– Third-Quarter Revenue of $743.3 Million
–
– Third-Quarter GAAP Earnings per Share of
$2.03 and Non-GAAP Earnings per Share of $2.33 –
– Increases 2020 Guidance –
Charles River Laboratories International, Inc. (NYSE: CRL) today
reported its results for the third quarter of 2020. For the
quarter, revenue was $743.3 million, an increase of 11.3% from
$668.0 million in the third quarter of 2019.
Acquisitions contributed 2.2% to consolidated third-quarter
revenue growth. The impact of foreign currency translation
benefited reported revenue growth by 1.3%. Excluding the effect of
these items, organic revenue growth was 7.8%, driven primarily by
the Discovery and Safety Assessment and Manufacturing Support
segments, with Research Models and Services also contributing.
On a GAAP basis, third-quarter net income attributable to common
shareholders was $102.9 million, an increase of 41.3% from net
income of $72.8 million for the same period in 2019. Third-quarter
diluted earnings per share on a GAAP basis were $2.03, an increase
of 39.0% from $1.46 for the third quarter of 2019. The GAAP net
income and earnings per share increases were driven primarily by
higher revenue, operating margin improvement, and venture capital
investment gains. GAAP earnings per share included a gain from the
Company’s venture capital and other strategic investments of $0.29
per share in the third quarter of 2020, compared to a loss of $0.01
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 was $118.0 million for the third
quarter of 2020, an increase of 40.8% from $83.8 million for the
same period in 2019. Third‑quarter diluted earnings per share on a
non-GAAP basis were $2.33, an increase of 37.9% from $1.69 per
share for the third quarter of 2019. The non-GAAP net income and
earnings per share increases were driven primarily by higher
revenue and operating margin improvement, as well as a lower tax
rate.
James C. Foster, Chairman, President and Chief Executive
Officer, said, “Our exceptional third-quarter performance is
indicative of several important factors: that our flexible and
reliable outsourced solutions resonate with clients even more today
than ever before; that our research model clients are already
resuming their research activities; that the market environment
remains robust; and that we are generating greater operating
leverage across our businesses as a result of our efforts to build
a more scalable and nimble organization.”
“The COVID-19 crisis has emphasized the strength and resilience
of our business model, our differentiated portfolio, and our
unwavering focus on the client experience, which collectively are
enhancing our position as the leading, early stage contract
research organization. As our clients focus on scientific
innovation and invest more in their preclinical pipelines, we
believe we will remain their partner of choice to move their
early-stage programs forward,” Mr. Foster concluded.
Third-Quarter Segment Results
Research Models and Services (RMS)
Revenue for the RMS segment was $151.9 million in the third
quarter of 2020, an increase of 14.6% from $132.5 million in the
third quarter of 2019. The HemaCare and Cellero acquisitions, which
were completed in January 2020 and August 2020, respectively,
contributed 11.1% to third-quarter RMS revenue. Organic revenue
growth of 2.0% was driven primarily by higher research model
services revenue, particularly the Genetically Engineered Models
and Services (GEMS) business, as well as strong demand for research
models in China, which rebounded from the COVID-19 pandemic earlier
than other geographic regions. Demand for research models outside
of China improved significantly on a sequential basis as clients
resumed more normalized research activities following
COVID-19-related disruptions earlier in the year. As a result,
client ordering trends for research models moved closer to
pre-COVID-19 levels during the third quarter, particularly in
Europe, but remained moderately below prior-year levels.
In the third quarter of 2020, the RMS segment’s GAAP operating
margin decreased to 24.4% from 25.9% in the third quarter of 2019.
The decrease was primarily due to acquisition-related amortization
costs associated with HemaCare and Cellero. On a non-GAAP basis,
the operating margin increased to 27.7% from 26.5% in the third
quarter of 2019, primarily due to operating leverage from higher
revenue, as well as the benefit of operating efficiency
initiatives, including cost controls associated with our COVID-19
response.
