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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
August 8, 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 August 8, 2006, Charles River Laboratories International, Inc. issued a press
release providing financial results for the quarter ended July 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) Exhibits.
99.1 Press release dated August 8, 2006.
2
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: August 8, 2006
By: /s/ Joanne P. Acford
-------------------------------------------
Joanne P. Acford, Corporate Senior Vice
President, General Counsel and
Corporate Secretary
3
Exhibit Index
Exhibit No. Description
- ----------- -----------
99.1 Press release dated August 8, 2006.
4
Exhibit 99.1
Charles River Laboratories Announces Second-Quarter 2006
Results from Continuing Operations
WILMINGTON, Mass.--(BUSINESS WIRE)--Aug. 8, 2006--Charles River
Laboratories International, Inc. (NYSE: CRL)
- Net Sales Increase of 6.8% on Preclinical Services Growth of
14.1% -
- GAAP EPS of $0.46 and Non-GAAP EPS of $0.57 -
- Non-GAAP EPS Increase 21% from $0.47 in First Quarter of 2006 -
- Benefit of Strategic Initiatives Drives Operating Efficiency -
Charles River Laboratories International, Inc. (NYSE: CRL) today
reported second-quarter and year-to-date 2006 financial results.
Beginning this period, the Company is reporting results from
continuing operations, reflecting its strategic portfolio realignment
to focus on its core competencies in research models and preclinical
services. As a result of the of the intended sale of the Clinical
Phase II - IV business and closure of the Interventional and Surgical
Services (ISS) business (announced on May 9, 2006), these businesses
are now reported as discontinued operations, and the Company has
reclassified historical comparisons accordingly.
Net sales from continuing operations increased 6.8% in the second
quarter of 2006, to $267.9 million from $250.9 million in the second
quarter of 2005. The sales increase was driven by strong Preclinical
Services sales, while sales from Research Models & Services (RMS) were
unchanged from the second quarter of 2005. GAAP earnings from
continuing operations were $0.46 per diluted share, compared to $0.43
per diluted share in the second quarter of last year, and on a
non-GAAP basis, earnings from continuing operations were $0.57 per
diluted share, compared to $0.55 per share in the prior period. On a
sequential basis, non-GAAP earnings from continuing operations
increased 21.3% from $0.47 per diluted share reported in the first
quarter of 2006, and GAAP earnings from continuing operations
increased 17.9% from $0.39 per diluted share.
"We are very pleased with the progress we achieved during the
second quarter," said James C. Foster, Chairman, President and Chief
Executive Officer. "Exceptional sales growth in the Preclinical
Services segment, due in part to new capacity, stable pricing, an
optimal study mix and improved operating efficiency, translated into
stronger sales and operating income growth for the quarter. In the RMS
segment, we saw improvement in Vaccine product sales and another
strong quarter for our In Vitro business, however, ongoing cost
reductions by several large pharmaceutical customers limited research
model sales."
Mr. Foster continued, "At Charles River, we remain committed to
further strengthening our core businesses, by executing our planned
capacity expansion, increasing operational efficiencies, and enhancing
our management team and scientific expertise. During the balance of
this year, we will continue to focus on these key initiatives as a
means to advance our goal of building a stronger foundation for our
business, our customers, and our shareholders over the long term."
Second-Quarter Results
Net sales from continuing operations increased 6.8% to $267.9
million in the second quarter of 2006, compared to $250.9 million in
the same period in 2005.
On a GAAP basis, net income from continuing operations was $32.8
million, or $0.46 per diluted share, for the second quarter of 2006,
compared to $31.0 million, or $0.43 per diluted share, for the second
quarter of 2005. In accordance with Statement of Financial Accounting
Standards No. 123R (SFAS 123R), "Share-Based Payment," which the
Company adopted on January 1, 2006, second-quarter 2006 results
included $3.3 million, or $0.03 per share, of stock option expense.
