UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
May 4, 2022
Date of Report (Date of earliest event reported)
 
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Charter)
 
Delaware
 
001-15943
 
06-1397316
(State or Other
 
(Commission File Number)
 
(IRS Employer
Jurisdiction of Incorporation)
 
 
 
Identification No.)
 
251 Ballardvale Street
Wilmington, Massachusetts 01887
(Address of Principal Executive Offices) (Zip Code)
 
781-222-6000
(Registrant’s Telephone Number, including Area Code)
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
  Name of each exchange on which registered
Common stock, $0.01 par value
  CRL
  New York Stock Exchange

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
 
Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

ITEM 2.02.  Results of Operations and Financial Condition 
 
The following information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
On May 4, 2022, Charles River Laboratories International, Inc. issued a press release providing financial results for the first quarter ended March 26, 2022.
 
The press release, attached as an exhibit to this report, includes "safe harbor" language pursuant to the Private Securities Litigation Reform Act of 1995, as amended, indicating that certain statements contained in the press release are "forward-looking" rather than historic. The press release also states that these and other risks relating to Charles River are set forth in the documents filed by Charles River with the Securities and Exchange Commission.
 
ITEM 9.01.  Financial Statements and Exhibits
 
(d) Exhibits.
 
Exhibit No.
 
Description
 
 
 
 
104
 
Cover Page Interactive Data File (embedded within the Inline XBRL document)

2

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
CHARLES RIVER LABORATORIES
INTERNATIONAL, INC.
 
 
 
 
 
Date: May 4, 2022
By:
/s/ Matthew L. Daniel
 
 
 
Matthew L. Daniel, Corporate Senior Vice President,
 
 
General Counsel, Corporate Secretary & Chief Compliance Officer


3
Exhibit 99.1

Charles River Laboratories Announces First-Quarter 2022 Results

– First-Quarter Revenue of $913.9 Million –

– First-Quarter GAAP Earnings per Share of $1.81 and Non-GAAP Earnings per Share of $2.75 –

– Updates 2022 Guidance –

WILMINGTON, Mass.--(BUSINESS WIRE)--May 4, 2022--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2022. For the quarter, revenue was $913.9 million, an increase of 10.8% from $824.6 million in the first quarter of 2021.

Acquisitions contributed 4.7% to consolidated first-quarter revenue growth. The divestiture of the Research Models and Services operations in Japan (RMS Japan) in October 2021 reduced reported revenue growth by 1.6%. The impact of foreign currency translation reduced reported revenue growth by 1.7%. Excluding the effect of these items, organic revenue growth of 9.4% was driven by contributions from all three business segments.

On a GAAP basis, first-quarter net income attributable to common shareholders was $93.0 million, an increase of 51.2% from net income of $61.5 million for the same period in 2021. First-quarter diluted earnings per share on a GAAP basis were $1.81, an increase of 50.8% from $1.20 for the first quarter of 2021. The increases in the GAAP net income and earnings per share were driven primarily by higher revenue and operating income, as well as lower costs associated with the Company’s debt refinancing activities in the first quarter of 2021.

On a non-GAAP basis, net income from continuing operations was $141.1 million for the first quarter of 2022, an increase of 9.3% from $129.2 million for the same period in 2021. First‑quarter diluted earnings per share on a non-GAAP basis were $2.75, an increase of 8.7% from $2.53 per share for the first quarter of 2021. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating margin improvement, partially offset by a higher tax rate and increased interest expense.

James C. Foster, Chairman, President and Chief Executive Officer, said, “We are pleased with our solid, first-quarter financial results that were in line with our expectations, and believe we are continuing to distinguish ourselves from the competition in the current business environment. We continue to benefit from strong, sustained business trends, including record booking activity and robust backlog growth in the Discovery and Safety Assessment segment, that is affording us exceptional visibility into future demand as studies are booked well into 2023. We believe these trends, coupled with the continued strength of biopharmaceutical client spending, support our expectation that the revenue growth rate will accelerate from the first-quarter level, positioning us to achieve our financial guidance for the year.”


First-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $176.5 million in the first quarter of 2022, essentially unchanged from $176.9 million in the first quarter of 2021. Reported revenue growth was reduced by 7.7% due to the divestiture of RMS Japan, and by 1.2% due to the impact of foreign currency translation. Organic revenue growth of 8.7% was driven by broad-based growth for research models, particularly in North America, and research model services, particularly in the Insourcing Solutions (IS) business.

