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Charles River Announces Fourth-Quarter and Full-Year 2011 Results from Continuing Operations
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  • Fourth-Quarter Sales of $291.0 Million and Full-Year 2011 Sales of $1.14 Billion
  • Fourth-Quarter GAAP Earnings per Share of $0.55 and Non-GAAP Earnings per Share of $0.69
  • Full-Year GAAP Earnings per Share of $2.24 and Non-GAAP Earnings per Share Increase 29% to $2.56
  • Reaffirms 2012 Guidance

WILMINGTON, Mass.--(BUSINESS WIRE)--Feb. 13, 2012-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2011. For the quarter, net sales from continuing operations were $291.0 million, an increase of 3.3% from $281.7 million in the fourth quarter of 2010. On a segment basis, sales increased in the Research Models and Services (RMS) segment, but declined in the Preclinical Services (PCS) segment.

The addition of a 53rd week at the end of 2011, which is periodically required to true up to a December 31st fiscal year end, contributed approximately 4.5% to reported fourth-quarter sales. At a 0.2% benefit, the impact of foreign currency translation on reported fourth-quarter sales was negligible.

On a GAAP basis, net income from continuing operations for the fourth quarter of 2011 was $27.1 million, or $0.55 per diluted share, compared to a net loss of $342.4 million, or $5.94 per diluted share, for the fourth quarter of 2010. In the fourth quarter of 2010, GAAP results included non-cash goodwill and asset impairments of $395.0 million, or $6.28 per share.

On a non-GAAP basis, net income from continuing operations was $33.6 million for the fourth quarter of 2011, a decline of 2.8% from $34.5 million for the same period in 2010. A higher tax rate and lower other income were the primary drivers of the change. Fourth-quarter diluted earnings per share on a non-GAAP basis were $0.69, an increase of 15.0% compared to $0.60 per share in the fourth quarter of 2010. Non-GAAP earnings per share benefited primarily from the net accretion of stock repurchases.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Our clients are increasingly viewing our broad portfolio of essential products and services and our scientific expertise as tools they can use to further their goal to bring more drugs to market sooner, and at a lower cost. We believe that our fourth-quarter results demonstrate a modestly improving environment on a number of levels: stable large biopharma demand, increasing demand for non-regulated services, better funding for mid-tier biopharma companies, and consistent growth in the academic and government sector. The fourth-quarter results and our expectation for relative stability in our end markets confirm our outlook for 2012. Therefore, we are reaffirming our sales and earnings per share guidance for the year.”

The Company reports results from continuing operations, which excludes results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a discontinued operation.

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Net sales for the RMS segment were $182.4 million in the fourth quarter of 2011, an increase of 8.3% from $168.4 million in the fourth quarter of 2010. Excluding the 0.4% benefit from of foreign exchange, RMS sales increased by 7.9%, primarily driven by higher sales of Other Products and Research Model Services. Other Products includes the In Vitro and Avian businesses. The 53rd week contributed approximately 4.5% to fourth-quarter sales.

In the fourth quarter of 2011, the RMS segment’s GAAP operating margin was 27.6% compared to 26.4% for the fourth quarter of 2010. On a non-GAAP basis, the operating margin decreased to 28.8% from 30.5% in the fourth quarter of 2010. The non-GAAP operating margin decline was primarily attributable to the performance of the large models business and an associated inventory write-down.

Preclinical Services (PCS)

Fourth-quarter 2011 net sales from continuing operations for the PCS segment were $108.5 million, a decrease of 4.2% from $113.3 million in the fourth quarter of 2010. The PCS sales decline was due primarily to a continuing proportion of shorter term, less complex studies in the sales mix, as well as fewer GLP safety assessment studies. Foreign currency translation reduced the sales growth rate by 0.3%. The 53rd week contributed approximately 4.0% to fourth-quarter sales.

On a non-GAAP basis, the operating margin increased to 13.0% from 12.0% in the fourth quarter of 2010. The non-GAAP operating margin improvement was due principally to the benefits of cost-savings actions implemented in 2010 and 2011, as well as a non-income based tax adjustment. The fourth-quarter 2011 GAAP operating margin increased to 3.8% from (345.9%) in the same period in 2010, which reflected the fourth-quarter 2010 goodwill and other impairments.

Stock Repurchase Update

During the fourth quarter of 2011, the Company repurchased approximately 0.8 million shares for $25.0 million. As of December 31, 2011, Charles River had $116.3 million remaining on its $750 million stock repurchase authorization.

