Investor Relations

– Fourth-Quarter Revenue of $329.5 Million and Full-Year 2014 Revenue of $1.30 Billion –

– Fourth-Quarter GAAP Earnings per Share of $0.59 and Non-GAAP Earnings per Share of $0.81 –

– Full-Year GAAP Earnings per Share of $2.70 and Non-GAAP Earnings per Share of $3.46 –

– Provides 2015 Guidance for Constant Currency Revenue Growth of 6-7.5% and Reported Revenue Growth of 1-2.5%; Non-GAAP Earnings per Share of $3.55-$3.65, including Unfavorable Impact from Foreign Exchange of $0.12 per share; GAAP Earnings per Share of $3.15-$3.25 –

WILMINGTON, Mass.--(BUSINESS WIRE)--Feb. 10, 2015-- Charles River Laboratories International, Inc. (NYSE:CRL) today reported its results for the fourth-quarter and full-year 2014 and provided guidance for 2015. For the quarter, revenue from continuing operations was $329.5 million, an increase of 13.9% from $289.2 million in the fourth quarter of 2013. Revenue growth was driven by the Discovery and Safety Assessment and Manufacturing Support segments. The Early Discovery acquisitions in 2014, which include Argenta, BioFocus, and ChanTest, contributed 9.3% to consolidated fourth-quarter revenue growth. Foreign currency translation reduced reported revenue growth by 2.9%.

On a GAAP basis, net income from continuing operations for the fourth quarter of 2014 was $28.5 million, or $0.59 per diluted share, compared to $19.5 million, or $0.40 per diluted share, for the fourth quarter of 2013.

On a non-GAAP basis, net income from continuing operations was $38.5 million for the fourth quarter of 2014, an increase of 9.7% from $35.1 million for the same period in 2013. Fourth-quarter diluted earnings per share on a non-GAAP basis were $0.81, an increase of 11.0% compared to $0.73 per share in the fourth quarter of 2013. Higher revenue was the primary contributor to the earnings per share increase, which was partially offset by a higher tax rate. A gain of $0.03 per share on our limited partnership investments in the fourth quarter of 2014 compared to a $0.01 gain for the same period in 2013.

James C. Foster, Chairman, President and Chief Executive Officer, said, “I am very pleased to say that 2014 was an exceptional year. Our financial results demonstrate what we’ve worked very hard to achieve: the strongest portfolio we’ve ever had, with the ability to support clients from target discovery through preclinical development; deep client relationships, where we are a respected and trusted partner; a streamlined organization, with the flexibility to respond to a changing industry and client requirements; and employees who are committed to providing exceptional service to our clients.”

“Given our strong performance in 2014, and the fact that we believe the company is very well positioned to win new business, we are optimistic about the opportunities in 2015. The potential for expanding strategic relationships, gaining market share in each of our client segments, and implementation of new efficiency and productivity initiatives give us confidence that we can achieve our guidance in 2015 for constant currency revenue growth of 6.0 to 7.5% and non-GAAP EPS in a range from $3.55 to $3.65,” Mr. Foster concluded.

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $117.7 million in the fourth quarter of 2014, a decrease of 3.9% from $122.5 million in the fourth quarter of 2013. Foreign currency translation reduced reported revenue growth by 3.7%. On a constant-currency basis, revenue was essentially unchanged, as higher sales of research models, particularly in North America, were offset by lower sales of research model services, due in part to the termination of an Insourcing Solutions contract with the National Cancer Institute.

In the fourth quarter of 2014, the RMS segment’s GAAP operating margin was 20.1% compared to 15.6% in the fourth quarter of 2013. On a non-GAAP basis, the operating margin increased to 23.2% from 22.9% in the fourth quarter of 2013. The increase was primarily driven by benefits from the Company’s global efficiency initiatives, partially offset by the impact of lower revenue for research model services.

Discovery and Safety Assessment (DSA)

Revenue from continuing operations for the DSA segment was $149.6 million in the fourth quarter of 2014, an increase of 35.4% from $110.5 million in the fourth quarter of 2013. Foreign currency translation reduced reported revenue growth by 1.5%. DSA revenue growth was driven primarily by the Early Discovery acquisitions, which contributed 24.3% to DSA revenue growth in the fourth quarter, as well as low-double-digit revenue growth for the Company’s safety assessment services. Sales to mid-tier clients were robust, and sales to global key accounts also increased.

In the fourth quarter of 2014, the DSA segment’s GAAP operating margin was 14.0% compared to 7.9% in the fourth quarter of 2013. On a non-GAAP basis, the operating margin increased to 19.4% from 16.8% in the fourth quarter of 2013. The non-GAAP operating margin improvement was driven by leverage from higher sales and a foreign exchange benefit due to a weaker Canadian dollar.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $62.3 million in the fourth quarter of 2014, an increase of 10.6% from $56.3 million in the fourth quarter of 2013. Foreign currency translation reduced reported revenue growth by 3.7%. Excluding foreign exchange, Manufacturing revenue increased 14.3% on a constant-currency basis, driven by double-digit growth in the Endotoxin and Microbial Detection business.

