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Operating income in the fourth quarter of 2002 rose 38.2% to $31.0 million from $22.4 million in the same period in 2001. The Company's operating margin rose to 21.7% compared to 17.8% achieved in the fourth quarter of last year, reflecting higher sales in both the Research Models and Biomedical Products and Services segments and operating efficiencies resulting from the increased volume.
For 2002, net sales increased 19.1% to $554.6 million from $465.6 million in 2001. Significantly higher sales yielded a gross margin of 37.7% compared to 35.9% last year. Higher sales, operating efficiencies, and the January 1, 2002, implementation of SFAS 142, "Goodwill and Other Intangible Assets," resulted in operating income of $122.3 million, a 35.4% increase over the $90.3 million reported in 2001 and a 22.0% operating margin compared to 19.4% in 2001. Income before extraordinary items was $68.4 million, a 68.2% increase over the $40.7 million reported in 2001 and diluted earnings per share before extraordinary item were $1.42, a gain of 54.3% from the $0.92 per diluted share in 2001.
James C. Foster, Chairman, President and Chief Executive Officer said, "For the fourth quarter and full year 2002, Charles River has again delivered substantial growth in sales, margins, and earnings per share. Our solid and consistent financial performance reflects the leading share position we hold in a number of attractive markets and the strength of the growing drug discovery and development market."
Mr. Foster continued, "We view 2002 as a very positive year, one which has further strengthened the Company and positioned us for continued growth on many fronts. The April 2002 opening of our new Transgenic Services building in Wilmington, Massachusetts, reinforced our position as the world's largest provider of these services, and the building is 50% utilized. Our acquisitions of BioLabs in June and Springborn Laboratories in October added both geographic and customer depth to our drug discovery and development services offerings, and both acquisitions have performed well and in line with our expectations. The proteomics joint venture begun in October added a novel service to our growing portfolio of businesses. The platform is now in place and we expect to begin generating sales in the second quarter of 2003."
Fourth-quarter 2002 net sales for the Research Models segment of the business were $53.6 million compared to $49.4 million last year. The 8.5% gain reflected increased customer demand for animal research models and higher sales of specialty models for pre-clinical drug discovery and development work. Higher sales yielded a gross margin of 39.9% compared to 36.6% in the fourth quarter of last year. The sales increase also generated operating efficiencies which resulted in a 32.0% increase in operating income, to $13.8 million in the fourth quarter with an operating margin of 25.8%, compared to last year's $10.5 million and 21.2%.
Net sales for the Biomedical Products and Services segment rose 16.5% in the fourth quarter, to $89.4 million from $76.7 million in the same period last year. The Company's discovery services business, which includes transgenic, laboratory testing, and contract staffing services, had significant sales growth in the quarter, led by transgenic services. Sales for the development services business, which includes the entire range of pre-clinical drug testing services, also increased due principally to the acquisitions of BioLabs and Springborn Laboratories. Both in vitro products and vaccine support services also reported robust sales growth.
The fourth-quarter 2002 gross margin for the Biomedical Products and Services segment was 35.6% compared to 33.3% achieved in last year's fourth quarter. Operating income for this segment rose 49.4% to $18.4 million from $12.3 million last year and the operating margin increased to 20.5% from 16.0%.
Net interest expense for the fourth quarter was $1.6 million compared to $3.9 million in the fourth quarter of 2001.
Effective January 1, 2002, the Company adopted SFAS 142, the effect of which amounted to $0.02 per diluted share on the Company's fourth-quarter 2002 results and $0.09 per diluted share for the full year.
For 2002, net sales for the Research Models segment of the business were $223.8 million compared to $197.5 million last year. The 13.3% gain reflected increased customer demand for animal research models and higher sales of specialty models for pre-clinical drug discovery and development work. Higher sales yielded a gross margin of 44.2% compared to 40.5% last year. The sales increase also generated operating efficiencies which resulted in a 39.4% increase in operating income to $70.9 million with an operating margin of 31.7%, compared to last year's $50.9 million and 25.8%.
Net sales for the Biomedical Products and Services segment rose 23.4% for the year, to $330.9 million from $268.1 million last year. The Company's discovery services business had significant sales growth, led by transgenic services and contract staffing. Sales for the development services business also increased due principally to the acquisitions of BioLabs and Springborn Laboratories and growth of in vitro products and vaccine support services.
The 2002 gross margin for the Biomedical Products and Services segment was 33.3% compared to 32.5% achieved last year. Segment operating income rose 41.3% to $65.9 million from $46.6 million last year and the operating margin increased to 19.9% from 17.4%.
The following forward-looking guidance may be affected by an uncertain economic and political environment in 2003. Guidance is based on current exchange rates and is exclusive of any acquisitions which may occur in 2003.
The Company anticipates that for 2003, net sales will increase by 15% to 17%, due to continued growth in both the Research Models and Biomedical Products and Services segments. The Research Model segment is expected to grow between 12% and 14 % and the Biomedical Products and Services segment is expected to grow between 17% and 19%.
Diluted earnings per share are expected to be in a range of $1.67 to $1.70, reflecting higher sales and operating efficiencies.
For the first quarter of 2003, the Company expects net sales to increase between 13% and 16% due to higher sales in both the Research Models and Biomedical Products and Services business segments. Based on higher net sales and operating efficiencies, consolidated earnings per diluted share are expected to be in a range of $0.39 to $0.41.
