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Charles River Laboratories Announces Fourth-Quarter and Full-Year 2017 Results from Continuing Operations and Provides 2018 Guidance
– Fourth-Quarter Revenue of
– Fourth-Quarter GAAP Loss per Share of
– Full-Year GAAP Earnings per Share of
– Provides 2018 Guidance –
– ANNOUNCES DEFINITIVE AGREEMENT TO ACQUIRE MPI RESEARCH –
The addition of a 53rd week at the end of 2016, which is
periodically required to align to a
On a GAAP basis, the fourth-quarter net loss from continuing operations
attributable to common shareholders was
On a non-GAAP basis, net income from continuing operations was
quarter diluted earnings per share on a non-GAAP basis were
On both a GAAP and non-GAAP basis, the gain from the Company’s venture
capital investments contributed
“We are continuing to strategically expand our portfolio with the
intended acquisition of
Fourth-Quarter Segment Results
Research Models and Services (RMS)
Revenue for the RMS segment was
In the fourth quarter of 2017, the RMS segment’s GAAP operating margin
decreased to 10.5% from 26.7% in the fourth quarter of 2016. The GAAP
operating margin decline was related primarily to an asset impairment
and related charges associated with the planned closure of the Company’s
research model production site in
Discovery and Safety Assessment (DSA)
Revenue from continuing operations for the DSA segment was
In the fourth quarter of 2017, the DSA segment’s GAAP operating margin increased to 18.6% from 18.1% in the fourth quarter of 2016. The GAAP operating margin increase was due primarily to higher site consolidation costs in the fourth quarter of 2016, associated with the Company’s ongoing efficiency initiatives. On a non-GAAP basis, the operating margin decreased to 22.0% from 23.8% in the fourth quarter of 2016. The non-GAAP operating margin decline was driven primarily by study mix and higher staffing costs to support growth. In addition, foreign exchange reduced the DSA operating margin by approximately 80 basis points.
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was
In fourth quarter of 2017, the Manufacturing segment’s GAAP operating margin increased to 34.7% from 31.0% in the fourth quarter of 2016. On a non-GAAP basis, the operating margin increased to 37.6% from 34.2% in the fourth quarter of 2016. The GAAP and non-GAAP operating margin improvements were driven primarily by enhanced manufacturing efficiency and volume leverage from higher revenue in the Microbial Solutions business.
Full-Year Results
For 2017, revenue increased by 10.5% to
On a GAAP basis, net income from continuing operations attributable to
common shareholders was
On a non-GAAP basis, net income from continuing operations was
On both a GAAP and non-GAAP basis, the Company recorded gains from
venture capital investments totaling
Research Models and Services (RMS)
For 2017, RMS revenue was
On a GAAP basis, the RMS segment operating margin decreased to 23.2% in 2017 from 27.6% in 2016. On a non-GAAP basis, the operating margin decreased to 27.3% in 2017 from 28.4% in 2016.
Discovery and Safety Assessment (DSA)
For 2017, DSA revenue was
On a GAAP basis, the DSA segment operating margin increased to 18.8% in 2017 from 16.5% in 2016. On a non-GAAP basis, the operating margin decreased to 22.3% in 2017 from 22.7% in 2016.
Manufacturing Support (Manufacturing)
For 2017, Manufacturing revenue was
On a GAAP basis, the Manufacturing segment operating margin increased to 32.3% in 2017 from 29.8% in 2016. On a non-GAAP basis, the operating margin increased to 35.5% in 2017 from 33.8% in 2016.
Stock Repurchase Update
During the fourth quarter of 2017, the Company did not repurchase any
shares of its common stock. For the full-year 2017, the Company
repurchased 957,292 shares for a total of
Acquisition of
In a separate press release today, Charles River announced that it has
entered into a definitive agreement to acquire
MPI is a leading non-clinical contract research organization (CRO) providing comprehensive testing services to biopharmaceutical and medical device companies worldwide. Acquiring MPI will enhance Charles River’s position as a leading global early-stage CRO by strengthening its ability to partner with clients across the drug discovery and development continuum. MPI is expected to be reported as part of Charles River’s Discovery and Safety Assessment segment.
