Exhibit 99.1
Charles River Laboratories Announces Third-Quarter
2003 Results, Confirms Outlook for 2003, and Provides Outlook
for Continued Growth in 2004
WILMINGTON, Mass.--(BUSINESS WIRE)--Oct. 29, 2003--Charles River
Laboratories International, Inc. (NYSE:CRL) today reported
third-quarter 2003 net sales of $151.2 million, a 7.0% increase over
the $141.4 million reported in the third quarter of 2002. Net income
for the third quarter of 2003 increased 5.7% to $19.6 million, or
$0.40 per diluted share, from $18.5 million, or $0.38 per diluted
share, in the third quarter of 2002. Cash provided by operating
activities in the third quarter was $35.2 million, driving the
Company's cash, cash equivalents and marketable securities to a record
$179.7 million at the end of the third quarter.
Operating income for the third quarter of 2003 rose 5.3% to $34.3
million from $32.5 million in the third quarter of last year. The
Company's operating margin was 22.7% in the third quarter of 2003
compared to 23.0% in the third quarter of last year, a modest decrease
that reflected the Company's efforts to manage costs in line with
revenue growth.
James C. Foster, Chairman, President and Chief Executive Officer
said, "The unsettled drug discovery and development market affected
our results in the third quarter, but we nevertheless delivered sales
and earnings growth and a significant increase in cash. This
demonstrates the value of our diversified product and services
offerings, and clearly shows that we can deliver good growth and
strong profitability and cash flow despite challenging market
conditions."
Business Segment Detail
Third-quarter 2003 net sales of $151.2 million increased 7.0% over
the third quarter of 2002. Favorable foreign currency translation
contributed approximately 2.5% of the net sales gain.
Third-quarter 2003 net sales for the Research Models segment of
the business were $60.0 million compared to $56.8 million last year,
an increase of 5.7%. The Research Models business was affected by
lower growth rates in sales to certain customer segments as the third
quarter progressed, due to pharmaceutical mergers, tighter
pharmaceutical and biotech spending and more pronounced seasonality.
Due to slower sales growth, the gross margin was 42.9% compared to
44.7% in the third quarter of last year. Operating income increased to
$18.7 million in the third quarter compared to $18.6 million last
year, and the operating margin was 31.2% compared to last year's
32.8%.
Net sales for the Biomedical Products and Services segment rose
7.8% in the third quarter, to $91.2 million from $84.6 million in the
same period last year. The Company's discovery services business,
which includes transgenic, laboratory testing, and contract staffing
services, and its in vitro business reported significant sales growth
in the quarter. The vaccine support business also reported strong
sales growth, due principally to consolidation of a Mexican joint
venture. Sales for the development services business, which includes
the entire range of pre-clinical drug testing services, were lower
than in the third quarter of last year, but as evidence of steady
improvement, were higher than in the second quarter of 2003. Sales
from the acquisition of Springborn Laboratories, acquired in the
fourth quarter of 2002, partially offset the development services
third-quarter sales decrease.
Higher net sales in the third quarter resulted in an improvement
in gross margins for the Biomedical Products and Services segment, to
33.7% from 33.2% in the same period in 2002. Operating income for this
segment was $18.8 million compared to $17.1 million in the third
quarter of last year. The third-quarter operating margin increased to
20.6% from 20.2% last year, and from 18.5% reported in the second
quarter of 2003. The increase in the operating margin was due to
improved operating efficiency in the discovery services, in vitro and
vaccine support businesses as a result of higher net sales, the
continuing focus on limiting operating expense growth, and the cost
savings program initiated in the development services operation in the
second quarter of 2003.
Year-to-Date Results
Net sales for the first nine months of 2003 were $457.7 million,
an 11.2% increase over the $411.7 million reported in the same period
last year. Operating income rose 12.9% to $103.1 million from $91.3
million last year, and the operating margin increased to 22.5% from
22.2%, primarily as a result of improved operating performance from
the Research Models segment.
Diluted earnings per share for the nine-month period were $1.22,
compared to $0.70 in the same period last year. This year's nine-month
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 results for the first nine months of
2002 included charges of $29.9 million, or $0.36 per diluted share,
for the early retirement of high-yield debt.
2003 Confirmation/2004 Outlook
The following forward-looking guidance may be affected by
uncertain economic and political environments. Guidance is based on
current exchange rates, as the Company is unable to predict the
effects of any currency fluctuations on its future results, and is
exclusive of any acquisitions which may occur.
The Company confirms its guidance provided in September of this
year that for 2003, net sales growth is expected to be between 9% and
11%. Net sales growth for the Research Models segment is expected to
be between 10% and 12%, and for the Biomedical Products and Services
segment is expected to be between 8% and 10%.
The Company also confirms that diluted earnings per share for 2003
are expected to be in a range of $1.58 to $1.63.
For 2004, exclusive of any acquisitions, the Company anticipates
earnings per diluted share of at least $1.76, based on net sales
growth between 5% and 9%.
