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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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(Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED September 26, 2020
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE TRANSITION PERIOD FROM TO |
Commission File No. 001-15943
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
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06-1397316 |
(State or Other Jurisdiction of
Incorporation or Organization) |
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(I.R.S. Employer
Identification No.) |
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251 Ballardvale Street |
Wilmington |
Massachusetts |
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01887 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(Registrant’s telephone number, including area code):
(781) 222-6000
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Securities registered pursuant to Section 12(b) of the
Act: |
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Title of each class |
Ticker symbol(s) |
Name of each exchange on which registered |
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Common stock, $0.01 par value |
CRL |
New York Stock Exchange |
Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past
90 days. Yes ☑ No ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File
required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the
registrant was required to submit such
files. Yes ☑ No ☐
Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange
Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If
an emerging growth company, indicate by a check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ☐
No ☑
As of October 23, 2020, there
were
49,742,626 shares
of the Registrant’s common stock outstanding.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 2020
TABLE OF CONTENTS
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Item |
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Page |
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PART I - FINANCIAL INFORMATION |
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1 |
Financial Statements |
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Condensed Consolidated Statements of Income (Unaudited) for the
three and nine months ended September 26, 2020 and September 28,
2019
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Condensed Consolidated Statements of Comprehensive Income
(Unaudited) for the three and nine months ended September 26, 2020
and September 28, 2019
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Condensed Consolidated Balance Sheets (Unaudited) as of September
26, 2020 and December 28, 2019
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Condensed Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 26, 2020 and September 28,
2019
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Condensed Consolidated Statements of Changes in Equity (Unaudited)
for the three and nine months ended September 26, 2020 and
September 28, 2019
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Notes to Unaudited Condensed Consolidated Financial
Statements
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2 |
Management’s Discussion and Analysis of Financial Condition and
Results of Operations |
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3 |
Quantitative and Qualitative Disclosure About Market
Risk |
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4 |
Controls and Procedures |
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PART II - OTHER INFORMATION |
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1 |
Legal Proceedings |
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1A |
Risk Factors |
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2 |
Unregistered Sales of Equity Securities and Use of
Proceeds |
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6 |
Exhibits |
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Signatures |
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Special Note on Factors Affecting Future Results
This Quarterly Report on Form 10-Q contains forward-looking
statements regarding future events and the future results of
Charles River Laboratories International, Inc. that are based
on our current expectations, estimates, forecasts and projections
about the industries in which we operate and the beliefs and
assumptions of our management. Words such as “expect,”
“anticipate,” “target,” “goal,” “project,” “intend,” “plan,”
“believe,” “seek,” “estimate,” “will,” “likely,” “may,” “designed,”
“would,” “future,” “can,” “could,” and other similar expressions
which are predictions of, indicate future events and trends or
which do not relate to historical matters, are intended to identify
such forward-looking statements. These statements are based on our
current expectations and beliefs and involve a number of risks,
uncertainties and assumptions that are difficult to
predict.
For example, we may use forward-looking statements when addressing
topics such as: the COVID-19 pandemic, its duration, its impact on
our business, results of operations, financial condition,
liquidity, use of our borrowings, business practices, operations,
suppliers, third party service providers, customers, 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 demand, the global economy and financial markets; goodwill and
asset impairments still under review; changes and uncertainties in
the global economy; future demand for drug discovery and
development products and services, including the outsourcing of
these services; our expectations regarding stock repurchases,
including the number of shares to be repurchased, expected timing
and duration, the amount of capital that may be expended and the
treatment of repurchased shares; the impact of unauthorized access
into our information systems, including the timing and
effectiveness of any enhanced security and monitoring; present
spending trends and other cost reduction activities by our clients;
future actions by our management; the outcome of contingencies;
changes in our business strategy, business practices and methods of
generating revenue; the development and performance of our services
and products; market and industry conditions, including competitive
and pricing trends; our strategic relationships with leading
pharmaceutical and biotechnology companies, venture capital
investments, and opportunities for future similar arrangements; our
cost structure; the impact of acquisitions, including HemaCare and
Cellero, LLC; our expectations with respect to revenue growth and
operating synergies (including the impact of specific actions
intended to cause related improvements); the impact of specific
actions intended to improve overall operating efficiencies and
profitability (and our ability to accommodate future demand with
our infrastructure), including gains and losses attributable to
businesses we plan to close, consolidate, divest or repurpose;
changes in our expectations regarding future stock option,
restricted stock, performance share units, and other equity grants
to employees and directors; expectations with respect to foreign
currency exchange; assessing (or changing our assessment of) our
tax positions for financial statement purposes; and our liquidity.
In addition, these statements include the impact of economic and
market conditions on us and our clients; the effects of our cost
saving actions and the steps to optimize returns to shareholders on
an effective and timely basis; and our ability to withstand the
current market conditions.
Forward-looking statements are predictions and are subject to
risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially and adversely from
those expressed in any forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this document, or in
the case of statements incorporated by reference, on the date of
the document incorporated by reference.
Factors that might cause or contribute to such differences include,
but are not limited to, those discussed in our Annual Report on
Form 10-K for the year ended December 28, 2019, under the
sections entitled “Our Strategy,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and in
this Quarterly Report on Form 10-Q, under the sections entitled
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors,” in our press releases,
and other financial filings with the Securities and Exchange
Commission. We have no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events, or risks. New information, future events, or risks
may cause the forward-looking events we discuss in this report not
to occur.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements. |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
Net income |
$ |
102,611 |
|
|
$ |
73,552 |
|
|
$ |
221,116 |
|
|
$ |
173,549 |
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment and other |
20,112 |
|
|
(15,889) |
|
|
(17,993) |
|
|
(9,075) |
|
|
Amortization of net loss and prior service benefit included in net
periodic cost for pension and other post-retirement benefit
plans |
1,411 |
|
|
365 |
|
|
4,150 |
|
|
1,113 |
|
|
Comprehensive income, before income taxes
|
124,134 |
|
|
58,028 |
|
|
207,273 |
|
|
165,587 |
|
|
Less: Income tax expense (benefit) related to items of other
comprehensive income |
3,201 |
|
|
(2,511) |
|
|
3,024 |
|
|
(1,381) |
|
|
Comprehensive income, net of income taxes |
120,933 |
|
|
60,539 |
|
|
204,249 |
|
|
166,968 |
|
|
Less: Comprehensive income (loss) related to noncontrolling
interests, net of income taxes |
591 |
|
|
(37) |
|
|
399 |
|
|
1,064 |
|
|
Comprehensive income attributable to common shareholders, net of
income taxes |
$ |
120,342 |
|
|
$ |
60,576 |
|
|
$ |
203,850 |
|
|
$ |
165,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements. |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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 |
|
|
|
Commitments and contingencies (Notes 2, 9, 11, 12, 16 and
17) |
|
|
|
|
|
Redeemable noncontrolling interests |
24,033 |
|
|
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; 49,882
shares issued and 49,736 shares outstanding as of September 26,
2020, and 48,936 shares issued and 48,936 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 |
