Charles River Laboratories Reports Record First-Quarter Sales and Non-GAAP Earnings and Raises Guidance for 2004.Business Editors BioWire2K WILMINGTON Wilmington. 1 City (1990 pop. 71,529), seat of New Castle co., NE Del., on the Delaware River and tributary streams, the Christina and the Brandywine; settled 1638, inc. as a city 1832. , Mass.--(BUSINESS WIRE)--April 28, 2004 Charles River Charles River River, eastern Massachusetts, U.S. The longest river wholly in the state, it flows into Boston Bay after a course of about 80 mi (130 km). Navigable for about 7 mi (11 km), its estuary separates the cities of Boston and Cambridge. Laboratories International, Inc. (NYSE NYSE See: New York Stock Exchange :CRL CRL - Carnegie Representation Language. Carnegie Group, Inc. Frame language derived from SRL. Written in Common LISP. Used in the product Knowledge Craft. ) today reported a 13.5% increase in first-quarter 2004 net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , to $172.6 million from $152.1 million reported in the first quarter of 2003. Net income for the first quarter of 2004 was $17.6 million, or $0.36 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $19.4 million, or $0.40 per diluted share, in the first quarter of 2003. The reduction in net income was due to a one time, non-cash net charge related to the reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of the Company's European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations. Non-GAAP net income for the first quarter of 2004 was $23.4 million, an 18.2% increase over the $19.8 million reported in the first quarter of 2003, and non-GAAP earnings per diluted share were $0.47 compared to $0.41, an increase of 14.6%. As a result of the European reorganization, the first quarter of 2004 included a net charge of $5.8 million, or $0.11 per diluted share, related to the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of a deferred tax asset and release of a tax valuation allowance. The first quarter of 2003 included a net charge of $0.5 million, or $0.01 per share, for the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of certain contract manufacturing assets and the benefit of a litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement in the Company's favor. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the first quarter of 2004 rose 16.7% to $39.5 million from $33.8 million in the first quarter of 2003. The Company's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: was 22.9% in the first quarter of 2004 compared to 22.3% in the same period last year. James C. Foster James Clifford Foster is the chairman and chief executive officer of Charles River Laboratories, Inc., an international company that works on the drug discovery and development process. , Chairman, President and Chief Executive Officer said, "We are extremely pleased with the first-quarter results. The market for outsourced development services continues to strengthen, and we are benefiting from increased spending in the pharmaceutical and biotechnology biotechnology, the use of biological processes, as through the exploitation and manipulation of living organisms or biological systems, in the development or manufacture of a product or in the technological solution to a problem. sectors. "As a result of the improved business environment, we are increasing our guidance for 2004. We now expect net sales growth in a range of 9% to 13% and non-GAAP earnings per diluted share, which excludes the net charge associated with the European reorganization, in a range between $1.83 and $1.89." Business Segments Results First-quarter 2004 net sales of $172.6 million increased 13.5% over the first quarter of 2003. Favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translation contributed approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 4.6% of the net sales gain. First-quarter 2004 net sales for the Research Models and Services (RMS (1) (Record Management Services) A file management system used in VAXs. (2) (Root Mean Square) A method used to measure electrical output in volts and watts. 1. RMS - Record Management Services. 2. ) segment increased 10.0% to $113.5 million from $103.1 million in the prior year. The sales increase was due to price increases and increased pharmaceutical and biotechnology spending. The RMS segment's gross margin was 43.1% compared to 43.5% in the first quarter of 2003 due to a change in product mix and costs associated with consolidation of research model production capacity. Operating income was $36.5 million and the operating margin was 32.1%, compared to $37.2 million and 36.1% in the same period last year. Last year's first-quarter results included the benefit of a litigation settlement in the Company's favor of $2.9 million, which was the primary reason for the margin decrease. Net sales for the Development and Safety Testing (DST (1) (DeSTination) Contrast with SRC, which is an abbreviation of "source." (2) (Digital Signal Trust Company, Salt Lake City, UT, www.digsigtrust.com) An organization that sets up and manages PKI systems for companies and industry groups. ) segment rose 20.8% in the first quarter, to $59.2 million from $49.0 million in the same period in 2003. The demand for outsourced services has continued to strengthen, and net sales for the DST segment have improved sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Higher