Investor Relations

Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them.

CR-000172

News Release

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Charles River Laboratories Announces First-Quarter 2020 Results

– First-Quarter Revenue of $707.1 Million

– First-Quarter GAAP Earnings per Share of $1.02 and Non-GAAP Earnings per Share of $1.84

– Revises 2020 Guidance Due to COVID-19 Impact –

WILMINGTON, Mass.--(BUSINESS WIRE)--May 7, 2020-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2020. For the quarter, revenue was $707.1 million, an increase of 17.0% from $604.6 million in the first quarter of 2019.

Acquisitions contributed 9.5% to consolidated first-quarter revenue growth. The impact of foreign currency translation reduced reported revenue growth by 0.7%. Excluding the effect of these items, organic revenue growth was 8.2%, driven by the Discovery and Safety Assessment and Manufacturing Support segments. The impact of the COVID-19 pandemic reduced both the reported and organic revenue growth rates by 150 basis points, principally in the Research Models and Services segment.

On a GAAP basis, first-quarter net income attributable to common shareholders was $50.8 million, a decrease of 7.9% from net income of $55.1 million for the same period in 2019. First-quarter diluted earnings per share on a GAAP basis were $1.02, a decrease of 8.1% from $1.11 for the first quarter of 2019. The GAAP net income and earnings per share declines were primarily related to a loss from the Company’s venture capital investments of $0.18 per share in the first quarter of 2020, compared to a $0.16 gain for the same period in 2019. The Company’s venture capital investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income was $91.8 million for the first quarter of 2020, an increase of 32.3% from $69.4 million for the same period in 2019. First‑quarter diluted earnings per share on a non-GAAP basis were $1.84, an increase of 31.4% from $1.40 per share for the first quarter of 2019. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue, including the contributions from the Citoxlab and HemaCare acquisitions, and operating margin improvement, as well as a lower tax rate.

 

James C. Foster, Chairman, President and Chief Executive Officer, said, “As a result of robust client order activity, a strong biotech funding environment, and the dedication of our employees, Charles River had an exceptional start to the year. As the global COVID-19 pandemic intensified during the first quarter, we moved swiftly to mitigate the anticipated impact, which will be most pronounced in the research models business. We implemented measures that are focused on maintaining the health and safety of our employees and the continuity of our operations; sustaining our solid financial position; and ensuring our ability to support our clients’ critical programs. As a result of these measures, all of our operating sites have remained open and adequately staffed to accommodate significant client demand across most of our businesses.”

Mr. Foster continued, “We believe the long-term growth prospects for the Company remain firmly intact. The healthcare industry will play a crucial role in finding a solution to the COVID-19 pandemic, which will enhance the focus on scientific innovation for years to come. We believe our unique position in healthcare, specifically our non-clinical focus, global scale, and scientific expertise, is critical in helping our clients develop treatments for COVID-19 and other diseases across multiple therapeutic areas. We have partnered with more than 40 clients to-date on their development programs for potential vaccine candidates and other treatments associated with COVID-19. Our value is being reinforced during these challenging times, as clients are choosing to outsource more work to us to take advantage of our broad portfolio and flexible, efficient solutions, which enable them to continue the research required to move all of their early-stage programs forward. We believe our ability to provide support to clients globally during this time further distinguishes us as the early-stage CRO partner of choice, which we are proud to be.”

“I am deeply grateful for the hard work and unwavering commitment of our employees who make our contributions to this important research possible. Their dedication allows us to continue to fulfill our mission every day,” Mr. Foster concluded.

First-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $146.0 million in the first quarter of 2020, an increase of 6.4% from $137.2 million in the first quarter of 2019. The HemaCare acquisition, which was completed on January 3, 2020, contributed 9.0% to first-quarter RMS revenue growth. Organic revenue declined by 1.7%, principally due to the impact of the COVID-19 pandemic, which reduced the RMS revenue growth rate by 660 basis points in the first quarter. COVID-19 had a meaningful impact on worldwide demand for research models due to closures and reduced on-site activities at the research sites of academic institutions and biopharmaceutical clients, including in China as anticipated, as well as in North America and Europe at the end of the quarter. This was partially offset by higher revenue for research model services, particularly the Insourcing Solutions (IS) and the Genetically Engineered Models and Services (GEMS) businesses.