Full-Year Results

For 2011, net sales from continuing operations increased by 0.8% to $1.14 billion from $1.13 billion in 2010. Foreign currency translation benefited net sales growth by 2.2%. The 53rd week contributed approximately 1.0% to reported 2011 sales.

On a GAAP basis, net income from continuing operations for 2011 was $115.5 million, or $2.24 per diluted share, compared to a net loss of $334.1 million, or $5.25 per diluted share, in 2010. In addition to the goodwill and asset impairments, the 2010 GAAP results also include a $30.0 million fee related to the termination of a proposed acquisition.

On a non-GAAP basis, net income from continuing operations for 2011 was $131.3 million, or $2.56 per diluted share, compared to $125.6 million, or $1.99 per diluted share, in 2010.

Research Models and Services (RMS)

For 2011, RMS net sales were $705.4 million, an increase of 5.8% from $667.0 million in 2010. Foreign currency translation benefited net sales growth by 2.7%. On a GAAP basis, the RMS segment operating margin was 29.2% in 2011, compared to 27.7% in 2010. On a non-GAAP basis, the operating margin was 30.4% in 2011, compared to 29.5% in 2010.

Preclinical Services (PCS)

For 2011, PCS net sales were $437.2 million, a decrease of 6.3% from $466.4 million in 2010. Foreign currency translation benefited net sales growth by 1.5%. On a non-GAAP basis, the operating margin was 12.6% in 2011, compared to 11.9% in 2010. The GAAP operating margin for the PCS segment was 5.7% in 2011, compared to (81.4%) in 2010 as a result of the goodwill and other impairments.

Items Excluded from Non-GAAP Results

Items excluded from non-GAAP results in the fourth quarter of 2011 and 2010 were as follows:

($ in millions)       4Q11       4Q10
Amortization of intangible assets       $5.3       $6.2
Severance related to cost-savings actions       4.1       10.9
Impairment and other items, net (1)       (0.4)       383.5
Adjustment of SPC contingent consideration and related items       0.5       5.8
Operating losses for PCS China, Massachusetts and Arkansas       (1.8)       2.7
Costs associated with evaluation of acquisitions       0.1       0.2
Fees and tax costs associated with corporate subsidiary restructuring and repatriation       0.1       --
Convertible debt accounting       3.8       3.3

(1) In the fourth quarter of 2010, these items were related primarily to goodwill and asset impairments associated with the Company’s PCS business segment.

Items excluded from non-GAAP results in 2011 and 2010 were as follows:

($ in millions)       FY2011       FY2010
Amortization of intangible assets       $21.8       $24.4
Severance related to cost-savings actions       5.5       16.5
Impairment and other items, net (1)       0.5       384.9
Adjustment of SPC contingent consideration and related items       (0.7)       2.9
Operating losses for PCS China, Massachusetts and Arkansas       6.5       13.4
Costs associated with evaluation of acquisitions       0.2       8.3
Acquisition agreement termination fee       --       30.0
Gain on settlement of life insurance policy       (7.7)       --
Write-off of deferred financing costs related to amended credit agreement       1.5       4.5
Fees and tax costs associated with corporate subsidiary restructuring and repatriation       1.6       15.7
Convertible debt accounting       14.0       12.9
Tax benefit related to disposition of Phase I clinical business       (11.1)       --

(1) In 2011, these items were related primarily to (i) asset impairments associated with certain RMS and PCS operations; (ii) gains related to dispositions of RMS facilities in Michigan and Europe; (iii) costs associated with exiting a defined benefit plan in RMS Japan; and (iv) costs associated with exiting a corporate leased facility. In 2010, these items were related primarily to goodwill and asset impairments associated with the Company’s PCS business segment.

2012 Guidance

The Company reaffirms its forward-looking guidance based on continuing operations for 2012, which was originally provided on December 14, 2011.

2012 GUIDANCE (from continuing operations)        
Net sales growth, reported       0% - 2%
Impact of foreign exchange       Approx. 1%
Net sales growth, constant currency       1% - 3%
GAAP EPS estimate       $2.10 - $2.20
Amortization of intangible assets       $0.25
Operating losses (1)       $0.05
Convertible debt accounting       $0.20
Non-GAAP EPS estimate       $2.60 - $2.70

(1) These costs relate primarily to the Company’s PCS facility in Massachusetts.

