EX-99.1 2 a52380137ex99_1.htm EXHIBIT 99.1
Exhibit 99.1

Charles River Laboratories Announces Fourth-Quarter and Full-Year 2020 Results and Provides 2021 Guidance

– Fourth-Quarter Revenue of $791.0 Million and Full-Year Revenue of $2.92 Billion –

– Fourth-Quarter GAAP Earnings per Share of $2.81 and Non-GAAP Earnings per Share of $2.39 –

– Full-Year GAAP Earnings per Share of $7.20 and Non-GAAP Earnings per Share of $8.13 –

– Provides 2021 Guidance –

– Announces Definitive Agreement to Acquire Cognate BioServices, A Premier, Cell and Gene Therapy CDMO –

WILMINGTON, Mass.--(BUSINESS WIRE)--February 17, 2021--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2020 and provided guidance for 2021. For the quarter, revenue was $791.0 million, an increase of 14.4% from $691.1 million in the fourth quarter of 2019.

Acquisitions contributed 2.1% to consolidated fourth-quarter revenue growth. The impact of foreign currency translation benefited reported revenue growth by 2.0%. Excluding the effect of these items, organic revenue growth of 10.3% was driven by contributions from all three business segments.

On a GAAP basis, fourth-quarter net income attributable to common shareholders was $143.2 million, an increase of 78.2% from net income of $80.3 million for the same period in 2019. Fourth-quarter diluted earnings per share on a GAAP basis were $2.81, an increase of 74.5% from $1.61 for the fourth quarter of 2019. The increases in GAAP net income and earnings per share were driven primarily by higher revenue, operating income, and venture capital investment gains. GAAP earnings per share included a gain from the Company’s venture capital and other strategic investments of $1.01 per share in the fourth quarter of 2020, compared to $0.22 per share for the same period in 2019. The Company’s venture capital and other strategic investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income from continuing operations was $122.1 million for the fourth quarter of 2020, an increase of 22.0% from $100.1 million for the same period in 2019. Fourth‑quarter diluted earnings per share on a non-GAAP basis were $2.39, an increase of 18.9% from $2.01 per share for the fourth quarter of 2019. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating income, as well as a benefit from non-operating items, including a lower tax rate.

James C. Foster, Chairman, President and Chief Executive Officer, said, “2020 was an extraordinary year, in which we were able to successfully navigate the challenges of the COVID-19 pandemic and reinforce our position as the leading, non-clinical CRO. Our strong financial performance reflects the resilience of our business model and the robust demand environment, which was driven by clients intensifying their use of strategic outsourcing and partnering with us to move their critical research programs forward. Our focus on enhancing the value that we provide to clients has made us a trusted partner, and we expect that the robust demand trends will continue. As a result, we believe we are well positioned for an excellent start in 2021.”

Mr. Foster continued, “We are pleased to be expanding our early-stage research and manufacturing support portfolio into the complementary, high-growth cell and gene therapy CDMO sector. The planned acquisition of Cognate BioServices will create a premier scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research through CGMP production. We believe this strategic expansion of our portfolio will be highly synergistic with our existing capabilities, particularly for biologics testing. It will enhance our ability to achieve our long-term financial goals and deliver greater value to both clients and shareholders.”

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $156.7 million in the fourth quarter of 2020, an increase of 19.3% from $131.3 million in the fourth quarter of 2019. The HemaCare and Cellero acquisitions completed in 2020 contributed 11.2% to fourth-quarter RMS revenue. Organic revenue growth of 5.2% was driven by higher revenue for research models services, particularly Genetically Engineered Models and Services (GEMS), as well as higher sales volume for research models due to accelerated demand in all geographic regions, particularly in China. Global demand for research models improved both on a year-over-year and sequential basis, as clients returned to normalized order activity in all geographic regions following COVID-19-related disruptions earlier in the year, principally in the second quarter.

In the fourth quarter of 2020, the RMS segment’s GAAP operating margin decreased to 21.9% from 23.0% in the fourth quarter of 2019, primarily due to acquisition-related amortization costs associated with HemaCare and Cellero. On a non-GAAP basis, the operating margin increased to 25.1% from 24.6% in the fourth quarter of 2019. The non-GAAP operating margin increased primarily due to operating leverage from higher sales volume in the research models business, as well as the benefit of operating efficiency initiatives.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $495.0 million in the fourth quarter of 2020, an increase of 12.7% from $439.2 million in the fourth quarter of 2019. Organic revenue growth of 11.3% was primarily driven by robust demand from global biopharmaceutical and biotechnology clients in both the Discovery Services and Safety Assessment businesses.

