Investor Relations

First-Quarter Sales Decrease 11% to $302 Million

WILMINGTON, Mass.--(BUSINESS WIRE)--May. 5, 2009-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first-quarter of 2009. For the quarter, net sales decreased 10.7% to $301.5 million from $337.7 million in the first quarter of 2008. Sales declined in both the Research Models and Services (RMS) and Preclinical Services (PCS) segments, driven by the negative impact of foreign exchange and softer market demand for the Company’s broad portfolio of products and services, as pharmaceutical and biotechnology clients reprioritize their drug development pipelines and restructure their operations. Foreign currency translation reduced net sales by 5.8%.

On a GAAP basis, net income for the first quarter of 2009 was $25.4 million, or $0.38 per diluted share, compared to net income of $44.1 million, or $0.63 per diluted share, for the first quarter of 2008.

On a non-GAAP basis, net income was $38.2 million for the first quarter of 2009, compared to $50.8 million for the same period in 2008, a decrease of 24.8%. First-quarter diluted earnings per share on a non-GAAP basis were $0.58, a decrease of 19.4% compared to $0.72 per share in the first quarter of 2008. Both the GAAP and non-GAAP results were impacted primarily by lower sales volume.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Our financial performance in the first quarter of 2009 was consistent with our expectations, which assumed softness in demand for both RMS and PCS and a negative impact from foreign currency exchange. While visibility in the preclinical market remains limited, we are pleased to report that pricing, inquiry levels and bookings appear to have stabilized, although at lower levels than in the prior year. Based on these trends combined with our disciplined focus on expenses, we believe we will achieve the sales and earnings guidance that we previously provided for 2009.”

First-Quarter Segment Results

Research Models and Services (RMS)

Sales for the RMS segment were $161.5 million in the first quarter of 2009, a decrease of 4.2% from $168.6 million in the first quarter of 2008. Foreign currency translation reduced sales by 4.2%. Excluding the effect of foreign exchange, RMS sales were flat as growth of academic accounts offset softer demand from pharmaceutical and biotechnology clients. Higher sales of Endotoxin and Microbial Detection products (formerly In Vitro) and the addition of MIR Preclinical Services (acquired in September 2008) were offset by lower sales for the Consulting & Staffing Services business and the September 2008 divestiture of the Vaccine business in Mexico.

Lower sales volume and higher operating costs related to new capacity brought on line in California and Maryland in 2008 resulted in lower operating margins for the RMS segment. The 2009 first-quarter GAAP operating margin was 29.4% compared to 33.1% in the first quarter of 2008. On a non-GAAP basis, the operating margin was 31.6% compared to 33.4% for the first quarter of 2008.

Preclinical Services (PCS)

First-quarter 2009 net sales for the PCS segment were $140.0 million, a decrease of 17.2% from $169.1 million in the first quarter of 2008. The PCS sales decline was due primarily to slower market demand from both pharmaceutical and biotechnology companies, and the negative effect of foreign currency translation, which reduced sales by 7.4%. The sales decline was partially offset by the addition of NewLab BioQuality AG, which was acquired in September 2008.

As expected, lower capacity utilization, pricing pressure and costs associated with the start-up of new facilities in China and Canada resulted in lower operating margins for the PCS segment. The 2009 first-quarter GAAP operating margin declined to 7.5% from 13.8% in the first quarter of 2008. On a non-GAAP basis, the operating margin declined to 15.5% from 18.3% in the first quarter of 2008.

Items Excluded from Non-GAAP Results

Items excluded from non-GAAP results in the first quarter of 2009 and 2008 are as follows:

(1) In the first quarter of 2009, these items were related primarily to an asset impairment charge associated with the Company’s planned divestiture of its clinical Phase I business in Scotland and additional miscellaneous expenses. In the first quarter of 2008, these items were related primarily to Company’s disposition of its legacy PCS facility in Worcester, Massachusetts.

2009 Guidance

The Company reaffirms its forward-looking guidance for 2009, which was originally provided on February 9, 2009. The sales guidance includes the negative impact of foreign exchange, which is expected to reduce sales by approximately 5.5-6.0%.

Acquisition of Piedmont Research Center

On May 1, 2009, the Company completed the acquisition of the business and assets of Piedmont Research Center, LLC, a provider of preclinical discovery services focused on efficacy studies primarily in oncology and other therapeutic areas for pharmaceutical and biotechnology clients, for approximately $46 million. Piedmont’s addition expands Charles River’s Discovery and Imaging Services business, and makes us one of the largest providers of non-GLP efficacy studies.

Webcast

Charles River Laboratories has scheduled a live webcast on Wednesday, May 6, 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 amortization of intangible assets and other charges related to our acquisitions, charges related to the dispositions of our clinical Phase I business in Scotland and our legacy preclinical facility in Worcester, Massachusetts, expenses associated with evaluating acquisitions, operating losses attributable to our businesses we plan to close or divest, severance costs associated with our 2009 first-quarter cost-saving actions, and the additional interest recorded as a result of the adoption of FSP No. APB 14-1. 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 news 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 2009 sales and earnings; the future demand for drug discovery and development products and services (particularly in light of the challenging economic environment), including the outsourcing of these services and present spending trends by our customers; the impact of specific actions intended to improve overall operating efficiencies and profitability; the timing of the opening of new and expanded facilities by us and our competitors; our future stock purchase activities; future cost reduction activities by our customers; and Charles River’s future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to sales growth and foreign exchange impact. In addition, these statements include the availability of funding for our customers and the impact of economic and market conditions on them generally, and the anticipated strength of our balance sheet, the effects of our first-quarter 2009 cost-saving actions and other actions designed to manage expenses, operating costs and capital spending, and to streamline efficiency, and the ability of the Company to withstand the current market conditions. 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 the acquisition of the business and assets of Piedmont Research Center, LLC; a decrease in research and development spending, a decrease 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, 2009, 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 8,700 employees worldwide are focused on providing clients with exactly what they need to improve and expedite the discovery, development through first-in-human evaluation, 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.
Investor Contact:
Susan E. Hardy, 781-222-6190
Corporate Vice President, Investor Relations
or
Media Contact:
Amy Cianciaruso, 781-222-6168
Associate Director, Public Relations