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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15 (d) of the
Securities Exchange Act of 1934
April 28, 2004
Date of Report (Date of earliest event reported)
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as specified in its Charter)
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Delaware 333-92383 06-1397316
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
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251 Ballardvale Street
Wilmington, Massachusetts 01887
(Address of Principal Executive Offices) (Zip Code)
978-658-6000
(Registrant's Telephone Number, including Area Code)
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 April 28, 2004, Charles River Laboratories International, Inc. issued a press
release providing financial results for the fiscal quarter ended March 27, 2004.
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: April 28, 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 April 28, 2004.
4
Exhibit 99.1
Charles River Laboratories Reports Record First-Quarter Sales
and Non-GAAP Earnings and Raises Guidance for 2004
WILMINGTON, Mass.--(BUSINESS WIRE)--April 28, 2004--Charles River
Laboratories International, Inc. (NYSE:CRL) today reported a 13.5%
increase in first-quarter 2004 net sales, to $172.6 million from
$152.1 million reported in the first quarter of 2003. Net income for
the first quarter of 2004 was $17.6 million, or $0.36 per diluted
share, compared to $19.4 million, or $0.40 per diluted share, in the
first quarter of 2003. The reduction in net income was due to a one
time, non-cash net charge related to the reorganization of the
Company's European operations.
Non-GAAP net income for the first quarter of 2004 was $23.4
million, an 18.2% increase over the $19.8 million reported in the
first quarter of 2003, and non-GAAP earnings per diluted share were
$0.47 compared to $0.41, an increase of 14.6%. As a result of the
European reorganization, the first quarter of 2004 included a net
charge of $5.8 million, or $0.11 per diluted share, related to the
write-off of a deferred tax asset and release of a tax valuation
allowance. The first quarter of 2003 included a net charge of $0.5
million, or $0.01 per share, for the write-down of certain contract
manufacturing assets and the benefit of a litigation settlement in the
Company's favor.
Operating income for the first quarter of 2004 rose 16.7% to $39.5
million from $33.8 million in the first quarter of 2003. The Company's
operating margin was 22.9% in the first quarter of 2004 compared to
22.3% in the same period last year.
James C. Foster, Chairman, President and Chief Executive Officer
said, "We are extremely pleased with the first-quarter results. The
market for outsourced development services continues to strengthen,
and we are benefiting from increased spending in the pharmaceutical
and biotechnology sectors.
"As a result of the improved business environment, we are
increasing our guidance for 2004. We now expect net sales growth in a
range of 9% to 13% and non-GAAP earnings per diluted share, which
excludes the net charge associated with the European reorganization,
in a range between $1.83 and $1.89."
Business Segments Results
First-quarter 2004 net sales of $172.6 million increased 13.5%
over the first quarter of 2003. Favorable foreign currency translation
contributed approximately 4.6% of the net sales gain.
First-quarter 2004 net sales for the Research Models and Services
(RMS) segment increased 10.0% to $113.5 million from $103.1 million in
the prior year. The sales increase was due to price increases and
increased pharmaceutical and biotechnology spending. The RMS segment's
gross margin was 43.1% compared to 43.5% in the first quarter of 2003
due to a change in product mix and costs associated with consolidation
of research model production capacity. Operating income was $36.5
million and the operating margin was 32.1%, compared to $37.2 million
and 36.1% in the same period last year. Last year's first-quarter
results included the benefit of a litigation settlement in the
Company's favor of $2.9 million, which was the primary reason for the
margin decrease.
Net sales for the Development and Safety Testing (DST) segment
rose 20.8% in the first quarter, to $59.2 million from $49.0 million
in the same period in 2003. The demand for outsourced services has
continued to strengthen, and net sales for the DST segment have
improved sequentially. Higher net sales and improved utilization
raised the gross margin for the DST segment to 33.7% from 26.7% in the
first quarter of 2003. Due principally to higher sales, operating
income for the first quarter rose to $9.8 million from $0.9 million in
the first quarter of 2003, and the operating margin increased to 16.6%
from 1.9%. The first quarter of 2003 included a charge of $3.7 million
associated with the closure of a contract manufacturing facility.
European Reorganization
In the first quarter of 2004, the Company implemented a
reorganization of its European operations. The purpose of the
reorganization was to streamline the corporate legal structure in
order to improve operating efficiency and cash management, facilitate
acquisitions and provide tax benefits. The reorganization, which did
not involve reductions of personnel or facility closures, resulted in
a one time, non-cash charge for the write-off of a deferred tax asset
in the first quarter of 2004 of approximately $7.9 million. As a
result of the write-off, a valuation allowance associated with foreign
tax credit carryforwards was reassessed and $2.1 million was released
as a tax benefit. The effect of these two items, which is reflected in
the provision for income taxes, was a net charge of $5.8 million, or
$0.11 per diluted share.