On a non-GAAP basis, net income from continuing operations was
$40.9 million for the second quarter of 2006, an increase of 2.6% from
$39.9 million for the same period in 2005. Second-quarter earnings per
diluted share on a non-GAAP basis were $0.57, compared to $0.55 per
share in the second quarter of 2005. Non-GAAP net income and earnings
per share for the second quarter of 2006 excluded the following
planned charges which were recorded during the period:
-- $5.3 million, or $0.05 per diluted share, for cost-saving
initiatives. In the RMS segment, the charges were $2.3 million
for closure of two small vaccine facilities and a management
consolidation in the Transgenic Services business. In the
Preclinical Services segment, the charges were $3.0 million,
for headcount reductions, primarily in the Montreal facility,
and closure of a small Interventional and Surgical Services
operation in Ireland.
-- $8.6 million, or $0.08 per share, of amortization and
stock-based compensation costs associated with the acquisition
of Inveresk.
Non-GAAP results for the second quarter of 2005 excluded $12.9
million, or $0.11 per diluted share, for Inveresk-related amortization
and compensation costs.
Including a loss of $7.0 million from discontinued operations,
consolidated net income for the second quarter of 2006 was $25.7
million, or $0.36 per diluted share, compared to $31.9 million, or
$0.44 per diluted share, in the second quarter of 2005.
Research Models and Services (RMS)
Sales for the RMS segment were $130.8 million in the second
quarter of 2006, unchanged from the second quarter of 2005. Strong
sales of Vaccine and In Vitro products were offset by slower sales of
research models in Europe and the United States and Transgenic
Services, as a result of certain large pharmaceutical customers'
efforts to reduce costs. In addition, foreign exchange reduced net
sales by 0.6%.
In the second quarter of 2006, the RMS segment's gross and
operating margins were lower than in the second quarter of last year,
reflecting slower sales of research models, continuing softness in
Transgenic Services, and $1.3 million associated with the adoption of
SFAS 123R. In addition, charges of $2.3 million associated with
cost-saving initiatives in the second quarter reduced the GAAP
operating margin. On a GAAP basis, the segment's gross margin was
42.4%, compared to 44.1% for the second quarter of 2005, and the
operating margin was 29.1%, compared to 32.9% for the same period last
year. On a non-GAAP basis, which excludes the charges associated with
cost-saving initiatives, the operating margin was 30.8%. Costs of SFAS
123R reduced the second-quarter 2006 GAAP and non-GAAP operating
margins by 0.9% and 1.0%, respectively.
On a sequential basis, the RMS gross margin declined to 42.4% from
43.3% in the first quarter of 2006. The GAAP operating margin declined
to 29.1% from 31.4%, and on a non-GAAP basis, the operating margin
declined to 30.8% from 31.4% in the first quarter of 2006. Lower sales
of research models in Europe and the United States were the primary
drivers of the decline.
Preclinical Services
Results for the Preclinical Services segment now include the Phase
I Clinical business, and historical results have been restated
accordingly.
Second-quarter net sales for the Preclinical Services segment were
$137.0 million, an increase of 14.1% from the $120.1 million in the
second quarter of 2005. Sales were driven by a number of factors
including: strong demand across the Company's largest facilities; a
favorable study mix, particularly in Montreal; new capacity brought on
line in the second quarter in existing facilities in Edinburgh,
Massachusetts and Nevada; and higher sales of Discovery Services in
Massachusetts.
On a GAAP basis, the Preclinical segment's gross margin was 37.7%,
up from 36.5% for the second quarter of 2005. The operating margin
improved to 16.4% from 15.5%. Significantly higher sales and improved
operating efficiencies offset the $3.0 million charge for cost-saving
initiatives and $1.6 million cost associated with adoption of SFAS
123R. On a non-GAAP basis, which excludes $8.5 million of amortization
related to the Inveresk acquisition and charges associated with
cost-saving initiatives, the second-quarter operating margin increased
to 24.8% compared to 24.3% for the second quarter of 2005. Non-GAAP
operating income for the second quarter of 2005 excluded amortization
and compensation charges related to Inveresk of $10.6 million. The
GAAP and non-GAAP operating margins increased in the second quarter of
2006 despite the costs associated with SFAS 123R, which reduced the
GAAP and non-GAAP operating margins by 1.2%.
