Investor Relations

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.

CR-000172

News Release

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Charles River Laboratories Announces Record Second-Quarter 2004 Results and Increases Guidance for 2004

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    - Sales Increase 17% and Operating Income Increases 26% -

    - Operating Margin Reaches a Record 24.5% -

    - Earnings Per Share Rise 24% to $0.52 -

WILMINGTON, Mass.--(BUSINESS WIRE)--July 28, 2004-- Charles River Laboratories International, Inc. (NYSE:CRL) today reported second-quarter 2004 net sales of $180.2 million, a 16.7% increase over the $154.4 million reported in the second quarter of 2003. Net income for the second quarter of 2004 increased 27.9% to $26.3 million, or $0.52 per diluted share, from $20.6 million, or $0.42 per diluted share, in the second quarter of 2003. Last year's second-quarter results included a $0.9 million charge, or $0.01 per diluted share, resulting from a cost reduction program undertaken in the Development and Safety Testing segment.

Operating income for the second quarter of 2004 rose 26.3% to $44.2 million from $35.0 million in the second quarter of last year. The Company's operating margin increased to 24.5% compared to 22.7% in the second quarter of last year. The operating margin increase resulted from higher sales and improved operating efficiency in both the Research Models and Services segment and the Development and Safety Testing segment.

James C. Foster, Chairman, President and Chief Executive Officer said, "We are very pleased with our second-quarter results. The value of our portfolio of essential products and services and our focused sales efforts are evident in our performance. Both business segments delivered strong results, benefiting from increased spending on drug discovery and development by pharmaceutical and biotechnology companies and by academic research institutions. By maintaining a consistent focus on expense management, we have leveraged significantly higher sales to generate an operating margin of 24.5%, the highest margin ever achieved by the Company."

Mr. Foster continued, "The investment we made over the last eighteen months to streamline our Development Services business has positioned us extremely well to compete effectively in the robust market for outsourced drug development services. We are optimistic about our future performance both because of our positioning and our belief that the current market climate will continue through 2004 and beyond."

Business Segments Results

Second-quarter 2004 net sales for the Research Models and Services (RMS) segment of the business were $113.3 million compared to $102.5 million last year, an increase of 10.6%. The double-digit growth reflected higher prices, increased customer demand, and favorable foreign currency translation. Increased capacity utilization resulted in a gross margin of 43.6%, compared to 42.0% in the second quarter of last year. Higher sales and increased operating efficiencies resulted in a 19.5% increase in operating income, to $38.0 million in the second quarter with an operating margin of 33.5%, compared to last year's $31.8 million and 31.0%.

Net sales for the Development and Safety Testing (DST) segment rose 28.9% in the second quarter, to $66.9 million from $51.9 million in the same period last year. The Company's efforts to integrate and harmonize its Development Services business and to focus its sales efforts positioned it to benefit from stronger customer demand for outsourced services, particularly in general and specialty toxicology. The segment's gross margin increased to 37.7% from 31.9% in the second quarter of 2003. Operating income doubled to $14.4 million from $7.3 million in the second quarter of last year. The second-quarter operating margin increased to 21.6% from 14.1% last year, reflecting greater operating efficiencies as a result of higher sales, and the benefit of efforts to streamline the Development Services business.

Year-to-Date Results

Net sales for the first six months of 2004 were $352.8 million, a 15.1% increase over the $306.5 million reported in the same period last year. As a result of higher net sales and increased capacity utilization, the gross margin rose to 40.7% from 38.4% in the first half of 2003. Operating income increased 21.6% to $83.7 million from $68.9 million last year, and the operating margin increased to 23.7% from 22.5%, due to improved operating performance from the DST segment.

Diluted earnings per share for the first half of 2004 increased to $0.88 from $0.82 in the same period last year, or 7.3%. Non-GAAP earnings per diluted share rose 17.9% in the first six months of 2004, to $0.99 from $0.84 in the first half of 2003. Non-GAAP earnings per share for the first six months of 2004 excluded a net charge of $5.8 million, or approximately $0.11 per diluted share, related to the write-off of a deferred tax asset and release of a related tax valuation allowance. Non-GAAP earnings per share for the first six months of 2003 excluded a net charge of $1.7 million, or approximately $0.02 per diluted share, as a result of an asset impairment charge of $3.7 million related to the scale-back of a biopharmaceutical production facility, a French litigation settlement in the Company's favor of $2.9 million, and a charge of $0.9 million for expenses associated with cost reduction initiatives. Charles River believes that the foregoing comparison of non-GAAP earnings is useful to investors in assessing the performance of the business on an ongoing basis, since the specified charges are unusual in nature.

