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 Third-Quarter 2020 Results

– Third-Quarter Revenue of $743.3 Million

– Third-Quarter GAAP Earnings per Share of $2.03 and Non-GAAP Earnings per Share of $2.33

– Increases 2020 Guidance –

WILMINGTON, Mass.--(BUSINESS WIRE)--Oct. 29, 2020-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2020. For the quarter, revenue was $743.3 million, an increase of 11.3% from $668.0 million in the third quarter of 2019.

Acquisitions contributed 2.2% to consolidated third-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 1.3%. Excluding the effect of these items, organic revenue growth was 7.8%, driven primarily by the Discovery and Safety Assessment and Manufacturing Support segments, with Research Models and Services also contributing.

On a GAAP basis, third-quarter net income attributable to common shareholders was $102.9 million, an increase of 41.3% from net income of $72.8 million for the same period in 2019. Third-quarter diluted earnings per share on a GAAP basis were $2.03, an increase of 39.0% from $1.46 for the third quarter of 2019. The GAAP net income and earnings per share increases were driven primarily by higher revenue, operating margin improvement, and venture capital investment gains. GAAP earnings per share included a gain from the Company’s venture capital and other strategic investments of $0.29 per share in the third quarter of 2020, compared to a loss of $0.01 per share for the same period in 2019. The Company’s venture capital and other strategic investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income was $118.0 million for the third quarter of 2020, an increase of 40.8% from $83.8 million for the same period in 2019. Third‑quarter diluted earnings per share on a non-GAAP basis were $2.33, an increase of 37.9% from $1.69 per share for the third quarter of 2019. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating margin improvement, as well as a lower tax rate.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Our exceptional third-quarter performance is indicative of several important factors: that our flexible and reliable outsourced solutions resonate with clients even more today than ever before; that our research model clients are already resuming their research activities; that the market environment remains robust; and that we are generating greater operating leverage across our businesses as a result of our efforts to build a more scalable and nimble organization.”

 

“The COVID-19 crisis has emphasized the strength and resilience of our business model, our differentiated portfolio, and our unwavering focus on the client experience, which collectively are enhancing our position as the leading, early stage contract research organization. As our clients focus on scientific innovation and invest more in their preclinical pipelines, we believe we will remain their partner of choice to move their early-stage programs forward,” Mr. Foster concluded.

Third-Quarter Segment Results
Research Models and Services (RMS)

Revenue for the RMS segment was $151.9 million in the third quarter of 2020, an increase of 14.6% from $132.5 million in the third quarter of 2019. The HemaCare and Cellero acquisitions, which were completed in January 2020 and August 2020, respectively, contributed 11.1% to third-quarter RMS revenue. Organic revenue growth of 2.0% was driven primarily by higher research model services revenue, particularly the Genetically Engineered Models and Services (GEMS) business, as well as strong demand for research models in China, which rebounded from the COVID-19 pandemic earlier than other geographic regions. Demand for research models outside of China improved significantly on a sequential basis as clients resumed more normalized research activities following COVID-19-related disruptions earlier in the year. As a result, client ordering trends for research models moved closer to pre-COVID-19 levels during the third quarter, particularly in Europe, but remained moderately below prior-year levels.

In the third quarter of 2020, the RMS segment’s GAAP operating margin decreased to 24.4% from 25.9% in the third quarter of 2019. The decrease was primarily due to acquisition-related amortization costs associated with HemaCare and Cellero. On a non-GAAP basis, the operating margin increased to 27.7% from 26.5% in the third quarter of 2019, primarily due to operating leverage from higher revenue, as well as the benefit of operating efficiency initiatives, including cost controls associated with our COVID-19 response.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $461.2 million in the third quarter of 2020, an increase of 9.8% from $420.1 million in the third quarter of 2019. Organic revenue growth of 8.6% was driven by strong demand in both the Discovery Services and Safety Assessment businesses.

In the third quarter of 2020, the DSA segment’s GAAP operating margin increased to 19.6% from 15.5% in the third quarter of 2019. On a non-GAAP basis, the operating margin increased to 25.2% from 22.1% in the third quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher revenue and the benefit of operating efficiency initiatives.

