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Charles River Laboratories Announces Third-Quarter 2017 Results from Continuing Operations
– Third-Quarter Revenue of
– Third-Quarter GAAP EPS of
– Updates 2017 Guidance –
The acquisitions of
On a GAAP basis, third-quarter net income from continuing operations
attributable to common shareholders was
On a non-GAAP basis, net income from continuing operations was
An excess tax benefit associated with stock compensation contributed
“We remain enthusiastic about the outlook for our businesses, and continue to invest in our growth, through strategic acquisitions, facility expansions, and additional staffing. We believe these investments are imperative to maintain and enhance our position as the premier early-stage CRO, to continue to differentiate Charles River from the competition, and to support our future growth,” Mr. Foster concluded.
Third-Quarter Segment Results
Research Models and Services (RMS)
Revenue for the RMS segment was
In the third quarter of 2017, the RMS segment’s GAAP operating margin decreased to 25.2% from 25.8% in the third quarter of 2016. On a non-GAAP basis, the operating margin decreased to 25.5% from 27.3% in the third quarter of 2016. The GAAP and non-GAAP operating margin declines were primarily driven by the research models business.
Discovery and Safety Assessment (DSA)
Revenue from continuing operations for the DSA segment was
In the third quarter of 2017, the DSA segment’s GAAP operating margin increased to 18.9% from 14.5% in the third quarter of 2016. The GAAP operating margin increase was due primarily to lower acquisition- and integration-related costs. On a non-GAAP basis, the operating margin decreased to 22.4% from 22.7% in the third quarter of 2016. Foreign exchange reduced the DSA operating margin by approximately 30 basis points.
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was
In the third quarter of 2017, the Manufacturing segment’s GAAP operating margin increased to 33.5% from 30.0% in the third quarter of 2016. On a non-GAAP basis, the operating margin increased to 36.5% from 33.8% in the third quarter of 2016. The GAAP and non-GAAP operating margin improvements were driven primarily by the Microbial Solutions business.
Stock Repurchase Update
During the third quarter of 2017, the Company repurchased 350,000 shares
for a total of
Updates 2017 Guidance
The Company is updating its revenue growth and earnings per share
guidance, which was previously provided on
In view of the Company’s long-term expectation for low-single-digit
revenue growth in the RMS segment, we have committed to a plan to close
our research model production site in
Based on information concerning the performance of one of our venture
capital investments, we have included a
2017 GUIDANCE (from continuing operations) |
REVISED |
PRIOR |
||||
Revenue growth, reported | 9.75% - 10.5% | 8.5% - 10.0% | ||||
Less: Contribution from acquisitions (1) | (~5.5% - 6.0%) | (~5.0% - 6.0%) | ||||
Add: Effect of CDMO divestiture | ~1.0% | ~1.0% | ||||
Add: Negative effect of 53rd week in 2016 | ~1.5% | ~1.5% | ||||
Add: Negative effect of foreign exchange | NM | ~1.0% | ||||
Revenue growth, organic (2) | 6.5% - 7.25% | 7.0% - 8.5% | ||||
GAAP EPS estimate | $3.95 - $4.05 | $4.18 - $4.33 | ||||
Amortization of intangible assets | ~$0.61 | ~$0.58 | ||||
Charges related to global efficiency initiatives (3) | ~$0.25 - $0.30 | ~$0.02 | ||||
Acquisition/divestiture-related adjustments (4) | ~$0.09 | ~$0.07 | ||||
Net impact of CDMO divestiture (5) | ~$0.15 | ~$0.15 | ||||
Non-GAAP EPS estimate | $5.08 - $5.18 | $5.00 - $5.15 | ||||
Footnotes to Guidance Table
(1) The contribution from acquisitions reflects only completed
acquisitions.
(2) Organic revenue growth is defined as reported
revenue growth adjusted for acquisitions, the divestiture of the CDMO
business, the 53rd week, and foreign currency translation.
(3)
These charges relate primarily to the Company’s planned efficiency
initiatives including the closure of the
(4) These adjustments are related to the evaluation
and integration of acquisitions and the divestiture of the CDMO
business, and primarily include transaction, advisory, and certain
third-party integration costs, as well as certain costs associated with
acquisition-related efficiency initiatives.
(5) These adjustments
include the preliminary net gain and tax impact related to the
divestiture of the CDMO business.
