Full Press Release Details
River Laboratories Announces Third-Quarter 2017 Results from Continuing
Third-Quarter Revenue of $464.2 Million -
Third-Quarter GAAP EPS of $1.09 and Non-GAAP EPS of $1.30 -
WILMINGTON, Mass.--(BUSINESS WIRE)--November 9, 2017--Charles River
Laboratories International, Inc. (NYSE: CRL) today reported its results
for the third quarter of 2017. Revenue from continuing operations was
$464.2 million, an increase of 9.0% from $425.7 million in the third
quarter of 2016. Revenue growth was driven primarily by the Discovery
and Safety Assessment and Manufacturing Support segments.
The acquisitions of Agilux Laboratories and Brains On-Line contributed
2.7% to consolidated third-quarter revenue growth, both on a reported
basis and in constant currency. The February 2017 divestiture of the
Contract Development and Manufacturing (CDMO) business reduced reported
revenue growth by 1.0%. The impact of foreign currency translation
benefited reported revenue growth by 1.0%. Excluding the effect of these
items, organic revenue growth was 6.3%.
On a GAAP basis, third-quarter net income from continuing operations
attributable to common shareholders was $52.5 million, an increase of
40.4% from $37.4 million for the same period in 2016. Third-quarter
diluted earnings per share on a GAAP basis were $1.09, an increase of
39.7% from $0.78 for the third quarter of 2016. The GAAP earnings per
share increase was primarily driven by higher revenue and lower
acquisition- and integration-related costs in the third quarter of 2017.
On a non-GAAP basis, net income from continuing operations was $62.9
million for the third quarter of 2017, an increase of 10.9% from $56.7
million for the same period in 2016. Third-quarter diluted earnings per
share on a non-GAAP basis were $1.30, an increase of 10.2% from $1.18
per share for the third quarter of 2016. The non-GAAP earnings per share
increase was primarily driven by higher revenue, partially offset by a
lower operating margin in the Research Models and Services segment.
An excess tax benefit associated with stock compensation contributed
$0.02 to both GAAP and non-GAAP earnings per share in the third quarter
of 2017; and a gain from the Company's venture capital investments
contributed $0.07 per share, compared to a nominal gain for the same
James C. Foster, Chairman, President and Chief Executive Officer, said,
"We are pleased that Microbial Solutions, Biologics, Safety Assessment,
and RMS China delivered strong performances in the third quarter,
resulting in reported and organic revenue growth of 9.0% and 6.3%,
respectively. We firmly believe that these businesses will continue to
be important drivers of future growth. Demand for our products and
services is robust and we continue to gain market share, which supports
our expectation for revenue and earnings per share growth in 2017."
"We remain enthusiastic about the outlook for our businesses, and
continue to invest in our growth, through strategic acquisitions,
facility expansions, and additional staffing. We believe these
investments are imperative to maintain and enhance our position as the
premier early-stage CRO, to continue to differentiate Charles River from
the competition, and to support our future growth," Mr. Foster concluded.
Third-Quarter Segment Results
Research Models and Services (RMS)
Revenue for the RMS segment was $122.0 million in the third quarter of
2017, an increase of 0.9% from $120.9 million in the third quarter of
2016. Organic revenue growth was 0.4%, driven primarily by higher
revenue for research models in China and the Insourcing Solutions and
Genetically Engineered Models and Services (GEMS) businesses. These
increases were largely offset by lower revenue for research models
outside of China and the Research Animal Diagnostic Services (RADS)
In the third quarter of 2017, the RMS segment's GAAP operating margin
decreased to 25.2% from 25.8% in the third quarter of 2016. On a
non-GAAP basis, the operating margin decreased to 25.5% from 27.3% in
the third quarter of 2016. The GAAP and non-GAAP operating margin
declines were primarily driven by the research models business.
Discovery and Safety Assessment (DSA)
Revenue from continuing operations for the DSA segment was $246.9
million in the third quarter of 2017, an increase of 14.4% from $215.8
million in the third quarter of 2016. The acquisitions of Agilux
Laboratories and Brains On-Line contributed 5.4% to DSA revenue growth.
Organic revenue growth of 8.1% was primarily driven by the Safety
Assessment business. The DSA revenue increase was driven primarily by
demand from mid-tier biotechnology clients.
In the third quarter of 2017, the DSA segment's GAAP operating margin
increased to 18.9% from 14.5% in the third quarter of 2016. The GAAP
operating margin increase was due primarily to lower acquisition- and
integration-related costs. On a non-GAAP basis, the operating margin
decreased to 22.4% from 22.7% in the third quarter of 2016. Foreign
exchange reduced the DSA operating margin by approximately 30 basis
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was $95.3 million in the third
quarter of 2017, an increase of 7.1% from $89.0 million in the third
quarter of 2016. The divestiture of the CDMO business reduced
Manufacturing revenue growth by 4.7% in the third quarter of 2017.
Organic revenue growth was 10.0%, driven by strong performances from the
Microbial Solutions and Biologics Testing Solutions businesses.
In the third quarter of 2017, the Manufacturing segment's GAAP operating
margin increased to 33.5% from 30.0% in the third quarter of 2016. On a
non-GAAP basis, the operating margin increased to 36.5% from 33.8% in
the third quarter of 2016. The GAAP and non-GAAP operating margin
improvements were driven primarily by the Microbial Solutions business.
Stock Repurchase Update
During the third quarter of 2017, the Company repurchased 350,000 shares
for a total of $36.0 million. As of September 30, 2017, the Company had
$129.1 million available on its authorized stock repurchase program.
Updates 2017 Guidance
The Company is updating its revenue growth and earnings per share
guidance, which was previously provided on August 9, 2017, to reflect
its third-quarter performance and expectations for the fourth quarter of
In view of the Company's long-term expectation for low-single-digit
revenue growth in the RMS segment, we have committed to a plan to close
our research model production site in Maryland in order to improve the
segment's operating efficiency. The revised GAAP earnings per share