CRL Charles River Laboratories International Inc

– Third-Quarter Revenue of $1.01 Billion –

– Third-Quarter GAAP Earnings per Share of $1.33 and Non-GAAP Earnings per Share of $2.59 –

– Updates 2024 Guidance –

Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2024. For the quarter, revenue was $1.01 billion, a decrease of 1.6% from $1.03 billion in the third quarter of 2023.

The impact of foreign currency translation benefited reported revenue by 0.4%, and an acquisition contributed 0.9% to consolidated third-quarter revenue. A divestiture of a small Safety Assessment site reduced reported revenue by 0.2%. Excluding the effect of these items, revenue declined 2.7% on an organic basis. On a segment basis, organic revenue growth in the Manufacturing Solutions (Manufacturing) and Research Models and Services (RMS) segments were more than offset by lower revenue in the Discovery and Safety Assessment (DSA) segment.

In the third quarter of 2024, the GAAP operating margin decreased to 11.6% from 14.8% in the third quarter of 2023. This GAAP decrease was primarily driven by costs associated with the Company’s restructuring initiatives. On a non-GAAP basis, the operating margin improved in all three segments; however, the improvements were more than offset by higher unallocated corporate costs, which resulted in the third-quarter operating margin decreasing to 19.9% from 20.5%.

On a GAAP basis, third-quarter net income attributable to common shareholders was $68.7 million, a decrease of 21.4% from $87.4 million for the same period in 2023. Third-quarter diluted earnings per share on a GAAP basis were $1.33, a decrease of 21.3% from $1.69 for the third quarter of 2023. The GAAP net income and earnings per share decreases were driven primarily by lower revenue and operating income, which included higher costs associated with the Company’s restructuring initiatives. On a non-GAAP basis, net income was $133.7 million for the third quarter of 2024, a decrease of 4.8% from $140.5 million for the same period in 2023. Third-quarter diluted earnings per share on a non-GAAP basis were $2.59, a decrease of 4.8% from $2.72 per share for the third quarter of 2023. The decreases in non-GAAP net income and earnings per share were driven primarily by lower revenue and operating income.

James C. Foster, Chair, President and Chief Executive Officer, said, “Forward-looking demand indicators were relatively stable in the third quarter, contributing to third-quarter financial performance which exceeded our prior outlook. We are continuing to navigate through a challenging period as global biopharmaceutical clients reduce spending in conjunction with major restructuring and pipeline reprioritization activities, but overall demand trends do not appear to have deteriorated further. In addition, biotech funding has improved in 2024, and demand appears to be demonstrating early signs of stabilization. These factors resulted in a slight, sequential improvement in net book-to-bill and the cancellation rate in the Safety Assessment business.”

“We remain laser focused during this period on our strategy, which includes aggressively managing our cost structure, enhancing our clients’ experiences to gain additional share, and protecting shareholder value. We will continue to distinguish ourselves through our exceptional science and preclinical focus, in order to extend our leading position as our clients’ preferred, global, non-clinical drug development partner. We expect to emerge from this period as a stronger, leaner, and more profitable company, and an even more responsive partner for our clients,” Mr. Foster concluded.

Third-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $197.8 million in the third quarter of 2024, an increase of 5.9% from $186.8 million in the third quarter of 2023. The Noveprim acquisition in November 2023 contributed 4.9% to third-quarter RMS reported revenue, and the impact of foreign currency translation increased revenue by 0.4%. Organic revenue increased by 0.6%, due primarily to higher sales of small research models in all geographic regions, principally driven by higher pricing. This was largely offset by a revenue decline for research model services, particularly in the Insourcing Solutions business.