Webcast

Charles River Laboratories has scheduled a live webcast on Tuesday, February 14, 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-savings actions, taxes associated with the disposition of our Phase I clinical business, adjustments related to contingent consideration related to our acquisitions, a gain recognized upon the settlement of a life insurance policy of a former officer, fees and taxes associated with corporate subsidiary restructuring and repatriation, write-offs of deferred financing costs related to our amended credit facility, 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 2012 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 2012; 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 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 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 http://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

Twelve Months Ended

December 31,
2011

December 25,
2010

December 31,
2011

December 25,
2010

 
Total net sales $ 290,962 $ 281,652 $ 1,142,647 $ 1,133,416
Cost of products sold and services provided   190,394     188,347     740,405     748,656  
Gross margin 100,568 93,305 402,242 384,760
Selling, general and administrative 53,579 57,275 206,140 232,489
Goodwill impairment - 305,000 - 305,000
Asset impairment - 90,030 - 91,378
Termination fee - - - 30,000
Amortization of intangibles   5,342     6,159     21,796     24,405  
Operating income 41,647 (365,159 ) 174,306 (298,512 )
Interest income (expense) (9,674 ) (9,197 ) (41,233 ) (34,093 )
Other income (expense)   681     1,373     (411 )   (1,477 )
Income from continuing operations before income taxes 32,654 (372,983 ) 132,662 (334,082 )
Provision (benefit) for income taxes   5,576     (30,554 )   17,140     23  
Income from continuing operations, net of tax 27,078 (342,429 ) 115,522 (334,105 )
Discontinued operations, net of tax   150     (5,549 )   (5,545 )   (8,012 )
Net income 27,228 (347,978 ) 109,977 (342,117 )
Noncontrolling interests   (113 )   4,414     (411 )   5,448  
Net income attributable to common shareowners $ 27,115   $ (343,564 ) $ 109,566   $ (336,669 )
 
Earnings per common share
Basic:
Continuing operations $ 0.55 $ (5.94 ) $ 2.26 $ (5.25 )
Discontinued operations $ - $ (0.10 ) $ (0.11 ) $ (0.13 )
Net $ 0.56 $ (6.04 ) $ 2.16 $ (5.38 )
Diluted:
Continuing operations $ 0.55 $ (5.94 ) $ 2.24 $ (5.25 )
Discontinued operations $ - $ (0.10 ) $ (0.11 ) $ (0.13 )
Net $ 0.55 $ (6.04 ) $ 2.14 $ (5.38 )
 
Weighted average number of common shares outstanding
Basic 48,670,624 56,886,053 50,823,063 62,561,294
Diluted 48,907,278 56,886,053 51,318,242 62,561,294
 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
           
 

December 31,
2011

December 25,
2010

Assets
Current assets
Cash and cash equivalents $ 68,905 $ 179,160
Trade receivables, net 184,810 192,972
Inventories 92,969 100,297
Other current assets 79,052 76,603
Current assets of discontinued businesses   107   3,862
Total current assets 425,843 552,894
Property, plant and equipment, net 738,030 752,657
Goodwill, net 197,561 198,438
Other intangibles, net 93,437 121,236
Deferred tax asset 44,804 45,003
Other assets 57,659 62,323
Long-term assets of discontinued businesses   986   822
Total assets $ 1,558,320 $ 1,733,373
 
Liabilities and Equity
Current liabilities
Current portion of long-term debt & capital leases $ 14,758 $ 30,582
Accounts payable 34,332 30,627
Accrued compensation 41,602 48,918
Deferred revenue 56,530 66,905
Accrued liabilities 54,377 59,369
Other current liabilities 14,033 20,095
Current liabilities of discontinued businesses   1,165   3,284
Total current liabilities 216,797 259,780
Long-term debt & capital leases 703,187 670,270
Other long-term liabilities 108,451 114,596
Long-term liabilities of discontinued businesses   2,522   -
Total liabilities   1,030,957   1,044,646
Non-controlling interests 1,780 1,304
Total equity   527,363   688,727
Total liabilities and equity $ 1,558,320 $ 1,733,373
 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
                     

Three Months Ended

Twelve Months Ended

December 31,
2011

December 25,
2010

December 31,
2011

December 25,
2010

Research Models and Services
Net sales $ 182,414 $ 168,382 $ 705,419 $ 666,986
Gross margin 74,667 68,383 297,327 278,391
Gross margin as a % of net sales 40.9 % 40.6 % 42.1 % 41.7 %
Operating income 50,352 44,405 206,319 184,464
Operating income as a % of net sales 27.6 % 26.4 % 29.2 % 27.7 %
Depreciation and amortization 9,326 9,703 37,240 37,657
Capital expenditures 20,055 11,867 34,257 27,694
 
