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Charles River  (CRL) Announces Second-Quarter 2017 Results From Continuing Operations



8/9/2017 6:37:54 AM

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WILMINGTON, Mass.--(BUSINESS WIRE)--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the second quarter of 2017. Revenue from continuing operations was $469.1 million, an increase of 8.1% from $434.1 million in the second quarter of 2016. Revenue growth was driven primarily by the Discovery and Safety Assessment and Manufacturing Support segments.

The acquisitions of Agilux Laboratories, WIL Research, and Blue Stream Laboratories contributed 3.9% to consolidated second-quarter revenue growth, both on a reported basis and in constant currency. The February 2017 divestiture of the Contract Development and Manufacturing (CDMO) business reduced reported revenue growth by 1.0%. The impact of foreign currency translation reduced reported revenue growth by 1.9%. Excluding the effect of these items, organic revenue growth was 7.1%.

On a GAAP basis, second-quarter net income from continuing operations attributable to common shareholders was $54.0 million, an increase of 53.5% from $35.2 million for the same period in 2016. Second-quarter diluted earnings per share on a GAAP basis were $1.12, an increase of 53.4% from $0.73 for the second quarter of 2016.

On a non-GAAP basis, net income from continuing operations was $62.4 million for the second quarter of 2017, an increase of 8.7% from $57.4 million for the same period in 2016. Second-quarter diluted earnings per share on a non-GAAP basis were $1.29, an increase of 7.5% from $1.20 per share for the second quarter of 2016.

Both the GAAP and non-GAAP earnings per share increases were driven by higher revenue and operating margin improvement. GAAP earnings per share also benefited from lower acquisition- and integration-related costs in the second quarter of 2017. An excess tax benefit associated with stock compensation also contributed $0.03 to both GAAP and non-GAAP earnings per share in the second quarter of 2017; and a gain from the Company’s venture capital investments contributed $0.03 per share, compared to a $0.06 gain for the same period in 2016.

James C. Foster, Chairman, President and Chief Executive Officer, said, “I am very pleased to say that our collective portfolio delivered high-single digit revenue growth, operating margin expansion, and earnings per share growth. The positive factors which contributed to the strong start to the year continued in the second quarter of 2017. Demand for our products and services remained robust, as clients chose to partner with Charles River to take advantage of our strong portfolio and scientific expertise.”

“We intend to continue to focus on enhancing the three primary factors which differentiate Charles River in early-stage drug research: First, our unique portfolio of essential products and services, which increases our relevance to our clients’ drug research, development, and manufacturing efforts; second, our scientific expertise and depth, which we believe is unique and unparalleled in the early-stage CRO universe; and third, our intense focus on efficiency and responsiveness, which enables us to provide exceptional, flexible service to clients without adding significant cost. By leveraging the investments we have made, and new ones we intend to make, we will continue to differentiate Charles River as the CRO partner of choice, which is the foundation for our future growth.”

Second-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $124.0 million in the second quarter of 2017, a decrease of 0.8% from $125.1 million in the second quarter of 2016 due to the impact of foreign currency translation. Organic revenue growth was 1.0%, driven primarily by higher sales of research models in China, as well as in the Insourcing Solutions and Genetically Engineered Models and Services (GEMS) businesses. Growth in these businesses was partially offset by lower revenue in the Research Animal Diagnostic Services (RADS) business.

In the second quarter of 2017, the RMS segment’s GAAP operating margin decreased to 27.1% from 28.3% in the second quarter of 2016. On a non-GAAP basis, the operating margin decreased to 27.4% from 28.9% in the second quarter of 2016. The GAAP and non-GAAP operating margin declines were primarily driven by the research models business in North America and Europe and the RADS business.

Discovery and Safety Assessment (DSA)

Revenue from continuing operations for the DSA segment was $252.1 million in the second quarter of 2017, an increase of 14.0% from $221.1 million in the second quarter of 2016. The acquisitions of Agilux Laboratories and WIL Research(1) contributed 6.9% to DSA revenue growth. Organic revenue growth of 9.3% was primarily driven by low-double-digit growth in the Safety Assessment business. The revenue increase was driven primarily by demand from mid-tier biotechnology clients, and higher sales to global biopharmaceutical clients also contributed.

In the second quarter of 2017, the DSA segment’s GAAP operating margin increased to 20.5% from 14.6% in the second quarter of 2016. The GAAP operating margin increase was due in part to lower acquisition-related costs associated with the acquisition and integration of WIL Research. On a non-GAAP basis, the operating margin increased to 23.7% from 21.2% in the second quarter of 2016. The Safety Assessment business was the primary contributor to the GAAP and non-GAAP margin improvement. Foreign exchange also benefited the DSA operating margin by approximately 100 basis points.

(1) The acquisition of WIL Research closed on April 4, 2016, during the second quarter. As a result, the second quarter of 2017 included one additional week of revenue for WIL Research, which has been excluded from the calculation of organic revenue growth.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $93.0 million in the second quarter of 2017, an increase of 5.8% from $87.9 million in the second quarter of 2016. The acquisition of Blue Stream Laboratories contributed 1.9% to Manufacturing revenue growth in the second quarter of 2017, while the divestiture of the CDMO business reduced Manufacturing revenue growth by 4.8%. Organic revenue increased 10.1%, driven by strong growth in the Microbial Solutions and Biologics Testing Solutions businesses.

In the second quarter of 2017, the Manufacturing segment’s GAAP operating margin increased to 31.2% from 30.8% in the second quarter of 2016, due primarily to lower amortization of intangible assets related to acquisitions. On a non-GAAP basis, the operating margin decreased to 34.2% from 35.4% in the second quarter of 2016, due primarily to the Biologics Testing Solutions and Avian Vaccine businesses.

Stock Repurchase Update

During the second quarter of 2017, the Company repurchased 244,292 shares for a total of $22.5 million. As of July 1, 2017, the Company had $165.1 million available on its authorized stock repurchase program.

Updates 2017 Guidance

The Company is increasing its reported revenue growth guidance for 2017 to primarily reflect favorable movements in foreign exchange rates, and maintaining its GAAP and non-GAAP earnings per share guidance, that were previously provided on May 10, 2017.


Read at BioSpace.com


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