 

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $130.2 million in the third quarter of 2020, an increase of 12.9% from $115.3 million in the third quarter of 2019. Organic revenue growth was 11.5%, driven primarily by robust demand in the Biologics Testing Solutions (Biologics) business. Revenue for the Microbial Solutions business increased in the third quarter and the growth rate improved from the second-quarter level, due primarily to gradual improvement in the backlog of delayed instrument installations related to the COVID-19 pandemic.

In the third quarter of 2020, the Manufacturing segment’s GAAP operating margin increased to 37.1% from 34.0% in the third quarter of 2019. On a non-GAAP basis, the operating margin increased to 39.1% from 36.4% in the third quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from robust revenue growth in the Biologics business, as well as contributions from the Avian Vaccine business. The elimination of duplicate costs associated with last year’s transition to the new Biologics facility also benefited the year-over-year operating margin comparison.

Increases 2020 Guidance

The Company is increasing its 2020 financial guidance, which was previously provided on August 5, 2020, primarily as a result of the better-than-expected third quarter performance. The revenue loss from the COVID-19 pandemic will be approximately $70 million in 2020, which is favorable to its prior estimate of approximately $100 million.

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

2020 GUIDANCE

CURRENT

PRIOR

Revenue growth, reported

9.5% – 10.5%

7.5% – 9.0%

Less: Contribution from acquisitions (1)

(4.0%) – (4.5%)

~(4.0%)

Unfavorable/(favorable) impact of foreign exchange

0.0% – (0.5%)

~0.5%

Revenue growth, organic (2)

5.0% – 6.0%

4.0% – 5.5%

GAAP EPS estimate

$5.80$5.90

$4.70$5.00

Acquisition-related amortization

$1.75$1.80

~$1.75

Charges related to global efficiency initiatives (3)

~$0.15

$0.25$0.30

Acquisition-related adjustments (4)

$0.25$0.30

$0.20$0.25

Other items (5)

~$0.25

$0.25$0.32

Venture capital and other strategic
investment losses/(gains), net (6)

($0.49)

($0.20)

Non-GAAP EPS estimate

$7.75$7.85

$7.05$7.35

Free cash flow (7)

~$415 million

$350$365 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) 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.

(4) 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.

(5) These items primarily relate to charges of approximately $0.15 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 primarily associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure.

(6) Venture capital and other strategic investment performance only includes recognized gains or losses. The Company does not forecast the future performance of these investments.

(7) The reconciliation of the current 2020 free cash flow guidance is as follows: Cash flow from operating activities of approximately $545 million, less capital expenditures of approximately $130 million, results in free cash flow of approximately $415 million.

Webcast

Charles River has scheduled a live webcast on Thursday, October 29, at 9:30 a.m. ET to discuss matters relating to this press release. 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.

Estimates of COVID-19 Impact

In this press release, the Company has provided its estimates for the impact from the COVID-19 pandemic, 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 were primarily based on comparisons to daily historical research model sales volumes prior to the COVID-19 pandemic and the subsequent reduction in research model order activity associated with our clients’ COVID-19 pandemic-related site closures and/or their reduced on-site activity, as well as our discussions with clients, particularly of our research model services and HemaCare businesses, with regard to revenue expectations and operational impacts from the COVID-19 pandemic. For the Discovery and Safety Assessment segment, estimates were 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 were based on multiple factors including, but not limited to, analysis of the sales impact due to the COVID-19 pandemic, assessments of idle instruments and the related revenue streams due to the inability to access clients’ sites, as well as discussions with clients with regard to their revenue expectations and operations. Further, we assumed for the purposes of formulating these estimates that (1) restrictions on economic activity, including stay-in-place orders and other similar government actions, will largely not be re-imposed for the remainder of the fiscal year; (2) the global economy, as it relates to demand for Charles River’s products and services, will gradually improve through the remainder of 2020; and (3) most of the Company’s essential personnel will be able to work on-site; and (4) that the Company will have adequate supplies and resources to support its businesses. In addition, the estimated revenue loss related to COVID-19 is expected to be partially offset by incremental work on clients’ COVID-19 programs. 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; investment gains or losses associated with our venture capital and other strategic investments; and adjustments related to the recognition of deferred tax assets expected to be utilized as a result of changes to the our international financing structure. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “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 and other strategic 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 and Cellero, 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; 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 and the Quarterly Report on Form 10-Q as filed on August 5, 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   Nine Months Ended
      September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019
                   
  Service revenue

$

580,774

 

 

$

523,169

 

 

$

1,677,927

 

 

