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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of the
Securities Exchange Act of 1934
May 9, 2006
Date of Report (Date of earliest event reported)
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as specified in its Charter)
---------------------
Delaware 333-92383 06-1397316
(State or Other Jurisdiction) (Commission File Number) (I.R.S. Employer
of Incorporation Identification No.)
---------------------
251 Ballardvale Street
Wilmington, Massachusetts 01887
(Address of Principal Executive Offices) (Zip Code)
978-658-6000
(Registrant's Telephone Number, including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. Results of Operations and Financial Condition
The following information shall not be deemed "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
On May 9, 2006, Charles River Laboratories International, Inc. issued a press
release providing financial results for the first quarter ended April 1, 2006.
The press release, attached as an exhibit to this report, includes "safe harbor"
language pursuant to the Private Securities Litigation Reform Act of 1995, as
amended, indicating that certain statements contained in the press release are
"forward-looking" rather than historic. The press release also states that these
and other risks relating to Charles River are set forth in the documents filed
by Charles River with the Securities and Exchange Commission.
ITEM 9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
99.1 Press release dated May 9, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
we have duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC.
Dated: May 9, 2006
By: /s/ Joanne P. Acford
-----------------------------
Joanne P. Acford, Corporate Senior Vice
President, General Counsel and
Corporate Secretary
Exhibit Index
Exhibit No. Description
- ----------- -----------
99.1 Press release dated May 9, 2006.
Exhibit 99.1
Charles River Laboratories Announces First-Quarter 2006 Results;
Enters into Agreement to Sell Phase II - IV Clinical
Business to Kendle; Provides Revised Guidance for 2006;
Increases Stock Repurchase Authorization
WILMINGTON, Mass.--(BUSINESS WIRE)--May 9, 2006--Charles River
Laboratories International, Inc. (NYSE: CRL) today reported
first-quarter 2006 financial results and announced that it has entered
into a definitive agreement with Kendle International Inc. (Nasdaq:
KNDL) to sell its Phase II - IV Clinical Services business, as it
realigns its portfolio to focus on its core drug discovery and
development strengths. In conjunction with the planned portfolio
realignment, the Company recorded a goodwill impairment charge of
$129.2 million, or $1.81 per share, for the Phase II - IV Clinical
business in the first quarter of 2006. As a result, the Company
reported a net loss per share of $1.40 for the first quarter of 2006,
on sales of $283.8 million. On a non-GAAP basis, earnings per share
were $0.50, which excludes the impairment charge and amortization and
compensation charges related to the Inveresk acquisition.
Further actions announced by the Company today included strategic
initiatives targeted at streamlining the business infrastructure and
improving operating efficiency, an increase of its stock repurchase
authorization to $300 million and revised annual guidance for 2006.
James C. Foster, Chairman, President and Chief Executive Officer
said, "In keeping with our goal to capitalize on our core competencies
and to focus on internal process improvement, we are realigning our
business through the sale of the Phase II - IV portion of our Clinical
Services business. In addition, we will be closing our Interventional
and Surgical Services (ISS) facility in Massachusetts. These actions
will allow us to focus our financial and operating resources on our
core Research Models and Services, Preclinical Services and Clinical
Phase I businesses, which we believe offer significant long-term
growth opportunities. We believe that the market for outsourced
preclinical services, particularly toxicology, continues to be strong,
and we see emerging opportunities in In Vitro products,
preconditioning services for research models, and early-stage clinical
trials. We have concluded these businesses offer us the most promising
opportunities for growth, and support our long-term goals of sales
growth of 11% to 12%, earnings per share growth of 14% to 15%, an
operating margin of 25%, strong cash flow generation, and steadily
improving returns on invested capital."
Mr. Foster said that sales growth from continuing operations for
2006 would be revised to a range of 6% to 8%, due primarily to
continuing softness in Transgenic Services, flat Vaccine sales and
Preclinical Services capacity constraints. The year-over-year growth
rate is based on pro forma sales of approximately $990 million in
2005, which excludes sales from the Phase II - IV Clinical and ISS
businesses. As a result of lower sales, partially offset by expected
benefits from the strategic initiatives, and including the goodwill
impairment charge, the Company now expects the 2006 GAAP net loss per
share from continuing operations, which excludes the results of its
Phase II-IV Clinical and ISS businesses, will be in a range of $0.09
to $0.15. Non-GAAP earnings per share, which exclude the charge for
goodwill impairment, the cost of the strategic initiatives, and
amortization and stock compensation charges related to the Inveresk
acquisition, are expected to be in a range of $2.12 to $2.18.