Webcast
Charles River has scheduled a live webcast on
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; expenses associated with evaluating and integrating acquisitions and divestitures, as well as fair value adjustments associated with contingent consideration; charges, gains, and losses attributable to businesses or properties we plan to close, consolidate, or divest; severance and other costs associated with our efficiency initiatives; gain on and tax effect of the divestiture of the CDMO business; and costs related to a U.S. government billing adjustment and related expenses. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “constant currency,” which we define as reported revenue growth adjusted for the impact of foreign currency translation, and “organic revenue growth,” which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, the divestiture, and the 53rd week. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. 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 divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, 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 and their underlying associated costs, such as business acquisitions, generally occur periodically but on an unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. 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,” “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 on the Company,
our service offerings, client perception, 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 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; 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,
such as our
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 | Nine Months Ended | |||||||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | |||||||||||||||||
Total revenue | $ | 464,232 | $ | 425,720 | $ | 1,379,124 | $ | 1,214,643 | ||||||||||||
Cost of revenue (excluding amortization of intangible assets) | 287,028 | 269,450 | 844,559 | 747,858 | ||||||||||||||||
Selling, general and administrative | 92,863 | 85,650 | 278,886 | 269,067 | ||||||||||||||||
Amortization of intangible assets | 10,357 | 11,825 | 30,913 | 29,390 | ||||||||||||||||
Operating income | 73,984 | 58,795 | 224,766 | 168,328 | ||||||||||||||||
Interest income | 134 | 523 | 497 | 1,008 | ||||||||||||||||
Interest expense | (7,667 | ) | (7,079 | ) | (22,053 | ) | (20,199 | ) | ||||||||||||
Other income (expense), net | 6,488 | 1,017 | 24,692 | 10,059 | ||||||||||||||||
Income from continuing operations, before income taxes | 72,939 | 53,256 | 227,902 | 159,196 | ||||||||||||||||
Provision for income taxes | 19,945 | 15,565 | 73,272 | 48,385 | ||||||||||||||||
Income from continuing operations, net of income taxes | 52,994 | 37,691 | 154,630 | 110,811 | ||||||||||||||||
Income (Loss) from discontinued operations, net of income taxes | (39 | ) | 342 | (114 | ) | 328 | ||||||||||||||
Net income | 52,955 | 38,033 | 154,516 | 111,139 | ||||||||||||||||
Less: Net income attributable to noncontrolling interests | 481 | 298 | 1,312 | 1,054 | ||||||||||||||||
Net income attributable to common shareholders | $ | 52,474 | $ | 37,735 | $ | 153,204 | $ | 110,085 | ||||||||||||
Earnings (loss) per common share | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Continuing operations attributable to common shareholders | $ | 1.11 | $ | 0.79 | $ | 3.23 | $ | 2.34 | ||||||||||||
Discontinued operations | $ | — | $ | 0.01 | $ | — | $ | — | ||||||||||||
Net income attributable to common shareholders | $ | 1.11 | $ | 0.80 | $ | 3.22 | $ | 2.34 | ||||||||||||
Diluted: | ||||||||||||||||||||
Continuing operations attributable to common shareholders | $ | 1.09 | $ | 0.78 | $ | 3.17 | $ | 2.29 | ||||||||||||
Discontinued operations | $ | — | $ | 0.01 | $ | — | $ | 0.01 | ||||||||||||
Net income attributable to common shareholders | $ | 1.08 | $ | 0.79 | $ | 3.16 | $ | 2.30 | ||||||||||||
Weighted average number of common shares outstanding | ||||||||||||||||||||
Basic | 47,451 | 47,160 | 47,530 | 46,954 | ||||||||||||||||
Diluted | 48,390 | 48,034 | 48,440 | 47,838 | ||||||||||||||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||