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements. |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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 |
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements. |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional Paid-In Capital |
|
Retained Earnings |
|
Accumulated Other Comprehensive Income (Loss) |
|
Treasury Stock |
|
Total Equity Attributable to Common Shareholders |
|
Noncontrolling Interest |
|
Total Equity |
|
Shares |
|
Amount |
|
|
|
|
Shares |
|
Amount |
|
|
|
|
December 28, 2019 |
48,936 |
|
|
$ |
489 |
|
|
$ |
1,531,785 |
|
|
$ |
280,329 |
|
|
$ |
(178,019) |
|
|
— |
|
|
$ |
— |
|
|
$ |
1,634,584 |
|
|
$ |
3,244 |
|
|
$ |
1,637,828 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
50,769 |
|
|
— |
|
|
— |
|
|
— |
|
|
50,769 |
|
|
399 |
|
|
51,168 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(40,898) |
|
|
— |
|
|
— |
|
|
(40,898) |
|
|
— |
|
|
(40,898) |
|
|
Buy-out and contingent consideration recognition in connection with
redeemable noncontrolling interest |
— |
|
|
— |
|
|
(2,379) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,379) |
|
|
— |
|
|
(2,379) |
|
|
Issuance of stock under employee compensation plans |
694 |
|
|
7 |
|
|
22,616 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
22,623 |
|
|
— |
|
|
22,623 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
144 |
|
|
(23,675) |
|
|
(23,675) |
|
|
— |
|
|
(23,675) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
10,960 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
10,960 |
|
|
— |
|
|
10,960 |
|
|
March 28, 2020 |
49,630 |
|
|
496 |
|
|
1,562,982 |
|
|
331,098 |
|
|
(218,917) |
|
|
144 |
|
|
(23,675) |
|
|
1,651,984 |
|
|
3,643 |
|
|
1,655,627 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
67,435 |
|
|
— |
|
|
— |
|
|
— |
|
|
67,435 |
|
|
441 |
|
|
67,876 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,203 |
|
|
— |
|
|
— |
|
|
6,203 |
|
|
— |
|
|
6,203 |
|
|
Issuance of stock under employee compensation plans |
174 |
|
|
2 |
|
|
13,992 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
13,994 |
|
|
— |
|
|
13,994 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
(118) |
|
|
(118) |
|
|
— |
|
|
(118) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
13,143 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
13,143 |
|
|
— |
|
|
13,143 |
|
|
June 27, 2020 |
49,804 |
|
|
498 |
|
|
1,590,117 |
|
|
398,533 |
|
|
(212,714) |
|
|
145 |
|
|
(23,793) |
|
|
1,752,641 |
|
|
4,084 |
|
|
1,756,725 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
102,909 |
|
|
— |
|
|
— |
|
|
— |
|
|
102,909 |
|
|
441 |
|
|
103,350 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
17,433 |
|
|
— |
|
|
— |
|
|
17,433 |
|
|
— |
|
|
17,433 |
|
|
Issuance of stock under employee compensation plans |
78 |
|
|
1 |
|
|
7,198 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,199 |
|
|
— |
|
|
7,199 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
(112) |
|
|
(112) |
|
|
— |
|
|
(112) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
16,870 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,870 |
|
|
— |
|
|
16,870 |
|
|
September 26, 2020 |
49,882 |
|
|
$ |
499 |
|
|
$ |
1,614,185 |
|
|
$ |
501,442 |
|
|
$ |
(195,281) |
|
|
146 |
|
|
$ |
(23,905) |
|
|
$ |
1,896,940 |
|
|
$ |
4,525 |
|
|
$ |
1,901,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
Additional Paid-In Capital |
|
Retained Earnings |
|
Accumulated Other Comprehensive Income (Loss) |
|
Treasury Stock |
|
Total Equity Attributable to Common Shareholders |
|
Noncontrolling Interest |
|
Total Equity |
|
Shares |
|
Amount |
|
|
|
|
Shares |
|
Amount |
|
|
|
|
December 29, 2018 |
48,210 |
|
|
$ |
482 |
|
|
$ |
1,447,512 |
|
|
$ |
42,096 |
|
|
$ |
(172,703) |
|
|
1 |
|
|
$ |
(55) |
|
|
$ |
1,317,332 |
|
|
$ |
2,446 |
|
|
$ |
1,319,778 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
55,133 |
|
|
— |
|
|
— |
|
|
— |
|
|
55,133 |
|
|
469 |
|
|
55,602 |
|
|
Other comprehensive income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9,903 |
|
|
— |
|
|
— |
|
|
9,903 |
|
|
— |
|
|
9,903 |
|
|
Adjustment of redeemable noncontrolling interest to redemption
value |
— |
|
|
— |
|
|
(1,451) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,451) |
|
|
— |
|
|
(1,451) |
|
|
Issuance of stock under employee compensation plans |
674 |
|
|
7 |
|
|
22,051 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
22,058 |
|
|
— |
|
|
22,058 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
136 |
|
|
(17,760) |
|
|
(17,760) |
|
|
— |
|
|
(17,760) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
12,899 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12,899 |
|
|
— |
|
|
12,899 |
|
|
March 30, 2019 |
48,884 |
|
|
489 |
|
|
1,481,011 |
|
|
97,229 |
|
|
(162,800) |
|
|
137 |
|
|
(17,815) |
|
|
1,398,114 |
|
|
2,915 |
|
|
1,401,029 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
43,728 |
|
|
— |
|
|
— |
|
|
— |
|
|
43,728 |
|
|
383 |
|
|
44,111 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,436) |
|
|
— |
|
|
— |
|
|
(3,436) |
|
|
— |
|
|
(3,436) |
|
|
Purchase of additional equity interest in and modification of Vital
River redeemable noncontrolling interest |
— |
|
|
— |
|
|
(1,870) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,870) |
|
|
— |
|
|
(1,870) |
|
|
Issuance of stock under employee compensation plans |
53 |
|
|
— |
|
|
2,148 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,148 |
|
|
— |
|
|
2,148 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
(123) |
|
|
(123) |
|
|
— |
|
|
(123) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
16,505 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,505 |
|
|
— |
|
|
16,505 |
|
|
June 29, 2019 |
48,937 |
|
|
489 |
|
|
1,497,794 |
|
|
140,957 |
|
|
(166,236) |
|
|
138 |
|
|
(17,938) |
|
|
1,455,066 |
|
|
3,298 |
|
|
1,458,364 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
72,810 |
|
|
— |
|
|
— |
|
|
— |
|
|
72,810 |
|
|
776 |
|
|
73,586 |
|
|
Other comprehensive loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,234) |
|
|
— |
|
|
— |
|
|
(12,234) |
|
|
— |
|
|
(12,234) |
|
|
Issuance of stock under employee compensation plans |
39 |
|
|
1 |
|
|
2,801 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,802 |
|
|
— |
|
|
2,802 |
|
|
Acquisition of treasury shares |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
(156) |
|
|
(156) |
|
|
— |
|
|
(156) |
|
|
Stock-based compensation |
— |
|
|
— |
|
|
14,025 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
14,025 |
|
|
— |
|
|
14,025 |
|
|
September 28, 2019 |
48,976 |
|
|
$ |
490 |
|
|
$ |
1,514,620 |
|
|
$ |
213,767 |
|
|
$ |
(178,470) |
|
|
139 |
|
|
$ |
(18,094) |
|
|
$ |
1,532,313 |
|
|
$ |
4,074 |
|
|
$ |
1,536,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are
unaudited and have been prepared by Charles River Laboratories
International, Inc. (the Company) in accordance with accounting
principles generally accepted in the United States (U.S. GAAP) and
pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC). The year-end condensed consolidated
balance sheet data was derived from the Company’s audited
consolidated financial statements, but does not include all
disclosures required by U.S. GAAP. These unaudited condensed
consolidated financial statements should be read in conjunction
with the Company’s Annual Report on Form 10-K for fiscal year
2019. The unaudited condensed consolidated financial statements, in
the opinion of management, reflect all normal and recurring
adjustments necessary for a fair statement of the Company’s
financial position and results of operations.
Use of Estimates
The preparation of unaudited condensed consolidated financial
statements in accordance with U.S. GAAP requires that the Company
make estimates and judgments that may affect the reported amounts
of assets, liabilities, revenues, expenses and related disclosure
of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, judgments, and methodologies. The
Company bases its estimates on historical experience and on various
other assumptions that are believed to be reasonable, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities. Actual results may differ from
these estimates under different assumptions or conditions. Changes
in estimates are reflected in reported results in the period in
which they become known.
On March 11, 2020, the World Health Organization declared the
outbreak of a strain of novel coronavirus disease, COVID-19, a
global pandemic. The COVID-19 pandemic is dynamic and expanding,
and its ultimate scope, duration and effects are uncertain. This
pandemic has and continues to result in, and any future epidemic or
pandemic crises may potentially result in, direct and indirect
adverse effects on the Company’s industry and customers, which in
turn has (with respect to COVID-19) and may (with respect to future
epidemics or crises) impact the Company’s business, results of
operations and financial condition. Further, the COVID-19 pandemic
may also affect the Company’s operating and financial results in a
manner that is not presently known to the Company or that the
Company currently does not expect to present significant risks to
its operations or financial results. As of the date of issuance of
these unaudited condensed consolidated financial statements, the
Company is not aware of any specific event or circumstance that
would require the Company to update estimates, judgments or revise
the carrying value of any assets or liabilities. These estimates
may change, as new events occur and additional information is
obtained, and are recognized in the condensed consolidated
financial statements as soon as they become known. Actual results
could differ from those estimates and any such differences may be
material to the Company’s condensed consolidated financial
statements.
Consolidation
The Company’s unaudited condensed consolidated financial statements
reflect its financial statements and those of its subsidiaries in
which the Company holds a controlling financial interest. For
consolidated entities in which the Company owns or is exposed to
less than 100% of the economics, the Company records net income
(loss) attributable to noncontrolling interests in its consolidated
statements of income equal to the percentage of the economic or
ownership interest retained in such entities by the respective
noncontrolling parties. Intercompany balances and transactions are
eliminated in consolidation.
