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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of the
Securities Exchange Act of 1934
February 10, 2004
Date of Report (Date of earliest event reported)
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as specified in its Charter)
---------------------
Delaware 333-92383 06-1397316
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
---------------------
251 Ballardvale Street
Wilmington, Massachusetts 01887
(Address of Principal Executive Offices) (Zip Code)
978-658-6000
(Registrant's Telephone Number, including Area Code)
ITEM 7. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
This exhibit is furnished pursuant to Item 12 hereof and should not be
deemed to be "filed" under the Securities Exchange Act of 1934, as amended.
99.1 Press release dated February 10, 2004.
ITEM 12. Results of Operations and Financial Condition
The following information shall not be deemed "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific
reference in such a filing.
On February 10, 2004, Charles River Laboratories International, Inc. issued a
press release providing financial results for the fiscal quarter ended December
27, 2003. The press release, attached as an exhibit to this report, includes
"safe harbor" language pursuant to the Private Securities Litigation Reform Act
of 1995, as amended, indicating that certain statements about Charles River's
business contained in the press release are "forward-looking" rather than
historic. The press release also states that these and other risks relating to
Charles River are set forth in the documents filed by Charles River with the
Securities and Exchange Commission.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
we have duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC.
Dated: February 10, 2004
By: /s/ Dennis R. Shaughnessy
----------------------------------
Dennis R. Shaughnessy, Senior Vice
President, Corporate Development, General
Counsel and Secretary
3
Exhibit Index
Exhibit No. Description
- ----------- -----------
99.1 Press release dated February 10, 2004.
4
Exhibit 99.1
Charles River Laboratories Reports Record Year in 2003,
Strong Fourth-Quarter Results and Improving Outlook for 2004
WILMINGTON, Mass.--(BUSINESS WIRE)--Feb. 10, 2004--Charles River
Laboratories International, Inc. (NYSE:CRL) today reported a 9.2%
increase in fourth-quarter 2003 net sales, to $156.0 million from
$142.9 million reported in the fourth quarter of 2002. Net income for
the fourth quarter of 2003 increased 17.9% to $20.6 million, or $0.42
per diluted share, from $17.5 million, or $0.36 per diluted share, in
the fourth quarter of 2002. Due primarily to the double-digit net
income gain, cash provided by operating activities increased to $43.5
million, and at the end of the fourth quarter, the Company's combined
cash, cash equivalents and marketable securities were a record $202.8
million.
Operating income for the fourth quarter of 2003 rose 14.5% to
$35.4 million from $31.0 million in the fourth quarter of 2002. The
Company's operating margin was 22.7% in the fourth quarter of 2003
compared to 21.7% in the fourth quarter of the prior year.
Full-year 2003 net sales were $613.7 million, a record for the
Company, and a 10.7% increase over the $554.6 million reported in
2002. Operating income rose 13.3% to $138.6 million from $122.3
million in the prior year, and the operating margin increased to 22.6%
from 22.0%.
Diluted earnings per share for 2003 were a record $1.64, compared
to $1.06 in 2002. The 2003 results included a net charge of $1.6
million, or approximately $0.02 per diluted share, as a result of an
asset impairment charge of $3.7 million related to the closure of a
biopharmaceutical production facility, a French litigation settlement
in the Company's favor of $2.9 million and a charge of $0.9 million
for expenses associated with cost savings initiatives. The 2002
results included charges of $29.9 million, or $0.36 per diluted share,
for the early retirement of high-yield debt. After adjusting for all
items, non-GAAP earnings per diluted share were $1.66 in 2003 compared
to $1.42 in 2002, a 16.9% increase.
James C. Foster, Chairman, President and Chief Executive Officer,
said, "We are very pleased with the fourth-quarter and full-year
results. Research models finished the year on a stronger note, as did
our Development Services business. We benefited from improving
pharmaceutical and biotechnology spending and increasing demand for
outsourced services. We believe that the upward trend in demand for
outsourced development services will continue and are optimistic about
the business environment for 2004."
