from continuing operations increased by 3.2% to $1.17 billion from $1.13 billion in 2012. Foreign currency translation reduced reported sales by 0.8%.

On a GAAP basis, net income from continuing operations for 2013 was $105.4 million, or $2.15 per diluted share, compared to $102.1 million, or $2.10 per diluted share, in 2012.

On a non-GAAP basis, net income from continuing operations for 2013 was $142.3 million, or $2.93 per diluted share, compared to $132.5 million, or $2.74 per diluted share, in 2012.

Research Models and Services (RMS)

For 2013, RMS net sales were $707.1 million, an increase of 1.7% from $695.1 million in 2012. Foreign currency translation reduced reported sales by 1.2%. On a GAAP basis, the RMS segment operating margin was 25.6% in 2013, compared to 29.1% in 2012. On a non-GAAP basis, the operating margin was 29.5% in 2013, compared to 30.7% in 2012.

Preclinical Services (PCS)

For 2013, PCS net sales were $458.4 million, an increase of 5.5% from $434.4 million in 2012. Foreign currency translation reduced reported sales by 0.4%. On a GAAP basis, the PCS segment operating margin was 9.6% in 2013, compared to 8.0% in 2012. On a non-GAAP basis, the operating margin was 14.2% in 2013, compared to 11.8% in 2012. The non-GAAP operating margin improvement was due primarily to increased study volume, favorable study mix and improved operating efficiency. In addition, tax-related items contributed approximately 120 basis points to the PCS non-GAAP operating margin in 2013; including a multi-year Canadian tax settlement, a real estate tax abatement in Scotland, and the tax law change in the United Kingdom.

2014 Guidance

The Company is providing the following financial guidance for 2014. This guidance assumes that net sales growth for both the RMS and PCS segments will be within the consolidated range in 2014. Based on current rates, foreign currency translation is expected to provide only a small benefit to reported net sales. Earnings per share in 2014 are expected to benefit from higher sales and enhanced efficiency initiatives.

           
2014 GUIDANCE (from continuing operations)          
Net sales growth, reported         3.0% – 5.0%
Impact of foreign exchange         N/M
Net sales growth, constant currency         3.0% - 5.0%
GAAP EPS estimate         $2.68 - $2.78
Amortization of intangible assets         $0.22
Operating losses (1)         $0.04
Charges related to global efficiency initiative (2)         $0.05-$0.07
Non-GAAP EPS estimate         $3.00 - $3.10

(1) These costs relate primarily to the Company's PCS facility in Massachusetts.
(2) These charges are related to the consolidation of a research model production operation in North America. Other projects in support of the global efficiency initiative are expected in 2014, but at this time, no specific decisions have been made. Accordingly, our current guidance does not include a quantification of potential future charges.

Webcast

Charles River Laboratories has scheduled a live webcast on Wednesday, February 12, 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.

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, gains and losses attributable to businesses or properties we plan to close, consolidate or divest; severance costs associated with our efficiency initiatives; accelerated depreciation charges related to the consolidation of research model production operations in California; costs and adjustments related to our ongoing investigation of inaccurate billing with respect to certain government contracts; the write-off of large model inventory held at a vendor; 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 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," "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 future financial performance including sales, operating margins, 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 future revenue trends; 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 clients; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings, including with respect to our ongoing investigation of inaccurate billing with respect to certain government contracts; and Charles River's future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to sales, 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); 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 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 27, 2013, 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, visitwww.criver.com.

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for per share data)
                   
   

Three Months Ended

   

Twelve Months Ended

   

December 28,
2013

 

December 29,
2012

   

December 28,
2013

 

December 29,
2012

                   
Total net sales   $ 289,228     $ 280,140       $ 1,165,528     $ 1,129,530  
Cost of products sold and services provided     201,033       189,115         770,626       737,449  
Gross margin     88,195       91,025         394,902       392,081  
Selling, general and administrative     58,674       51,324         225,695       208,248  
Amortization of intangibles     4,914       4,632         17,806       18,068  
Operating income     24,607       35,069         151,401       165,765  
Interest income (expense)     (2,572 )     (8,180 )       (20,239 )     (32,753 )
Other income (expense)     1,071       (684 )       7,165       (3,266 )
Income from continuing operations before income taxes     23,106       26,205         138,327       129,746  
Provision for income taxes     3,580       3,488         32,911       27,628  
Income from continuing operations, net of tax     19,526       22,717         105,416       102,118  
(Loss) income from discontinued operations, net of tax     (82 )     (4,189 )       (1,265 )     (4,252 )
Net income     19,444       18,528         104,151       97,866  
Net loss (income) from noncontrolling interests     (345 )     (112 )       (1,323 )     (571 )
Net income attributable to common shareowners   $ 19,099     $ 18,416       $ 102,828     $ 97,295  
                   