SCHEDULE 2 | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 123,618 | $ | 117,626 | ||||
Trade receivables, net | 422,335 | 364,050 | ||||||
Inventories | 107,372 | 95,833 | ||||||
Prepaid assets | 42,695 | 34,315 | ||||||
Other current assets | 86,358 | 45,008 | ||||||
Total current assets | 782,378 | 656,832 | ||||||
Property, plant and equipment, net | 767,192 | 755,827 | ||||||
Goodwill | 800,247 | 787,517 | ||||||
Client relationships, net | 304,382 | 320,157 | ||||||
Other intangible assets, net | 71,065 | 74,291 | ||||||
Deferred tax asset | 30,856 | 28,746 | ||||||
Other assets | 109,798 | 88,430 | ||||||
Total assets | $ | 2,865,918 | $ | 2,711,800 | ||||
Liabilities, Redeemable Noncontrolling Interest and Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt and capital leases | $ | 27,090 | $ | 27,313 | ||||
Accounts payable | 66,232 | 68,485 | ||||||
Accrued compensation | 86,402 | 93,471 | ||||||
Deferred revenue | 108,984 | 127,731 | ||||||
Accrued liabilities | 91,783 | 84,470 | ||||||
Other current liabilities | 33,614 | 26,500 | ||||||
Current liabilities of discontinued operations | 1,650 | 1,623 | ||||||
Total current liabilities | 415,755 | 429,593 | ||||||
Long-term debt, net and capital leases | 1,155,998 | 1,207,696 | ||||||
Deferred tax liabilities | 81,783 | 55,717 | ||||||
Other long-term liabilities | 167,493 | 159,239 | ||||||
Long-term liabilities of discontinued operations | 4,395 | 5,771 | ||||||
Total liabilities | 1,825,424 | 1,858,016 | ||||||
Redeemable noncontrolling interest | 15,785 | 14,659 | ||||||
Total equity attributable to common shareholders | 1,021,513 | 836,768 | ||||||
Noncontrolling interests | 3,196 | 2,357 | ||||||
Total liabilities, redeemable noncontrolling interest and equity | $ | 2,865,918 | $ | 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 | Nine Months Ended | ||||||||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | ||||||||||||||||||
Research Models and Services | |||||||||||||||||||||
Revenue | $ | 122,020 | $ | 120,928 | $ | 373,183 | $ | 369,325 | |||||||||||||
Operating income | 30,726 | 31,224 | 102,016 | 103,055 | |||||||||||||||||
Operating income as a % of revenue | 25.2 | % | 25.8 | % | 27.3 | % | 27.9 | % | |||||||||||||
Add back: | |||||||||||||||||||||
Amortization related to acquisitions | 433 | 592 | 1,238 | 1,776 | |||||||||||||||||
Severance | — | 618 | — | 618 | |||||||||||||||||
Government billing adjustment and related expenses | — | 505 | 150 | 634 | |||||||||||||||||
Site consolidation costs, impairments and other items | — | 69 | — | 207 | |||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 433 | $ | 1,784 | $ | 1,388 | $ | 3,235 | |||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 31,159 | $ | 33,008 | $ | 103,404 | $ | 106,290 | |||||||||||||
Non-GAAP operating income as a % of revenue | 25.5 | % | 27.3 | % | 27.7 | % | 28.8 | % | |||||||||||||
Depreciation and amortization | $ | 5,272 | $ | 5,245 | $ | 15,309 | $ | 15,613 | |||||||||||||
Capital expenditures | $ | 6,762 | $ | 2,532 | $ | 13,769 | $ | 5,966 | |||||||||||||
Discovery and Safety Assessment | |||||||||||||||||||||
Revenue | $ | 246,946 | $ | 215,817 | $ | 726,796 | $ | 594,859 | |||||||||||||
Operating income | 46,616 | 31,303 | 136,966 | 94,514 | |||||||||||||||||
Operating income as a % of revenue | 18.9 | % | 14.5 | % | 18.8 | % | 15.9 | % | |||||||||||||
Add back: | |||||||||||||||||||||
Amortization related to acquisitions | 7,602 | 8,583 | 22,107 | 19,068 | |||||||||||||||||
Severance | 84 | 3,367 | 356 | 7,487 | |||||||||||||||||
Acquisition related adjustments (2) | 776 | 677 | 2,303 | 4,317 | |||||||||||||||||
Site consolidation costs, impairments and other items | 276 | 5,125 | 835 | 7,279 | |||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 8,738 | $ | 17,752 | $ | 25,601 | $ | 38,151 | |||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 55,354 | $ | 49,055 | $ | 162,567 | $ | 132,665 | |||||||||||||
Non-GAAP operating income as a % of revenue | 22.4 | % | 22.7 | % | 22.4 | % | 22.3 | % | |||||||||||||
Depreciation and amortization | $ | 20,333 | $ | 20,671 | $ | 58,667 | $ | 51,228 | |||||||||||||