Discovery and Safety Assessment (DSA)
Revenue for the DSA segment was $461.2 million in the third
quarter of 2020, an increase of 9.8% from $420.1 million in the
third quarter of 2019. Organic revenue growth of 8.6% was driven by
strong demand in both the Discovery Services and Safety Assessment
businesses.
In the third quarter of 2020, the DSA segment’s GAAP operating
margin increased to 19.6% from 15.5% in the third quarter of 2019.
On a non-GAAP basis, the operating margin increased to 25.2% from
22.1% in the third quarter of 2019. The GAAP and non-GAAP operating
margin increases were driven primarily by operating leverage from
higher revenue and the benefit of operating efficiency
initiatives.
Manufacturing Support (Manufacturing)
Revenue for the Manufacturing segment was $130.2 million in the
third quarter of 2020, an increase of 12.9% from $115.3 million in
the third quarter of 2019. Organic revenue growth was 11.5%, driven
primarily by robust demand in the Biologics Testing Solutions
(Biologics) business. Revenue for the Microbial Solutions business
increased in the third quarter and the growth rate improved from
the second-quarter level, due primarily to gradual improvement in
the backlog of delayed instrument installations related to the
COVID-19 pandemic.
In the third quarter of 2020, the Manufacturing segment’s GAAP
operating margin increased to 37.1% from 34.0% in the third quarter
of 2019. On a non-GAAP basis, the operating margin increased to
39.1% from 36.4% in the third quarter of 2019. The GAAP and
non-GAAP operating margin increases were driven primarily by
operating leverage from robust revenue growth in the Biologics
business, as well as contributions from the Avian Vaccine business.
The elimination of duplicate costs associated with last year’s
transition to the new Biologics facility also benefited the
year-over-year operating margin comparison.
Increases 2020 Guidance
The Company is increasing its 2020 financial guidance, which was
previously provided on August 5, 2020, primarily as a result of the
better-than-expected third quarter performance. The revenue loss
from the COVID-19 pandemic will be approximately $70 million in
2020, which is favorable to its prior estimate of approximately
$100 million.
The Company’s revenue, earnings per share, and free cash flow
guidance is as follows:
2020 GUIDANCE
CURRENT
PRIOR
Revenue growth, reported
9.5% – 10.5%
7.5% – 9.0%
Less: Contribution from acquisitions
(1)
(4.0%) – (4.5%)
~(4.0%)
Unfavorable/(favorable) impact of foreign
exchange
0.0% – (0.5%)
~0.5%
Revenue growth, organic (2)
5.0% – 6.0%
4.0% – 5.5%
GAAP EPS estimate
$5.80 – $5.90
$4.70 – $5.00
Acquisition-related amortization
$1.75 – $1.80
~$1.75
Charges related to global efficiency
initiatives (3)
~$0.15
$0.25 – $0.30
Acquisition-related adjustments (4)
$0.25 – $0.30
$0.20 – $0.25
Other items (5)
~$0.25
$0.25 – $0.32
Venture capital and other strategic
investment losses/(gains), net (6)
($0.49)
($0.20)
Non-GAAP EPS estimate
$7.75 – $7.85
$7.05 – $7.35
Free cash flow (7)
~$415 million
$350 – $365 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) 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.
(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
$0.15 associated with the planned termination of the Company’s U.S.
pension plan in the second half of 2020, as well as charges of
approximately $0.10 primarily associated with U.S. and
international tax legislation that necessitated changes to the
Company’s international financing structure.
(6) Venture capital and other strategic investment performance
only includes recognized gains or losses. The Company does not
forecast the future performance of these investments.
(7) The reconciliation of the current 2020 free cash flow
guidance is as follows: Cash flow from operating activities of
approximately $545 million, less capital expenditures of
approximately $130 million, results in free cash flow of
approximately $415 million.