Divestiture of Phase II - IV Clinical Business
As a result of an evaluation of its strategic goals, the Company
determined that the Phase II - IV Clinical Services business, at its
current scale, while profitable, does not take advantage of the
Company's core competencies, and believes that monetizing the Phase II
- - IV clinical assets and redeploying the resulting cash would be more
beneficial to the long-term business, to customers and to
shareholders.
On May 9, 2006, the Company entered into a definitive agreement to
sell the Phase II - IV Clinical business to Kendle International Inc.
for $215 million in cash. Kendle is a global clinical research
organization that generated over $200 million in net service revenues
in 2005. By combining the Company's Phase II-IV business with its own,
Kendle will significantly enhance its ability to conduct large-scale
multinational clinical studies. The transaction, which the Company
expects to close in the third quarter of 2006, is subject to
regulatory approvals and other customary conditions. Credit Suisse
acted as financial advisor to the Company.
As a result of the pending sale of the Phase II - IV business, the
Company assessed the goodwill assigned to its Clinical segment, and
based on management's estimates of fair value, which includes the
projected sales price, determined that an impairment existed. As a
result, a charge of $129.2 million, or $1.81 per share, was recorded
in the first quarter of 2006 for the impairment of goodwill.
The Company has determined that the Phase I Clinical Services
business is an essential, strategic component of its service
offerings, as it enables us to support customers' preclinical efforts
through early-stage clinical trials. The Company will retain the Phase
I facility in Edinburgh, Scotland, and is continuing to assess options
for a Phase I presence in North America. Beginning in the second
quarter of 2006, the Company anticipates that the Phase I financial
results will be included in the Preclinical Services business segment.
First-Quarter 2006 Results
Net sales for the first quarter of 2006 increased to $283.8
million compared to $273.7 million reported in the first quarter of
2005, a gain of 3.7%, or 6.7% excluding the negative effect of foreign
exchange. Strong sales of toxicology services, research models in
North American and Europe, and In Vitro products drove the
first-quarter sales increase.
On a GAAP basis, which includes the impairment charge, the Company
reported a net loss of $100.1 million, or $1.40 per diluted share, in
the first quarter of 2006, compared to net income of $27.6 million, or
$0.40 per diluted share, in the first quarter of 2005. In addition to
the impairment charge, first-quarter 2006 results included $3.6
million of stock option expense recognized in accordance with
Statement of Financial Accounting Standard No. 123R (SFAS 123R),
"Share-Based Payments," which the Company adopted on January 1, 2006.
In accordance with SFAS 123R, stock compensation expense was recorded
in the business segment results and in unallocated corporate
overheard. Had SFAS 123R been adopted in 2005, first-quarter 2005
results would have included $6.0 million of stock option expense.
On a non-GAAP basis, net income was $36.4 million, or $0.50 per
diluted share, in the first quarter of 2006, compared to $38.6
million, or $0.55 per diluted share, in the first quarter of 2005.
Non-GAAP results in the first quarter of both years exclude
amortization and stock-based compensation charges related to the
acquisition of Inveresk. These charges amounted to $10.9 million, or
$0.10 per share, in the first quarter of 2006 and $16.3 million, or
$0.15 per share, in the first quarter of 2005. In addition,
first-quarter 2006 non-GAAP results exclude the goodwill impairment
charge of $129.2 million, or $1.81 per share.
Business Segments Results
Research Models and Services (RMS)
First-quarter 2006 net sales for the RMS segment of the business
were $129.0 million, compared to $127.9 million in the first quarter
of 2005, an increase of approximately 1.0%. When excluding the
negative effect of foreign exchange, the growth rate was 4.7%. As was
the case in the second half of 2005, growth was driven by North
America Research Model sales and In Vitro products and services.