The transaction is expected to be accretive to non-GAAP earnings per
share by approximately
2018 Guidance
The Company is providing the following revenue growth and earnings per
share guidance for 2018, both excluding and including the impact of the
planned acquisition of
Excluding MPI, earnings per share in 2018 are expected to benefit from
both higher revenue and modest operating margin improvement. The 2018
earnings per share guidance includes a gain of
Adjusting for gains from venture capital investments and the excess tax benefit from stock compensation in both 2018 and 2017, year-over-year earnings per share growth is expected to be approximately 119%-127% on a GAAP basis, and 8-11% on a non-GAAP basis.
The Company’s revenue and earnings per share guidance excluding the impact of MPI is as follows:
2018 GUIDANCE EXCLUDING MPI |
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Revenue growth, reported | 7.2% - 8.2% | ||
Less: Contribution from acquisitions (1) | (0.5% - 1.0%) | ||
Less: Favorable impact from foreign exchange | (~1.0%) | ||
Revenue growth, organic (2) | 5.7% - 6.7% | ||
GAAP EPS estimate (3) | $4.71 - $4.86 | ||
Amortization of intangible assets | ~$0.58 | ||
Charges related to global efficiency initiatives (4) | ~$0.08 | ||
Acquisition-related adjustments (5) | ~$0.05 | ||
Non-GAAP EPS estimate | $5.42 - $5.57 | ||
Footnotes to Guidance Table excluding MPI:
(1) The contribution from acquisitions reflects only the completed
acquisitions of Brains On-Line and KWS BioTest.
(2) Organic revenue
growth is defined as reported revenue growth adjusted for acquisitions,
the divestiture of the CDMO business, and foreign currency translation.
Divestiture of the CDMO business is not expected to have a material
impact on the revenue growth rate in 2018.
(3) GAAP EPS guidance
and related adjustments do not include any acquisition-related costs and
charges associated with the planned acquisition of MPI because the
transaction has not been completed and estimates for these costs have
not been finalized.
(4) These charges relate primarily to the
Company’s planned efficiency initiatives including the closure of the
(5) These adjustments are related to the evaluation and
integration of acquisitions completed prior to
The Company is also providing revenue and non-GAAP earnings per share guidance for 2018 including the benefit of the MPI acquisition. This combined guidance assumes that the transaction will be completed early in the second quarter of 2018. MPI is expected to be reported as part of Charles River’s DSA segment.
2018 GUIDANCE INCLUDING MPI |
|||
Charles River revenue growth, reported | 7.2% - 8.2% | ||
Contribution from MPI | 9% - 10% | ||
Revenue growth including MPI, reported | 16% - 18% | ||
Charles River non-GAAP EPS estimate | $5.42 - $5.57 | ||
Contribution from MPI | ~$0.25 | ||
Non-GAAP EPS estimate including MPI (1) | $5.67 - $5.82 | ||
Footnote to Guidance Table including MPI:
(1) Additional items excluded from non-GAAP earnings per share are expected to include MPI acquisition and integration-related costs, which primarily include amortization of intangible assets, transaction, advisory and certain third-party integration costs, as well as certain costs associated with acquisition-related efficiency initiatives and the write-off of deferred financing costs and fees related to debt financing. Estimates of these costs have not been finalized.
Webcast
Charles River has scheduled a live webcast on
Leerink Healthcare Conference Presentation
Charles River will present at the
A live webcast of the presentation will be available through a link that will be posted on ir.criver.com. A webcast replay will be accessible through the same website shortly after the presentation and will remain available for approximately two weeks.