In the third quarter of 2024, the RMS segment’s GAAP operating margin decreased to 13.9% from 15.2% in the third quarter of 2023. The GAAP operating margin decline was driven primarily by higher amortization expense related to the Noveprim acquisition coupled with higher costs associated with the Company’s restructuring initiatives, including severance and site consolidation costs. On a non-GAAP basis, the operating margin increased to 21.0% from 18.9%. The non-GAAP operating margin increase was primarily driven by higher pricing for small research models, a favorable revenue mix related to the Noveprim acquisition, and the benefit of cost savings associated with the Company's restructuring initiatives.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $615.1 million in the third quarter of 2024, a decrease of 7.4% from $664.0 million in the third quarter of 2023. The divestiture of a small Safety Assessment site reduced reported revenue by 0.3% and the impact of foreign currency translation increased DSA revenue by 0.3%. Organic revenue decreased by 7.4%, driven primarily by lower sales volume in both the Discovery Services and Safety Assessment businesses.

In the third quarter of 2024, the DSA segment’s GAAP operating margin decreased to 20.6% from 22.1% in the third quarter of 2023 primarily driven by lower revenue and higher severance costs related to restructuring initiatives. On a non-GAAP basis, the operating margin increased to 27.4% from 27.2% in the third quarter of 2023. The non-GAAP operating margin increase was primarily driven by the benefit of cost savings associated with restructuring initiatives.

Manufacturing Solutions (Manufacturing)

Revenue for the Manufacturing segment was $196.9 million in the third quarter of 2024, an increase of 12.0% from $175.7 million in the third quarter of 2023. The impact of foreign currency translation increased Manufacturing revenue by 0.2%. Organic revenue growth of 11.8% reflected higher revenue across each of the segment’s businesses.

In the third quarter of 2024, the Manufacturing segment’s GAAP operating margin increased to 20.4% from 15.0% in the third quarter of 2023, and on a non-GAAP basis, the operating margin increased to 28.7%, from 24.5% in the third quarter of 2023. The GAAP and non-GAAP operating margin increases were driven primarily by improved operating leverage from higher revenue in each of segment’s businesses, as well as the benefit of cost savings associated with restructuring initiatives.

Stock Repurchase Update

On August 2, 2024, the Company’s Board of Directors approved a new stock repurchase authorization of $1.0 billion. Following the new authorization, the Company repurchased 500,000 shares during the third quarter of 2024 for a total of $100.7 million. As of September 28, 2024, the Company has $899.3 million remaining on its $1.0 billion stock repurchase authorization.

Updates 2024 Guidance

The Company is updating its financial guidance for 2024, which was previously revised on August 7, 2024. Revenue and non-GAAP earnings per share guidance have been narrowed and slightly raised from the midpoint of the previous ranges to principally reflect the third-quarter financial performance, which exceeded the Company's prior outlook. In addition, GAAP earnings per share guidance has been reduced due primarily to increased charges related to the Company's additional restructuring actions.

The Company’s 2024 guidance for revenue growth and earnings per share is as follows:

2024 GUIDANCE

CURRENT

PRIOR

Revenue growth/(decrease), reported

(3.0)%-(2.0)%

(4.5)% – (2.5)%

Impact of divestitures/(acquisitions), net

~(0.5)%

~(0.5)%

(Favorable)/unfavorable impact of foreign exchange

~(0.5)%

--

Revenue growth/(decrease), organic (1)

(4.0)% – (3.0)%

(5.0)% – (3.0)%

GAAP EPS estimate

$5.30 - $5.50

$5.65 – $5.95

Acquisition-related amortization (2)

~$2.50

~$2.75

Acquisition and integration-related adjustments (3)

~$0.35

~$0.20

Costs associated with restructuring actions (4)

~$1.50

~$1.00

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

($0.17)

($0.14)

Incremental dividends related to Noveprim (6)

$0.25 – $0.30

~$0.25

Other items (7)

~$0.35

~$0.20

Non-GAAP EPS estimate

$10.10 – $10.30

$9.90 – $10.20

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; as well as fair value adjustments associated with contingent consideration arrangements.

(4) These adjustments primarily include site consolidation (including site transition costs), severance, impairment, and other costs related to the Company’s restructuring actions.

(5) Certain venture capital and other strategic investment performance only includes recognized gains or losses on certain investments. The Company does not forecast the future performance of these investments.

