Charles River Laboratories Announces Third-Quarter 2013 Results from Continuing Operations

WILMINGTON, Mass.--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2013. For the quarter, net sales from continuing operations were $292.1 million, an increase of 4.8% from$278.7 million in the third quarter of 2012. Foreign currency translation reduced sales by 0.8%. On a segment basis, sales increased in both the Research Models and Services (RMS) and Preclinical Services (PCS) segments.

On a GAAP basis, net income from continuing operations for the third quarter of 2013 was$31.3 million, or $0.64 per diluted share, compared to $22.4 million, or $0.46 per diluted share, for the third quarter of 2012.

On a non-GAAP basis, net income from continuing operations was $38.2 million for the third quarter of 2013, an increase of 22.6% from $31.2 million for the same period in 2012. Third-quarter diluted earnings per share on a non-GAAP basis were $0.79, an increase of 21.5% compared to $0.65 per share in the third quarter of 2012. Higher sales contributed to the earnings per share increase, as did a $0.05 gain on our limited partnership investments and a $0.02 net benefit from certain tax-related items.

James C. Foster, Chairman, President and Chief Executive Officer, said, "The efforts we have made to improve our operating efficiency, to maintain and enhance scientific expertise, to effectively deploy sales resources and to broaden the portfolio through targeted acquisitions have successfully positioned Charles River as the partner of choice for early-stage drug development. Demand trends are more favorable: global pharmaceutical clients are outsourcing more as they reduce infrastructure and the funding environment appears to have improved for biotechnology companies. We are leveraging all of these factors to win market share and drive sales and earnings growth. This is evident in our third-quarter results, which were highlighted by mid-single-digit sales growth for both segments, as well as meaningful margin expansion in our Preclinical Services segment."

Third-Quarter Segment Results

Research Models and Services (RMS)

Net sales for the RMS segment were $173.4 million in the third quarter of 2013, an increase of 4.2% from $166.5 million in the third quarter of 2012. Foreign currency translation reduced reported sales by 0.9%. Higher sales were driven primarily by the acquisitions of Vital Riverand Accugenix, as well as growth in the legacy Endotoxin and Microbial Detection (EMD) business.

In the third quarter of 2013, the RMS segment's GAAP operating margin was 23.2% compared to 26.1% for the third quarter of 2012. On a non-GAAP basis, the operating margin decreased to 29.0% from 29.3% in the third quarter of 2012. The non-GAAP operating margin decline was primarily attributable to lower legacy sales volume for research models.

Preclinical Services (PCS)

Third-quarter 2013 net sales from continuing operations for the PCS segment were $118.7 million, an increase of 5.8% from $112.2 million in the third quarter of 2012. Foreign currency translation reduced reported sales by 0.5%. PCS sales growth was driven by increased sales to both large biopharmaceutical and mid-tier clients, primarily as a result of market share gains and improved client demand.

In the third quarter of 2013, the PCS segment's GAAP operating margin was 15.7% compared to 9.8% in the third quarter of 2012. On a non-GAAP basis, the operating margin increased to 18.2% from 13.0% in the third quarter of 2012. The non-GAAP operating margin improvement was due in part to favorable study mix and increased study volume. In addition, several tax-related items contributed approximately 370 basis points to the PCS third-quarter operating margin including: a multi-year Canadian tax settlement, a real estate tax abatement in Scotland, and a tax law change in the United Kingdom which resulted in reclassification of research and development tax credits to segment operating income.

Stock Repurchase Update

During the third quarter of 2013, the Company repurchased approximately 1.4 million shares of its common stock for $65.5 million. As of September 28, 2013, the Company had $66.3 million remaining on its $850 million stock repurchase authorization.

Nine-Month Results

For the first nine months of 2013, net sales increased by 3.2% to $876.3 million from $849.4 million in the same period in 2012. Foreign currency translation reduced reported sales by 0.9%.

