– Fourth-Quarter Revenue of $1.01
Billion and Full-Year Revenue of $4.13 Billion –
– Fourth-Quarter GAAP Earnings per Share of
$3.62 and Non-GAAP Earnings per Share of $2.46 –
– Full-Year GAAP Earnings per Share of
$9.22 and Non-GAAP Earnings per Share of $10.67 –
– Provides 2024 Guidance –
Charles River Laboratories International, Inc. (NYSE: CRL) today
reported its results for the fourth-quarter and full-year 2023 and
provided guidance for 2024. For the quarter, revenue was $1.01
billion, a decrease of 7.9% from $1.10 billion in the fourth
quarter of 2022.
The impact of foreign currency translation benefited reported
revenue by 1.2%, and acquisitions contributed 0.7% to consolidated
fourth-quarter revenue. The addition of a 53rd week at the end of
2022, which is periodically required to align to a December 31st
calendar year end, reduced reported revenue growth by approximately
4.7%, and the divestiture of the Avian Vaccine business in December
2022 reduced reported revenue by 1.6%. Excluding the effect of
these items, organic revenue decreased 3.5%. On a segment basis,
revenue increased in the Manufacturing segment on an organic basis,
but was offset by lower revenue in the Discovery and Safety
Assessment (DSA) and the Research Models and Services (RMS)
business segments.
In the fourth quarter of 2023, the GAAP operating margin
decreased to 13.1% from 14.9% in the fourth quarter of 2022, and on
a non-GAAP basis, the operating margin decreased to 19.1% from
20.4%. The GAAP and non-GAAP decreases were primarily driven by
higher unallocated corporate costs.
On a GAAP basis, fourth-quarter net income attributable to
common shareholders was $187.1 million, a decrease of 0.2% from
$187.4 million for the same period in 2022. Fourth-quarter diluted
earnings per share on a GAAP basis were $3.62, a decrease of 0.8%
from $3.65 for the fourth quarter of 2022. Lower GAAP net income
and earnings per share were driven primarily by lower revenue and
operating income. GAAP earnings per share included gains on certain
venture capital and other strategic investments of $2.04 per share
in the fourth quarter of 2023, which included a gain on our
original strategic investment in Noveprim Group. This compares to a
loss of $0.13 per share on certain venture capital and other
strategic investments for the same period in 2022. The GAAP gain
related to the Noveprim investment in 2023 was more than offset by
a prior-year gain on the sale of the Avian Vaccine business in the
fourth quarter of 2022.
On a non-GAAP basis, net income was $127.2 million for the
fourth quarter of 2023, a decrease of 16.8% from $152.9 million for
the same period in 2022. Fourth-quarter diluted earnings per share
on a non-GAAP basis were $2.46, a decrease of 17.4% from $2.98 per
share for the fourth quarter of 2022. The non-GAAP net income and
earnings per share decreases were driven primarily by lower revenue
and operating income, including an increase in unallocated
corporate expenses, as well as a higher tax rate.
James C. Foster, Chairman, President and Chief Executive
Officer, said, “Our 2023 performance demonstrated the resilience
and stability of our strategy and business model. Despite
moderating demand trends in the broader life sciences sector, we
were able to deliver solid revenue growth and non-GAAP earning per
share that were in the upper half of our original guidance ranges.
We are focused on innovation, enhancing our portfolio to support
clients from target discovery to non-clinical development, and
delivering flexible solutions to respond to a changing industry and
client requirements. As a result, Charles River is positioned
exceptionally well to meet the evolving needs of our clients.”
“We believe the current market environment is transitory. We are
anticipating that some level of constrained client spending will
persist in 2024, but that demand will stabilize over the course of
the year. We will continue to focus on opportunities to win
additional market share, and on driving efficiencies to be an even
more compelling partner for our clients. The long-term industry
fundamentals for drug development remain firmly intact, which
supports our goals to deliver sustained revenue growth and solid
operating margin improvement in 2024 and in the future,” Mr. Foster
concluded.