(6) This item primarily relates to incremental dividends attributable to Noveprim noncontrolling interest holders who have and may continue to receive preferential dividends for fiscal year 2024.

(7) These items primarily relate to (i) certain third-party legal costs related to investigations by the U.S. government into the NHP supply chain related to our Safety Assessment business; and (ii) charges associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure.

Webcast

Charles River has scheduled a live webcast on Wednesday, November 6th, at 9:30 a.m. ET to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. You can also find the associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

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 incremental dividends attributable to Noveprim noncontrolling interest holders and 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: on a non-GAAP basis, we define “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 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; ability to gain market share and capitalize on business opportunities; the impact of our restructuring initiatives, including annualized savings; the impact of our stock repurchase authorization; and Charles River’s future performance, including 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 14, 2024, as well as other filings we make with the Securities and Exchange Commission. Because forward-looking statements involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by Charles River, and Charles River assumes no obligation and expressly disclaims any duty to update information contained in this press release except as required by law.

About Charles River

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

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.   SCHEDULE 1 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except for per share data)   Three Months Ended Nine Months Ended September 28,2024 September 30,2023 September 28,2024 September 30,2023   Service revenue

$

832,463

 

$

869,759

 

$

2,492,225

 

$

2,602,016

 

Product revenue

 

177,300

 

 

156,864

 

 

555,215

 

 

513,917

 

Total revenue

 

1,009,763

 

 

1,026,623

 

 

3,047,440

 

 

3,115,933

 

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

 

568,699

 

 

587,560

 

 

1,724,246

 

 

1,731,136

 

Cost of products sold (excluding amortization of intangible assets)

 

92,043

 

 

77,223

 

 

275,617

 

 

246,326

 

Selling, general and administrative

 

199,213

 

 

176,109

 

 

555,295

 

 

550,713

 

Amortization of intangible assets

 

32,403

 

 

34,229

 

 

97,248

 

 

103,419

 

Operating income

 

117,405

 

 

151,502

 

 

395,034

 

 

484,339

 

Other income (expense): Interest income

 

1,528

 

 

1,373

 

 

6,740

 

 

3,605

 

Interest expense

 

(30,284

)

 

(33,742

)

 

(98,054

)

 

(103,166

)

Other income (expense), net

 

2,592

 

 

(6,260

)

 

6,185

 

 

(12,200

)

Income before income taxes

 

91,241

 

 

112,873

 

 

309,905

 

 

372,578

 

Provision for income taxes

 

20,946

 

 

24,852

 

 

70,867

 

 

81,160

 

Net income

 

70,295

 

 

88,021

 

 

239,038

 

 

291,418

 

Less: Net income attributable to noncontrolling interests

 

638

 

 

632

 

 

2,340

 

 

3,878

 

Net income available to Charles River Laboratories International, Inc.

$

69,657

 

$

87,389

 

$

236,698

 

$

287,540

 

  Calculation of net income per share attributable to common shareholders of Charles River Laboratories International, Inc. Net income available to Charles River Laboratories International, Inc.

$

69,657

 

$

87,389

 

$

236,698

 

$

287,540

 

Less: Adjustment of redeemable noncontrolling interest

 

379

 

 

—

 

 

1,081

 

 

—

 

Less: Incremental dividends attributable to noncontrolling interest holders

 

599

 

 

—

 

 

9,621

 

 

—

 

Net income available to Charles River Laboratories International, Inc. common shareholders

$

68,679

 

$

87,389

 

$

225,996

 

$

287,540

 

    Earnings per common share Basic

$

1.34

 

$

1.70

 

$

4.39

 

$

5.62

 

Diluted

$

1.33

 

$

1.69

 

$

4.37

 

$

5.58

 

  Weighted-average number of common shares outstanding: Basic

 

51,394

 

 

51,283

 

 

51,461

 

 

51,199

 

Diluted

 

51,583

 

 

51,607

 

 

51,713

 

 

51,493

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 

SCHEDULE 2 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except per share amounts)     September 28,2024 December 30,2023 Assets Current assets: Cash and cash equivalents