On a sequential basis, the Preclinical gross margin increased to
37.7% from 31.7% in the first quarter of 2006. The GAAP operating
margin increased to 16.4% from 11.0% and on a non-GAAP basis, the
operating margin increased to 24.8% from 17.6% in the first quarter of
2006. The increases were driven by higher sales growth and improved
operating efficiency.
Six-Month Results
For the first six months of 2006, net sales from continuing
operations increased by 6.0% to $522.0 million, compared to $492.3
million in the same period in 2005. The negative effect of foreign
exchange reduced the six-month growth rate by approximately 1.6%.
On a GAAP basis, net income from continuing operations was $61.3
million, or $0.84 per diluted share, for the first half of 2006,
compared to $59.4 million, or $0.84 per diluted share, for the same
period in 2005. In accordance with SFAS 123R, first-half 2006 results
included $6.7 million, or $0.06 per share, of stock option expense.
On a non-GAAP basis, net income from continuing operations was
$75.2 million, or $1.03 per diluted share, for the first six months of
2006, compared to $77.4 million, or $1.08 per diluted share, for the
same period in 2005. For the first six months of 2006, non-GAAP net
income excluded the following charges:
-- $5.3 million, or $0.05 per diluted share, for cost-saving
initiatives.
-- $17.2 million, or $0.16 per share, of amortization and
stock-based compensation costs associated with the acquisition
of Inveresk.
Non-GAAP net income for the first half of 2005 excluded
Inveresk-related charges of $26.1 million, or $0.24 per diluted share.
Including a loss of $135.7 million from discontinued operations,
$129.2 million of which resulted from the goodwill impairment recorded
in the first quarter of 2006 related to the intended sale of the
Clinical Phase II - IV business, the consolidated net loss for the
first six months of 2006 was $74.4 million, or $1.02 per diluted
share, compared to net income of $59.5 million, or $0.84 per diluted
share, for the same period in 2005.
Research Models and Services (RMS)
For the first six months of 2006, RMS net sales were $259.8
million, slightly higher than the first-half 2005 net sales of $258.7
million, but an increase of 2.6% when excluding the negative effect of
foreign exchange. The RMS segment gross margin was 42.9% in the first
half of 2006, compared to 44.2% for the year-ago period, and the
operating margin was 30.2% compared to 33.0%. On a non-GAAP basis,
which excluded the $2.3 million charge associated with cost-saving
initiatives, the operating margin was 31.1%, compared to 33.0% in the
first six months of 2005. Costs of $2.7 million related to SFAS 123R
reduced the GAAP and non-GAAP operating margins for the first half of
2006 by 1.0%.
Preclinical Services
For the first six months of 2006, Preclinical net sales were
$262.2 million, an increase of 12.2% over first-half 2005 net sales of
$233.6 million. Both the gross and operating margin were affected by
the $3.0 million charge for cost-saving initiatives. On a GAAP basis,
the Preclinical segment gross margin was 34.8% in the first half of
2006, compared to 35.7% in the year-ago period, and the operating
margin was 13.9% compared to 13.6%. On a non-GAAP basis, the operating
margin was 21.4% in the first half of 2006 compared to 22.8% in the in
the year-ago period. On a year-to-date basis, the cost of SFAS 123R
was $3.5 million, which reduced the GAAP and non-GAAP operating
margins by 1.3%.
Stock Repurchase Program
Charles River presently has a stock repurchase authorization in
place from its Board of Directors which provides for the purchase of
up to $300.0 million of its common stock. The Company repurchased
stock under this authorization pursuant to a Rule 10b5-1 plan
initiated in August 2005. Stock repurchases made under this plan
totaled approximately 0.9 million shares at a cost of $37.5 million
through June 5, 2006, the date on which the Rule 10b5-1 plan was
cancelled.
In the second quarter of 2006, as previously announced, the
Company closed the sale of $350 million of Convertible Senior Notes
due in 2013. Concurrent with the sale of those notes, the Company
repurchased approximately 3.7 million shares at a cost of $148.9
million. Combined with stock repurchases made under the 10b5-1 plan,
the Company has repurchased a total of approximately 4.6 million
shares at a cost of $186.4 million. There are currently no specific
plans for the shares that have been or may be purchased under the
authorization. As of July 1, 2006, Charles River had approximately
68.3 million shares of common stock outstanding.