Webcast
Charles River has scheduled a live webcast on Thursday, October
29, at 9:30 a.m. ET to discuss matters relating to this press
release. To participate, please go to ir.criver.com and select the
webcast link. You can also find the associated slide presentation
and reconciliations of GAAP financial measures to non-GAAP
financial measures on the website.
Estimates of COVID-19
Impact
In this press release, the Company has provided its estimates
for the impact from the COVID-19 pandemic, including on the
Company's revenue. These estimates were determined using
methodologies and assumptions that vary depending on the specific
reporting segment and situation. For the Research Models and
Services segment, estimates were primarily based on comparisons to
daily historical research model sales volumes prior to the COVID-19
pandemic and the subsequent reduction in research model order
activity associated with our clients’ COVID-19 pandemic-related
site closures and/or their reduced on-site activity, as well as our
discussions with clients, particularly of our research model
services and HemaCare businesses, with regard to revenue
expectations and operational impacts from the COVID-19 pandemic.
For the Discovery and Safety Assessment segment, estimates were
based on multiple factors including, but not limited to,
discussions with clients with regard to the cause of delays to
discovery projects and safety assessment studies, location-specific
actions to ensure employee safety in our facilities, the impact of
remote versus in-person activities and services, and supply chain
delays and other resource constraints. For the Manufacturing
Support segment, estimates were based on multiple factors
including, but not limited to, analysis of the sales impact due to
the COVID-19 pandemic, assessments of idle instruments and the
related revenue streams due to the inability to access clients’
sites, as well as discussions with clients with regard to their
revenue expectations and operations. Further, we assumed for the
purposes of formulating these estimates that (1) restrictions on
economic activity, including stay-in-place orders and other similar
government actions, will largely not be re-imposed for the
remainder of the fiscal year; (2) the global economy, as it relates
to demand for Charles River’s products and services, will gradually
improve through the remainder of 2020; and (3) most of the
Company’s essential personnel will be able to work on-site; and (4)
that the Company will have adequate supplies and resources to
support its businesses. In addition, the estimated revenue loss
related to COVID-19 is expected to be partially offset by
incremental work on clients’ COVID-19 programs. Because these
estimates and assumptions involve risks and uncertainties, actual
events and results may differ materially from these estimates and
assumptions, and Charles River assumes no obligation and expressly
disclaims any duty to update them.
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; 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 planned 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
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 and Cellero, 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 August 5, 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 Nine Months Ended
September 26, 2020 September 28, 2019 September
26, 2020 September 28, 2019 Service revenue
$
580,774
$
523,169
$
1,677,927
$
1,479,991
Product revenue
162,526
144,782
455,016
450,097
Total revenue
743,300
667,951
2,132,943
1,930,088
Costs and expenses: Cost of services provided (excluding
amortization of intangible assets)
377,226
351,894
1,124,988
1,014,063
Cost of products sold (excluding amortization of intangible assets)
76,800