Fourth-Quarter Segment
Results
Research Models and Services (RMS)
Revenue for the RMS segment was $195.8 million in the fourth
quarter of 2023, a decrease of 0.2% from $196.1 million in the
fourth quarter of 2022. The Noveprim acquisition contributed 3.1%
to fourth-quarter RMS reported revenue growth, and the impact of
foreign currency translation benefited revenue by 0.8% in the
quarter. The addition of the 53rd week in 2022 reduced RMS revenue
growth by 3.7%. Organic revenue decreased by 0.4%, due primarily to
lower small research model sales, particularly in North America and
Europe, and lower revenue in the Cell Solutions business, partially
offset by higher revenue for NHPs in China.
In the fourth quarter of 2023, the RMS segment’s GAAP operating
margin of 18.9% was unchanged from the fourth quarter of 2022, and
on a non-GAAP basis, the operating margin increased to 23.1% from
22.7%. The non-GAAP operating margin increase was driven primarily
by product mix, specifically higher revenue for NHPs including in
China and from Noveprim.
Discovery and Safety Assessment (DSA)
Revenue for the DSA segment was $625.8 million in the fourth
quarter of 2023, a decrease of 9.5% from $691.7 million in the
fourth quarter of 2022. The impact of foreign currency translation
benefited revenue by 1.3%, and the SAMDI Tech acquisition
contributed 0.3% to reported DSA revenue growth in the quarter. The
addition of the 53rd week in 2022 reduced DSA revenue growth by
5.1%. Organic revenue decreased by 6.0%, driven by a meaningful
revenue decline in the Discovery Services business, as well as
lower Safety Assessment revenue, which was impacted by a difficult,
prior-year growth comparison.
In the fourth quarter of 2023, the DSA segment’s GAAP operating
margin decreased to 20.2% from 22.7% in the fourth quarter of 2022.
The GAAP operating margin decrease was primarily due to asset
impairment charges related to the divestiture of a small Safety
Assessment operation in Canada and other restructuring costs. On a
non-GAAP basis, the operating margin decreased to 26.0% from 26.3%
in the fourth quarter of 2022. The non-GAAP operating margin
decrease was primarily the result of the revenue decline in the
Discovery Services business.
Manufacturing Solutions (Manufacturing)
Revenue for the Manufacturing segment was $191.9 million in the
fourth quarter of 2023, a decrease of 9.5% from $212.1 million in
the fourth quarter of 2022. The impact of the Avian Vaccine
divestiture reduced revenue by 9.0%, and the addition of the 53rd
week in 2022 reduced Manufacturing revenue growth by 4.4%. The
impact of foreign currency translation benefited revenue by 1.6% in
the quarter. Organic revenue growth of 2.3% reflected higher
revenue in the CDMO business, which was largely offset by lower
revenue in the Biologics Testing Solutions and Microbial Solutions
businesses.
In the fourth quarter of 2023, the Manufacturing segment’s GAAP
operating margin increased to 18.5% from 12.6% in the fourth
quarter of 2022, and on a non-GAAP basis, the operating margin
increased slightly to 25.4%, from 25.3% in the fourth quarter of
2022. The GAAP operating margin increase was driven primarily by
higher acquisition-related adjustments in the CDMO business in the
fourth quarter of 2022.
Full-Year Results
For 2023, revenue increased by 3.9% to $4.13 billion from $3.98
billion in 2022. Organic revenue growth was 6.5%.
The GAAP operating margin decreased to 14.9% in 2023 from 16.4%
in 2022, and on a non-GAAP basis, the operating margin decreased to
20.3% from 21.0%.
On a GAAP basis, net income attributable to common shareholders
was $474.6 million in 2023, a decrease of 2.4% from $486.2 million
in 2022. Diluted earnings per share on a GAAP basis in 2023 were
$9.22, a decrease of 2.7% from $9.48 in 2022.