Business Segments Revision
During the fourth quarter of 2003, Charles River revised its
consolidated financial reporting segments to better reflect the manner
in which the Company's operating units are managed. The Company
believed the revision was required because in 2003, a number of
changes were made to align related businesses, to focus sales force
responsibilities and to simplify management structure. The Company
will continue to report two segments, now called Research Models &
Services (RMS) and Development & Safety Testing (DST). The Research
Models business will continue to be reported in the RMS segment and
Transgenic Services, Laboratory Services, Contract Staffing Services
and Vaccine Support Services will now be reported in the RMS segment.
The Company will now report Development Services, including Drug
Safety Testing, Pathology Services and Interventional and Surgical
Services, and In Vitro Technology in the DST segment. The changes in
segment presentation have no effect on consolidated revenues or net
income.
Management believes that the new business segments will better
reflect results of operations and facilitate investors' understanding
of the Company's business. The business segment detail discussed in
this press release is based on the new business segments.
Business Segments Results
Fourth-quarter 2003 net sales of $156.0 million increased 9.2%
over the fourth quarter of 2002. Favorable foreign currency
translation contributed approximately 4.5% of the net sales gain.
Fourth-quarter 2003 net sales for the Research Models & Services
segment of the business increased 11.7% to $100.4 million from $89.9
million in the prior year. The sales increase was due in part to an
increase in biotechnology spending and higher demand for research
models. Higher net sales yielded a gross margin of 39.6% compared to
37.9% in the fourth quarter of 2002. Operating income increased 20.3%
in the fourth quarter to $28.5 million from $23.7 million in 2002, and
the operating margin was 28.4% compared to the prior year's 26.3%.
Net sales for the Development & Safety Testing segment rose 4.9%
in the fourth quarter, to $55.6 million from $53.0 million in the same
period in 2002. Net sales for Development Services improved from the
fourth quarter of 2002 and sequentially from the third quarter of
2003, as the demand for outsourced services continued to strengthen.
The In Vitro Technology business had a strong fourth quarter due to
higher product demand, particularly in North America, and increasing
sales of the Endosafe(R)PTS, the Company's recently-launched portable
testing device for rapid microbial detection.
In the fourth quarter of 2003, gross margins for the Development &
Safety Testing segment were relatively flat at 35.7%. Operating income
for the fourth quarter rose 26.4% to $10.7 million from $8.5 million
in the fourth quarter of 2002, and the operating margin increased to
19.3% from 16.0%. The increase in the operating margin was due to
improved operating efficiency resulting from higher net sales, the
cost savings program initiated in the second quarter of 2003 and a
continuing focus on limiting operating expense growth.
European Reorganization
In the first quarter of 2004, the Company began a reorganization
of its European operations. The purpose of the reorganization is to
streamline the corporate legal structure in order to improve operating
efficiency and cash management, facilitate acquisitions and provide
tax benefits. The reorganization, which will not involve reductions of
personnel or facility closures, is expected to result in a one-time,
non-cash charge to earnings for the write-off of a deferred tax asset
in the first quarter of 2004 of approximately $7.5 million, or $0.15
per diluted share, but is expected to improve full-year 2004 earnings
per diluted share by an estimated $0.02 to $0.03 excluding the
one-time charge. The earnings benefit is expected to increase in 2005.
2004 Outlook
The following forward-looking 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 7% and 11%, higher than previous guidance of 5% to 9% due to
the acquisition of River Valley Farms on January 8, 2004, the benefit
of foreign exchange and an improving business environment. As a result
of stronger sales growth and the benefit of the European
reorganization, the Company now expects 2004 earnings per diluted
share to be in a range of $1.63 to $1.69. Excluding the one-time
charge for reorganization of the European operations, non-GAAP
earnings per diluted share would be $1.78 to $1.84, compared to the
Company's earlier guidance of at least $1.76.
For the first quarter of 2004, the Company expects that net sales
will increase between 7% and 11% and that earnings per diluted share
will be in a range of $0.28 to $0.30. Excluding the one-time charge,
non-GAAP earnings per diluted share are expected to be in a range of
$0.43 to $0.45.
