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.
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|Charles River Announces First-Quarter 2011 Results from Continuing Operations|
- Sales of $285.8 Million -
WILMINGTON, Mass., May 03, 2011 (BUSINESS WIRE) -- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2011. For the quarter, net sales from continuing operations were $285.8 million, a decline of 2.2% from $292.3 million in the first quarter of 2010. Foreign currency translation benefited the reported sales by 0.8%. Sales declined in the Preclinical Services (PCS) segment, but improved slightly in the Research Models and Services (RMS) segment.
On a GAAP basis, net income from continuing operations for the first quarter of 2011 was $35.4 million, or $0.65 per diluted share, compared to $17.3 million, or $0.27 per diluted share, for the first quarter of 2010. The first-quarter results included an $11.1 million Corporate tax benefit in continuing operations related to the disposition of the Phase I clinical business.
On a non-GAAP basis, net income from continuing operations was $33.1 million for the first quarter of 2011, compared to $29.4 million for the same period in 2010, an increase of 12.9%. First-quarter diluted earnings per share on a non-GAAP basis were $0.61, an increase of 35.6% compared to $0.45 per share in the first quarter of 2010. The non-GAAP results benefited from cost-saving actions, the net accretion from stock repurchases since August 2010 and a lower tax rate.
James C. Foster, Chairman, President and Chief Executive Officer, said, "We are pleased with the progress we are making on our four key initiatives to enhance shareholder value. The 35.6% increase in first-quarter non-GAAP earnings per share over the previous year demonstrates improved operating margins as a result of cost-savings actions, as well as the benefit of share repurchases."
"PCS sales have continued to show stability over the last three quarters. However, the greater proportion of shorter-term studies in the sales mix is limiting visibility into a recovery in preclinical demand. As a result of the continued low visibility, coupled with the uncertain impact of the disaster on our clients and our operations in Japan, we are maintaining our prior sales and non-GAAP earnings guidance for the year."
The Company reports results from continuing operations, which excludes results of the Phase I clinical business that was divested on March 28, 2011. The Phase I business is reported as a discontinued operation.
First-Quarter Segment Results
Research Models and Services (RMS)
Sales for the RMS segment were $173.4 million in the first quarter of 2011, an increase of 0.7% from $172.2 million in the first quarter of 2010. Excluding the effect of foreign currency translation, which benefited the sales growth rate by 0.7%, RMS sales were flat.
In the first quarter of 2011, the RMS segment's GAAP operating margin was 29.8% compared to 29.0% for the first quarter of 2010. On a non-GAAP basis, the operating margin increased to 31.2% from 30.4% in the first quarter of 2010. The operating margin improvement was primarily attributable to leverage from higher sales of research model services and other products, as well as efficiencies derived from cost-saving actions.
Preclinical Services (PCS)
First-quarter 2011 net sales from continuing operations for the PCS segment were $112.5 million, a decrease of 6.3% from $120.1 million in the first quarter of 2010. The PCS sales decline was due primarily to continued soft demand from our large pharmaceutical clients, as well as the impact of sales mix, which continues to be more heavily weighted towards short-term studies. Foreign currency translation benefited the sales growth rate by 0.9%.
The first-quarter 2011 GAAP operating margin increased to 8.3% from 0.4% in the first quarter of 2010. On a non-GAAP basis, the operating margin improved to 14.1% from 9.8% in the first quarter of 2010. The significant operating margin improvement was primarily attributable to the impact of cost-saving actions.
Stock Repurchase Update
Following completion of its $300 million Accelerated Stock Repurchase (ASR) program on February 11, 2011, the Company implemented a new ASR program, on February 24, 2011, to repurchase $150 million of its common stock, at Morgan Stanley & Co. Incorporated's discretion. The Company received an initial delivery of approximately 3.8 million shares. The Company expects the ASR program to be completed by the end of May 2011. The actual total number of shares to be repurchased under the ASR program will be determined based on a discount to the daily volume weighted average price (VWAP) of its common stock over the course of the calculation period.
In addition, the Company repurchased approximately 0.6 million shares on the open market in February 2011 for $21.6 million. Upon completion of the $150 million ASR program, Charles River is expected to have $225.5 million remaining on its $750 million stock repurchase authorization.
Items Excluded from Non-GAAP Results
Items excluded from non-GAAP results in the first quarter of 2011 and 2010 were as follows:
The Company reaffirms its forward-looking guidance based on continuing operations for 2011 sales and non-GAAP earnings per share, which was originally provided on December 14, 2010. The Company has updated its 2011 GAAP earnings per share guidance, previously provided on February 8, 2011, to reflect a Corporate tax benefit related to the disposition of its Phase I clinical business. Guidance for 2011 excludes the results of the Company's Phase I business as a discontinued operation. Furthermore, the operating loss from PCS-China has been excluded from non-GAAP results.
Charles River Laboratories has scheduled a live webcast on Wednesday, May 4, 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.
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 our businesses we plan to close or divest, severance costs associated with our cost-saving actions, tax expense associated with the disposition of our Phase I clinical business, 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. 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. 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 the text of 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 2011 financial performance including sales and earnings per share; the future demand for drug discovery and development products and services (particularly in light of the challenging economic environment); our expectations regarding stock repurchases, which include our accelerated stock repurchase program, the number of shares to be repurchased, expected timing and duration, the amount of capital that may be expended and the treatment of repurchased shares; the development and performance of our services and products; market and industry conditions including the outsourcing of these services and present spending trends by our customers; the impact of specific actions intended to more accurately align our infrastructure to the current operating environment, and to improve overall operating efficiencies and profitability; 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 23, 2011, 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 approximately 7,500 employees worldwide 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.
SOURCE: Charles River Laboratories International, Inc.
Charles River Laboratories International, Inc.