On a non-GAAP basis, net income was $548.9 million in 2023, a
decrease of 3.8% from $570.6 million in 2022. Diluted earnings per
share on a non-GAAP basis in 2023 were $10.67, a decrease of 4.0%
from $11.12 in 2022.
Research Models and Services (RMS)
For 2023, RMS revenue was $792.3 million, an increase of 7.2%
from $739.2 million in 2022. Organic revenue growth increased
5.9%.
On a GAAP basis, the RMS segment operating margin decreased to
19.5% in 2023 from 21.7% in 2022. On a non-GAAP basis, the
operating margin decreased to 23.0% in 2023 from 25.2% in 2022.
Discovery and Safety Assessment (DSA)
For 2023, DSA revenue was $2.62 billion, an increase of 6.9%
from $2.45 billion in 2022. Organic revenue growth was 7.9%.
On a GAAP basis, the DSA segment operating margin increased to
23.2% in 2023 from 21.8% in 2022. On a non-GAAP basis, the
operating margin increased to 27.5% in 2023 from 25.3% in 2022.
Manufacturing Solutions (Manufacturing)
For 2023, Manufacturing revenue was $721.4 million, a decrease
of 8.6% from $789.6 million in 2022. Organic revenue growth was
2.0%.
On a GAAP basis, the Manufacturing segment operating margin
decreased to 12.2% in 2023 from 21.2% in 2022. On a non-GAAP basis,
the operating margin decreased to 21.8% in 2023 from 28.8% in
2022.
Acquisition of Noveprim
Group
On November 30, 2023, Charles River Laboratories completed the
acquisition of an additional 41% equity stake of Noveprim Group, a
Mauritius-based provider of non-human primates (NHPs) for
regulatory required biomedical, pharmaceutical, and toxicological
research purposes, resulting in a 90% controlling interest. The
Noveprim acquisition strengthens and diversifies the supply chain
for the DSA segment. The purchase price for the additional 41%
equity stake in November was $144.6 million, plus contingent
payments of up to $55.0 million based on future performance and
additional deferred payments of $12.0 million. In 2022, the Company
had previously acquired a 49% equity stake for $90.0 million and
additional future contingent payments of up to $5.0 million.
Noveprim is reported as part of the RMS segment for NHPs sold to
third-party clients and the DSA segment for NHPs vertically
integrated into our Safety Assessment supply chain.
2024 Guidance
The Company is providing financial guidance for 2024. The 2024
revenue growth outlook reflects a continuation of the more cautious
biopharmaceutical demand environment that the Company experienced
throughout most of 2023. Earnings per share in 2024 are expected to
benefit from higher revenue and modest operating margin
improvement, as well as the acquisition of Noveprim, which is
expected to contribute to the non-GAAP operating margin and at
least $0.30 to non-GAAP earnings per share in 2024.
The Company’s 2024 guidance for revenue growth and earnings per
share is as follows:
2024 GUIDANCE
Revenue growth, reported
1.0% – 4.0%
Impact of divestitures/(acquisitions),
net
~(0.5)%
(Favorable)/unfavorable impact of foreign
exchange
~(0.5)%
Revenue growth, organic (1)
0.0% – 3.0%
GAAP EPS estimate
$7.90 – $8.40
Acquisition-related amortization (2)
~$2.40
Acquisition and integration-related
adjustments (3)
~$0.10
Costs associated with restructuring
actions (4)
~$0.25
Other items (5)
~$0.25
Non-GAAP EPS estimate
$10.90 – $11.40
Footnotes to
Guidance Table:
(1) Organic revenue growth is defined as
reported revenue growth adjusted for completed acquisitions and
divestitures, as well as foreign currency translation.
(2) These adjustments include amortization
related to intangible assets, as well as the purchase accounting
step-up on inventory and certain long-term biological assets.