Non-GAAP Reconciliations/Discontinued Operations
The Company reports non-GAAP results in this press release, which exclude often one-time charges and other 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,
including the intended acquisition of
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,” “intend,” “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 the projected future financial performance of Charles River
and our specific businesses, including revenue (on both a reported,
constant-currency, and organic growth basis), operating margins,
earnings per share, the expected impact of foreign exchange rates, and
the expected benefit of our life science venture capital investments;
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, including the
intended acquisition of
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.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||||||||||||
SCHEDULE 1 | ||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||||||||||||||
(in thousands, except for per share data) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | |||||||||||||||||
Total revenue | $ | 478 477 | $ | 466 789 | $ | 1 857 601 | $ | 1 681 432 | ||||||||||||
Cost of revenue (excluding amortization of intangible assets) | 310 728 | 286 908 | 1 155 287 | 1 034 766 | ||||||||||||||||
Selling, general and administrative | 94 560 | 98 481 | 373 446 | 367 548 | ||||||||||||||||
Amortization of intangible assets | 10 457 | 12 309 | 41 370 | 41 699 | ||||||||||||||||
Operating income | 62 732 | 69 091 | 287 498 | 237 419 | ||||||||||||||||
Interest income | 193 | 306 | 690 | 1 314 | ||||||||||||||||
Interest expense | (7 724 | ) | (7 510 | ) | (29 777 | ) | (27 709 | ) | ||||||||||||
Other income, net | 13 852 | 1 838 | 38 544 | 11 897 | ||||||||||||||||
Income from continuing operations, before income taxes | 69 053 | 63 725 | 296 955 | 222 921 | ||||||||||||||||
Provision for income taxes | 98 097 | 18 450 | 171 369 | 66 835 | ||||||||||||||||
Income (loss) from continuing operations, net of income taxes | (29 044 | ) | 45 275 | 125 586 | 156 086 | |||||||||||||||
Income (loss) from discontinued operations, net of income taxes | (23 | ) | (48 | ) | (137 | ) | 280 | |||||||||||||
Net income (loss) | (29 067 | ) | 45 227 | 125 449 | 156 366 | |||||||||||||||
Less: Net income attributable to noncontrolling interests | 782 | 547 | 2 094 | 1 601 | ||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (29 849 | ) | $ | 44 680 | $ | 123 355 | $ | 154 765 | |||||||||||
Earnings (loss) per common share | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Continuing operations attributable to common shareholders | $ | (0,63 | ) | $ | 0,95 | $ | 2,60 | $ | 3,28 | |||||||||||
Discontinued operations | $ | — | $ | — | $ | — | $ | 0,01 | ||||||||||||
Net income (loss) attributable to common shareholders | $ | (0,63 | ) | $ | 0,95 | $ | 2,60 | $ | 3,29 | |||||||||||
Diluted: | ||||||||||||||||||||
Continuing operations attributable to common shareholders | $ | (0,63 | ) | $ | 0,93 | $ | 2,54 | $ | 3,22 | |||||||||||
Discontinued operations | $ | — | $ | — | $ | — | $ | 0,01 | ||||||||||||
Net income (loss) attributable to common shareholders | $ | (0,63 | ) | $ | 0,93 | $ | 2,54 | $ | 3,23 | |||||||||||
Weighted average number of common shares outstanding | ||||||||||||||||||||
Basic | 47 337 | 47 194 | 47 481 | 47 014 | ||||||||||||||||
Diluted | 47 337 | 48 265 | 48 564 | 47 958 | ||||||||||||||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||
SCHEDULE 2 | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in thousands) | ||||||||
December 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 163 794 | $ | 117 626 | ||||
Trade receivables, net | 430 016 | 364 050 | ||||||
Inventories | 114 956 | 95 833 | ||||||
Prepaid assets | 36 544 | 34 315 | ||||||
Other current assets | 81 315 | 45 008 | ||||||
Total current assets | 826 625 | 656 832 | ||||||
Property, plant and equipment, net | 781 973 | 755 827 | ||||||
