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 2021 Results

– Third-Quarter Revenue of $895.9 Million

– Third-Quarter GAAP Earnings per Share of $2.01 and Non-GAAP Earnings per Share of $2.70

– Updates 2021 Guidance –

WILMINGTON, Mass.--(BUSINESS WIRE)--Nov. 3, 2021-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2021. For the quarter, revenue was $895.9 million, an increase of 20.5% from $743.3 million in the third quarter of 2020.

Acquisitions contributed 5.9% to consolidated third-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 1.0%. Excluding the effect of these items, organic revenue growth was 13.6%, driven by contributions from all three business segments. The comparison to last year’s COVID-19-related impact increased the reported and organic revenue growth rates in the third quarter of 2021 by 1.8% and 1.7%, respectively.

On a GAAP basis, third-quarter net income attributable to common shareholders was $103.4 million, an increase of 0.5% from net income of $102.9 million for the same period in 2020. Third-quarter diluted earnings per share on a GAAP basis were $2.01, a decrease of 1.0% from $2.03 for the third quarter of 2020. GAAP net income and earnings per share reflect higher revenue and a lower tax rate, which were offset by venture capital investment losses. GAAP net income and earnings per share included a loss from the Company’s venture capital and other strategic investments of $0.15 per share in the third quarter of 2021, compared to a gain of $0.29 per share for the same period in 2020. 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 $139.1 million for the third quarter of 2021, an increase of 17.9% from $118.0 million for the same period in 2020. Third‑quarter diluted earnings per share on a non-GAAP basis were $2.70, an increase of 15.9% from $2.33 per share for the third quarter of 2020. The non-GAAP net income and earnings per share increases were primarily driven by higher revenue and a lower tax rate.

James C. Foster, Chairman, President and Chief Executive Officer, said, “Our strong third-quarter results demonstrate the effectiveness of our strategy, the sustained strength of industry fundamentals, and the success we have had in becoming our clients’ partner of choice from concept, to nonclinical development, to the safe manufacture of their life-saving therapeutics.”

 

“We continue to add people and capacity to accommodate growing client demand and to build a scalable operating model; to enhance our scientifically distinguished portfolio; and to work with clients to devise outsourcing solutions which enable them to increase productivity and speed to market. We believe these efforts will enable us to achieve our strategic and financial goals, both in 2021 and over the longer term,” Mr. Foster concluded.

Third-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $171.3 million in the third quarter of 2021, an increase of 12.7% from $151.9 million in the third quarter of 2020. The impact of foreign currency translation contributed 1.4% and the acquisition of Cellero contributed 0.6% to third-quarter RMS revenue. Organic revenue growth of 10.7% was primarily driven by robust demand for research models, particularly in China, as well as higher revenue for research model services, particularly the Genetically Engineered Models and Services (GEMS) business. Third-quarter revenue for the cell supply business, which consists of HemaCare and Cellero, continued to be impacted by limitations on donor availability. The comparison to last year’s COVID-19-related impact increased the reported and organic revenue growth rates in the third quarter of 2021 by 2.2% and 2.1%, respectively.

In the third quarter of 2021, the RMS segment’s GAAP operating margin decreased to 22.8% from 24.4% in the third quarter of 2020, and on a non-GAAP basis, the operating margin decreased to 26.1% from 27.7%. The GAAP and non-GAAP operating margin decreases were primarily driven by the cell supply business.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $531.8 million in the third quarter of 2021, an increase of 15.3% from $461.2 million in the third quarter of 2020. The impact of foreign currency translation contributed 0.9%, and the acquisitions of Distributed Bio and Retrogenix contributed 1.4% to DSA revenue growth. Organic revenue growth of 13.0% was driven by both the Safety Assessment and Discovery Services businesses. From a client perspective, biotechnology clients were the primary driver of DSA revenue growth, with solid contributions from global biopharmaceutical clients as well.

In the third quarter of 2021, the DSA segment’s GAAP operating margin increased to 21.9% from 19.6% in the third quarter of 2020. The increase was primarily due to lower acquisition-related adjustments associated with contingent consideration. On a non-GAAP basis, the operating margin decreased by 90 basis points to 24.3% from 25.2% in the third quarter of 2020, primarily due to the impact of foreign currency translation, which reduced the DSA operating margin by approximately 70 basis points. In addition, a Discovery Services milestone payment received in the third quarter of 2020 contributed approximately 50 basis points to last year’s DSA operating margin.