In the first quarter of 2022, the RMS segment’s GAAP operating margin increased to 27.1% from 25.4% in the first quarter of 2021. On a non-GAAP basis, the operating margin increased to 29.9% from 28.7% in the first quarter of 2021. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher sales of research models.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $544.3 million in the first quarter of 2022, an increase of 8.6% from $501.2 million in the first quarter of 2021. The impact of foreign currency translation reduced revenue by 1.6%, while acquisitions contributed 0.7% to DSA revenue growth. Organic revenue growth of 9.5% was primarily driven by the Safety Assessment business.

In the first quarter of 2022, the DSA segment’s GAAP operating margin increased to 19.3% from 18.1% in the first quarter of 2021. The GAAP operating margin increase was driven by lower acquisition-related adjustments associated with contingent consideration. On a non-GAAP basis, the operating margin decreased to 22.9% from 23.8% in the first quarter of 2021, primarily reflecting higher staffing costs.

Manufacturing Solutions (Manufacturing)

Revenue for the Manufacturing segment was $193.1 million in the first quarter of 2022, an increase of 31.8% from $146.5 million in the first quarter of 2021. The acquisitions of the Cognate BioServices (Cognate) and Vigene Biosciences (Vigene) CDMO businesses contributed 24.4% to Manufacturing revenue growth, while the impact of foreign currency translation reduced revenue by 2.7%. Organic revenue growth of 10.1% was driven by strong demand for Biologics Testing Solutions services, with Microbial Solutions revenue also increasing.

In the first quarter of 2022, the Manufacturing segment’s GAAP operating margin decreased to 24.0% from 33.8% in the first quarter of 2021. On a non-GAAP basis, the operating margin decreased to 33.1% from 35.5% in the first quarter of 2021. The GAAP and non-GAAP operating margin decreases were driven primarily by the additions of Cognate and Vigene. Higher amortization and other integration costs associated with these acquisitions also contributed to the GAAP operating margin decline.


Updates 2022 Guidance

The Company is updating its 2022 financial guidance, which was previously provided on February 16, 2022. Reported revenue growth guidance is being increased by 50 basis points to 13.5% to 15.5% to reflect the Explora BioLabs acquisition, which was completed on April 5, 2022, partially offset by unfavorable movements in foreign currency translation. Organic revenue growth guidance remains unchanged for 2022.

The Company is maintaining its non-GAAP earnings per share guidance as a result of its first-quarter financial performance that was in line with prior expectations and an outlook of accelerating revenue growth during the remainder of the year. The 2022 non-GAAP earnings per share outlook includes a higher-than-expected tax rate, due principally to a lower excess tax benefit associated with stock-based compensation in the first quarter, as well as increased interest expense due to higher rate assumptions for the year. GAAP earnings per share guidance is being lowered to reflect amortization and other acquisition-related costs associated with Explora BioLabs, as well as the first-quarter loss from venture capital and other strategic investments.

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

2022 GUIDANCE

CURRENT

PRIOR

Revenue growth, reported

13.5% – 15.5%

13.0% – 15.0%

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

~(1.0%)

Less: Impact of 53rd week in 2022

~(1.5)%

~(1.5%)

Unfavorable/(favorable) impact of foreign exchange

~1.5%

~1.0%

Revenue growth, organic (2)

12.5% – 14.5%

12.5% – 14.5%

GAAP EPS

$8.70 – $8.95

$9.20 – $9.45

Acquisition-related amortization (3)

$2.15 – $2.25

$1.90 – $2.10

Acquisition and integration-related adjustments (4)

~$0.25

~$0.10

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

$0.20

Other items (6)

~$0.15

~$0.10

Non-GAAP EPS

$11.50 – $11.75

$11.50 – $11.75

Cash flow from operating activities

~$810 million

~$810 million

Capital expenditures

~$360 million

~$360 million

Free cash flow

~$450 million

~$450 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, the 53rd week in 2022, and foreign currency translation.

(3) Acquisition-related amortization includes an estimate of $0.05-$0.15 for the impact of the Explora BioLabs acquisition because the preliminary purchase price allocation has not been completed.

(4) 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.

(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) These items primarily relate to charges associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure; environmental litigation costs related to the Microbial Solutions business; and severance and other costs related to the Company’s efficiency initiatives.

Webcast

Charles River has scheduled a live webcast on Wednesday, May 4th, 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.