Goodwill | 804 906 | 787 517 | ||||||
Client relationships, net | 301 891 | 320 157 | ||||||
Other intangible assets, net | 67 871 | 74 291 | ||||||
Deferred tax asset | 22 654 | 28 746 | ||||||
Other assets | 124 002 | 88 430 | ||||||
Total assets | $ | 2 929 922 | $ | 2 711 800 | ||||
Liabilities, Redeemable Noncontrolling Interest and Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt and capital leases | $ | 30 998 | $ | 27 313 | ||||
Accounts payable | 77 838 | 68 485 | ||||||
Accrued compensation | 101 044 | 93 471 | ||||||
Deferred revenue | 117 569 | 127 731 | ||||||
Accrued liabilities | 89 780 | 84 470 | ||||||
Other current liabilities | 44 460 | 26 500 | ||||||
Current liabilities of discontinued operations | 1 815 | 1 623 | ||||||
Total current liabilities | 463 504 | 429 593 | ||||||
Long-term debt, net and capital leases | 1 114 105 | 1 207 696 | ||||||
Deferred tax liabilities | 89 540 | 55 717 | ||||||
Other long-term liabilities | 194 815 | 159 239 | ||||||
Long-term liabilities of discontinued operations | 3 942 | 5 771 | ||||||
Total liabilities | 1 865 906 | 1 858 016 | ||||||
Redeemable noncontrolling interest | 16 609 | 14 659 | ||||||
Total equity attributable to common shareholders | 1 045 080 | 836 768 | ||||||
Noncontrolling interests | 2 327 | 2 357 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 2 929 922 | $ | 2 711 800 | ||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||||||||||||
SCHEDULE 3 | ||||||||||||||||||||
RECONCILIATION OF GAAP TO NON-GAAP | ||||||||||||||||||||
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1) | ||||||||||||||||||||
(in thousands, except percentages) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | |||||||||||||||||
Research Models and Services | ||||||||||||||||||||
Revenue | $ | 120 432 | $ | 124 712 | $ | 493 615 | $ | 494 037 | ||||||||||||
Operating income | 12 696 | 33 310 | 114 712 | 136 365 | ||||||||||||||||
Operating income as a % of revenue | 10,5 | % | 26,7 | % | 23,2 | % | 27,6 | % | ||||||||||||
Add back: | ||||||||||||||||||||
Amortization related to acquisitions | 438 | 577 | 1 676 | 2 353 | ||||||||||||||||
Severance | 429 | 139 | 429 | 757 | ||||||||||||||||
Government billing adjustment and related expenses | — | — | 150 | 634 | ||||||||||||||||
Site consolidation costs, impairments and other items | 17 716 | — | 17 716 | 207 | ||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 18 583 | $ | 716 | $ | 19 971 | $ | 3 951 | ||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 31 279 | $ | 34 026 | $ | 134 683 | $ | 140 316 | ||||||||||||
Non-GAAP operating income as a % of revenue | 26,0 | % | 27,3 | % | 27,3 | % | 28,4 | % | ||||||||||||
Depreciation and amortization | $ | 4 318 | $ | 5 240 | $ | 19 627 | $ | 20 853 | ||||||||||||
Capital expenditures | $ | 7 110 | $ | 5 676 | $ | 20 879 | $ | 11 642 | ||||||||||||
Discovery and Safety Assessment | ||||||||||||||||||||
Revenue | $ | 253 226 | $ | 241 734 | $ | 980 022 | $ | 836 593 | ||||||||||||
Operating income | 47 097 | 43 643 | 184 063 | 138 157 | ||||||||||||||||
Operating income as a % of revenue | 18,6 | % | 18,1 | % | 18,8 | % | 16,5 | % | ||||||||||||
Add back: | ||||||||||||||||||||
Amortization related to acquisitions | 7 775 | 8 675 | 29 882 | 27 743 | ||||||||||||||||
Severance | — | 197 | 356 | 7 684 | ||||||||||||||||
Acquisition related adjustments (2) | 630 | 872 | 2 933 | 5 189 | ||||||||||||||||
Site consolidation costs, impairments and other items | 94 | 4 062 | 929 | 11 341 | ||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 8 499 | $ | 13 806 | $ | 34 100 | $ | 51 957 | ||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 55 596 | $ | 57 449 | $ | 218 163 | $ | 190 114 | ||||||||||||
Non-GAAP operating income as a % of revenue | 22,0 | % | 23,8 | % | 22,3 | % | 22,7 | % | ||||||||||||
Depreciation and amortization | $ | 20 688 | $ | 20 588 | $ | 79 355 | $ | 71 816 | ||||||||||||
