Charles River Laboratories Announces Second-Quarter 2018 Results from Continuing Operations

WILMINGTON, Mass.--(BUSINESS WIRE)-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the second quarter of 2018. For the quarter, revenue from continuing operations was $585.3 million, an increase of 24.8% from $469.1 million in the second quarter of 2017. Revenue growth was driven by all three business segments, particularly the Discovery and Safety Assessment segment.

The acquisitions of MPI Research, Brains On-Line, and KWS BioTest contributed 15.1% to consolidated second-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 2.6%. 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 $52.2 million, a decrease of 3.4% from net income of $54.0 million for the same period in 2017. Second-quarter diluted earnings per share on a GAAP basis were $1.06, a decrease of 5.4% from $1.12 for the second quarter of 2017. The lower GAAP net income and earnings per share were driven primarily by acquisition and integration costs, including amortization of intangible assets, primarily related to MPI Research.

On a non-GAAP basis, net income from continuing operations was $79.3 million for the second quarter of 2018, an increase of 27.2% from $62.4 million for the same period in 2017. Second-quarter diluted earnings per share on a non-GAAP basis were $1.62, an increase of 25.6% from $1.29 per share for the second quarter of 2017. The non-GAAP net income and earnings per share increases were driven primarily by the contribution from the MPI acquisition, as well as gains on the Company’s venture capital investments and a lower tax rate. The gains on the Company’s venture capital investments were $0.17 per share in the second quarter of 2018, compared to gains of $0.03 for the same period in 2017.

James C. Foster, Chairman, President and Chief Executive Officer, said, “We believe our robust second-quarter revenue growth is indicative of an extremely healthy market environment, and our position as the premier, early-stage CRO with a unique ability to support our clients from target discovery through non-clinical development. Our clients, both large and small, are intensifying investments in their pipelines, which is creating new business opportunities for Charles River. At this critical time, we believe that it is incumbent upon us to invest in our portfolio, our people, and our infrastructure to solidify our position as our clients’ early-stage partner of choice, and to enhance shareholder value. We are pleased with our second-quarter performance, and optimistic about the opportunities for growth in 2018 and beyond. As a result, we are increasing our revenue and earnings per share guidance for the year.”

Second-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $130.4 million in the second quarter of 2018, an increase of 5.2% from $124.0 million in the second quarter of 2017. Organic revenue growth was 2.0%, driven primarily by increased demand for research models in China, as well as higher revenue for research model services.

In the second quarter of 2018, the RMS segment’s GAAP operating margin decreased to 26.3% from 27.1% in the second quarter of 2017. On a non-GAAP basis, the operating margin decreased to 26.8% from 27.4% in the second quarter of 2017. The non-GAAP operating margin decline was driven primarily by research model services.

Discovery and Safety Assessment (DSA)

Revenue from continuing operations for the DSA segment was $346.4 million in the second quarter of 2018, an increase of 37.4% from $252.1 million in the second quarter of 2017. Acquisitions contributed 28.1% to DSA revenue growth, due primarily to the revenue contribution from MPI Research. Organic revenue growth of 7.3% was driven by both the Safety Assessment and Discovery Services businesses. By client segment, the DSA revenue increase was driven primarily by robust demand from both biotechnology and global biopharmaceutical clients.

In the second quarter of 2018, the DSA segment’s GAAP operating margin decreased to 16.3% from 20.4% in the second quarter of 2017. The GAAP operating margin decline was driven primarily by acquisition and integration costs, principally amortization of intangible assets related to MPI Research. On a non-GAAP basis, the operating margin decreased to 21.5% from 23.5% in the second quarter of 2017. The GAAP and non-GAAP operating margin declines were driven primarily by study mix and foreign exchange. Foreign exchange reduced the DSA operating margin by approximately 60 basis points.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $108.5 million in the second quarter of 2018, an increase of 16.6% from $93.0 million in the second quarter of 2017. Organic revenue growth was 13.1%, driven primarily by robust demand across all businesses: Microbial Solutions, Biologics Testing Solutions, and Avian Vaccine Services.

In the second quarter of 2018, the Manufacturing segment’s GAAP operating margin increased to 31.5% from 31.2% in the second quarter of 2017. On a non-GAAP basis, the operating margin decreased to 33.6% from 34.2% in the second quarter of 2017. The non-GAAP operating margin decline was driven primarily by cost associated with capacity expansions, principally in the Biologics Testing Solutions business.

Increases 2018 Guidance

The Company is updating its 2018 financial guidance, which was previously provided on May 10, 2018.