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 9% and 13%, higher than previous guidance of 7% to 11% due to
the more robust business environment. As a result of stronger sales
growth, the Company now expects 2004 earnings per diluted share to be
in a range of $1.72 to $1.78. Excluding the one-time net charge
associated with the reorganization of the European operations,
non-GAAP earnings per diluted share are expected to be $1.83 to $1.89,
compared to the Company's earlier guidance of $1.78 to $1.84.
For the second quarter of 2004, the Company expects that net sales
will increase between 9% and 13% and that earnings per diluted share
will be in a range of $0.46 to $0.48.
Webcast
Charles River Laboratories has scheduled a live webcast on
Thursday, April 29, at 8:30 a.m. EDT 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.
EDT on May 6, 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 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 10, 2004, 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
March 27, March 29,
2004 2003
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Total net sales $172,637 $152,125
Cost of products sold and services provided 103,809 94,143
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Gross margin 68,828 57,982
Selling, general and administrative 28,120 22,139
Other operating expenses, net - 747
Amortization of intangibles 1,191 1,248
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Operating income 39,517 33,848
Interest income (expense) (1,415) (1,586)
Other, net 200 (18)
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Income before income taxes and minority
interests 38,302 32,244
Provision for income taxes 20,152 12,414
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Income before minority interests 18,150 19,830
Minority interests (556) (476)
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Net income $17,594 $19,354
======================
Earnings per common share
Basic $0.38 $0.43
Diluted $0.36 $0.40
Weighted average number of common shares
outstanding
Basic 45,855,115 45,178,566
Diluted 52,133,240 51,201,008
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)
March 27, March 29,
2004 2003
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Assets
Current assets
Cash and cash equivalents $189,746 $182,331
Marketable securities 13,301 13,156
Trade receivables, net 119,916 111,514
Inventories 53,050 52,370
Other current assets 10,356 11,517
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Total current assets 386,369 370,888
Property, plant and equipment, net 207,309 203,458
Goodwill, net 112,695 105,308
Other intangibles, net 33,506 30,415
Deferred tax asset 56,858 61,603
Other assets 29,089 27,882
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Total assets $825,826 $799,554
========= =========
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $16,227 $19,433
Accrued compensation 28,158 27,251
Deferred income 33,099 30,846
Other current liabilities 33,230 36,821
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Total current liabilities 110,714 114,351
Long-term debt 186,229 185,600
Other long-term liabilities 25,495 24,804
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Total liabilities 322,438 324,755
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Minority interests 9,389 10,176
Total shareholders' equity 493,999 464,623
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Total liabilities and shareholders' equity $825,826 $799,554
========= =========
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended
March 27, March 29,
2004 2003
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Research Models and Services
Net sales $113,466 $103,123
Gross margin 48,888 44,885
Gross margin as a % of net sales 43.1% 43.5%
Operating income 36,479 37,238
Operating income as a % of net sales 32.1% 36.1%
Depreciation and amortization 4,142 3,590
Capital expenditures 3,171 2,164
Development and Safety Testing
Net sales $59,171 $49,002
Gross margin 19,940 13,097
Gross margin as a % of net sales 33.7% 26.7%
Operating income 9,846 931
Operating income as a % of net sales 16.6% 1.9%
Depreciation and amortization 3,695 3,335
Capital expenditures 1,354 3,072
Unallocated Corporate Overhead $(6,808) $(4,321)
Total
Net sales $172,637 $152,125
Gross margin 68,828 57,982
Gross margin as a % of net sales 39.9% 38.1%
Operating income 39,517 33,848
Operating income as a % of net sales 22.9% 22.3%
Depreciation and amortization 7,837 6,925
Capital expenditures 4,525 5,236
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS
(dollars in thousands, except for per share data)
Three months ended
March 27, March 29,
2004 2003
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Net income $17,594 $19,354
Add back:
Deferred tax asset write-off 7,900 -
Valuation allowance release (2,111) -
Impairment charge - 3,655
Litigation settlement - (2,908)
Tax effect of impairment charge and litigation
settlement - (288)
----------------------
Net income, excluding specified charges (Non-
GAAP) $23,383 $19,813
======================
Calculation of earnings per common share,
excluding specified charges (Non-GAAP):
Net income for purposes of calculating earnings
per share, excluding specified charges (Non-GAAP) $23,383 $19,813
After-tax equivalent interest expense on 3.5%
senior convertible debentures 996 996
----------------------
Income for purposes of calculating fully diluted
earnings per share, excluding specified
charges (Non-GAAP) $24,379 $20,809
======================
Weighted average shares outstanding - Basic 45,855,115 45,178,566
Effect of dilutive securities:
3.5% senior convertible debentures 4,759,455 4,759,455
Stock options and contingently issued
restricted stock 1,184,465 802,511
Warrants 334,205 460,476
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Weighted average shares outstanding - Diluted 52,133,240 51,201,008
======================
Basic earnings per share $0.38 $0.43
Diluted earnings per share $0.36 $0.40
Basic earnings per share, excluding specified
charges
(Non-GAAP) $0.51 $0.44
Diluted earnings per share, excluding specified
charges
(Non-GAAP) $0.47 $0.41
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
Susan E. Hardy, 978-658-6000 Ext. 1616