Bank of America Healthcare Conference Presentation

Charles River will present at the Bank of America 2022 Healthcare Conference in Las Vegas, Nevada, on Wednesday, May 11th, at 1:20 p.m. PT (4:20pm 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, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP free cash flow. Non-GAAP financial measures exclude, but are not limited to, 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 pension plans; 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 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, 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, 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; 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 and 2022 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 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 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 Explora BioLabs); 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 the ongoing conflict between the Russian federation and Ukraine; 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 16, 2022, 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


March 26, 2022
March 27, 2021




 
Service revenue

$

720,485

 


$

626,581

 

Product revenue

 

193,444

 


 

197,985

 

Total revenue

 

913,929

 


 

824,566

 

Costs and expenses:


Cost of services provided (excluding amortization of intangible assets)

 

486,864

 


 

423,975

 

Cost of products sold (excluding amortization of intangible assets)

 

90,247

 


 

92,313

 

Selling, general and administrative

 

150,033

 


 

155,733

 

Amortization of intangible assets

 

38,007

 


 

28,842

 

Operating income

 

148,778

 


 

123,703

 

Other income (expense):


Interest income

 

127

 


 

35

 

Interest expense

 

(9,434

)


 

(29,719

)

Other expense, net

 

(28,625

)


 

(27,717

)

Income before income taxes

 

110,846

 


 

66,302

 

Provision for income taxes

 

15,620

 


 

2,367

 

Net income

 

95,226

 


 

63,935

 

Less: Net income attributable to noncontrolling interests

 

2,204

 


 

2,405

 

Net income attributable to common shareholders

$

93,022

 


$

61,530

 





 
Earnings per common share


Net income attributable to common shareholders:


Basic

$

1.84

 


$

1.23

 

Diluted

$

1.81

 


$

1.20

 





 
Weighted-average number of common shares outstanding;


Basic

 

50,640

 


 

49,980

 

Diluted

 

51,325

 


 

51,075

 


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 
SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)



 



 

March 26, 2022
December 25, 2021
Assets


Current assets:


Cash and cash equivalents

$

241,869

 


$

241,214

 

Trade receivables and contract assets, net of allowances for credit losses of $6,154 and $7,180, respectively

 

697,843

 


 

642,881

 

Inventories

 

221,175

 


 

199,146

 

Prepaid assets

 

90,496

 


 

93,543

 

Other current assets

 

81,703

 


 

97,311

 

Total current assets

 

1,333,086

 


 

1,274,095

 

Property, plant and equipment, net

 

1,321,618

 


 

1,291,068

 

Operating lease right-of-use assets, net

 

304,758

 


 

292,941

 

Goodwill

 

2,695,994

 


 

2,711,881

 

Client relationships, net

 

948,830

 


 

981,398

 

Other intangible assets, net

 

70,707

 


 

79,794

 

Deferred tax assets

 

43,404

 


 

40,226

 

Other assets

 

356,652

 


 

352,889

 

Total assets

$

7,075,049

 


$

7,024,292

 




 
Liabilities, Redeemable Noncontrolling Interests and Equity


Current liabilities:


Current portion of long-term debt and finance leases

$

2,642

 


$

2,795

 

Accounts payable

 

225,977

 


 

198,130

 

Accrued compensation

 

165,224

 


 

246,119

 

Deferred revenue

 

228,260

 


 

219,703

 

Accrued liabilities

 

227,203

 


 

228,797

 

Other current liabilities

 

144,533

 


 

137,641

 

Total current liabilities

 

993,839

 


 

1,033,185

 

Long-term debt, net and finance leases

 

2,676,165

 


 

2,663,564

 

Operating lease right-of-use liabilities

 

264,356

 


 

252,972

 

Deferred tax liabilities

 

230,949

 


 

239,720

 

Other long-term liabilities

 

239,015

 


 

242,859

 

Total liabilities

 

4,404,324

 


 

4,432,300

 

Redeemable noncontrolling interests

 

55,819

 


 

53,010

 

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; 50,911 shares issued and 50,800 shares outstanding as of March 26, 2022, and 50,480 shares issued and outstanding as of December 25, 2021

 

509

 


 

505

 

Additional paid-in capital

 

1,744,829

 


 

1,718,304

 

Retained earnings

 

1,073,773

 


 

980,751

 

Treasury stock, at cost, 111 and 0 shares, as of March 26, 2022 and December 25, 2021, respectively

 

(33,994

)


 

-

 

Accumulated other comprehensive loss

 

(174,933

)


 

(164,740

)

Total equity attributable to common shareholders

 

2,610,184

 


 

2,534,820

 

Noncontrolling interest

 

4,722

 


 

4,162

 

Total equity

 

2,614,906

 


 

