Filed by
Charles River Laboratories International, Inc.
pursuant
to Rule 14a-12
of the
Securities Exchange Act of 1934
Subject
Company: Charles River Laboratories International, Inc.
(Commission
File No.: 001-15943)
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[GRAPHIC]
Charles River and WuXi PharmaTech
To Combine
Creating the First Fully Integrated,
Global Early-Stage CRO
April 26, 2010
(Copyright) 2010 Charles River Laboratories International, Inc.
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Speakers
James C. Foster Dr. Ge Li
Chairman, President and CEO Chairman and CEO
Charles River Laboratories WuXi PharmaTech
Thomas F. Ackerman Edward Hu
Executive Vice President and CFO COO and Acting CFO
Charles River Laboratories WuXi PharmaTech
2
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Safe Harbor Statement
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 current expectations and beliefs of Charles River
Laboratories ("Charles River") and WuXi PharmaTech (Cayman) Inc ("WuXi"), 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. Those risks and uncertainties include, but are
not limited to: 1) the possibility that the companies may be unable to obtain stockholder or
regulatory approvals required for the combination; 2) problems may arise in successfully integrating
the businesses of the two companies; 3) the acquisition may involve unexpected costs; 4) the
combined company may be unable to achieve cost synergies; 5) the businesses may suffer as a result
of uncertainty surrounding the acquisition; and 6) the industry may be subject to future regulatory
or legislative actions and other risks that are described in Securities and Exchange Commission
("SEC") reports filed or furnished by Charles River and WuXi.
In addition, these statements include the availability of funding for our customers and the impact
of economic and market conditions on them generally, the anticipated strength of our balance sheet,
the effects of our 2009 and 2010 cost-saving actions and other actions designed to manage expenses,
operating costs and capital spending, and to streamline efficiency, and the ability of the Company
to withstand the current market conditions. 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 the businesses we acquire; the ability to
successfully develop and commercialize SPC's technology platform; a decrease in research and
development spending, a decrease in the level of outsourced services, or other cost reduction
actions by our customers; the ability to convert backlog to sales; 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 19, 2010, as well as other filings we make with the SEC.
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 WuXi. Charles
River and WuXi assume no obligation and expressly disclaim any duty to update information contained
in this filing except as required by law.
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Regulation G This presentation includes discussion of non-GAAP financial measures. We believe that the inclusion of these non-GAAP financial measures provides useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Compan's performance. The non-GAAP financial measures included in this presentation 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. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations to those GAAP measures on our website at ir.criver.com. Additional Information This document may be deemed to be solicitation material in respect of the proposed combination of Charles River and WuXi. In connection with the proposed transaction, Charles River will file a preliminary proxy statement and a definitive proxy statement with the SEC. The information contained in the preliminary filing will not be complete and may be changed. Before making any voting or investment decisions, investors and security holders are urged to read the definitive proxy statement when it becomes available and any other relevant documents filed with the SEC because they will contain important information. The definitive proxy statement will be mailed to the shareholders of Charles River seeking their approval of the proposed transaction. Charles River's shareholders will also be able to obtain a copy of the definitive proxy statement free of charge by directing a request to: Charles River Laboratories, 251 Ballardvale Street, Wilmington, MA 01887, Attention: General Counsel. In addition, the preliminary proxy statement and definitive proxy statement will be available free of charge at the SEC's website, www.sec.gov or shareholders may access copies of the documentation filed with the SEC by Charles River and on Charles River's website at www.criver.com. Charles River and its directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Charles River's directors and executive officers is available in Charles River's proxy statement for its 2010 annual meeting of shareholders, which was filed with the SEC on March 30, 2010. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of Charles River shareholders in connection with the proposed transaction will be set forth in the preliminary proxy statement when it is filed with the SEC. This document does not constitute an offer of any securities for sale or a solicitation of an offer to buy any securities. The Charles River shares to be issued in the proposed transaction have not been and will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Charles River intends to issue such Charles River shares pursuant to the exemption from registration set forth in Section 3(a)(10) of the Securities Act. 4 |
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Charles River to Acquire WuXi
o Charles River signed a definitive agreement to acquire WuXi for ~$1.6B in cash and stock
o Combination will create the first and premier early-stage contract research organization (CRO)
o Offering a full range of products and services from molecule creation to first-in-human
testing
o Charles River's expertise in in vivo biology and WuXi's expertise in chemistry combine to
create a partner capable of supporting clients' early-stage drug development efforts as no
other CRO can
o Providing that expertise in North America, Europe and China
o Dramatically improves both companies' ability to meet client needs
o Believe the two companies are an exceptional cultural fit
o Focused on clients and employees
o Drives shareholder value through profitable growth
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Founded 1947 2000
NYSE Ticker CRL WX
2009 Sales (1) $1.2B $270M
Employees (Dec. 909) ~8,000 ~4,200
CEO James C. Foster Dr. Ge Li
Chairman, President and CEO Founder, Chairman and CEO
Core Capabilities
Geographic Reach
6 1)Based on FY 2009 revenues.