 

Manufacturing Solutions (Manufacturing)

Revenue for the Manufacturing segment was $192.9 million in the third quarter of 2021, an increase of 48.1% from $130.2 million in the third quarter of 2020. The impact of foreign currency translation contributed 1.1%, and the acquisitions of Cognate BioServices (Cognate) and Vigene Biosciences (Vigene) contributed 27.9% to third-quarter Manufacturing revenue. Organic revenue growth of 19.1% was driven primarily by robust demand in the Biologics Testing Solutions and Microbial Solutions businesses. The comparison to last year’s COVID-19-related impact increased the reported and organic revenue growth rates in the third quarter of 2021 by 4.4% and 3.5%, respectively.

In the third quarter of 2021, the Manufacturing segment’s GAAP operating margin decreased to 25.2% from 37.1% in the third quarter of 2020, and on a non-GAAP basis, the operating margin decreased to 32.7% from 39.1%. The GAAP and non-GAAP operating margin decreases were driven primarily by the addition of the Cognate and Vigene CDMO businesses. The GAAP operating margin also declined due to amortization of intangible assets and acquisition-related costs associated with the transactions.

Updates 2021 Guidance

The Company is updating its 2021 financial guidance, which was previously provided on August 4, 2021. The Company completed the divestitures of its RMS operations in Japan and its CDMO site in Sweden on October 12th. The effect of these transactions will reduce revenue by nearly $20 million and non-GAAP diluted earnings per share by less than $0.10 in the fourth quarter of 2021. The divestitures have been reflected in the updated 2021 financial guidance.

The primary drivers of the updated reported revenue growth guidance are the impact of foreign exchange and the divestitures. Foreign currency translation is now expected to benefit reported revenue growth by 1.5% to 2.0% in 2021, compared to the prior outlook of a 2.5% benefit.

The Company is updating its GAAP and non-GAAP earnings per share guidance, primarily to reflect a lower-than-expected tax rate driven by R&D tax credits and a favorable excess tax benefit from stock-based compensation, partially offset by the impact of the divestitures. On a GAAP basis, the updated guidance also reflects a gain related to the sale of the Company’s RMS Japan operations.

 

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

2021 GUIDANCE

CURRENT

PRIOR

Revenue growth, reported

19.5% – 20.5%

20.5% – 22.5%

Less: Contribution from acquisitions/
divestitures, net (1)

(4.0%) – (4.5%)

~(5.0%)

Unfavorable/(favorable) impact of foreign exchange

(1.5%) – (2.0%)

~(2.5%)

Revenue growth, organic (2)

13.5% – 14.5%

13% – 15%

GAAP EPS estimate

$7.05$7.15

$6.55$6.80

Acquisition-related amortization

$1.90$1.95

$1.90$2.00

Acquisition and integration-related adjustments (3)

$0.65$0.70

$0.70$0.80

Gain on the sale of RMS Japan

~($0.40)

--

Other items (4)

~$0.70

$0.70$0.75

Venture capital and other strategic
investment losses/(gains), net (5)

$0.26

$0.10

Non-GAAP EPS estimate

$10.20$10.30

$10.10$10.35

Free cash flow (6)

~$500 million

~$500 million

Footnotes to Guidance Table:

(1) The contribution from acquisitions/divestitures (net) reflects only those transactions that have been completed.
(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions, divestitures, and foreign currency translation.
(3) These adjustments are related to the evaluation and integration of acquisitions and divestitures, and primarily include transaction, advisory, and certain third-party integration costs, as well as adjustments related to contingent consideration and certain costs associated with acquisition-related efficiency initiatives.
(4) These items primarily relate to charges of a) approximately $0.30 associated with U.S. and international tax legislation, and b) approximately $0.40 associated with debt extinguishment costs and the write-off of deferred financing costs related to debt refinancing.
(5) Venture capital and other strategic investment performance only includes recognized gains or losses. The Company does not forecast the future performance of these investments.
(6) Reconciliation of the current 2021 free cash flow guidance is as follows: Cash flow from operating activities of approximately $720 million, less capital expenditures of approximately $220 million, equates to free cash flow of approximately $500 million.