The Company is increasing its guidance for both reported and organic revenue growth, due primarily to its belief that the strong demand trends in the second quarter are expected to continue in the second half of the year. Foreign exchange is now expected to contribute approximately 2% to reported revenue growth, compared to the Company’s prior outlook of an approximate 3% benefit.

The Company is increasing its guidance for GAAP and non-GAAP earnings per share, due primarily to higher-than-expected gains from venture capital investments. The Company has not included any venture capital investment gains in its outlook for the remainder of the year, since its initial, full-year estimate of $0.14 per share was exceeded during the first half of the year.

The Company’s revenue and earnings per share guidance is as follows:

                 
2018 GUIDANCE (from continuing operations)       REVISED       PRIOR
Revenue growth, reported       19% - 21%       18% - 20%
Less: Contribution from acquisitions (1)       (10% - 11%)       (9.5% - 10.5%)
Less: Favorable impact of foreign exchange       (~2%)       (~3%)
Revenue growth, organic (2)       7% - 8%       5.7% - 6.7%
GAAP EPS estimate       $4.30-$4.45       $4.22-$4.37
Amortization of intangible assets (3)       $1.00-$1.10       $1.00-$1.10
Charges related to global efficiency initiatives (4)       $0.05       $0.09
Acquisition-related adjustments (5)       $0.44       $0.41
Non-GAAP EPS estimate       $5.85 - $6.00       $5.77 - $5.92

Footnotes to Guidance Table:

     
(1)   The contribution from acquisitions reflects only those acquisitions which have been completed.
     
(2)   Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, the divestiture of the CDMO business, and foreign currency translation. Divestiture of the CDMO business did not have a material impact on the revenue growth rate in 2018.
     
(3)   Amortization of intangible assets includes an estimate of $0.40-$0.50 for the impact of the MPI Research acquisition based on the preliminary purchase price allocation.
     
(4)   These charges relate primarily to the Company’s planned efficiency initiatives. These charges primarily include severance and other costs. Other projects in support of global productivity and efficiency initiatives are expected, but these charges reflect only the decisions that have already been finalized.
     
(5)   These adjustments are related to the evaluation and integration of acquisitions, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with acquisition-related efficiency initiatives, and the write-off of deferred financing costs and fees related to debt financing.
     

 

Webcast

Charles River has scheduled a live webcast on Wednesday, August 8, 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 GAAP financial measures to non-GAAP financial measures on the website.

Investor Day

Charles River will host a Meeting with Management on Tuesday, August 14, from 8:00 a.m. to 12:30 p.m. ET in New York. The meeting will also be webcast live on the Investor Relations section of the Company’s website at ir.criver.com.

Non-GAAP Reconciliations/Discontinued Operations

The Company reports non-GAAP results in this press release, which exclude often-one-time charges and other 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; bargain gains associated with our acquisitions; expenses associated with evaluating and integrating acquisitions and divestitures, as well as fair value adjustments associated with contingent consideration; charges, gains, and losses attributable to businesses or properties we plan to close, consolidate, or divest; severance and other costs associated with our efficiency initiatives; gain on and tax effect of the divestiture of the CDMO business; the write-off of deferred financing costs and fees related to debt financing; and costs related to a U.S. government billing adjustment and related expenses. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “constant currency,” which we define as reported revenue growth adjusted for the impact of foreign currency translation, and “organic revenue growth,” which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, and divestitures. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. 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 divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, 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 and their underlying associated costs, such as business acquisitions, generally occur periodically but on an unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. Presenting revenue on an organic basis allows investors to measure our revenue growth exclusive of acquisitions, divestitures, and 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,” “intend,” “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 projected future financial performance of Charles River and our specific businesses, including revenue (on both a reported, constant-currency, and organic growth basis), operating margins, earnings per share, the expected impact of foreign exchange rates, and the expected benefit of our life science venture capital investments; the future demand for drug discovery and development products and services, including our expectations for future revenue trends; our expectations with respect to the impact of acquisitions on the Company, our service offerings, client perception, strategic relationships, revenue, revenue growth rates, and earnings; our expected operational synergies with MPI; the development and performance of our services and products; market and industry conditions including the outsourcing of 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; the impact of U.S. tax reform enacted in the fourth quarter of 2017; and Charles River’s future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to revenue, 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, such as our Maryland research model production site); 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 revenue; 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 13, 2018, 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

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.