2)Virtually all WuXi revenues are from clients outside of China.
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The New Corporate Profile
Company Name and HQ Charles River Laboratories
Wilmington, MA
Board Composition 10 Charles River / 3 WuXi
|X| Dr. Li joins Board
Pro forma Ownership Charles River holders will own ~78%
of the combined company
Chairman, President and CEO James C. Foster
Corporate EVP and President, Global Dr. Ge Li
Discovery and China Services
Chief Financial Officer Thomas F. Ackerman
Business Segment Management Real Renaud - RMS
Nancy Gillett - PCS
Ge Li - DS
Combined Employees ~12,200
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Strategic Rationale
Creates a fully integrated global early-stage CRO
Drives profitable revenue growth
Compelling value proposition for clients
Leverages increasing strategic importance of China
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Creates a fully integrated global early-stage CRO
o Combines leaders in in vivo biology and chemistry
o Highly complementary portfolios with limited overlap
o Creates fully integrated drug development portfolio from molecule creation to first-in-human
testing
o With large footprint in critical Western and Chinese markets
o Combined company offers biopharmaceutical companies more capabilities to support drug
development
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WuXi's Discovery-Focused Services [graphic] 10 |
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CRL's Preclinical-Focused Services [graphic] 11 |
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The New Charles River: Integrated Services [graphic] 12 |
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Diversified Portfolio 2009 Combined Sales*: $1.5B 13 |
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Diversified Portfolio Discovery Services Research Models and Services Preclinical Services o A leader in discovery chemistry services o A leading position in non-GLP efficacy testing o DIS o Developing position in chemistry-based manufacturing o Research and commercial scale o The market leader in research model production o Largest number of most widely used models o Disease-specific models o A leading service provider with broad capabilities o GEMS, RADS, CSS o A leader in endotoxin detection o A leader in GLP safety assessment o Both in Western markets and China o Breadth and depth of specialty services is key competitive advantage o A leader in worldwide biopharmaceutical services (BPS) o Phase I clinic in U.S. |X| Endosafe(R)-PTS(TM) 14 |
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Drives profitable revenue growth
o WuXi provides opportunity to enhance revenue growth while expanding Charles River's
margins
o Discovery and Chemistry services
o Fastest-growing business segment as pharmas increasingly choose to outsource
o Significant growth opportunity for WuXi's new, downstream services
o Service biology, DMPK/ADME, formulation, process research, bioanalytical chemistry,
manufacturing
o GLP safety assessment in China
o Expands the development and scope of GLP capabilities in China
o Manufacturing services
o Emerging opportunity for active pharmaceutical ingredients (APIs) for clinical trial and
commercial-scale manufacturing services in China
o New business opportunities
o Drives more business upstream and downstream with existing and prospective clients based on
unprecedented scope of early-stage portfolio
o Expanded portfolio drives market share gains
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WuXi's Revenue Growth [graphic] 16 |
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WuXi's China Facilities 17 |
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WuXi's U.S. Facilities Combined with Charles River's biopharmaceutical testing facilities in the U.S. and Germany, believe we will be the leading global provider of manufacturing support for biologics 18 |