 

Webcast

Charles River has scheduled a live webcast on Wednesday, November 3, at 9:00 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.

Credit Suisse Healthcare Conference Presentation

Charles River will virtually present at the Credit Suisse 30th Annual Healthcare Conference, on Tuesday, November 9th, at 10:30 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.

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 and divestitures; 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 impact of the termination of the Company’s U.S. pension plan; 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; investment gains or losses associated with our venture capital and other strategic equity investments; certain costs in our Microbial Solutions business related to environmental litigation; 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 and the revaluation of deferred tax liabilities as a result of foreign tax legislation. 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. 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 and divestitures completed in 2020 and 2021 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 (including Cognate BioServices and Vigene Biosciences, and risks and uncertainties associated with Cognate’s and Vigene’s products and services, which are in areas that the Company did not previously operate); 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 17, 2021 and the Quarterly Report on Form 10-Q as filed on August 4, 2021, 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.

 

Assessment of COVID-19 Impact in 2020

In this press release, the Company has provided its assessment for the impact from the COVID-19 pandemic in 2020, including on the Company's revenue. This assessment was determined using methodologies, assumptions, and estimates that vary depending on the specific reporting segment and situation. For the Research Models and Services segment, the assessment was 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, the assessment was 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 Solutions segment, the assessment was 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. The estimated revenue loss related to COVID-19 was also expected to be partially offset by incremental work on clients’ COVID-19 programs. Because this assessment involves 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.

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 25, 2021   September 26, 2020   September 25, 2021   September 26, 2020
                   
  Service revenue

$

703,859

 

 

$

580,774

 

 

$

2,045,760

 

 

$

1,677,927

 

  Product revenue

 

192,078

 

 

 

162,526

 

 

 

589,350

 

 

 

455,016

 

  Total revenue

 

895,937

 

 

 

743,300

 

 

 

2,635,110

 

 

 

2,132,943

 

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

 

468,659

 

 

 

377,226

 

 

 

1,369,396

 

 

 

1,124,988

 

  Cost of products sold (excluding amortization of intangible assets)

 

90,051

 

 

 

76,800

 

 

 

278,188

 

 

 

234,382

 

  Selling, general and administrative

 

148,573

 

 

 

128,289

 

 

 

475,807

 

 

 

385,902

 

  Amortization of intangible assets

 

32,852

 

 

 

28,232

 

 

 

94,664

 

 

 

83,869

 

  Operating income

 

155,802

 

 

 

132,753

 

 

 

417,055

 

 

 

303,802

 

  Other income (expense):              
  Interest income

 

137

 

 

 

179

 

 

 

343

 

 

 

771

 

  Interest expense

 

(16,455

)

 

 

(18,867

)

 

 

(62,364

)

 

 

(53,286

)

  Other (expense) income, net

 

(16,214

)

 

 

21,211

 

 

 

(37,966

)

 

 

23,400

 

  Income before income taxes

 

123,270

 

 

 

135,276

 

 

 

317,068

 

 

 

274,687

 

  Provision for income taxes

 

18,111

 

 

 

32,665

 

 

 

58,058

 

 

 

53,571

 

  Net income

 

105,159

 

 

 

102,611

 

 

 

259,010

 

 

 

221,116

 

  Less: Net income (expense) attributable to noncontrolling interests

 

1,733

 

 

 

(298

)

 

 

5,606

 

 

 

3

 

  Net income attributable to common shareholders

$

103,426

 

 

$

102,909

 

 

$

253,404

 

 

$

221,113

 

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

$

2.05

 

 

$

2.07

 

 

$

5.04

 

 

$

4.47

 

  Diluted

$

2.01

 

 

$

2.03

 

 

$

4.93

 

 

$

4.39

 

                   
  Weighted-average number of common shares outstanding;              
  Basic

 

50,425

 

 

 

49,703

 

 

 

50,234

 

 

 

49,482

 

  Diluted

 

51,558

 

 

 

50,702

 

 

 

51,360

 

 

 

50,371

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
 
SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
       
       
  September 25, 2021   December 26, 2020
Assets      
Current assets:      
Cash and cash equivalents

$

212,539

 

 

