View printer-friendly version |
Charles River Announces First-Quarter 2012 Results from Continuing Operations
On a GAAP basis, net income from continuing operations for the first quarter of 2012 was
On a non-GAAP basis, net income from continuing operations was
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.
First-Quarter Segment Results
Research Models and Services (RMS)
Net sales for the RMS segment were
In the first quarter of 2012, the RMS segment's GAAP operating margin was 32.5% compared to 29.8% for the first quarter of 2011. On a non-GAAP basis, the operating margin increased to 33.3% from 31.2% in the first quarter of 2011. The non-GAAP operating margin expansion was primarily attributable to broad-based improvement across most RMS businesses, which benefitted from higher sales volume and process efficiency initiatives.
Preclinical Services (PCS)
First-quarter 2012 net sales from continuing operations for the PCS segment were
In the first quarter of 2012, the PCS segment's GAAP operating margin decreased to 4.1% from 8.3% in the first quarter of 2011. On a non-GAAP basis, the operating margin declined to 8.9% from 14.1% in the first quarter of 2011. The operating margin decline was primarily attributable to a reduction in profitability for the BPS business in the first quarter of 2012.
Stock Repurchase Update
During the first quarter of 2012, the Company repurchased approximately 348,000 shares for
Items Excluded from Non-GAAP Results
Items excluded from non-GAAP results in the first quarter of 2012 and 2011 were as follows:
($ in millions) | 1Q12 | 1Q11 | ||||
Amortization of intangible assets | $4.5 | $5.4 | ||||
Severance related to cost-savings actions | 0.9 | 0.5 | ||||
Impairment and other items, net (1) | -- | 0.5 | ||||
Operating losses for PCS China, Massachusetts and Arkansas | 1.4 | 2.8 | ||||
Costs associated with evaluation of acquisitions | 0.2 | -- | ||||
Loss on the sale of auction rate securities | 0.7 | -- | ||||
Convertible debt accounting | 3.5 | 3.3 | ||||
Tax benefit related to disposition of Phase I clinical business | -- | (11.1) |
(1) In the first quarter of 2011, these items were related primarily to exiting a defined benefit plan in RMS Japan and asset impairments associated with the consolidation of the Company's RMS Discovery Services operations.
2012 Guidance
The Company reaffirms its forward-looking guidance based on continuing operations for 2012, which was originally provided on
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 | ||
Severance costs and other items (2) | $0.03 | ||
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
(2) Severance costs and other items were added to the reconciliation in the first quarter of 2012. Other items primarily include costs associated with the evaluation of acquisitions and a loss on the sale of auction rate securities.
Webcast
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, 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 organic 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 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
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 | ||||||||
March 31, |
March 26, | |||||||
Total net sales | $ | 285,981 | $ | 285,843 | ||||
Cost of products sold and services provided | 181,769 | 183,205 | ||||||
Gross margin | 104,212 | 102,638 | ||||||
Selling, general and administrative | 55,977 | 55,007 | ||||||
Amortization of intangibles | 4,495 | 5,380 | ||||||
Operating income | 43,740 | 42,251 | ||||||
Interest income (expense) | (8,250 | ) | (9,652 | ) | ||||
Other income (expense) | (344 | ) | 63 | |||||
Income from continuing operations before income taxes | 35,146 | 32,662 | ||||||
Provision (benefit) for income taxes | 8,676 | (2,715 | ) | |||||
Income from continuing operations, net of tax | 26,470 | 35,377 | ||||||
Discontinued operations, net of tax | 77 | (3,945 | ) | |||||
Net income | 26,547 | 31,432 | ||||||
Noncontrolling interests | (108 | ) | (97 | ) | ||||
Net income attributable to common shareowners | $ | 26,439 | $ | 31,335 | ||||
Earnings per common share | ||||||||
Basic: | ||||||||
Continuing operations | $ | 0.55 | $ | 0.65 | ||||