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o Larger footprint with more capabilities enables clients to partner with one company from
chemistry to man
o More attractive partner for biopharmaceutical companies looking to gain more value from fewer
service providers
o Allows clients to utilize services in North America, Europe or China
o Seamless transfer of therapeutics across the early-stage continuum helps reduce time and cost
to bring a drug to market
o Enables sponsors to make earlier "go/no-go" decisions
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Enhancing Client Relationships o Focus on expanding existing client partnerships o Enhances solid, high-level relationships in the same companies o Strengthens relationships with those clients where one company is pre-eminent o Creates new opportunities with clients where both entities currently have minority share o Enables pull through for both companies' clients - upstream and downstream o Client retention driven by breadth of portfolio, high-quality science and exceptional service 20 |
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Diverse Client Base
o Client base composed of big pharma and biotech, small and mid-tier pharma and biotech, academic
and government clients, CROs and agricultural and chemical manufacturers
o Top 10 clients represent ~35% of combined sales
o 3 clients above 5% of sales
o Largest client represents ~6% of sales
Non-Commercial 13%
Commercial 87%
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Leverages increasing strategic importance of China
o Supportive of global pharmas who view China as the new frontier for drug
development
o Pharmas are taking advantage of cost leverage by placing chemistry in China
o Lower cost, highly skilled scientists with advanced degrees
o Emerging opportunities for chemistry, safety assessment and manufacturing services as clients
advance development activities in China
o Charles River gains largest early-stage provider in China
o Enables clients to choose where to place work
o Expect some proportion of safety assessment will migrate to China
o Limited preclinical capacity in China will restrict the amount of work that
can be done there for some time
o More than 8M ft2 in North America and Western Europe vs ~500k ft2 of preclinical space in China
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Diversified Revenue Base North America 58% Europe 22% China 15% Asia (ex. China) 5% 23 |
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Expands CRL Scientific Leadership o Enhanced management team including: o Ge Li, PhD: Director, Corporate EVP and President, Global Discovery and China Services o Edward Hu: Corporate SVP and General Manager, Global Discovery and China Services o Shuhui Chen, PhD: Corporate SVP and General Manager, Chemistry Services o Suhan Tang, PhD: Corporate VP and General Manager, Manufacturing Services o Large, educated work force in China, augmented by returnees o Necessary knowledge transfer for capabilities not yet available in China o WuXi employs 2,900 scientists with advanced degrees, including 2,000 chemists o One of the largest global employers of chemists in the pharmaceutical industry 24 |
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Shared Corporate Culture o Dedication to exceeding customer expectations o Shared mission to accelerate our clients' drug development efforts o Scientific expertise o Employee-centric o Focus on market leadership o Commitment to building shareholder value 25 |
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Comments from Dr. Li
o Transformational transaction which creates the leading early-stage CRO
o Combination of chemistry and in vivo biology
o Provides a larger services platform to support our clients' research and development efforts ?