Capital expenditures | $ | 10,127 | $ | 4,509 | $ | 25,552 | $ | 13,860 | |||||||||||||
Manufacturing Support | |||||||||||||||||||||
Revenue | $ | 95,266 | $ | 88,975 | $ | 279,145 | $ | 250,459 | |||||||||||||
Operating income | 31,923 | 26,711 | 87,565 | 73,447 | |||||||||||||||||
Operating income as a % of revenue | 33.5 | % | 30.0 | % | 31.4 | % | 29.3 | % | |||||||||||||
Add back: | |||||||||||||||||||||
Amortization related to acquisitions | 2,322 | 2,888 | 7,568 | 9,367 | |||||||||||||||||
Severance (3) | 552 | 30 | 1,620 | 30 | |||||||||||||||||
Acquisition related adjustments (2) | — | 469 | 26 | 1,146 | |||||||||||||||||
Site consolidation costs, impairments and other items | — | — | — | 301 | |||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 2,874 | $ | 3,387 | $ | 9,214 | $ | 10,844 | |||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 34,797 | $ | 30,098 | $ | 96,779 | $ | 84,291 | |||||||||||||
Non-GAAP operating income as a % of revenue | 36.5 | % | 33.8 | % | 34.7 | % | 33.7 | % | |||||||||||||
Depreciation and amortization | $ | 5,572 | $ | 6,181 | $ | 17,321 | $ | 18,682 | |||||||||||||
Capital expenditures | $ | 2,879 | $ | 1,862 | $ | 7,111 | $ | 8,247 | |||||||||||||
Unallocated Corporate Overhead | $ | (35,281 | ) | $ | (30,443 | ) | $ | (101,781 | ) | $ | (102,688 | ) | |||||||||
Add back: | |||||||||||||||||||||
Acquisition related adjustments (2) | 1,326 | 2,033 | 2,539 | 13,056 | |||||||||||||||||
Total non-GAAP adjustments to operating expense | $ | 1,326 | $ | 2,033 | $ | 2,539 | $ | 13,056 | |||||||||||||
Unallocated corporate overhead, excluding non-GAAP adjustments | $ | (33,955 | ) | $ | (28,410 | ) | $ | (99,242 | ) | $ | (89,632 | ) | |||||||||
Total | |||||||||||||||||||||
Revenue | $ | 464,232 | $ | 425,720 | $ | 1,379,124 | $ | 1,214,643 | |||||||||||||
Operating income | $ | 73,984 | $ | 58,795 | $ | 224,766 | $ | 168,328 | |||||||||||||
Operating income as a % of revenue | 15.9 | % | 13.8 | % | 16.3 | % | 13.9 | % | |||||||||||||
Add back: | |||||||||||||||||||||
Amortization related to acquisitions | 10,357 | 12,063 | 30,913 | 30,211 | |||||||||||||||||
Severance | 636 | 4,015 | 1,976 | 8,135 | |||||||||||||||||
Acquisition related adjustments (2) | 2,102 | 3,179 | 4,868 | 18,519 | |||||||||||||||||
Government billing adjustment and related expenses | — | 505 | 150 | 634 | |||||||||||||||||
Site consolidation costs, impairments and other items | 276 | 5,194 | 835 | 7,787 | |||||||||||||||||
Total non-GAAP adjustments to operating income | $ | 13,371 | $ | 24,956 | $ | 38,742 | $ | 65,286 | |||||||||||||
Operating income, excluding non-GAAP adjustments | $ | 87,355 | $ | 83,751 | $ | 263,508 | $ | 233,614 | |||||||||||||
Non-GAAP operating income as a % of revenue | 18.8 | % | 19.7 | % | 19.1 | % | 19.2 | % | |||||||||||||
Depreciation and amortization | $ | 33,465 | $ | 34,108 | $ | 97,675 | $ | 91,116 | |||||||||||||
Capital expenditures | $ | 22,011 | $ | 9,568 | $ | 53,928 | $ | 29,609 | |||||||||||||
(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) | This adjustment relates to transition costs associated with the 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 | Nine Months Ended | ||||||||||||||||||||
September 30, 2017 | September 24, 2016 | September 30, 2017 | September 24, 2016 | ||||||||||||||||||
Net income attributable to common shareholders | $ | 52,474 | $ | 37,735 | $ | 153,204 | $ | 110,085 | |||||||||||||
Less: Income (loss) from discontinued operations, net of income taxes | (39 | ) | 342 | (114 | ) | 328 | |||||||||||||||
Net income from continuing operations attributable to common shareholders | 52,513 | 37,393 | 153,318 | 109,757 | |||||||||||||||||
Add back: | |||||||||||||||||||||
Non-GAAP adjustments to operating income (Refer to Schedule 3) | 13,371 | 24,956 | 38,742 | 65,286 | |||||||||||||||||
Gain on divestiture of CDMO business | — | — | (10,577 | ) | — | ||||||||||||||||
Write-off of deferred financing costs and fees related to debt financing | — | (462 | ) | — | 987 | ||||||||||||||||
Acquisition related adjustments (2) | — | 815 | — | 815 | |||||||||||||||||