In the fourth quarter of 2020, the DSA segment’s GAAP operating margin decreased to 18.4% from 19.1% in the fourth quarter of 2019. On a non-GAAP basis, the operating margin decreased to 23.2% from 25.6% in the fourth quarter of 2019. The GAAP and non-GAAP operating margin decreases were driven primarily by increased costs due in part to higher performance-based compensation expense, as well as the study mix in the Safety Assessment business.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $139.3 million in the fourth quarter of 2020, an increase of 15.5% from $120.6 million in the fourth quarter of 2019. Organic revenue growth of 12.4% was led by robust demand in the Biologics Testing Solutions (Biologics) business. Both the Microbial Solutions and Avian Vaccine businesses were also significant contributors to fourth-quarter revenue growth.

In the fourth quarter of 2020, the Manufacturing segment’s GAAP operating margin increased to 35.3% from 34.4% in the fourth quarter of 2019. On a non-GAAP basis, the operating margin increased to 37.3% from 37.2% in the fourth quarter of 2019. The GAAP and non-GAAP operating margin increases were driven primarily by operating leverage from higher revenue in the Biologics and Avian Vaccine businesses.

Full-Year Results

For 2020, revenue increased by 11.5% to $2.92 billion from $2.62 billion in 2019. Organic revenue growth was 7.0%.

On a GAAP basis, net income attributable to common shareholders was $364.3 million in 2020, an increase of 44.6% from $252.0 million in 2019. Diluted earnings per share on a GAAP basis in 2020 were $7.20, an increase of 42.0% from $5.07 in 2019. On a GAAP basis, the Company recorded a gain from venture capital and other strategic investments totaling $1.50 per share in 2020, compared to a gain of $0.30 in 2019.

On a non-GAAP basis, net income from continuing operations was $411.5 million in 2020, an increase of 23.1% from $334.4 million in 2019. Diluted earnings per share on a non-GAAP basis in 2020 were $8.13, an increase of 20.8% from $6.73 in 2019.

Research Models and Services (RMS)

For 2020, RMS revenue was $571.2 million, an increase of 6.3% from $537.1 million in 2019. Organic revenue growth declined by 3.3%, principally due to the impact of the COVID-19 pandemic.

On a GAAP basis, the RMS segment operating margin decreased to 18.0% in 2020 from 24.9% in 2019. On a non-GAAP basis, the operating margin decreased to 22.0% in 2020 from 26.2% in 2019.

Discovery and Safety Assessment (DSA)

For 2020, DSA revenue was $1.84 billion, an increase of 13.5% from $1.62 billion in 2019. Organic revenue growth was 9.4%.

On a GAAP basis, the DSA segment operating margin increased to 17.7% in 2020 from 16.0% in 2019. On a non-GAAP basis, the operating margin increased to 23.4% in 2020 from 22.0% in 2019.

Manufacturing Support (Manufacturing)

For 2020, Manufacturing revenue was $515.4 million, an increase of 10.8% from $465.1 million in 2019. Organic revenue growth was 10.4%.

On a GAAP basis, the Manufacturing segment operating margin increased to 35.2% in 2020 from 31.3% in 2019. On a non-GAAP basis, the operating margin increased to 37.4% in 2020 from 33.9% in 2019.

Planned Acquisition of Cognate BioServices

In a separate press release today, Charles River announced that it has signed a definitive agreement to acquire Cognate BioServices, Inc. for approximately $875 million in cash, subject to customary closing adjustments.

Cognate is a premier, cell and gene therapy CDMO offering comprehensive manufacturing solutions for cell therapies, as well as for production of plasmid DNA and other inputs in the CDMO value chain. The planned acquisition of Cognate will establish Charles River as a premier scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research through CGMP production.

Cognate is expected to generate annual revenue of approximately $140 million in 2021. By expanding into this high-growth sector, Cognate is expected to enhance Charles River’s growth potential by generating at least 25% compound annual revenue growth over the next five years. Cognate will be reported as part of Charles River’s Manufacturing Solutions segment.

2021 Guidance Excluding Cognate BioServices

The Company is providing the following revenue, earnings per share, and free cash flow guidance for 2021 excluding the financial impact of the planned acquisition of Cognate. The 2021 revenue growth outlook reflects a continuation of robust client demand trends, as well as a favorable comparison to last year’s revenue impact from the COVID-19 pandemic. Earnings per share in 2021 are expected to benefit from higher revenue and modest operating margin improvement, partially offset by a higher tax rate.