Enables pull-through for both companies, upstream and downstream
o Provides access for global pharmas to services in China
o Clients can choose where to place work
o Larger footprint with big pharma clients
o Strategically more important to their drug development efforts
o Access to Charles River's 200-person global sales force supports expansion of WuXi's business
globally
o Opportunities with mid-tier pharma and 3,500 academic accounts
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Unique Opportunity
o Combines leaders in in vivo biology and chemistry
o Larger footprint with more capabilities enables clients to partner with one company from
chemistry to man
o Supportive of global pharmas who view China as the new frontier for drug
development
o Dramatically improves both companies' ability to meet client needs
o Expands management team and scientific leadership
o WuXi provides opportunity to drive revenue growth while expanding Charles River's margins
Creates the only fully integrated, global early--stage CRO
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TRANSACTION SUMMARY 28 |
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Transaction Summary
Purchase price >> $1.6B, including the assumption
of WuXi's debt and cash
Consideration >> $21.25 total per ADS subject to collar (below)
per share o $11.25 in cash (~53%) plus
o $10.00 of CRL common stock (~47%)
determined by exchange ratio
Exchange Ratio >> $10.00 divided by 20-day weighted average closing price
prior to closing subject to collar (below)
Collar >> At Charles River's stock price of $37.1486 or below,
exchange ratio is fixed at 0.2692; at a price of $43.1726 or
above, exchange ratio is fixed at 0.2316
Premium >> 28% based on WuXi's 04/23/2010 closing price of $16.57
>> 38% based on 30-day average closing price of $15.45
Expected closing >> By 4Q10, subject to approval by each company's
shareholders and the satisfaction of customary closing
conditions and regulatory approvals
Ownership >> Approximately 78% Charles River/
22% WuXi pro forma ownership
Tax Treatment >> Taxable exchange under U.S. tax law
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Financial Benefits
EPS Impact*
Annual Synergies
Free Cash Flow
o Expected to be neutral to slightly accretive to non-GAAP EPS in 2011 and increasingly accretive
thereafter
o Expect to generate $20M in annualized synergies beginning in 2011
o Public company costs
o Corporate G and A
o Refinement of certain operating units
o Significant opportunity for revenue synergies
o Strong cash generation
* Items excluded from non-GAAP EPS consist of all deal-related costs including repatriation impact.
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Strong Combined(1) Financial Profile
FY DECEMBER 2009
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CRL WUXI(2) COMBINED(3)
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Sales $1,203 $270 $1,473
Non-GAAP OI(4) $225 $55 $280
Margin 19% 20% 19%
1) "Combined" financial information is presented as a supplementary non-GAAP financial measure,
and is not intended to be superior to or a substitute for any financial measure prepared in
accordance with GAAP. Furthermore, "combined" financial information is not equivalent to pro
forma financial information as may be included in any proxy statement Charles River will
file with the SEC in connection with this transaction. For example, combined financial
information does not give effect to adjustments likely to be found in pro forma financial
information such as increased amortization and depreciation.
2) Includes stock-based compensation.
3) Excludes any potential synergies due to combination.
4) Excludes amortization of intangibles and non-recurring items.
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Strong Combined(1) Financial Profile
FY DECEMBER 2010
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CRL WUXI(2) COMBINED(3)
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Sales $1,200-$1,240 $310-$320 $1,510-$1,560
Non-GAAP OI(4) $210-$225 $53-$60 $263-$285
1) "Combined" financial information is presented as a supplementary non-GAAP financial measure,
and is not intended to be superior to or a substitute for any financial measure prepared in
accordance with GAAP. Furthermore, "combined" financial information is not equivalent to pro
forma financial information as may be included in any proxy statement Charles River will
file with the SEC in connection with this transaction. For example, combined financial
information does not give effect to adjustments likely to be found in pro forma financial
information such as increased amortization and depreciation.
2) Includes an estimate of stock-based compensation.
3) Excludes any potential synergies due to combination.
4) Excludes amortization of intangibles and deal-related costs.
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Transaction Financing
Sources ($mm)
New equity $755
Balance sheet cash and new debt 1,137
Total sources $1,892
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Uses ($mm)
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Equity purchase price $1,604
Debt refinancing(1) 221
Fees and other 67
Total uses $1,892
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Adjusted combined(2) leverage 3.3x
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Committed financing will be provided by
J..P.. Morgan Chase
and
Bank of America/
Merrill Lynch
(1) Debt refinancing includes all WuXi outstanding debt and Charles River bank debt of $190mm
(2) "Combined" financial information is presented as a supplementary non-GAAP financial measure,
and is not intended to be superior to or a substitute for any financial measure prepared in
accordance with GAAP. Furthermore, "combined" financial information is not equivalent to pro
forma financial information as may be included in any proxy statement Charles River will file
with the SEC in connection with this transaction. For example, combined financial information
does not give effect to adjustments likely to be found in pro forma financial information such
as increased amortization and depreciation.