$

210,171

 

$

276,771

 

Trade receivables and contract assets, net of allowances for credit losses of $23,877 and $25,722, respectively

 

754,207

 

 

780,375

 

Inventories

 

336,200

 

 

380,259

 

Prepaid assets

 

92,631

 

 

87,879

 

Other current assets

 

101,514

 

 

83,378

 

Total current assets

 

1,494,723

 

 

1,608,662

 

Property, plant and equipment, net

 

1,639,978

 

 

1,639,741

 

Venture capital and strategic equity investments

 

235,987

 

 

243,811

 

Operating lease right-of-use assets, net

 

385,133

 

 

394,029

 

Goodwill

 

3,124,592

 

 

3,095,045

 

Intangible assets, net

 

778,461

 

 

864,051

 

Deferred tax assets

 

37,963

 

 

40,279

 

Other assets

 

307,005

 

 

309,383

 

Total assets

$

8,003,842

 

$

8,195,001

 

  Liabilities, Redeemable Noncontrolling Interests and Equity Current liabilities: Accounts payable

$

135,963

 

$

168,937

 

Accrued compensation

 

211,077

 

 

213,290

 

Deferred revenue

 

251,968

 

 

241,820

 

Accrued liabilities

 

208,124

 

 

227,825

 

Other current liabilities

 

205,089

 

 

203,210

 

Total current liabilities

 

1,012,221

 

 

1,055,082

 

Long-term debt, net and finance leases

 

2,326,653

 

 

2,647,147

 

Operating lease right-of-use liabilities

 

432,836

 

 

419,234

 

Deferred tax liabilities

 

167,746

 

 

191,349

 

Other long-term liabilities

 

236,669

 

 

223,191

 

Total liabilities

 

4,176,125

 

 

4,536,003

 

Redeemable noncontrolling interest

 

40,590

 

 

56,722

 

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; 51,718 shares issued and 51,134 shares outstanding as of September 28, 2024, and 51,338 shares issued and outstanding as of December 30, 2023

 

517

 

 

513

 

Additional paid-in capital

 

1,971,413

 

 

1,905,578

 

Retained earnings

 

2,122,835

 

 

1,887,218

 

Treasury stock, at cost, 584 and zero shares, as of September 28, 2024 and December 30, 2023, respectively

 

(119,621

)

 

—

 

Accumulated other comprehensive loss

 

(192,871

)

 

(196,427

)

Total Charles River Laboratories International, Inc. equity

 

3,782,273

 

 

3,596,882

 

Nonredeemable noncontrolling interests

 

4,854

 

 

5,394

 

Total equity

 

3,787,127

 

 

3,602,276

 

Total liabilities, equity and noncontrolling interests

$

8,003,842

 

$

8,195,001

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 

SCHEDULE 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)   Nine Months Ended September 28,2024 September 30,2023 Cash flows relating to operating activities Net income

$

239,038

 

$

291,418

 

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

 

259,637

 

 

233,610

 

Stock-based compensation

 

52,656

 

 

52,527

 

Deferred income taxes

 

(25,988

)

 

(28,251

)

Long-lived asset impairment charges

 

17,339

 

 

26,202

 

(Gain) loss on venture capital & strategic equity investments, net

 

(8,788

)

 

9,246

 

Provision for credit losses

 

8,223

 

 

11,030

 

Loss on divestitures, net

 

659

 

 

995

 

Other, net

 

20,372

 

 

6,947

 

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

 

18,300

 

 

(59,081

)

Inventories

 

13,789

 

 

(44,126

)

Accounts payable

 

(7,095

)

 

(26,531

)

Accrued compensation

 

(1,981

)

 

28,438

 

Deferred revenue

 

13,583

 

 

(9,997

)

Customer contract deposits

 

14,707

 

 

(21,534

)

Other assets and liabilities, net

 

(39,236

)

 

(7,938

)

Net cash provided by operating activities

 

575,215

 

 

462,955

 

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

 

(5,479

)

 

(50,166

)