2021 GUIDANCE EXCLUDING COGNATE

 

Revenue growth, reported

12% – 14%

Less: Contribution from acquisitions (1)

(0.5%) – (1.0%)

Unfavorable/(favorable) impact of foreign exchange

(2.0%) – (2.5%)

Revenue growth, organic (2)

9% – 11%

GAAP EPS estimate (3)

$7.10 – $7.35

Acquisition-related amortization

$1.65 – $1.70

Acquisition-related adjustments (4)

$0.10 – $0.15

Other items (5)

~$0.10

Non-GAAP EPS estimate

$9.00 – $9.25

Free cash flow (6)

$415 – $435 million

Footnotes to Guidance Table:

(1) The contribution from acquisitions reflects only those acquisitions that have been completed.

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions and foreign currency translation.

(3) GAAP EPS guidance does not include an estimate for future gains or losses from venture capital and other strategic investments. Potential gains or losses are expected in 2021, but the Company does not forecast the future performance of these investments. Any future gains or losses would be excluded from non-GAAP results.

(4) These adjustments are related to the evaluation and integration of acquisitions, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with acquisition-related efficiency initiatives.

(5) These items primarily relate to charges of approximately $0.10 associated with U.S. and international tax legislation that necessitated changes to the Company’s international financing structure.

(6) Reconciliation of the current 2021 free cash flow guidance is as follows: Cash flow from operating activities of $595-$615 million, less capital expenditures of approximately $180 million, equates to free cash flow of $415-$435 million.

2021 Financial Impact of Cognate Acquisition

Based on the anticipated completion of the acquisition by the end of the first quarter of 2021, Cognate is expected to add approximately $110 million to Charles River’s 2021 consolidated revenue for the partial year. With this contribution from Cognate, Charles River’s reported revenue growth guidance is expected to increase to 16% to 18% for 2021.

The transaction is expected to be neutral to non-GAAP earnings per share in 2021, and therefore, is not expected to have a meaningful impact on the Company’s non-GAAP earnings per share guidance. Items excluded from non-GAAP earnings per share are expected to include all acquisition-related costs, which primarily include amortization of intangible assets, advisory fees, certain costs associated with efficiency initiatives, and certain third-party integration costs.

Webcast

Charles River has scheduled a live webcast on Wednesday, February 17th, 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, which exclude the amortization of intangible assets, and other charges related to our acquisitions; 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; executive transition costs; the write-off of deferred financing costs and fees related to debt financing; third-party costs associated with the remediation of unauthorized access into our information systems detected in March 2019; the non-cash tax benefit related to our international financing structure; charges related to the settlement of our U.S. pension plan; charges recorded in connection with the modification of our option to purchase equity in one of our joint ventures; investment gains or losses associated with our venture capital and other strategic equity investments; 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. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “organic revenue growth,” which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, and divestitures. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. Commencing in the first quarter of 2019, we exclude the performance of our venture capital and other strategic investments due to the determination that such investment gains or losses are not core to our overall operations. There are limitations in using non-GAAP financial measures, as they are not presented in accordance with generally accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. We believe that the financial impact of our acquisitions and divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, whether or not ultimately consummated) is often large relative to our overall financial performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities and their underlying associated costs, such as business acquisitions, generally occur periodically but on an unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. Presenting revenue on an organic basis allows investors to measure our revenue growth exclusive of acquisitions, divestitures, and foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company’s operations against the financial results of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations presented in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-GAAP results consistent with applicable rules and regulations. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in this press release, and can also be found on the Company’s website at ir.criver.com.