Capital expenditures | $ | 11 064 | $ | 13 633 | $ | 36 616 | $ | 27 493 | ||||||||||||
Manufacturing Support | ||||||||||||||||||||
Revenue | $ | 104 819 | $ | 100 343 | $ | 383 964 | $ | 350 802 | ||||||||||||
Operating income | 36 338 | 31 096 | 123 903 | 104 543 | ||||||||||||||||
Operating income as a % of revenue | 34,7 | % | 31,0 | % | 32,3 | % | 29,8 | % | ||||||||||||
Add back: | ||||||||||||||||||||
Amortization related to acquisitions | 2 244 | 3 283 | 9 812 | 12 650 | ||||||||||||||||
Severance (3) | 873 | — | 2 493 | 31 | ||||||||||||||||
Acquisition related adjustments (2) | — | (55 | ) | 26 | 1 090 | |||||||||||||||
Site consolidation costs, impairments and other items | — | — | — | 301 | ||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 3 117 | $ | 3 228 | $ | 12 331 | $ | 14 072 | ||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 39 455 | $ | 34 324 | $ | 136 234 | $ | 118 615 | ||||||||||||
Non-GAAP operating income as a % of revenue | 37,6 | % | 34,2 | % | 35,5 | % | 33,8 | % | ||||||||||||
Depreciation and amortization | $ | 5 572 | $ | 6 884 | $ | 22 893 | $ | 25 566 | ||||||||||||
Capital expenditures | $ | 8 077 | $ | 4 000 | $ | 15 188 | $ | 12 247 | ||||||||||||
Unallocated Corporate Overhead | $ | (33 399 | ) | $ | (38 958 | ) | $ | (135 180 | ) | $ | (141 646 | ) | ||||||||
Add back: | ||||||||||||||||||||
Acquisition related adjustments (2) | 1 189 | 2 552 | $ | 3 728 | $ | 15 608 | ||||||||||||||
Total non-GAAP adjustments to operating expense | $ | 1 189 | $ | 2 552 | $ | 3 728 | $ | 15 608 | ||||||||||||
Unallocated corporate overhead, excluding non-GAAP adjustments | $ | (32 210 | ) | $ | (36 406 | ) | $ | (131 452 | ) | $ | (126 038 | ) | ||||||||
Total | ||||||||||||||||||||
Revenue | $ | 478 477 | $ | 466 789 | $ | 1 857 601 | $ | 1 681 432 | ||||||||||||
Operating income | $ | 62 732 | $ | 69 091 | $ | 287 498 | $ | 237 419 | ||||||||||||
Operating income as a % of revenue | 13,1 | % | 14,8 | % | 15,5 | % | 14,1 | % | ||||||||||||
Add back: | ||||||||||||||||||||
Amortization related to acquisitions | 10 457 | 12 535 | 41 370 | 42 746 | ||||||||||||||||
Severance | 1 302 | 336 | 3 278 | 8 472 | ||||||||||||||||
Acquisition related adjustments (2) | 1 819 | 3 369 | 6 687 | 21 887 | ||||||||||||||||
Government billing adjustment and related expenses | — | — | 150 | 634 | ||||||||||||||||
Site consolidation costs, impairments and other items | 17 810 | 4 062 | 18 645 | 11 849 | ||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 31 388 | $ | 20 302 | $ | 70 130 | $ | 85 588 | ||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 94 120 | $ | 89 393 | $ | 357 628 | $ | 323 007 | ||||||||||||
Non-GAAP operating income as a % of revenue | 19,7 | % | 19,2 | % | 19,3 | % | 19,2 | % | ||||||||||||
Depreciation and amortization | $ | 33 484 | $ | 35 542 | $ | 131 159 | $ | 126 658 | ||||||||||||
Capital expenditures | $ | 28 503 | $ | 25 679 | $ | 82 431 | $ | 55 288 | ||||||||||||
(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 often-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 U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance. | |
(2) | These adjustments are related to the evaluation and integration of acquisitions, which primarily include transaction, third-party integration, and certain compensation costs, and fair value adjustments associated with contingent consideration. | |
(3) | The adjustment for FY 2017 includes transition costs associated with the February 2017 divestiture of the CDMO business. | |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||||||||||||
SCHEDULE 4 | ||||||||||||||||||||
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (UNAUDITED)(1) | ||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 30, 2017 | December 31, 2016 | December 30, 2017 | December 31, 2016 | |||||||||||||||||
Net income (loss) attributable to common shareholders | $ | (29 849 | ) | $ | 44 680 | $ | 123 355 | $ | 154 765 | |||||||||||