$

228,424

 

Trade receivables and contract assets, net of allowances for doubtful accounts of $7,024 and $6,702, respectively

 

660,452

 

 

 

617,740

 

Inventories

 

181,694

 

 

 

185,695

 

Prepaid assets

 

77,527

 

 

 

96,712

 

Other current assets

 

246,828

 

 

 

72,560

 

Total current assets

 

1,379,040

 

 

 

1,201,131

 

Property, plant and equipment, net

 

1,175,911

 

 

 

1,124,358

 

Operating lease right-of-use assets, net

 

284,722

 

 

 

178,220

 

Goodwill

 

2,736,322

 

 

 

1,809,168

 

Client relationships, net

 

1,012,606

 

 

 

721,505

 

Other intangible assets, net

 

87,274

 

 

 

66,094

 

Deferred tax assets

 

41,117

 

 

 

37,729

 

Other assets

 

341,445

 

 

 

352,626

 

Total assets

$

7,058,437

 

 

$

5,490,831

 

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

$

2,275

 

 

$

50,214

 

Accounts payable

 

127,913

 

 

 

122,475

 

Accrued compensation

 

223,045

 

 

 

206,823

 

Deferred revenue

 

221,731

 

 

 

207,942

 

Accrued liabilities

 

244,790

 

 

 

149,820

 

Other current liabilities

 

163,997

 

 

 

102,477

 

Total current liabilities

 

983,751

 

 

 

839,751

 

Long-term debt, net and finance leases

 

2,892,676

 

 

 

1,929,571

 

Operating lease right-of-use liabilities

 

244,012

 

 

 

155,595

 

Deferred tax liabilities

 

259,119

 

 

 

217,031

 

Other long-term liabilities

 

214,258

 

 

 

205,215

 

Total liabilities

 

4,593,816

 

 

 

3,347,163

 

Redeemable noncontrolling interests

 

32,556

 

 

 

25,499

 

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; 50,607 shares issued and 50,460 shares outstanding as of September 25, 2021, and 49,767 shares issued and outstanding as of December 26, 2020

 

506

 

 

 

498

 

Additional paid-in capital

 

1,720,461

 

 

 

1,627,564

 

Retained earnings

 

878,818

 

 

 

625,414

 

Treasury stock, at cost, 147 and 0 shares, as of September 25, 2021 and December 26, 2020, respectively

 

(40,440

)

 

 

-

 

Accumulated other comprehensive loss

 

(132,779

)

 

 

(138,874

)

Total equity attributable to common shareholders

 

2,426,566

 

 

 

2,114,602

 

Noncontrolling interest

 

5,499

 

 

 

3,567

 

Total equity

 

2,432,065

 

 

 

2,118,169

 

Total liabilities, redeemable noncontrolling interests and equity

$

7,058,437

 

 

$

5,490,831

 

 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
   
SCHEDULE 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
         
    Nine Months Ended
    September 25, 2021   September 26, 2020
  Cash flows relating to operating activities      
  Net income

$

259,010

 

 

$

221,116

 

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

 

198,299

 

 

 

174,048

 

  Stock-based compensation

 

52,289

 

 

 

40,973

 

  Debt extinguishment and financing costs

 

28,972

 

 

 

2,759

 

  Deferred income taxes

 

(13,757

)

 

 

(3,131

)

  Loss (gain) on venture capital and strategic equity investments, net

 

17,277

 

 

 

(32,226

)

  Other, net

 

(9,432

)

 

 

14,143

 

  Changes in assets and liabilities:      
  Trade receivables and contract assets, net

 

(35,592

)

 

 

(51,456

)

  Inventories

 

(5,639

)

 

 

(14,055

)

  Accounts payable

 

11,431

 

 

 

(12,327

)

  Accrued compensation

 

18,210

 

 

 

29,438

 

  Deferred revenue

 

(9,394

)

 

 

(1,308

)

  Customer contract deposits

 

4,850

 

 

 

9,887

 

  Other assets and liabilities, net

 

15,017

 

 

 

30,335

 

  Net cash provided by operating activities

 

531,541

 

 

 

408,196

 

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

 

(1,292,093

)

 

 

(419,146

)

  Capital expenditures

 

(129,997

)

 

 

(78,706

)