Discontinued operations | $ | - | $ | (0.07 | ) | |||
Net | $ | 0.55 | $ | 0.58 | ||||
Diluted: | ||||||||
Continuing operations | $ | 0.54 | $ | 0.65 | ||||
Discontinued operations | $ | - | $ | (0.07 | ) | |||
Net | $ | 0.54 | $ | 0.57 | ||||
Weighted average number of common shares outstanding | ||||||||
Basic | 48,254,950 | 53,937,948 | ||||||
Diluted | 48,771,743 | 54,597,740 | ||||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||
(dollars in thousands) | ||||||
March 31, |
December 31, | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 61,031 | $ | 68,905 | ||
Trade receivables, net | 205,893 | 184,810 | ||||
Inventories | 89,347 | 92,969 | ||||
Other current assets | 80,892 | 79,052 | ||||
Current assets of discontinued businesses | 107 | 107 | ||||
Total current assets | 437,270 | 425,843 | ||||
Property, plant and equipment, net | 740,225 | 738,030 | ||||
Goodwill, net | 198,882 | 197,561 | ||||
Other intangibles, net | 90,454 | 93,437 | ||||
Deferred tax asset | 40,523 | 44,804 | ||||
Other assets | 47,045 | 57,659 | ||||
Long-term assets of discontinued businesses | 959 | 986 | ||||
Total assets | $ | 1,555,358 | $ | 1,558,320 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Current portion of long-term debt & capital leases | $ | 29,575 | $ | 14,758 | ||
Accounts payable | 32,353 | 34,332 | ||||
Accrued compensation | 40,199 | 41,602 | ||||
Deferred revenue | 58,195 | 56,530 | ||||
Accrued liabilities | 47,889 | 54,377 | ||||
Other current liabilities | 14,461 | 14,033 | ||||
Current liabilities of discontinued businesses | 1,164 | 1,165 | ||||
Total current liabilities | 223,836 | 216,797 | ||||
Long-term debt & capital leases | 674,743 | 703,187 | ||||
Other long-term liabilities | 99,822 | 108,451 | ||||
Long-term liabilities of discontinued businesses | 2,452 | 2,522 | ||||
Total liabilities | 1,000,853 | 1,030,957 | ||||
Non-controlling interests | 1,906 | 1,780 | ||||
Total equity | 554,505 | 527,363 | ||||
Total liabilities and equity | $ | 1,555,358 | $ | 1,558,320 | ||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) | ||||||||
(dollars in thousands) | ||||||||
Three Months Ended | ||||||||
March 31, |
March 26, | |||||||
Research Models and Services | ||||||||
Net sales | $ | 183,152 | $ | 173,371 | ||||
Gross margin | 82,196 | 73,839 | ||||||
Gross margin as a % of net sales | 44.9 | % | 42.6 | % | ||||
Operating income | 59,467 | 51,742 | ||||||
Operating income as a % of net sales | 32.5 | % | 29.8 | % | ||||
Depreciation and amortization | 8,942 | 9,269 | ||||||
Capital expenditures | 12,900 | 4,403 | ||||||
Preclinical Services | ||||||||
Net sales | $ | 102,829 | $ | 112,472 | ||||
Gross margin | 22,016 | 28,799 | ||||||
Gross margin as a % of net sales | 21.4 | % | 25.6 | % | ||||
Operating income | 4,174 | 9,306 | ||||||
Operating income as a % of net sales | 4.1 | % | 8.3 | % | ||||
Depreciation and amortization | 11,060 | 11,996 | ||||||
Capital expenditures | 1,212 | 2,387 | ||||||
Unallocated Corporate Overhead | $ | (19,901 | ) | $ | (18,797 | ) | ||
Total | ||||||||
Net sales | $ | 285,981 | $ | 285,843 | ||||
Gross margin | 104,212 | 102,638 | ||||||
Gross margin as a % of net sales | 36.4 | % | 35.9 | % | ||||
Operating income | 43,740 | 42,251 | ||||||
Operating income as a % of net sales | 15.3 | % | 14.8 | % | ||||
Depreciation and amortization | 20,002 | 21,265 | ||||||
Capital expenditures | 14,112 | 6,790 | ||||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||
RECONCILIATION OF GAAP TO NON-GAAP | ||||||||
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) | ||||||||
(dollars in thousands) | ||||||||
Three Months Ended | ||||||||
March 31, |
March 26, | |||||||
Research Models and Services | ||||||||
Net sales | $ | 183,152 | $ | 173,371 | ||||
Operating income | 59,467 | 51,742 | ||||||
Operating income as a % of net sales | 32.5 | % | 29.8 | % | ||||
Add back: | ||||||||
Amortization related to acquisitions | 1,500 | 1,707 | ||||||
Severance related to cost-savings actions | - | 229 | ||||||
Impairment and other items (2) | - | 463 | ||||||
Operating income, excluding specified charges (Non-GAAP) | $ | 60,967 | $ | 54,141 | ||||