 

SCHEDULE 1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)(1)
(in thousands, except for per share data)

                     
        Three Months Ended   Six Months Ended
        June 30, 2018   July 1, 2017   June 30, 2018   July 1, 2017
                     
Total revenue       $ 585,301     $ 469,129     $ 1,079,271     $ 914,892  
Cost of revenue (excluding amortization of intangible assets)         369,320       283,804       681,821       558,215  
Selling, general and administrative         120,531       93,820       223,903       184,729  
Amortization of intangible assets         18,740       9,819       29,008       20,556  
Operating income         76,710       81,686       144,539       151,392  
Interest income         182       161       464       363  
Interest expense         (18,643 )     (7,403 )     (29,834 )     (14,386 )
Other income, net         12,039       2,472       18,159       17,594  
Income from continuing operations, before income taxes         70,288       76,916       133,328       154,963  
Provision for income taxes         17,438       22,243       27,210       53,327  
Income from continuing operations, net of income taxes         52,850       54,673       106,118       101,636  
Income (loss) from discontinued operations, net of income taxes         1,529       (71 )     1,506       (75 )
Net income         54,379       54,602       107,624       101,561  
Less: Net income attributable to noncontrolling interests         670       650       1,284       831  
Net income attributable to common shareholders       $ 53,709     $ 53,952     $ 106,340     $ 100,730  
                     
Earnings per common share                    
Basic:                    
Continuing operations attributable to common shareholders       $ 1.08     $ 1.14     $ 2.18     $ 2.12  
Discontinued operations       $ 0.03     $     $ 0.03     $  
Net income attributable to common shareholders       $ 1.11     $ 1.13     $ 2.22     $ 2.12  
Diluted:                    
Continuing operations attributable to common shareholders       $ 1.06     $ 1.12     $ 2.14     $ 2.08  
Discontinued operations       $ 0.03     $     $ 0.03     $  
Net income attributable to common shareholders       $ 1.10     $ 1.12     $ 2.17     $ 2.08  
                     
Weighted average number of common shares outstanding                    
Basic         48,198       47,591       47,992       47,569  
Diluted         49,043       48,342       48,966       48,404  
                                     
(1)   Effective in the first quarter of 2018, the Company adopted new accounting standard ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Prior-year income statement amounts were recast to reflect the retrospective adoption of the new pension accounting standard.
     

 

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 

SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)

             
             
        June 30, 2018   December 30, 2017
Assets            
Current assets:            
Cash and cash equivalents       $ 192,300   $ 163,794
Trade receivables, net         478,735     430,016
Inventories         124,131     114,956
Prepaid assets         44,531     36,544
Other current assets         49,833     81,315
Total current assets         889,530     826,625
Property, plant and equipment, net         896,273     781,973
Goodwill         1,254,444     804,906
Client relationships, net         553,277     301,891
Other intangible assets, net         95,859     67,871
Deferred tax assets         27,230     22,654
Other assets         149,270     124,002
Total assets       $ 3,865,883   $ 2,929,922
             
Liabilities, Redeemable Noncontrolling Interest and Equity            
Current liabilities:            
Current portion of long-term debt and capital leases       $ 31,346   $ 30,998
Accounts payable         67,481     77,838
Accrued compensation         104,547     101,044
Deferred revenue         130,393     117,569
Accrued liabilities         110,770     89,780
Other current liabilities         73,603     44,460
Current liabilities of discontinued operations             1,815
Total current liabilities         518,140     463,504
Long-term debt, net and capital leases         1,796,451     1,114,105
Deferred tax liabilities         152,785     89,540
Other long-term liabilities         196,640     194,815
Long-term liabilities of discontinued operations             3,942
Total liabilities         2,664,016     1,865,906
Redeemable noncontrolling interest         16,662     16,609
Total equity attributable to common shareholders         1,181,966     1,045,080
Noncontrolling interest         3,239     2,327
Total liabilities, redeemable noncontrolling interest and equity       $ 3,865,883   $ 2,929,922
                 

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
 
SCHEDULE 3
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1)(2)
(in thousands, except percentages)
                           
              Three Months Ended   Six Months Ended
              June 30, 2018   July 1, 2017   June 30, 2018   July 1, 2017
Research Models and Services                    
      Revenue       $ 130,426     $ 124,002     $ 264,384     $ 251,163  
      Operating income         34,245       33,594       72,772       71,284  
      Operating income as a % of revenue         26.3 %     27.1 %     27.5 %     28.4 %
      Add back:                    
      Amortization related to acquisitions         408       369       817       805  
      Severance         220             743        
      Government billing adjustment and related expenses               57             150  
      Site consolidation costs, impairments and other items         69             584        
      Total non-GAAP adjustments to operating income       $ 697     $ 426     $ 2,144     $ 955  
      Operating income, excluding non-GAAP adjustments       $ 34,942     $ 34,020     $ 74,916     $ 72,239  
      Non-GAAP operating income as a % of revenue         26.8 %     27.4 %     28.3 %     28.8 %
                           
