Exhibit 99.1

Charles River Laboratories Announces Third-Quarter 2019 Results

– Third-Quarter Revenue of $668.0 Million –

– Third-Quarter GAAP Earnings per Share of $1.46 and Non-GAAP Earnings per Share of $1.69 –

– Updates 2019 Guidance –

WILMINGTON, Mass.--(BUSINESS WIRE)--November 6, 2019--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the third quarter of 2019. For the quarter, revenue was $668.0 million, an increase of 14.1% from $585.3 million in the third quarter of 2018.

Acquisitions, which principally included Citoxlab, contributed 7.5% to consolidated third-quarter revenue growth. The impact of foreign currency translation reduced reported revenue growth by 1.3%. Excluding the effect of these items, organic revenue growth of 7.9% was driven by contributions from all three business segments.

On a GAAP basis, third-quarter net income from continuing operations attributable to common shareholders was $72.8 million, an increase of 20.6% from net income of $60.4 million for the same period in 2018. Third-quarter diluted earnings per share on a GAAP basis were $1.46, an increase of 19.7% from $1.22 for the third quarter of 2018. The increases in GAAP net income and earnings per share were driven primarily by a non-cash, discrete tax benefit of $20.4 million, or $0.41 per share, related to the Company’s international financing structure, partially offset by higher acquisition-related costs. The Company’s venture capital investments represented a loss of $0.01 per share in the third quarter of 2019, compared to a gain of $0.08 for the same period in 2018. As previously disclosed, the Company’s venture capital investment performance has been excluded from non-GAAP results.

On a non-GAAP basis, net income from continuing operations was $83.8 million for the third quarter of 2019, an increase of 17.1% from $71.6 million for the same period in 2018. Third-quarter diluted earnings per share on a non-GAAP basis were $1.69, an increase of 16.6% from $1.45 per share for the third quarter of 2018. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue and operating margin improvement.

James C. Foster, Chairman, President and Chief Executive Officer, said, “We are pleased with our overall third-quarter results, which were highlighted by mid-teens reported revenue growth and high-single-digit organic revenue growth, consistent with our long-term targets, and non-GAAP operating margin expansion that represented a positive step towards achieving our two-year target. We have spent the past several years investing internally to support growing demand, while striving to improve the scalability of the business. As a result of these investments, we believe that we now have an enhanced ability to leverage top-line growth and drive greater efficiency, which will enable us to continue to improve our operating margins.”

“We are the early-stage CRO partner of choice for our clients’ drug research, development, and manufacturing support efforts due to our extensive scientific expertise, which we believe is unique and unparalleled in the early-stage CRO universe. The investments that we have made have also created a more efficient and responsive organization that provides flexible, customized solutions to our clients. We believe we are well positioned to maintain and enhance our market leadership position, as well as to achieve our long-term strategic and financial goals and generate greater shareholder returns,” Mr. Foster concluded.


Third-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $132.5 million in the third quarter of 2019, an increase of 4.5% from $126.8 million in the third quarter of 2018. Organic revenue growth was 5.8%, driven primarily by higher revenue for research model services, as well as increased demand for research models in China. Research model services benefited from robust growth in the Insourcing Solutions (IS) business, including the contribution from a large government contract, which commenced in September 2018. The revenue increase was partially offset by lower sales volume for research models outside of China, particularly to large biopharmaceutical clients.

In the third quarter of 2019, the RMS segment’s GAAP operating margin increased to 25.9% from 25.3% in the third quarter of 2018. On a non-GAAP basis, the operating margin increased to 26.5% from 25.9% in the third quarter of 2018. The GAAP and non-GAAP operating margin increases were driven primarily by the research models business and ongoing operating efficiency initiatives, partially offset by the large IS government contract.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $420.1 million in the third quarter of 2019, an increase of 19.3% from $352.3 million in the third quarter of 2018. Acquisitions contributed 12.5% to DSA revenue growth, driven by the Citoxlab acquisition. Organic revenue growth of 7.9% was driven by both the Discovery Services and Safety Assessment businesses. By client segment, the DSA revenue increase was driven primarily by robust demand from biotechnology clients.