In the first quarter of 2020, the RMS segment’s GAAP operating margin decreased to 18.7% from 27.6% in the first quarter of 2019. On a non-GAAP basis, the operating margin decreased to 23.0% from 28.1% in the first quarter of 2019. The GAAP and non-GAAP operating margin decreases were primarily the result of the lower sales volume in the research models business due to the impact of the COVID-19 pandemic. The GAAP operating margin also declined due to acquisition-related amortization associated with the HemaCare acquisition.

 

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $438.7 million in the first quarter of 2020, an increase of 23.9% from $354.2 million in the first quarter of 2019. The Citoxlab acquisition contributed 12.8% to DSA revenue growth. Organic revenue growth of 11.6% was driven by both the Safety Assessment and Discovery Services businesses.

In the first quarter of 2020, the DSA segment’s GAAP operating margin increased to 16.5% from 13.2% in the first quarter of 2019. On a non-GAAP basis, the operating margin increased to 22.0% from 18.6% in the first quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher revenue in both the Safety Assessment and Discovery Services businesses.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $122.4 million in the first quarter of 2020, an increase of 8.1% from $113.2 million in the first quarter of 2019. Organic revenue growth was 9.6%, driven primarily by robust demand in the Biologics Testing Solutions (Biologics) and Avian Vaccine businesses. First-quarter revenue growth for the Microbial Solutions business was affected by last year’s large stocking order from a strategic partner, which was not expected to recur in 2020.

In the first quarter of 2020, the Manufacturing segment’s GAAP operating margin increased to 33.6% from 27.8% in the first quarter of 2019. On a non-GAAP basis, the operating margin increased to 35.6% from 31.0% in the first quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by enhanced operating efficiency in the Microbial Solutions business and operating leverage from higher revenue in the Biologics and Avian Vaccine businesses, as well as lower costs related to Biologics capacity expansions.

2020 Guidance

Due to the global COVID-19 pandemic and its expected impact on the Company’s operations, client demand, and its financial results, Charles River is revising its financial guidance for 2020, which was initially provided on February 11, 2020. The impact from the COVID-19 pandemic is expected to reduce 2020 revenue by approximately $135 to $215 million. COVID-19 will have a significant impact on the RMS revenue growth rate in 2020, particularly in the second quarter, and is also expected to modestly reduce the DSA and Manufacturing revenue growth rates.

 

The Company’s revised guidance for revenue growth, earnings per share, and free cash flow is as follows:

         

2020 GUIDANCE

 

CURRENT

 

PRIOR

Revenue growth, reported

 

4.5% – 8.0%

 

13.0% – 14.5%

Less: Contribution from acquisitions (1)

 

~(4.0%)

 

(4.0%) – (4.5%)

Unfavorable/(favorable) impact of foreign exchange

 

0.5% – 1.0%

 

(1.0%) – (1.5%)

Revenue growth, organic (2)

 

1.5% – 4.5%

 

7.75% – 8.75%

GAAP EPS estimate

 

$4.25$4.60

 

$5.20$5.35

Acquisition-related amortization (3)

 

$1.75$1.80

 

$1.65$1.70

Charges related to global efficiency initiatives (4)

 

~$0.05

 

<$0.05

Acquisition-related adjustments (5)

 

~$0.20

 

~$0.25

Other items (6)

 

$0.25$0.32

 

$0.25$0.32

Venture capital investment losses/(gains) (7)

 

$0.18

 

--

Non-GAAP EPS estimate

 

$6.75$7.10

 

$7.45$7.60

Free cash flow (8)

 

$325$350 million

 

$350$360 million

         

Footnotes to Guidance Table:

(1) The contribution from acquisitions reflects only those acquisitions that have been completed.

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions and foreign currency translation.

(3) Acquisition-related amortization includes an estimate of $0.25-$0.30 for the impact of the HemaCare acquisition as the purchase price allocation has not been finalized.

(4) These charges, which primarily include severance and other costs, relate primarily to the Company’s planned efficiency initiatives. Other projects in support of global productivity and efficiency initiatives are expected, but these charges reflect only the decisions that have already been finalized.

(5) These adjustments are related to the evaluation and integration of acquisitions, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with acquisition-related efficiency initiatives.

(6) These items primarily relate to charges of $0.15-$0.22 associated with the planned termination of the Company’s U.S. pension plan in the second half of 2020, as well as charges of approximately $0.10 associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure.