European Research Models sales also showed improvement in the first
quarter of 2006 compared to the same period last year, benefiting from
higher pharmaceutical and biotechnology customers' spending.
First-quarter sales growth was partially offset by the effect of
foreign exchange on sales, mainly in Japan, a continuing decline in
the U.S. Transgenic Services businesses, and lower sales of vaccine
products due to avian influenza. In addition, sales of large animals
were below the first quarter of last year due to timing of shipments.
Primarily as a result of lower sales and $1.4 million of stock
compensation expense, the gross margin declined to 43.3% from 44.2%
reported in the first quarter of 2005. The first-quarter operating
income was $40.5 million and the operating margin was 31.4%, down from
$42.3 million and 33.1% in the same period last year.
Preclinical Services
Net sales for the Preclinical Services segment were $122.5 million
in the first quarter of 2006, an increase of 7.4% from the $114.1
million reported in the first quarter of 2005. Excluding the negative
effect of foreign exchange, the first-quarter growth rate was 9.1%.
The sales increase was due to continuing strong demand for outsourced
toxicology services, partially offset by negative foreign exchange,
capacity constraints, lower sales of discovery services (which include
metabolism, pharmacokinetics and pharmacology) and ISS, and study
delays in our Pennsylvania facility. These issues negatively affected
the gross and operating margins, as did $1.9 million of stock
compensation expense and increased operating costs in the Company's
Montreal operation. Montreal's cost structure has increased as a
result of rapid expansion and the associated hiring, and its results
were further affected by the unfavorable impact of foreign exchange.
To improve operating efficiency in Montreal, the Company has
implemented headcount reductions in administrative and support areas.
As a result of these actions and the impending closure of ISS
Massachusetts, the Company expects margins to improve beginning in the
second quarter of 2006.
The segment's gross margin was 30.3% compared to 33.5% in the
first quarter of 2005. Operating income was $12.1 million in the first
quarter of 2006, compared to $12.5 million in the first quarter of
last year. The operating margin was 9.9% compared to 11.0% in the
first quarter of 2005. When excluding amortization related to the
Inveresk acquisition, first-quarter non-GAAP operating income was
$20.2 million and the non-GAAP operating margin was 16.5%, compared to
non-GAAP operating income of $22.8 million and an operating margin of
20.0% in the first quarter of 2005. The decline in gross and operating
margins was due primarily to SFAS 123R costs of $1.9 million, ISS,
study delays, and the cost structure in Montreal.
Clinical Services
For the first quarter of 2006, net sales for the Clinical Services
segment were $32.3 million compared to $31.7 million in the first
quarter of 2005, an increase of 1.9%. Excluding the negative effect of
foreign exchange, the sales growth rate was 6.3%. The Phase I clinic
had very strong sales in the quarter, as the effect of the European
Clinical Trials Directive waned and targeted sales efforts brought new
clients from Europe and Japan to the clinic.
Higher sales and continued efforts to optimize the cost structure
resulted in a gross margin of 31.6% compared to 31.0% in the first
quarter of 2005. Including the goodwill impairment charge of $129.2
million, the segment's operating loss was $127.4 million in the first
quarter of 2006, compared to operating income of $0.8 million in the
first quarter of last year. When excluding the impairment charge and
amortization related to the Inveresk acquisition, first-quarter
non-GAAP operating income was $4.2 million and the non-GAAP operating
margin was 13.1%, compared to non-GAAP operating income of $3.8
million and an operating margin of 12.1% in the first quarter of 2005.
The GAAP and non-GAAP margin increases were due primarily to improved
operating efficiency, partially offset by allocation of $0.2 million
of stock compensation expense.
Backlog
The backlog for Preclinical and Clinical Services at April 1,
2006, was $481 million compared to $427 million at the end of the
first quarter of 2005 and $448 million at the end of the fourth
quarter of 2005. Net bookings increased 35.9% to $190 million and the
net book-to-bill ratio rose to 1.23 from 0.96 in the first quarter of
2005. Once the Phase II - IV Clinical Services business has been
divested, the Company will no longer report quarterly backlog. The
Company does not report backlog for the RMS business segment because
turnaround time from placement to completion of orders, both for
products and services, is rapid, and the characteristics of the
Preclinical Services business are similar.