Merger with Inveresk Research Group

On July 1, 2004, Charles River Laboratories and Inveresk Research Group announced that their respective Boards of Directors had approved a definitive merger agreement to create a leading global provider of essential preclinical and clinical drug development products and services to the pharmaceutical and biotechnology industry. On July 21, 2004, the companies announced that the Federal Trade Commission had granted early termination of the waiting period required by Hart-Scott-Rodino in connection with the merger. Subject to additional regulatory and shareholder approvals, the Company expects the merger to close in the fourth quarter of 2004.

2004 Outlook

The following forward-looking guidance is based on current foreign exchange rates and is exclusive of the Inveresk merger or any acquisitions which may occur. Since it is uncertain when in the fourth quarter the Inveresk merger would occur, it is impracticable to provide an estimate of the combined company's operating results or any related GAAP reconciliations. Closing of the merger with Inveresk could cause actual results to be materially different from the forward-looking guidance.

For 2004, the Company anticipates that net sales will increase between 12% and 16%, higher than previous guidance of 9% to 13% due to the more robust business environment. As a result of stronger sales growth, the Company now expects 2004 earnings per diluted share to be in a range of $1.79 to $1.85. Excluding the one-time net charge associated with the reorganization of the European operations, non-GAAP earnings per diluted share are expected to be $1.90 to $1.96, compared to the Company's earlier guidance of $1.83 to $1.89.

For the third quarter of 2004, the Company expects net sales to increase between 14% and 16% due to higher sales in both the RMS and DST business segments. Based on higher net sales and operating efficiencies, earnings per diluted share are expected to be in a range of $0.48 to $0.50.

Webcast

Charles River Laboratories has scheduled a live webcast on Thursday, July 29, at 8:30 a.m. EDT to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. The webcast will be available until 5:00 p.m. EDT on August 5, 2004.

Charles River Laboratories, based in Wilmington, Massachusetts, is a leading provider of critical research tools and integrated support services that enable innovative and efficient drug discovery and development. The Company is a global leader in providing the animal research models required in research and development for new drugs, devices and therapies. The Company also offers a broad and growing portfolio of products and services that enable customers to reduce cost, increase speed, and enhance productivity and effectiveness in drug discovery and development. Charles River's customer base spans over 50 countries, and includes all of the major pharmaceutical companies, biotechnology companies, and many leading hospitals and academic institutions.

Caution Concerning Forward-Looking Statements. This document 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," "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 are based on management's current expectations, and involve a number of risks and uncertainties that could cause actual results to differ materially from those stated or implied by the forward-looking statements, and the Company expressly does not undertake any duty to update forward-looking statements, which speak only as of the date of this document. Those risks and uncertainties include, but are not limited to: the proposed merger with Inveresk; a decrease in pre-clinical research and development spending or a decrease in the level of outsourced services; acquisition integration risks; 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 the Company's Annual Report on Form 10-K as filed on March 10, 2004, with the Securities and Exchange Commission.

Additional Information

This press release may be deemed to be solicitation material in respect of the proposed merger of Charles River and Inveresk. In connection with the proposed transaction, a registration statement on Form S-4 will be filed with the SEC. SHAREHOLDERS OF CHARLES RIVER AND SHAREHOLDERS OF INVERESK ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus will be mailed to shareholders of Charles River and shareholders of Inveresk. Investors and security holders will be able to obtain the documents free of charge at the SEC's website, www.sec.gov, from Charles River Laboratories, 251 Ballardvale Street, Wilmington, MA 01887, Attention: General Counsel, or from Inveresk Research Group, 11000 Weston Parkway, Cary, North Carolina 27513, Attention: Secretary. In addition, shareholders may access copies of the documentation filed with the SEC by Charles River on Charles River's website at www.criver.com and shareholders may access copies of the documents filed with the SEC by Inveresk on Inveresk's website at www.inveresk.com.