(7) Venture capital investment performance only includes recognized gains or losses. The Company does not forecast the future performance of its venture capital investments.

(8) The reconciliation of the current 2020 free cash flow guidance is as follows: Cash flow from operating activities of $445-$470 million, less capital expenditures of approximately $120 million, equates to free cash flow of $325-$350 million.

Webcast

Charles River has scheduled a live webcast on Thursday, May 7, at 9:30 a.m. ET to discuss matters relating to this press release, including additional information related to the impact of the COVID-19 pandemic on the Company. To participate, please go to ir.criver.com and select the webcast link. You can also find the associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

 

Bank of America Health Care Conference Presentation

Charles River will virtually present at the Bank of America 2020 Health Care Conference, on Tuesday, May 12, at 11:00 a.m. ET. Management will provide an overview of Charles River’s strategic focus and business developments.

A live webcast of the presentation will be available through a link that will be posted on ir.criver.com. A webcast replay will be accessible through the same website shortly after the presentation and will remain available for approximately two weeks.

Estimates of COVID-19 Impact

The Company has provided in this press release its estimates for the impact from COVID-19, including on the Company's revenue. These estimates were determined using methodologies and assumptions that vary depending on the specific reporting segment and situation. For the Research Models and Services segment, estimates are primarily based on comparisons to daily historical research model sales volumes prior to COVID-19 and the subsequent reduction in research model order activity associated with our clients’ COVID-19-related site closures and/or their reduced on-site activity, as well as our discussions with clients, particularly of our research model services businesses, with regard to revenue expectations and operational impacts from COVID-19. For the Discovery and Safety Assessment segment, estimates are based on multiple factors including, but not limited to, discussions with clients with regard to the cause of delays to discovery projects and safety assessment studies, location-specific actions to ensure employee safety in our facilities, the impact of remote versus in-person activities and services, and supply chain delays and other resource constraints. For the Manufacturing Support segment, estimates are based on discussions with clients with regard to their revenue expectations and operations. Further, we assume for the purposes of formulating these estimates that (1) restrictions on economic activity, including stay-in-place orders and other similar government actions, are largely relaxed in the third quarter and these restrictions are not re-imposed for the remainder of the fiscal year and (2) the global economy gradually improves through the remainder of 2020. Because these estimates and assumptions involve risks and uncertainties, actual events and results may differ materially from these estimates and assumptions, and Charles River assumes no obligation and expressly disclaims any duty to update them.

Non-GAAP Reconciliations

The Company reports non-GAAP results in this press release, which exclude often-one-time charges and other items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the schedules at the end of this press release.

 

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as non-GAAP earnings per diluted share, which exclude the amortization of intangible assets, and other charges related to our acquisitions; expenses associated with evaluating and integrating acquisitions and divestitures, as well as fair value adjustments associated with contingent consideration; charges, gains, and losses attributable to businesses or properties we plan to close, consolidate, or divest; severance and other costs associated with our efficiency initiatives; the write-off of deferred financing costs and fees related to debt financing; third-party costs associated with the remediation of unauthorized access into our information systems detected in March 2019; the non-cash tax benefit related to our international financing structure; charges related to the planned settlement of our U.S. pension plan; charges recorded in connection with the modification of our option to purchase equity in one of our joint ventures; and investment gains or losses associated with our venture capital investments. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “constant currency,” which we define as reported revenue growth adjusted for the impact of foreign currency translation, and “organic revenue growth,” which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, and divestitures. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. Commencing in the first quarter of 2019, we exclude the performance of our venture capital investments due to the determination that such investment gains or losses are not core to our overall operations. There are limitations in using non-GAAP financial measures, as they are not presented in accordance with generally accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. We believe that the financial impact of our acquisitions and divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, whether or not ultimately consummated) is often large relative to our overall financial performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities and their underlying associated costs, such as business acquisitions, generally occur periodically but on an unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. Presenting revenue on an organic basis allows investors to measure our revenue growth exclusive of acquisitions, divestitures, and foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company’s operations against the financial results of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations presented in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in this press release, and can also be found on the Company’s website at ir.criver.com.