(3) These adjustments are related to the
evaluation and integration of acquisitions and divestitures, and
primarily include transaction, advisory, certain third-party
integration, and related costs.
(4) These adjustments primarily include
site consolidation, severance, impairment, and other costs related
to the Company’s restructuring actions.
(5) These items primarily relate to
charges associated with U.S. and international tax legislation that
necessitated changes to the Company’s international financing
structure; and certain third-party legal costs related to
investigations by the U.S. government into the NHP supply chain
related to our Safety Assessment business.
Webcast
Charles River has scheduled a live webcast on Wednesday,
February 14th, at 8:30 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.
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, non-GAAP operating income,
non-GAAP operating margin, and non-GAAP net income. Non-GAAP
financial measures exclude, but are not limited to, the
amortization of intangible assets and the purchase accounting
step-up adjustment on inventory and certain long term biological
assets, and other charges and adjustments related to our
acquisitions and divestitures, including the gain on our sale of
our Avian Vaccine business; expenses associated with evaluating and
integrating acquisitions and divestitures, including advisory fees
and certain other transaction-related costs, 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 restructuring initiatives; the write-off of
deferred financing costs and fees related to debt financing;
investment gains or losses associated with our venture capital and
other strategic equity investments; certain legal costs in our
Microbial Solutions business related to environmental litigation
and in our Safety Assessment business related to U.S. government
investigations into the NHP supply chain; tax effect of all of the
aforementioned matters; 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 on both
a GAAP and non-GAAP basis: “organic revenue growth,” which we
define as reported revenue growth adjusted for foreign currency
translation, acquisitions, divestitures, and the impact of the 53rd
week in 2022. 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, the 53rd week in
2022, 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 Charles River’s
expectations regarding the availability of Cambodia-sourced NHPs;
the impact of the investigations by the U.S. government into the
Cambodia NHP supply chain, including but not limited to Charles
River’s ability to cooperate fully with the U.S. government;
Charles River’s ability to effectively manage any Cambodia NHP
supply impact; the projected future financial performance of
Charles River and our specific businesses, including our
expectations with respect to the impact of NHP supply constraints
and our ability to gain market share; earnings per share; operating
margin; client demand, particularly the future demand for drug
discovery and development products and services, including our
expectations for future revenue trends; our expectations with
respect to pricing of our products and services; our expectations
with respect to future tax rates and the impact of such tax rates
on our business; our expectations with respect to the impact of
acquisitions and divestitures completed in 2021, 2022, and 2023,
including the Noveprim acquisition, on the Company, our service
offerings, client perception, strategic relationships, revenue,
revenue growth rates, revenue growth drivers, 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 identification of
spending trends by our clients and funding available to them; and
Charles River’s future performance as delineated in our
forward-looking guidance, and particularly our expectations with