The Company’s fiscal year is typically based on 52-weeks, with each
quarter composed of 13 weeks ending on the last Saturday on,
or closest to, March 31, June 30, September 30, and
December 31.
Segment Reporting
The Company reports its results in three reportable segments:
Research Models and Services (RMS), Discovery and Safety Assessment
(DSA), and Manufacturing Support (Manufacturing). The Company’s RMS
reportable segment includes the Research Models, Research Model
Services, and Research Products businesses. Research Models
includes the commercial production and sale of small research
models, as well as the supply of large research models. Research
Model Services includes: Genetically Engineered Models and Services
(GEMS), which performs contract breeding and other services
associated with genetically engineered models; Research Animal
Diagnostic Services (RADS), which provides health monitoring and
diagnostics services related to research models; and Insourcing
Solutions (IS), which provides colony management of its clients’
research operations (including recruitment, training, staffing, and
management services). Research Products supplies controlled,
consistent, customized primary cells and blood components derived
from normal and mobilized peripheral blood, bone marrow, and cord
blood. The Company’s DSA reportable segment includes services
required to take a drug through the early development process
including discovery services, which are non-regulated services to
assist clients with the identification, screening, and selection of
a lead compound for drug development, and regulated and
non-regulated (GLP and non-GLP) safety assessment services. The
Company’s Manufacturing reportable segment includes Microbial
Solutions, which provides
in vitro
(non-animal) lot-release testing products, microbial detection
products, and species identification
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
services; Biologics Testing Services (Biologics), which performs
specialized testing of biologics; and Avian Vaccine Services
(Avian), which supplies specific-pathogen-free chicken eggs and
chickens.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note
1, “Description of Business and Summary of Significant Accounting
Policies” in the Company’s Annual Report on Form 10-K for
fiscal year 2019.
Newly Adopted Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (FASB)
issued ASU 2018-15, “Intangibles - Goodwill and Other -
Internal-Use Software (Subtopic 350-40): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computer Arrangement that
is a Service Contract.” ASU 2018-15 aligns the requirements for
capitalizing implementation costs incurred in a hosting arrangement
that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use
software (and hosting arrangements that include an internal-use
software license). This standard became effective for the Company
in the three months ended March 28, 2020 and did not have a
significant impact on the unaudited condensed consolidated
financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-13, “Fair Value
Measurement (Topic 820) - Disclosure Framework - Changes to the
Disclosure Requirements for Fair Value Measurement.” ASU 2018-13
removes the disclosure requirement for the amount and reasons for
transfers between Level 1 and Level 2 fair value measurements as
well as the process for Level 3 fair value measurements. In
addition, the ASU adds the disclosure requirements for changes in
unrealized gains and losses included in Other comprehensive income
(loss) for recurring Level 3 fair value measurements held at the
end of the reporting period as well as the range and weighted
average of significant unobservable inputs used to develop Level 3
fair value measurements. This standard became effective for the
Company in the three months ended March 28, 2020 and did not have a
significant impact on the unaudited condensed consolidated
financial statements and related disclosures.
In August 2018, the FASB issued ASU 2018-14, “Compensation
Retirement Benefits - Defined Benefit Plans -General (Subtopic
715-20).” ASU 2018-14 removes the requirements to disclose the
amounts in Accumulated other comprehensive income (loss) expected
to be recognized as components of net periodic benefit cost over
the next fiscal year and the related party disclosures about the
amount of future annual benefits covered by insurance contracts. In
addition, the ASU adds the requirement to disclose an explanation
for any significant gains and losses related to changes in the
benefit obligation for the period. This standard became effective
for the Company in the three months ended March 28, 2020 and did
not have a significant impact on the unaudited condensed
consolidated financial statements and related
disclosures.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test
for
Goodwill Impairment.” The standard simplifies the accounting
for goodwill impairment by removing Step 2 of the goodwill
impairment test, which requires a hypothetical purchase price
allocation. This standard became effective for the Company in the
three months ended March 28, 2020 and did not have an impact on the
unaudited condensed consolidated financial statements and related
disclosures. The Company performs its annual impairment test during
the fourth quarter of a fiscal year and does not expect any
significant impact on the consolidated financial statements and
related disclosures.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments -
Credit Losses”. The standard, including subsequently issued
amendments, requires a financial asset measured at amortized cost
basis, such as trade and notes receivables, to be presented at the
net amount expected to be collected based on relevant information
about past events, including historical experience, current
conditions, and reasonable and supportable forecasts that affect
the collectability of the reported amount. This standard became
effective for the Company in the three months ended March 28, 2020
and did not have a significant impact on the unaudited condensed
consolidated financial statements and related
disclosures.
Newly Issued Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting.” The ASU offers temporary optional
expedients and exceptions for applying U.S. GAAP to modifications
to agreements such as loans, debt securities, derivatives, and
borrowings which reference LIBOR or another reference rate that is
expected to be discontinued by December 31, 2021. The expedients
and exceptions provided by the standard do not apply to
modifications made and hedging relationships entered into or
evaluated after December 31, 2022, except for hedging relationships
existing as of December 31, 2022 that an entity has elected certain
optional expedients for and are retained through the end of the
hedging relationship. The ASU is effective until December 31, 2022
when the replacement for LIBOR is expected to be completed. The
interest rate on the Company’s senior credit facility, which
matures in fiscal year 2023, is linked to LIBOR. The Company is in
the process of evaluating options for transitioning away from the
senior credit facility’s use of LIBOR and expects to be completed
by the time LIBOR is phased out. The Company did not elect to apply
any of the expedients or exceptions as of and for the three and
nine months ended September 26, 2020 and is currently evaluating
the impact this new standard will have on the
unaudited condensed
consolidated financial statements
and related disclosures.
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity
Securities (Topic 321), Investments-Equity Method and Joint
Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” ASU
2020-01 states any equity security transitioning
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
from the alternative method of accounting under Topic 321 to the
equity method, or vice versa, due to an observable transaction will
be remeasured immediately before the transition. In addition, the
ASU clarifies the accounting for certain non-derivative forward
contracts or purchased
call options to acquire equity securities stating such instruments
will be measured using the fair value principles of Topic 321
before settlement or exercise. The ASU is effective for fiscal
years beginning after December 15, 2020, and will be applied on a
prospective basis. Early adoption is permitted. The Company is
still evaluating the impact this standard will have on its
consolidated financial statements and related disclosures,
but does not believe there
will be a material impact upon adoption.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic
740): Simplifying the Accounting for Income Taxes.” ASU 2019-12
simplifies the accounting for income taxes by removing exceptions
within the general principles of Topic 740 regarding the
calculation of deferred tax liabilities, the incremental approach
for intraperiod tax allocation, and calculating income taxes in an
interim period. In addition, the ASU adds clarifications to the
accounting for franchise tax (or similar tax), which is partially
based on income, evaluating tax basis of goodwill recognized from a
business combination, and reflecting the effect of any enacted
changes in tax laws or rates in the annual effective tax rate
computation in the interim period that includes the enactment date.
The ASU is effective for fiscal years beginning after December 15,
2020, and will be applied either retrospectively or prospectively
based upon the applicable amendments. Early adoption is permitted.
The adoption of this standard is not expected to have a material
impact on the Company’s consolidated financial statements
and
related disclosures.
2. BUSINESS COMBINATIONS
Cellero, LLC
On August 6, 2020, the Company acquired Cellero, LLC
(Cellero), a provider of cellular products for cell therapy
developers and manufacturers worldwide. The addition of Cellero
enhances the Company’s unique, comprehensive solutions for the
high-growth cell therapy market, strengthening the ability to help
accelerate clients’ critical programs from basic research and
proof-of-concept to regulatory approval and commercialization. It
also expands the Company’s access to high-quality, human-derived
biomaterials with Cellero’s donor sites in the United States. The
purchase price for Cellero was $37.5 million in cash, subject to
certain post-closing adjustments that may change the purchase
price.
The acquisition was funded through cash on hand. This business is
reported as part of the Company’s RMS reportable
segment.