$

1,479,991

 

  Product revenue

 

162,526

 

 

 

144,782

 

 

 

455,016

 

 

 

450,097

 

  Total revenue

 

743,300

 

 

 

667,951

 

 

 

2,132,943

 

 

 

1,930,088

 

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

 

377,226

 

 

 

351,894

 

 

 

1,124,988

 

 

 

1,014,063

 

  Cost of products sold (excluding amortization of intangible assets)

 

76,800

 

 

 

69,941

 

 

 

234,382

 

 

 

220,028

 

  Selling, general and administrative

 

128,289

 

 

 

129,509

 

 

 

385,902

 

 

 

388,024

 

  Amortization of intangible assets

 

28,232

 

 

 

23,805

 

 

 

83,869

 

 

 

65,611

 

  Operating income

 

132,753

 

 

 

92,802

 

 

 

303,802

 

 

 

242,362

 

  Other income (expense):              
  Interest income

 

179

 

 

 

385

 

 

 

771

 

 

 

838

 

  Interest expense

 

(18,867

)

 

 

(5,698

)

 

 

(53,286

)

 

 

(36,520

)

  Other income (expense), net

 

21,211

 

 

 

(14,254

)

 

 

23,400

 

 

 

(8,161

)

  Income from operations, before income taxes

 

135,276

 

 

 

73,235

 

 

 

274,687

 

 

 

198,519

 

  Provision (benefit) for income taxes

 

32,665

 

 

 

(317

)

 

 

53,571

 

 

 

24,970

 

  Net income

 

102,611

 

 

 

73,552

 

 

 

221,116

 

 

 

173,549

 

  Less: Net (expense) income attributable to noncontrolling interests

 

(298

)

 

 

742

 

 

 

3

 

 

 

1,878

 

  Net income attributable to common shareholders

$

102,909

 

 

$

72,810

 

 

$

221,113

 

 

$

171,671

 

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

$

2.07

 

 

$

1.49

 

 

$

4.47

 

 

$

3.53

 

  Diluted

$

2.03

 

 

$

1.46

 

 

$

4.39

 

 

$

3.46

 

                   
  Weighted-average number of common shares outstanding;              
  Basic

 

49,703

 

 

 

48,818

 

 

 

49,482

 

 

 

48,682

 

  Diluted

 

50,702

 

 

 

49,715

 

 

 

50,371

 

 

 

49,627

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
 
SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
       
       
  September 26, 2020   December 28, 2019
Assets      
Current assets:      
Cash and cash equivalents

$

242,879

 

 

$

238,014

 

Trade receivables, net

 

572,058

 

 

 

514,033

 

Inventories

 

181,367

 

 

 

160,660

 

Prepaid assets

 

69,481

 

 

 

52,588

 

Other current assets

 

74,489

 

 

 

56,030

 

Total current assets

 

1,140,274

 

 

 

1,021,325

 

Property, plant and equipment, net

 

1,037,212

 

 

 

1,044,128

 

Operating lease right-of-use assets, net

 

168,379

 

 

 

140,085

 

Goodwill

 

1,777,642

 

 

 

1,540,565

 

Client relationships, net

 

732,408

 

 

 

613,573

 

Other intangible assets, net

 

70,370

 

 

 

75,840

 

Deferred tax assets

 

39,515

 

 

 

44,659

 

Other assets

 

247,538

 

 

 

212,615

 

Total assets

$

5,213,338

 

 

$

4,692,790

 

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

$

47,946

 

 

$

38,545

 

Accounts payable

 

96,758

 

 

 

111,498

 

Accrued compensation

 

191,295

 

 

 

158,617

 

Deferred revenue

 

172,336

 

 

 

171,805

 

Accrued liabilities

 

151,061

 

 

 

139,118

 

Other current liabilities

 

127,618

 

 

 

90,598

 

Total current liabilities

 

787,014

 

 

 

710,181

 

Long-term debt, net and finance leases

 

1,968,161

 

 

 

1,849,666

 

Operating lease right-of-use liabilities

 

146,578

 

 

 

116,252

 

Deferred tax liabilities

 

202,392

 

 

 

167,283

 

Other long-term liabilities

 

183,695

 

 

 

182,933

 

Total liabilities

 

3,287,840

 

 

 

3,026,315

 

Redeemable noncontrolling interests

 

24,033

 

 

 