In the third quarter of 2019, the DSA segment’s GAAP operating margin decreased to 15.5% from 17.9% in the third quarter of 2018. The GAAP operating margin decline was driven primarily by acquisition-related costs primarily related to the Citoxlab acquisition, including amortization of intangible assets. On a non-GAAP basis, the operating margin decreased to 22.1% from 22.6% in the third quarter of 2018. The non-GAAP operating margin decline was driven primarily by the acquisition of Citoxlab, which has a lower operating margin than the legacy Safety Assessment business.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $115.3 million in the third quarter of 2019, an increase of 8.6% from $106.2 million in the third quarter of 2018. Organic revenue growth was 10.6%, driven by robust demand in the Biologics Testing Solutions and Microbial Solutions businesses.

In the third quarter of 2019, the Manufacturing segment’s GAAP operating margin increased to 34.0% from 31.3% in the third quarter of 2018. On a non-GAAP basis, the operating margin increased to 36.4% from 33.4% in the third quarter of 2018. The GAAP and non-GAAP operating margin increases were driven primarily by enhanced operating efficiency in the Microbial Solutions business and operating leverage from higher revenue in Biologics Testing Solutions business.


Updates 2019 Guidance

The Company is updating 2019 financial guidance, which was previously provided on July 31, 2019.

The moderated revenue growth guidance reflects two primary factors: a greater headwind from foreign exchange that reduces the reported growth rate and a slight moderation of the organic revenue growth outlook. The Company continues to expect organic revenue growth will be in the high-single-digit range in 2019, and within the same ranges as its previous guidance for each of the business segments.

The Company is narrowing its GAAP earnings per share guidance to the lower end of its previous range due primarily to higher acquisition-related and efficiency costs, partially offset by the non-cash, discrete tax benefit in the third quarter related to its international financing structure. Non-GAAP earnings per share guidance is being narrowed to the upper end of the previous range to reflect the Company’s third-quarter operating performance.

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

2019 GUIDANCE

CURRENT

PRIOR

Revenue growth, reported

15.0% - 15.5%

16% - 17%

Less: Contribution from acquisitions (1)

8.5% - 9.0%

8.5% - 9.0%

Add: Negative impact of foreign exchange

1.5% - 2.0%

1.0% - 1.5%

Revenue growth, organic (2)

8.25% - 8.75%

8.5% - 9.5%

GAAP EPS estimate

$4.65-$4.75

$4.65-$4.80

Amortization of intangible assets (3)

~$1.35

$1.35-$1.40

Charges related to global efficiency initiatives (4)

$0.20-$0.25

~$0.07

Acquisition-related adjustments (5)

$0.72-$0.75

$0.40-$0.45

Other items (6)

~$0.05

~$0.03

Venture capital investment (gains)/losses (7)

(~$0.08)

(~$0.09)

Discrete tax benefit (8)

($0.41)

--

Non-GAAP EPS estimate

$6.50 - $6.60

$6.45 - $6.60

Free cash flow (9)

$310 - $320 million

$310 - $320 million

Footnotes to Guidance Table:

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

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

(3) Amortization of intangible assets includes an estimate of approximately $0.20 for the impact of the Citoxlab acquisition based on the preliminary purchase price allocation.

(4) These charges, which primarily include severance and other costs, relate primarily to the Company’s planned efficiency initiatives. Other projects in support of global productivity and efficiency initiatives are expected, but these charges reflect only the decisions that have already been finalized.

(5) 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. In addition, these adjustments include a charge associated with modification of a purchase option for the remaining 8% equity interest in Vital River. These costs are partially offset by the net impact of discrete tax items.

(6) Other items include 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. In addition, other items include the write-off of deferred financing costs and fees related to debt financing.

(7) Venture capital investment performance only includes recognized gains or losses. The Company does not forecast future venture capital investment gains or losses.

(8) This item includes a non-cash, discrete tax benefit related to the Company’s international financing structure. The Company recorded a $20.4 million deferred tax asset relating to foreign indefinite-lived tax loss carryforwards, which it now expects to utilize in the future.

(9) The reconciliation of the current 2019 free cash flow guidance is as follows: Cash flow from operating activities of $450-$460 million, less capital expenditures of approximately $140 million, equates to free cash flow of $310-$320 million.