The Company intends to implement an accelerated stock repurchase
(ASR) program in the third quarter of 2006. Under the ASR program, the
Company expects to repurchase approximately $75.0 million of common
stock, which would leave a balance of approximately $39.0 million
available for repurchases under the current authorization.
Guidance
The Company continues to maintain its forward-looking non-GAAP
guidance based on continuing operations for 2006, which was originally
provided with the first-quarter financial results on May 9, 2006. The
2006 GAAP guidance for continuing operations has been revised to
reflect the reclassification to discontinued operations of the
first-quarter 2006 Clinical Phase II - IV goodwill impairment charge
of $129.2 million, or $1.81 per diluted share. In addition, a portion
of the amortization and compensation charges related to Inveresk has
been reclassified to discontinued operations, as the charges were
related to the Clinical Phase II - IV business.
2006 GUIDANCE (from continuing operations) REVISED
- ----------------------------------------------------------------------
Net sales growth (in %) 6% - 8%
Sales ($ in millions) $1,050 - $1,075
GAAP EPS estimate $1.73 - $1.79
Q2 cost-saving initiatives $0.05
Inveresk amortization and compensation charges $0.34
----------------
Non-GAAP EPS estimate $2.12 - $2.18
- ----------------------------------------------------------------------
Mr. Foster concluded, "While we do not expect the pressures
impacting our pharma customers to improve in the near term, we believe
that their growing emphasis on strategic outsourced services, the
value of the essential products and services we provide and the strong
relationships we maintain with our customers will enable us to achieve
our goals for 2006."
Webcast
Charles River Laboratories has scheduled a live webcast on
Wednesday, August 9, 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 August
23, 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, goodwill impairment
charges taken with respect to our Phase II - IV Clinical business, and
strategic cost-saving initiatives. 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
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, including the possible implementation of
an ASR program; the timing of the opening of new and expanded
facilities; future cost reduction activities by our customers; 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, a decrease in the level of outsourced
services, or other cost reduction actions by our customers; 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 two categories which span the
drug development pipeline: Research Models and Services, and
Preclinical 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 8,500 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 Six Months Ended
---------------------- ----------------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
Total net sales $267,859 $250,890 $522,000 $492,300
Cost of products sold and
services provided 160,749 149,286 319,385 294,628
---------------------- ----------------------
Gross margin 107,110 101,604 202,615 197,672
Selling, general and
administrative 50,031 41,070 92,765 80,107
Amortization of
intangibles 9,377 11,476 18,452 23,080
---------------------- ----------------------
Operating income (loss) 47,702 49,058 91,398 94,485
Interest income (expense) (3,661) (4,806) (6,677) (11,096)
Other, net (736) (598) (688) (252)
---------------------- ----------------------
Income before income
taxes and minority
interests 43,305 43,654 84,033 83,137
Provision for income
taxes 9,870 12,223 21,681 22,877
---------------------- ----------------------
Income before minority
interests 33,435 31,431 62,352 60,260
Minority interests (654) (422) (1,056) (907)
---------------------- ----------------------
Income from continuing
operations 32,781 31,009 61,296 59,353
Income (loss) from
discontinued businesses,
net of tax (7,032) 851 (135,662) 155
---------------------- ----------------------
Net income (loss) $25,749 $31,860 $(74,366) $59,508
====================== ======================
Earnings (loss) per
common share
Basic:
Continuing operations $0.46 $0.44 $0.86 $0.88
Discontinued operations $(0.10) $0.01 $(1.89) $-
Net income $0.36 $0.46 $(1.04) $0.88
Diluted:
Continuing operations $0.46 $0.43 $0.84 $0.84
Discontinued operations $(0.10) $0.01 $(1.86) $-
Net income $0.36 $0.44 $(1.02) $0.84
Weighted average number
of common shares
outstanding
Basic 70,851,430 69,738,107 71,615,867 67,807,103
Diluted 71,835,166 72,916,234 72,798,832 72,734,098
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
July 1, December
2006 31, 2005
Assets
Current assets
Cash and cash equivalents $193,067 $114,821
Trade receivables, net 177,555 171,259
Inventories 69,036 65,128