  Purchases of investments and contributions to venture capital investments

 

(31,963

)

 

 

(19,887

)

  Proceeds from sale of investments

 

5,960

 

 

 

5,810

 

  Other, net

 

854

 

 

 

(1,192

)

  Net cash used in investing activities

 

(1,447,239

)

 

 

(513,121

)

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

 

6,119,671

 

 

 

1,411,954

 

  Proceeds from exercises of stock options

 

43,314

 

 

 

43,806

 

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

 

(5,190,394

)

 

 

(1,320,961

)

  Purchase of treasury stock

 

(40,440

)

 

 

(23,905

)

  Payment of debt extinguishment and financing costs

 

(38,253

)

 

 

-

 

  Other, net

 

(2,328

)

 

 

(4,417

)

  Net cash provided by financing activities

 

891,570

 

 

 

106,477

 

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

 

17,514

 

 

 

5,825

 

  Net change in cash, cash equivalents, and restricted cash

 

(6,614

)

 

 

7,377

 

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

 

233,119

 

 

 

240,046

 

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

$

226,505

 

 

$

247,423

 

         
  Supplemental cash flow information:      
  Cash and cash equivalents

$

212,539

 

 

$

242,879

 

  Cash classified within current assets held for sale

 

8,612

 

 

 

-

 

  Restricted cash included in Other current assets

 

4,275

 

 

 

2,968

 

  Restricted cash included in Other assets

 

1,079

 

 

 

1,576

 

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

$

226,505

 

 

$

247,423

 

 
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 25, 2021   September 26, 2020   September 25, 2021   September 26, 2020
Research Models and Services                
  Revenue  

$

171,258

 

 

$

151,910

 

 

$

524,862

 

 

$

414,455

 

  Operating income  

 

39,111

 

 

 

37,108

 

 

 

126,626

 

 

 

68,325

 

  Operating income as a % of revenue  

 

22.8

%

 

 

24.4

%

 

 

24.1

%

 

 

16.5

%

  Add back:                
  Amortization related to acquisitions  

 

5,344

 

 

 

4,010

 

 

 

16,029

 

 

 

15,581

 

  Severance  

 

-

 

 

 

27

 

 

 

7

 

 

 

527

 

  Acquisition related adjustments (2)  

 

241

 

 

 

922

 

 

 

1,217

 

 

 

1,499

 

  Site consolidation costs, impairments and other items  

 

-

 

 

 

(59

)

 

 

-

 

 

 

200

 

  Total non-GAAP adjustments to operating income  

$

5,585

 

 

$

4,900

 

 

$

17,253

 

 

$

17,807

 

  Operating income, excluding non-GAAP adjustments  

$

44,696

 

 

$

42,008

 

 

$

143,879

 

 

$

86,132

 

  Non-GAAP operating income as a % of revenue  

 

26.1

%

 

 

27.7

%

 

 

27.4

%

 

 

20.8

%

                   
  Depreciation and amortization  

$

9,927

 

 

$

9,455

 

 

$

29,450

 

 

$

27,333

 

  Capital expenditures  

$

18,026

 

 

$

3,552

 

 

$

29,521

 

 

$

15,585

 

                   
Discovery and Safety Assessment            
  Revenue  

$

531,823

 

 

$

461,177

 

 

$

1,573,095

 

 

$

1,342,424

 

  Operating income  

 

116,548

 

 

 

90,348

 

 

 

312,011

 

 

 

234,872

 

  Operating income as a % of revenue  

 

21.9

%

 

 

19.6

%

 

 

19.8

%

 

 

17.5

%

  Add back:                
  Amortization related to acquisitions  

 

20,983

 

 

 

22,191

 

 

 

64,807

 

 

 

68,326

 

  Severance  

 

(180

)

 

 

423

 

 

 

1,160

 

 

 

3,987

 

  Acquisition related adjustments (2)  

 

(9,316

)

 

 

461

 

 

 

(3,642

)

 

 

2,845

 

  Site consolidation costs, impairments and other items  

 

961

 

 

 

2,938

 

 

 

1,254

 

 

 

5,872

 

  Total non-GAAP adjustments to operating income  

$

12,448

 

 

$

26,013

 

 

$

63,579

 

 

$

81,030

 

