Charles River Laboratories International's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Charles River Laboratories International (CRL)

Q1 2012 Earnings Call

May 03, 2012 8:30 am ET


Susan E. Hardy - Corporate Vice President of Investor Relations

James C. Foster - Chairman, Chief Executive Officer, President and Member of Strategic Planning & Capital Allocation Committee

Thomas F. Ackerman - Chief Financial Officer and Corporate Executive Vice President


David H. Windley - Jefferies & Company, Inc., Research Division

Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division

Gregory T. Bolan - Sterne Agee & Leach Inc., Research Division

Beth Rose

Timothy C. Evans - Wells Fargo Securities, LLC, Research Division

Tycho W. Peterson - JP Morgan Chase & Co, Research Division

Douglas D. Tsao - Barclays Capital, Research Division

John L. Sullivan - Leerink Swann LLC, Research Division

Garen Sarafian - Citigroup Inc, Research Division

Todd Van Fleet - First Analysis Securities Corporation, Research Division

Zachary W. Sopcak - Morgan Stanley, Research Division



Ladies and gentlemen, we'd like to thank you for standing by, and welcome to the Charles River Laboratories' First Quarter 2012 Conference Call. [Operator Instructions] As a reminder, today's conference call will be recorded. I would like to turn the conference over to your hostess and conference facilitator, as well as your Corporate Vice President of Investor Relations, Ms. Susan Hardy. Please go ahead, ma'am.

Susan E. Hardy

Thank you. Good morning, and welcome to Charles River Laboratories' First Quarter 2012 Conference Call and Webcast. This morning, Jim Foster, Chairman, President and Chief Executive Officer; and Tom Ackerman, Executive Vice President and Chief Financial Officer, will comment on our first quarter results and review guidance for 2012. Following the presentation, we will respond to questions.

There's a slide presentation associated with today's remarks, which is posted on the Investor Relations section of our website at A taped replay of this call will be available beginning at noon today and can be accessed by calling (800) 475-6701. The international access number is (320) 365-3844. The access code in either case is 243794. The replay will be available through May 17. You may also access an archived version of the webcast on our Investor Relations website.

I'd like to remind you of our Safe Harbor. Any remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by any forward-looking statements as a result of various important factors including, but not limited to, those discussed on our annual report on Form 10-K, which was filed on February 27, 2012, as well as other filings we make with the Securities and Exchange Commission.

During this call, we will be primarily discussing results from continuing operations and non-GAAP financial measures. We believe that these non-GAAP financial measures help investors to gain a meaningful understanding of our core operating results and future prospects, consistent with the manner in which management measures and forecasts the company's performance.

The non-GAAP financial measures are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations to those GAAP measures on the Investor Relations section of our website through the Financial Reconciliations link.

Now I'd like to turn the call over to Jim Foster.

James C. Foster

Good morning. I'd like to begin by providing a summary of our first quarter results before providing commentary on our business prospects.

We reported sales of $286 million in the first quarter of 2012, unchanged from the same period in 2011. The RMS business delivered an exceptionally strong performance in the first quarter. As was the case in the fourth quarter of 2011, both businesses in the segment recorded higher year-over-year sale on both the reported and constant currency basis, driving the best quarterly results at the end of 2008 and better than the fourth quarter. The majority of these businesses also reported higher operating margins.

The PCS segment was moderately weaker than expected although the in-life business was in line with our expectations. Our Biopharmaceutical or BPS business performed significantly less well than expected.

The operating margin declined 30 basis points from the first quarter of 2011 but improved 60 basis points sequentially to 17.7%. The increase was due primarily to the RMS margin, which improved on both the year-over-year and a sequential basis to 33.3%. Higher sales volume and process efficiency initiatives were the primary drivers of the improvement.

Earnings per diluted share increased 14.8% in the first quarter of 2012 to $0.70 per share from $0.61 in the first quarter of 2011. The increase in earnings per share was driven primarily by the lower number of shares outstanding. We continued to return value to shareholders in the first quarter through our share repurchase plan with the purchase of approximately 348,000 shares for $12.5 million.

We are reaffirming our sales and EPS guidance for 2012. Although we have yet to see sustained signs of improvement from our large biopharma client base, we believe that demand for regulated safety assessment continues to remain relatively stable. Furthermore, the growth drivers we discussed on our conference call, Discovery Research Services, GEMS, Insourcing Solutions and In Vitro, are enabling us to generate higher sales.

Based on the first quarter sales increase, combined with our ongoing efforts to improve operating efficiency and the benefit of our stock repurchases, we maintain confidence in the guidance we gave on December 14.

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