 

Caution Concerning Forward-Looking Statements

This press release 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,” “intend,” “will,” “would,” “may,” “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 also include statements regarding the impact of the COVID-19 pandemic; the projected future financial performance of Charles River and our specific businesses; the future demand for drug discovery and development products and services, including our expectations for future revenue trends; our expectations with respect to the impact of acquisitions, including the acquisition of HemaCare, on the Company, our service offerings, client perception, strategic relationships, revenue, revenue growth rates, and earnings; the development and performance of our services and products, including our investments in our portfolio; market and industry conditions including the outsourcing of services and spending trends by our clients; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings; and Charles River’s future performance as delineated in our revised forward-looking guidance, and particularly our expectations with respect to revenue, the impact of foreign exchange, enhanced efficiency initiatives, and the assumptions surrounding the COVID-19 pandemic that form the basis for our revised annual guidance. Forward-looking statements are based on Charles River’s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the COVID-19 pandemic, its duration, its impact on our business, results of operations, financial condition, liquidity, business practices, operations, suppliers, third party service providers, clients, employees, industry, ability to meet future performance obligations, ability to efficiently implement advisable safety precautions, and internal controls over financial reporting; the COVID-19 pandemic’s impact on client demand, the global economy and financial markets; the ability to successfully integrate businesses we acquire; the timing and magnitude of our share repurchases; negative trends in research and development spending, negative trends in the level of outsourced services, or other cost reduction actions by our clients; the ability to convert backlog to revenue; special interest groups; contaminations; industry trends; new displacement technologies; USDA and FDA regulations; changes in law; the impact of Brexit; 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 Charles River's Annual Report on Form 10-K as filed on February 11, 2020, as well as other filings we make with the Securities and Exchange Commission. Because forward-looking statements involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by Charles River, and Charles River assumes no obligation and expressly disclaims any duty to update information contained in this press release except as required by law.

About Charles River

Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them. To learn more about our unique portfolio and breadth of services, visit www.criver.com.

 
                 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except for per share data)
                 
    Three Months Ended
    March 28, 2020   March 30, 2019
                 
Service revenue  

$

546,592

 

 

$

450,942

 

Product revenue  

 

160,467

 

 

 

153,627

 

Total revenue  

 

707,059

 

 

 

604,569

 

Costs and expenses:                
Cost of services provided (excluding amortization of intangible assets)  

 

372,824

 

 

 

316,800

 

Cost of products sold (excluding amortization of intangible assets)  

 

82,174

 

 

 

75,992

 

Selling, general and administrative  

 

129,901

 

 

 

122,574

 

Amortization of intangible assets  

 

27,879

 

 

 

19,411

 

Operating income  

 

94,281

 

 

 

69,792

 

Other income (expense):                
Interest income  

 

316

 

 

 

179

 

Interest expense  

 

(15,067

)

 

 

(9,987

)

Other (expense) income, net  

 

(24,071

)

 

 

6,306

 

Income from operations, before income taxes  

 

55,459

 

 

 

66,290

 

Provision for income taxes  

 

4,622

 

 

 

10,602

 

Net income  

 

50,837

 

 

 

55,688

 

Less: Net income attributable to noncontrolling interests  

 

68

 

 

 

555

 

Net income attributable to common shareholders  

$

50,769

 

 

$

55,133

 

                 
Earnings per common share                
Net income attributable to common shareholders:                
Basic  

$

1.03

 

 

$

1.14

 

Diluted  

$

1.02

 

 

$

1.11

 

                 
Weighted-average number of common shares outstanding;                
Basic  

 

49,189

 

 

 

48,458

 

Diluted  

 

49,966

 

 

 

49,462

 

                 
 
                 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
                 
                 
    March 28, 2020   December 28, 2019
Assets                
Current assets:                
Cash and cash equivalents  

$

372,433

 

 

$

238,014

 

Trade receivables, net  

 

542,390

 

 

 

514,033

 

Inventories  

 

162,938

 

 

 

160,660

 

Prepaid assets  

 

68,826

 

 

 

52,588

 

Other current assets  

 

61,694

 

 

 

56,030

 

Total current assets  

 

1,208,281

 

 

 

1,021,325

 

Property, plant and equipment, net  

 

1,033,409

 

 

 

1,044,128

 

Operating lease right-of-use assets, net  

 

155,568

 

 

 

140,085

 

Goodwill  

 

1,731,837

 

 

 

1,540,565

 

Client relationships, net  

 

752,516

 

 

 

613,573

 

Other intangible assets, net  

 

80,347

 

 

 

75,840

 

Deferred tax assets  

 

42,753

 

 

 

44,659

 

Other assets  

 

197,079

 

 

 