Current assets held for sale 44,179 41,256
Other current assets 42,546 26,858
----------- -----------
Total current assets 526,383 419,322
Property, plant and equipment, net 440,348 387,501
Goodwill, net 1,097,932 1,097,590
Other intangibles, net 164,302 175,021
Deferred tax asset 100,633 68,046
Long-term assets held for sale 217,385 356,020
Other assets 70,103 34,709
----------- -----------
Total assets $2,617,086 $2,538,209
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities
Current portion of long-term debt $36,724 $36,263
Accounts payable 26,813 28,727
Accrued compensation 35,449 38,238
Deferred income 82,352 95,564
Accrued liabilites 34,450 38,625
Current liabilities held for sale 31,968 30,414
Other current liabilities 27,367 43,581
----------- -----------
Total current liabilities 275,123 311,412
Long-term debt 571,808 259,902
Long-term liabilities held for sale 8,168 13,661
Other long-term liabilities 112,189 116,503
----------- -----------
Total liabilities 967,288 701,478
----------- -----------
Minority interests 8,808 9,718
Total shareholders' equity 1,640,990 1,827,013
----------- -----------
Total liabilities and shareholders' equity $2,617,086 $2,538,209
=========== ===========
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended Six Months Ended
------------------ -----------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
Research Models and Services
Net sales $130,816 $130,771 $259,788 $258,683
Gross margin 55,478 57,729 111,344 114,296
Gross margin as a % of net
sales 42.4% 44.1% 42.9% 44.2%
Operating income 38,003 43,050 78,479 85,358
Operating income as a % of net
sales 29.1% 32.9% 30.2% 33.0%
Depreciation and amortization 5,237 5,047 10,272 9,920
Capital expenditures 4,783 6,478 8,349 11,792
Preclinical Services
Net sales $137,043 $120,119 $262,212 $233,617
Gross margin 51,632 43,875 91,271 83,376
Gross margin as a % of net
sales 37.7% 36.5% 34.8% 35.7%
Operating income 22,530 18,596 36,318 31,766
Operating income as a % of net
sales 16.4% 15.5% 13.9% 13.6%
Depreciation and amortization 15,288 16,616 29,913 33,865
Capital expenditures 12,620 5,115 48,441 11,967
Unallocated Corporate Overhead $(12,831)$(12,588) $(23,399)$(22,639)
Total
Net sales $267,859 $250,890 $522,000 $492,300
Gross margin 107,110 101,604 202,615 197,672
Gross margin as a % of net
sales 40.0% 40.5% 38.8% 40.2%
Operating income (loss) 47,702 49,058 91,398 94,485
Operating income as a % of net
sales 17.8% 19.6% 17.5% 19.2%
Depreciation and amortization 20,525 21,663 40,185 43,785
Capital expenditures 17,403 11,593 56,790 23,759
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended Six Months Ended
------------------ -----------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
Research Models and Services
Net sales $130,816 $130,771 $259,788 $258,683
Operating income 38,003 43,050 78,479 85,358
Operating income as a % of net
sales 29.1% 32.9% 30.2% 33.0%
Add back:
Second-quarter actions 2,334 2,334
- - - -
------------------ ------------------
Operating income, excluding
specified charges (Non-GAAP) 40,337 43,050 80,813 85,358
Non-GAAP operating income as a
% of net sales 30.8% 32.9% 31.1% 33.0%
Preclinical Services
Net sales $137,043 $120,119 $262,212 $233,617
Operating income 22,530 18,596 36,318 31,766
Operating income as a % of net
sales 16.4% 15.5% 13.9% 13.6%
Add back:
Amortization related to
acquisition 8,532 10,610 16,789 21,393
Second-quarter actions 2,966 - 2,966 -
------------------ ------------------
Operating income, excluding
specified charges (Non-GAAP) 34,028 29,206 56,073 53,159
Non-GAAP operating income as a
% of net sales 24.8% 24.3% 21.4% 22.8%
Unallocated Corporate Overhead $(12,831)$(12,588) $(23,399)$(22,639)
Add back:
Stock-based compensation
related to acquisition 117 2,285 402 4,676
- - - -
------------------ ------------------
Unallocated corporate overhead,
excluding specified charges
(Non-GAAP) (12,714) (10,303) (22,997) (17,963)
Total
Net sales $267,859 $250,890 $522,000 $492,300
Operating income 47,702 49,058 91,398 94,485
Operating income as a % of net
sales 17.8% 19.6% 17.5% 19.2%
Add back:
Amortization related to
acquisition 8,532 10,610 16,789 21,393
Stock-based compensation
related to acquisition 117 2,285 402 4,676
Second-quarter actions 5,300 - 5,300 -
------------------ ------------------
Operating income, excluding
specified charges (Non-GAAP) 61,651 61,953 113,889 120,554
Non-GAAP operating income as a
% of net sales 23.0% 24.7% 21.8% 24.5%
Charles River management believes that 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 one-time charges, 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. The Company intends
to continue to assess the potential value of reporting non-GAAP
results consistent with applicable rules and regulations.