The preliminary purchase price allocation of $37.0 million, net of
$0.5 million of cash acquired was as follows:
|
|
|
|
|
|
|
August 6, 2020 |
|
(in thousands) |
|
Trade receivables |
$ |
1,525 |
|
|
Inventories |
551 |
|
|
Other current assets (excluding cash) |
182 |
|
|
Property, plant and equipment |
1,648 |
|
|
Goodwill |
19,532 |
|
|
Definite-lived intangible assets |
16,230 |
|
|
Other long-term assets |
849 |
|
|
Current liabilities |
(1,360) |
|
|
Deferred tax liabilities |
(1,467) |
|
|
Other long-term liabilities |
(740) |
|
|
Total purchase price allocation |
$ |
36,950 |
|
The preliminary purchase price allocation is subject to change as
additional information becomes available concerning the fair value
and tax basis of the assets acquired and liabilities assumed,
including certain contracts and obligations. Any additional
adjustments to the purchase price allocation will be made as soon
as practicable but no later than one year from the date of
acquisition.
The breakout of definite-lived intangible assets acquired was as
follows:
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-Lived Intangible Assets |
|
Weighted Average Amortization Life |
|
(in thousands) |
|
(in years) |
|
Client relationships |
$ |
14,740 |
|
|
13 |
|
Other intangible assets |
1,490 |
|
|
3 |
|
Total definite-lived intangible assets |
$ |
16,230 |
|
|
12 |
The goodwill resulting from the transaction, $10.8 million of which
is deductible for tax purposes due to a prior asset acquisition, is
primarily attributable to the potential growth of the Company’s RMS
business from customers introduced through Cellero and the
assembled workforce of the acquired business.
The Company incurred transaction and integration costs in
connection with the acquisition of $2.0 million for the three and
nine months ended September 26, 2020, which was primarily included
in Selling, general and administrative expenses within the
unaudited condensed consolidated statements of income.
Pro forma financial information as well as the disclosure of actual
revenue and operating income (loss) have not been included because
Cellero's financial results are not significant when compared to
the Company’s consolidated financial results.
HemaCare Corporation
On January 3, 2020, the Company acquired HemaCare Corporation
(HemaCare), a business specializing in the production of
human-derived cellular products for the cell therapy market. The
acquisition of HemaCare expands the Company’s comprehensive
portfolio of early-stage research and manufacturing support
solutions to encompass the production and customization of
high-quality, human derived cellular products to better support
clients’ cell therapy programs. The purchase price of HemaCare was
$379.8 million in cash. The acquisition was funded through a
combination of cash on hand and proceeds from the Company’s Credit
Facility under the multi-currency revolving facility. See Note 9,
“Long-Term Debt and Finance Leases.” This business is reported as
part of the Company’s RMS reportable segment.
The
preliminary
purchase price allocation of $376.7 million, net of
$3.1 million of cash acquired was as follows:
|
|
|
|
|
|
|
January 3, 2020
|
|
(in thousands) |
|
Trade receivables |
$ |
6,451 |
|
|
Inventories |
8,468 |
|
|
Other current assets (excluding cash) |
3,494 |
|
|
Property, plant and equipment |
10,033 |
|
|
Goodwill |
210,196 |
|
|
Definite-lived intangible assets |
183,540 |
|
|
Other long-term assets |
5,920 |
|
|
Current liabilities |
(5,188) |
|
|
Deferred tax liabilities |
(38,529) |
|
|
Other long-term liabilities |
(7,664) |
|
|
Total purchase price allocation |
$ |
376,721 |
|
The purchase price allocation is subject to change as additional
information becomes available concerning the fair value and tax
basis of the assets acquired and liabilities assumed, including
certain contracts and obligations. Any additional adjustments to
the purchase price allocation will be made as soon as practicable
but no later than one year from the date of
acquisition.
The breakout of definite-lived intangible assets acquired was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-Lived Intangible Assets |
|
Weighted Average Amortization Life |
|
(in thousands) |
|
(in years) |
|
Client relationships |
$ |
170,390 |
|
|
19 |
|
Trade name |
7,330 |
|
|
10 |
|
Other intangible assets |
5,820 |
|
|
3 |
|
Total definite-lived intangible assets |
$ |
183,540 |
|
|
18 |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The goodwill resulting from the transaction is primarily
attributable to the potential growth of the Company’s RMS business
from customers introduced through HemaCare and the assembled
workforce of the acquired business. The goodwill attributable to
HemaCare is not deductible for tax purposes.
The Company incurred transaction and integration costs in
connection with the acquisition of $0.1 million and $5.9
million for the three and nine months ended September 26, 2020,
respectively, which were primarily included in Selling, general and
administrative expenses within the unaudited condensed consolidated
statements of income.
Beginning on January 3, 2020, HemaCare has been included in
the operating results of the Company. HemaCare revenue for
the
three and nine months ended September 26, 2020
was
$12.8 million and $31.5 million, respectively. HemaCare operating
income for the three months ended September 26, 2020 was $0.4
million and its operating loss for the nine months ended September
26, 2020 was $7.7 million.
The following selected unaudited pro forma consolidated results of
operations are presented as if the HemaCare acquisition had
occurred as of the beginning of the period
immediately preceding the period of acquisition, which is December
30, 2018, after giving effect to certain adjustments. For the nine
months ended September 26, 2020, these adjustments included
additional amortization of intangible assets and depreciation of
fixed assets of $0.6 million, elimination of intercompany activity
and other one-time costs, and the tax impacts of these adjustments.
For the nine months ended September 28, 2019, these adjustments
included additional amortization of intangible assets and
depreciation of fixed assets of $9.6 million, additional interest
expense on borrowings of $8.8 million, elimination of intercompany
activity and other one-time costs, and the tax impacts of these
adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
(unaudited) |
|
Revenue |
$ |
743,300 |
|
|
$ |
677,993 |
|
|
$ |
2,132,961 |
|
|
$ |
1,959,544 |
|
|
Net income attributable to common shareholders |
102,802 |
|
|
70,722 |
|
|
225,890 |
|
|
165,376 |
|
These unaudited pro forma results of operations have been prepared
for comparative purposes only, and they do not purport to be
indicative of the results of operations that actually would have
resulted ad the acquisition occurred on the dates indicated or that
may result in the future. No effect has been given for synergies,
if any, that may be realized through the acquisition.
Citoxlab
On April 29, 2019, the Company acquired Citoxlab, a
non-clinical CRO, specializing in regulated safety assessment
services, non-regulated discovery services, and medical device
testing. With operations in Europe and North America, the
acquisition of Citoxlab further strengthens the Company’s position
as a leading, global, early-stage CRO by expanding its scientific
portfolio and geographic footprint, which enhances the Company’s
ability to partner with clients across the drug discovery and
development continuum. The purchase price for Citoxlab was $527.1
million in cash. The acquisition was funded through a combination
of cash on hand and proceeds from the Company’s Credit Facility
under the multi-currency revolving facility. This business is
reported as part of the Company’s DSA reportable
segment.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The purchase price allocation of $490.4 million, net of $36.7
million of cash acquired was as follows:
|
|
|
|
|
|
|
April 29, 2019 |
|
(in thousands) |
|
Trade receivables |
$ |
35,405 |
|
|
Inventories |
5,282 |
|
|
Other current assets (excluding cash) |
13,917 |
|
|
Property, plant and equipment |
88,605 |
|
|
Goodwill |
280,161 |
|
|
Definite-lived intangible assets |
162,400 |
|
|
Other long-term assets |
20,063 |
|
|
Deferred revenue |
(15,278) |
|
|
Current liabilities |
(46,081) |
|
|
Deferred tax liabilities |
(27,458) |
|
|
Other long-term liabilities |
(22,624) |
|
|
Redeemable noncontrolling interest |
(4,035) |
|
|
Total purchase price allocation |
$ |
490,357 |
|
From the date of the acquisition through March 28, 2020, the
Company recorded measurement-period adjustments related to the
acquisition that resulted in an immaterial change to the purchase
price allocation on a consolidated basis. No further adjustments
will be made to the purchase price allocation.
The breakout of definite-lived intangible assets acquired was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite-Lived Intangible Assets |
|
Weighted Average Amortization Life |
|
(in thousands) |
|
(in years) |
|
Client relationships |
$ |
134,600 |
|
|
13 |
|
Developed technology |
19,900 |
|
|
3 |
|
Backlog |
7,900 |
|
|
1 |
|
Total definite-lived intangible assets |
$ |
162,400 |
|
|
12 |
The goodwill resulting from the transaction, $7.2 million of which
is deductible for tax purposes due to a prior asset acquisition, is
primarily attributable to the potential growth of the Company’s DSA
business from customers introduced through Citoxlab and the
assembled workforce of the acquired business.