Preclinical Services
Net sales $ 108,548 $ 113,270 $ 437,228 $ 466,430
Gross margin 25,901 24,922 104,915 106,369
Gross margin as a % of net sales 23.9 % 22.0 % 24.0 % 22.8 %
Operating income 4,081 (391,842 ) 24,925 (379,726 )
Operating income as a % of net sales 3.8 % -345.9 % 5.7 % -81.4 %
Depreciation and amortization 11,656 13,956 47,990 55,992
Capital expenditures 7,416 4,141 14,886 15,166
 
 
Unallocated Corporate Overhead $ (12,786 ) $ (17,722 ) $ (56,938 ) $ (103,250 )
 
 
Total
Net sales $ 290,962 $ 281,652 $ 1,142,647 $ 1,133,416
Gross margin 100,568 93,305 402,242 384,760
Gross margin as a % of net sales 34.6 % 33.1 % 35.2 % 33.9 %
Operating income 41,647 (365,159 ) 174,306 (298,512 )
Operating income as a % of net sales 14.3 % -129.6 % 15.3 % -26.3 %
Depreciation and amortization 20,982 23,659 85,230 93,649
Capital expenditures 27,471 16,008 49,143 42,860
 
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 31,
2011

December 25,
2010

December 31,
2011

December 25,
2010

Research Models and Services
Net sales $ 182,414 $ 168,382 $ 705,419 $ 666,986
Operating income 50,352 44,405 206,319 184,464
Operating income as a % of net sales 27.6 % 26.4 % 29.2 % 27.7 %
Add back:
Amortization related to acquisitions 1,755 1,824 6,747 7,349
Severance related to cost-savings actions 752 4,238 1,196 4,429
Impairment and other items (2)   (257 )   846     312     846  
Operating income, excluding specified charges (Non-GAAP) $ 52,602 $ 51,313 $ 214,574 $ 197,088
Non-GAAP operating income as a % of net sales 28.8 % 30.5 % 30.4 % 29.5 %
 
Preclinical Services
Net sales $ 108,548 $ 113,270 $ 437,228 $ 466,430
Operating income 4,081 (391,842 ) 24,925 (379,726 )
Operating income as a % of net sales 3.8 % -345.9 % 5.7 % -81.4 %
Add back:
Amortization related to acquisitions 3,586 4,335 15,048 17,056
Severance related to cost-savings actions 3,393 4,277 4,372 9,145
Adjustment of SPC contingent consideration and related items (3) 4,879 7,200 4,879 7,200
Impairment and other items (2) 425 386,999 425 388,347
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas   (2,297 )   2,662     5,580     13,387  
Operating income, excluding specified charges (Non-GAAP) $ 14,067 $ 13,631 $ 55,229 $ 55,409
Non-GAAP operating income as a % of net sales 13.0 % 12.0 % 12.6 % 11.9 %
 
Unallocated Corporate Overhead $ (12,786 ) $ (17,722 ) $ (56,938 ) $ (103,250 )
Add back:

Severance related to cost-savings actions

- 2,418 (106 ) 2,930
Impairment and other items (2) (532 ) - (264 ) -
Adjustment of SPC contingent consideration and related items (3) (4,394 ) (1,405 ) (5,600 ) (4,335 )
Costs related to PCS China 485 - 891 -
Costs associated with the evaluation of acquisitions 65 182 215 6,769
Acquisition agreement termination fee - - - 30,000
Gain on settlement of life insurance policy - - (7,710 ) -
Costs associated with corporate legal entity restructuring & repatriation 145 - 930 393
Convertible debt accounting (4)   53     53     213     213  
Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (16,964 ) $ (16,474 ) $ (68,369 ) $ (67,280 )
 
Total
Net sales $ 290,962 $ 281,652 $ 1,142,647 $ 1,133,416
Operating income 41,647 (365,159 ) 174,306 (298,512 )
Operating income as a % of net sales 14.3 % -129.6 % 15.3 % -26.3 %
Add back:
Amortization related to acquisitions 5,341 6,159 21,795 24,405
Severance related to cost-savings actions 4,145 10,933 5,462 16,504
Adjustment of SPC contingent consideration and related items (3) 485 5,795 (721 ) 2,865
Impairment and other items (2) (364 ) 387,845 473 389,193
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas (1,812 ) 2,662 6,471 13,387
Costs associated with the evaluation of acquisitions 65 182 215 6,769
Acquisition agreement termination fee - - - 30,000
Gain on settlement of life insurance policy - - (7,710 ) -
Costs associated with corporate legal entity restructuring & repatriation 145 - 930 393
Convertible debt accounting (4)   53     53     213     213  
Operating income, excluding specified charges (Non-GAAP) $ 49,705 $ 48,470 $ 201,434 $ 185,217
Non-GAAP operating income as a % of net sales 17.1 % 17.2 % 17.6 % 16.3 %
 
(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 twelve months ended December 31, 2011 include: (i) asset impairments associated with certain RMS and PCS operations; (ii) gains on the disposition of RMS facilities in Michigan and Europe; (iii) costs associated with exiting a defined benefit plan in RMS Japan; and (iv) costs associated with vacating a corporate leased facility. The three and twelve month periods ended December 25, 2010 include items primarily related to goodwill and asset impairments associated with the Company’s PCS business segment.
 