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
---------------------- ---------------------
July 1, June 25, July 1, June 25,
2006 2005 2006 2005
Net income (loss) $25,749 $31,860 $(74,366) $59,508
Less: Discontinued
operations 7,032 (851) 135,662 (155)
---------------------- ----------------------
Net income from
continuing operations 32,781 31,009 61,296 59,353
Add back:
Amortization related to
acquisition 8,532 10,610 16,789 21,393
Stock-based compensation
related to acquisition 117 2,285 402 4,676
Second-quarter actions:
Severance 2,556 2,556
Impairment 2,644 2,644
Other 100 100
Tax effect (5,791) (3,988) (8,595) (8,064)
---------------------- ----------------------
Net income from
continuing operations,
excluding specified
charges (Non-GAAP) $40,939 $39,916 $75,192 $77,358
====================== ======================
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) $40,939 $39,916 $75,192 $77,358
After-tax equivalent
interest expense on 3.5%
senior
convertible debentures - 295 - 1,463
---------------------- ----------------------
Income for purposes of
calculating diluted
earnings
per share, excluding
specified charges (Non-
GAAP) $40,939 $40,211 $75,192 $78,821
====================== ======================
Weighted average shares
outstanding - Basic 70,851,430 69,738,107 71,615,867 67,807,103
Effect of dilutive
securities:
3.5% senior convertible
debentures - 1,202,939 - 2,981,197
Stock options and
contingently issued
restricted stock 851,925 1,633,092 1,043,535 1,604,147
Warrants 131,811 342,096 139,430 341,651
---------------------- ----------------------
Weighted average shares
outstanding - Diluted 71,835,166 72,916,234 72,798,832 72,734,098
====================== ======================
Basic earnings (loss) per
share $0.36 $0.46 $(1.04) $0.88
Diluted earnings (loss)
per share $0.36 $0.44 $(1.02) $0.84
Basic earnings per share,
excluding specified
charges (Non-GAAP) $0.58 $0.57 $1.05 $1.14
Diluted earnings per
share, excluding
specified charges (Non-
GAAP) $0.57 $0.55 $1.03 $1.08
Charles River management believes that 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 one-time charges, 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. The Company intends to continue to
assess the potential value of reporting non-GAAP results consistent
with applicable rules and regulations.