      Depreciation and amortization       $ 4,901     $ 4,945     $ 9,754     $ 10,037  
      Capital expenditures       $ 5,314     $ 4,404     $ 9,939     $ 7,007  
                           
Discovery and Safety Assessment                    
      Revenue       $ 346,416     $ 252,092     $ 606,408     $ 479,850  
      Operating income         56,623       51,335       97,482       89,670  
      Operating income as a % of revenue         16.3 %     20.4 %     16.1 %     18.7 %
      Add back:                    
      Amortization related to acquisitions         16,051       6,905       23,592       14,505  
      Severance         1,197       76       943       272  
      Acquisition related adjustments (3)         767       824       1,197       1,527  
      Site consolidation costs, impairments and other items               150       (143 )     559  
      Total non-GAAP adjustments to operating income       $ 18,015     $ 7,955     $ 25,589     $ 16,863  
      Operating income, excluding non-GAAP adjustments       $ 74,638     $ 59,290     $ 123,071     $ 106,533  
      Non-GAAP operating income as a % of revenue         21.5 %     23.5 %     20.3 %     22.2 %
                           
      Depreciation and amortization       $ 31,043     $ 18,965     $ 51,830     $ 38,334  
      Capital expenditures       $ 10,894     $ 7,102     $ 23,696     $ 15,425  
                           
Manufacturing Support                    
      Revenue       $ 108,459     $ 93,035     $ 208,479     $ 183,879  
      Operating income         34,115       29,043       62,638       55,643  
      Operating income as a % of revenue         31.5 %     31.2 %     30.0 %     30.3 %
      Add back:                    
      Amortization related to acquisitions         2,281       2,544       4,599       5,246  
      Severance               247       870       1,068  
      Acquisition related adjustments (3)         15             15       26  
      Site consolidation costs, impairments and other items                     159        
      Total non-GAAP adjustments to operating income       $ 2,296     $ 2,791     $ 5,643     $ 6,340  
      Operating income, excluding non-GAAP adjustments       $ 36,411     $ 31,834     $ 68,281     $ 61,983  
      Non-GAAP operating income as a % of revenue         33.6 %     34.2 %     32.8 %     33.7 %
                           
      Depreciation and amortization       $ 5,868     $ 5,787     $ 11,604     $ 11,749  
      Capital expenditures       $ 3,188     $ 1,939     $ 10,022     $ 4,231  
                           
Unallocated Corporate Overhead       $ (48,273 )   $ (32,286 )   $ (88,353 )   $ (65,205 )
      Add back:                    
      Severance         659             659        
      Acquisition related adjustments (3)         11,033       1,192       13,897       1,213  
      Total non-GAAP adjustments to operating expense       $ 11,692     $ 1,192     $ 14,556     $ 1,213  
      Unallocated corporate overhead, excluding non-GAAP adjustments       $ (36,581 )   $ (31,094 )   $ (73,797 )   $ (63,992 )
                           
Total                    
      Revenue       $ 585,301     $ 469,129     $ 1,079,271     $ 914,892  
      Operating income       $ 76,710     $ 81,686     $ 144,539     $ 151,392  
      Operating income as a % of revenue         13.1 %     17.4 %     13.4 %     16.5 %
      Add back:                    
      Amortization related to acquisitions         18,740       9,818       29,008       20,556  
      Severance         2,076       323       3,215       1,340  
      Acquisition related adjustments (3)         11,815       2,016       15,109       2,766  
      Government billing adjustment and related expenses               57             150  
      Site consolidation costs, impairments and other items         69       150       600       559  
      Total non-GAAP adjustments to operating income       $ 32,700     $ 12,364     $ 47,932     $ 25,371  
      Operating income, excluding non-GAAP adjustments       $ 109,410     $ 94,050     $ 192,471     $ 176,763  
      Non-GAAP operating income as a % of revenue         18.7 %     20.0 %     17.8 %     19.3 %
                           
      Depreciation and amortization       $ 43,396     $ 31,799     $ 76,606     $ 64,210  
      Capital expenditures       $ 21,213     $ 15,997     $ 48,939     $ 31,917  
                                           
(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 often-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 U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.
     
(2)   Effective in the first quarter of 2018, the Company adopted new accounting standard ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” Prior-year income statement amounts were recast to reflect the retrospective adoption of the new pension accounting standard.
     
(3)   These adjustments are related to the evaluation and integration of acquisitions, which primarily include transaction, third-party integration, and certain compensation costs, and fair value adjustments associated with contingent consideration.
     