Non-GAAP operating income as a % of net sales | 33.3 | % | 31.2 | % | ||||
Preclinical Services | ||||||||
Net sales | $ | 102,829 | $ | 112,472 | ||||
Operating income | 4,174 | 9,306 | ||||||
Operating income as a % of net sales | 4.1 | % | 8.3 | % | ||||
Add back: | ||||||||
Amortization related to acquisitions | 2,996 | 3,673 | ||||||
Severance related to cost-savings actions | 911 | 257 | ||||||
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas | 1,054 | 2,646 | ||||||
Operating income, excluding specified charges (Non-GAAP) | $ | 9,135 | $ | 15,882 | ||||
Non-GAAP operating income as a % of net sales | 8.9 | % | 14.1 | % | ||||
Unallocated Corporate Overhead | $ | (19,901 | ) | $ | (18,797 | ) | ||
Add back: | ||||||||
Severance related to cost-savings actions | - | 6 | ||||||
Costs related to PCS China | - | 141 | ||||||
Costs associated with the evaluation of acquisitions | 232 | - | ||||||
Convertible debt accounting (3) | 53 | 53 | ||||||
Unallocated corporate overhead, excluding specified charges (Non-GAAP) | $ | (19,616 | ) | $ | (18,597 | ) | ||
Total | ||||||||
Net sales | $ | 285,981 | $ | 285,843 | ||||
Operating income | 43,740 | 42,251 | ||||||
Operating income as a % of net sales | 15.3 | % | 14.8 | % | ||||
Add back: | ||||||||
Amortization related to acquisitions | 4,496 | 5,380 | ||||||
Severance related to cost-savings actions | 911 | 492 | ||||||
Impairment and other items (2) | - | 463 | ||||||
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas | 1,054 | 2,787 | ||||||
Costs associated with the evaluation of acquisitions | 232 | - | ||||||
Convertible debt accounting (3) | 53 | 53 | ||||||
Operating income, excluding specified charges (Non-GAAP) | $ | 50,486 | $ | 51,426 | ||||
Non-GAAP operating income as a % of net sales | 17.7 | % | 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 months ended
(3) 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 | ||||||||
March 31, |
March 26, | |||||||
Net income attributable to common shareholders | $ | 26,439 | $ | 31,335 | ||||
Less: Discontinued operations | (77 | ) | 3,945 | |||||
Net income from continuing operations | 26,362 | 35,280 | ||||||
Add back: | ||||||||
Amortization related to acquisitions | 4,496 | 5,380 | ||||||
Severance related to cost-savings actions | 911 | 492 | ||||||
Impairment and other items (2) | - | 463 | ||||||
Operating losses for PCS China, PCS Massachusetts and PCS Arkansas | 1,362 | 2,787 | ||||||
Costs associated with the evaluation of acquisitions | 232 | - | ||||||
Loss on sale of auction rate securities | 712 | - | ||||||
Convertible debt accounting, net (3) | 3,497 | 3,333 | ||||||
Tax benefit from disposition of Phase 1 clinical business | - | (11,111 | ) | |||||
Tax effect | (3,659 | ) | (3,482 | ) | ||||
Net income, excluding specified charges (Non-GAAP) | $ | 33,913 | $ | 33,142 | ||||
Weighted average shares outstanding - Basic | 48,254,950 | 53,937,948 | ||||||
Effect of dilutive securities: | ||||||||
Stock options and contingently issued restricted stock | 516,793 | 659,792 | ||||||
Weighted average shares outstanding - Diluted | 48,771,743 | 54,597,740 | ||||||
Basic earnings per share | $ | 0.55 | $ | 0.58 | ||||
Diluted earnings per share | $ | 0.54 | $ | 0.57 | ||||
Basic earnings per share, excluding specified charges (Non-GAAP) | $ | 0.70 | $ | 0.61 | ||||
Diluted earnings per share, excluding specified charges (Non-GAAP) | $ | 0.70 | $ | 0.61 | ||||
(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 months ended
(3) The three months ended
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | |||||||||
RECONCILIATION OF NET SALES GROWTH (YEAR-OVER-YEAR) EXCLUDING THE IMPACT OF FOREIGN EXCHANGE (FX) (1) | |||||||||
For the Three Months Ended March 31, 2012 | |||||||||
Total CRL |
RMS Segment |
PCS Segment | |||||||
Net sales growth, reported | 0.0 | % | 5.6 | % | (8.6 | %) | |||
Impact of foreign exchange | (1.0 | %) | (0.9 | %) | (1.0 | %) | |||
Net sales growth, constant currency | 1.0 | % | 6.5 | % | (7.6 | %) | |||
(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.
Source:
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