Webcast

Charles River has scheduled a live webcast on Wednesday, November 6, at 9:00 a.m. ET to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. You can also find the associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

Non-GAAP Reconciliations/Discontinued Operations

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. In addition, the Company reports results from continuing operations, which exclude results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a discontinued operation.


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; 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; and investment gains or losses associated with our venture capital investments. This press release also refers to our revenue in both a GAAP and non-GAAP basis: “constant currency,” which we define as reported revenue growth adjusted for the impact of foreign currency translation, and “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 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 projected future financial performance of Charles River and our specific businesses, including revenue (on both a reported, constant-currency, and organic growth basis), operating margins, earnings per share, the expected impact of foreign exchange rates, and the expected benefit of our life science venture capital investments; 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 Citoxlab, 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; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings; the impact of U.S. tax reform enacted in the fourth quarter of 2017; 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, and enhanced efficiency initiatives. Forward-looking statements are based on Charles River’s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the ability to successfully integrate businesses we acquire; risks and uncertainties associated with the unauthorized access into its information systems reported on April 30, 2019, including the timing and effectiveness of adding enhanced security features and monitoring procedures, the status and effectiveness of the ongoing remediation process, the percentage of clients affected by the unauthorized access, and the potential revenue and financial impact related to the incident; the ability to execute our efficiency initiatives on an effective and timely basis (including divestitures and site closures); 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 13, 2019 and the Quarterly Report on Form 10-Q as filed on July 31, 2019, 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 news release except as required by law.


About Charles River

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


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.



   

   

   
 
SCHEDULE 1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except for per share data)



   

   

   
 


Three Months Ended
Nine Months Ended


September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018



   

   

   
 
Service revenue

$

 

523,169

 


$

 

443,038

 


$

 

1,479,991

 


$

 

1,226,948

 

Product revenue

 

144,782

 


 

142,257

 


 

450,097

 


 

437,618

 

Total revenue

 

667,951

 


 

585,295

 


 

1,930,088

 


 

1,664,566

 

Costs and expenses:

   

   

   

Cost of services provided (excluding amortization of intangible assets)

 

351,894

 


 

298,018

 


 

1,014,063

 


 

844,130

 

Cost of products sold (excluding amortization of intangible assets)

 

69,941

 


 

71,077

 


 

220,028

 


 

206,786

 

Selling, general and administrative

 

129,509

 


 

113,033

 


 

388,024

 


 

336,936

 

Amortization of intangible assets

 

23,805

 


 

18,805

 


 

65,611

 


 

47,813

 

Operating income

 

92,802

 


 

84,362

 


 

242,362

 


 

228,901

 

Other income (expense):

   

   

   

Interest income

 

385

 


 

230

 


 

838

 


 

694

 

Interest expense

 

(5,698

)


 

(17,197

)


 

(36,520

)


 

(47,031

)

Other (expense) income, net

 

(14,254

)


 

5,910

 


 

(8,161

)


 

24,069

 

Income from continuing operations, before income taxes

 

73,235

 


 

73,305

 


 

198,519

 


 

206,633

 

(Benefit) provision for income taxes

 

(317

)


 

12,403

 


 

24,970

 


 

39,613

 

Income from continuing operations, net of income taxes

 

73,552

 


 

60,902

 


 

173,549

 


 

167,020

 

Income from discontinued operations, net of income taxes
  — 

  — 

  — 

 

1,506

 

Net income

 

73,552

 


 

60,902

 


 

173,549

 


 

168,526

 

Less: Net income attributable to noncontrolling interests

 

742

 


 

534

 


 

1,878

 


 

1,818

 

Net income attributable to common shareholders

$

 

72,810

 


$

 

60,368

 


$

 

171,671

 


$

 

166,708

 




   

   

   
 
Earnings per common share

   

   

   

Basic:

   

   

   

Continuing operations attributable to common shareholders

$

 

1.49

 


$

 

1.25

 


$

 

3.53

 


$

 

3.43

 

Discontinued operations


$


 

$


 

$


 

$


0.03

 

Net income attributable to common shareholders

$

 

1.49

 


$

 

1.25

 


$

 