The Company incurred transaction and integration costs in
connection with the acquisition of $0.6 million and $1.9 million
for the three months ended September 26, 2020 and September 28,
2019, respectively, which were primarily included in Selling,
general and administrative expenses within the unaudited condensed
consolidated statements of income. The Company incurred transaction
and integration costs in connection with the acquisition of $3.1
million and $19.1 million for the nine months ended September 26,
2020 and September 28, 2019, respectively, which were primarily
included in Selling, general and administrative expenses within the
unaudited condensed consolidated statements of income.
The following selected unaudited pro forma consolidated results of
operations are presented as if the Citoxlab acquisition had
occurred as of the beginning of the period immediately preceding
the period of acquisition, which is December 31, 2017, after giving
effect to certain adjustments. For the nine months ended September
28, 2019, these adjustments included additional amortization of
intangible assets and depreciation of fixed assets of $4.8 million,
additional interest expense on borrowings of $1.2 million,
elimination of intercompany activity and other one-time costs, and
the tax impacts of these adjustments.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 28, 2019 |
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
Revenue |
$ |
667,951 |
|
|
$ |
1,992,472 |
|
|
Net income attributable to common shareholders |
74,948 |
|
|
189,601 |
|
These unaudited pro forma results of operations have been prepared
for comparative purposes only, and they do not purport to be
indicative of the results of operations that actually would have
resulted had the acquisition occurred on the dates indicated or
that may result in the future. No effect has been given for
synergies, if any, that may be realized through the
acquisition.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Other Acquisition
On August 28, 2019, the Company acquired an 80% ownership
interest in a supplier that supports the Company’s DSA reportable
segment. The remaining 20% interest is a redeemable non-controlling
interest. See Note 10, “Equity and Noncontrolling Interests.” The
purchase price was $23.4 million, net of a $4.0 million
pre-existing relationship for a supply agreement settled upon
acquisition. The acquisition was funded through a combination of
cash on hand and proceeds from the Company’s Credit Facility under
the multi-currency revolving facility. The business is reported as
part of the Company’s DSA reportable segment.
The purchase price allocation of $23.1 million, net of $0.3 million
of cash acquired was as follows:
|
|
|
|
|
|
|
August 28, 2019 |
|
(in thousands) |
|
Trade receivables |
$ |
189 |
|
|
Inventories |
7,644 |
|
|
Property, plant and equipment |
1,462 |
|
|
Goodwill |
12,591 |
|
|
Other long-term assets |
11,849 |
|
|
Current liabilities |
(441) |
|
|
Deferred tax liabilities |
(1,253) |
|
|
Other long-term liabilities |
(238) |
|
|
Redeemable noncontrolling interest |
(8,740) |
|
|
Total purchase price allocation |
$ |
23,063 |
|
From the date of the acquisition through June 27, 2020, the Company
recorded measurement-period adjustments related to the acquisition
that resulted in an immaterial change to the purchase price
allocation on a consolidated basis. No further adjustments will be
made to the purchase price allocation.
No significant integration costs were incurred with the acquisition
for the
three and nine months ended September 26, 2020.
The Company incurred transaction and integration costs in
connection with the acquisition of $2.1 million and $3.2 million
for the three and nine months ended September 28, 2019,
respectively, which were primarily included in Selling, general and
administrative expenses within the unaudited condensed consolidated
statements of income.
Pro forma financial information as well as the disclosure of actual
results have not been included because these financial results are
not significant when compared to the Company’s consolidated
financial results.
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following tables disaggregate the Company’s revenue by major
business line and timing of transfer of products or
services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Major Products/Service Lines: |
|
|
|
|
|
|
|
|
RMS |
$ |
151,910 |
|
|
$ |
132,546 |
|
|
$ |
414,455 |
|
|
$ |
405,772 |
|
|
DSA |
461,177 |
|
|
420,079 |
|
|
1,342,424 |
|
|
1,179,793 |
|
|
Manufacturing |
130,213 |
|
|
115,326 |
|
|
376,064 |
|
|
344,523 |
|
|
Total revenue |
$ |
743,300 |
|
|
$ |
667,951 |
|
|
$ |
2,132,943 |
|
|
$ |
1,930,088 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Timing of Revenue Recognition: |
|
|
|
|
|
|
|
|
RMS |
|
|
|
|
|
|
|
|
Services and products transferred over time |
$ |
60,225 |
|
|
$ |
56,243 |
|
|
$ |
177,623 |
|
|
$ |
168,377 |
|
|
Services and products transferred at a point in time |
91,685 |
|
|
76,303 |
|
|
236,832 |
|
|
237,395 |
|
|
DSA |
|
|
|
|
|
|
|
|
Services and products transferred over time |
460,821 |
|
|
419,445 |
|
|
1,341,832 |
|
|
1,178,874 |
|
|
Services and products transferred at a point in time |
356 |
|
|
634 |
|
|
592 |
|
|
919 |
|
|
Manufacturing |
|
|
|
|
|
|
|
|
Services and products transferred over time |
47,457 |
|
|
36,308 |
|
|
126,088 |
|
|
102,674 |
|
|
Services and products transferred at a point in time |
82,756 |
|
|
79,018 |
|
|
249,976 |
|
|
241,849 |
|
|
Total revenue |
$ |
743,300 |
|
|
$ |
667,951 |
|
|
$ |
2,132,943 |
|
|
$ |
1,930,088 |
|
RMS
The RMS business generates revenue through the commercial
production and sale of research models, research products, and the
provision of services related to the maintenance and monitoring of
research models and management of clients’ research operations.
Revenue from the sale of research models and products is recognized
at a point in time when the customer obtains control of the
product, which may be upon shipment or upon delivery based on the
shipping terms of a contract. Revenue generated from research
models services is recognized over time and is typically based on a
right-to-invoice measure of progress (output method) as invoiced
amounts correspond directly to the value of the Company’s
performance to date.
DSA
The Discovery and Safety Assessment business provides a full suite
of integrated drug discovery services directed at the
identification, screening and selection of a lead compound for drug
development and offers a full range of safety assessment services
including bioanalysis, drug metabolism, pharmacokinetics,
toxicology and pathology. Discovery and Safety Assessment services
revenue is generally recognized over time using the cost-to-cost or
right to invoice measures of progress, primarily representing fixed
fee service contracts and per unit service contracts,
respectively.
Manufacturing
The Manufacturing business includes Microbial Solutions, which
provides
in
vitro
(non-animal) lot-release testing products, microbial detection
products, and species identification services; Biologics Testing
Services (Biologics), which performs specialized testing of
biologics; and Avian Vaccine Services (Avian), which supplies
specific-pathogen-free chicken eggs and chickens. Species
identification service revenue is generally recognized at a point
in time as identifications are completed by the Company. Biologics
service revenue is generally recognized over time using the
cost-to-cost measure of progress. Microbial Solutions and Avian
product sales are generally recognized at a point in time when the
customer obtains control of the product, which may be upon shipment
or upon delivery based on the contractual shipping terms of a
contract.
Transaction Price Allocated to Future Performance
Obligations
The Company discloses the aggregate amount of transaction price
that is allocated to performance obligations that have not yet been
satisfied as of September 26, 2020. Excluded from the
disclosure is the value of unsatisfied performance obligations for
(i) contracts with an original expected length of one year or less
and (ii) contracts for which revenue is recognized at the amount to
which the Company has the right to invoice for services performed.
The Company has assessed future performance obligations with
respect to the COVID-19 pandemic uncertainties and believes there
is an insignificant impact on the ability to meet future
performance
obligations and the amount of revenue to be
recognized.