Charles River, Inveresk and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from their respective shareholders in respect of the proposed transactions. Information regarding Charles River's directors and executive officers is available in Charles River's proxy statement for its 2004 annual meeting of shareholders, which was filed with the SEC on April 9, 2004, and information regarding Inveresk's directors and executive officers is available in Inveresk's proxy statement for its 2004 annual meeting of shareholders, which was filed with the SEC on March 31, 2004. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.


            CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
           (dollars in thousands, except for per share data)


                           Three Months Ended      Six Months Ended
                         ---------------------- ----------------------
                           June 26,   June 28,    June 26,   June 28,
                             2004       2003        2004       2003

Total net sales            $180,193   $154,364    $352,830   $306,489
Cost of products sold
 and services provided      105,572     94,779     209,381    188,922
                         ---------------------- ----------------------
Gross margin                 74,621     59,585     143,449    117,567
Selling, general and
 administrative              29,220     23,349      57,340     45,488
Other operating
 expenses, net                    -          -           -        747
Amortization of
 intangibles                  1,198      1,230       2,389      2,478
                         ---------------------- ----------------------
Operating income             44,203     35,006      83,720     68,854
Interest income (expense)    (1,310)    (1,713)     (2,725)    (3,299)
Other, net                      (73)       434         127        416
                         ---------------------- ----------------------
Income before income
 taxes and minority
 interests                   42,820     33,727      81,122     65,971
Provision for income
 taxes                       16,058     12,985      36,210     25,399
                         ---------------------- ----------------------
Income before minority
 interests                   26,762     20,742      44,912     40,572
Minority interests             (462)      (181)     (1,018)      (657)
                         ---------------------- ----------------------
Net income                  $26,300    $20,561     $43,894    $39,915
                         ====================== ======================

Earnings per common share
  Basic                       $0.57      $0.45       $0.96      $0.88
  Diluted                     $0.52      $0.42       $0.88      $0.82
Weighted average number of
 common shares outstanding
  Basic                  46,046,675 45,319,310  45,950,897 45,248,913
  Diluted                52,586,287 51,239,609  52,342,036 51,220,986



            CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
           CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                        (dollars in thousands)


                                                June 26, December 27,
                                                  2004       2003
Assets
Current assets
   Cash and cash equivalents                    $224,153  $182,331
   Marketable securities                          10,506    13,156
   Trade receivables, net                        124,978   111,514
   Inventories                                    54,676    52,370
   Other current assets                           10,297    11,517
                                                --------- ---------
      Total current assets                       424,610   370,888
Property, plant and equipment, net               205,885   203,458
Goodwill, net                                    113,691   105,308
Other intangibles, net                            32,158    30,415
Deferred tax asset                                53,126    61,603
Other assets                                      32,914    27,882
                                                --------- ---------
      Total assets                              $862,384  $799,554
                                                ========= =========

Liabilities and Shareholders' Equity
Current liabilities
   Accounts payable                              $16,451   $19,433
   Accrued compensation                           29,811    27,251
   Deferred income                                33,603    30,846
   Other current liabilities                      42,496    36,821
                                                --------- ---------
      Total current liabilities                  122,361   114,351
Long-term debt                                   185,500   185,600
Other long-term liabilities                       25,977    24,804
                                                --------- ---------
      Total liabilities                          333,838   324,755
                                                --------- ---------
Minority interests                                 9,484    10,176
Total shareholders' equity                       519,062   464,623
                                                --------- ---------
Total liabilities and shareholders' equity      $862,384  $799,554
                                                ========= =========


            CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
           SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
                        (dollars in thousands)



                                 Three Months Ended  Six Months Ended
                                 ------------------ ------------------
                                 June 26, June 28,  June 26, June 28,
                                   2004     2003      2004     2003
Research Models and Services
 Net sales                       $113,334 $102,500  $226,800 $205,623
 Gross margin                      49,401   43,054    98,289   87,939
 Gross margin as a % of
  net sales                         43.6%    42.0%     43.3%    42.8%
 Operating income                  38,007   31,798    74,486   69,036
 Operating income as a % of net
  sales                             33.5%    31.0%     32.8%    33.6%
 Depreciation and amortization      4,144    3,940     8,286    7,530
 Capital expenditures               4,319    2,363     7,490    4,527