respect to revenue, the impact of foreign exchange, interest rates,
enhanced efficiency initiatives. 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: NHP
supply constraints and the investigations by the U.S. Department of
Justice, including the impact on our projected future financial
performance, the timing of the resumption of Cambodia NHP imports
into the U.S., our ability to manage supply impact, and potential
study delays in our Safety Assessment business attributable to NHP
supply constraints; changes and uncertainties in the global economy
and financial markets; the ability to successfully integrate
businesses we acquire, including Noveprim; 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; 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; disruptions in the global economy caused by
geopolitical conflicts; 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 22, 2023, 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 Twelve Months Ended
December 30, 2023 December 31, 2022 December 30,
2023 December 31, 2022 Service revenue
$
838,003
$
900,698
$
3,440,019
$
3,216,904
Product revenue
175,473
199,145
689,390
759,156
Total revenue
1,013,476
1,099,843
4,129,409
3,976,060
Costs and expenses: Cost of services provided (excluding
amortization of intangible assets)
564,847
603,125
2,295,983
2,143,318
Cost of products sold (excluding amortization of intangible assets)
84,544
97,834
330,870
370,091
Selling, general and administrative
197,142
199,640
747,855
665,098
Amortization of intangible assets
34,021
35,434
137,440
146,578
Operating income
132,922
163,810
617,261
650,975
Other income (expense): Interest income
1,591
343
5,196
780
Interest expense
(33,544
)
(34,779
)
(136,710
)
(59,291
)
Other income (expense), net
107,737
115,547
95,537
30,523
Income before income taxes
208,706
244,921
581,284
622,987
Provision for income taxes
19,754
55,815
100,914
130,379
Net income
188,952
189,106
480,370
492,608
Less: Net income attributable to noncontrolling interests
1,868
1,696
5,746
6,382
Net income attributable to common shareholders
$
187,084
$
187,410
$
474,624
$
486,226
Earnings per common share Net income attributable to common
shareholders: Basic
$
3.65
$
3.68
$
9.27
$
9.57
Diluted
$
3.62
$
3.65
$
9.22
$
9.48
Weighted-average number of common shares outstanding: Basic
51,311
50,906
51,227
50,812
Diluted
51,624
51,377
51,451
51,301
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 2 CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (in thousands, except per share amounts)
December 30, 2023 December 31, 2022
Assets Current assets: Cash and cash equivalents
$
276,771
$
233,912
Trade receivables and contract assets, net of allowances for credit
losses of $25,722 and $11,278, respectively
780,375
752,390
Inventories
380,259
255,809
Prepaid assets
87,879
89,341
Other current assets
83,378
107,580
Total current assets
1,608,662
1,439,032
Property, plant and equipment, net
1,639,741
1,465,655
Venture capital and strategic equity investments
243,811
311,602
Operating lease right-of-use assets, net
394,029
391,762
Goodwill
3,095,045
2,849,903
Intangible assets, net
864,051
955,275
Deferred tax assets
40,279
41,262
Other assets
309,383
148,279
Total assets
$
8,195,001
$
7,602,770
Liabilities, Redeemable Noncontrolling Interests and
Equity Current liabilities: Accounts payable
168,937
205,915
Accrued compensation
213,290
197,078
Deferred revenue
241,820
264,259
Accrued liabilities
227,825
219,758
Other current liabilities
203,210
204,575
Total current liabilities
1,055,082
1,091,585
Long-term debt, net and finance leases
2,647,147
2,707,531
Operating lease right-of-use liabilities
419,234
389,745
Deferred tax liabilities
191,349
215,582
Other long-term liabilities
223,191
174,822