Strategic Initiatives
The Company is implementing a number of actions designed to
improve operating efficiency and profitability during the remainder of
2006. The total cost of these initiatives is expected to be $7.2
million, or $0.07 per diluted share. The benefit associated with these
actions is expected to be $16.0 million, or $0.16 per diluted share,
in 2006, with additional savings in later years. The Company expects
to record the charges in the second quarter of 2006.
Commenting on these actions, Mr. Foster said, "We continue to
identify and implement actions to improve our operating profitability,
while maintaining our high standards of customer service and
responsiveness. We do not see the two goals as mutually exclusive and
in fact, our 4th Generation Six Sigma(TM) initiative has helped us to
identify opportunities to enhance operations at a lower cost."
RMS initiatives are focused primarily on the closure of two remote
sites in the Vaccine businesses. These are smaller, satellite
facilities which are inefficient to operate. In addition, the Company
will continue its efforts to right-size the Transgenic Services
business to address the existing market opportunity through headcount
reductions and a management consolidation. The cost of these actions
is expected to be approximately $2.0 million, or $0.02 per diluted
share.
Preclinical Services initiatives include the closure of ISS
Massachusetts, as well as a small operating unit in Ireland which
provides similar services. The ISS facility will wind down operations
and is expected to close in late 2006. The second-quarter charge
related to these anticipated closures is expected to be $3.2 million,
or $0.03 per diluted share. In addition, the Company expects to record
a charge of $2.0 million, or $0.02 per diluted shares, for headcount
reductions in Montreal and Massachusetts.
To further support the Company's goal of operating efficiency,
cost savings initiatives have been implemented at the corporate level.
There will be no charges associated with these actions, which include
selective headcount freezes and adjustment of equity and incentive
compensation.
Mr. Foster continued, "With a realigned portfolio of high-end,
essential products and services and a leaner cost structure, we expect
to enhance our ability to support our customers in their pursuit of
drug discovery and development to improve human and animal health. We
are making significant investments across the spectrum of our
business, from production capacity and preconditioning services and
the PTS in our RMS segment, through our entire Preclinical Services
business. We believe that these investments, all of which leverage our
core competencies of veterinary medicine and regulatory preclinical
services, support our goal to build a larger, more profitable
business.
2006 Revised Guidance
The following forward-looking guidance is based on continuing
operations, which exclude the Phase II - IV Clinical and ISS
businesses. Beginning in the second quarter of 2006, the Company
expects to report the Phase II - IV and ISS businesses as discontinued
operations, which will result in $0.15 dilution to the Company's
original 2006 earnings guidance. This guidance also assumes
implementation on January 1, 2006, of SFAS 123R, and therefore
includes an estimated $0.12 of stock option expense. Guidance is based
on current foreign exchange rates.
The Company is revising its estimates for 2006 sales growth and
earnings per share from continuing operations. Net sales growth for
2006 from continuing operations is expected to be in a range of 6% to
8%, based on lower-than-expected first-quarter results. Due primarily
to the $1.81 per share goodwill impairment charge and the
first-quarter shortfall of $0.07 per share, the Company estimates that
on a GAAP basis, it will report a net loss for 2006 in a range of
$0.09 to $0.15. Non-GAAP earnings per share, which exclude the
goodwill impairment charge, $0.39 per share of amortization and
compensation charges related to the acquisition of Inveresk, and the
$0.07 per share second-quarter charge associated with the strategic
initiatives, are expected to be in a range of $2.12 to $2.18. The
Company is committed to improving its operating efficiency, and the
anticipated benefit of the strategic initiatives announced today is
expected to significantly improve operating results in the balance of
the year. The $0.16 per share benefit from the strategic initiatives
is included in the revised earnings per share estimates.
