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Charles River Laboratories Announces Fourth-Quarter and Full-Year 2013 Results from Continuing Operations and Provides 2014 Guidance

Companies mentioned in this article: Charles River Laboratories International, Inc.

WILMINGTON, Mass. -- (BUSINESS WIRE) -- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2013 and provided guidance for 2014. For the quarter, net sales from continuing operations were $289.2 million, an increase of 3.2% from $280.1 million in the fourth quarter of 2012. Foreign currency translation reduced sales by 0.5%. Sales growth was driven primarily by the Preclinical Services (PCS) segment.

On a GAAP basis, net income from continuing operations for the fourth quarter of 2013 was $19.5 million, or $0.40 per diluted share, compared to $22.7 million, or $0.47 per diluted share, for the fourth quarter of 2012.

On a non-GAAP basis, net income from continuing operations was $35.1 million for the fourth quarter of 2013, an increase of 13.1% from $31.0 million for the same period in 2012. Fourth-quarter diluted earnings per share on a non-GAAP basis were $0.73, an increase of 14.1% compared to $0.64 per share in the fourth quarter of 2012. The primary driver of this increase was higher sales and operating income in the PCS segment.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Over the past several years, we focused on targeted initiatives that were designed to position Charles River as the preferred provider for early-stage drug development: Broadening our unique portfolio, enhancing our scientific expertise, providing outstanding client service, and driving operating efficiencies. The benefit of these initiatives, and our willingness to structure strategic partnerships designed to meet the individual needs of our clients, is enabling us to win market share and drive sales and earnings growth.

We view 2014 as a year of continuing progress, with sales growth in a range of 3% to 5%, operating margin improvement, and non-GAAP earnings per share in a range of $3.00 to $3.10.”

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Net sales for the RMS segment were $172.3 million in the fourth quarter of 2013, an increase of 0.2% from $171.8 million in the fourth quarter of 2012. Excluding foreign exchange, which reduced reported sales by 0.8%, RMS sales increased by 1.0%. Higher sales were driven primarily by the Vital River acquisition and growth in the Endotoxin and Microbial Detection (EMD) business, partially offset by lower legacy sales of research models.

In the fourth quarter of 2013, the RMS segment’s GAAP operating margin was 21.0% compared to 25.6% for the fourth quarter of 2012. On a non-GAAP basis, the operating margin decreased slightly to 27.1% from 27.3% in the fourth quarter of 2012. The non-GAAP operating margin reflected lower sales and profitability for legacy research models, partially offset by sales and margin improvement in the EMD business and a strong performance by Vital River.

Preclinical Services (PCS)

Fourth-quarter 2013 net sales from continuing operations for the PCS segment were $117.0 million, an increase of 8.0% from $108.3 million in the fourth quarter of 2012. Foreign currency translation reduced reported sales by 0.2%. PCS sales growth was led by robust demand from mid-tier biotechnology clients, as well as continued growth in the Company’s global key accounts, which include the world’s leading biopharmaceutical companies.

In the fourth quarter of 2013, the PCS segment’s GAAP operating margin decreased to 5.5% from 8.0% in the fourth quarter of 2012. On a non-GAAP basis, the operating margin increased to 15.3% from 12.1% in the fourth quarter of 2012. The non-GAAP operating margin improvement was due primarily to increased study volume, favorable study mix and improved operating efficiency. In addition, the PCS non-GAAP operating margin benefited from a 2013 tax law change in the United Kingdom that resulted in reclassification of research and development tax credits to segment operating income. This benefitted the non-GAAP operating margin by approximately 90 basis points in the fourth quarter of 2013.

Stock Repurchase Update

During the fourth quarter of 2013, the Company repurchased approximately 1.5 million shares for $77.2 million. As of December 28, 2013, Charles River had $139.1 million remaining on its $1.0 billion stock repurchase authorization.

Full-Year Results

For 2013, net sales from continuing operations increased by 3.2% to $1.17 billion from $1.13 billion in 2012. Foreign currency translation reduced reported sales by 0.8%.

On a GAAP basis, net income from continuing operations for 2013 was $105.4 million, or $2.15 per diluted share, compared to $102.1 million, or $2.10 per diluted share, in 2012.

On a non-GAAP basis, net income from continuing operations for 2013 was $142.3 million, or $2.93 per diluted share, compared to $132.5 million, or $2.74 per diluted share, in 2012.

Research Models and Services (RMS)

For 2013, RMS net sales were $707.1 million, an increase of 1.7% from $695.1 million in 2012. Foreign currency translation reduced reported sales by 1.2%. On a GAAP basis, the RMS segment operating margin was 25.6% in 2013, compared to 29.1% in 2012. On a non-GAAP basis, the operating margin was 29.5% in 2013, compared to 30.7% in 2012.