In the fourth quarter of 2014, the Manufacturing segment’s GAAP operating margin was 33.0% compared to 26.0% in the fourth quarter of 2013. On a non-GAAP basis, the operating margin increased to 35.0% from 32.1% in the fourth quarter of 2013. The improvement was driven by fixed-cost leverage from higher sales.

Stock Repurchase Update

During the fourth quarter of 2014, the Company did not repurchase any shares of its common stock. For fiscal-year 2014, the Company repurchased 2.1 million shares for a total of $110.6 million. On December 1, 2014, the Company’s Board of Directors increased the stock repurchase authorization by $150 million, to an aggregate amount of $1.15 billion. As of December 27, 2014, the Company had $178.5 million remaining on its stock repurchase authorization.

Full-Year Results

For 2014, revenue increased by 11.3% to $1.30 billion from $1.17 billion in 2013. The Early Discovery acquisitions contributed 6.3% to 2014 revenue growth, while foreign currency translation reduced reported revenue growth by 0.1%.

On a GAAP basis, net income from continuing operations in 2014 was $129.9 million, or $2.70 per diluted share, compared to $105.4 million, or $2.15 per diluted share, in 2013.

On a non-GAAP basis, net income from continuing operations in 2014 was $164.5 million, or $3.46 per diluted share, compared to $142.3 million, or $2.93 per diluted share, in 2013.

Research Models and Services (RMS)

For 2014, RMS revenue was $507.3 million, a decrease of 0.8% from $511.4 million in 2013. Foreign currency translation reduced reported revenue growth by 0.7%. On a GAAP basis, the RMS segment operating margin was 23.9% in 2014, compared to 22.8% in 2013. On a non-GAAP basis, the operating margin was 26.9% in 2014, essentially unchanged from 2013.

Discovery and Safety Assessment (DSA)

For 2014, DSA revenue was $538.2 million, an increase of 24.5% from $432.4 million in 2013. The Early Discovery acquisitions contributed 17.0% to 2014 revenue growth, and foreign currency translation benefited reported revenue growth by 0.3%. On a GAAP basis, the DSA segment operating margin was 13.0% in 2014, compared to 11.0% in 2013. On a non-GAAP basis, the operating margin increased to 17.4% in 2014 from 15.6% in 2013.

Manufacturing Support (Manufacturing)

For 2014, Manufacturing revenue was $252.1 million, an increase of 13.7% from $221.8 million in 2013. Foreign currency translation benefited reported revenue growth by 0.2%. On a GAAP basis, the Manufacturing segment operating margin was 31.2% in 2014, compared to 27.6% in 2013. On a non-GAAP basis, the operating margin increased to 33.4% in 2014 from 31.0% in 2013.

2015 Guidance

The Company is providing the following financial guidance for 2015. Revenue growth is expected to be 6.0% to 7.5% on a constant-currency basis. Based on current rates, foreign currency translation is expected to reduce revenue growth by approximately 5%, which would result in reported revenue growth of 1.0% to 2.5%. Revenue growth in 2015 will be driven by the DSA and Manufacturing segments.

Earnings per share in 2015 are expected to benefit from higher sales and the Company’s ongoing global productivity and efficiency initiatives. These benefits are expected to be partially offset by foreign exchange, which is expected to reduce 2015 earnings per share by approximately $0.12. The Company’s 2014 earnings per share include a $0.12 gain on limited-partnership investments; 2015 guidance includes an estimated $0.03 benefit from these investments.

Webcast

Charles River Laboratories has scheduled a live webcast on Wednesday, February 11, at 9:00 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.

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 and integrating acquisitions; charges, gains and losses attributable to businesses or properties we plan to close, consolidate or divest; severance costs associated with our efficiency initiatives; accelerated depreciation charges related to the consolidation of research model production operations; a charge related to a dispute with a large model supplier; gains related to the sales of former research model facilities; write-offs of deferred financing costs and fees related to debt refinancing; costs related to a U.S. government billing adjustment and related expenses; 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 revenue 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 revenue on a constant currency basis allows investors to measure our revenue growth exclusive 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 revenue (on both a reported and constant currency basis), operating margins, 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; our expectations with respect to the impact of acquisitions on the Company, our service offerings, strategic relationships, revenue, revenue growth rates, and earnings; the development and performance of our services and products; market and industry conditions including the outsourcing of these services and spending trends by our clients; 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 revenue, the impact of foreign exchange, and enhanced efficiency initiatives. 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 efficiency initiatives 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 clients; the ability to convert backlog to revenue; 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 25, 2014, 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

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.

Source: Charles River Laboratories International, Inc.

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