Charles River Laboratories Announces Third-Quarter 2021 Results

WILMINGTON, Mass.--(BUSINESS WIRE)--November 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 12^th. 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 30^th Annual Healthcare Conference, on Tuesday, November 9^th, 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.