  Operating income, excluding non-GAAP adjustments  

$

128,996

 

 

$

116,361

 

 

$

375,590

 

 

$

315,902

 

  Non-GAAP operating income as a % of revenue  

 

24.3

%

 

 

25.2

%

 

 

23.9

%

 

 

23.5

%

                   
  Depreciation and amortization  

$

44,072

 

 

$

42,707

 

 

$

132,268

 

 

$

125,138

 

  Capital expenditures  

$

23,270

 

 

$

15,532

 

 

$

60,783

 

 

$

46,436

 

                   
Manufacturing Solutions                
  Revenue  

$

192,856

 

 

$

130,213

 

 

$

537,153

 

 

$

376,064

 

  Operating income  

 

48,563

 

 

 

48,246

 

 

 

154,717

 

 

 

132,288

 

  Operating income as a % of revenue  

 

25.2

%

 

 

37.1

%

 

 

28.8

%

 

 

35.2

%

  Add back:                
  Amortization related to acquisitions  

 

7,888

 

 

 

2,150

 

 

 

17,914

 

 

 

6,614

 

  Severance  

 

1,515

 

 

 

333

 

 

 

2,344

 

 

 

1,985

 

  Acquisition related adjustments (2)  

 

4,116

 

 

 

-

 

 

 

4,844

 

 

 

(421

)

  Site consolidation costs, impairments and other items (3)  

 

1,074

 

 

 

169

 

 

 

1,114

 

 

 

169

 

  Total non-GAAP adjustments to operating income  

$

14,593

 

 

$

2,652

 

 

$

26,216

 

 

$

8,347

 

  Operating income, excluding non-GAAP adjustments  

$

63,156

 

 

$

50,898

 

 

$

180,933

 

 

$

140,635

 

  Non-GAAP operating income as a % of revenue  

 

32.7

%

 

 

39.1

%

 

 

33.7

%

 

 

37.4

%

                   
  Depreciation and amortization  

$

13,953

 

 

$

6,655

 

 

$

34,474

 

 

$

19,257

 

  Capital expenditures  

$

13,296

 

 

$

5,787

 

 

$

34,008

 

 

$

13,985

 

                   
Unallocated Corporate Overhead  

$

(48,420

)

 

$

(42,949

)

 

$

(176,299

)

 

$

(131,683

)

  Add back:                
  Severance  

 

-

 

 

 

36

 

 

 

(151

)

 

 

36

 

  Acquisition related adjustments (2)  

 

3,387

 

 

 

2,124

 

 

 

29,011

 

 

 

9,976

 

  Other items (3)  

 

-

 

 

 

89

 

 

 

-

 

 

 

(661

)

  Total non-GAAP adjustments to operating expense  

$

3,387

 

 

$

2,249

 

 

$

28,860

 

 

$

9,351

 

  Unallocated corporate overhead, excluding non-GAAP adjustments  

$

(45,033

)

 

$

(40,700

)

 

$

(147,439

)

 

$

(122,332

)

                   
Total                
  Revenue  

$

895,937

 

 

$

743,300

 

 

$

2,635,110

 

 

$

2,132,943

 

  Operating income  

 

155,802

 

 

 

132,753

 

 

 

417,055

 

 

 

303,802

 

  Operating income as a % of revenue  

 

17.4

%

 

 

17.9

%

 

 

15.8

%

 

 

14.2

%

  Add back:                
  Amortization related to acquisitions  

 

34,215

 

 

 

28,351

 

 

 

98,750

 

 

 

90,521

 

  Severance  

 

1,335

 

 

 

819

 

 

 

3,360

 

 

 

6,535

 

  Acquisition related adjustments (2)  

 

(1,572

)

 

 

3,507

 

 

 

31,430

 

 

 

13,899

 

  Site consolidation costs, impairments and other items (3)  

 

2,035

 

 

 

3,137

 

 

 

2,368

 

 

 

5,580

 

  Total non-GAAP adjustments to operating income  

$

36,013

 

 

$

35,814

 

 

$

135,908

 

 

$

116,535

 

  Operating income, excluding non-GAAP adjustments  

$

191,815

 

 

$

168,567

 

 

$

552,963

 

 

$

420,337

 

  Non-GAAP operating income as a % of revenue  

 