Reversal of an indemnification asset associated with acquisition and corresponding interest (3) | — | 54 | — | 54 | |||||||||||||||||
Tax effect of non-GAAP adjustments: | |||||||||||||||||||||
Tax effect from divestiture of CDMO business | — | — | 18,005 | — | |||||||||||||||||
Tax effect of the remaining non-GAAP adjustments | (3,003 | ) | (6,057 | ) | (11,702 | ) | (16,306 | ) | |||||||||||||
Net income from continuing operations attributable to common shareholders, excluding non-GAAP adjustments | $ | 62,881 | $ | 56,699 | $ | 187,786 | $ | 160,593 | |||||||||||||
Weighted average shares outstanding - Basic | 47,451 | 47,160 | 47,530 | 46,954 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock units, performance share units and restricted stock | 939 | 874 | 910 | 884 | |||||||||||||||||
Weighted average shares outstanding - Diluted | 48,390 | 48,034 | 48,440 | 47,838 | |||||||||||||||||
Earnings per share from continuing operations attributable to common shareholders | |||||||||||||||||||||
Basic | $ | 1.11 | $ | 0.79 | $ | 3.23 | $ | 2.34 | |||||||||||||
Diluted | $ | 1.09 | $ | 0.78 | $ | 3.17 | $ | 2.29 | |||||||||||||
Basic, excluding non-GAAP adjustments | $ | 1.33 | $ | 1.20 | $ | 3.95 | $ | 3.42 | |||||||||||||
Diluted, excluding non-GAAP adjustments | $ | 1.30 | $ | 1.18 | $ | 3.88 | $ | 3.36 | |||||||||||||
(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. | ||||||||||||||||||||
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 September 30, 2017 | Total CRL | RMS Segment | DSA Segment | MS Segment | |||||||||||||
Revenue growth, reported | 9.0 | % | 0.9 | % | 14.4 | % | 7.1 | % | |||||||||
(Increase) Decrease due to foreign exchange | (1.0 | )% | (0.5 | )% | (0.9 | )% | (1.8 | )% | |||||||||
Contribution from acquisitions (2) | (2.7 | )% | — | % | (5.4 | )% | — | % | |||||||||
Impact of CDMO divestiture (3) | 1.0 | % | — | % | — | % | 4.7 | % | |||||||||
Non-GAAP revenue growth, organic (4) | 6.3 | % | 0.4 | % | 8.1 | % | 10.0 | % | |||||||||
For the nine months ended September 30, 2017 | Total CRL | RMS Segment | DSA Segment | MS Segment | |||||||||||||
Revenue growth, reported | 13.5 | % | 1.0 | % | 22.2 | % | 11.5 | % | |||||||||
(Increase) Decrease due to foreign exchange | 1.0 | % | 1.1 | % | 1.1 | % | 0.4 | % | |||||||||
Contribution from acquisitions (2) | (8.1 | )% | — | % | (15.6 | )% | (2.1 | )% | |||||||||
Impact of CDMO divestiture (3) | 0.7 | % | — | % | — | % | 3.4 | % | |||||||||
Non-GAAP revenue growth, organic (4) | 7.1 | % | 2.1 | % | 7.7 | % | 13.2 | % | |||||||||
(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, and foreign exchange. | ||||||||||||||||
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. | ||||||||||
|
SCHEDULE 6 | ||||||||||
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||||
|
(in thousands) | ||||||||||
Nine Months Ended | |||||||||||
September 30, 2017 | September 24, 2016 | ||||||||||
Cash flows relating to operating activities | $ | 193,838 | $ | 198,252 | |||||||
Cash flows relating to investing activities | (39,759 | ) | (617,669 | ) | |||||||
Cash flows relating to financing activities | (155,466 | ) | 404,682 | ||||||||
Cash flows used in discontinued operations | (1,489 | ) | (1,434 | ) | |||||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 9,135 | 4,325 | |||||||||
Net change in cash, cash equivalents, and restricted cash | 6,259 | (11,844 | ) | ||||||||
Cash, cash equivalents, and restricted cash, beginning of period (1) | 119,894 | 119,963 | |||||||||
Cash, cash equivalents, and restricted cash, end of period (2) | $ | 126,153 | $ | 108,119 | |||||||
(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 unaudited condensed consolidated balance sheets. | ||||||||||
(2) | Includes restricted cash balances of $2.5 million and $2.4 million as of September 30, 2017 and September 24, 2016, respectively, which are reported in current and long-term other assets within the unaudited condensed consolidated balance sheets. |
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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
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amy.cianciaruso@crl.com