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CRL 1Q10 RESULTS 34 |
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CRL 1Q10 Net Sales
($ in millions) 1Q10 1Q09 % change FX % change
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RMS $172.2 $161.5 6.6% 2.9% 3.7%
PCS $125.1 $140.0 (10.6)% 3.9% (14.5)%
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Net sales $297.3 $301.5 (1.4)% 3.4% (4.8)%
>> Sales up slightly from 4Q09
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CRL 1Q10 Operating Margin/EPS
($ in millions) 1Q10 1Q09 % change
Operating margin 9.9% 13.2% (330)bps
Non-GAAP OM% 14.8% 18.8% (400)bps
EPS $0.26 $0.38 (31.6)%
Non-GAAP EPS $0.45 $0.58 (22.4)%
o Operating margin and EPS decline driven by lower sales volume, resumption of incentive
compensation programs for 2010 and higher ERP costs, as anticipated
o Partially offset by benefit of cost-saving actions
o Non-GAAP EPS was in line with our prior expectations of a ~10% decline vs. 4Q09
36 See website for reconciliations of Non-GAAP to GAAP results.
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RMS: 1Q10 Results
($ in millions) 1Q10 1Q09 change 4Q09 change
Net sales $172.2 $161.5 6.6% $169.4 1.6%
Operating margin 29.0% 29.4% (30)bps 28.8% 30bps
Non-GAAP OM 30.4% 31.6% (110)bps 30.1% 40bps
o RMS sales growth driven by acquisitions of Piedmont and Cerebricon and foreign exchange
benefit
o Operating margin decline resulted from higher compensation and IT costs
37 See website for reconciliations of Non-GAAP to GAAP results.
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PCS: 1Q10 Results
($ in millions) 1Q10 1Q09 change 4Q09 change
Net sales $125.1 $140.0 (10.6)% $125.9 (0.6)%
Operating margin (0.2)% 7.5% (770)bps 0.2% (40)bps
Non-GAAP OM 9.3% 15.5% (620)bps 10.5% (120)bps
o Flat sequential sales indicate plateauing of preclinical demand and impact of stable but
lower-than-historical prices
o Year-over-year margin decline resulted primarily from lower sales
o Sequential margin decline resulted from higher compensation costs
38 See website for reconciliations of Non-GAAP to GAAP results.
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CRL Q2 Commentary
o Continue to view 2Q10 as the beginning of improved demand for preclinical services
o More robust inquiry levels, though not yet translated to sustained bookings and backlog due to
normal lag in the selling cycle
o Significant percentage of revenue booked for 2Q
o Demonstrates that clients are starting to reinvigorate the late discovery and early development
pipelines
o Expect 2Q10 sales to increase 2-3% as PCS sales improve
o Expect non-GAAP EPS to increase 8-10% sequentially due to sales leverage on our fixed cost base
39 See website for reconciliations of Non-GAAP to GAAP results.
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APPENDIX 40 |
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Glossary of Terms
o Advanced intermediate: An ingredient of a pharmaceutical created at an advanced stage of
manufacturing but prior to API.
o Analytical development: Development and validation of methods of analyzing APIs and formulated
products for properties such as potency, purity, solubility, and stability.
o API (active pharmaceutical ingredient): the finished portion of a pharmaceutical that has
intended biological activity.
o Assay: A test of biological activity.
o Bioanalytical chemistry: Analysis of blood samples from clinical trials, such as for
pharmacokinetics.
o Clinical testing: The third of three stages of drug development, where compounds are tested for
efficacy and safety in humans.
o Discovery biology/Service biology: Development and use of biological assays to test compounds
for activity.
o Discovery stage: The first of three stages of drug development, where biological targets are
identified and validated and compounds are synthesized and screened against biological assays
to identify hits, leads, and optimized leads.
o DMPK/ADME (distribution, metabolism, and pharmacokinetics/absorption, distribution, metabolism,
and excretion): preclinical testing of the interaction of a compound and the human body.
o Fee for service: A type of contract where billing is based on delivery of a specific product or
service at a predetermined price.
o Formulation: Creation of a form of a drug for administration into the body.