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; 49,882 shares issued and
49,736 shares outstanding as of September 26, 2020, and 48,936 shares issued and
48,936 shares outstanding as of December 28, 2019

 

499

 

 

 

489

 

Additional paid-in capital

 

1,614,185

 

 

 

1,531,785

 

Retained earnings

 

501,442

 

 

 

280,329

 

Treasury stock, at cost, 146 and 0 shares, as of September 26, 2020 and December 28,
2019, respectively

 

(23,905

)

 

 

-

 

Accumulated other comprehensive loss

 

(195,281

)

 

 

(178,019

)

Total equity attributable to common shareholders

 

1,896,940

 

 

 

1,634,584

 

Noncontrolling interest

 

4,525

 

 

 

3,244

 

Total equity

 

1,901,465

 

 

 

1,637,828

 

Total liabilities, redeemable noncontrolling interests and equity

$

5,213,338

 

 

$

4,692,790

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
   
SCHEDULE 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
         
    Nine Months Ended
    September 26, 2020   September 28, 2019
  Cash flows relating to operating activities      
  Net income

$

221,116

 

 

$

173,549

 

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

 

174,048

 

 

 

146,262

 

  Stock-based compensation

 

40,973

 

 

 

43,429

 

  Deferred income taxes

 

(3,131

)

 

 

(25,092

)

  Gain on venture capital and strategic equity investments, net

 

(32,226

)

 

 

(5,724

)

  Other, net

 

16,902

 

 

 

4,865

 

  Changes in assets and liabilities:      
  Trade receivables, net

 

(51,456

)

 

 

(24,491

)

  Inventories

 

(14,055

)

 

 

(12,981

)

  Accounts payable

 

(12,327

)

 

 

24,481

 

  Accrued compensation

 

29,438

 

 

 

(23,320

)

  Deferred revenue

 

(1,308

)

 

 

(1,556

)

  Customer contract deposits

 

9,887

 

 

 

(7,586

)

  Other assets and liabilities, net

 

30,335

 

 

 

8,423

 

  Net cash provided by operating activities

 

408,196

 

 

 

300,259

 

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

 

(419,146

)

 

 

(515,647

)

  Capital expenditures

 

(78,706

)

 

 

(76,675

)

  Purchases of investments and contributions to venture capital investments

 

(19,887

)

 

 

(17,664

)

  Proceeds from sale of investments

 

5,810

 

 

 

15

 

  Other, net

 

(1,192

)

 

 

(660

)

  Net cash used in investing activities

 

(513,121

)

 

 

(610,631

)

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

 

1,411,954

 

 

 

2,071,175

 

  Proceeds from exercises of stock options

 

43,806

 

 

 

26,982

 

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

 

(1,320,961

)

 

 

(1,798,620

)

  Purchase of treasury stock

 

(23,905

)

 

 

(18,040

)

  Other, net

 

(4,417

)

 

 

(10,516

)

  Net cash provided by financing activities

 

106,477

 

 

 

270,981

 

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

 

5,825

 

 

 

8,793

 

  Net change in cash, cash equivalents, and restricted cash

 

7,377

 

 

 

(30,598

)

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

 

240,046

 

 

 

197,318

 

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

$

247,423

 

 

$

166,720

 

         
  Supplemental cash flow information:      
  Cash and cash equivalents

$

242,879

 

 

$

164,759

 

  Restricted cash included in Other current assets

 

2,968

 

 

 

534

 

  Restricted cash included in Other assets

 

1,576

 

 

 

1,427

 

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

$

247,423

 

 

$

166,720

 

 
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   Nine Months Ended
      September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019
Research Models and Services                
  Revenue  

$

151,910

 

$

132,546

 

$

414,455

 

$

405,772

  Operating income  

 

37,108

 

 

34,385

 

 

68,325

 

 

103,729

  Operating income as a % of revenue  

 

24.4 %

 

 

25.9 %

 

 

16.5 %

 

 

25.6 %

  Add back:                
  Amortization related to acquisitions  

 

4,010

 

 

341

 

 

15,581

 

 

1,042

  Severance  

 

27

 

 

381

 

 

527

 

 

1,106

  Acquisition related adjustments (2)(3)  

 

922

 

 

-

 

 

1,499

 

 

2,201

  Site consolidation costs, impairments and other items  

 

(59)

 

 

-

 

 

200

 

 

257

  Total non-GAAP adjustments to operating income  

$

4,900

 