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                     
SCHEDULE 4
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (UNAUDITED)(1)
(in thousands, except per share data)
                     
        Three Months Ended   Six Months Ended
        June 30, 2018   July 1, 2017   June 30, 2018   July 1, 2017
                     
Net income attributable to common shareholders       $ 53,709     $ 53,952     $ 106,340     $ 100,730  
Less: Income (loss) from discontinued operations, net of income taxes         1,529       (71 )     1,506       (75 )
Net income from continuing operations attributable to common shareholders         52,180       54,023       104,834       100,805  
Add back:                    
Non-GAAP adjustments to operating income (Refer to Schedule 3)         32,700       12,364       47,932       25,371  
Write-off of deferred financing costs and fees related to debt refinancing         1,799             5,060        
Gain on divestiture of CDMO business                           (10,577 )
Tax effect of non-GAAP adjustments:                    
Tax effect from divestiture of CDMO business                           18,005  
Tax effect of the remaining non-GAAP adjustments         (7,341 )     (4,035 )     (10,992 )     (8,699 )
Net income from continuing operations attributable to common shareholders, excluding non-GAAP adjustments       $ 79,338     $ 62,352     $ 146,834     $ 124,905  
                     
Weighted average shares outstanding - Basic         48,198       47,591       47,992       47,569  
Effect of dilutive securities:                    
Stock options, restricted stock units, performance share units and restricted stock         845       751       974       835  
Weighted average shares outstanding - Diluted         49,043       48,342       48,966       48,404  
                     
Earnings per share from continuing operations attributable to common shareholders                
Basic       $ 1.08     $ 1.14     $ 2.18     $ 2.12  
Diluted       $ 1.06     $ 1.12     $ 2.14     $ 2.08  
                     
Basic, excluding non-GAAP adjustments       $ 1.65     $ 1.31     $ 3.06     $ 2.63  
Diluted, excluding non-GAAP adjustments       $ 1.62     $ 1.29     $ 3.00     $ 2.58  
                                     
(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 often-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 U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.
     

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                     
SCHEDULE 5
RECONCILIATION OF GAAP REVENUE GROWTH
TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1)
                     
                     
For the three months ended June 30, 2018       Total CRL   RMS Segment   DSA Segment   MS Segment
                     
Revenue growth, reported       24.8 %   5.2 %   37.4 %   16.6 %
Increase due to foreign exchange       (2.6 )%   (3.2 )%   (2.0 )%   (3.5 )%
Contribution from acquisitions (2)       (15.1 )%   %   (28.1 )%   %
Non-GAAP revenue growth, organic (4)       7.1 %   2.0 %   7.3 %   13.1 %
                     
For the six months ended June 30, 2018       Total CRL   RMS Segment   DSA Segment   MS Segment
                     
Revenue growth, reported       18.0 %   5.3 %   26.4 %   13.4 %
Increase due to foreign exchange       (3.7 )%   (4.2 )%   (2.9 )%   (4.7 )%
Contribution from acquisitions (2)       (8.2 )%   %   (15.7 )%   %
Impact of CDMO divestiture (3)       0.2 %   %   %   1.1 %
Non-GAAP revenue growth, organic (4)       6.3 %   1.1 %   7.8 %   9.8 %
                             
(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 often-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 U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.
     
(2)   The contribution from acquisitions reflects only completed acquisitions.
     
(3)   The CDMO business, which was acquired as part of WIL Research on April 4, 2016, was divested on February 10, 2017. This adjustment represents the revenue from the CDMO business.
     
(4)   Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, the divestiture of the CDMO business, and foreign exchange.
     

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
             
SCHEDULE 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
             
        Six Months Ended
        June 30, 2018   July 1, 2017
             
Cash flows relating to operating activities       $ 183,923     $ 134,353  
Cash flows relating to investing activities         (851,036 )     14,026  
Cash flows relating to financing activities         704,575       (155,064 )
Cash flows used in discontinued operations         (3,731 )     (997 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

        (4,697 )     6,808  
Net change in cash, cash equivalents, and restricted cash         29,034       (874 )
Cash, cash equivalents, and restricted cash, beginning of period         166,331       119,894  
Cash, cash equivalents, and restricted cash, end of period       $ 195,365     $ 119,020  

 

Contacts

Charles River Laboratories International, Inc.
Investor Contact:
Todd Spencer, 781-222-6455
Corporate Vice President, Investor Relations
todd.spencer@crl.com
or
Media Contact:
Amy Cianciaruso, 781-222-6168
Corporate Vice President, Public Relations
amy.cianciaruso@crl.com

 
 

Source: Charles River Laboratories International, Inc.

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