212,615

 

Total assets  

$

5,201,790

 

 

$

4,692,790

 

                 
Liabilities, Redeemable Noncontrolling Interests and Equity                
Current liabilities:                
Current portion of long-term debt and finance leases  

$

47,667

 

 

$

38,545

 

Accounts payable  

 

102,697

 

 

 

111,498

 

Accrued compensation  

 

113,620

 

 

 

158,617

 

Deferred revenue  

 

178,829

 

 

 

171,805

 

Accrued liabilities  

 

139,163

 

 

 

139,118

 

Other current liabilities  

 

108,920

 

 

 

90,598

 

Total current liabilities  

 

690,896

 

 

 

710,181

 

Long-term debt, net and finance leases  

 

2,326,770

 

 

 

1,849,666

 

Operating lease right-of-use liabilities  

 

133,440

 

 

 

116,252

 

Deferred tax liabilities  

 

197,094

 

 

 

167,283

 

Other long-term liabilities  

 

173,924

 

 

 

182,933

 

Total liabilities  

 

3,522,124

 

 

 

3,026,315

 

Redeemable noncontrolling interests  

 

24,039

 

 

 

28,647

 

Equity:                
Preferred stock, $0.01 par value; 20,000 shares authorized; no shares issued and outstanding  

 

-

 

 

 

-

 

Common stock, $0.01 par value; 120,000 shares authorized; 49,630 shares issued and 49,486 shares outstanding as of March 28, 2020, and 48,936 shares issued and 48,936 shares outstanding as of December 28, 2019  

 

496

 

 

 

489

 

Additional paid-in capital  

 

1,562,982

 

 

 

1,531,785

 

Retained earnings  

 

331,098

 

 

 

280,329

 

Treasury stock, at cost, 144 and 0 shares, as of March 28, 2020 and December 28, 2019, respectively  

 

(23,675

)

 

 

-

 

Accumulated other comprehensive loss  

 

(218,917

)

 

 

(178,019

)

Total equity attributable to common shareholders  

 

1,651,984

 

 

 

1,634,584

 

Noncontrolling interest  

 

3,643

 

 

 

3,244

 

Total equity  

 

1,655,627

 

 

 

1,637,828

 

Total liabilities, redeemable noncontrolling interests and equity  

$

5,201,790

 

 

$

4,692,790

 

                 
 
                 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
                 
    Three Months Ended
    March 28, 2020   March 30, 2019
Cash flows relating to operating activities                
Net income  

$

50,837

 

 

$

55,688

 

Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  

 

57,260

 

 

 

45,358

 

Stock-based compensation  

 

10,960

 

 

 

12,899

 

Deferred income taxes  

 

(2,973

)

 

 

7,781

 

Loss (gain) on venture capital investments  

 

12,035

 

 

 

(10,575

)

Other, net  

 

10,495

 

 

 

(380

)

Changes in assets and liabilities:                
Trade receivables, net  

 

(32,136

)

 

 

(23,127

)

Inventories  

 

4,076

 

 

 

(2,520

)

Accounts payable  

 

(10,003

)

 

 

10,245

 

Accrued compensation  

 

(45,245

)

 

 

(55,114

)

Deferred revenue  

 

6,065

 

 

 

(14,405

)

Customer contract deposits  

 

4,454

 

 

 

(5,866

)

Other assets and liabilities, net  

 

2,765

 

 

 

(5,125

)

Net cash provided by operating activities  

 

68,590

 

 

 

14,859

 

Cash flows relating to investing activities                
Acquisition of businesses and assets, net of cash acquired  

 

(382,250

)

 

 

(989

)

Capital expenditures  

 

(25,721

)

 

 

(16,731

)

Purchases of investments and contributions to venture capital investments  

 

(7,121

)

 

 

(2,419

)

Proceeds from sale of investments  

 

2,504

 

 

 

15

 

Other, net  

 

(1,097

)

 

 

(689

)

Net cash used in investing activities  

 

(413,685

)

 

 

(20,813

)

Cash flows relating to financing activities                
Proceeds from long-term debt and revolving credit facility  

 

1,409,793

 

 

 

290,111

 

Proceeds from exercises of stock options  

 

22,608

 

 

 

21,832

 

Payments on long-term debt, revolving credit facility, and finance lease obligations  

 

(925,109

)

 

 

(360,658

)

Purchase of treasury stock  

 

(23,675

)

 