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 $254,141 $241,410
Cost of products sold and services
provided 158,636 145,342
----------------------
Gross margin 95,505 96,068
Selling, general and administrative 42,734 39,037
Amortization of intangibles 9,075 11,604
----------------------
Operating income (loss) 43,696 45,427
Interest income (expense) (3,016) (6,290)
Other, net 48 346
----------------------
Income before income taxes and minority
interests 40,728 39,483
Provision for income taxes 11,811 10,654
----------------------
Income before minority interests 28,917 28,829
Minority interests (402) (485)
----------------------
Income from continuing operations 28,515 28,344
Income (loss) from discontinued
businesses, net of tax (128,630) (696)
----------------------
Net income (loss) $(100,115) $27,648
======================
Earnings (loss) per common share
Basic:
Continuing operations $0.40 $0.43
Discontinued operations $(1.80) $(0.01)
Net income $(1.40) $0.42
Diluted:
Continuing operations $0.39 $0.41
Discontinued operations $(1.76) $(0.01)
Net income $(1.37) $0.40
Weighted average number of common shares
outstanding
Basic 71,505,478 65,876,099
Diluted 72,890,237 72,526,888
Reclassified to reflect continuing and discontinued operations
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 $128,972 $127,912
Gross margin 55,866 56,567
Gross margin as a % of net sales 43.3% 44.2%
Operating income 40,476 42,308
Operating income as a % of net sales 31.4% 33.1%
Depreciation and amortization 5,035 4,873
Capital expenditures 3,566 5,314
Preclinical Services
Net sales $125,169 $113,498
Gross margin 39,639 39,501
Gross margin as a % of net sales 31.7% 34.8%
Operating income 13,788 13,170
Operating income as a % of net sales 11.0% 11.6%
Depreciation and amortization 14,625 17,249
Capital expenditures 35,821 6,852
Unallocated Corporate Overhead $(10,568)$(10,051)
Total
Net sales $254,141 $241,410
Gross margin 95,505 96,068
Gross margin as a % of net sales 37.6% 39.8%
Operating income (loss) 43,696 45,427
Operating income as a % of net sales 17.2% 18.8%
Depreciation and amortization 19,660 22,122
Capital expenditures 39,387 12,166
Reclassified to reflect continuing and discontinued operations
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 $128,972 $127,912
Operating income 40,476 42,308
Operating income as a % of net sales 31.4% 33.1%
Add back:
Second-quarter actions -
------------------
Operating income, excluding specified charges
(Non-GAAP) 40,476 42,308
Non-GAAP operating income as a % of net sales 31.4% 33.1%
Preclinical Services -
Net sales 125,169 113,498
Operating income 13,788 13,170
Operating income as a % of net sales 11.0% 11.6%
Add back:
Amortization related to acquisition 8,257 10,783
Second-quarter actions - -
------------------
Operating income, excluding specified charges
(Non-GAAP) 22,045 23,953
Non-GAAP operating income as a % of net sales 17.6% 21.1%
Unallocated Corporate Overhead (10,568) (10,051)
Add back:
Stock-based compensation related to acquisition 285 2,391
- -
------------------
Unallocated corporate overhead, excluding
specified charges (Non-GAAP) (10,283) (7,660)
Total
Net sales 254,141 241,410
Operating income 43,696 45,427
Operating income as a % of net sales 17.2% 18.8%
Add back:
Amortization related to acquisition 8,257 10,783
Stock-based compensation related to acquisition 285 2,391
Second-quarter actions - -
------------------
Operating income, excluding specified charges
(Non-GAAP) 52,238 58,601
Non-GAAP operating income as a % of net sales 20.6% 24.3%
Reclassified to reflect continuing and discontinued operations
Charles River management believes that 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 one-time charges, 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. The Company intends to continue to assess the
potential value of reporting non-GAAP results consistent with
applicable rules and regulations.
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
Less: Discontinued operations 128,630 696
----------------------
Net income from continuing operations 28,515 28,344
Add back:
Amortization related to acquisition 8,257 10,783
Stock-based compensation related to acquisition 285 2,391
Second-quarter actions: - -
Severance - -
Impairment - -
Other - -
Tax effect (2,804) (4,076)
----------------------
Net income from continuing operations, excluding
specified charges (Non-GAAP) $34,253 $37,442
======================
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) $34,253 $37,442
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) $34,253 $38,610
======================
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 $(1.37) $0.40
Basic earnings per share, excluding specified
charges (Non-GAAP) $0.48 $0.57
Diluted earnings per share, excluding specified
charges (Non-GAAP) $0.47 $0.53
Reclassified to reflect continuing and discontinued operations
Charles River management believes that 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 one-time charges, 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. The Company intends to continue to assess the
potential value of reporting non-GAAP results consistent with
applicable rules and regulations.
CONTACT: Charles River Laboratories International, Inc.
Investor Contact:
Susan E. Hardy, 781-262-7616