Capital expenditures

 

(157,351

)

 

(240,205

)

Purchases of investments and contributions to venture capital investments

 

(45,264

)

 

(36,322

)

Proceeds from sale of investments

 

39,470

 

 

3,953

 

Other, net

 

(358

)

 

(2,044

)

Net cash used in investing activities

 

(168,982

)

 

(324,784

)

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

 

976,783

 

 

333,034

 

Proceeds from exercises of stock options

 

23,110

 

 

19,658

 

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

 

(1,316,990

)

 

(530,909

)

Purchase of treasury stock

 

(119,051

)

 

(24,016

)

Payments of contingent consideration

 

—

 

 

(2,711

)

Purchases of additional equity interests, net

 

(12,000

)

 

—

 

Other, net

 

(26,900

)

 

(4,145

)

Net cash used in financing activities

 

(475,048

)

 

(209,089

)

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

 

(4,025

)

 

(4,680

)

Net change in cash, cash equivalents, and restricted cash

 

(72,840

)

 

(75,598

)

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

 

284,480

 

 

241,214

 

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

$

211,640

 

$

165,616

 

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 28,2024 September 30,2023 September 28,2024 September 30,2023 Research Models and Services Revenue

$

197,824

 

$

186,848

 

$

625,120

 

$

596,562

 

Operating income

 

27,544

 

 

28,326

 

 

100,641

 

 

117,653

 

Operating income as a % of revenue

 

13.9

%

 

15.2

%

 

16.1

%

 

19.7

%

Add back: Amortization related to acquisitions

 

9,086

 

 

5,398

 

 

26,731

 

 

16,383

 

Acquisition and integration-related adjustments (2)

 

—

 

 

604

 

 

337

 

 

2,431

 

Severance

 

2,651

 

 

965

 

 

3,685

 

 

965

 

Site consolidation and impairment charges

 

2,318

 

 

—

 

 

18,892

 

 

—

 

Total non-GAAP adjustments to operating income

$

14,055

 

$

6,967

 

$

49,645

 

$

19,779

 

Operating income, excluding non-GAAP adjustments

$

41,599

 

$

35,293

 

$

150,286

 

$

137,432

 

Non-GAAP operating income as a % of revenue

 

21.0

%

 

18.9

%

 

24.0

%

 

23.0

%

  Depreciation and amortization

$

18,389

 

$

13,872

 

$

53,050

 

$

41,310

 

Capital expenditures

$

7,186

 

$

9,192

 

$

36,543

 

$

35,769

 

  Discovery and Safety Assessment Revenue

$

615,060

 

$

664,028

 

$

1,847,931

 

$

1,989,838

 

Operating income

 

126,436

 

 

146,819

 

 

379,651

 

 

479,788

 

Operating income as a % of revenue

 

20.6

%

 

22.1

%

 

20.5

%

 

24.1

%

Add back: Amortization related to acquisitions

 

19,818

 

 

17,749

 

 

58,712

 

 

52,980

 

Acquisition and integration-related adjustments (2)

 

1,714

 

 

630

 

 

7,497

 

 

3,233

 

Severance

 

12,550

 

 

2,001

 

 

20,463

 

 

2,001

 

Site consolidation and impairment charges

 

1,324

 

 

11,219

 

 

3,668

 

 

11,219

 

Third-party legal costs (3)

 

6,713

 

 

2,099

 

 

11,014

 

 

6,396

 

Total non-GAAP adjustments to operating income

$

42,119

 

$

33,698

 

$

101,354

 

$

75,829

 

Operating income, excluding non-GAAP adjustments

$

168,555

 

$

180,517

 

$

481,005

 

$

555,617

 

Non-GAAP operating income as a % of revenue

 

27.4

%

 

27.2

%

 

26.0

%

 

27.9

%

  Depreciation and amortization

$

47,751

 

$

44,088

 

$

141,269

 

$

129,662

 

Capital expenditures

$

22,773

 

$

41,967

 

$

91,176

 

$

155,477

 

  Manufacturing Solutions Revenue

$

196,879

 