Julia D. Palm to Retire
Charles River Laboratories also announces that Julia D. Palm, Senior Vice President, Biomedical Products and Services, will retire from the Company at the end of 2003. To facilitate the management transition, the Company has already realigned the majority of Ms. Palm's responsibilities under two senior executives. Mr. Foster said, "We appreciate Julie's many contributions to Charles River and are very pleased that our executives will be able to work together throughout this year to ensure a seamless transition of responsibilities."
Charles River Laboratories has scheduled a live webcast on Tuesday, February 4, at 8:30 a.m. EST to discuss matters relating to this press release. To participate, please go to www.criver.com, Investor Relations, and select the webcast link. The webcast will be available until 5:00 p.m. EST on February 11, 2003.
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 the 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 biomedical 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 and biotechnology companies, as well as many leading hospitals and academic institutions. The Company operates 76 facilities in 16 countries worldwide.
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," 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: acquisition integration risks; special interest groups; contaminations; industry trends; new displacement technologies; outsourcing trends; USDA and FDA regulation; changes in law; continued availability of products and supplies; loss of key personnel; interest rate and foreign currency exchange rate fluctuations; 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 registration statement on Form S-3 as filed on April 9, 2002, with the Securities and Exchange Commission.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (dollars in thousands except for per share data) Three Months Ended Twelve Months Ended Dec. 28, Dec. 29, Dec. 28, Dec. 29, 2002 2001 2002 2001 Net sales $142,944 $126,094 $554,629 $465,630 Cost of products sold and services provided 89,795 82,486 345,646 298,379 Gross margin 53,149 43,608 208,983 167,251 Selling, general and administrative 20,974 18,554 83,303 68,315 Amortization of goodwill and intangibles 1,220 2,649 3,414 8,653 Operating income 30,955 22,405 122,266 90,283 Interest income (expense) (1,570) (3,909) (9,085) (21,304) Other income (expense) 193 (16) 1,222 500 Income before taxes, minority interests, earnings from equity investments and extraordinary item 29,578 18,480 114,403 69,479 Provision for income taxes 11,387 7,204 43,572 27,095 Income before minority interests, earnings from equity investments and extraordinary item 18,191 11,276 70,831 42,384 Minority interests (686) (347) (2,784) (2,206) Earnings from equity investments - 127 316 472 Net income before extraordinary item 17,505 11,056 68,363 40,650 Extraordinary loss, net of tax benefit - (2,139) (18,231) (5,243) Net income $17,505 $8,917 $50,132 $35,407 Earnings per common share before extraordinary item Basic $0.39 $0.25 $1.53 $0.99 Diluted $0.36 $0.24 $1.42 $0.92 Earnings per common share after extraordinary item Basic $0.39 $0.20 $1.12 $0.86 Diluted $0.36 $0.19 $1.06 $0.80 Weighted average number of common shares outstanding before and after extraordinary item Basic 45,077,506 44,133,268 44,681,601 40,998,558 Diluted 51,518,643 46,398,266 50,856,723 44,215,383 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (dollars in thousands) Dec. 28, Dec. 29, 2002 2001 Assets Current assets Cash and cash equivalents $127,509 $58,271 Trade receivables 94,245 98,478 Inventories 43,892 39,056 Other current assets 12,446 14,349 Total current assets 278,092 210,154 Property, plant and equipment, net 187,875 155,919 Goodwill, net 96,532 52,087 Other intangibles, net 34,204 38,287 Deferred tax asset 80,884 87,781 Other assets 23,757 27,134 Total assets $701,344 $571,362 Liabilities and Shareholders' Equity Current liabilities Accounts payable $13,084 $13,868 Accrued compensation 31,825 25,736 Other current liabilities 68,460 58,928 Total current liabilities 113,369 98,532 Long-term debt 192,420 155,506 Other long-term liabilities 19,612 14,826 Total liabilities 325,401 268,864 Minority interests 18,583 12,988 Total shareholders' equity 357,360 289,510 Total liabilities and shareholders' equity $701,344 $571,362 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (dollars in thousands) Three Months Ended Twelve Months Ended Dec. 28, Dec. 29, Dec. 28, Dec. 29, 2002 2001 2002 2001 Research Models Net sales $53,552 $49,360 $223,766 $197,494 Gross margin 21,343 18,085 98,877 80,060 Gross margin as a % of sales 39.9% 36.6% 44.2% 40.5% Operating income 13,796 10,450 70,917 50,878 Operating income as a % of sales 25.8% 21.2% 31.7% 25.8% Depreciation amortization 2,385 2,768 9,398 9,978 Capital expenditures 4,916 3,718 14,409 10,419 Biomedical Products and Services Net sales $89,392 $76,734 $330,863 $268,136 Gross margin 31,806 25,523 110,106 87,191 Gross margin as a % of sales 35.6% 33.3% 33.3% 32.5% Operating income 18,367 12,293 65,898 46,643 Operating income as a % of sales 20.5% 16.0% 19.9% 17.4% Depreciation amortization 4,220 5,166 14,588 17,197 Capital expenditures 11,013 12,158 23,134 25,987 Unallocated Corporate Overhead $(1,208) $(338) $(14,549) $(7,238) Total Net sales $142,944 $126,094 $554,629 $465,630 Gross margin 53,149 43,608 208,983 167,251 Gross margin as a % of sales 37.2% 34.6% 37.7% 35.9% Operating income 30,955 22,405 122,266 90,283 Operating income as a % of sales 21.7% 17.8% 22.0% 19.4% Depreciation amortization 6,605 7,934 23,986 27,175 Capital expenditures 15,929 15,876 37,543 36,406CONTACT:
Charles River Laboratories
Susan E. Hardy, 978/658-6000 Ext. 1616
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