$

722

 

$

17,807

 

$

4,606

  Operating income, excluding non-GAAP adjustments  

$

42,008

 

$

35,107

 

$

86,132

 

$

108,335

  Non-GAAP operating income as a % of revenue  

 

27.7 %

 

 

26.5 %

 

 

20.8 %

 

 

26.7 %

                   
  Depreciation and amortization  

$

9,455

 

$

4,895

 

$

27,333

 

$

14,198

  Capital expenditures  

$

3,552

 

$

5,818

 

$

15,585

 

$

14,979

                   
Discovery and Safety Assessment                
  Revenue  

$

461,177

 

$

420,079

 

$

1,342,424

 

$

1,179,793

  Operating income  

 

90,348

 

 

64,995

 

 

234,872

 

 

175,214

  Operating income as a % of revenue  

 

19.6 %

 

 

15.5 %

 

 

17.5 %

 

 

14.9 %

  Add back:                
  Amortization related to acquisitions  

 

22,191

 

 

21,560

 

 

68,326

 

 

58,067

  Severance  

 

423

 

 

1,848

 

 

3,987

 

 

2,533

  Acquisition related adjustments (3)  

 

461

 

 

4,524

 

 

2,845

 

 

8,516

  Site consolidation costs, impairments and other items  

 

2,938

 

 

(207)

 

 

5,872

 

 

(207)

  Total non-GAAP adjustments to operating income  

$

26,013

 

$

27,725

 

$

81,030

 

$

68,909

  Operating income, excluding non-GAAP adjustments  

$

116,361

 

$

92,720

 

$

315,902

 

$

244,123

  Non-GAAP operating income as a % of revenue  

 

25.2 %

 

 

22.1 %

 

 

23.5 %

 

 

20.7 %

                   
  Depreciation and amortization  

$

42,707

 

$

39,898

 

$

125,138

 

$

111,231

  Capital expenditures  

$

15,532

 

$

21,141

 

$

46,436

 

$

45,130

                   
Manufacturing Support                
  Revenue  

$

130,213

 

$

115,326

 

$

376,064

 

$

344,523

  Operating income  

 

48,246

 

 

39,253

 

 

132,288

 

 

103,893

  Operating income as a % of revenue  

 

37.1 %

 

 

34.0 %

 

 

35.2 %

 

 

30.2 %

  Add back:                
  Amortization related to acquisitions  

 

2,150

 

 

2,204

 

 

6,614

 

 

6,802

  Severance  

 

333

 

 

248

 

 

1,985

 

 

549

  Acquisition related adjustments (3)  

 

-

 

 

62

 

 

(421)

 

 

218

  Site consolidation costs, impairments and other items  

 

169

 

 

180

 

 

169

 

 

1,485

  Total non-GAAP adjustments to operating income  

$

2,652

 

$

2,694

 

$

8,347

 

$

9,054

  Operating income, excluding non-GAAP adjustments  

$

50,898

 

$

41,947

 

$

140,635

 

$

112,947

  Non-GAAP operating income as a % of revenue  

 

39.1 %

 

 

36.4 %

 

 

37.4 %

 

 

32.8 %

                   
  Depreciation and amortization  

$

6,655

 

$

5,990

 

$

19,257

 

$

17,577

  Capital expenditures  

$

5,787

 

$

6,421

 

$

13,985

 

$

14,299

                   
Unallocated Corporate Overhead  

$

(42,949)

 

$

(45,831)

 

$

(131,683)

 

$

(140,474)

  Add back:                
  Severance  

 

36

 

 

-

 

 

36

 

 

-

  Acquisition related adjustments (3)  

 

2,124

 

 

5,296

 

 

9,976

 

 

23,188

  Other items (4)  

 

89

 

 

379

 

 

(661)

 

 

1,408

  Total non-GAAP adjustments to operating expense  

$

2,249

 

$

5,675

 

$

9,351

 

$

24,596

  Unallocated corporate overhead, excluding non-GAAP adjustments  

$

(40,700)

 

$

(40,156)

 

$

(122,332)

 

$

(115,878)

                   
Total                
  Revenue  

$

743,300

 

$

667,951

 

$

2,132,943

 

$

1,930,088

  Operating income  

 

132,753

 

 

92,802

 

 

303,802

 

 

242,362

  Operating income as a % of revenue  

 