69,941
234,382
220,028
Selling, general and administrative
128,289
129,509
385,902
388,024
Amortization of intangible assets
28,232
23,805
83,869
65,611
Operating income
132,753
92,802
303,802
242,362
Other income (expense): Interest income
179
385
771
838
Interest expense
(18,867
)
(5,698
)
(53,286
)
(36,520
)
Other income (expense), net
21,211
(14,254
)
23,400
(8,161
)
Income from operations, before income taxes
135,276
73,235
274,687
198,519
Provision (benefit) for income taxes
32,665
(317
)
53,571
24,970
Net income
102,611
73,552
221,116
173,549
Less: Net (expense) income attributable to noncontrolling interests
(298
)
742
3
1,878
Net income attributable to common shareholders
$
102,909
$
72,810
$
221,113
$
171,671
Earnings per common share Net income attributable to common
shareholders: Basic
$
2.07
$
1.49
$
4.47
$
3.53
Diluted
$
2.03
$
1.46
$
4.39
$
3.46
Weighted-average number of common shares outstanding; Basic
49,703
48,818
49,482
48,682
Diluted
50,702
49,715
50,371
49,627
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SCHEDULE
2 CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
September 26, 2020 December 28, 2019 Assets
Current assets: Cash and cash equivalents
$
242,879
$
238,014
Trade receivables, net
572,058
514,033
Inventories
181,367
160,660
Prepaid assets
69,481
52,588
Other current assets
74,489
56,030
Total current assets
1,140,274
1,021,325
Property, plant and equipment, net
1,037,212
1,044,128
Operating lease right-of-use assets, net
168,379
140,085
Goodwill
1,777,642
1,540,565
Client relationships, net
732,408
613,573
Other intangible assets, net
70,370
75,840
Deferred tax assets
39,515
44,659
Other assets
247,538
212,615
Total assets
$
5,213,338
$
4,692,790
Liabilities, Redeemable Noncontrolling Interests and
Equity Current liabilities: Current portion of long-term debt
and finance leases
$
47,946
$
38,545
Accounts payable
96,758
111,498
Accrued compensation
191,295
158,617
Deferred revenue
172,336
171,805
Accrued liabilities
151,061
139,118
Other current liabilities
127,618
90,598
Total current liabilities
787,014
710,181
Long-term debt, net and finance leases
1,968,161
1,849,666
Operating lease right-of-use liabilities
146,578
116,252
Deferred tax liabilities
202,392
167,283
Other long-term liabilities
183,695
182,933
Total liabilities
3,287,840
3,026,315
Redeemable noncontrolling interests
24,033
28,647
Equity: Preferred stock, $0.01 par value; 20,000 shares authorized;
no shares issued andoutstanding
-
-
Common stock, $0.01 par value; 120,000 shares authorized; 49,882
shares issued and49,736 shares outstanding as of September 26,
2020, and 48,936 shares issued and48,936 shares outstanding as of
December 28, 2019
499
489
Additional paid-in capital
1,614,185
1,531,785
Retained earnings
501,442
280,329
Treasury stock, at cost, 146 and 0 shares, as of September 26, 2020
and December 28,2019, respectively
(23,905
)
-
Accumulated other comprehensive loss
(195,281
)
(178,019
)
Total equity attributable to common shareholders
1,896,940
1,634,584
Noncontrolling interest
4,525
3,244
Total equity
1,901,465
1,637,828
Total liabilities, redeemable noncontrolling interests and equity
$
5,213,338
$
4,692,790
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SCHEDULE 3 CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED) (in thousands) Nine Months
Ended September 26, 2020 September 28, 2019
Cash flows relating to operating activities Net income
$
221,116
$
173,549
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
174,048
146,262
Stock-based compensation
40,973
43,429
Deferred income taxes
(3,131
)
(25,092
)
Gain on venture capital and strategic equity investments, net
(32,226
)
(5,724
)
Other, net
16,902
4,865
Changes in assets and liabilities: Trade receivables, net
(51,456
)
(24,491