Webcast
Charles River Laboratories has scheduled a live webcast on
Wednesday, February 11, at 8:30 a.m. EST to discuss matters relating
to 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.
EST on February 18, 2004.
Charles River Laboratories, based in Wilmington, Massachusetts, is
a leading provider of critical research tools and integrated support
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 biomedical products and services that enable customers to
reduce cost, increase speed, and enhance productivity and
effectiveness in drug discovery and development. Charles River's
customer base spans over 50 countries, and includes all of the major
pharmaceutical companies, biotechnology companies, and many leading
hospitals and academic institutions.
Caution Concerning Forward-Looking Statements. This document
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," "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 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 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 the Company's Annual Report on
Form 10-K as filed on March 20, 2003, 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 Twelve Months Ended
------------------------------------------------
December 27,December 28,December 27,December 28,
2003 2002 2003 2002
Total net sales $ 156,040 $ 142,944 $ 613,723 $ 554,629
Cost of products sold
and services provided 96,434 89,795 380,058 345,646
----------- ----------- ----------- -----------
Gross margin 59,606 53,149 233,665 208,983
Selling, general and
administrative 22,998 20,974 89,489 83,303
Other operating
expense (income) - - 747 -
Amortization of
intangibles 1,165 1,220 4,876 3,414
----------- ----------- ----------- -----------
Operating income 35,443 30,955 138,553 122,266
Interest income
(expense) (1,685) (1,570) (6,706) (9,085)
Loss on debt
retirement - - - (29,882)
Other income (expense) 340 193 783 1,222
----------- ----------- ----------- -----------
Income before taxes,
minority interests
and earnings from
equity investments 34,098 29,578 132,630 84,521
Provision for income
taxes 13,128 11,387 51,063 31,921
----------- ----------- ----------- -----------
Income before minority
interests and
earnings from equity
investments 20,970 18,191 81,567 52,600
Minority interests (325) (686) (1,416) (2,784)
Earnings from equity
investments - - - 316
----------- ----------- ----------- -----------
Net income $ 20,645 $ 17,505 $ 80,151 $ 50,132
=========== =========== =========== ===========
Earnings per common
share
Basic $ 0.45 $ 0.39 $ 1.76 $ 1.12
Diluted $ 0.42 $ 0.36 $ 1.64 $ 1.06
Weighted average
number of common
shares outstanding
Basic 45,694,910 45,077,506 45,448,368 44,681,601
Diluted 51,453,537 51,518,643 51,314,805 50,856,723
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
December 27, December 28,
2003 2002
Assets
Current assets
Cash and cash equivalents $182,331 $127,509
Investment securities 13,156 $ -
Trade receivables, net 111,514 94,245
Inventories 52,370 43,892
Other current assets 11,517 12,446
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Total current assets 370,888 278,092
Property, plant and equipment, net 203,458 187,875
Goodwill, net 105,308 96,532
Other intangibles, net 30,415 34,204
Deferred tax asset 61,603 80,884
Other assets 27,882 23,757
-------- --------
Total assets $799,554 $701,344
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 19,433 $ 13,084
Accrued compensation 27,251 31,825
Deferred income 30,846 27,029
Other current liabilities 36,821 41,431
-------- --------
Total current liabilities 114,351 113,369
Long-term debt 185,600 192,420
Other long-term liabilities 24,804 19,612
-------- --------
Total liabilities 324,755 325,401
-------- --------
Minority interests 10,176 18,567
Total shareholders' equity 464,623 357,376
-------- --------
Total liabilities and shareholders'
equity $799,554 $701,344
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended Twelve Months Ended
------------------------------------------------
December 27,December 28,December 27,December 28,