The following table includes
estimated revenue expected to be recognized in the future related
to performance obligations that are unsatisfied (or partially
satisfied) as of September 26, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue Expected to be Recognized in Future Periods |
|
Less than 1 Year |
|
1 to 3 Years |
|
4 to 5 Years |
|
Beyond 5 Years |
|
Total |
|
(in thousands) |
|
DSA |
$ |
250,855 |
|
|
$ |
106,704 |
|
|
$ |
4,265 |
|
|
$ |
15 |
|
|
$ |
361,839 |
|
|
Manufacturing |
8,044 |
|
|
8,121 |
|
|
53 |
|
|
40 |
|
|
16,258 |
|
|
Total |
$ |
258,899 |
|
|
$ |
114,825 |
|
|
$ |
4,318 |
|
|
$ |
55 |
|
|
$ |
378,097 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Contract Balances from Contracts with Customers
The timing of revenue recognition, billings and cash collections
results in billed receivables (client receivables), contract assets
(unbilled revenue), and contract liabilities (current and long-term
deferred revenue and customer contract deposits) on the unaudited
condensed consolidated balance sheets. The Company’s payment
terms are generally 30 days in the United States and consistent
with prevailing practice in international markets. A contract asset
is recorded when a right to consideration in exchange for goods or
services transferred to a customer is conditioned other than the
passage of time. Client receivables are recorded separately from
contract assets since only the passage of time is required before
consideration is due. A contract liability is recorded when
consideration is received, or such consideration is unconditionally
due, from a customer prior to transferring goods or services to the
customer under the terms of a contract. Contract liabilities are
recognized as revenue after control of the products or services is
transferred to the customer and all revenue recognition criteria
have been met. The following table provides information about
client receivables, contract assets, and contract liabilities from
contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Balances from contracts with customers: |
|
|
|
|
Client receivables |
$ |
429,935 |
|
|
$ |
395,740 |
|
|
Contract assets (unbilled revenue) |
148,034 |
|
|
121,957 |
|
|
Contract liabilities (current and long-term deferred
revenue) |
191,459 |
|
|
192,788 |
|
|
Contract liabilities (customer contract deposits) |
42,990 |
|
|
33,080 |
|
When the Company
does not have the unconditional right to advanced billings, both
advanced client payments and unpaid advanced client billings are
excluded from deferred revenue, with the advanced billings also
being excluded from client receivables.
The Company excluded approximately $13 million
and
$27 million of unpaid advanced client billings from both client
receivables and deferred revenue in the accompanying unaudited
condensed consolidated balance sheets as of September 26, 2020
and December 28, 2019, respectively. Advanced client payments
of approximately $43 million and $33 million have been presented as
customer contract deposits within other current liabilities in the
accompanying unaudited condensed consolidated balance sheets as of
September 26, 2020 and December 28, 2019,
respectively.
Other changes in the contract asset and the contract liability
balances during the nine months ended September 26, 2020 were as
follows:
(i) Changes due to business combinations:
See Note 2. “Business Combinations” for client receivables that
were acquired as part of the HemaCare acquisition on
January 3, 2020 and Cellero acquisition on August 6,
2020. No significant contract assets or contract liabilities were
acquired as part of these acquisitions.
(ii) Cumulative catch-up adjustments to revenue that affect the
corresponding contract asset or contract liability, including
adjustments arising from a change in the measure of progress, a
change in an estimate of the transaction price (including any
changes in the assessment of whether an estimate of variable
consideration is constrained), or a contract
modification:
During the nine months ended September 26, 2020, an immaterial
cumulative catch-up adjustment to revenue was
recorded.
(iii) A change in the time frame for a right to consideration to
become unconditional (that is, for a contract asset to be recorded
as a client receivable):
Approximately
85%
of unbilled revenue as of December 28, 2019 was billed during
the nine months ended September 26, 2020.
(iv) A change in the time frame for a performance obligation to be
satisfied (that is, for the recognition of revenue arising from a
contract liability):
Approximately
80%
of contract
liabilities as of December 28, 2019 were recognized as revenue
during the nine months ended September 26, 2020.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. SEGMENT INFORMATION
The Company’s three reportable segments are RMS, DSA, and
Manufacturing. The following table presents revenue and other
financial information by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
RMS |
|
|
|
|
|
|
|
|
Revenue |
$ |
151,910 |
|
|
$ |
132,546 |
|
|
$ |
414,455 |
|
|
$ |
405,772 |
|
|
Operating income |
37,108 |
|
|
34,385 |
|
|
68,325 |
|
|
103,729 |
|
|
Depreciation and amortization |
9,455 |
|
|
4,895 |
|
|
27,333 |
|
|
14,198 |
|
|
Capital expenditures |
3,552 |
|
|
5,818 |
|
|
15,585 |
|
|
14,979 |
|
|
DSA |
|
|
|
|
|
|
|
|
Revenue |
$ |
461,177 |
|
|
$ |
420,079 |
|
|
$ |
1,342,424 |
|
|
$ |
1,179,793 |
|
|
Operating income |
90,348 |
|
|
64,995 |
|
|
234,872 |
|
|
175,214 |
|
|
Depreciation and amortization |
42,707 |
|
|
39,898 |
|
|
125,138 |
|
|
111,231 |
|
|
Capital expenditures |
15,532 |
|
|
21,141 |
|
|
46,436 |
|
|
45,130 |
|
|
Manufacturing |
|
|
|
|
|
|
|
|
Revenue |
$ |
130,213 |
|
|
$ |
115,326 |
|
|
$ |
376,064 |
|
|
$ |
344,523 |
|
|
Operating income |
48,246 |
|
|
39,253 |
|
|
132,288 |
|
|
103,893 |
|
|
Depreciation and amortization |
6,655 |
|
|
5,990 |
|
|
19,257 |
|
|
17,577 |
|
|
Capital expenditures |
5,787 |
|
|
6,421 |
|
|
13,985 |
|
|
14,299 |
|
Reconciliations of segment operating income, depreciation and
amortization, and capital expenditures to the respective
consolidated amounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
Depreciation and Amortization |
|
Capital Expenditures |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segments |
$ |
175,702 |
|
|
$ |
138,633 |
|
|
$ |
58,817 |
|
|
$ |
50,783 |
|
|
$ |
24,871 |
|
|
$ |
33,380 |
|
|
Unallocated corporate |
(42,949) |
|
|
(45,831) |
|
|
763 |
|
|
975 |
|
|
1,314 |
|
|
1,783 |
|
|
Total consolidated |
$ |
132,753 |
|
|
$ |
92,802 |
|
|
$ |
59,580 |
|
|
$ |
51,758 |
|
|
$ |
26,185 |
|
|
$ |
35,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
Total reportable segments |
$ |
435,485 |
|
|
$ |
382,836 |
|
|
$ |
171,728 |
|
|
$ |
143,006 |
|
|
$ |
76,006 |
|
|
$ |
74,408 |
|
|
Unallocated corporate |
(131,683) |
|
|
(140,474) |
|
|
2,320 |
|
|
3,256 |
|
|
2,700 |
|
|
2,267 |
|
|
Total consolidated |
$ |
303,802 |
|
|
$ |
242,362 |
|
|
$ |
174,048 |
|
|
$ |
146,262 |
|
|
$ |
78,706 |
|
|
$ |
76,675 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue for each significant product or service offering is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
RMS |
$ |
151,910 |
|
|
$ |
132,546 |
|
|
$ |
414,455 |
|
|
$ |
405,772 |
|
|
DSA |
461,177 |
|
|
420,079 |
|
|
1,342,424 |
|
|
1,179,793 |
|
|
Manufacturing |
130,213 |
|
|
115,326 |
|
|
376,064 |
|
|
344,523 |
|
|
Total revenue |
$ |
743,300 |
|
|
$ |
667,951 |
|
|
$ |
2,132,943 |
|
|
$ |
1,930,088 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
A summary of unallocated corporate expense consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Stock-based compensation |
$ |
10,116 |
|
|
$ |
8,752 |
|
|
$ |
25,023 |
|
|
$ |
27,744 |
|
|
Compensation, benefits, and other employee-related
expenses |
20,812 |
|
|
18,770 |
|
|
63,541 |
|
|
54,561 |
|
|
External consulting and other service expenses |
3,088 |
|
|
4,156 |
|
|
10,474 |
|
|
12,060 |
|
|
Information technology
|
4,937 |
|
|
3,534 |
|
|
12,888 |
|
|
10,811 |
|
|
Depreciation |
763 |
|
|
975 |
|
|
2,320 |
|
|
3,256 |
|
|
Acquisition and integration |
2,124 |
|
|
5,679 |
|
|
9,976 |
|
|
23,621 |
|
|
Other general unallocated corporate |
1,109 |
|
|
3,965 |
|
|
7,461 |
|
|
8,421 |
|
|
Total unallocated corporate expense |
$ |
42,949 |
|
|
$ |
45,831 |
|
|
$ |
131,683 |
|
|
$ |
140,474 |
|
Other general unallocated corporate expense consists of costs
associated with departments such as senior executives, corporate
accounting, legal, tax, human resources, treasury, and investor
relations.