 

(17,760

)

Other, net  

 

(4,405

)

 

 

(2,608

)

Net cash provided by (used in) financing activities  

 

479,212

 

 

 

(69,083

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash  

 

290

 

 

 

6,025

 

Net change in cash, cash equivalents, and restricted cash  

 

134,407

 

 

 

(69,012

)

Cash, cash equivalents, and restricted cash, beginning of period  

 

240,046

 

 

 

197,318

 

Cash, cash equivalents, and restricted cash, end of period  

$

374,453

 

 

$

128,306

 

                 
Supplemental cash flow information:                
Cash and cash equivalents  

$

372,433

 

 

$

126,316

 

Restricted cash included in Other current assets  

 

444

 

 

 

491

 

Restricted cash included in Other assets  

 

1,576

 

 

 

1,499

 

Cash, cash equivalents, and restricted cash, end of period  

$

374,453

 

 

$

128,306

 

                 
 
                 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 4
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1)
(in thousands, except percentages)
                 
    Three Months Ended
    March 28, 2020   March 30, 2019
Research Models and Services                
Revenue  

$

145,996

 

 

$

137,172

 

Operating income  

 

27,373

 

 

 

37,832

 

Operating income as a % of revenue  

 

18.7

%

 

 

27.6

%

Add back:                
Amortization related to acquisitions  

 

5,652

 

 

 

352

 

Severance  

 

(9

)

 

 

160

 

Acquisition related adjustments (2)  

 

285

 

 

 

-

 

Site consolidation costs, impairments and other items  

 

229

 

 

 

181

 

Total non-GAAP adjustments to operating income  

$

6,157

 

 

$

693

 

Operating income, excluding non-GAAP adjustments  

$

33,530

 

 

$

38,525

 

Non-GAAP operating income as a % of revenue  

 

23.0

%

 

 

28.1

%

                 
Depreciation and amortization  

$

8,752

 

 

$

4,322

 

Capital expenditures  

$

5,412

 

 

$

4,112

 

                 
Discovery and Safety Assessment                
Revenue  

$

438,683

 

 

$

354,197

 

Operating income  

 

72,283

 

 

 

46,705

 

Operating income as a % of revenue  

 

16.5

%

 

 

13.2

%

Add back:                
Amortization related to acquisitions  

 

23,007

 

 

 

16,735

 

Severance  

 

83

 

 

 

13

 

Acquisition related adjustments (2)  

 

1,289

 

 

 

2,254

 

Total non-GAAP adjustments to operating income  

$

24,379

 

 

$

19,002

 

Operating income, excluding non-GAAP adjustments  

$

96,662

 

 

$

65,707

 

Non-GAAP operating income as a % of revenue  

 

22.0

%

 

 

18.6

%

                 
Depreciation and amortization  

$

41,330

 

 

$

33,784

 

Capital expenditures  

$

14,729

 

 

$

8,848

 

                 
Manufacturing Support                
Revenue  

$

122,380

 

 

$

113,200

 

Operating income  

 

41,112

 

 

 

31,499

 

Operating income as a % of revenue  

 

33.6

%

 

 

27.8

%

Add back:                
Amortization related to acquisitions  

 

2,247

 

 

 

2,324

 

Severance  

 

256

 

 

 

227

 

Acquisition related adjustments (2)  

 

2

 

 

 

50

 

Site consolidation costs, impairments and other items  

 

-

 

 

 

1,008

 

Total non-GAAP adjustments to operating income  

$

2,505

 

 

$

3,609

 

Operating income, excluding non-GAAP adjustments  

$

43,617

 

 

$

35,108

 

Non-GAAP operating income as a % of revenue  

 

35.6

%

 

 

31.0

%

                 
Depreciation and amortization  

$

6,366

 

 

$

5,805

 

Capital expenditures  

$

5,161

 

 

$

3,606

 

                 
Unallocated Corporate Overhead  

$

(46,487

)

 

$

(46,244

)

Add back:                
Acquisition related adjustments (2)  

 

6,983

 

 

 

5,422

 

Other items (3)  

$

(287

)

 

$

-

 

Total non-GAAP adjustments to operating expense  

$

6,696

 

 

$

5,422

 

Unallocated corporate overhead, excluding non-GAAP adjustments  

$

(39,791

)

 

$

(40,822

)

                 
Total                
Revenue  

$

707,059

 

 

$

604,569

 