2003 2002 2003 2002
Research Models &
Services
Net sales $ 100,419 $ 89,898 $ 405,121 $ 353,912
Gross margin 39,756 34,068 166,860 141,666
Gross margin as a %
of net sales 39.6% 37.9% 41.2% 40.0%
Operating income 28,486 23,674 126,388 102,713
Operating income as
a % of net sales 28.4% 26.3% 31.2% 29.0%
Depreciation and
amortization 4,882 3,132 16,371 13,404
Capital
expenditures 9,607 9,163 22,984 23,343
Development & Safety
Testing
Net sales $ 55,621 $ 53,046 $ 208,602 $ 200,717
Gross margin 19,850 19,081 66,805 67,317
Gross margin as a %
of net sales 35.7% 36.0% 32.0% 33.5%
Operating income 10,733 8,489 27,651 34,102
Operating income as
a % of net sales 19.3% 16.0% 13.3% 17.0%
Depreciation and
amortization 3,400 3,473 13,193 10,582
Capital
expenditures 3,328 6,766 9,720 14,200
Unallocated Corporate
Overhead $ (3,776) $ (1,208) $ (15,486) $ (14,549)
Total
Net sales $ 156,040 $ 142,944 $ 613,723 $ 554,629
Gross margin 59,606 53,149 233,665 208,983
Gross margin as a %
of net sales 38.2% 37.2% 38.1% 37.7%
Operating income 35,443 30,955 138,553 122,266
Operating income as
a % of net sales 22.7% 21.7% 22.6% 22.0%
Depreciation and
amortization 8,282 6,605 29,564 23,986
Capital
expenditures 12,935 15,929 32,704 37,543
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(dollars in thousands, except for per share data)
Three Months Ending
-------------------------
March 27, 2004
Expected diluted earnings per share range $0.28 - $0.30
European reorganization one-time, non-cash
charge 0.15 0.15
----- -----
Diluted earnings per share range, excluding
European reorganization one-time, non-cash
charge (Non-GAAP) $0.43 - $0.45
===== =====
Twelve months ending
-------------------------
December 25, 2004
Expected diluted earnings per share range $1.63 - $1.69
European reorganization one-time, non-cash
charge 0.15 0.15
----- -----
Diluted earnings per share range, excluding
European reorganization one-time, non-cash
charge (Non-GAAP) $1.78 - $1.84
===== =====
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.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(dollars in thousands, except for per share data)
Twelve Months Ended
--------------------------
December 27, December 28,
2003 2002
--------------------------
Income before taxes, minority interests and
earnings from equity investments $ 132,630 $ 84,521
Add back:
Impairment charge 3,655 -
Litigation settlement (2,908) -
Severance charge 871
Loss on debt retirement - 29,882
------------ ------------
Income before taxes, minority interest and
earnings from equity investments, excluding
specified charges (Non-GAAP) 134,248 114,403
Provision for income taxes, excluding
specified charges (Non-GAAP) 51,685 43,572
------------ ------------
Income before minority interests and
earnings from equity investments, excluding
specified charges (Non-GAAP) 82,563 70,831
Minority interests (1,416) (2,784)
Earnings from equity investments - 316
------------ ------------
Net income, excluding specified charges
(Non-GAAP) $ 81,147 $ 68,363
============ ============
Calculation of earnings per common share,
excluding specified charges (Non-GAAP):
Net income, excluding specified charges
(Non-GAAP) $ 81,147 $ 68,363
After tax equivalent interest expense 3,982 3,706
------------ ------------
Net income for calculation of fully diluted
earnings per share, excluding specified
charges (Non-GAAP) $ 85,129 $ 72,069
============ ============
Weighted average shares outstanding - Basic 45,448,368 44,681,601
Effect of dilutive securities:
3.5% senior convertible debentures 4,759,455 4,419,847
Stock options 726,291 1,061,243
Warrants 380,691 685,219
2% convertible notes - 8,813
------------ ------------
Weighted average shares outstanding -
Diluted 51,314,805 50,856,723
============ ============
Basic earnings per share, excluding
specified charges (Non-GAAP) $ 1.79 $ 1.53
Diluted earnings per share, excluding
specified charges (Non-GAAP) $ 1.66 $ 1.42
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.
CONTACT: Charles River Laboratories International, Inc.
Susan E. Hardy, 978-658-6000 Ext. 1616