2,538,982

 

Total liabilities, redeemable noncontrolling interests and equity

$

7,075,049

 


$

7,024,292

 


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 
SCHEDULE 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)




 


Three Months Ended


March 26, 2022
March 27, 2021

Cash flows relating to operating activities



Net income

$

95,226

 


$

63,935

 


Adjustments to reconcile net income to net cash provided by operating activities:



Depreciation and amortization

 

75,299

 


 

61,508

 


Stock-based compensation

 

14,619

 


 

13,189

 


Loss on debt extinguishment and other financing costs

 

1,028

 


 

26,907

 


Deferred income taxes

 

(7,563

)


 

(9,125

)


Loss on venture capital and strategic equity investments, net

 

13,903

 


 

16,719

 


Contingent consideration, fair value changes

 

(3,450

)


 

-

 


Other, net

 

5,211

 


 

496

 


Changes in assets and liabilities:



Trade receivables and contract assets, net

 

(57,942

)


 

5,598

 


Inventories

 

(23,164

)


 

(11,404

)


Accounts payable

 

40,932

 


 

9,622

 


Accrued compensation

 

(79,795

)


 

(37,360

)


Deferred revenue

 

12,078

 


 

5,006

 


Customer contract deposits

 

4,750

 


 

(5,446

)


Other assets and liabilities, net

 

11,498

 


 

30,584

 


Net cash provided by operating activities

 

102,630

 


 

170,229

 


Cash flows relating to investing activities



Acquisition of businesses and assets, net of cash acquired

 

-

 


 

(94,197

)


Capital expenditures

 

(80,464

)


 

(28,030

)


Purchases of investments and contributions to venture capital investments

 

(13,296

)


 

(16,550

)


Proceeds from sale of investments

 

205

 


 

-

 


Other, net

 

(4,450

)


 

781

 


Net cash used in investing activities

 

(98,005

)


 

(137,996

)


Cash flows relating to financing activities



Proceeds from long-term debt and revolving credit facility

 

962,005

 


 

1,954,011

 


Proceeds from exercises of stock options

 

12,199

 


 

19,612

 


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

 

(948,267

)


 

(1,714,195

)


Purchase of treasury stock

 

(33,994

)


 

(36,028

)


Payment of debt extinguishment and financing costs

 

-

 


 

(28,680

)


Other, net

 

(5,226

)


 

-

 


Net cash provided by financing activities

 

(13,283

)


 

194,720

 


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

 

5,740

 


 

10,953

 


Net change in cash, cash equivalents, and restricted cash

 

(2,918

)


 

237,906

 


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

 

246,314

 


 

233,119

 


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

$

243,396

 


$

471,025

 





 

Supplemental cash flow information:



Cash and cash equivalents

$

241,869

 


$

465,411

 


Restricted cash included in Other current assets

 

413

 


 

4,012

 


Restricted cash included in Other assets

 

1,114

 


 

1,602

 


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

$

243,396

 


$

471,025

 


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



March 26, 2022
March 27, 2021
Research Models and Services




Revenue

$

176,542

 


$

176,910

 


Operating income

 

47,882

 


 

44,935

 


Operating income as a % of revenue

 

27.1

%


 

25.4

%


Add back:




Amortization related to acquisitions

 

3,838

 


 

5,339

 


Severance

 

674

 


 

7

 


Acquisition related adjustments (2)

 

383

 


 

456

 


Total non-GAAP adjustments to operating income

$

4,895

 


$

5,802

 


Operating income, excluding non-GAAP adjustments

$

52,777

 


$

50,737

 


Non-GAAP operating income as a % of revenue

 

29.9

%


 

28.7

%






 

Depreciation and amortization

$

9,469

 


$

9,679

 


Capital expenditures

$

8,646

 


$

2,983

 






 
Discovery and Safety Assessment




Revenue

$

544,259

 


$

501,178

 


Operating income

 

104,986

 


 

90,949

 


Operating income as a % of revenue

 

19.3

%


 

18.1

%


Add back:




Amortization related to acquisitions

 

22,365

 


 

22,648

 


Severance

 

74

 


 

412

 


Acquisition related adjustments (2)

 

(2,923

)


 

5,270

 


Site consolidation costs, impairments and other items

 

69

 


 

147

 


Total non-GAAP adjustments to operating income

$

19,585

 


$

28,477

 


Operating income, excluding non-GAAP adjustments

$

124,571

 


$

119,426

 


Non-GAAP operating income as a % of revenue

 

22.9

%


 

23.8

%






 