3.53

 


$

 

3.47

 

Diluted:

   

   

   

Continuing operations attributable to common shareholders

$

 

1.46

 


$

 

1.22

 


$

 

3.46

 


$

 

3.36

 

Discontinued operations


$


 

$


 

$


 

$


0.03

 

Net income attributable to common shareholders

$

 

1.46

 


$

 

1.22

 


$

 

3.46

 


$

 

3.39

 




   

   

   
 
Weighted-average number of common shares outstanding;

   

   

   

Basic

 

48,818

 


 

48,310

 


 

48,682

 


 

48,098

 

Diluted

 

49,715

 


 

49,326

 


 

49,627

 


 

49,118

 


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

   
SCHEDULE 2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)



 
   



 
   


September 28, 2019
December 29, 2018
Assets

 

 
Current assets:

 

 
Cash and cash equivalents

$

164,759

 


$

195,442

 

Trade receivables, net

 

524,074

 


 

472,248

 

Inventories

 

155,526

 


 

127,892

 

Prepaid assets

 

51,274

 


 

53,447

 

Other current assets

 

76,774

 


 

48,807

 

Total current assets

 

972,407

 


 

897,836

 

Property, plant and equipment, net

 

1,008,047

 


 

932,877

 

Operating lease right-of-use assets, net

 

140,359

 


— 
Goodwill

 

1,521,619

 


 

1,247,133

 

Client relationships, net

 

620,868

 


 

537,945

 

Other intangible assets, net

 

81,257

 


 

72,943

 

Deferred tax assets

 

44,831

 


 

23,386

 

Other assets

 

193,174

 


 

143,759

 

Total assets

$

4,582,562

 


$

3,855,879

 




 
   
Liabilities, Redeemable Noncontrolling Interests and Equity

 

 
Current liabilities:

 

 
Current portion of long-term debt and finance leases

$

33,611

 


$

31,416

 

Accounts payable

 

107,231

 


 

66,250

 

Accrued compensation

 

130,292

 


 

137,212

 

Deferred revenue

 

166,095

 


 

145,139

 

Accrued liabilities

 

130,015

 


 

106,925

 

Other current liabilities

 

114,402

 


 

71,280

 

Total current liabilities

 

681,646

 


 

558,222

 

Long-term debt, net and finance leases

 

1,882,593

 


 

1,636,598

 

Operating lease right-of-use liabilities

 

116,868

 


— 
Deferred tax liabilities

 

165,480

 


 

143,635

 

Other long-term liabilities

 

171,243

 


 

179,121

 

Total liabilities

 

3,017,830

 


 

2,517,576

 

Redeemable noncontrolling interests

 

28,345

 


 

18,525

 

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;
48,976 shares issued and 48,837 shares outstanding as of September 28, 2019,
and 48,210 shares issued and 48,209 shares outstanding as of December 29, 2018

 

490

 


 

482

 

Additional paid-in capital

 

1,514,620

 


 

1,447,512

 

Retained earnings

 

213,767

 


 

42,096

 

Treasury stock, at cost, 139 and 1 shares, as of September 28, 2019 and December 29, 2018, respectively

 

(18,094

)


 

(55

)

Accumulated other comprehensive loss

 

(178,470

)


 

(172,703

)

Total equity attributable to common shareholders

 

1,532,313

 


 

1,317,332

 

Noncontrolling interest

 

4,074

 


 

2,446

 

Total equity

 

1,536,387

 


 

1,319,778

 

Total liabilities, redeemable noncontrolling interests and equity

$

4,582,562

 


$

3,855,879

 


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.



