Untitled Document
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Filed by Charles River Laboratories
International, Inc.
Pursuant to Rule 425 under the Securities
Act of 1933
and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934 |
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Subject Company:
Inveresk Research Group, Inc
Commission File No.: 000-49765 |
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Additional Information
This press release may be deemed to be solicitation
material in respect of the proposed merger of Charles River and Inveresk.
In connection with the proposed transaction, a registration statement on
Form S-4 will be filed with the SEC. SHAREHOLDERS OF CHARLES RIVER AND SHAREHOLDERS
OF INVERESK ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL
BE PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus
will be mailed to shareholders of Charles River and shareholders of Inveresk.
Investors and security holders will be able to obtain the documents free
of charge at the SEC’s website, www.sec.gov, from Charles River Laboratories,
251 Ballardvale Street, Wilmington, MA 01887, Attention: General Counsel,
or from Inveresk Research Group, 11000 Weston Parkway, Cary, North Carolina
27513, Attention: Secretary. In addition, shareholders may access copies
of the documentation filed with the SEC by Charles River on Charles River’s
website at www.criver.com and shareholders may access copies of the documents
filed with the SEC by Inveresk on Inveresk’s website at www.inveresk.com.
Charles River, Inveresk and their respective
directors and executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies from their
respective shareholders in respect of the proposed transactions. Information
regarding Charles River’s directors and executive officers is available
in Charles River’s proxy statement for its 2004 annual meeting of shareholders,
which was filed with the SEC on April 9, 2004, and information regarding
Inveresk’s directors and executive officers is available in Inveresk’s
proxy statement for its 2004 annual meeting of shareholders, which was filed
with the SEC on March 31, 2004. Additional information regarding the interests
of such potential participants will be included in the joint proxy statement/prospectus
and the other relevant documents filed with the SEC when they become available.
The attached slide presentation was
used by Charles River as additional solicitation material in connection with
its second quarter 2004 earnings conference call on July 29, 2004.
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Safe Harbor Statement
This presentation includes "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words
such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and other
similar expressions that predict or indicate future events or trends or that are not statements of
historical matters. These statements are based on management's current expectations, and involve
a number of risks and uncertainties that could cause actual results to differ materially from those
stated or implied by the forward-looking statements, and the Company expressly does not undertake
any duty to update forward-looking statements, which speak only as of the date of this document.
Those risks and uncertainties include, but are not limited to: the proposed merger with Inveresk; a
decrease in pre-clinical research and development spending or a decrease in the level of outsourced
services; acquisition integration risks; special interest groups; contaminations; industry trends; new
displacement technologies; USDA and FDA regulations; changes in law; continued availability of
products and supplies; loss of key personnel; interest rate and foreign currency exchange rate
fluctuations; changes in tax regulation and laws; changes in generally accepted accounting
principles; and any changes in business, political, or economic conditions due to the threat of future
terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas.
A further description of these risks, uncertainties, and other matters can be found in the Risk Factors
detailed in the Company's Annual Report on Form 10-K as filed on March 10, 2004, with the
Securities and Exchange Commission.
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Key Financial Facts
2Q04 sales, margins, earnings and cash flow growth
Net sales increased nearly 17%, to $180 million
Operating income rose 26% to $44M Operating margin a record high of 24.5%
EPS increased to $0.52 from $0.42 in 2Q03, up 23.8%
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Key Financial Facts
2004 YTD sales, margins, earnings, and cash flow growth
Net sales rose 15.1%, to $352.8 million
Operating income increased 21.6% to $83.7
Operating margin of 23.7%
EPS was $0.88 compared to $0.82 in the prior year
Non-GAAP EPS was $0.99 compared to $0.84 in the prior year
Cash and marketable securities on hand of $246M at the end of June 2004
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Market Strength Drives Growth
Continued increase in spending by pharmaceutical and biotechnology companies
Improvement in the market for outsourced development services
Strength in the toxicology market
Increasing guidance for 2004
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RMS Segment - Research Models
Increased compound screening and improving toxicology market are driving sales of outbred models
Cancer research increases sales of immunodeficient mice
Increased focus on disease models such as obese and diabetic rats
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RMS Segment - Transgenics & Laboratory
Housing (hotel) business growing in low double digits
Genotyping and phenotyping services have increased significantly
Clients in Japan and Europe are doing more outsourcing, resulting in strong sales growth
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RMS Summary
Biotech sales show strong growth
Increased funding from capital markets and pharmaceutical companies
Increased sales to academic customers
Positive outlook for 2004
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Development Services
Developed a plan to integrate and harmonize DST sites in early 2003
Standardized processes across locations
Enhanced IT capabilities
Launched mycrlstudy.comTM
Reorganized customer service
Created a dedicated sales force
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Broad-Based Sales Increase
Winning new business
Specialty toxicology increased significantly
Interventional and Surgical Services performed well
Bioanalytical chemistry
Pathology services
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Interventional & Surgical Services
River Valley Farms integration is on schedule
Demand for outsourced device development services is accelerating
Double-digit sales growth
Adding capacity in Minneapolis
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In Vitro Technology
Winning new customers due to technology strength
PTS sales continue in R&D and in-process market
Expect FDA approval by end of 2005
Record lysate harvest
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DST Summary
Sales growth nearly 29%
21.6% operating margin
Robust market for outsourced services
A well-managed business, positioned to capitalize on market opportunities
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2004 Guidance
For 2004, expect sales growth in a range of 12%-16%
Full year non-GAAP EPS in a range of $1.90-$1.96, excluding one-time charges
Forward looking guidance is based on current foreign exchange rates and is
exclusive of the Inveresk merger or any acquisitions which may occur. Since it
is uncertain when in the fourth quarter the Inveresk merger would occur, it is
not appropriate to provide an estimate of the combined company’s operating
results or any related GAAP reconciliations. Closing of the merger with Inveresk
could cause actual results to be materially different from the forward-looking
guidance provided.
