Charles River Laboratories (Massachusetts) Expect 2011 Profit Growth
WILMINGTON, Mass.--(BUSINESS WIRE)--Charles River Laboratories International, Inc. (NYSE: CRL) shared today its outlook for its business, highlighting its unique portfolio in the industry, which is well aligned with clients’ increasing demand for integrated offerings from discovery through preclinical development. The Company also announced that it is intensifying its focus on four key initiatives to drive increased shareholder value, and provided guidance for 2011.
James C. Foster, Chairman, President and Chief Executive Officer, said, “Over the last two years, Charles River has taken decisive action to address the accelerating changes in the biopharmaceutical industry. We have aligned our infrastructure to current demand, rigorously managed operating costs and increased our stock repurchases, all of which were implemented to drive shareholder value. The four initiatives that we outlined today will allow us to further intensify our disciplined focus on driving profitable growth and maximizing value for our shareholders. By maintaining our focus on these initiatives, we will better position the company to operate successfully in the current and future business environment. The initial benefits of our intensified focus on cost management and capital allocation are demonstrated by our enhanced financial guidance, with non-GAAP earnings per share increasing to a range of $2.20 to $2.40 in 2011, or a robust 20% at the midpoint compared to our 2010 guidance.”
The four key initiatives are centered on optimizing returns for shareholders, as follows:
* Improving the consolidated operating margin. By continuing to aggressively manage our cost structure and drive operating efficiencies, the Company expects to generate improving non-GAAP operating margins with a goal of 20% within three to five years, depending on the strength of recovery in demand for preclinical services. The Company has already implemented significant actions to reduce costs during the last two years to manage challenging industry-wide preclinical market conditions, including the most recent cost-saving actions that were announced in November, which were intended to reduce costs by approximately $40 million in 2011.
As part of this initiative, the Company intends to pursue strategic alternatives for certain non-strategic or under-performing Preclinical Services assets, including the U.S. Phase I clinic and the China preclinical facility. These actions are expected to result in the elimination of approximately $10 million in combined operating losses from the two facilities in 2011 on a non-GAAP basis, which will also contribute to improved cash flow.
* Improving free cash flow generation. The Company believes it has adequate capacity to support revenue growth in both business segments without significant additional investment for expansion. With improved operating margins, elimination of the specified operating losses and minimal requirements for capital expansion, the Company expects to continue to generate strong cash flow.
* Disciplined investment in growth businesses. The Company expects to maintain a disciplined focus on deployment of capital, investing in those areas of our existing business which will generate the greatest sales growth and profitability, such as Discovery Services, In Vitro products and Biopharmaceutical Services. The Company also intends to focus its sales efforts to reinvigorate growth in its core research models and preclinical services businesses.
* Returning value to shareholders. Under the current $750 million authorization from its Board of Directors, the Company initiated a substantial stock repurchase program which is intended to drive immediate shareholder value and earnings per share accretion. The Company intends to complete the initial $500 million of the Board’s stock repurchase authorization by the end of 2011.