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



 
   


Nine Months Ended


September 28, 2019
September 29, 2018
Cash flows relating to operating activities

 

 
Net income

$

173,549

 


$

168,526

 

Less: Income from discontinued operations, net of income taxes
— 

 

1,506

 

Income from continuing operations, net of income taxes

 

173,549

 


 

167,020

 

Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

 

 
Depreciation and amortization

 

146,262

 


 

120,198

 

Stock-based compensation

 

43,429

 


 

35,908

 

Deferred income taxes

 

(25,092

)


 

(10,385

)

Gain on venture capital investments

 

(5,724

)


 

(22,760

)

Other, net

 

4,865

 


 

10,036

 

Changes in assets and liabilities:

 

 
Trade receivables, net

 

(24,491

)


 

(30,318

)

Inventories

 

(12,981

)


 

(10,340

)

Accounts payable

 

24,481

 


 

(5,322

)

Accrued compensation

 

(23,320

)


 

6,088

 

Deferred revenue

 

(1,556

)


 

33,491

 

Customer contract deposits

 

(7,586

)


 

34,455

 

Other assets and liabilities, net

 

8,423

 


 

(26,904

)

Net cash provided by operating activities

 

300,259

 


 

301,167

 

Cash flows relating to investing activities

 

 
Acquisition of businesses and assets, net of cash acquired

 

(515,647

)


 

(822,611

)

Capital expenditures

 

(76,675

)


 

(71,378

)

Purchases of investments and contributions to venture capital investments

 

(17,664

)


 

(20,535

)

Proceeds from sale of investments

 

15

 


 

30,595

 

Other, net

 

(660

)


 

(118

)

Net cash used in investing activities

 

(610,631

)


 

(884,047

)

Cash flows relating to financing activities

 

 
Proceeds from long-term debt and revolving credit facility

 

2,071,175

 


 

2,392,201

 

Proceeds from exercises of stock options

 

26,982

 


 

30,228

 

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

 

(1,798,620

)


 

(1,832,805

)

Payment of debt financing costs
— 

 

(18,337

)

Purchase of treasury stock

 

(18,040

)


 

(13,791

)

Other, net

 

(10,516

)


— 
Net cash provided by financing activities

 

270,981

 


 

557,496

 

Discontinued operations

 

 
Net cash used in operating activities from discontinued operations
— 

 

(3,735

)

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

 

8,793

 


 

4,664

 

Net change in cash, cash equivalents, and restricted cash

 

(30,598

)


 

(24,455

)

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

 

197,318

 


 

166,331

 

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

$

166,720

 


$

141,876

 




 
   
Supplemental cash flow information:

 

 
Cash and cash equivalents

$

164,759

 


$

138,866

 

Restricted cash included in Other current assets

 

534

 


 

426

 

Restricted cash included in Other assets

 

1,427

 


 

2,584

 

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

$

166,720

 


$

141,876

 


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.








 
SCHEDULE 4
RECONCILIATION OF GAAP TO NON-GAAP
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)(1)
(in thousands, except percentages)








 


Three Months Ended
Nine Months Ended


September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018
Research Models and Services







Revenue

$

132,546

 


$

126,811

 


$

405,772

 


$

391,195

 

Operating income

 

34,385

 


 

32,121

 


 

103,729

 


 

104,893

 

Operating income as a % of revenue

 

25.9

%


 

25.3

%


 

25.6

%


 

26.8

%

Add back:







Amortization related to acquisitions

 

341

 


 

385

 


 

1,042

 


 

1,202

 

Severance

 

381

 


 

65

 


 

1,106

 


 

808

 

Acquisition related adjustments (2)






 

2,201

 




Site consolidation costs, impairments and other items



 

238

 


 

257

 


 

822

 

Total non-GAAP adjustments to operating income

$

722

 


$

688

 


$

4,606

 


$

2,832

 

Operating income, excluding non-GAAP adjustments

$

35,107

 


$

32,809

 


$

108,335

 


$

107,725

 

Non-GAAP operating income as a % of revenue

 

26.5

%


 

25.9

%


 

26.7

%


 

27.5

%









 
Depreciation and amortization

$

4,895

 


$

4,811

 


$

14,198

 


$

14,565

 

Capital expenditures

$

5,818

 


$

8,166

 


$

14,979

 


$

18,105

 









 
Discovery and Safety Assessment







Revenue

$

420,079

 


$

352,257

 


$

1,179,793

 


$

958,665

 

Operating income

 

64,995

 


 

62,909

 


 

175,214

 


 

160,391

 

Operating income as a % of revenue

 

15.5

%


 

17.9

%


 

14.9

%


 

16.7

%

Add back:







Amortization related to acquisitions

 

21,560

 


 

16,204

 


 

58,067

 


 

39,796

 

