Charles River Announces Fourth-Quarter and Full-Year 2007 Results from Continuing Operations

Business Wire, Feb 11, 2008

- Strong Customer Demand Drives Double-Digit Sales and Earnings Growth -

- Fourth-Quarter Sales Increase 17.0% and Full Year Rises 16.3% to $1.23 Billion -

- Fourth-Quarter GAAP EPS of $0.55 and Non-GAAP EPS of $0.65 -

- 2007 GAAP EPS of $2.29 and Non-GAAP EPS of $2.62 Exceed Company Guidance -

WILMINGTON, Mass. -- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2007. For the fourth quarter, net sales from continuing operations increased 17.0% to $318.0 million from $271.7 million in the fourth quarter of 2006. Both the Research Models and Services (RMS) and Preclinical Services (PCS) business segments reported strong net sales growth, as pharmaceutical and biotechnology companies continued to invest in basic research and increased their strategic use of outsourced drug development services. Foreign exchange contributed 4.2% to the net sales growth.

On a GAAP basis, net income from continuing operations for the fourth quarter of 2007 was $38.9 million, or $0.55 per diluted share, compared to $31.8 million, or $0.47 per diluted share, for the fourth quarter of 2006. The 17.0% increase in earnings per share resulted primarily from higher sales.

On a non-GAAP basis, net income from continuing operations was $45.9 million for the fourth quarter of 2007, compared to $39.0 million for the same period in 2006. Fourth-quarter diluted earnings per share on a non-GAAP basis were $0.65, an increase of 12.1% compared to $0.58 per share in the fourth quarter of 2006. Non-GAAP earnings per share in the fourth quarter of 2007 excluded $9.1 million of amortization of intangible assets related to acquisitions, a charge of $4.6 million for impairment and other charges related to the Company's exit from its preclinical facility in Worcester, Massachusetts, and a benefit of $2.1 million resulting from a deferred tax revaluation. For the fourth quarter of 2006, non-GAAP results excluded $9.8 million of amortization of intangible assets and stock-based compensation related to acquisitions and $0.9 million of charges related to cost-savings initiatives.

James C. Foster, Chairman, President and Chief Executive Officer, said, "A strong fourth-quarter performance capped a tremendous 2007 for Charles River, during which we clearly demonstrated the strength of our business model and the value that we provide to our global client base. Our financial results for the quarter and year reflect our continued focus on our core competencies of laboratory animal medicine and science and regulatory compliant preclinical services, coupled with aggressive investment to expand and strengthen our infrastructure to meet our clients' needs. As a result, we are better positioned, both today and for the future, to partner with our clients at this critical inflection point when they are increasingly adopting strategic outsourcing as a means to improve the efficiency and cost effectiveness of their drug

development efforts. And increasingly, they are selecting Charles River to play an integral role in accelerating these efforts. With robust demand for our products and services, we see significant opportunities for continued growth in both our RMS and PCS businesses. As a result, we are reaffirming our 2008 guidance of sales growth in a range of 10% to 13%, GAAP earnings per share in a range of $2.59 to $2.69 and non-GAAP earnings per share in a range of $2.87 to $2.97."

Research Models and Services (RMS)

Sales for the RMS segment were $145.2 million in the fourth quarter of 2007, an increase of 13.7% from $127.7 million in the fourth quarter of 2006. Sales growth was driven by strong demand for research models in the United States and Europe, worldwide Transgenic Services, and In Vitro products.

In the fourth quarter of 2007, the RMS segment's GAAP operating margin increased to 27.1% compared to 25.6% in the fourth quarter of 2006. On a non-GAAP basis, which excluded charges of $0.7 million for acquisition-related amortization, the operating margin was 27.6% compared to 26.3% for the same period in the prior year. The improvement was due primarily to higher sales.

Preclinical Services (PCS)

Fourth-quarter net sales for the PCS segment were $172.9 million, an increase of 20.0% from $144.1 million in the fourth quarter of 2006. Continuing strong demand for general and specialty toxicology services from pharmaceutical and biotechnology customers was the primary factor which contributed to the sales growth. The addition of Northwest Kinetics' Phase I clinical services business, which was acquired on October 30, 2006, also contributed to the sales growth.

As expected, the additional costs associated with the transition to the new preclinical facilities in Massachusetts and Nevada and the negative impact of foreign exchange in Canada resulted in lower operating margins for the PCS segment. In the fourth quarter of 2007, the new Massachusetts facility reported a full quarter's costs compared to minimal costs in the fourth quarter of the prior year, and we also incurred operating costs in the new Nevada facility. The fourth-quarter GAAP operating margin declined to 13.1% from 16.0% in the same period in the prior year. On a non-GAAP basis, which excludes $8.3 million of acquisition-related amortization and $4.6 million of impairment and other charges associated with the Company's exit from its Worcester, Massachusetts facility, the operating margin declined to 20.6% from 22.7% in the fourth quarter of 2006.