On a GAAP basis, net income from continuing operations for the first nine months of 2013 was $85.9 million, or $1.75 per diluted share, compared to $79.4 million, or $1.63 per diluted share, for the same period in 2012.

On a non-GAAP basis, net income from continuing operations for the first nine months of 2013 was $107.1 million, or $2.20 per diluted share, compared to $101.5 million, or $2.09per diluted share, for the same period in 2012.

Research Models and Services (RMS)

For the first nine months of 2013, RMS net sales were $534.9 million, an increase of 2.2% from $523.2 million in the same period in 2012. Foreign currency translation reduced reported sales by 1.3%. On a GAAP basis, the RMS segment operating margin was 27.1% in the first nine months of 2013, compared to 30.3% for the prior-year period. On a non-GAAP basis, the operating margin was 30.3% in the first nine months of 2013, compared to 31.9% for the same period in 2012.

Preclinical Services (PCS)

For the first nine months of 2013, PCS net sales were $341.4 million, an increase of 4.7% from $326.1 million in the same period in 2012. Foreign currency translation reduced reported sales by 0.4%. On a GAAP basis, the PCS segment operating margin was 11.0% in the first nine months of 2013, compared to 8.0% for the prior-year period. On a non-GAAP basis, the operating margin was 13.8% in the first nine months of 2013, compared to 11.7% for the same period in 2012. The third-quarter tax-related items contributed approximately 130 basis points to the year-to-date PCS operating margin.

2013 Guidance

The Company is updating its 2013 forward-looking guidance based on continuing operations. For 2013, net sales are expected to be at the low end of the prior range. The Company is narrowing its 2013 non-GAAP earnings per share guidance to the high end of the prior range to reflect the strong year-to-date performance. GAAP earnings per share are expected to be lower than the prior range, due primarily to charges associated with the consolidation of research model production operations in California.

2013 GUIDANCE (from continuing operations)				REVISED				PRIOR
Net sales growth, reported				3.0% – 3.5%				3.0% – 5.0%
Negative impact of foreign exchange				Approx. 1%				Approx. 1%
Net sales growth, constant currency				4.0% - 4.5%				4.0% - 6.0%
GAAP EPS estimate (1)				$2.23 - $2.28				$2.40 - $2.50
Amortization of intangible assets related to acquisitions				$0.23				$0.23
Operating losses (2)				$0.04				$0.05
Impairment and other items (3)				$0.24				$0.05
Convertible debt accounting				$0.11				$0.11
Non-GAAP EPS estimate (1)				$2.85 - $2.90				$2.80 - $2.90

(1) GAAP and non-GAAP EPS guidance include limited partnership investment gains and the net benefit from certain tax-related items.

(2) These costs relate primarily to the Company's PCS-Massachusetts facility.

(3) Other items include an accelerated depreciation charge related to the consolidation of research model production operations in California, severance related to cost-savings actions, costs associated with the evaluation of acquisitions, a government contract billing adjustment and related expenses, and the write-off of deferred financing costs and fees related to debt refinancing.