REVISED
(from continuing
2006 EPS GUIDANCE PRIOR operations)
- ------------------------------------- -------------- -----------------
Sales 7% - 9% 6% - 8%
GAAP EPS estimates $1.95 - $2.01 ($0.09) - ($0.15)
Q2 Strategic initiatives charge --- $0.07
Goodwill impairment charge --- $1.81
Inveresk-related charges $0.39 $0.39
-------------- -----------------
Non-GAAP estimates $2.34 - $2.40 $2.12 - $2.18
-------------- -----------------
Dilution from divestiture of Phase II
- IV Clinical Services ($0.15)
First-quarter shortfall ($0.07)
- ------------------------------------- -------------- -----------------
Stock Repurchase Program
Charles River's Board of Directors approved an increase to the
Company's stock repurchase authorization, which now provides for the
purchase of up to $300.0 million of its common stock. The Company has
repurchased stock under this authorization pursuant to a Rule 10b5-1
plan initiated in August 2005. Stock purchases may be made from time
to time on the open market, through block trades or otherwise in
compliance with Rule 10b-18 of the federal securities laws. Depending
on market conditions and other factors, these repurchases may be
commenced or suspended at any time or from time to time without prior
notice. Funds for the repurchases are expected to come from cash on
hand, cash generated by operations, or cash derived from the sale of
non-core assets.
In the first quarter of 2006, the Company repurchased 246,900
shares at a total cost of $11.4 million. Since inception of the plan
in the third quarter of 2005 through the end of the first quarter of
2006, the Company has purchased 642,900 shares at a total cost of
$28.9 million. There are currently no specific plans for the shares
that have been or may be purchased under the program. As of April 1,
2006, Charles River had approximately 72.1 million shares of common
stock outstanding.
Webcast
Charles River Laboratories has scheduled a live webcast on
Wednesday, May 10, at 8:30 a.m. ET to discuss matters relating to this
press release. To participate, please go to ir.criver.com and select
the webcast link. You can also find the associated slide presentation
and reconciliations to comparable GAAP measures on the website. The
webcast will be available until 5:00 p.m. ET on May 24, 2006.
Use of Non-GAAP Financial Measures
This press release contains non-GAAP financial measures which
exclude, among other items, amortization of intangible assets and
other charges related to the Inveresk acquisition. We exclude these
items from the non-GAAP financial measures because they are outside
our normal operations. We believe that the inclusion of 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 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.
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 the text of, and
the accompanying exhibits to, this press release, and can also be
found on the Company's website at ir.criver.com.
Caution Concerning Forward-Looking Statements. This news release
includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the use of words such as "anticipate," "believe,"
"expect," "will," "may," "estimate," "plan," "outlook," and "project"
and other similar expressions that predict or indicate future events
or trends or that are not statements of historical matters. These
statements also include statements regarding the future demand for
drug discovery and development products and services, including the
outsourcing of these services; the impact of specific actions intended
to improve overall operating efficiencies and profitability,
particularly with respect to the Interventional and Surgical Services,
Transgenic Services, and Montreal businesses; the intended divestiture
of the Company's Phase II - IV Clinical Services business;
expectations regarding future stock option, restricted stock and other
equity grants to the Company's employees and directors; expectations
regarding stock repurchases; the timing of the opening of new and
expanded facilities; and Charles River's future performance as
delineated in our forward-looking guidance, and particularly our
expectations with respect to sales growth, efficiency improvements and
operating synergies. 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 divest
the Phase II - IV Clinical Services business without diverting
attention or resources from the Company's core businesses; a decrease
in research and development spending or a decrease in the level of
outsourced services; the ability to convert backlog to sales; special
interest groups; contaminations; industry trends; new displacement
technologies; USDA and FDA regulations; changes in law; continued
availability of products and supplies; loss of key personnel; interest
rate and foreign currency exchange rate fluctuations; changes in tax
regulation and laws; changes in generally accepted accounting
principles; and any changes in business, political, or economic
conditions due to the threat of future terrorist activity in the U.S.
and other parts of the world, and related U.S. military action
overseas. A further description of these risks, uncertainties, and
other matters can be found in the Risk Factors detailed in Charles
River's Annual Report on Form 10-K as filed on March 14, 2006, as well
as other filings we make with the Securities and Exchange Commission.
Because forward-looking statements involve risks and uncertainties,
actual results and events may differ materially from results and
events currently expected by Charles River, and Charles River assumes
no obligation and expressly disclaims any duty to update information
contained in this news release except as required by law.
