Charles River quarterly net profit down on charges
second quarter revenues with a leap in operating earnings, helped
by its acquisition of Inveresk Research Group, and also to
continuing strong demand for research models and outsourced
preclinical services.
The company, which breeds animals and provides services to assist in drug research and development, reported net income (GAAP) for 2005 to be $31.9 million (€26.1 million) or $0.44 per diluted share, compared to $26.3 million, or $0.52 per diluted share, in the second quarter of 2004.
Growth of the Research Models and Services segment was due to the research model business, partially offset by lower sales of Transgenic Services and of Vaccine Products. Second-quarter figures were $130.8 million compared to $120.1 million last year, an increase of 8.9 per cent.
However, the decrease in gross and operating margins was due to lower transgenic Services and Vaccine Products sales. The operating margin was 32.9 per cent compared to 34.2 per cent in the same period last year.
Net sales for the Preclinical Services segment were $119.1 million in the second quarter of 2005, an increase of 98.2 per cent from the $60.1 million reported in the second quarter of 2004. Net sales of global toxicology services were partially offset by interventional and surgical services sales, which declined from the second quarter of 2004.
Operating income was $17.7 million in the second quarter of 2005, compared to $11.4 million last year. The operating margin was 14.9 per cent compared to 19.0 per cent in the second quarter of 2004, was due to the amortization of intangibles related to the acquisition of Inveresk.
For the second quarter of 2005, net sales for the Clinical Services segment were $33.5 million. The gross margin was 33 per cent, operating income was $1.9 million and the operating margin was 5.8 per cent.
For the first six months of 2005, Clinical net sales were $65.3 million and the gross margin was 32 per cent. Operating income was $2.8 million and the operating margin was 4.3 per cent.
For the six-month period, net sales were $258.7 million, an increase of 8 per cent from the $239.6 million reported in the first half of 2004. The gross margin was 44.2 per cent compared to 44.7 per cent in the same period in 2004, and the operating margin was 33 per cent compared to 33.3 per cent in the first half of 2004.
For the first six months of 2005, Preclinical net sales were $233.2 million compared to $113.3 million in the same period last year, an increase of 105.9 per cent. The gross margin for the first half of 2005 rose to 34.8 per cent from 32.1 per cent in the same period last year, and the operating margin was 13.0 per cent compared to 16.7 per cent in the first half of 2004.
"Strong demand for products and services across our broad portfolio drove our second-quarter net sales increase," said James Foster, chairman, president and chief executive officer of Charles River Laboratories.
"We benefited from our customers' continued focus on development of new drugs and therapies, as they looked to us to support those efforts more extensively than in the past. As a result of higher net sales, our continued focus on operating efficiencies, and the success of our integration efforts, we achieved operating margin improvement in the Preclinical and Clinical business segments," he added.
For the first six months of 2005, net sales increased 57.9 per cent to $557.1 million from $352.8 million in the first half of 2004. Net income on a GAAP basis was $59.5 million, or $0.84 per diluted share in the first half of 2005, compared to $43.9 million, or $0.88 per diluted share, in the first half of 2004.