Webcast

Charles River Laboratories has scheduled a live webcast on Wednesday, October 30, at 8:00 a.m. ET to discuss matters relating to this press release. To participate, please go toir.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 and operating losses attributable to businesses we plan to close, consolidate or divest, severance costs associated with our cost-savings actions, 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, 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. 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, 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 customers; 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 and foreign exchange impact. Forward-looking statements are based on Charles River's current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the ability to successfully integrate businesses we acquire; the ability to execute our cost-savings actions on an effective and timely basis (including divestitures and site closures); the timing and magnitude of our share repurchases; negative trends in research and development spending, negative trends in the level of outsourced services, or other cost reduction actions by our customers; the ability to convert backlog to sales; special interest groups; contaminations; industry trends; new displacement technologies; USDA and FDA regulations; changes in law; continued availability of products and supplies; loss of key personnel; interest rate and foreign currency exchange rate fluctuations; changes in tax regulation and laws; changes in generally accepted accounting principles; and any changes in business, political, or economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas. A further description of these risks, uncertainties, and other matters can be found in the Risk Factors detailed in Charles River's Annual Report on Form 10-K as filed on February 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, visit www.criver.com.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for per share data)
				Three Months Ended											Nine Months Ended
				September 28,  2013					September 29,  2012						September 28,  2013				September 29,  2012
Total net sales				$	292,129				$	278,686					$	876,300			$	849,390
Cost of products sold and services provided					192,203					185,427						569,593				548,334
Gross margin					99,926					93,259						306,707				301,056
Selling, general and administrative					54,903					51,047						167,021				156,924
Amortization of intangibles					4,180					4,530						12,892				13,436
Operating income					40,843					37,682						126,794				130,696
Interest income (expense)					(2,176	)				(8,395	)					(17,667	)			(24,573	)
Other income (expense)					4,059					(892	)					6,094				(2,582	)
Income from continuing operations before income taxes					42,726					28,395						115,221				103,541
Provision for income taxes					11,390					6,011						29,331				24,140
Income from continuing operations, net of tax					31,336					22,384						85,890				79,401
(Loss) income from discontinued operations, net of tax					(113	)				(182	)					(1,183	)			(63	)
Net income					31,223					22,202						84,707				79,338
Net loss (income) from noncontrolling interests					(356	)				(230	)					(978	)			(459	)
Net income attributable to common shareowners				$	30,867				$	21,972					$	83,729			$	78,879
Earnings per common share
Basic:
Continuing operations				$	0.65				$	0.47					$	1.77			$	1.64
Discontinued operations				$	-				$	-					$	(0.02	)		$	-
Net				$	0.64				$	0.46					$	1.75			$	1.64
Diluted:
Continuing operations				$	0.64				$	0.46					$	1.75			$	1.63
Discontinued operations				$	-				$	-					$	(0.02	)		$	-
Net				$	0.64				$	0.46					$	1.72			$	1.63
Weighted average number of common shares outstanding
Basic					47,910,649					47,625,806						47,950,018				48,028,602
Diluted					48,441,165					48,108,614						48,654,136				48,476,146

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
				September 28,  2013					December 29,  2012
Assets
Current assets
Cash and cash equivalents				$	130,454				$	109,685
Trade receivables, net					224,270					203,001
Inventories					87,146					88,470
Other current assets					105,153					83,601
Current assets of discontinued businesses					758					495
Total current assets					547,781					485,252
Property, plant and equipment, net					690,725					717,020
Goodwill, net					229,271					208,609
Other intangibles, net					87,245					84,922
Deferred tax asset					28,249					38,554
Other assets					57,170					48,659
Long-term assets of discontinued businesses					3,326					3,328
Total assets				$	1,643,767				$	1,586,344
Liabilities and Equity
Current liabilities
Current portion of long-term debt & capital leases				$	16,170				$	139,384
Accounts payable					29,675					31,218
Accrued compensation					57,414					46,951
Deferred revenue					55,357					56,422
Accrued liabilities					53,998					45,208
Other current liabilities					20,613					21,262
Current liabilities of discontinued businesses					1,944					1,802
Total current liabilities					235,171					342,247
Long-term debt & capital leases					624,310					527,136
Other long-term liabilities					101,724					104,966
Long-term liabilities of discontinued businesses					8,531					8,795
Total liabilities					969,736					983,144
Non-controlling interests					17,523					2,395
Total equity					656,508					600,805
Total liabilities and equity				$	1,643,767				$	1,586,344