Revenue by geographic area is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
Europe |
|
Canada |
|
Asia Pacific |
|
Other |
|
Consolidated |
|
(in thousands) |
|
Three Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
$ |
406,975 |
|
|
$ |
214,194 |
|
|
$ |
78,995 |
|
|
$ |
41,553 |
|
|
$ |
1,583 |
|
|
$ |
743,300 |
|
|
September 28, 2019 |
373,094 |
|
|
184,685 |
|
|
71,984 |
|
|
36,698 |
|
|
1,490 |
|
|
667,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended: |
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
$ |
1,196,605 |
|
|
$ |
595,391 |
|
|
$ |
227,171 |
|
|
$ |
109,347 |
|
|
$ |
4,429 |
|
|
$ |
2,132,943 |
|
|
September 28, 2019 |
1,091,194 |
|
|
533,820 |
|
|
194,865 |
|
|
106,090 |
|
|
4,119 |
|
|
1,930,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the Other category above are operations located in
Brazil and Israel. Revenue represents sales originating in entities
physically located in the identified geographic area.
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
The composition of trade receivables, net is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Client receivables |
$ |
429,935 |
|
|
$ |
395,740 |
|
|
Unbilled revenue |
148,034 |
|
|
121,957 |
|
|
Total |
577,969 |
|
|
517,697 |
|
|
Less: Allowance for doubtful accounts |
(5,911) |
|
|
(3,664) |
|
|
Trade receivables, net |
$ |
572,058 |
|
|
$ |
514,033 |
|
The composition of inventories is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Raw materials and supplies |
$ |
26,300 |
|
|
$ |
24,613 |
|
|
Work in process |
34,672 |
|
|
35,852 |
|
|
Finished products |
120,395 |
|
|
100,195 |
|
|
Inventories |
$ |
181,367 |
|
|
$ |
160,660 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The composition of other current assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Prepaid income tax |
$ |
70,258 |
|
|
$ |
54,358 |
|
|
Short-term investments |
963 |
|
|
941 |
|
|
Restricted cash |
2,968 |
|
|
431 |
|
|
Other |
300 |
|
|
300 |
|
|
Other current assets |
$ |
74,489 |
|
|
$ |
56,030 |
|
The composition of other assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Venture capital investments |
$ |
142,998 |
|
|
$ |
108,983 |
|
|
Strategic equity investments |
21,019 |
|
|
13,996 |
|
|
Life insurance policies |
38,339 |
|
|
38,207 |
|
|
Other long-term income tax assets |
21,376 |
|
|
20,570 |
|
|
Restricted cash |
1,576 |
|
|
1,601 |
|
|
Other |
22,230 |
|
|
29,258 |
|
|
Other assets |
$ |
247,538 |
|
|
$ |
212,615 |
|
The composition of other current liabilities is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Current portion of operating lease right-of-use
liabilities |
$ |
24,870 |
|
|
$ |
20,357 |
|
|
Accrued income taxes |
36,978 |
|
|
26,066 |
|
|
Customer contract deposits |
42,990 |
|
|
33,080 |
|
|
Other |
22,780 |
|
|
11,095 |
|
|
Other current liabilities |
$ |
127,618 |
|
|
$ |
90,598 |
|
The composition of other long-term liabilities is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
U.S. Transition Tax |
$ |
48,781 |
|
|
$ |
52,066 |
|
|
Long-term pension liability, accrued executive supplemental life
insurance retirement plan and deferred compensation
plan |
75,960 |
|
|
80,833 |
|
|
Long-term deferred revenue |
19,123 |
|
|
20,983 |
|
|
Other |
39,831 |
|
|
29,051 |
|
|
Other long-term liabilities |
$ |
183,695 |
|
|
$ |
182,933 |
|
6. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS
Venture capital investments were $143.0 million and $109.0 million
as of September 26, 2020 and December 28, 2019,
respectively. The Company’s total commitment to the venture capital
funds as of September 26, 2020 was $130.8 million, of which
the Company funded $92.0 million through that date. The
Company received dividends totaling $6.3 million and $0.2 million
for the three months ended September 26, 2020 and September 28,
2019, respectively. The Company received dividends totaling $9.6
million and $1.8 million for the nine months ended September 26,
2020 and September 28, 2019, respectively.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
The Company recognized gains of $19.9 million and losses of $0.6
million related to the venture capital investments for the three
months ended September 26, 2020 and September 28, 2019,
respectively. The Company recognized gains of $31.6 million and
$5.7 million related to the venture capital investments for the
nine months ended September 26, 2020 and September 28, 2019,
respectively.
The Company also invests, with minority positions, directly in
equity of predominantly privately-held companies. Strategic equity
investments were $21.0 million and $14.0 million as of
September 26, 2020 and December 28, 2019, respectively.
The Company recognized insignificant gains and losses for the three
and nine months ended September 26, 2020 and September 28, 2019,
respectively.
7. FAIR VALUE
The Company has certain assets and liabilities recorded at fair
value, which have been classified as Level 1, 2, or 3 within the
fair value hierarchy:
•Level
1 - Fair values are determined utilizing prices (unadjusted) in
active markets for identical assets or liabilities that the Company
has the ability to access,
•Level
2 - Fair values are determined by utilizing quoted prices for
identical or similar assets and liabilities in active markets or
other market observable inputs such as interest rates, yield
curves, and foreign currency spot rates,
•Level
3 - Prices or valuations that require inputs that are both
significant to the fair value measurement and
unobservable.
The fair value hierarchy level is determined by asset and class
based on the lowest level of significant input. The observability
of inputs may change for certain assets or liabilities. This
condition could cause an asset or liability to be reclassified
between levels. The Company recognizes transfers between
levels within the fair value hierarchy, if any, at
the end of each quarter. During the nine months ended
September 26, 2020 and September 28, 2019, there were no transfers
between levels.
Valuation methodologies used for assets and liabilities measured or
disclosed at fair value are as follows:
•Cash
equivalents - Valued at market prices determined through
third-party pricing services;
•Foreign
currency forward contracts - Valued using market observable inputs,
such as forward foreign exchange points and foreign exchanges
rates;
•Life
insurance policies - Valued at cash surrender value based on the
fair value of underlying investments;
•Debt
instruments - The book value of the Company’s term and revolving
loans, which are variable rate loans carried at amortized cost,
approximates the fair value based on current market pricing of
similar debt. The book value of the Company’s 5.5% Senior Notes due
in 2026 and the 4.25% Senior Notes due in 2028 (Senior Notes),
which are fixed rate debt, are carried at amortized cost. Fair
value of the Senior Notes is based on quoted market prices and on
borrowing rates available to the Company; and
•Contingent
consideration - Valued based on a probability weighting of the
future cash flows associated with the potential
outcomes.
Assets and liabilities measured at fair value on a recurring basis
are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
(in thousands) |
|
Cash equivalents |
$ |
— |
|
|
$ |
1,678 |
|
|
$ |
— |
|
|
$ |
1,678 |
|
|
Other assets: |
|
|
|
|
|
|
|
|
Life insurance policies |
— |
|
|
30,459 |
|
|
— |
|
|
30,459 |
|
|
Total assets measured at fair value |
$ |
— |
|
|
$ |
32,137 |
|
|
$ |
— |
|
|
$ |
32,137 |
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities measured at fair value: |
|
|
|
|
|
|
|
|
Contingent consideration |
$ |
— |
|
|
$ |
— |
|
|
$ |
2,220 |
|
|
$ |
2,220 |
|
|
Total liabilities measured at fair value |
$ |
— |
|
|
$ |
— |
|
|
$ |
2,220 |
|
|
$ |
2,220 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2019 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
(in thousands) |
|
Cash equivalents |
$ |
— |
|
|
$ |
55,278 |
|
|
$ |
— |
|
|
$ |
55,278 |
|
|
Other assets: |
|
|
|
|
|
|
|
|
Life insurance policies |
— |
|
|
30,454 |
|
|
— |
|
|
30,454 |
|
|
Total assets measured at fair value |
$ |
— |
|
|
$ |
85,732 |
|
|
$ |
— |
|
|
$ |
85,732 |
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities measured at fair value: |
|
|
|
|
|
|
|
|
Contingent consideration |
$ |
— |
|
|
$ |
— |
|
|
$ |
712 |
|
|
$ |
712 |
|
|
Foreign currency forward contract |
— |
|
|
876 |
|
|
— |
|
|
876 |
|
|
Total liabilities measured at fair value |
$ |
— |
|
|
$ |
876 |
|
|
$ |
712 |
|
|
$ |
1,588 |
|
Contingent Consideration
The following table provides a rollforward of the contingent
consideration related to previous business acquisitions. See Note
2, “Business Combinations.”