$

175,747

 

$

574,389

 

$

529,533

 

Operating income

 

40,188

 

 

26,275

 

 

111,099

 

 

52,784

 

Operating income as a % of revenue

 

20.4

%

 

15.0

%

 

19.3

%

 

10.0

%

Add back: Amortization related to acquisitions

 

10,802

 

 

11,164

 

 

32,363

 

 

34,310

 

Acquisition and integration-related adjustments (2)

 

143

 

 

3,279

 

 

1,386

 

 

6,290

 

Severance

 

4,892

 

 

612

 

 

8,086

 

 

4,045

 

Site consolidation and impairment charges

 

502

 

 

364

 

 

1,592

 

 

3,118

 

Third-party legal costs (3)

 

—

 

 

1,336

 

 

—

 

 

8,194

 

Total non-GAAP adjustments to operating income

$

16,339

 

$

16,755

 

$

43,427

 

$

55,957

 

Operating income, excluding non-GAAP adjustments

$

56,527

 

$

43,030

 

$

154,526

 

$

108,741

 

Non-GAAP operating income as a % of revenue

 

28.7

%

 

24.5

%

 

26.9

%

 

20.5

%

  Depreciation and amortization

$

20,298

 

$

20,070

 

$

60,176

 

$

59,677

 

Capital expenditures

$

8,735

 

$

14,349

 

$

28,180

 

$

46,949

 

  Unallocated Corporate Overhead

$

(76,763

)

$

(49,918

)

$

(196,357

)

$

(165,886

)

Add back: Acquisition and integration-related adjustments (2)

 

4,082

 

 

1,958

 

 

7,719

 

 

8,960

 

Severance

 

6,443

 

 

—

 

 

9,237

 

 

—

 

Total non-GAAP adjustments to operating expense

$

10,525

 

$

1,958

 

$

16,956

 

$

8,960

 

Unallocated corporate overhead, excluding non-GAAP adjustments

$

(66,238

)

$

(47,960

)

$

(179,401

)

$

(156,926

)

  Total Revenue

$

1,009,763

 

$

1,026,623

 

$

3,047,440

 

$

3,115,933

 

Operating income

 

117,405

 

 

151,502

 

 

395,034

 

 

484,339

 

Operating income as a % of revenue

 

11.6

%

 

14.8

%

 

13.0

%

 

15.5

%

Add back: Amortization related to acquisitions

 

39,706

 

 

34,311

 

 

117,806

 

 

103,673

 

Acquisition and integration-related adjustments (2)

 

5,939

 

 

6,471

 

 

16,939

 

 

20,914

 

Severance

 

26,536

 

 

3,578

 

 

41,471

 

 

7,011

 

Site consolidation and impairment charges

 

4,144

 

 

11,583

 

 

24,152

 

 

14,337

 

Third-party legal costs (3)

 

6,713

 

 

3,435

 

 

11,014

 

 

14,590

 

Total non-GAAP adjustments to operating income

$

83,038

 

$

59,378

 

$

211,382

 

$

160,525

 

Operating income, excluding non-GAAP adjustments

$

200,443

 

$

210,880

 

$

606,416

 

$

644,864

 

Non-GAAP operating income as a % of revenue

 

19.9

%

 

20.5

%

 

19.9

%

 

20.7

%

  Depreciation and amortization

$

88,198

 

$

78,870

 

$

259,637

 

$

233,610

 

Capital expenditures

$

38,721

 

$

65,947

 

$

157,351

 

$

240,205

 

(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 and divestitures, and primarily include transaction, advisory, certain third-party integration, and related costs; as well as fair value adjustments associated with contingent consideration arrangements.