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
				Three Months Ended											Nine Months Ended
				September 28, 2013					September 29, 2012						September 28, 2013					September 29, 2012
Research Models and Services
Net sales				$	173,405				$	166,484					$	534,867				$	523,247
Gross margin					65,710					65,902						221,916					224,364
Gross margin as a % of net sales					37.9	%				39.6	%					41.5	%				42.9	%
Operating income					40,260					43,389						145,193					158,398
Operating income as a % of net sales					23.2	%				26.1	%					27.1	%				30.3	%
Depreciation and amortization					16,876					9,670						37,378					27,697
Capital expenditures					6,110					7,423						16,464					27,892
Preclinical Services
Net sales				$	118,724				$	112,202					$	341,433				$	326,143
Gross margin					34,216					27,358						84,791					76,693
Gross margin as a % of net sales					28.8	%				24.4	%					24.8	%				23.5	%
Operating income					18,636					10,975						37,631					25,958
Operating income as a % of net sales					15.7	%				9.8	%					11.0	%				8.0	%
Depreciation and amortization					10,039					10,880						29,957					32,920
Capital expenditures					2,986					2,819						8,855					5,903
Unallocated Corporate Overhead				$	(18,053	)			$	(16,682	)				$	(56,030	)			$	(53,660	)
Total
Net sales				$	292,129				$	278,686					$	876,300				$	849,390
Gross margin					99,926					93,260						306,707					301,057
Gross margin as a % of net sales					34.2	%				33.5	%					35.0	%				35.4	%
Operating income					40,843					37,682						126,794					130,696
Operating income as a % of net sales					14.0	%				13.5	%					14.5	%				15.4	%
Depreciation and amortization					26,915					20,550						67,335					60,617
Capital expenditures					9,096					10,242						25,319					33,795

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1)
(dollars in thousands)
				Three Months Ended											Nine Months Ended
				September 28,  2013					September 29,  2012						September 28,  2013					September 29,  2012
Research Models and Services
Net sales				$	173,405				$	166,484					$	534,867				$	523,247
Add back government billing adjustment					-					-						1,495					-
Non-GAAP net sales				$	173,405				$	166,484					$	536,362				$	523,247
Operating income					40,260					43,389						145,193					158,398
Operating income as a % of net sales					23.2	%				26.1	%					27.1	%				30.3	%
Add back:
Amortization of intangible assets related to acquisitions					1,950					1,611						6,164					4,542
Severance related to cost-savings actions					429					934						810					934
Government billing adjustment and related expenses					321					-						2,176					-
Impairment and other items (2)					7,238					2,927						7,238					2,927
Operating losses (3)					46					-						255					-
Operating income, excluding specified charges (Non-GAAP)				$	50,244				$	48,861					$	161,836				$	166,801
Non-GAAP operating income as a % of net sales					29.0	%				29.3	%					30.3	%				31.9	%
Preclinical Services
Net sales				$	118,724				$	112,202					$	341,433				$	326,143
Operating income					18,636					10,975						37,631					25,958
Operating income as a % of net sales					15.7	%				9.8	%					11.0	%				8.0	%
Add back:
Amortization of intangible assets related to acquisitions					2,229					2,917						6,727					8,892
Severance related to cost-savings actions					46					37						247					948
Impairment and other items (2)					-					(233	)					-					(233	)
Operating losses (3)					738					837						2,473					2,700
Operating income, excluding specified charges (Non-GAAP)				$	21,649				$	14,533					$	47,078				$	38,265
Non-GAAP operating income as a % of net sales					18.2	%				13.0	%					13.8	%				11.7	%
Unallocated Corporate Overhead				$	(18,053	)			$	(16,682	)				$	(56,030	)			$	(53,660	)
Add back:
Severance related to cost-savings actions					-					-						-					-
Impairment and other items					-					-						-					-
Costs associated with the evaluation of acquisitions					306					658						986					1,634
Convertible debt accounting					-					53						107					160
Unallocated corporate overhead, excluding specified charges (Non-GAAP)				$	(17,747	)			$	(15,971	)				$	(54,937	)			$	(51,866	)
Total
Net sales				$	292,129				$	278,686					$	876,300				$	849,390
Add back government billing adjustment					-					-						1,495					-
Non-GAAP net sales				$	292,129				$	278,686					$	877,795				$	849,390
Operating income					40,843					37,682						126,794					130,696
Operating income as a % of net sales					14.0	%				13.5	%					14.5	%				15.4	%
Add back:
Amortization of intangible assets related to acquisitions					4,179					4,528						12,891					13,434
Severance related to cost-savings actions					475					971						1,057					1,882
Government billing adjustment and related expenses					321					-						2,176					-
Impairment and other items (2)					7,238					2,694						7,238					2,694
Operating losses (3)					784					837						2,728					2,700
Costs associated with the evaluation of acquisitions					306					658						986					1,634
Convertible debt accounting					-					53						107					160
Operating income, excluding specified charges (Non-GAAP)				$	54,146				$	47,423					$	153,977				$	153,200
Non-GAAP operating income as a % of net sales					18.5	%				17.0	%					17.6	%				18.0	%