About Charles River Laboratories
Charles River Laboratories, based in Wilmington, Massachusetts, is
a global provider of solutions that advance the drug discovery and
development process. Our leading-edge products and services are
designed to enable our clients to bring drugs to market faster and
more efficiently. Backed by our rigorous, best-in-class procedures and
our proven data collection, analysis and reporting capabilities, our
products and services are organized into three categories spanning
every step of the drug development pipeline: Research Models and
Services, Preclinical Services, and Clinical Services. Charles River's
customer base includes all of the major pharmaceutical companies and
many biotechnology companies, government agencies and leading
hospitals and academic institutions. Charles River's 8,600 employees
serve clients in more than 50 countries. For more information on
Charles River, visit our website at www.criver.com.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for per share data)
Three Months Ended
-----------------------
April 1, March 26,
2006 2005
Total net sales $283,769 $273,722
Cost of products sold and services provided 180,585 169,111
----------- -----------
Gross margin 103,184 104,611
Selling, general and administrative 47,772 44,852
Goodwill impairment charge 129,187
Amortization of intangibles 11,189 14,363
----------- -----------
Operating income (loss) (84,964) 45,396
Interest income (expense) (2,948) (6,259)
Other, net 238 (144)
----------- -----------
Income before income taxes and minority
interests (87,674) 38,993
Provision for income taxes 12,039 10,860
----------- -----------
Income before minority interests (99,713) 28,133
Minority interests (402) (485)
----------- -----------
Net income (loss) $(100,115) $27,648
=========== ===========
Earnings (loss ) per common share
Basic $(1.40) $0.42
Diluted $(1.40) $0.40
Weighted average number of common shares
outstanding
Basic 71,505,478 65,876,099
Diluted 71,505,478 72,526,888
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
April 1, December 31,
2006 2005
Assets
Current assets
Cash and cash equivalents $101,456 $114,821
Trade receivables, net 201,069 203,274
Inventories 68,167 65,270
Other current assets 41,967 35,957
----------- ------------
Total current assets 412,659 419,322
Property, plant and equipment, net 428,004 399,454
Goodwill, net 1,288,239 1,417,666
Other intangibles, net 188,291 199,148
Deferred tax asset 71,720 67,911
Other assets 21,511 34,708
----------- ------------
Total assets $2,410,424 $2,538,209
=========== ============
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $36,403 $36,445
Accounts payable 34,133 30,447
Accrued compensation 27,237 40,358
Deferred income 100,379 116,302
Other current liabilities 69,871 87,860
----------- ------------
Total current liabilities 268,023 311,412
Long-term debt 270,652 260,217
Other long-term liabilities 126,451 129,849
----------- ------------
Total liabilities 665,126 701,478
----------- ------------
Minority interests 8,243 9,718
Total shareholders' equity 1,737,055 1,827,013
----------- ------------
Total liabilities and shareholders' equity $2,410,424 $2,538,209
=========== ============
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended
---------------------
April 1, March 26,
2006 2005
Research Models and Services
Net sales $128,973 $127,912
Gross margin 55,885 56,586
Gross margin as a % of net sales 43.3% 44.2%
Operating income 40,477 42,308
Operating income as a % of net sales 31.4% 33.1%
Depreciation and amortization 5,034 4,729
Capital expenditures 3,566 5,275
Preclinical Services
Net sales $122,458 $114,072
Gross margin 37,089 38,188
Gross margin as a % of net sales 30.3% 33.5%
Operating income 12,091 12,516
Operating income as a % of net sales 9.9% 11.0%
Depreciation and amortization 14,414 16,993
Capital expenditures 35,821 7,023
Clinical Services
Net sales $32,338 $31,738
Gross margin 10,210 9,837
Gross margin as a % of net sales 31.6% 31.0%
Operating income (loss) (127,440) 833
Operating income as a % of net sales -394.1% 2.6%
Depreciation and amortization 3,171 3,704
Capital expenditures 253 100
Unallocated Corporate Overhead $(10,092) $(10,261)
Total
Net sales $283,769 $273,722
Gross margin 103,184 104,611
Gross margin as a % of net sales 36.4% 38.2%