net sales and improved utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be raised the gross margin for the DST segment to 33.7% from 26.7% in the first quarter of 2003. Due principally to higher sales, operating income for the first quarter rose to $9.8 million from $0.9 million in the first quarter of 2003, and the operating margin increased to 16.6% from 1.9%. The first quarter of 2003 included a charge of $3.7 million associated with the closure of a contract manufacturing facility. European Reorganization In the first quarter of 2004, the Company implemented a reorganization of its European operations. The purpose of the reorganization was to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. the corporate legal structure in order to improve operating efficiency and cash management, facilitate acquisitions and provide tax benefits. The reorganization, which did not involve reductions of personnel or facility closures, resulted in a one time, non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for the write-off of a deferred tax asset in the first quarter of 2004 of approximately $7.9 million. As a result of the write-off, a valuation allowance associated with foreign tax credit carryforwards Carryforwards Tax losses allowed to be applied to offset future income in some specified number of future years. was reassessed and $2.1 million was released as a tax benefit. The effect of these two items, which is reflected in the provision for income taxes, was a net charge of $5.8 million, or $0.11 per diluted share. 2004 Outlook The following forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. guidance is based on current foreign exchange rates and is exclusive of any acquisitions which may occur. For 2004, the Company anticipates that net sales will increase between 9% and 13%, higher than previous guidance of 7% to 11% due to the more robust business environment. As a result of stronger sales growth, the Company now expects 2004 earnings per diluted share to be in a range of $1.72 to $1.78. Excluding the one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. net charge associated with the reorganization of the European operations, non-GAAP earnings per diluted share are expected to be $1.83 to $1.89, compared to the Company's earlier guidance of $1.78 to $1.84. For the second quarter of 2004, the Company expects that net sales will increase between 9% and 13% and that earnings per diluted share will be in a range of $0.46 to $0.48. Webcast Charles River Laboratories has scheduled a live webcast on Thursday Thursday: see week. , April 29, at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to discuss matters relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc this press release. To participate, please go to ir.criver.com and select the webcast link. The webcast will be available until 5:00 p.m. EDT on May 6, 2004. Charles River Laboratories, based in Wilmington, Massachusetts For other towns and places named Wilmington, see Wilmington. Wilmington is a town in Middlesex County, Massachusetts, United States. The population was 21,363 at the 2000 census. , is a leading provider of critical research tools and integrated support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services that enable innovative and efficient drug discovery and development. The Company is the global leader in providing the animal research models required in research and development for new drugs, devices and therapies. The Company also offers a broad and growing portfolio of products and services that enable customers to reduce cost, increase speed, and enhance productivity and effectiveness in drug discovery and development. Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by River's customer base spans over 50 countries, and includes all of the major pharmaceutical companies, biotechnology companies Top 100 Biotechnology Companies The following is a list of the top 100 biotechnology companies ranked by revenue. The first nine companies qualify for the list of the top 50 pharmaceutical companies. , and many leading hospitals and academic institutions. Caution Concerning Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . This document includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "expect," "estimate," "plan," "outlook," and "project" and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements are based on management's current expectations, and involve a number of risks and uncertainties that could cause actual results to differ materially from those stated or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by the forward-looking statements, and the Company expressly does not undertake any duty to update forward-looking statements, which speak only as of the date of this document. Those risks and uncertainties include, but are not limited to: a decrease in pre-clinical research and development spending or a decrease in the level of outsourced services; acquisition integration risks; special interest groups; contaminations; industry trends; new displacement displacement, in psychology: see defense mechanism. Same as offset. See base/displacement. technologies; USDA USDA, n.pr See United States Department of Agriculture. and FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. 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 The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ; and any changes in business, political, or economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas. A further description of these risks, uncertainties, and other matters can be found in the Risk Factors detailed in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. as filed on March 10, 2004, with the Securities and Exchange Commission.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for per share data)