)
Inventories
(14,055
)
(12,981
)
Accounts payable
(12,327
)
24,481
Accrued compensation
29,438
(23,320
)
Deferred revenue
(1,308
)
(1,556
)
Customer contract deposits
9,887
(7,586
)
Other assets and liabilities, net
30,335
8,423
Net cash provided by operating activities
408,196
300,259
Cash flows relating to investing activities Acquisition of
businesses and assets, net of cash acquired
(419,146
)
(515,647
)
Capital expenditures
(78,706
)
(76,675
)
Purchases of investments and contributions to venture capital
investments
(19,887
)
(17,664
)
Proceeds from sale of investments
5,810
15
Other, net
(1,192
)
(660
)
Net cash used in investing activities
(513,121
)
(610,631
)
Cash flows relating to financing activities Proceeds from
long-term debt and revolving credit facility
1,411,954
2,071,175
Proceeds from exercises of stock options
43,806
26,982
Payments on long-term debt, revolving credit facility, and finance
lease obligations
(1,320,961
)
(1,798,620
)
Purchase of treasury stock
(23,905
)
(18,040
)
Other, net
(4,417
)
(10,516
)
Net cash provided by financing activities
106,477
270,981
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
5,825
8,793
Net change in cash, cash equivalents, and restricted cash
7,377
(30,598
)
Cash, cash equivalents, and restricted cash, beginning of period
240,046
197,318
Cash, cash equivalents, and restricted cash, end of period
$
247,423
$
166,720
Supplemental cash flow information: Cash and cash
equivalents
$
242,879
$
164,759
Restricted cash included in Other current assets
2,968
534
Restricted cash included in Other assets
1,576
1,427
Cash, cash equivalents, and restricted cash, end of period
$
247,423
$
166,720
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 26, 2020 September 28,
2019 September 26, 2020 September 28, 2019
Research Models and Services Revenue
$
151,910
$
132,546
$
414,455
$
405,772
Operating income
37,108
34,385
68,325
103,729
Operating income as a % of revenue
24.4 %
25.9 %
16.5 %
25.6 %
Add back: Amortization related to acquisitions
4,010
341
15,581
1,042
Severance
27
381
527
1,106
Acquisition related adjustments (2)(3)
922
-
1,499
2,201
Site consolidation costs, impairments and other items
(59)
-
200
257
Total non-GAAP adjustments to operating income
$
4,900
$
722
$
17,807
$
4,606
Operating income, excluding non-GAAP adjustments
$
42,008
$
35,107
$
86,132
$
108,335
Non-GAAP operating income as a % of revenue
27.7 %
26.5 %
20.8 %
26.7 %
Depreciation and amortization
$
9,455
$
4,895
$
27,333
$
14,198
Capital expenditures
$
3,552
$
5,818
$
15,585
$
14,979
Discovery and Safety Assessment Revenue
$
461,177
$
420,079
$
1,342,424
$
1,179,793
Operating income
90,348
64,995
234,872
175,214
Operating income as a % of revenue
19.6 %
15.5 %
17.5 %
14.9 %
Add back: Amortization related to acquisitions
22,191
21,560
68,326
58,067
Severance
423
1,848
3,987
2,533
Acquisition related adjustments (3)
461
4,524
2,845
8,516
Site consolidation costs, impairments and other items
2,938
(207)
5,872
(207)
Total non-GAAP adjustments to operating income
$
26,013
$
27,725
$
81,030
$
68,909
Operating income, excluding non-GAAP adjustments
$
116,361
$
92,720
$
315,902
$
244,123
Non-GAAP operating income as a % of revenue
25.2 %
22.1 %
23.5 %
20.7 %
Depreciation and amortization
$
42,707
$
39,898
$
125,138
$
111,231
Capital expenditures
$
15,532
$
21,141
$
46,436
$
45,130
Manufacturing Support Revenue
$
130,213
$
115,326
$
376,064
$
344,523
Operating income
48,246
39,253
132,288
103,893
Operating income as a % of revenue
37.1 %
34.0 %
35.2 %
30.2 %
Add back: Amortization related to acquisitions
2,150
2,204
6,614
6,802
Severance
333
248
1,985
549
Acquisition related adjustments (3)
-
62
(421)
218
Site consolidation costs, impairments and other items
169
180
169
1,485