Total liabilities
4,536,003
4,579,265
Redeemable noncontrolling interest
56,722
42,427
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; 51,338
shares issued and outstanding as of December 30, 2023 and 50,944
shares issued and outstanding as of December 31, 2022
513
509
Additional paid-in capital
1,905,578
1,804,940
Retained earnings
1,887,218
1,432,901
Treasury stock, at cost, zero shares as of December 30, 2023 and
December 31, 2022
—
—
Accumulated other comprehensive loss
(196,427
)
(262,057
)
Total equity attributable to common shareholders
3,596,882
2,976,293
Noncontrolling interests (nonredeemable)
5,394
4,785
Total equity
3,602,276
2,981,078
Total liabilities, redeemable noncontrolling interests and equity
$
8,195,001
$
7,602,770
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) (in thousands) Twelve Months
Ended December 30, 2023 December 31, 2022 Cash
flows relating to operating activities Net income
$
480,370
$
492,608
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
314,124
303,870
Stock-based compensation
72,048
73,617
Loss on debt extinguishment and amortization of other financing
costs
3,967
4,118
Deferred income taxes
(50,903
)
(35,884
)
Long-lived asset impairment charges
41,911
5,816
(Gain) loss on venture capital and strategic equity investments,
net
(97,827
)
26,775
Provision for credit losses
18,225
6,706
Loss (gain) on divestitures, net
961
(123,405
)
Changes in fair value of contingent consideration arrangements
1,810
(3,753
)
Other, net
1,592
21,726
Changes in assets and liabilities: Trade receivables and contract
assets, net
(33,434
)
(150,570
)
Inventories
(62,301
)
(78,523
)
Accounts payable
(20,427
)
(2,652
)
Accrued compensation
12,447
(42,164
)
Deferred revenue
(21,743
)
57,658
Customer contract deposits
(15,564
)
30,457
Other assets and liabilities, net
38,642
33,240
Net cash provided by operating activities
683,898
619,640
Cash flows relating to investing activities Acquisition of
businesses and assets, net of cash acquired
(194,785
)
(283,392
)
Capital expenditures
(318,528
)
(324,733
)
Purchases of investments and contributions to venture capital
investments
(54,215
)
(158,274
)
Proceeds from sale of investments
6,667
4,549
Proceeds from sale of businesses, net
—
163,275
Other, net
(2,294
)
(9,347
)
Net cash used in investing activities
(563,155
)
(607,922
)
Cash flows relating to financing activities Proceeds from
long-term debt and revolving credit facility
776,353
2,952,430
Proceeds from exercises of stock options
25,597
25,110
Payments on long-term debt, revolving credit facility, and finance
lease obligations
(851,676
)
(2,932,636
)
Purchase of treasury stock
(24,155
)
(38,651
)
Payments of contingent consideration
(2,711
)
(10,356
)
Purchases of additional equity interests, net
(4,784
)
(30,533
)
Other, net
(4,145
)
(7,761
)
Net cash used in financing activities
(85,521
)
(42,397
)
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
8,044
25,579
Net change in cash, cash equivalents, and restricted cash
43,266
(5,100
)
Cash, cash equivalents, and restricted cash, beginning of period
241,214
246,314
Cash, cash equivalents, and restricted cash, end of period
$
284,480
$
241,214
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
Twelve Months Ended December 30, 2023 December 31,
2022 December 30, 2023 December 31, 2022
Research Models and Services Revenue
$
195,781
$
196,109
$
792,343
$
739,175
Operating income
37,013
37,111
154,666
160,410
Operating income as a % of revenue
18.9
%
18.9
%
19.5
%
21.7
%
Add back: Amortization related to acquisitions
5,359
5,587
21,742
20,364
Acquisition related adjustments (2)
311
1,740
2,742
4,220
Severance
215
—
1,180
1,017
Site consolidation and impairment charges
2,299
—
2,299
—
Total non-GAAP adjustments to operating income
$
8,184
$
7,327