Caution Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “would,” “may,” “estimate,” “plan,” “outlook,” and “project,” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements also include statements regarding the impact of the COVID-19 pandemic; the projected future financial performance of Charles River and our specific businesses; the future demand for drug discovery and development products and services, including our expectations for future revenue trends; our expectations with respect to the impact of acquisitions, including the acquisition of HemaCare, Cellero, Distributed Bio, and Cognate BioServices on the Company, our service offerings, client perception, strategic relationships, revenue, revenue growth rates, and earnings; the development and performance of our services and products, including our investments in our portfolio; market and industry conditions including the outsourcing of services and spending trends by our clients; and Charles River’s future performance as delineated in our revised forward-looking guidance, and particularly our expectations with respect to revenue, the impact of foreign exchange, enhanced efficiency initiatives, and the assumptions surrounding the COVID-19 pandemic that form the basis for our revised annual guidance. Forward-looking statements are based on Charles River’s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the COVID-19 pandemic, its duration, its impact on our business, results of operations, financial condition, liquidity, business practices, operations, suppliers, third party service providers, clients, employees, industry, ability to meet future performance obligations, ability to efficiently implement advisable safety precautions, and internal controls over financial reporting; the COVID-19 pandemic’s impact on client demand, the global economy and financial markets; the ability to successfully integrate businesses we acquire; the timing and magnitude of our share repurchases; negative trends in research and development spending, negative trends in the level of outsourced services, or other cost reduction actions by our clients; the ability to convert backlog to revenue; special interest groups; contaminations; industry trends; new displacement technologies; USDA and FDA regulations; changes in law; the impact of Brexit; continued availability of products and supplies; loss of key personnel; interest rate and foreign currency exchange rate fluctuations; changes in tax regulation and laws; changes in generally accepted accounting principles; and any changes in business, political, or economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas. A further description of these risks, uncertainties, and other matters can be found in the Risk Factors detailed in Charles River's Annual Report on Form 10-K as filed on February 11, 2020 and the Quarterly Report on Form 10-Q as filed on October 29, 2020, 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 26, 2020   December 28, 2019   December 26, 2020   December 28, 2019

 
         
Service revenue

$

                           618,229

 


$

                          549,380

 

 

$

                      2,296,156

 

 

$

                      2,029,371

 

Product revenue

 

                              172,761

 


 

                             141,758

 

 

 

                            627,777

 

 

 

                            591,855

 

Total revenue

 

                              790,990

 


 

                             691,138

 

 

 

                         2,923,933

 

 

 

                         2,621,226

 

Costs and expenses:


 
 
Cost of services provided (excluding amortization of intangible assets)

 

                              408,242

 


 

                             357,636

 

 

 

                         1,533,230

 

 

 

                         1,371,699

 

Cost of products sold (excluding amortization of intangible assets)

 

                                82,780

 


 

                               71,188

 

 

 

                            317,162

 

 

 

                            291,216

 

Selling, general and administrative

 

                              143,033

 


 

                             129,598

 

 

 

                            528,935

 

 

 

                            517,622

 

Amortization of intangible assets

 

                                28,008

 


 

                               23,927

 

 

 

                            111,877

 

 

 

                              89,538

 

Operating income

 

                              128,927

 


 

                             108,789

 

 

 

                            432,729

 

 

 

                            351,151

 

Other income (expense):


 
 
Interest income

 

                                       63

 


 

                                    684

 

 

 

                                   834

 

 

 

                                1,522

 

Interest expense

 

                             (33,147

)


 

                            (24,362

)

 

 

                           (86,433

)

 

 

                           (60,882

)

Other income, net

 

                                76,584

 


 

                               20,454

 

 

 

                              99,984

 

 

 

                              12,293

 

Income from operations, before income taxes

 

                              172,427

 


 

                             105,565

 

 

 

                            447,114

 

 

 

                            304,084

 

Provision for income taxes

 

                                28,237

 


 

                               25,053

 

 

 

                              81,808

 

 

 

                              50,023

 

Net income

 

                              144,190

 


 

                               80,512

 

 

 

                            365,306

 

 

 

                            254,061

 

Less: Net income attributable to noncontrolling interests

 

                                     999

 


 

                                    164

 

 

 

                                1,002

 

 

 

                                2,042

 

Net income attributable to common shareholders

$

                           143,191

 


$

                            80,348

 

 

$

                         364,304

 

 

$

                         252,019

 


 
         
Earnings per common share


 
 
Net income attributable to common shareholders:


 
 
Basic

$

                                 2.88

 


$

                                1.64

 

 

$

                               7.35

 

 

$

                               5.17

 

Diluted

$

                                 2.81

 


$

                                1.61

 

 

$

                               7.20

 

 

$

                               5.07

 





 
   
Weighted-average number of common shares outstanding:


 
 
Basic

 

                                49,754

 


 

                               48,875

 

 

 

                              49,550

 

 

 

                              48,730

 

Diluted

 

                                51,028

 


 

                               49,867

 

 

 

                              50,611

 

 

 

                              49,693

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

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


   


   

December 26, 2020   December 28, 2019
Assets      
Current assets:
 
Cash and cash equivalents

$

                            228,424

 

 

$

                            238,014

 

Trade receivables, net of allowances for doubtful accounts of $6,702 and
$3,664, respectively

 

