Charles River Laboratories International reports 1.4% decline in first-quarter 2010 net sales

Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2010. For the quarter, net sales were $297.3 million, a decline of 1.4% from $301.5 million in the first quarter of 2009. The decrease was net of a foreign currency translation benefit of 3.4%. Higher sales for the Research Models and Services (RMS) segment were offset by lower sales for the Preclinical Services (PCS) segment.

On a GAAP basis, net income attributable to common shareholders for the first quarter of 2010 was $17.4 million, or $0.26 per diluted share, compared to net income of $25.4 million, or $0.38 per diluted share, for the first quarter of 2009.

On a non-GAAP basis, net income was $29.3 million for the first quarter of 2010, compared to $38.2 million for the same period in 2009, a decrease of 23.2%. First-quarter diluted earnings per share on a non-GAAP basis were $0.45, a decrease of 22.4% compared to $0.58 per share in the first quarter of 2009. Both the GAAP and non-GAAP results were impacted by lower sales volume and higher costs related to the Company's enterprise resource planning (ERP) initiative, offset in part by cost-savings actions implemented throughout 2009 and in the first quarter of 2010.

James C. Foster, Chairman, President and Chief Executive Officer, said, "First-quarter sales reflect the consistency of the research model business and the stability of preclinical demand, albeit at lower levels. At $0.45, non-GAAP earnings per share were in line with our expectations, and reflected the anticipated increase in information technology and compensation costs. Early indications for orders booked in the second quarter support our previously announced expectation that preclinical sales will begin to improve in the second quarter."

Mr. Foster continued, "This morning, we announced an agreement to acquire WuXi PharmaTech. This is a transformational transaction that creates the first fully integrated, global early-stage contract research organization. We are enthusiastic about the growth opportunities that the broader portfolio and larger global footprint afford us, and the value it creates for both our clients and shareholders. We look forward to begin the planning stages for a seamless integration, while continuing to maintain our steadfast focus on re-accelerating the growth in our PCS and RMS businesses."

First-Quarter Segment Results

Research Models and Services (RMS)

Sales for the RMS segment were $172.2 million in the first quarter of 2010, an increase of 6.6% from $161.5 million in the first quarter of 2009. Foreign currency translation contributed 2.9% to the sales growth rate. Growth was driven by the acquisitions of Piedmont and Cerebricon, which were completed on May 1 and July 31, 2009, respectively, as well as strong sales of In Vitro products.

In the first quarter of 2010, the RMS segment's GAAP operating margin was 29.0% compared to 29.4% for the first quarter of 2009. On a non-GAAP basis, the operating margin decreased to 30.4% from 31.6% in the first quarter of 2009. The margin decline was primarily attributable to higher information technology and compensation costs.

Preclinical Services (PCS)

First-quarter 2010 net sales for the PCS segment were $125.1 million, a decrease of 10.6% from $140.0 million in the first quarter of 2009. The PCS sales decline was due primarily to continued measured demand for our services from pharmaceutical and biotechnology companies, as well as stable but lower than historical prices. The sales decline was partially offset by the positive effect of foreign currency translation, which increased the growth rate by 3.9%.

A greater proportion of short-term studies in the sales mix and the continued impact of lower prices, partially offset by cost-saving actions, resulted in lower operating margins for the PCS segment. The 2010 first-quarter GAAP operating margin declined to (0.2%) from 7.5% in the first quarter of 2009. On a non-GAAP basis, the operating margin declined to 9.3% from 15.5% in the first quarter of 2009.

Items Excluded from Non-GAAP Results

Items excluded from non-GAAP results in the first quarter of 2010 and 2009 were as follows:

(1) In the first quarter of 2010, these items were related primarily to an asset impairment associated with the Company's planned disposition of its PCS facility in Arkansas. In the first quarter of 2009, these items were related primarily to Company's subsequent divestiture of its clinical Phase I business in Scotland and additional miscellaneous expenses.