$
27,963
$
25,601
Operating income, excluding non-GAAP adjustments
$
45,197
$
44,438
$
182,629
$
186,011
Non-GAAP operating income as a % of revenue
23.1
%
22.7
%
23.0
%
25.2
%
Depreciation and amortization
$
14,260
$
13,449
$
55,570
$
49,274
Capital expenditures
$
17,050
$
10,897
$
52,819
$
44,136
Discovery and Safety Assessment Revenue
$
625,785
$
691,677
$
2,615,623
$
2,447,316
Operating income
126,288
156,967
606,076
532,889
Operating income as a % of revenue
20.2
%
22.7
%
23.2
%
21.8
%
Add back: Amortization related to acquisitions
19,477
19,901
72,457
83,154
Acquisition related adjustments (2)
256
3,934
3,489
(1,975
)
Severance
1,739
—
3,740
433
Site consolidation and impairment charges (3)
13,804
181
25,023
435
Third-party legal costs (4)
991
667
7,387
3,414
Total non-GAAP adjustments to operating income
$
36,267
$
24,683
$
112,096
$
85,461
Operating income, excluding non-GAAP adjustments
$
162,555
$
181,650
$
718,172
$
618,350
Non-GAAP operating income as a % of revenue
26.0
%
26.3
%
27.5
%
25.3
%
Depreciation and amortization
$
45,057
$
44,137
$
174,719
$
179,465
Capital expenditures
$
49,414
$
55,655
$
204,891
$
189,563
Manufacturing Solutions Revenue
$
191,910
$
212,057
$
721,443
$
789,569
Operating income
35,545
26,734
88,329
167,084
Operating income as a % of revenue
18.5
%
12.6
%
12.2
%
21.2
%
Add back: Amortization related to acquisitions
11,083
10,030
45,393
43,416
Acquisition related adjustments (2)
127
10,004
6,417
5,813
Severance
1,757
958
5,802
1,577
Site consolidation and impairment charges
219
2,625
3,337
3,612
Third-party legal costs (4)
39
3,250
8,233
5,944
Total non-GAAP adjustments to operating income
$
13,225
$
26,867
$
69,182
$
60,362
Operating income, excluding non-GAAP adjustments
$
48,770
$
53,601
$
157,511
$
227,446
Non-GAAP operating income as a % of revenue
25.4
%
25.3
%
21.8
%
28.8
%
Depreciation and amortization
$
20,305
$
19,463
$
79,982
$
72,950
Capital expenditures
$
11,185
$
21,688
$
58,134
$
87,084
Unallocated Corporate Overhead
$
(65,924
)
$
(57,002
)
$
(231,810
)
$
(209,408
)
Add back: Severance
889
—
889
1,061
Acquisition related adjustments (2)
2,462
2,149
11,422
10,508
Total non-GAAP adjustments to operating expense
$
3,351
$
2,149
$
12,311
$
11,569
Unallocated corporate overhead, excluding non-GAAP adjustments
$
(62,573
)
$
(54,853
)
$
(219,499
)
$
(197,839
)
Total Revenue
$
1,013,476
$
1,099,843
$
4,129,409
$
3,976,060
Operating income
132,922
163,810
617,261
650,975
Operating income as a % of revenue
13.1
%
14.9
%
14.9
%
16.4
%
Add back: Amortization related to acquisitions
35,919
35,518
139,592
146,934
Acquisition related adjustments (2)
3,156
17,827
24,070
18,566
Severance
4,600
958
11,611
4,088
Site consolidation and impairment charges (3)
16,322
2,806
30,659
4,047
Third-party legal costs (4)
1,030
3,917
15,620
9,358
Total non-GAAP adjustments to operating income
$
61,027
$
61,026
$
221,552
$
182,993
Operating income, excluding non-GAAP adjustments
$
193,949
$
224,836
$
838,813
$
833,968
Non-GAAP operating income as a % of revenue
19.1
%
20.4
%
20.3
%
21.0
%
Depreciation and amortization
$
80,514
$
77,545
$
314,124
$
303,870
Capital expenditures
$
78,323
$
89,024
$
318,528
$
324,733
(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, fair value adjustments
associated with contingent consideration arrangements, and an
adjustment related to certain indirect tax liabilities.
(3)
The adjustments include approximately $13 million of asset
impairment charges related to an immaterial Safety Assessment
business unit divested during January 2024.
(4)
Third-party legal costs are related to (a) an environmental
litigation related to the Microbial Solutions business and (b)
investigations by the U.S. government into the NHP supply chain
applicable to our Safety Assessment business.