Earnings per common share                  
Basic:                  
Continuing operations   $ 0.41     $ 0.48       $ 2.18     $ 2.12  
Discontinued operations   $ -     $ (0.09 )     $ (0.03 )   $ (0.09 )
Net   $ 0.41     $ 0.39       $ 2.15     $ 2.03  
Diluted:                  
Continuing operations   $ 0.40     $ 0.47       $ 2.15     $ 2.10  
Discontinued operations   $ -     $ (0.09 )     $ (0.03 )   $ (0.09 )
Net   $ 0.40     $ 0.38       $ 2.12     $ 2.01  
                   
Weighted average number of common shares outstanding                  
Basic     47,150,688       47,562,614         47,740,167       47,912,135  
Diluted     48,134,992       48,257,197         48,489,322       48,406,320  
                                   

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
           
           
   

December 28,
2013

   

December 29,
2012

Assets          
Current assets          
Cash and cash equivalents   $ 155,927     $ 109,685
Trade receivables, net     220,630       203,001
Inventories     89,396       88,470
Other current assets     85,847       83,601
Current assets of discontinued businesses     750       495
Total current assets     552,550       485,252
Property, plant and equipment, net     676,182       717,020
Goodwill, net     230,701       208,609
Other intangibles, net     84,537       84,922
Deferred tax asset     35,536       38,554
Other assets     61,964       48,659
Long-term assets of discontinued businesses     3,151       3,328
Total assets   $ 1,644,621     $ 1,586,344
           
Liabilities and Equity          
Current liabilities          
Current portion of long-term debt & capital leases   $ 21,437     $ 139,384
Accounts payable     31,770       31,218
Accrued compensation     58,461       46,951
Deferred revenue     54,177       56,422
Accrued liabilities     56,711       45,208
Other current liabilities     22,547       21,262
Current liabilities of discontinued businesses     1,931       1,802
Total current liabilities     247,034       342,247
Long-term debt & capital leases     642,352       527,136
Other long-term liabilities     82,497       104,966
Long-term liabilities of discontinued businesses     8,080       8,795
Total liabilities     979,963       983,144
Non-controlling interests     23,674       2,395
Total equity     640,984       600,805
Total liabilities and equity   $ 1,644,621     $ 1,586,344
               

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
                     
     

Three Months Ended

   

Twelve Months Ended

     

December 28,
2013

 

December 29,
2012

   

December 28,
2013

 

December 29,
2012

Research Models and Services                  
  Net sales   $ 172,259     $ 171,836       $ 707,126     $ 695,083  
  Gross margin     62,892       65,386         284,808       289,750  
  Gross margin as a % of net sales     36.5 %     38.1 %       40.3 %     41.7 %
  Operating income     36,128       43,964         181,321       202,362  
  Operating income as a % of net sales     21.0 %     25.6 %       25.6 %     29.1 %
  Depreciation and amortization     17,444       9,844         54,822       37,541  
  Capital expenditures     7,920       8,964         24,384       36,856  
                     
Preclinical Services                  
  Net sales   $ 116,969     $ 108,304       $ 458,402     $ 434,447  
  Gross margin     25,302       25,638         110,093       102,331  
  Gross margin as a % of net sales     21.6 %     23.7 %       24.0 %     23.6 %
  Operating income     6,425       8,670         44,056       34,628  
  Operating income as a % of net sales     5.5 %     8.0 %       9.6 %     8.0 %
  Depreciation and amortization     11,857       10,814         41,814       43,734  
  Capital expenditures     5,915       4,775         14,770       10,678  
                     
Unallocated Corporate Overhead   $ (17,946 )   $ (17,565 )     $ (73,976 )   $ (71,225 )
                     