Less: Income (loss) from discontinued operations, net of income taxes | (23 | ) | (48 | ) | (137 | ) | 280 | |||||||||||||
Net income (loss) from continuing operations attributable to common shareholders | (29 826 | ) | 44 728 | 123 492 | 154 485 | |||||||||||||||
Add back: | ||||||||||||||||||||
Non-GAAP adjustments to operating income (Refer to Schedule 3) | 31 388 | 20 302 | 70 130 | 85 588 | ||||||||||||||||
Gain on divestiture of CDMO business | — | — | (10 577 | ) | — | |||||||||||||||
Write-off of deferred financing costs and fees related to debt financing | — | — | — | 987 | ||||||||||||||||
Acquisition related adjustments (2) | — | — | — | 815 | ||||||||||||||||
Reversal of an indemnification asset associated with acquisition and corresponding interest (3) | — | — | — | 54 | ||||||||||||||||
Gain on bargain purchase (4) | (277 | ) | 15 | (277 | ) | 15 | ||||||||||||||
Debt forgiveness associated with a prior acquisition (5) | (1 863 | ) | — | (1 863 | ) | — | ||||||||||||||
Tax effect of non-GAAP adjustments: | ||||||||||||||||||||
Tax effect from U.S. Tax Reform (6) | 78 537 | — | 78 537 | — | ||||||||||||||||
Tax effect from divestiture of CDMO business | (300 | ) | — | 17 705 | — | |||||||||||||||
Tax effect of the remaining non-GAAP adjustments | (9 482 | ) | (6 719 | ) | (21 184 | ) | (23 025 | ) | ||||||||||||
Net income from continuing operations attributable to common shareholders, excluding non-GAAP adjustments | $ | 68 177 | $ | 58 326 | $ | 255 963 | $ | 218 919 | ||||||||||||
Weighted average shares outstanding - Basic | 47 337 | 47 194 | 47 481 | 47 014 | ||||||||||||||||
Effect of dilutive securities: | ||||||||||||||||||||
Stock options, restricted stock units, performance share units and restricted stock | 1 290 | 1 071 | 1 083 | 944 | ||||||||||||||||
Weighted average shares outstanding - Diluted | 48 627 | 48 265 | 48 564 | 47 958 | ||||||||||||||||
Earnings (loss) per share from continuing operations attributable to common shareholders | ||||||||||||||||||||
Basic | $ | (0,63 | ) | $ | 0,95 | $ | 2,60 | $ | 3,28 | |||||||||||
Diluted | $ | (0,63 | ) | $ | 0,93 | $ | 2,54 | $ | 3,22 | |||||||||||
Basic, excluding non-GAAP adjustments | $ | 1,44 | $ | 1,24 | $ | 5,39 | $ | 4,66 | ||||||||||||
Diluted, excluding non-GAAP adjustments | $ | 1,40 | $ | 1,21 | $ | 5,27 | $ | 4,56 | ||||||||||||
(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 often-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 U.S. 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 amount represents a $1.5 million charge recorded in connection with the modification of the option to purchase the remaining 13% equity interest in Vital River, partially offset by a $0.7 million gain on remeasurement of previously held equity interest in an entity acquired in a step acquisition. | |
(3) | These amounts represent the reversal of an uncertain tax position and an offsetting indemnification asset primarily related to the acquisition of BioFocus. | |
(4) | The amounts in the current year relate to an immaterial acquisition that represents the excess of the estimated fair value of the net assets acquired over the purchase price. | |
(5) | The amount represents the forgiveness of a liability related to the acquisition of Vital River. | |
(6) | The amounts for 4Q17 and FY 2017 include a $78.5 million estimate for the impact of the enactment of U.S. Tax Reform legislation. The estimated impact of U.S. Tax Reform consists of the one-time transition tax on unrepatriated earnings (also known as the toll tax), withholding and state taxes related to the Company’s withdrawal of its indefinite reinvestment assertion regarding unremitted earnings, and the revaluation of U.S. federal net deferred tax liabilities. The final impact of U.S. Tax Reform may differ from these estimates, due to, among other things, changes in interpretations, analysis, and assumptions made by the Company, additional guidance that may be issued by regulatory agencies, and any updated or changes to estimates the Company utilized to calculate the transition impact. | |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||||||||