21.4

%

 

 

22.7

%

 

 

21.0

%

 

 

19.7

%

                   
  Depreciation and amortization  

$

68,686

 

 

$

59,580

 

 

$

198,299

 

 

$

174,048

 

  Capital expenditures  

$

55,536

 

 

$

26,185

 

 

$

129,997

 

 

$

78,706

 

 

(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)

  Other items include certain costs in our Microbial Solutions business related to environmental litigation incurred during the three and nine months ended September 25, 2021, which impacted Manufacturing Solutions; and third-party costs, net of insurance reimbursements, incurred during the three and nine months ended September 26, 2020 associated with the remediation of the unauthorized access into the Company's information systems which was detected in March 2019, which impacted Unallocated Corporate Overhead.
 
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 25, 2021   September 26, 2020   September 25, 2021   September 26, 2020
                 
Net income attributable to common shareholders

$

103,426

 

 

$

102,909

 

 

$

253,404

 

 

$

221,113

 

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

 

36,013

 

 

 

35,814

 

 

 

135,908

 

 

 

116,535

 

Write-off of deferred financing costs and fees related to debt financing

 

-

 

 

 

-

 

 

 

26,089

 

 

 

-

 

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

 

10,367

 

 

 

(20,350

)

 

 

17,277

 

 

 

(32,226

)

Other (2)

 

-

 

 

 

-

 

 

 

(2,942

)

 

 

-

 

Tax effect of non-GAAP adjustments:              
Non-cash tax provision related to international financing structure (3)

 

1,461

 

 

 

804

 

 

 

3,781

 

 

 

2,990

 

Enacted tax law changes

 

-

 

 

 

-

 

 

 

10,036

 

 

 

-

 

Tax effect of the remaining non-GAAP adjustments

 

(12,139

)

 

 

(1,216

)

 

 

(41,468

)

 

 

(19,040

)

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

$

139,128

 

 

$

117,961

 

 

$

402,085

 

 

$

289,372

 

                 
Weighted average shares outstanding - Basic

 

50,425

 

 

 

49,703

 

 

 

50,234

 

 

 

49,482

 

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

 

1,133

 

 

 

999

 

 

 

1,126

 

 

 

889

 

Weighted average shares outstanding - Diluted

 

51,558

 

 

 

50,702

 

 

 

51,360

 

 

 

50,371

 

                 
Earnings per share attributable to common shareholders:              
Basic

$

2.05

 

 

$

2.07

 

 

$

5.04

 

 

$

4.47

 

Diluted

$

2.01

 

 

$

2.03

 

 

$

4.93

 

 

$

4.39

 

                 
Basic, excluding non-GAAP adjustments

$

2.76

 

 

$

2.37

 

 

$

8.00

 

 

$

5.85

 

Diluted, excluding non-GAAP adjustments

$

2.70

 

 

$

2.33

 

 

$

7.83

 

 

$

5.74

 

(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)

  Includes adjustments related to the gain on an immaterial divestiture and the finalization of the annuity purchase related to the termination of the Company's U.S. pension plan.

(3)

  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 25, 2021   Total CRL   RMS Segment   DSA Segment   MS Segment
                   
Revenue growth, reported  

20.5 %

 

12.7 %

 

15.3 %

 

48.1 %

Decrease (increase) due to foreign exchange  

(1.0)%

 

(1.4)%

 

(0.9)%

 

(1.1)%

Contribution from acquisitions (2)  

(5.9)%

 

(0.6)%

 

(1.4)%

 

(27.9)%

Non-GAAP revenue growth, organic (3)  

13.6 %

 

10.7 %

 

13.0 %

 

19.1 %

                   
Nine Months Ended September 25, 2021   Total CRL   RMS Segment   DSA Segment   MS Segment
                   
Revenue growth, reported  

23.5 %

 

26.6 %

 

17.2 %

 

42.8 %

Decrease (increase) due to foreign exchange  

(2.6)%

 

(3.5)%

 

(2.1)%

 

(3.5)%

Contribution from acquisitions (2)  

(4.2)%

 

(1.5)%

 

(0.9)%

 

(18.9)%

Non-GAAP revenue growth, organic (3)  

16.7 %

 

21.6 %

 

14.2 %

 

20.4 %

(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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