Preclinical Services (PCS)

For 2013, PCS net sales were $458.4 million, an increase of 5.5% from $434.4 million in 2012. Foreign currency translation reduced reported sales by 0.4%. On a GAAP basis, the PCS segment operating margin was 9.6% in 2013, compared to 8.0% in 2012. On a non-GAAP basis, the operating margin was 14.2% in 2013, compared to 11.8% in 2012. The non-GAAP operating margin improvement was due primarily to increased study volume, favorable study mix and improved operating efficiency. In addition, tax-related items contributed approximately 120 basis points to the PCS non-GAAP operating margin in 2013; including a multi-year Canadian tax settlement, a real estate tax abatement in Scotland, and the tax law change in the United Kingdom.

2014 Guidance

The Company is providing the following financial guidance for 2014. This guidance assumes that net sales growth for both the RMS and PCS segments will be within the consolidated range in 2014. Based on current rates, foreign currency translation is expected to provide only a small benefit to reported net sales. Earnings per share in 2014 are expected to benefit from higher sales and enhanced efficiency initiatives.

           
2014 GUIDANCE (from continuing operations)          
Net sales growth, reported         3.0% – 5.0%
Impact of foreign exchange         N/M
Net sales growth, constant currency         3.0% - 5.0%
GAAP EPS estimate $2.68 - $2.78
Amortization of intangible assets $0.22
Operating losses (1) $0.04
Charges related to global efficiency initiative (2)         $0.05-$0.07
Non-GAAP EPS estimate         $3.00 - $3.10

(1) These costs relate primarily to the Company’s PCS facility in Massachusetts.
(2) These charges are related to the consolidation of a research model production operation in North America. Other projects in support of the global efficiency initiative are expected in 2014, but at this time, no specific decisions have been made. Accordingly, our current guidance does not include a quantification of potential future charges.

Webcast

Charles River Laboratories has scheduled a live webcast on Wednesday, February 12, 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 of non-GAAP financial measures to comparable GAAP financial measures on the website.

Non-GAAP Reconciliations/Discontinued Operations

The Company reports non-GAAP results in this press release, which exclude certain items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the schedules at the end of this press release. In addition, the Company reports results from continuing operations, which exclude results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a discontinued operation.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as non-GAAP earnings per diluted share, which exclude the amortization of intangible assets and other charges related to our acquisitions; expenses associated with evaluating acquisitions; charges, gains and losses attributable to businesses or properties we plan to close, consolidate or divest; severance costs associated with our efficiency initiatives; accelerated depreciation charges related to the consolidation of research model production operations in California; costs and adjustments related to our ongoing investigation of inaccurate billing with respect to certain government contracts; the write-off of large model inventory held at a vendor; and the additional interest recorded as a result of the adoption in 2009 of an accounting standard related to our convertible debt accounting which increased interest and depreciation expense. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. This press release also refers to our sales in both a GAAP and non-GAAP (constant currency) basis. There are limitations in using non-GAAP financial measures, as they are not prepared in accordance with generally accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. We believe that the financial impact of our acquisitions (and in certain cases, the evaluation of such acquisitions, whether or not ultimately consummated) is often large relative to our overall financial performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities, such as business acquisitions, happen infrequently and the underlying costs associated with such activities do not recur on a regular basis. Presenting sales on a constant currency basis allows investors to measure our sales growth exclusive of foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company’s operations against the financial results of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in this press release, and can also be found on the Company’s website at ir.criver.com.

Caution Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “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 our projected future financial performance including sales, operating margins, earnings per share, and the expected impact of foreign exchange rates; the future demand for drug discovery and development products and services, including our expectations for future revenue trends; the development and performance of our services and products, including the impact this can have on our clients’ drug development models; market and industry conditions including the outsourcing of these services and spending trends by our clients; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings, including with respect to our ongoing investigation of inaccurate billing with respect to certain government contracts; and Charles River’s future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to sales, the impact of foreign exchange, and enhanced efficiency initiatives. Forward-looking statements are based on Charles River’s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the ability to successfully integrate businesses we acquire; the ability to execute our efficiency initiatives on an effective and timely basis (including divestitures and site closures); the timing and magnitude of our share repurchases; negative trends in research and development spending, negative trends in the level of outsourced services, or other cost reduction actions by our clients; 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 February 27, 2013, 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

Accelerating Drug Development. Exactly. Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them. To learn more about our unique portfolio and breadth of services, visit www.criver.com.