Depreciation and amortization

$

46,789

 


$

44,608

 


Capital expenditures

$

48,930

 


$

17,040

 






 
Manufacturing Solutions




Revenue

$

193,128

 


$

146,478

 


Operating income

 

46,368

 


 

49,437

 


Operating income as a % of revenue

 

24.0

%


 

33.8

%


Add back:




Amortization related to acquisitions

 

11,898

 


 

2,214

 


Severance

 

107

 


 

294

 


Acquisition related adjustments (2)

 

4,142

 


 

42

 


Site consolidation costs, impairments and other items (3)

 

1,421

 


 

40

 


Total non-GAAP adjustments to operating income

$

17,568

 


$

2,590

 


Operating income, excluding non-GAAP adjustments

$

63,936

 


$

52,027

 


Non-GAAP operating income as a % of revenue

 

33.1

%


 

35.5

%






 

Depreciation and amortization

$

18,482

 


$

6,569

 


Capital expenditures

$

22,828

 


$

7,110

 






 
Unallocated Corporate Overhead

$

(50,458

)


$

(61,618

)


Add back:




Severance

 

1,087

 


 

(151

)


Acquisition related adjustments (2)

 

4,116

 


 

10,560

 


Total non-GAAP adjustments to operating expense

$

5,203

 


$

10,409

 


Unallocated corporate overhead, excluding non-GAAP adjustments

$

(45,255

)


$

(51,209

)






 
Total




Revenue

$

913,929

 


$

824,566

 


Operating income

 

148,778

 


 

123,703

 


Operating income as a % of revenue

 

16.3

%


 

15.0

%


Add back:




Amortization related to acquisitions

 

38,101

 


 

30,201

 


Severance

 

1,942

 


 

562

 


Acquisition related adjustments (2)

 

5,718

 


 

16,328

 


Site consolidation costs, impairments and other items (3)

 

1,490

 


 

187

 


Total non-GAAP adjustments to operating income

$

47,251

 


$

47,278

 


Operating income, excluding non-GAAP adjustments

$

196,029

 


$

170,981

 


Non-GAAP operating income as a % of revenue

 

21.4

%


 

20.7

%






 

Depreciation and amortization

$

75,299

 


$

61,508

 


Capital expenditures

$

80,464

 


$

28,030

 

(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 months ended March 26, 2022, which impacted Manufacturing Solutions.

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


March 26, 2022
March 27, 2021




 
Net income attributable to common shareholders

$

93,022

 


$

61,530

 

Add back:


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

 

47,251

 


 

47,278

 

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

 

-

 


 

25,979

 

Venture capital and strategic equity investment losses, net

 

13,903

 


 

16,719

 

Other (2)

 

357

 


 

(2,370

)

Tax effect of non-GAAP adjustments:


Non-cash tax provision related to international financing structure (3)

 

1,122

 


 

1,035

 

Tax effect of the remaining non-GAAP adjustments

 

(14,520

)


 

(21,013

)

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

$

141,135

 


$

129,158

 





 
Weighted average shares outstanding - Basic

 

50,640

 


 

49,980

 

Effect of dilutive securities:


Stock options, restricted stock units and performance share units

 

685

 


 

1,095

 

Weighted average shares outstanding - Diluted

 

51,325

 


 

51,075

 





 
Earnings per share attributable to common shareholders:


Basic

$

1.84

 


$

1.23

 

Diluted

$

1.81

 


$

1.20

 





 
Basic, excluding non-GAAP adjustments

$

2.79

 


$

2.58

 

Diluted, excluding non-GAAP adjustments

$

2.75

 


$

2.53

 

(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 in the three months ended March 26, 2022 related to the sale of RMS Japan operations in October 2021 and a gain on an immaterial divestiture which occured in the three months ended March 27, 2021.

(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 March 26, 2022
Total CRL
RMS Segment
DSA Segment
MS Segment









 
Revenue growth, reported

10.8 %


(0.2)%


8.6 %


31.8 %

Decrease (increase) due to foreign exchange

1.7 %


1.2 %


1.6 %


2.7 %

Contribution from acquisitions (2)

(4.7)%


- %


(0.7)%


(24.4)%

Impact of divestitures (3)

1.6 %


7.7 %


- %


- %

Non-GAAP revenue growth, organic (4)

9.4 %


8.7 %


9.5 %


10.1 %

(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)

  The Company sold its RMS Japan operations on October 12, 2021. This adjustment represents the revenue from this business for the applicable period in 2021.

(4)

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

 

Contacts

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

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