Development and Safety Testing
 Net sales                        $66,859  $51,864  $126,030 $100,866
 Gross margin                      25,220   16,531    45,160   29,628
 Gross margin as a % of
  net sales                         37.7%    31.9%     35.8%    29.4%
 Operating income                  14,431    7,320    24,277    8,251
 Operating income as a % of
  net sales                         21.6%    14.1%     19.3%     8.2%
 Depreciation and amortization      3,552    3,191     7,247    6,526
 Capital expenditures               3,023    6,855     4,377    9,927


Unallocated Corporate Overhead    $(8,235) $(4,112) $(15,043) $(8,433)


Total
 Net sales                       $180,193 $154,364  $352,830 $306,489
 Gross margin                      74,621   59,585   143,449  117,567
 Gross margin as a % of
  net sales                         41.4%    38.6%     40.7%    38.4%
 Operating income                  44,203   35,006    83,720   68,854
 Operating income as a % of
  net sales                         24.5%    22.7%     23.7%    22.5%
 Depreciation and amortization      7,696    7,131    15,533   14,056
 Capital expenditures               7,342    9,218    11,867   14,454



            CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
         RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
           (dollars in thousands, except for per share data)


                           Three Months Ended      Six Months Ended
                         ---------------------- ----------------------
                           June 26,   June 28,    June 26,   June 28,
                             2004       2003        2004       2003
                         ---------------------------------------------

Net income                  $26,300    $20,561     $43,894    $39,915
Add back:
Deferred tax asset write-off      -          -       7,900          -
Valuation allowance release       -          -      (2,111)         -
Impairment charge                 -          -           -      3,655
Litigation settlement             -          -           -     (2,908)
Severance charges                 -        871           -        871
Tax effect of impairment
 charge, litigation
 settlement and
 severance charges                -       (335)          -       (623)
                         ---------------------- ----------------------
Net income, excluding
 specified charges
 (Non-GAAP)                 $26,300    $21,097     $49,683    $40,910
                         ====================== ======================

Calculation of earnings
 per common share,
 excluding specified
 charges (Non-GAAP):
Net income for purposes
 of calculating
 earnings per share,
 excluding specified
 charges (Non-GAAP)         $26,300    $21,097     $49,683    $40,910
After-tax equivalent
 interest expense on
 3.5% senior convertible
 debentures                     995        995       1,991      1,991
                         ---------------------- ----------------------
Income for purposes of
 calculating fully
 diluted earnings per
 share, excluding
 specified charges
 (Non-GAAP)                 $27,295    $22,092     $51,674    $42,901
                         ====================== ======================

Weighted average shares
 outstanding - Basic     46,046,675 45,319,310  45,950,897 45,248,913
Effect of dilutive
 securities: 3.5% senior
 convertible debentures   4,759,455  4,759,455   4,759,455  4,759,455
Stock options and
 contingently issued
 restricted stock         1,440,297    747,095   1,294,509    775,189
Warrants                    339,860    413,749     337,175    437,429
                         ---------------------- ----------------------
Weighted average shares
 outstanding - Diluted   52,586,287 51,239,609  52,342,036 51,220,986
                         ====================== ======================

Basic earnings per share      $0.57      $0.45       $0.96      $0.88
Diluted earnings per share    $0.52      $0.42       $0.88      $0.82

Basic earnings per share,
 excluding specified
 charges (Non-GAAP)           $0.57      $0.47       $1.08      $0.90
Diluted earnings per
 share, excluding specified
 charges (Non-GAAP)           $0.52      $0.43       $0.99      $0.84


Charles River management believes that non-GAAP financial results
provide useful information to investors in being able to assess the
Company's ongoing operations without the effect of one-time charges.
Such information provides investors with the ability to assess the
Company's operating performance. The Company intends to continue to
assess the potential value of reporting non-GAAP results consistent
with applicable rules and regulations.

    CONTACT: Investor Contact:
             Charles River Laboratories International, Inc.
             Susan E. Hardy, 978-658-6000 Ext. 1616
             Director, Investor Relations

    SOURCE: Charles River Laboratories International, Inc.

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