(3) The three and twelve month periods ended December 31, 2011 include an impairment of in-process research and development and a deferred revenue reversal related to Systems Pathology Company, LLC (SPC). The three and twelve month periods ended December 25, 2010 include an impairment of in-process research and development related to SPC.
 
(4) Includes the impact of convertible debt accounting adopted at the beginning of 2009, which increased depreciation expense.
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 31,
2011

December 25,
2010

December 31,
2011

December 25,
2010

 
Net income attributable to common shareholders $ 27,115 $ (343,564 ) $ 109,566 $ (336,669 )
Less: Discontinued operations   (150 )   5,549     5,545     8,012  
Net income from continuing operations 26,965 (338,015 ) 115,111 (328,657 )
Add back:
Amortization related to acquisitions 5,341 6,159 21,795 24,405
Severance related to cost-savings actions 4,145 10,933 5,462 16,504
Impairment and other items (2) (364 ) 383,548 473 384,896
Adjustment of SPC contingent consideration and related items (3) 485 5,795 (721 ) 2,865
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas (1,812 ) 2,662 6,471 13,387
Costs associated with the evaluation of acquisitions 65 182 215 8,319
Acquisition agreement termination fee - - - 30,000
Gain on settlement of life insurance policy - - (7,710 ) -
Writeoff of deferred financing costs related to debt extinguishment - - 1,450 4,542
Costs and taxes associated with corporate legal entity restructuring & repatriation 145 - 1,637 15,689
Convertible debt accounting, net (4) 3,762 3,333 13,978 12,948
Tax benefit from disposition of Phase I clinical business - - (11,111 ) -
Tax effect   (5,162 )   (40,056 )   (15,710 )   (59,274 )
Net income, excluding specified charges (Non-GAAP) $ 33,569   $ 34,541   $ 131,340   $ 125,624  
 
Weighted average shares outstanding - Basic 48,670,624 56,886,053 50,823,063 62,561,294
Effect of dilutive securities:
Stock options and contingently issued restricted stock 236,654 487,130 495,179 558,229
Weighted average shares outstanding - Diluted   48,907,278     57,373,183     51,318,242     63,119,523  
 
Basic earnings per share $ 0.56 $ (6.04 ) $ 2.16 $ (5.38 )
Diluted earnings per share $ 0.55 $ (6.04 ) $ 2.14 $ (5.38 )
 
Basic earnings per share, excluding specified charges (Non-GAAP) $ 0.69 $ 0.61 $ 2.58 $ 2.01
Diluted earnings per share, excluding specified charges (Non-GAAP) $ 0.69 $ 0.60 $ 2.56 $ 1.99
 
(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 twelve months ended December 31, 2011 include: (i) asset impairments associated with certain RMS and PCS operations; (ii) gains on the disposition of RMS facilities in Michigan and Europe; (iii) costs associated with exiting a defined benefit plan in RMS Japan; and (iv) costs associated with vacating a corporate leased facility. The three and twelve month periods ended December 25, 2010 include items primarily related to goodwill and asset impairments associated with the Company’s PCS business segment.
 
(3) The three and twelve month periods ended December 31, 2011 include an impairment of in-process research and development and a deferred revenue reversal related to Systems Pathology Company, LLC (SPC). The three and twelve month periods ended December 25, 2010 include an impairment of in-process research and development related to SPC.
 
(4) The three and twelve months ended December 31, 2011 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $3,709 and $13,765 and depreciation expense by $53 and $213, respectively. The three and twelve months ended December 25, 2010 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $3,280 and $12,735 and depreciation expense by $53 and $213, respectively.

Source: Charles River Laboratories International, Inc.

Charles River Laboratories International, Inc.
Investor Contact:
Susan E. Hardy, 781-222-6190
Corporate Vice President, Investor Relations
susan.hardy@crl.com
or
Media Contact:
Amy Cianciaruso, 781-222-6168
Director, Public Relations
amy.cianciaruso@crl.com