SCHEDULE 5 | ||||||||||||||||
RECONCILIATION OF GAAP REVENUE GROWTH | ||||||||||||||||
TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1) | ||||||||||||||||
For the three months ended December 30, 2017 | Total CRL | RMS Segment | DSA Segment | MS Segment | ||||||||||||
Revenue growth, reported | 2,5 | % | (3,4 | )% | 4,8 | % | 4,5 | % | ||||||||
(Increase) Decrease due to foreign exchange | (2,4 | )% | (2,1 | )% | (2,1 | )% | (3,5 | )% | ||||||||
Contribution from acquisitions (2) | (0,7 | )% | — | % | (1,4 | )% | — | % | ||||||||
Impact of CDMO divestiture (3) | 1,1 | % | — | % | — | % | 5,5 | % | ||||||||
Effect of 53rd week in fiscal year 2016 | 5,1 | % | 4,1 | % | 5,5 | % | 5,3 | % | ||||||||
Non-GAAP revenue growth, organic (4) | 5,6 | % | (1,4 | )% | 6,8 | % | 11,8 | % | ||||||||
For the twelve months ended December 30, 2017 | Total CRL | RMS Segment | DSA Segment | MS Segment | ||||||||||||
Revenue growth, reported | 10,5 | % | (0,1 | )% | 17,1 | % | 9,5 | % | ||||||||
(Increase) Decrease due to foreign exchange | — | % | 0,2 | % | 0,2 | % | (0,7 | )% | ||||||||
Contribution from acquisitions (2) | (6,0 | )% | — | % | (11,5 | )% | (1,5 | )% | ||||||||
Impact of CDMO divestiture (3) | 0,8 | % | — | % | — | % | 3,8 | % | ||||||||
Effect of 53rd week in fiscal year 2016 | 1,4 | % | 1,1 | % | 1,7 | % | 1,8 | % | ||||||||
Non-GAAP revenue growth, organic (4) | 6,7 | % | 1,2 | % | 7,5 | % | 12,9 | % | ||||||||
(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 often-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 U.S. 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 contribution from acquisitions reflects only completed acquisitions. | |
(3) | The CDMO business, which was acquired as part of WIL Research on April 4, 2016, was divested on February 10, 2017. This adjustment represents the revenue from the CDMO business for all applicable periods in 2017 and 2016. | |
(4) | Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, the divestiture of the CDMO business, the effect of the 53rd week in fiscal year 2016, and foreign exchange. | |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||
SCHEDULE 6 | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
(in thousands) | ||||||||||
Twelve Months Ended | ||||||||||
December 30, 2017 | December 31, 2016 | |||||||||
Cash flows relating to operating activities | $ | 318 074 | $ | 316 899 | ||||||
Cash flows relating to investing activities | (72 586 | ) | (692 672 | ) | ||||||
Cash flows relating to financing activities | (208 476 | ) | 380 756 | |||||||
Cash flows used in discontinued operations | (1 809 | ) | (2 056 | ) | ||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 11 234 | (2 996 | ) | |||||||
Net change in cash, cash equivalents, and restricted cash | 46 437 | (69 | ) | |||||||
Cash, cash equivalents, and restricted cash, beginning of period (1) | 119 894 | 119 963 | ||||||||
Cash, cash equivalents, and restricted cash, end of period (2) | $ | 166 331 | $ | 119 894 | ||||||
(1) | Includes restricted cash of $2.3 million and $2.0 million as of December 31, 2016 and December 26, 2015, respectively, which are reported in current and long-term other assets within the consolidated balance sheets. | |
(2) | Includes restricted cash balances of $2.5 million and $2.3 million as of December 30, 2017 and December 31, 2016, respectively, which are reported in current and long-term other assets within the consolidated balance sheets. |
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Source:
Charles River Laboratories International, Inc.
Investors:
Susan
E. Hardy, 781-222-6190
Corporate Vice President,
Investor
Relations
susan.hardy@crl.com
or
Media:
Amy
Cianciaruso, 781-222-6168
Corporate Vice President,
Public
Relations
amy.cianciaruso@crl.com