17.9 %

 

 

13.9 %

 

 

14.2 %

 

 

12.6 %

  Add back:                
  Amortization related to acquisitions  

 

28,351

 

 

24,105

 

 

90,521

 

 

65,911

  Severance  

 

819

 

 

2,477

 

 

6,535

 

 

4,188

  Acquisition related adjustments (2)(3)  

 

3,507

 

 

9,882

 

 

13,899

 

 

34,123

  Site consolidation costs, impairments and other items (4)  

 

3,137

 

 

352

 

 

5,580

 

 

2,943

  Total non-GAAP adjustments to operating income  

$

35,814

 

$

36,816

 

$

116,535

 

$

107,165

  Operating income, excluding non-GAAP adjustments  

$

168,567

 

$

129,618

 

$

420,337

 

$

349,527

  Non-GAAP operating income as a % of revenue  

 

22.7 %

 

 

19.4 %

 

 

19.7 %

 

 

18.1 %

                   
  Depreciation and amortization  

$

59,580

 

$

51,758

 

$

174,048

 

$

146,262

  Capital expenditures  

$

26,185

 

$

35,163

 

$

78,706

 

$

76,675

(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 amount represents a $2.2 million charge recorded in connection with the modification of the option to purchase the remaining 8% equity interest in Vital River in the nine months ended September 28, 2019.

(3)

  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.

(4)

  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   Nine Months Ended
    September 26, 2020   September 28, 2019   September 26, 2020   September 28, 2019
                 
Net income attributable to common shareholders

$

102,909

 

 

$

72,810

 

 

$

221,113

 

 

$

171,671

 

Add back:              
Non-GAAP adjustments to operating income (Refer to previous schedule)

 

35,814

 

 

 

36,816

 

 

 

116,535

 

 

 

107,165

 

Venture capital and strategic equity investment (gains) losses, net

 

(20,350

)

 

 

598

 

 

 

(32,226

)

 

 

(5,724

)

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

 

804

 

 

 

(20,368

)

 

 

2,990

 

 

 

(20,368

)

Tax effect of the remaining non-GAAP adjustments

 

(1,216

)

 

 

(6,073

)

 

 

(19,040

)

 

 

(18,443

)

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

$

117,961

 

 

$

83,783

 

 

$

289,372

 

 

$

234,301

 

                 
Weighted average shares outstanding - Basic

 

49,703

 

 

 

48,818

 

 

 

49,482

 

 

 

48,682

 

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

 

999

 

 

 

897

 

 

 

889

 

 

 

945

 

Weighted average shares outstanding - Diluted

 

50,702

 

 

 

49,715

 

 

 

50,371

 

 

 

49,627

 

                 
Earnings per share attributable to common shareholders:              
Basic

$

2.07

 

 

$

1.49

 

 

$

4.47

 

 

$

3.53

 

Diluted

$

2.03

 

 

$

1.46

 

 

$

4.39

 

 

$

3.46

 

                 
Basic, excluding non-GAAP adjustments

$

2.37

 

 

$

1.72

 

 

$

5.85

 

 

$

4.81

 

Diluted, excluding non-GAAP adjustments

$

2.33

 

 

$

1.69

 

 

$

5.74

 

 

$

4.72

 

(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 September 26, 2020   Total CRL   RMS Segment   DSA Segment   MS Segment
                   
Revenue growth, reported  

11.3 %

 

14.6 %

 

9.8 %

 

12.9 %

Increase due to foreign exchange  

(1.3)%

 

(1.5)%

 

(1.2)%

 

(1.4)%

Contribution from acquisitions (2)  

(2.2)%

 

(11.1)%

 

- %

 

- %

Non-GAAP revenue growth, organic (3)  

7.8 %

 

2.0 %

 

8.6 %

 

11.5 %

                   
Nine Months Ended September 26, 2020   Total CRL   RMS Segment   DSA Segment   MS Segment
                   
Revenue growth, reported  

10.5 %

 

2.1 %

 

13.8 %

 

9.2 %

Decrease due to foreign exchange  

- %

 

- %

 

- %

 

0.5 %

Contribution from acquisitions (2)  

(4.8)%

 

(8.2)%

 

(5.1)%

 

- %

Non-GAAP revenue growth, organic (3)  

5.7 %

 

(6.1)%

 

8.7 %

 

9.7 %

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

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

Source: Charles River Laboratories

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