Total non-GAAP adjustments to operating income
$
2,652
$
2,694
$
8,347
$
9,054
Operating income, excluding non-GAAP adjustments
$
50,898
$
41,947
$
140,635
$
112,947
Non-GAAP operating income as a % of revenue
39.1 %
36.4 %
37.4 %
32.8 %
Depreciation and amortization
$
6,655
$
5,990
$
19,257
$
17,577
Capital expenditures
$
5,787
$
6,421
$
13,985
$
14,299
Unallocated Corporate Overhead
$
(42,949)
$
(45,831)
$
(131,683)
$
(140,474)
Add back: Severance
36
-
36
-
Acquisition related adjustments (3)
2,124
5,296
9,976
23,188
Other items (4)
89
379
(661)
1,408
Total non-GAAP adjustments to operating expense
$
2,249
$
5,675
$
9,351
$
24,596
Unallocated corporate overhead, excluding non-GAAP adjustments
$
(40,700)
$
(40,156)
$
(122,332)
$
(115,878)
Total Revenue
$
743,300
$
667,951
$
2,132,943
$
1,930,088
Operating income
132,753
92,802
303,802
242,362
Operating income as a % of revenue
17.9 %
13.9 %
14.2 %
12.6 %
Add back: Amortization related to acquisitions
28,351
24,105
90,521
65,911
Severance
819
2,477
6,535
4,188
Acquisition related adjustments (2)(3)
3,507
9,882
13,899
34,123
Site consolidation costs, impairments and other items (4)
3,137
352
5,580
2,943
Total non-GAAP adjustments to operating income
$
35,814
$
36,816
$
116,535
$
107,165
Operating income, excluding non-GAAP adjustments
$
168,567
$
129,618
$
420,337
$
349,527
Non-GAAP operating income as a % of revenue
22.7 %
19.4 %
19.7 %
18.1 %
Depreciation and amortization
$
59,580
$
51,758
$
174,048
$
146,262
Capital expenditures
$
26,185
$
35,163
$
78,706
$
76,675
(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 in the nine months
ended September 28, 2019.
(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 26, 2020 September 28, 2019 September
26, 2020 September 28, 2019 Net income
attributable to common shareholders
$
102,909
$
72,810
$
221,113
$
171,671
Add back: Non-GAAP adjustments to operating income (Refer to
previous schedule)
35,814
36,816
116,535
107,165
Venture capital and strategic equity investment (gains) losses, net
(20,350
)
598
(32,226
)
(5,724
)
Tax effect of non-GAAP adjustments: Non-cash tax provision
(benefit) related to international financing structure (2)
804
(20,368
)
2,990
(20,368
)
Tax effect of the remaining non-GAAP adjustments
(1,216
)
(6,073
)
(19,040
)
(18,443
)
Net income attributable to common shareholders, excluding non-GAAP
adjustments
$
117,961
$
83,783
$
289,372
$
234,301
Weighted average shares outstanding - Basic
49,703
48,818
49,482
48,682
Effect of dilutive securities: Stock options, restricted stock
units and performance share units
999
897
889
945
Weighted average shares outstanding - Diluted
50,702
49,715
50,371
49,627
Earnings per share attributable to common shareholders:
Basic
$
2.07
$
1.49
$
4.47
$
3.53
Diluted
$
2.03
$
1.46
$
4.39
$
3.46
Basic, excluding non-GAAP adjustments
$
2.37
$
1.72
$
5.85
$
4.81
Diluted, excluding non-GAAP adjustments
$
2.33
$
1.69
$
5.74
$
4.72
(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) Three Months
Ended September 26, 2020 Total CRL RMS Segment
DSA Segment MS Segment Revenue growth,
reported
11.3 %
14.6 %
9.8 %
12.9 %
Increase due to foreign exchange
(1.3)%
(1.5)%
(1.2)%
(1.4)%
Contribution from acquisitions (2)
(2.2)%
(11.1)%
- %
- %
Non-GAAP revenue growth, organic (3)
7.8 %
2.0 %
8.6 %
11.5 %
Nine Months Ended September 26, 2020 Total CRL
RMS Segment DSA Segment MS Segment
Revenue growth, reported
10.5 %
2.1 %
13.8 %
9.2 %
Decrease due to foreign exchange
- %
- %
- %
0.5 %
Contribution from acquisitions (2)
(4.8)%
(8.2)%
(5.1)%
- %
Non-GAAP revenue growth, organic (3)
5.7 %
(6.1)%
8.7 %
9.7 %
(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/20201029005122/en/
Investor: 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
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