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Glossary of Terms
o Full time equivalent: A type of contract where services are billed according to an employee�s
time and effort rather than for shipment of a specific deliverable.
o GLP (good laboratory practice): A standard of laboratory practice characterized by a high
quality of equipment, training, and documentation of procedures.
o GMP, cGMP (good manufacturing practice, current good manufacturing practice): A standard of
manufacturing practice characterized by a high quality of equipment, training, and
documentation of procedures.
o High-throughput compound screening: Rapid testing of many compounds, such as using robotics, to
measure biological activity.
o Hit: A compound that has demonstrated biological activity during screening with an assay.
o Integrated services: Services that join seamlessly, thereby saving the customer time and money.
o In vitro: In a test tube or similar laboratory receptacle.
o In vivo: In a living organism, such as a research model or human being.
o Lead: A hit that has been enhanced and nominated for preclinical development.
o Lead optimization: Refinement of a molecule to further enhance its performance.
o Medicinal chemistry: An iterative process involving biologists and chemists where a
biologically active molecule is modified to enhance its efficacy, safety, or other parameters.
o Pharmacodynamics: the study of the effects of a drug on the human body.
o Pharmacokinetics: the study of the effects of the human body on a drug.
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Glossary of Terms
o Phase 1 clinical trial: The stage of clinical testing where compounds are tested primarily for
safety in small numbers of healthy patients.
o Phase 2 clinical trial: The stage of clinical testing where compounds are tested, often in a
range of doses, for efficacy and safety in small numbers of patients with a particular disease.
o Phase 3 clinical trial: The stage of clinical testing where compounds are tested for efficacy
and safety in large numbers of patients with a particular disease for the purpose of preparing
a regulatory filing necessary for approval and marketing. ? Phase 4 clinical trial: The stage
of clinical testing where compounds continue to be tested after they have been approved and
marketed.
o Preclinical stage: The second of three stages of drug development in which a lead compound is
further characterized for the purpose of preparing a regulatory filing necessary to begin human
clinical trials.
o Process chemistry and scale-up: Development of processes for manufacturing a compound at scale.
o Purification: The process after compound synthesis involving removal of unwanted impurities
from the sample of a compound.
o Safety pharmacology: The in vitro or in vivo study of potentially harmful pharmacodynamic
effects of a drug.
o Synthetic chemistry: The process of creating molecules from essential building blocks.
o Toxicology: Testing compounds for safety, such as in research models.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1)
(dollars in thousands)
Three Months Ended
March 27, March 28, December 26,
Research Models and Services 2010 2009 2009
Net sales $ 172,205 $ 161,490 $ 169,444
Operating income 49,984 47,444 48,880
Operating income as a % of net sales 29.0% 29.4% 28.8%
Add back:
Amortization related to acquisitions 2,400 887 1,320
Severance - 2,709 383
Impairment and other charges (2) - - 357
----------- ---------- ------------
Operating income, excluding specified charges (Non-GAAP) $ 52,384 $ 51,040 $ 50,940
Non-GAAP operating income as a % of net sales 30.4% 31.6% 30.1%
Preclinical Services
Net sales $ 125,140 $ 140,036 $ 125,937
Operating income (263) 10,546 201
Operating income as a % of net sales (0.2)% 7.5% 0.2%
Add back:
Amortization related to acquisitions 4,773 5,261 5,771
Severance 2,656 2,776 4,991
Impairment and other charges (2) 986 1,527 1,402
Operating losses for PCS Arkansas, PCS Massachusetts and Phase 1 Scotland 3,471 1,543 808
Gain on sale of UK real estate - - (12)
----------- ---------- ------------
Operating income, excluding specified charges (Non-GAAP) $ 11,623 $ 21,653 $ 13,161
Non-GAAP operating income as a % of net sales 9.3% 15.5% 10.5%
Unallocated Corporate Overhead $ (20,219) $ 18,097) $ (17,157)
Add back:
Severance 16 1,648 -
Impairment and other charges (2) - 97 4
Costs associated with the evaluation of acquisitions 117 229 1,830
Convertible debt accounting (3) 53 44 54
----------- ---------- ------------
Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (20,033) $ 16,079) $ (15,269)
Total
Net sales $ 297,345 $ 301,526 $ 295,381
Operating income 29,502 39,893 31,924
Operating income as a % of net sales 9.9% 13.2% 10.8%
Add back:
Amortization related to acquisitions 7,173 6,148 7,091
Severance 2,672 7,133 5,374
Impairment and other charges (2) 986 1,624 1,763
Operating losses for PCS Arkansas, PCS Massachusetts and Phase 1 Scotland 3,471 1,543 808
Costs associated with the evaluation of acquisitions 117 229 1,830
Gain on sale of UK real estate - - (12)
Convertible debt accounting (3) 53 44 54
----------- ---------- ------------
Operating income, excluding specified charges (Non-GAAP) $ 43,974 $ 56,614 $ 48,832
Non-GAAP operating income as a % of net sales 14.8% 18.8% 16.5%
(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 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 GAAP. The Company intends to continue to assess the potential value of
reporting non-GAAP results consistent with applicable rules, regulations and guidance.
(2) For the three months ended March 27, 2010, these items were primarily related to asset
impairments associated with our PCS Arkansas facility. For the three months ended March 28,
2009, these items were primarily related to an asset impairment due to the subsequent sale of
our clinical Phase I business in Scotland, as well as additional miscellaneous costs. For the
three months ended December 26, 2009, these items were primarily related to asset impairments
associated with certain of the Company's RMS and PCS facilities.
(3) This item includes the impact of convertible debt accounting adopted at the beginning of 2009,
which increased depreciation expense.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1)
(dollars in thousands, except for per share data)
Three Months Ended
March 27, March 28,
2010 2009
Net income attributable to common shareholders $ 17,382 $ 25,405
Add back:
Amortization related to acquisitions 7,173 6,148
Severance 2,672 7,133
Impairment and other charges (2) 986 1,624
Operating losses for PCS Arkansas, PCS Massachusetts and Phase 1 Scotland 3,471 1,543
Costs associated with the evaluation of acquisitions 117 229
Convertible debt accounting, net (3) 3,116 2,397
Tax effect (5,578) (6,289)
Net income, excluding specified charges (Non-GAAP) $ 29,339 $ 38,190
Weighted average shares outstanding - Basic 65,124,451 65,889,835
Effect of dilutive securities:
2.25% senior convertible debentures - -
Stock options and contingently issued restricted stock 700,211 126,896
Warrants - 3,351
Weighted average shares outstanding - Diluted 65,824,662 66,020,082
Basic earnings per share $ 0.27 $ 0.39
Diluted earnings per share $ 0.26 $ 0.38
Basic earnings per share, excluding specified charges (Non-GAAP) $ 0.45 $ 0.58
Diluted earnings per share, excluding specified charges (Non-GAAP) $ 0.45 $ 0.58
(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 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 GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP
results consistent with applicable rules, regulations and guidance.
(2) For the three months ended March 27, 2010, these items were primarily related to asset
impairments associated with our PCS Arkansas facility. For the three months ended March 28,
2009, these items were primarily related to an asset impairment due to the subsequent sale of
our clinical Phase I business in Scotland, as well as additional
miscellaneous costs.
(3) This item includes the impact of convertible debt accounting adopted at the beginning of 2009,
which increased interest expense by $3,063 and depreciation expense by $53 for the three months
ended March 27, 2010, and increased interest expense by $2,860, capitalized interest by $507
and depreciation expense by $44 for the three months ended March 28, 2009.
45
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Accelerating Drug Development. Exactly.
CRL
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(Copyright) 2010 Charles River Laboratories International, Inc.
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