(1) Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company's performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2) The three and nine months ended September 28, 2013 primarily includes accelerated depreciation related to the consolidation of research model production operations inCalifornia.

(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											Nine Months Ended
				September 28,  2013					September 29,  2012						September 28, 2013					September 29,  2012
Net income attributable to common shareholders				$	30,867				$	21,972					$	83,729				$	78,879
Less: Discontinued operations					113					182						1,183					63
Net income from continuing operations					30,980					22,154						84,912					78,942
Add back:
Amortization of intangible assets related to acquisitions					4,179					4,528						12,891					13,434
Severance related to cost-savings actions					475					971						1,057					1,882
Impairment and other items (2)					7,238					2,888						7,238					2,888
Operating losses (3)					784					1,025						2,728					3,044
Costs associated with the evaluation of acquisitions					306					658						986					1,634
Government billing adjustment and related expenses					321					-						2,176					-
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)					-					3,860						6,710					10,928
Tax effect of items above					(6,041	)				(4,886	)					(12,207	)				(11,986	)
Net income, excluding specified charges (Non-GAAP)				$	38,242				$	31,198					$	107,136				$	101,478
Weighted average shares outstanding - Basic					47,910,649					47,625,806						47,950,018					48,028,602
Effect of dilutive securities:
Stock options and contingently issued restricted stock					530,516					482,808						704,118					447,544
Weighted average shares outstanding - Diluted					48,441,165					48,108,614						48,654,136					48,476,146
Basic earnings per share				$	0.64				$	0.46					$	1.75				$	1.64
Diluted earnings per share				$	0.64				$	0.46					$	1.72				$	1.63
Basic earnings per share, excluding specified charges (Non-GAAP)				$	0.80				$	0.66					$	2.23				$	2.11
Diluted earnings per share, excluding specified charges (Non-GAAP)				$	0.79				$	0.65					$	2.20				$	2.09

(1) Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company's performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2) The three and nine months ended September 28, 2013 primarily includes accelerated depreciation related to the consolidation of research model production operations inCalifornia.

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

(4) The nine months ended September 28, 2013 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $6,603and depreciation expense by $107, respectively. The three and nine months endedSeptember 29, 2012 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $3,807 and $10,768 and depreciation expense by $53 and $160, 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 Nine Months Ended September 28, 2013
For the three months ended September 28, 2013:				Total CRL				RMS Segment				PCS Segment
Net sales growth, reported				4.8	%			4.2	%			5.8	%
Impact of foreign exchange				(0.8	%)			(0.9	%)			(0.5	%)
Non-GAAP net sales growth, constant currency				5.6	%			5.1	%			6.3	%
For the nine months ended September 28, 2013:				Total CRL				RMS Segment				PCS Segment
Net sales growth, reported				3.2	%			2.2	%			4.7	%
Impact of foreign exchange				(0.9	%)			(1.3	%)			(0.4	%)
Impact of government billing adjustment				(0.2	%)			(0.3	%)			-
Non-GAAP net sales growth, constant currency				4.3	%			3.8	%			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, 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.