Three Months Ended
March 27, March 29,
2004 2003
-----------------------
Total net sales $172,637 $152,125
Cost of products sold and services provided 103,809 94,143
----------------------
Gross margin 68,828 57,982
Selling, general and administrative 28,120 22,139
Other operating expenses, net - 747
Amortization of intangibles 1,191 1,248
----------------------
Operating income 39,517 33,848
Interest income (expense) (1,415) (1,586)
Other, net 200 (18)
----------------------
Income before income taxes and minority
interests 38,302 32,244
Provision for income taxes 20,152 12,414
----------------------
Income before minority interests 18,150 19,830
Minority interests (556) (476)
----------------------
Net income $17,594 $19,354
======================
Earnings per common share
Basic $0.38 $0.43
Diluted $0.36 $0.40
Weighted average number of common shares
outstanding
Basic 45,855,115 45,178,566
Diluted 52,133,240 51,201,008
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
March 27, March 29,
2004 2003
--------- ---------
Assets
Current assets
Cash and cash equivalents $189,746 $182,331
Marketable securities 13,301 13,156
Trade receivables, net 119,916 111,514
Inventories 53,050 52,370
Other current assets 10,356 11,517
--------- ---------
Total current assets 386,369 370,888
Property, plant and equipment, net 207,309 203,458
Goodwill, net 112,695 105,308
Other intangibles, net 33,506 30,415
Deferred tax asset 56,858 61,603
Other assets 29,089 27,882
--------- ---------
Total assets $825,826 $799,554
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $16,227 $19,433
Accrued compensation 28,158 27,251
Deferred income 33,099 30,846
Other current liabilities 33,230 36,821
--------- ---------
Total current liabilities 110,714 114,351
Long-term debt 186,229 185,600
Other long-term liabilities 25,495 24,804
--------- ---------
Total liabilities 322,438 324,755
--------- ---------
Minority interests 9,389 10,176
Total shareholders' equity 493,999 464,623
--------- ---------
Total liabilities and shareholders' equity $825,826 $799,554
========= =========
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended
March 27, March 29,
2004 2003
------------------
Research Models and Services
Net sales $113,466 $103,123
Gross margin 48,888 44,885
Gross margin as a % of net sales 43.1% 43.5%
Operating income 36,479 37,238
Operating income as a % of net sales 32.1% 36.1%
Depreciation and amortization 4,142 3,590
Capital expenditures 3,171 2,164
Development and Safety Testing
Net sales $59,171 $49,002
Gross margin 19,940 13,097
Gross margin as a % of net sales 33.7% 26.7%
Operating income 9,846 931
Operating income as a % of net sales 16.6% 1.9%
Depreciation and amortization 3,695 3,335
Capital expenditures 1,354 3,072
Unallocated Corporate Overhead $(6,808) $(4,321)
Total
Net sales $172,637 $152,125
Gross margin 68,828 57,982
Gross margin as a % of net sales 39.9% 38.1%
Operating income 39,517 33,848
Operating income as a % of net sales 22.9% 22.3%
Depreciation and amortization 7,837 6,925
Capital expenditures 4,525 5,236
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(dollars in thousands, except for per share data)
Three months ended
March 27, March 29,
2004 2003
----------------------
Net income $17,594 $19,354
Add back:
Deferred tax asset write-off 7,900 -
Valuation allowance release (2,111) -
Impairment charge - 3,655
Litigation settlement - (2,908)
Tax effect of impairment charge and litigation
settlement - (288)
----------------------
Net income, excluding specified charges (Non-
GAAP) $23,383 $19,813
======================
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) $23,383 $19,813
After-tax equivalent interest expense on 3.5%
senior convertible debentures 996 996
----------------------
Income for purposes of calculating fully diluted
earnings per share, excluding specified
charges (Non-GAAP) $24,379 $20,809
======================
Weighted average shares outstanding - Basic 45,855,115 45,178,566
Effect of dilutive securities:
3.5% senior convertible debentures 4,759,455 4,759,455
Stock options and contingently issued
restricted stock 1,184,465 802,511
Warrants 334,205 460,476
----------------------
Weighted average shares outstanding - Diluted 52,133,240 51,201,008
======================
Basic earnings per share $0.38 $0.43
Diluted earnings per share $0.36 $0.40
Basic earnings per share, excluding specified
charges
(Non-GAAP) $0.51 $0.44
Diluted earnings per share, excluding specified
charges
(Non-GAAP) $0.47 $0.41
Charles River management believes that non-GAAP financial results
provide useful information to investors in being able to assess the
Company's ongoing operations without the effect of one-time charges.
Such information provides investors with the ability to assess the
Company's operating performance. The Company intends to continue to
assess the potential value of reporting non-GAAP results consistent
with applicable rules and regulations.
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