                               617,740

 

 

 

                               514,033

 

Inventories

 

                               185,695

 

 

 

                               160,660

 

Prepaid assets

 

                                 96,712

 

 

 

                                 52,588

 

Other current assets

 

                                 72,560

 

 

 

                                 56,030

 

Total current assets

 

                            1,201,131

 

 

 

                            1,021,325

 

Property, plant and equipment, net

 

                            1,124,358

 

 

 

                            1,044,128

 

Operating lease right-of-use assets, net

 

                               178,220

 

 

 

                               140,085

 

Goodwill

 

                            1,809,168

 

 

 

                            1,540,565

 

Client relationships, net

 

                               721,505

 

 

 

                               613,573

 

Other intangible assets, net

 

                                 66,094

 

 

 

                                 75,840

 

Deferred tax assets

 

                                 37,729

 

 

 

                                 44,659

 

Other assets

 

                               352,626

 

 

 

                               212,615

 

Total assets

$

                         5,490,831

 

 

$

                         4,692,790

 


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

$

                              50,214

 

 

$

                              38,545

 

Accounts payable

 

                               122,475

 

 

 

                               111,498

 

Accrued compensation

 

                               206,823

 

 

 

                               158,617

 

Deferred revenue

 

                               207,942

 

 

 

                               171,805

 

Accrued liabilities

 

                               149,820

 

 

 

                               139,118

 

Other current liabilities

 

                               102,477

 

 

 

                                 90,598

 

Total current liabilities

 

                               839,751

 

 

 

                               710,181

 

Long-term debt, net and finance leases

 

                            1,929,571

 

 

 

                            1,849,666

 

Operating lease right-of-use liabilities

 

                               155,595

 

 

 

                               116,252

 

Deferred tax liabilities

 

                               217,031

 

 

 

                               167,283

 

Other long-term liabilities

 

                               205,215

 

 

 

                               182,933

 

Total liabilities

 

                            3,347,163

 

 

 

                            3,026,315

 

Redeemable noncontrolling interests

 

                                 25,499

 

 

 

                                 28,647

 

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; 49,767 shares
issued and outstanding as of December 26, 2020 and 48,936 shares issued and
outstanding as of December 28, 2019

 

                                      498

 

 

 

                                      489

 

Additional paid-in capital

 

                            1,627,564

 

 

 

                            1,531,785

 

Retained earnings

 

                               625,414

 

 

 

                               280,329

 

Treasury stock, at cost, 0 shares as of December 26, 2020 and December 28, 2019

 

                                          -

 

 

 

                                          -

 

Accumulated other comprehensive loss

 

                            (138,874

)

 

 

                            (178,019

)

Total equity attributable to common shareholders

 

                            2,114,602

 

 

 

                            1,634,584

 

Noncontrolling interest

 

                                   3,567

 

 

 

                                   3,244

 

Total equity

 

                            2,118,169

 

 

 

                            1,637,828

 

Total liabilities, redeemable noncontrolling interests and equity

$

                         5,490,831

 

 

$

                         4,692,790

 

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

 

 

SCHEDULE 3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


 

Twelve Months Ended

December 26, 2020   December 28, 2019

     
Cash flows relating to operating activities
 
Net income

$

                           365,306

 

 

$

                           254,061

 

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

 

                              234,924

 

 

 

                              198,095

 

Stock-based compensation

 

                                56,341

 

 

 

                                57,271

 

Deferred income taxes

 

                                  (133

)

 

 

                             (21,895

)

Gain on venture capital and strategic equity investments, net

 

                           (100,861

)

 

 

                             (20,706

)

Other, net

 

                                17,273

 

 

 

                                  7,931

 

Changes in assets and liabilities:      
Trade receivables, net

 

                             (85,627

)

 

 

                               (8,323

)

Inventories

 

                             (18,379

)

 

 

                             (21,399

)

Accounts payable

 

                                     748

 

 

 

                                29,775

 

Accrued compensation

 

                                40,481

 

 

 

                                  3,394

 

Deferred revenue

 

                                28,647

 

 

 

                               (3,620

)

Customer contract deposits

 

                                  8,955

 

 

 

                             (10,898

)

Other assets and liabilities, net

 

                               (1,100

)

 

 

                                17,250

 

Net cash provided by operating activities

 

                              546,575

 

 

 

                              480,936

 

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

 

                           (418,628

)

 

 

                           (515,701

)

Capital expenditures

 

                           (166,560

)

 

 

                           (140,514

)