Mr. Foster added, "We are very pleased that the business is well
positioned for growth in sales, earnings and cash flow for 2004.
Although overall demand continues to be affected by pharmaceutical and
biotechnology companies' spending patterns, our broad spectrum of
products and services enables us to capitalize on opportunities where
they are strongest. From a long-term perspective, we believe our
business is well positioned as a leading provider to the
pharmaceutical and biotechnology industries. Our goal is to maintain
that position by delivering an increasing array of high-quality
products and services to existing and emerging markets."
Webcast
Charles River Laboratories has scheduled a live webcast on
Thursday, October 30, 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 November 6, 2003.
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. The Company operates 82
facilities in 16 countries worldwide.
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 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 Nine Months Ended
------------------ -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
Total net sales $151,194 $141,364 $457,683 $411,685
Cost of products
sold and services
provided 94,702 87,889 283,624 255,851
-------- -------- -------- --------
Gross margin 56,492 53,475 174,059 155,834
Selling, general
and administrative 21,003 20,023 66,491 62,329
Other operating
expense (income) - - 747 -
Amortization of
intangibles 1,233 933 3,711 2,194
-------- -------- -------- --------
Operating income 34,256 32,519 103,110 91,311
Interest income
(expense) (1,722) (1,862) (5,021) (7,515)
Loss on debt
retirement - (613) - (29,882)
Other income
(expense) 27 (48) 443 1,029
-------- -------- -------- --------
Income before taxes, minority interests
and earnings from
equity investments 32,561 29,996 98,532 54,943
Provision for
income taxes 12,536 10,805 37,935 20,534
-------- -------- -------- --------
Income before minority interests
and earnings from
equity investments 20,025 19,191 60,597 34,409
Minority interests (434) (717) (1,091) (2,098)
Earnings from
equity investments - 57 - 316
-------- -------- -------- --------
Net income $19,591 $18,531 $59,506 $32,627
======== ======== ======== ========
Earnings per common
share
Basic $0.43 $0.41 $1.31 $0.73
Diluted $0.40 $0.38 $1.22 $0.70
Weighted average number of common shares outstanding
Basic 45,600,735 44,836,974 45,366,187 44,549,632
Diluted 51,490,250 51,362,263 51,288,568 50,672,782
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in thousands)
September 27, December 28,
2003 2002
Assets
Current assets
Cash and cash equivalents $164,316 $127,509
Marketable securities 11,192 -
Trade receivables, net 105,653 94,245
Inventories 48,541 43,892
Other current assets 16,389 12,446
------- -------
Total current assets 346,091 278,092
Property, plant and equipment, net 193,003 187,875
Goodwill, net 103,600 96,532
Other intangibles, net 31,020 34,204
Deferred tax asset 66,287 80,884
Other assets 25,151 23,757
------- -------
Total assets $765,152 $701,344
======= =======
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $12,450 $13,084
Accrued compensation 28,996 31,825
Deferred income 25,248 27,029
Other current liabilities 43,871 41,431
------- -------
Total current liabilities 110,565 113,369
Long-term debt 189,690 192,420
Other long-term liabilities 23,418 19,612
------- -------
Total liabilities 323,673 325,401
------- -------
Minority interests 9,539 18,567
Total shareholders' equity 431,940 357,376
------- -------
Total liabilities and shareholders'
equity $765,152 $701,344
======= =======
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
Research Models
Net sales $59,986 $56,771 $189,198 $170,214
Gross margin 25,745 25,375 87,278 77,534
Gross margin as a % of
net sales 42.9% 44.7% 46.1% 45.6%
Operating income 18,703 18,596 65,746 57,121
Operating income as a %
of net sales 31.2% 32.8% 34.7% 33.6%
Depreciation and
amortization 2,751 2,472 7,945 7,013
Capital expenditures 2,938 2,954 10,122 9,493
Biomedical Products and Services
Net sales $91,208 $84,593 $268,485 $241,471
Gross margin 30,747 28,100 86,781 78,300
Gross margin as a % of
net sales 33.7% 33.2% 32.3% 32.4%
Operating income 18,830 17,093 49,074 47,531
Operating income as a %
of net sales 20.6% 20.2% 18.3% 19.7%
Depreciation and
amortization 4,475 3,859 13,337 10,368
Capital expenditures 2,377 4,354 9,647 12,121
Unallocated Corporate
Overhead $(3,277) $(3,170) $(11,710) $(13,341)
Total
Net sales $151,194 $141,364 $457,683 $411,685
Gross margin 56,492 53,475 174,059 155,834
Gross margin as a % of
net sales 37.4% 37.8% 38.0% 37.9%
Operating income 34,256 32,519 103,110 91,311
Operating income as a %
of net sales 22.7% 23.0% 22.5% 22.2%
Depreciation and
amortization 7,226 6,331 21,282 17,381
Capital expenditures 5,315 7,308 19,769 21,614
CONTACT: Charles River Laboratories
Investors:
Susan E. Hardy, 978-658-6000 Ext. 1616