Operating income (loss) (84,964) 45,396
Operating income as a % of net sales -29.9% 16.6%
Depreciation and amortization 22,619 25,426
Capital expenditures 39,640 12,398
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended
-------------------
April 1, March 26,
2006 2005
Research Models and Services
Net sales $128,973 $127,912
Operating income 40,477 42,308
Operating income as a % of net sales 31.4% 33.1%
Add back:
- -
--------- ---------
Operating income, excluding specified charges
(Non-GAAP) 40,477 42,308
Non-GAAP operating income as a % of net sales 31.4% 33.1%
Preclinical Services
Net sales $122,458 $114,072
Operating income 12,091 12,516
Operating income as a % of net sales 9.9% 11.0%
Add back:
Amortization related to acquisition 8,095 10,317
- -
--------- ---------
Operating income, excluding specified charges
(Non-GAAP) 20,186 22,833
Non-GAAP operating income as a % of net sales 16.5% 20.0%
Clinical Services
Net sales $32,338 $31,738
Operating income (loss) (127,440) 833
Operating income as a % of net sales -394.1% 2.6%
Add back:
Amortization related to acquisition 2,499 3,014
Goodwill impairment 129,187 -
- -
--------- ---------
Operating income, excluding specified charges
(Non-GAAP) 4,246 3,847
Non-GAAP operating income as a % of net sales 13.1% 12.1%
Unallocated Corporate Overhead $(10,092) $(10,261)
Add back:
Stock-based compensation related to
acquisition 325 2,969
- -
--------- ---------
Unallocated corporate overhead, excluding
specified charges (Non-GAAP) (9,767) (7,292)
Total
Net sales $283,769 $273,722
Operating income (loss) (84,964) 45,396
Operating income as a % of net sales -29.9% 16.6%
Add back:
Amortization related to acquisition 10,594 13,331
Stock-based compensation related to
acquisition 325 2,969
Goodwill impairment 129,187 -
--------- ---------
Operating income, excluding specified charges
(Non-GAAP) 55,142 61,696
Non-GAAP operating income as a % of net sales 19.4% 22.5%
Charles River management believes that non-GAAP financial measures
helps investors to gain a meaningful understanding of our core
operating results and future prospects, consistent with the manner in
which management measures and forecasts the Company's performance. The
non-GAAP financial measures included are not meant to be considered
superior to or a substitute for results of operations prepared in
accordance with GAAP.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(dollars in thousands, except for per share data)
Three Months Ended
-----------------------
April 1, March 26,
2006 2005
Net income (loss) $(100,115) $27,648
Add back:
Amortization related to acquisition 10,594 13,331
Goodwill impairment 129,187
Stock-based compensation related to
acquisition 325 2,969
Tax effect (3,603) (5,313)
----------- -----------
Net income, excluding specified charges (Non-
GAAP) $36,388 $38,635
=========== ===========
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) $36,388 $38,635
After-tax equivalent interest expense on 3.5%
senior convertible debentures - 1,168
----------- -----------
Income for purposes of calculating diluted
earnings per share, excluding specified
charges (Non-GAAP) $36,388 $39,803
=========== ===========
Weighted average shares outstanding - Basic 71,505,478 65,876,099
Effect of dilutive securities:
3.5% senior convertible debentures - 4,759,455
Stock options and contingently issued
restricted stock 1,239,254 1,550,175
Warrants 145,505 341,159
----------- -----------
Weighted average shares outstanding - Diluted 72,890,237 72,526,888
=========== ===========
Basic earnings (loss) per share $(1.40) $0.42
Diluted earnings (loss) per share $(1.40) $0.40
Basic earnings per share, excluding specified
charges (Non-GAAP) $0.51 $0.59
Diluted earnings per share, excluding
specified charges (Non-GAAP) $0.50 $0.55
Charles River management believes that non-GAAP financial measures
helps investors to gain a meaningful understanding of our core
operating results and future prospects, consistent with the manner in
which management measures and forecasts the Company's performance. The
non-GAAP financial measures included are not meant to be considered
superior to or a substitute for results of operations prepared in
accordance with GAAP.
CONTACT: Charles River Laboratories
Susan E. Hardy, 781-262-7616
Corporate Vice President, Investor Relations