Severance

 

1,848

 


 

30

 


 

2,533

 


 

973

 

Acquisition related adjustments (3)

 

4,524

 


 

269

 


 

8,516

 


 

1,466

 

Site consolidation costs, impairments and other items

 

(207

)


 

26

 


 

(207

)


 

(117

)

Total non-GAAP adjustments to operating income

$

27,725

 


$

16,529

 


$

68,909

 


$

42,118

 

Operating income, excluding non-GAAP adjustments

$

92,720

 


$

79,438

 


$

244,123

 


$

202,509

 

Non-GAAP operating income as a % of revenue

 

22.1

%


 

22.6

%


 

20.7

%


 

21.1

%









 
Depreciation and amortization

$

39,898

 


$

31,433

 


$

111,231

 


$

83,262

 

Capital expenditures

$

21,141

 


$

10,800

 


$

45,130

 


$

34,496

 









 
Manufacturing Support







Revenue

$

115,326

 


$

106,227

 


$

344,523

 


$

314,706

 

Operating income

 

39,253

 


 

33,266

 


 

103,893

 


 

95,904

 

Operating income as a % of revenue

 

34.0

%


 

31.3

%


 

30.2

%


 

30.5

%

Add back:







Amortization related to acquisitions

 

2,204

 


 

2,217

 


 

6,802

 


 

6,816

 

Severance

 

248

 





 

549

 


 

870

 

Acquisition related adjustments (3)

 

62

 


 

(15

)


 

218

 




Site consolidation costs, impairments and other items

 

180

 





 

1,485

 


 

159

 

Total non-GAAP adjustments to operating income

$

2,694

 


$

2,202

 


$

9,054

 


$

7,845

 

Operating income, excluding non-GAAP adjustments

$

41,947

 


$

35,468

 


$

112,947

 


$

103,749

 

Non-GAAP operating income as a % of revenue

 

36.4

%


 

33.4

%


 

32.8

%


 

33.0

%









 
Depreciation and amortization

$

5,990

 


$

5,709

 


$

17,577

 


$

17,313

 

Capital expenditures

$

6,421

 


$

2,709

 


$

14,299

 


$

12,731

 









 
Unallocated Corporate Overhead

$

(45,831

)


$

(43,934

)


$

(140,474

)


$

(132,287

)

Add back:







Severance



 

4,619

 





 

5,278

 

Acquisition related adjustments (3)

 

5,296

 


 

1,801

 


 

23,188

 


 

15,698

 

Other items (4)

$

379

 


$



$

1,408

 


$


Total non-GAAP adjustments to operating expense

$

5,675

 


$

6,420

 


$

24,596

 


$

20,976

 

Unallocated corporate overhead, excluding non-GAAP adjustments

$

(40,156

)


$

(37,514

)


$

(115,878

)


$

(111,311

)









 
Total







Revenue

$

667,951

 


$

585,295

 


$

1,930,088

 


$

1,664,566

 

Operating income

$

92,802

 


$

84,362

 


$

242,362

 


$

228,901

 

Operating income as a % of revenue

 

13.9

%


 

14.4

%


 

12.6

%


 

13.8

%

Add back:







Amortization related to acquisitions

 

24,105

 


 

18,806

 


 

65,911

 


 

47,814

 

Severance and executive transition costs

 

2,477

 


 

4,714

 


 

4,188

 


 

7,929

 

Acquisition related adjustments (2)(3)

 

9,882

 


 

2,055

 


 

34,123

 


 

17,164

 

Site consolidation costs, impairments and other items (4)

 

352

 


 

264

 


 

2,943

 


 

864

 

Total non-GAAP adjustments to operating income

$

36,816

 


$

25,839

 


$

107,165

 


$

73,771

 

Operating income, excluding non-GAAP adjustments

$

129,618

 


$

110,201

 


$

349,527

 


$

302,672

 

Non-GAAP operating income as a % of revenue

 

19.4

%


 

18.8

%


 

18.1

%


 

18.2

%









 
Depreciation and amortization

$

51,758

 


$

43,592

 


$

146,262

 


$

120,198

 

Capital expenditures

$

35,163

 


$

22,439

 


$

76,675

 