Total                  
  Net sales   $ 289,228     $ 280,140       $ 1,165,528     $ 1,129,530  
  Gross margin     88,194       91,024         394,901       392,081  
  Gross margin as a % of net sales     30.5 %     32.5 %       33.9 %     34.7 %
  Operating income     24,607       35,069         151,401       165,765  
  Operating income as a % of net sales     8.5 %     12.5 %       13.0 %     14.7 %
  Depreciation and amortization     29,301       20,658         96,636       81,275  
  Capital expenditures     13,835       13,739         39,154       47,534  
                                     

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1)
(dollars in thousands)
                   
   

Three Months Ended

   

Twelve Months Ended

   

December 28,
2013

 

December 29,
2012

   

December 28,
2013

 

December 29,
2012

Research Models and Services                  
Net sales   $ 172,259     $ 171,836       $ 707,126     $ 695,083  
Add back government billing adjustment     -       -         1,495       -  
Non-GAAP net sales   $ 172,259     $ 171,836       $ 708,621     $ 695,083  
Operating income     36,128       43,964         181,321       202,362  
Operating income as a % of net sales     21.0 %     25.6 %       25.6 %     29.1 %
Add back:                  
Amortization of intangible assets related to acquisitions     2,660       1,870         8,824       6,412  
Severance related to cost-savings actions     1,244       138         2,054       1,072  
Government billing adjustment and related expenses     226       -         2,402       -  
Impairment and other items (2)     6,445       883         13,683       3,810  
Operating losses (3)     15       -         270       -  
Operating income, excluding specified items (Non-GAAP)   $ 46,718     $ 46,855       $ 208,554     $ 213,656  
Non-GAAP operating income as a % of net sales     27.1 %     27.3 %       29.5 %     30.7 %
                   
Preclinical Services                  
Net sales   $ 116,969     $ 108,304       $ 458,402     $ 434,447  
Operating income     6,425       8,670         44,056       34,628  
Operating income as a % of net sales     5.5 %     8.0 %       9.6 %     8.0 %
Add back:                  
Amortization of intangible assets related to acquisitions     2,255       2,763         8,982       11,655  
Severance related to cost-savings actions     917       560         1,164       1,508  
Impairment and other items (2)     7,698       199         7,698       (34 )
Operating losses (3)     628       941         3,101       3,641  
Operating income, excluding specified items (Non-GAAP)   $ 17,923     $ 13,133       $ 65,001     $ 51,398  
Non-GAAP operating income as a % of net sales     15.3 %     12.1 %       14.2 %     11.8 %
                   
Unallocated Corporate Overhead   $ (17,946 )   $ (17,565 )     $ (73,976 )   $ (71,225 )
Add back:                  
Costs associated with the evaluation of acquisitions     766       2,140         1,752       3,774  
Convertible debt accounting     -       53         107       213  
Unallocated corp. costs, excluding specified items (Non-GAAP)   $ (17,180 )   $ (15,372 )     $ (72,117 )   $ (67,238 )
                   
Total                  
Net sales   $ 289,228     $ 280,140       $ 1,165,528     $ 1,129,530  
Add back government billing adjustment     -       -         1,495       -  
Non-GAAP net sales   $ 289,228     $ 280,140       $ 1,167,023     $ 1,129,530  
Operating income     24,607       35,069         151,401       165,765  
Operating income as a % of net sales     8.5 %     12.5 %       13.0 %     14.7 %
Add back:                  
Amortization of intangible assets related to acquisitions     4,915       4,633         17,806       18,067  
Severance related to cost-savings actions     2,161       698         3,218       2,580  
Government billing adjustment and related expenses     226       -         2,402       -  
Impairment and other items (2)     14,143       1,082         21,381       3,776  
Operating losses (3)     643       941         3,371       3,641  
Costs associated with the evaluation of acquisitions     766       2,140         1,752       3,774  
Convertible debt accounting     -       53         107       213  
Operating income, excluding specified items (Non-GAAP)   $ 47,461     $ 44,616       $ 201,438     $ 197,816  
Non-GAAP operating income as a % of net sales     16.4 %     15.9 %       17.3 %     17.5 %
                   

(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) For the year ended December 28, 2013, impairment and other items includes: (i) accelerated depreciation of $13.5 million and $1.9 million related to the consolidation of research model production operations in California and our BPS operations, respectively; (ii) an impairment charge of $3.8 million related to our PCS Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences of $1.6 million; and (iv) $0.6 million for the impairment of assets at certain European facilities. For the year ended December 29, 2012, impairment and other items includes: (i) an impairment charge of $3.5 million for long-lived assets at certain RMS Europe facilities; (ii) $0.6 million for the gain on the sale of land at an RMS facility; and (iii) $0.9 million for the write-off of large model inventory held at a vendor.