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for per share data)
         

Three Months Ended

Twelve Months Ended

December 28,
2013

December 29,
2012

December 28,
2013

December 29,
2012

 
Total net sales $ 289,228 $ 280,140 $ 1,165,528 $ 1,129,530
Cost of products sold and services provided   201,033     189,115     770,626     737,449  
Gross margin 88,195 91,025 394,902 392,081
Selling, general and administrative 58,674 51,324 225,695 208,248
Amortization of intangibles   4,914     4,632     17,806     18,068  
Operating income 24,607 35,069 151,401 165,765
Interest income (expense) (2,572 ) (8,180 ) (20,239 ) (32,753 )
Other income (expense)   1,071     (684 )   7,165     (3,266 )
Income from continuing operations before income taxes 23,106 26,205 138,327 129,746
Provision for income taxes   3,580     3,488     32,911     27,628  
Income from continuing operations, net of tax 19,526 22,717 105,416 102,118
(Loss) income from discontinued operations, net of tax   (82 )   (4,189 )   (1,265 )   (4,252 )
Net income 19,444 18,528 104,151 97,866
Net loss (income) from noncontrolling interests   (345 )   (112 )   (1,323 )   (571 )
Net income attributable to common shareowners $ 19,099   $ 18,416   $ 102,828   $ 97,295  
 
Earnings per common share
Basic:
Continuing operations $ 0.41 $ 0.48 $ 2.18 $ 2.12
Discontinued operations $ - $ (0.09 ) $ (0.03 ) $ (0.09 )
Net $ 0.41 $ 0.39 $ 2.15 $ 2.03
Diluted:
Continuing operations $ 0.40 $ 0.47 $ 2.15 $ 2.10
Discontinued operations $ - $ (0.09 ) $ (0.03 ) $ (0.09 )
Net $ 0.40 $ 0.38 $ 2.12 $ 2.01
 
Weighted average number of common shares outstanding
Basic 47,150,688 47,562,614 47,740,167 47,912,135
Diluted 48,134,992 48,257,197 48,489,322 48,406,320
 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
     
 

December 28,
2013

December 29,
2012

Assets
Current assets
Cash and cash equivalents $ 155,927 $ 109,685
Trade receivables, net 220,630 203,001
Inventories 89,396 88,470
Other current assets 85,847 83,601
Current assets of discontinued businesses   750   495
Total current assets 552,550 485,252
Property, plant and equipment, net 676,182 717,020
Goodwill, net 230,701 208,609
Other intangibles, net 84,537 84,922
Deferred tax asset 35,536 38,554
Other assets 61,964 48,659
Long-term assets of discontinued businesses   3,151   3,328
Total assets $ 1,644,621 $ 1,586,344
 
Liabilities and Equity
Current liabilities
Current portion of long-term debt & capital leases $ 21,437 $ 139,384
Accounts payable 31,770 31,218
Accrued compensation 58,461 46,951
Deferred revenue 54,177 56,422
Accrued liabilities 56,711 45,208
Other current liabilities 22,547 21,262
Current liabilities of discontinued businesses   1,931   1,802
Total current liabilities 247,034 342,247
Long-term debt & capital leases 642,352 527,136
Other long-term liabilities 82,497 104,966
Long-term liabilities of discontinued businesses   8,080   8,795
Total liabilities   979,963   983,144
Non-controlling interests 23,674 2,395
Total equity   640,984   600,805
Total liabilities and equity $ 1,644,621 $ 1,586,344
 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
           

Three Months Ended

Twelve Months Ended

December 28,
2013

 

December 29,
2012

December 28,
2013

 

December 29,
2012

Research Models and Services
Net sales $ 172,259 $ 171,836 $ 707,126 $ 695,083
Gross margin 62,892 65,386 284,808 289,750
Gross margin as a % of net sales 36.5 % 38.1 % 40.3 % 41.7 %
Operating income 36,128 43,964 181,321 202,362
Operating income as a % of net sales 21.0 % 25.6 % 25.6 % 29.1 %
Depreciation and amortization 17,444 9,844 54,822 37,541
Capital expenditures 7,920 8,964 24,384 36,856
 
Preclinical Services
Net sales $ 116,969 $ 108,304 $ 458,402 $ 434,447
Gross margin 25,302 25,638 110,093 102,331
Gross margin as a % of net sales 21.6 % 23.7 % 24.0 % 23.6 %
Operating income 6,425 8,670 44,056 34,628
Operating income as a % of net sales 5.5 % 8.0 % 9.6 % 8.0 %
Depreciation and amortization 11,857 10,814 41,814 43,734
Capital expenditures 5,915 4,775 14,770 10,678
 