Purchases of investments and contributions to venture capital investments

 

                             (26,692

)

 

 

                             (22,341

)

Proceeds from sale of investments

 

                                11,401

 

 

 

                                     942

 

Other, net

 

                               (1,065

)

 

 

                               (3,888

)

Net cash used in investing activities

 

                           (601,544

)

 

 

                           (681,502

)

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

 

                           2,230,988

 

 

 

                           3,358,461

 

Proceeds from exercises of stock options

 

                                46,586

 

 

 

                                34,546

 

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

 

                        (2,200,400

)

 

 

                        (3,124,588

)

Payments on debt financing costs

 

                                         -

 

 

 

                               (6,593

)

Purchase of treasury stock

 

                             (23,979

)

 

 

                             (18,087

)

Other, net

 

                               (5,947

)

 

 

                             (11,802

)

Net cash provided by financing activities

 

                                47,248

 

 

 

                              231,937

 

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

 

                                     794

 

 

 

                                11,357

 

Net change in cash, cash equivalents, and restricted cash

 

                               (6,927

)

 

 

                                42,728

 

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

 

                              240,046

 

 

 

                              197,318

 

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

$

                           233,119

 

 

$

                           240,046

 


     
Supplemental cash flow information:

$

                           228,424

 

 

$

                           238,014

 

Cash and cash equivalents

 

                                  3,074

 

 

 

                                     431

 

Restricted cash included in Other current assets

 

                                  1,621

 

 

 

                                  1,601

 

Restricted cash included in Other assets

$

                           233,119

 

 

$

                           240,046

 

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


   
Cash paid for income taxes

$

                             60,059

 

 

$

                             54,060

 

Cash paid for interest

$

                             72,461

 

 

$

                             67,813

 

Non-cash investing and financing activities:
 
Additions to property, plant and equipment, net

$

                             25,614

 

 

$

                             21,447

 

Assets acquired under finance leases

$

                               1,571

 

 

$

                               4,819

 

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 26, 2020   December 28, 2019   December 26, 2020   December 28, 2019
Research Models and Services  
     
 

Revenue

$

                           156,697

 


$

                           131,317

 

 

$

                           571,152

 


$

                           537,089

 


Operating income

 

                                34,381

 


 

                                30,183

 

 

 

                              102,706

 


 

                              133,912

 


Operating income as a % of revenue

 

21.9

%


 

23.0

%

 

 

18.0

%


 

24.9

%


Add back:


 



Amortization related to acquisitions

 

                                  3,975

 


 

                                     339

 

 

 

                                19,556

 


 

                                  1,381

 


Severance

 

                                     118

 


 

                                  1,000

 

 

 

                                     645

 


 

                                  2,106

 


Acquisition related adjustments (2)(3)

 

                                     876

 


 

                                         -

 

 

 

                                  2,375

 


 

                                  2,201

 


Site consolidation costs, impairments and other items

 

                                         -

 


 

                                     786

 

 

 

                                     200

 


 

                                  1,043

 


Total non-GAAP adjustments to operating income

$

                               4,969

 

 

$

                               2,125

 

 

$

                             22,776

 

 

$

                               6,731

 


Operating income, excluding non-GAAP adjustments

$

                             39,350

 

 

$

                             32,308

 

 

$

                           125,482

 

 

$

                           140,643

 


Non-GAAP operating income as a % of revenue

 

25.1

%


 

24.6

%

 

 

22.0

%


 

26.2

%






 

 

Depreciation and amortization

$

                               9,747

 


$

                               4,999

 

 

$

                             37,080

 


$

                             19,197

 


Capital expenditures

$

                             13,902

 


$

                             12,010

 

 

$

                             29,487

 


$

                             26,989

 






 

 
Discovery and Safety Assessment


 



Revenue

$

                           495,004

 


$

                           439,202

 

 

$

                        1,837,428

 


$

                        1,618,995

 


Operating income

 

                                91,087

 


 

                                83,689

 

 

 

                              325,959

 


 

                              258,903

 


Operating income as a % of revenue

 

18.4

%


 

19.1

%

 

 

17.7

%


 

16.0

%


Add back:


 



Amortization related to acquisitions

 

                                21,978

 


 

                                22,357

 

 

 

                                90,304

 


 

                                80,424

 


Severance

 

                                     130

 


 

                                  4,778

 

 

 

                                  4,117

 


 

                                  7,311

 


Acquisition related adjustments (3)

 

                                     828

 


 

                                  1,614

 

 

 

                                  3,673

 


 