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 Twelve Months Ended
December 30, 2023 December 31, 2022 December 30,
2023 December 31, 2022 Net income attributable to
common shareholders
$
187,084
$
187,410
$
474,624
$
486,226
Add back: Non-GAAP adjustments to operating income (Refer to
previous schedule)
61,027
61,026
221,552
182,993
Venture capital and strategic equity investment (gains) losses, net
(2)
(105,919
)
6,707
(93,515
)
26,775
(Gain) loss on divestitures (3)
(34
)
(123,524
)
961
(123,524
)
Other (4)
877
1,080
1,372
5,285
Tax effect of non-GAAP adjustments: Non-cash tax provision related
to international financing structure (5)
991
1,024
4,694
4,648
Enacted tax law changes
—
(382
)
—
(382
)
Tax effect of the remaining non-GAAP adjustments
(16,860
)
19,529
(60,789
)
(11,399
)
Net income attributable to common shareholders, excluding non-GAAP
adjustments
$
127,166
$
152,870
$
548,899
$
570,622
Weighted average shares outstanding - Basic
51,311
50,906
51,227
50,812
Effect of dilutive securities: Stock options, restricted stock
units and performance share units
313
471
224
489
Weighted average shares outstanding - Diluted
51,624
51,377
51,451
51,301
Earnings per share attributable to common shareholders:
Basic
$
3.65
$
3.68
$
9.27
$
9.57
Diluted
$
3.62
$
3.65
$
9.22
$
9.48
Basic, excluding non-GAAP adjustments
$
2.48
$
3.00
$
10.72
$
11.23
Diluted, excluding non-GAAP adjustments
$
2.46
$
2.98
$
10.67
$
11.12
(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 gain during fiscal year 2023 relates predominantly to a gain
recognized on our 49% equity interest in Noveprim Group, acquired
in April 2022, which was then remeasured at fair value upon
acquisition of a 90% controlling equity interest during the fourth
quarter of fiscal 2023.
(3)
Adjustments included in 2023 relate to the gain on sale of our
Avian Vaccine business, which was divested in 2022.
(4)
Amounts included in 2023 relate to transfer taxes paid in
connection with the Noveprim Group acquisition and a final
adjustment on the termination of a Canadian pension plan. Amounts
included in 2022 relate to the sale of RMS Japan operations in
October 2021 and a reversal of an indemnification asset related to
a prior acquisition.
(5)
This amount 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 December 30, 2023 Total
CRL RMS Segment DSA Segment MS Segment
Revenue growth, reported
(7.9
)%
(0.2
)%
(9.5
)%
(9.5
)%
(Increase) decrease due to foreign exchange
(1.2
)%
(0.8
)%
(1.3
)%
(1.6
)%
Contribution from acquisitions (2)
(0.7
)%
(3.1
)%
(0.3
)%
—
%
Impact of divestitures (3)
1.6
%
—
%
—
%
9.0
%
Effect of 53rd week in fiscal year 2022
4.7
%
3.7
%
5.1
%
4.4
%
Non-GAAP revenue growth, organic (4)
(3.5
)%
(0.4
)%
(6.0
)%
2.3
%
Twelve Months Ended December 30, 2023 Total
CRL RMS Segment DSA Segment MS Segment
Revenue growth, reported
3.9
%
7.2
%
6.9
%
(8.6
)%
(Increase) decrease due to foreign exchange
(0.2
)%
0.6
%
(0.3
)%
(0.4
)%
Contribution from acquisitions (2)
(0.7
)%
(2.9
)%
(0.3
)%
—
%
Impact of divestitures (3)
2.0
%
—
%
—
%
9.8
%
Effect of 53rd week in fiscal year 2022
1.5
%
1.0
%
1.6
%
1.2
%
Non-GAAP revenue growth, organic (4)
6.5
%
5.9
%
7.9
%
2.0
%
(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)
Impact of divestitures relates to the sale of Avian Vaccine
business, which occurred on December 20, 2022.
(4)
Organic revenue growth is defined as reported revenue growth
adjusted for acquisitions, divestitures, the 53rd week, and foreign
exchange.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240214568393/en/
Investor: Todd Spencer Corporate Vice President, Investor
Relations 781.222.6455 todd.spencer@crl.com
Media: Amy Cianciaruso Corporate Vice President, Chief
Communications Officer 781.222.6168 amy.cianciaruso@crl.com
Charles River Laboratories (NYSE:CRL)
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Charles River Laboratories (NYSE:CRL)
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