(3) 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

   

Twelve Months Ended

   

December 28,
2013

 

December 29,
2012

   

December 28,
2013

 

December 29,
2012

                   
Net income attributable to common shareholders   $ 19,099     $ 18,416       $ 102,828     $ 97,295  
Less: Discontinued operations     82       4,189         1,265       4,252  
Net income from continuing operations     19,181       22,605         104,093       101,547  
Add back:                  
Amortization of intangible assets related to acquisitions     4,915       4,633         17,806       18,067  
Severance related to cost-savings actions     2,161       698         3,218       2,580  
Impairment and other items (2)     14,143       1,075         21,381       3,963  
Operating losses (3)     643       694         3,371       3,738  
Costs associated with the evaluation of acquisitions     766       2,140         1,752       3,774  
Government billing adjustment and related expenses     226       -         2,402       -  
Writeoff of deferred financing costs and fees related to debt refinancing     -       -         645       -  
Loss on sale of auction rate securities     -       -         -       712  
Convertible debt accounting, net (4)     -       3,813         6,710       14,741  
Tax effect of items above     (6,919 )     (4,618 )       (19,126 )     (16,604 )
Net income, excluding specified charges (Non-GAAP)   $ 35,116     $ 31,040       $ 142,252     $ 132,518  
                   
Weighted average shares outstanding - Basic     47,150,688       47,562,614         47,740,167       47,912,135  
Effect of dilutive securities:                  
Stock options and contingently issued restricted stock     984,304       694,583         749,155       494,185  
Weighted average shares outstanding - Diluted     48,134,992       48,257,197         48,489,322       48,406,320  
                   
Basic earnings per share   $ 0.41     $ 0.39       $ 2.15     $ 2.03  
Diluted earnings per share   $ 0.40     $ 0.38       $ 2.12     $ 2.01  
                   
Basic earnings per share, excluding specified charges (Non-GAAP)   $ 0.74     $ 0.65       $ 2.98     $ 2.77  
Diluted earnings per share, excluding specified charges (Non-GAAP)   $ 0.73     $ 0.64       $ 2.93     $ 2.74  
                   

(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) For the year ended December 28, 2013, impairment and other items includes: (i) accelerated depreciation of $13.5 million and $1.9 million related to the consolidation of research model production operations in California and our BPS operations, respectively; (ii) an impairment charge of $3.8 million related to our PCS Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences of $1.6 million; and (iv) $0.6 million for the impairment of assets at certain European facilities. For the year ended December 29, 2012, impairment and other items includes: (i) an impairment charge of $3.5 million for long-lived assets at certain RMS Europe facilities; (ii) $0.6 million for the gain on the sale of land at an RMS facility; and (iii) $0.9 million for the write-off of large model inventory held at a vendor.

(3) Includes operating losses related primarily to the Company's PCS-Massachusetts facility.

(4) The year ended December 28, 2013 includes the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $6,603 and depreciation expense by $107, respectively. The three and twelve months ended December 29, 2012 include increased interest expense of $3,760 and $14,528 and increased depreciation expense of $53 and $213, respectively.

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET SALES GROWTH (YEAR-OVER-YEAR)
EXCLUDING THE IMPACT OF FOREIGN EXCHANGE AND GOVERNMENT BILLING ADJUSTMENT
For the Three and Twelve Months Ended December 28, 2013
             
             
For the three months ended December 28, 2013:  

Total CRL

 

RMS Segment

 

PCS Segment

             
Net sales growth, reported   3.2 %   0.2 %   8.0 %
Impact of foreign exchange   (0.5 %)   (0.8 %)   (0.2 %)
Non-GAAP net sales growth, constant currency   3.7 %   1.0 %   8.2 %
             
For the twelve months ended December 28, 2013:  

Total CRL

 

RMS Segment

 

PCS Segment

             
Net sales growth, reported   3.2 %   1.7 %   5.5 %
Impact of foreign exchange   (0.8 %)   (1.2 %)   (0.4 %)
Impact of government billing adjustment   (0.2 %)   (0.2 %)   0.0 %
Non-GAAP net sales growth, constant currency   4.2 %   3.1 %   5.9 %
             

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.

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