$

71,378

 

(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 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
Nine Months Ended


September 28, 2019
September 29, 2018
September 28, 2019
September 29, 2018



 

 

 
   
Net income attributable to common shareholders

$

72,810

 


$

60,368

 


$

171,671

 


$

166,708

 

Less: Income from discontinued operations, net of income taxes
— 

— 

— 

 

1,506

 

Net income from continuing operations attributable to common shareholders

 

72,810

 


 

60,368

 


 

171,671

 


 

165,202

 

Add back:

 

 

 

 
Non-GAAP adjustments to operating income (Refer to Schedule 4)

 

36,816

 


 

25,839

 


 

107,165

 


 

73,771

 

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

— 

— 

 

5,060

 

Venture capital (gains) losses

 

598

 


 

(5,376

)


 

(5,724

)


 

(22,760

)

Tax effect of non-GAAP adjustments:

 

 

 

 
Tax effect from U.S. Tax Reform (2)
— 

 

(2,800

)


— 

 

(2,800

)

Tax effect from divestiture of CDMO business
— 

 

(1,000

)


— 

 

(1,000

)

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

 

(20,368

)


— 

 

(20,368

)


— 
Tax effect of the remaining non-GAAP adjustments

 

(6,073

)


 

(5,476

)


 

(18,443

)


 

(11,822

)

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

$

83,783

 


$

71,555

 


$

234,301

 


$

205,651

 




 

 

 
   
Weighted average shares outstanding - Basic

 

48,818

 


 

48,310

 


 

48,682

 


 

48,098

 

Effect of dilutive securities:

 

 

 

 
Stock options, restricted stock units, performance share units and restricted stock

 

897

 


 

1,016

 


 

945

 


 

1,020

 

Weighted average shares outstanding - Diluted

 

49,715

 


 

49,326

 


 

49,627

 


 

49,118

 




 

 

 
   
Earnings per share from continuing operations attributable to common shareholders

 

 

 

 
Basic

$

1.49

 


$

1.25

 


$

3.53

 


$

3.43

 

Diluted

$

1.46

 


$

1.22

 


$

3.46

 


$

3.36

 




 

 

 
   
Basic, excluding non-GAAP adjustments

$

1.72

 


$

1.48

 


$

4.81

 


$

4.28

 

Diluted, excluding non-GAAP adjustments

$

1.69

 


$

1.45

 


$

4.72

 


$

4.19

 

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

(2)This adjustment is related to the refinement of one-time charges associated with the enactment of U.S. Tax Reform related to the transition tax on unrepatriated earnings (also known as the toll tax), and the revaluation of U.S. federal net deferred tax liabilities.

(3)This adjustment relates to the recognition of deferred tax assets expected to be utilized as a result of changes to the Company's international financing structure.


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.








 
SCHEDULE 6
RECONCILIATION OF GAAP REVENUE GROWTH
TO NON-GAAP REVENUE GROWTH, ORGANIC (UNAUDITED) (1)








 








 
Three Months Ended September 28, 2019
Total CRL
RMS Segment
DSA Segment
MS Segment








 
Revenue growth, reported

14.1

%


4.5

%


19.3

%


8.6

%

Decrease (increase) due to foreign exchange

1.3

%


1.3

%


1.1

%


2.2

%

Contribution from acquisitions (2)

(7.5

)%


%


(12.5

)%


(0.2

)%

Non-GAAP revenue growth, organic (3)

7.9

%


5.8

%


7.9

%


10.6

%









 
Nine Months Ended September 28, 2019
Total CRL
RMS Segment
DSA Segment
MS Segment








 
Revenue growth, reported

16.0

%


3.7

%


23.1

%


9.5

%

Decrease (increase) due to foreign exchange

1.9

%


2.3

%


1.4

%


3.1

%

Contribution from acquisitions (2)

(8.9

)%


%


(15.4

)%


(0.2

)%

Non-GAAP revenue growth, organic (3)

9.0

%


6.0

%


9.1

%


12.4

%

(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. Manufacturing Support includes an immaterial acquisition of an Australian Microbial Solutions business.

(3)Organic revenue growth is defined as reported revenue growth adjusted for acquisitions 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

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