                                10,130

 


Site consolidation costs, impairments and other items

 

                                     726

 


 

                                         -

 

 

 

                                  6,598

 


 

                                  (207

)


Total non-GAAP adjustments to operating income

$

                             23,662

 

 

$

                             28,749

 

 

$

                           104,692

 

 

$

                             97,658

 


Operating income, excluding non-GAAP adjustments

$

                           114,749

 

 

$

                           112,438

 

 

$

                           430,651

 

 

$

                           356,561

 


Non-GAAP operating income as a % of revenue

 

23.2

%


 

25.6

%

 

 

23.4

%


 

22.0

%






 

 

Depreciation and amortization

$

                             43,784

 


$

                             39,908

 

 

$

                           168,922

 


$

                           151,139

 


Capital expenditures

$

                             59,217

 


$

                             41,713

 

 

$

                           105,653

 


$

                             86,843

 






 

 
Manufacturing Support


 



Revenue

$

                           139,289

 


$

                           120,619

 

 

$

                           515,353

 


$

                           465,142

 


Operating income

 

                                49,206

 


 

                                41,527

 

 

 

                              181,494

 


 

                              145,420

 


Operating income as a % of revenue

 

35.3

%


 

34.4

%

 

 

35.2

%


 

31.3

%


Add back:


 



Amortization related to acquisitions

 

                                  2,144

 


 

                                  2,260

 

 

 

                                  8,758

 


 

                                  9,062

 


Severance

 

                                     428

 


 

                                  1,102

 

 

 

                                  2,413

 


 

                                  1,651

 


Acquisition related adjustments (3)

 

                                         -

 


 

                                       68

 

 

 

                                  (421

)


 

                                     286

 


Site consolidation costs, impairments and other items

 

                                     151

 


 

                                  (103

)

 

 

                                     320

 


 

                                  1,382

 


Total non-GAAP adjustments to operating income

$

                               2,723

 

 

$

                               3,327

 

 

$

                             11,070

 

 

$

                             12,381

 


Operating income, excluding non-GAAP adjustments

$

                             51,929

 

 

$

                             44,854

 

 

$

                           192,564

 

 

$

                           157,801

 


Non-GAAP operating income as a % of revenue

 

37.3

%


 

37.2

%

 

 

37.4

%


 

33.9

%






 

 

Depreciation and amortization

$

                               6,647

 


$

                               6,007

 

 

$

                             25,904

 


$

                             23,584

 


Capital expenditures

$

                             12,302

 


$

                               9,318

 

 

$

                             26,287

 


$

                             23,617

 






 

 
Unallocated Corporate Overhead

$

                           (45,747

)


$

                           (46,610

)

 

$

                         (177,430

)


$

                         (187,084

)


Add back:


 



Severance and executive transition costs

 

                                     375

 


 

                                     390

 

 

 

                                     411

 


 

                                     390

 


Acquisition related adjustments (3)

 

                                  4,020

 


 

                                  3,634

 

 

 

                                13,996

 


 

                                26,822

 


Other items (4)

 

                                         -

 


 

                                     657

 

 

 

                                  (661

)


 

                                  2,065

 


Total non-GAAP adjustments to operating expense

$

                               4,395

 

 

$

                               4,681

 

 

$

                             13,746

 

 

$

                             29,277

 


Unallocated corporate overhead, excluding non-GAAP adjustments

$

                           (41,352

)

 

$

                           (41,929

)

 

$

                         (163,684

)

 

$

                         (157,807

)






 

 
Total


 



Revenue

$

                           790,990

 


$

                           691,138

 

 

$

                        2,923,933

 


$

                        2,621,226

 


Operating income

 

                              128,927

 


 

                              108,789

 

 

 

                              432,729

 


 

                              351,151

 


Operating income as a % of revenue

 

16.3

%


 

15.7

%

 

 

14.8

%


 

13.4

%


Add back:


 



Amortization related to acquisitions

 

                                28,097

 


 

                                24,956

 

 

 

                              118,618

 


 

                                90,867

 


Severance and executive transition costs

 

                                  1,051

 


 

                                  7,270

 

 

 

                                  7,586

 


 

                                11,458

 


Acquisition related adjustments (2)(3)

 

                                  5,724

 


 

                                  5,316

 

 

 

                                19,623

 


 

                                39,439

 


Site consolidation costs, impairments and other items (4)

 

                                     877

 


 

                                  1,340

 

 

 

                                  6,457

 


 

                                  4,283

 


