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

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– 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 –

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

-

2,201

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210217005517/en/

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