Unallocated Corporate Overhead $ (17,946 ) $ (17,565 ) $ (73,976 ) $ (71,225 )
 
Total
Net sales $ 289,228 $ 280,140 $ 1,165,528 $ 1,129,530
Gross margin 88,194 91,024 394,901 392,081
Gross margin as a % of net sales 30.5 % 32.5 % 33.9 % 34.7 %
Operating income 24,607 35,069 151,401 165,765
Operating income as a % of net sales 8.5 % 12.5 % 13.0 % 14.7 %
Depreciation and amortization 29,301 20,658 96,636 81,275
Capital expenditures 13,835 13,739 39,154 47,534
 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1)
(dollars in thousands)
         

Three Months Ended

Twelve Months Ended

December 28,
2013

December 29,
2012

December 28,
2013

December 29,
2012

Research Models and Services
Net sales $ 172,259 $ 171,836 $ 707,126 $ 695,083
Add back government billing adjustment   -     -     1,495     -  
Non-GAAP net sales $ 172,259 $ 171,836 $ 708,621 $ 695,083
Operating income 36,128 43,964 181,321 202,362
Operating income as a % of net sales 21.0 % 25.6 % 25.6 % 29.1 %
Add back:
Amortization of intangible assets related to acquisitions 2,660 1,870 8,824 6,412
Severance related to cost-savings actions 1,244 138 2,054 1,072
Government billing adjustment and related expenses 226 - 2,402 -
Impairment and other items (2) 6,445 883 13,683 3,810
Operating losses (3)   15     -     270     -  
Operating income, excluding specified items (Non-GAAP) $ 46,718 $ 46,855 $ 208,554 $ 213,656
Non-GAAP operating income as a % of net sales 27.1 % 27.3 % 29.5 % 30.7 %
 
Preclinical Services
Net sales $ 116,969 $ 108,304 $ 458,402 $ 434,447
Operating income 6,425 8,670 44,056 34,628
Operating income as a % of net sales 5.5 % 8.0 % 9.6 % 8.0 %
Add back:
Amortization of intangible assets related to acquisitions 2,255 2,763 8,982 11,655
Severance related to cost-savings actions 917 560 1,164 1,508
Impairment and other items (2) 7,698 199 7,698 (34 )
Operating losses (3)   628     941     3,101     3,641  
Operating income, excluding specified items (Non-GAAP) $ 17,923 $ 13,133 $ 65,001 $ 51,398
Non-GAAP operating income as a % of net sales 15.3 % 12.1 % 14.2 % 11.8 %
 
Unallocated Corporate Overhead $ (17,946 ) $ (17,565 ) $ (73,976 ) $ (71,225 )
Add back:
Costs associated with the evaluation of acquisitions 766 2,140 1,752 3,774
Convertible debt accounting   -     53     107     213  
Unallocated corp. costs, excluding specified items (Non-GAAP) $ (17,180 ) $ (15,372 ) $ (72,117 ) $ (67,238 )
 
Total
Net sales $ 289,228 $ 280,140 $ 1,165,528 $ 1,129,530
Add back government billing adjustment   -     -     1,495     -  
Non-GAAP net sales $ 289,228 $ 280,140 $ 1,167,023 $ 1,129,530
Operating income 24,607 35,069 151,401 165,765
Operating income as a % of net sales 8.5 % 12.5 % 13.0 % 14.7 %
Add back:
Amortization of intangible assets related to acquisitions 4,915 4,633 17,806 18,067
Severance related to cost-savings actions 2,161 698 3,218 2,580
Government billing adjustment and related expenses 226 - 2,402 -
Impairment and other items (2) 14,143 1,082 21,381 3,776
Operating losses (3) 643 941 3,371 3,641
Costs associated with the evaluation of acquisitions 766 2,140 1,752 3,774
Convertible debt accounting   -     53     107     213  
Operating income, excluding specified items (Non-GAAP) $ 47,461 $ 44,616 $ 201,438 $ 197,816
Non-GAAP operating income as a % of net sales 16.4 % 15.9 % 17.3 % 17.5 %
 

(1) Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2) For the year ended December 28, 2013, impairment and other items includes: (i) accelerated depreciation of $13.5 million and $1.9 million related to the consolidation of research model production operations in California and our BPS operations, respectively; (ii) an impairment charge of $3.8 million related to our PCS Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences of $1.6 million; and (iv) $0.6 million for the impairment of assets at certain European facilities. For the year ended December 29, 2012, impairment and other items includes: (i) an impairment charge of $3.5 million for long-lived assets at certain RMS Europe facilities; (ii) $0.6 million for the gain on the sale of land at an RMS facility; and (iii) $0.9 million for the write-off of large model inventory held at a vendor.

