Charles River Announces Second-Quarter 2012 Results from Continuing Operations
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Charles River Laboratories International, Inc. has reported its results for the second quarter of 2012. For the quarter, net sales from continuing operations were $284.7 million, a decrease of 1.2% from $288.3 million in the second quarter of 2011.
Excluding foreign currency translation, which reduced reported sales by 3.1%, second-quarter 2012 sales increased by 1.9%.
On a segment basis, sales increased in the Preclinical Services (PCS) segment, but declined in the Research Models and Services (RMS) segment due primarily to foreign currency translation.
On a GAAP basis, net income from continuing operations for the second quarter of 2012 was $30.5 million, or $0.63 per diluted share, compared to $34.2 million, or $0.66 per diluted share, for the second quarter of 2011.
In 2011, the second-quarter results included a $7.7 million gain ($0.15 per share both before and after tax) on the settlement of a life insurance policy.
On a non-GAAP basis, net income from continuing operations was $36.4 million for the second quarter of 2012, an increase of 1.2% from $35.9 million for the same period in 2011.
Second-quarter 2012 diluted earnings per share on a non-GAAP basis were $0.75, an increase of 7.1% compared to $0.70 per share in the second quarter of 2011. Non-GAAP earnings per share benefited primarily from stock repurchases.
James C. Foster, Chairman, President and Chief Executive Officer, said, “We are very pleased to report another strong quarter for non-GAAP earnings per share, and to increase both our GAAP and non-GAAP earnings per share guidance for 2012. The PCS segment led the quarter’s sales growth, benefiting from the strategic partnership which was initiated with a global pharmaceutical company in the fourth quarter of 2011, as well as improved demand for regulated safety assessment. We believe that biopharmaceutical companies continue to move forward with outsourcing as a cornerstone of their goal to improve efficiency and enhance productivity of the drug development pipeline. Our continuing discussions with multiple large clients concerning strategic relationships indicate to us that they value Charles River’s broad portfolio of early-stage products and services, our scientific expertise, and our flexible solutions to their drug development challenges.”
The Company reports results from continuing operations, which excludes results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a discontinued operation.
Second-Quarter Segment Results
Research Models and Services (RMS)
Net sales for the RMS segment were $173.6 million in the second quarter of 2012, a decrease of 2.6% from $178.2 million in the second quarter of 2011. Excluding foreign exchange, which reduced reported sales by 3.8%, RMS sales increased by 1.2%.
On a sequential basis, sales declined primarily due to lower sales of research models, reflecting seasonal softness in Europe and Japan, as well as the unfavorable impact from foreign exchange.
In the second quarter of 2012, the RMS segment’s GAAP operating margin was 32.0% compared to 31.3% for the second quarter of 2011. On a non-GAAP basis, the operating margin increased to 32.8% from 32.6% in the second quarter of 2011.
The non-GAAP operating margin improvement was primarily attributable to receipt of an insurance settlement related to last year’s disaster in Japan.
Preclinical Services (PCS)
Second-quarter 2012 net sales from continuing operations for the PCS segment were $111.1 million, an increase of 0.9% from $110.1 million in the second quarter of 2011. Foreign currency translation reduced reported sales by 2.1%.
Excluding foreign exchange, constant-currency sales growth of 3.0% was primarily driven by increased demand for non-GLP discovery services.
On a sequential basis, sales growth was also driven by improved demand for regulated safety assessment services and biopharmaceutical services (BPS).
In the second quarter of 2012, the PCS segment’s GAAP operating margin increased to 9.7% from 7.2% in the second quarter of 2011. On a non-GAAP basis, the operating margin declined to 13.1% from 14.0% in the second quarter of 2011.
The non-GAAP operating margin decline was primarily attributable to the initial transfer of client protocols under the strategic partnership.
Stock Repurchase Update
During the second quarter of 2012, the Company repurchased approximately 458,000 shares for $15.3 million. As of June 30, 2012, Charles River had $88.5 million remaining on its $750 million stock repurchase authorization.
Six-Month Results
For the first six months of 2012, net sales decreased by 0.6% to $570.7 million from $574.1 million in the same period in 2011. Foreign currency translation reduced reported sales by 2.0%.
On a GAAP basis, net income from continuing operations for the first half of 2012 was $57.0 million, or $1.17 per diluted share, compared to $69.5 million, or $1.30 per diluted share, for the same period in 2011.
On a non-GAAP basis, net income from continuing operations for the first half of 2012 was $70.3 million, or $1.45 per diluted share, compared to $69.1 million, or $1.30 per diluted share, for the same period in 2011.
Research Models and Services (RMS)
For the first six months of 2012, RMS net sales were $356.8 million, an increase of 1.5% from $351.5 million in the same period in 2011. Foreign currency translation reduced reported sales by 2.3%.
On a GAAP basis, the RMS segment operating margin was 32.2% in the first half of 2012, compared to 30.6% for the prior-year period. On a non-GAAP basis, the operating margin was 33.1% in the first half of 2012, compared to 31.9% for the same period in 2011.
Preclinical Services (PCS)
For the first six months of 2012, PCS net sales were $213.9 million, a decrease of 3.9% from $222.6 million in the same period in 2011. Foreign currency translation reduced reported sales by 1.6%.
On a GAAP basis, the PCS segment operating margin was 7.0% in the first half of 2012, compared to 7.7% for the prior-year period. On a non-GAAP basis, the operating margin was 11.1% in the first half of 2012, compared to 14.0% for the same period in 2011.