Total non-GAAP adjustments to operating income

$

                             35,749

 

 

$

                             38,882

 

 

$

                           152,284

 

 

$

                           146,047

 


Operating income, excluding non-GAAP adjustments

$

                           164,676

 

 

$

                           147,671

 

 

$

                           585,013

 

 

$

                           497,198

 


Non-GAAP operating income as a % of revenue

 

20.8

%


 

21.4

%

 

 

20.0

%


 

19.0

%






 

 

Depreciation and amortization

$

                             60,876

 


$

                             51,833

 

 

$

                           234,924

 


$

                           198,095

 


Capital expenditures

$

                             87,854

 


$

                             63,839

 

 

$

                           166,560

 


$

                           140,514

 

(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 a $2.2 million charge recorded during fiscal 2019 in connection with the modification of the option to purchase the remaining 8% equity interest in Vital River.

(3)

  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.

(4)

  This amount relates to third-party costs, net of insurance reimbursements, associated with the remediation of the unauthorized access into the Company's information systems which was detected in March 2019.

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 26, 2020   December 28, 2019
December 26, 2020   December 28, 2019

 
 
 
 
Net income attributable to common shareholders

$

                           143,191

 


$

                             80,348

 


$

                           364,304

 


$

                           252,019

 

Add back:






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

 

                                35,749

 


 

                                38,882

 


 

                              152,284

 


 

                              146,047

 

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

 

                                         -

 


 

                                  1,605

 


 

                                         -

 


 

                                  1,605

 

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

 

                             (68,635

)


 

                             (14,983

)


 

                           (100,861

)


 

                             (20,707

)

Loss due to U.S. Pension termination

 

                                10,283

 


 

                                         -

 


 

                                10,283

 


 

                                         -

 

Tax effect of non-GAAP adjustments:






Non-cash tax provision (benefit) related to international financing structure (2)

 

                                  1,454

 


 

                                     581

 


 

                                  4,444

 


 

                             (19,787

)

Tax effect of the remaining non-GAAP adjustments

 

                                       87

 


 

                               (6,368

)


 

                             (18,953

)


 

                             (24,811

)

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

$

                           122,129

 


$

                           100,065

 


$

                           411,501

 


$

                           334,366

 


 
 
 
 
Weighted average shares outstanding - Basic

 

                                49,754

 


 

                                48,875

 


 

                                49,550

 


 

                                48,730

 

Effect of dilutive securities:






Stock options, restricted stock units and performance share units

 

                                  1,274

 


 

                                     992

 


 

                                  1,061

 


 

                                     963

 

Weighted average shares outstanding - Diluted

 

                                51,028

 


 

                                49,867

 


 

                                50,611

 


 

                                49,693

 


 
 
 
 
Earnings per share attributable to common shareholders:






Basic

$

                                 2.88

 


$

                                 1.64

 


$

                                 7.35

 


$

                                 5.17

 

Diluted

$

                                 2.81

 


$

                                 1.61

 


$

                                 7.20

 


$

                                 5.07

 








 
Basic, excluding non-GAAP adjustments

$

                                 2.45

 


$

                                 2.05

 


$

                                 8.30

 


$

                                 6.86

 

Diluted, excluding non-GAAP adjustments

$

                                 2.39

 


$

                                 2.01

 


$

                                 8.13

 


$

                                 6.73

 

(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 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)







 







 
For the three months ended December 26, 2020
Total CRL RMS Segment
DSA Segment
MS Segment


   
 
 
Revenue growth, reported

14.4 %

19.3 %


12.7 %


15.5 %

Decrease (increase) due to foreign exchange

(2.0)%

(2.9)%


(1.4)%


(3.1)%

Contribution from acquisitions (2)

(2.1)%

(11.2)%


- %


- %

Non-GAAP revenue growth, organic (3)

10.3 %

5.2 %


11.3 %


12.4 %



   
 
 
For the twelve months ended December 26, 2020
Total CRL RMS Segment
DSA Segment
MS Segment


   
 
 
Revenue growth, reported

11.5 %

6.3 %


13.5 %


10.8 %

Decrease (increase) due to foreign exchange

(0.4)%

(0.6)%


(0.4)%


(0.4)%

Contribution from acquisitions (2)

(4.1)%

(9.0)%


(3.7)%


- %

Non-GAAP revenue growth, organic (3)

7.0 %

(3.3)%


9.4 %


10.4 %

(1)

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

(2)

  The contribution from acquisitions reflects only completed acquisitions.

(3)

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

 

Contacts

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

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