Operating income  

 

94,281

 

 

 

69,792

 

Operating income as a % of revenue  

 

13.3

%

 

 

11.5

%

Add back:                
Amortization related to acquisitions  

 

30,906

 

 

 

19,411

 

Severance and executive transition costs  

 

330

 

 

 

400

 

Acquisition related adjustments (2)  

 

8,559

 

 

 

7,726

 

Site consolidation costs, impairments and other items (3)  

 

(58

)

 

 

1,189

 

Total non-GAAP adjustments to operating income  

$

39,737

 

 

$

28,726

 

Operating income, excluding non-GAAP adjustments  

$

134,018

 

 

$

98,518

 

Non-GAAP operating income as a % of revenue  

 

19.0

%

 

 

16.3

%

                 
Depreciation and amortization  

$

57,260

 

 

$

45,358

 

Capital expenditures  

$

25,721

 

 

$

16,731

 

   

 

 

 

 

 

 

 

(1)

 

Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of often-one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2)

 

These adjustments are related to the evaluation and integration of acquisitions, which primarily include transaction, third-party integration, and certain compensation costs, and fair value adjustments associated with contingent consideration.

(3)

 

This amount relates to third-party costs, net of insurance reimbursements, associated with the remediation of the unauthorized access into the Company's information systems which was detected in March 2019.

     
 
                 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 5
RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (UNAUDITED)(1)
(in thousands, except per share data)
                 
    Three Months Ended
    March 28, 2020   March 30, 2019
                 
Net income attributable to common shareholders  

$

50,769

 

 

$

55,133

 

Add back:                
Non-GAAP adjustments to operating income (Refer to Schedule 4)  

 

39,737

 

 

 

28,726

 

Venture capital (gains) losses  

 

12,035

 

 

 

(10,575

)

Tax effect of non-GAAP adjustments:                
Non-cash tax benefit related to international financing structure (2)  

 

1,073

 

 

 

-

 

Tax effect of the remaining non-GAAP adjustments  

 

(11,804

)

 

 

(3,880

)

Net income attributable to common shareholders, excluding non-GAAP adjustments  

$

91,810

 

 

$

69,404

 

                 
Weighted average shares outstanding - Basic  

 

49,189

 

 

 

48,458

 

Effect of dilutive securities:                
Stock options, restricted stock units and performance share units  

 

777

 

 

 

1,004

 

Weighted average shares outstanding - Diluted  

 

49,966

 

 

 

49,462

 

                 
Earnings per share attributable to common shareholders:                
Basic  

$

1.03

 

 

$

1.14

 

Diluted  

$

1.02

 

 

$

1.11

 

                 
Basic, excluding non-GAAP adjustments  

$

1.87

 

 

$

1.43

 

Diluted, excluding non-GAAP adjustments  

$

1.84

 

 

$

1.40

 

                 

(1)

 

Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of often-one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2)

 

This adjustment relates to the recognition of deferred tax assets expected to be utilized as a result of changes to the Company's international financing structure.

 
 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
                 
SCHEDULE 6
RECONCILIATION OF GAAP REVENUE GROWTH
TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1)
                 
                 
Three Months Ended March 28, 2020   Total CRL   RMS Segment   DSA Segment   MS Segment
                 
Revenue growth, reported  

17.0

%

 

6.4

%

 

23.9

%

 

8.1

%

Decrease due to foreign exchange  

0.7

%

 

0.9

%

 

0.5

%

 

1.5

%

Contribution from acquisitions (2)  

(9.5

)%

 

(9.0

)%

 

(12.8

)%

  - %
Non-GAAP revenue growth, organic (3)  

8.2

%

 

(1.7

)%

 

11.6

%

 

9.6

%

                 

(1)

 

Charles River management believes that supplementary non-GAAP financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of often-one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company’s performance. The supplementary non-GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with U.S. GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules, regulations and guidance.

(2)

 

The contribution from acquisitions reflects only completed acquisitions.

(3)

 

Organic revenue growth is defined as reported revenue growth adjusted for acquisitions and foreign exchange.

 

Investor Contacts:
Todd Spencer
Corporate Vice President,
Investor Relations
781.222.6455
todd.spencer@crl.com

Media Contact:
Amy Cianciaruso
Corporate Vice President,
Public Relations
781.222.6168
amy.cianciaruso@crl.com

Source: Charles River Laboratories International, Inc.

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