(3)

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 Nine Months Ended September 28,2024 September 30,2023 September 28,2024 September 30,2023   Net income available to Charles River Laboratories International, Inc. common shareholders

$

68,679

 

$

87,389

 

$

225,996

 

$

287,540

 

Add back: Adjustment of redeemable noncontrolling interest (2)

 

379

 

 

—

 

 

1,081

 

 

—

 

Incremental dividends attributable to noncontrolling interest holders (3)

 

599

 

 

—

 

 

9,621

 

 

—

 

Non-GAAP adjustments to operating income (4)

 

82,315

 

 

59,378

 

 

209,332

 

 

160,525

 

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

 

(2,507

)

 

7,249

 

 

(9,171

)

 

12,404

 

(Gain) loss on divestitures (5)

 

—

 

 

433

 

 

658

 

 

995

 

Other (6)

 

—

 

 

—

 

 

—

 

 

495

 

Tax effect of non-GAAP adjustments: Non-cash tax provision related to international financing structure (7)

 

292

 

 

1,283

 

 

1,504

 

 

3,703

 

Enacted tax law changes

 

3,596

 

 

—

 

 

3,596

 

 

—

 

Tax effect of the remaining non-GAAP adjustments

 

(19,608

)

 

(15,271

)

 

(46,323

)

 

(43,929

)

Net income attributable to Charles River Laboratories International, Inc. common shareholders, excluding non-GAAP adjustments

$

133,745

 

$

140,461

 

$

396,294

 

$

421,733

 

  Weighted average shares outstanding - Basic

 

51,394

 

 

51,283

 

 

51,461

 

 

51,199

 

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

 

189

 

 

324

 

 

252

 

 

294

 

Weighted average shares outstanding - Diluted

 

51,583

 

 

51,607

 

 

51,713

 

 

51,493

 

  Earnings per share attributable to common shareholders: Basic

$

1.34

 

$

1.70

 

$

4.39

 

$

5.62

 

Diluted

$

1.33

 

$

1.69

 

$

4.37

 

$

5.58

 

  Basic, excluding non-GAAP adjustments

$

2.60

 

$

2.74

 

$

7.70

 

$

8.24

 

Diluted, excluding non-GAAP adjustments

$

2.59

 

$

2.72

 

$

7.66

 

$

8.19

 

(1)

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

(2)

This amount represents accretion adjustments of the Noveprim redeemable noncontrolling interest.

(3)

This amount represents incremental declared and undeclared dividends attributable to Noveprim noncontrolling interest holders who receive preferential dividends for fiscal year 2024.

(4)

This amount excludes Non-GAAP adjustments attributable to noncontrolling interest holders.

(5)

The amount included in 2024 relates to a loss on the sale of a Safety Assessment site. Adjustments included in 2023 relate to the gain on the sale of our Avian Vaccine business, which was divested in 2022.

(6)

Amounts included in 2023 relate to a final adjustment on the termination of a Canadian pension plan.

(7)

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 September 28, 2024 Total CRL RMS Segment DSA Segment MS Segment   Revenue growth, reported

(1.6

)%

5.9

%

(7.4

)%

12.0

%

(Increase) decrease due to foreign exchange

(0.4

)%

(0.4

)%

(0.3

)%

(0.2

)%

Contribution from acquisitions (2)

(0.9

)%

(4.9

)%

—

%

—

%

Impact of divestitures (3)

0.2

%

—

%

0.3

%

—

%

Non-GAAP revenue growth, organic (4)

(2.7

)%

0.6

%

(7.4

)%

11.8

%

  Nine Months Ended September 28, 2024 Total CRL RMS Segment DSA Segment MS Segment   Revenue growth, reported

(2.2

)%

4.8

%

(7.1

)%

8.5

%

(Increase) decrease due to foreign exchange

(0.1

)%

0.1

%

(0.3

)%

—

%

Contribution from acquisitions (2)

(1.0

)%

(5.0

)%

—

%

—

%

Impact of divestitures (3)

0.2

%

—

%

0.4

%

—

%

Non-GAAP revenue growth, organic (4)

(3.1

)%

(0.1

)%

(7.0

)%

8.5

%

(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 a site within our Safety Assessment business.

(4)

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106571740/en/

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

Media Contact: Amy Cianciaruso Corporate Vice President, Chief Communications Officer 781.222.6168 amy.cianciaruso@crl.com