(3) Includes operating losses related primarily to the Company's PCS-Massachusetts facility.

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1)
(dollars in thousands, except for per share data)
         

Three Months Ended

Twelve Months Ended

December 28,
2013

December 29,
2012

December 28,
2013

December 29,
2012

 
Net income attributable to common shareholders $ 19,099 $ 18,416 $ 102,828 $ 97,295
Less: Discontinued operations   82     4,189     1,265     4,252  
Net income from continuing operations 19,181 22,605 104,093 101,547
Add back:
Amortization of intangible assets related to acquisitions 4,915 4,633 17,806 18,067
Severance related to cost-savings actions 2,161 698 3,218 2,580
Impairment and other items (2) 14,143 1,075 21,381 3,963
Operating losses (3) 643 694 3,371 3,738
Costs associated with the evaluation of acquisitions 766 2,140 1,752 3,774
Government billing adjustment and related expenses 226 - 2,402 -
Writeoff of deferred financing costs and fees related to debt refinancing - - 645 -
Loss on sale of auction rate securities - - - 712
Convertible debt accounting, net (4) - 3,813 6,710 14,741
Tax effect of items above   (6,919 )   (4,618 )   (19,126 )   (16,604 )
Net income, excluding specified charges (Non-GAAP) $ 35,116   $ 31,040   $ 142,252   $ 132,518  
 
Weighted average shares outstanding - Basic 47,150,688 47,562,614 47,740,167 47,912,135
Effect of dilutive securities:
Stock options and contingently issued restricted stock   984,304     694,583     749,155     494,185  
Weighted average shares outstanding - Diluted   48,134,992     48,257,197     48,489,322     48,406,320  
 
Basic earnings per share $ 0.41 $ 0.39 $ 2.15 $ 2.03
Diluted earnings per share $ 0.40 $ 0.38 $ 2.12 $ 2.01
 
Basic earnings per share, excluding specified charges (Non-GAAP) $ 0.74 $ 0.65 $ 2.98 $ 2.77
Diluted earnings per share, excluding specified charges (Non-GAAP) $ 0.73 $ 0.64 $ 2.93 $ 2.74
 

(1) Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2) For the year ended December 28, 2013, impairment and other items includes: (i) accelerated depreciation of $13.5 million and $1.9 million related to the consolidation of research model production operations in California and our BPS operations, respectively; (ii) an impairment charge of $3.8 million related to our PCS Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences of $1.6 million; and (iv) $0.6 million for the impairment of assets at certain European facilities. For the year ended December 29, 2012, impairment and other items includes: (i) an impairment charge of $3.5 million for long-lived assets at certain RMS Europe facilities; (ii) $0.6 million for the gain on the sale of land at an RMS facility; and (iii) $0.9 million for the write-off of large model inventory held at a vendor.

(3) Includes operating losses related primarily to the Company's PCS-Massachusetts facility.

(4) The year ended December 28, 2013 includes the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $6,603 and depreciation expense by $107, respectively. The three and twelve months ended December 29, 2012 include increased interest expense of $3,760 and $14,528 and increased depreciation expense of $53 and $213, respectively.

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP NET SALES GROWTH (YEAR-OVER-YEAR)
EXCLUDING THE IMPACT OF FOREIGN EXCHANGE AND GOVERNMENT BILLING ADJUSTMENT
For the Three and Twelve Months Ended December 28, 2013
     
 
For the three months ended December 28, 2013:

Total CRL

RMS Segment

PCS Segment

 
Net sales growth, reported 3.2 % 0.2 % 8.0 %
Impact of foreign exchange (0.5 %)   (0.8 %)   (0.2 %)
Non-GAAP net sales growth, constant currency 3.7 %   1.0 %   8.2 %
 
For the twelve months ended December 28, 2013:

Total CRL

RMS Segment

PCS Segment

 
Net sales growth, reported 3.2 % 1.7 % 5.5 %
Impact of foreign exchange (0.8 %) (1.2 %) (0.4 %)
Impact of government billing adjustment (0.2 %)   (0.2 %)   0.0 %
Non-GAAP net sales growth, constant currency 4.2 %   3.1 %   5.9 %
 

Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations.


Copyright © Business Wire 2014
Contact:

Charles River Laboratories International, Inc.
Investor Contact:
Susan E. Hardy, 781-222-6190
Corporate Vice President, Investor Relations
susan.hardy@crl.com
or
Media Contact:
Amy Cianciaruso, 781-222-6168
Executive Director, Public Relations
amy.cianciaruso@crl.com