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Market Outlook
Pharma and biotech customers accelerate efforts to fill the drug pipeline, resulting in more sales in both RMS and DST
Medical device customers accelerate development
Discussions with pharma, biotech, and medical device customers around the world confirm our expectations that demand will continue to increase
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Merger Update
Charles River/Inveresk merger will create a leading global provider of
essential products and services to the preclinical and clinical drug
development market
FTC granted early termination of the Hart-Scott-Rodino waiting period
Integration team has begun planning
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2Q and YTD Segment Growth
($ in millions)
2004 2Q YOY% YTD YOY%
RMS $ 113.3 10.6% $ 226.8 10.3%
DST $ 66.9 28.9% $ 126.0 24.9%
Total
Revenue $ 180.2 16.7% $ 352.8 15.1%
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2Q and YTD Gross Margin
2004 2Q YOY 2004 YTD YOY
RMS 43.6% +1.6% 43.3% +0.5%
DTS 37.7% +5.8% 35.8% +6.4%
Gross
Margin 41.4% +2.8% 40.7% 2.3%
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2Q SG&A
($ in millions)
2004 2Q YOY% 2004 YTD YOY%
SG&A $29.2 25.1% $57.3 26.1%
% Sales 16.2% +1.1% 16.3% +1.5%
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2Q and YTD Operating Margin
2004 2Q YOY 2004 YTD YOY
RMS* 33.5% +2.5% 32.8% -0.8%(1)
DST* 21.6% +7.5% 19.3% +11.1%(2)
Consolidated
Operating Margin 24.5% +1.8% 23.7% +1.2%
*Excludes unallocated corporate overhead
Note 1: The first half of 2003 includes a $2.9 million benefit from a litigation settlement
Note 2: The first half of 2003 includes a $3.7 million charge related to the closure of a contract manufacturing facility
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Income Tax Rate
1Q net charge of $5.8 million for reorganization of European operations was recorded in the income tax provision
Excluding the one-time charge, tax rate for 2Q and YTD was 37.5% compared to 38.5% in the same periods in 2003
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YTD GAAP EPS
($ in millions, except per share amounts)
2Q04 2Q03 YTD 2004 YTD 2003
Net income $26.3 $20.6 $43.9 $39.9
Earnings per
common share
Basic $0.57 $0.45 $0.96 $0.88
Diluted $0.52$ 0.42 $0.88 $0.82
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YTD Non-GAAP EPS
($ in millions, except per share amounts) 6/26/04 6/28/03
Net income $43.9 $39.9
Add back:
Deferred tax asset write-off 7.9 -
Valuation allowance release (2.1) -
Impairment charge - 3.7
Litigation settlement - (2.9)
Severance charges - 0.9
Tax effect of impairment charge and litigation - (0.6)
settlement
Net income, excluding specified charges (non-GAAP) $49.7 $41.0
Basic EPS (non-GAAP) $1.08 $0.90
Diluted EPS (non-GAAP) $0.99 $0.84
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Balance Sheet Highlights
($ in millions)
6/26/04 12/27/03
Cash $224.2 $182.3
Marketable Securities (S-T & L-T) 21.9 20.5
Total $246.1 $202.8
Accounts Receivable $125.0 $111.5
DSO 64 days 67 days
Inventory $ 54.7 $ 52.4
MOH 1.6 months 1.6 months
Working Capital $302.2 $256.5
See website for reconciliations of Non-GAAP to GAAP results.
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Key Financial Facts
($ in millions)
2004 2Q 2004 YTD 2004E
Capex $ 7.3 $11.9 $40.0
Depreciation $ 6.5 $13.1
Amortization $ 1.2 $ 2.4
FCF $35.0 $56.3
See website for reconciliations of Non-GAAP to GAAP results.
Forward looking guidance is based on current foreign exchange rates and is exclusive of the Inveresk merger or
any acquisitions which may occur. Since it is uncertain when in the fourth quarter the Inveresk merger would occur,
it is not appropriate to provide an estimate of the combined company’s operating results or any related GAAP
reconciliations. Closing of the merger with Inveresk could cause actual results to be materially different from the
forward-looking guidance provided.
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2004 Guidance
Expected 2004 growth in a range of 12%- 16%
Full year non-GAAP EPS expected in a range of $1.90-$1.96, excluding one-time charges
Expected 3Q sales increase of 14%-16% and diluted EPS in a range of $0.48-$0.50
Forward looking guidance is based on current foreign exchange rates and is exclusive of the Inveresk merger or
any acquisitions which may occur. Since it is uncertain when in the fourth quarter the Inveresk merger would occur,
it is not appropriate to provide an estimate of the combined company's operating results or any related GAAP
reconciliations. Closing of the merger with Inveresk could cause actual results to be materially different from the
forward-looking guidance provided.
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