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Beginning balance |
$ |
712 |
|
|
$ |
3,033 |
|
|
Additions |
2,131 |
|
|
2,869 |
|
|
Payments |
(230) |
|
|
(5,252) |
|
|
Adjustment of previously recorded contingent liability |
(468) |
|
|
— |
|
|
Foreign currency |
75 |
|
|
42 |
|
|
Ending balance |
$ |
2,220 |
|
|
$ |
692 |
|
The unobservable inputs used in the fair value measurement of the
Company’s contingent consideration are the probabilities of
successful achievement of certain financial targets and a discount
rate. Increases or decreases in any of the probabilities of success
would result in a higher or lower fair value measurement,
respectively. Increases or decreases in the discount rate would
result in a lower or higher fair value measurement,
respectively.
Debt Instruments
The book value of the Company’s term and revolving loans, which are
variable rate loans carried at amortized cost, approximates the
fair value based on current market pricing of similar debt. As the
fair value is based on significant other observable inputs,
including current interest and foreign currency exchange rates, it
is deemed to be Level 2 within the fair value
hierarchy.
The book value of the Company’s 2026 and 2028 Senior Notes is a
fixed rate obligation carried at amortized cost. Fair value is
based on quoted market prices as well as borrowing rates available
to the Company. As the fair value is based on significant other
observable outputs, it is deemed to be Level 2 within the fair
value hierarchy. The book value and fair value of the Company’s
2026 and 2028 Senior Notes is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
Book Value |
|
Fair Value |
|
Book Value |
|
Fair Value |
|
2026 Senior Notes |
$ |
500,000 |
|
|
$ |
519,450 |
|
|
$ |
500,000 |
|
|
$ |
537,500 |
|
|
2028 Senior Notes |
500,000 |
|
|
515,000 |
|
|
500,000 |
|
|
510,000 |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table provides a rollforward of the Company’s
goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Goodwill |
|
|
|
December 28, 2019 |
|
Acquisitions |
|
|
|
Foreign Exchange |
|
September 26, 2020 |
|
(in thousands) |
|
RMS |
$ |
56,586 |
|
|
$ |
229,728 |
|
|
|
|
$ |
618 |
|
|
$ |
286,932 |
|
|
DSA |
1,345,223 |
|
|
(629) |
|
|
|
|
7,484 |
|
|
1,352,078 |
|
|
Manufacturing |
138,756 |
|
|
— |
|
|
|
|
(124) |
|
|
138,632 |
|
|
Goodwill |
$ |
1,540,565 |
|
|
$ |
229,099 |
|
|
|
|
$ |
7,978 |
|
|
$ |
1,777,642 |
|
The increase in goodwill during the nine months ended September 26,
2020 related primarily to the acquisitions of HemaCare and Cellero
in the RMS reportable segment.
Intangible Assets, Net
The following table displays intangible assets, net by major
class:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
Gross |
|
Accumulated Amortization |
|
Net |
|
Gross |
|
Accumulated Amortization |
|
Net |
|
(in thousands) |
|
Backlog |
$ |
28,875 |
|
|
$ |
(28,382) |
|
|
$ |
493 |
|
|
$ |
28,865 |
|
|
$ |
(26,895) |
|
|
$ |
1,970 |
|
|
Technology |
127,288 |
|
|
(74,045) |
|
|
53,243 |
|
|
122,106 |
|
|
(57,737) |
|
|
64,369 |
|
|
Trademarks and trade names |
15,622 |
|
|
(5,374) |
|
|
10,248 |
|
|
8,430 |
|
|
(4,901) |
|
|
3,529 |
|
|
Other |
20,600 |
|
|
(14,214) |
|
|
6,386 |
|
|
18,279 |
|
|
(12,307) |
|
|
5,972 |
|
|
Other intangible assets |
192,385 |
|
|
(122,015) |
|
|
70,370 |
|
|
177,680 |
|
|
(101,840) |
|
|
75,840 |
|
|
Client relationships |
1,116,222 |
|
|
(383,814) |
|
|
732,408 |
|
|
934,668 |
|
|
(321,095) |
|
|
613,573 |
|
|
Intangible assets |
$ |
1,308,607 |
|
|
$ |
(505,829) |
|
|
$ |
802,778 |
|
|
$ |
1,112,348 |
|
|
$ |
(422,935) |
|
|
$ |
689,413 |
|
The increase in intangible assets, net during the nine months ended
September 26, 2020 related primarily to the acquisitions of
HemaCare and Cellero.
9. LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS
Long-term debt, net and finance leases consists of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 26, 2020 |
|
December 28, 2019 |
|
(in thousands) |
|
Term loans |
$ |
160,938 |
|
|
$ |
193,750 |
|
|
Revolving facility |
836,767 |
|
|
676,134 |
|
|
2026 Senior Notes
|
500,000 |
|
|
500,000 |
|
|
2028 Senior Notes
|
500,000 |
|
|
500,000 |
|
|
Other debt
|
5,867 |
|
|
5,781 |
|
|
Finance leases (Note 16)
|
27,783 |
|
|
30,527 |
|
|
Total debt and finance leases |
2,031,355 |
|
|
1,906,192 |
|
|
Less: |
|
|
|
|
Current portion of long-term debt |
45,017 |
|
|
35,548 |
|
|
Current portion of finance leases (Note 16) |
2,929 |
|
|
2,997 |
|
|
Current portion of long-term debt and finance leases |
47,946 |
|
|
38,545 |
|
|
Long-term debt and finance leases |
1,983,409 |
|
|
1,867,647 |
|
|
Debt discount and debt issuance costs |
(15,248) |
|
|
(17,981) |
|
|
Long-term debt, net and finance leases |
$ |
1,968,161 |
|
|
$ |
1,849,666 |
|
As of September 26, 2020 and December 28, 2019, the
weighted average interest rate on the Company’s debt was 3.21% and
3.46%, respectively.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Term Loans
and Revolving Facility
The Company has a credit facility consisting of a $750 million term
loan and a $2.05 billion multi-currency revolving facility (Credit
Facility). The term loan facility matures in 19 quarterly
installments with the last installment due March 26, 2023. On
October 23, 2019, the Company prepaid $500.0 million of the
term loan with proceeds from a $500.0 million unregistered
private offering (see 2028 Senior Notes below). The revolving
facility matures on March 26, 2023, and requires no scheduled
payment before that date.
Under specified circumstances, the Company has the ability to
increase the term loan and/or revolving facility by up to
$1.0 billion in the aggregate.
The interest rates applicable to the term loan and revolving
facility under the Credit Facility are, at the Company’s option,
equal to either the base rate (which is the higher of (1) the prime
rate, (2) the federal funds rate plus 0.50%, or (3) the one-month
adjusted LIBOR rate plus 1.0%) or the adjusted LIBOR rate, plus an
interest rate margin based upon the Company’s leverage
ratio.
The Credit Facility includes certain customary representations and
warranties, events of default, notices of material adverse changes
to the Company’s business and negative and affirmative covenants.
These covenants include (1) maintenance of a ratio of consolidated
earnings before interest, taxes, depreciation and amortization
(EBITDA) less capital expenditures to consolidated cash interest
expense, for any period of four consecutive fiscal quarters, of no
less than 3.50 to 1.0 as well as (2) maintenance of a ratio of
consolidated indebtedness to consolidated EBITDA for any period of
four consecutive fiscal quarters, of no more than 4.00 to
1.0.
As of September 26, 2020, the
Company was compliant with all covenants.
The obligations of the Company under the Credit Facility are
collateralized by substantially all of the assets of the
Company.
During the nine months ended September 26, 2020 and September 28,
2019, the Company had multiple U.S. dollar denominated loans
borrowed by a non-U.S. Euro functional currency entity under the
Company’s Credit Facility, which ranged from $300 million to $400
million. This resulted in foreign currency losses recognized in
Other income, net of $4.2 million and $14.9 million during the nine
months ended September 26, 2020 and September 28, 2019,
respectively, related to the remeasurement of the underlying debt.
The Company entered into foreign exchange forward contracts to
limit its foreign currency exposures related to these borrowings
and recognized gains of $6.1 million and $21.6 million during the
nine months ended September 26, 2020 and September 28, 2019,
respectively, within Interest expense. As of September 26,
2020, the
Company did not have any outstanding borrowings in a currency
different than its respective functional currency.
See
Note 14, “Foreign Currency Contracts”, for further
discussion.
Base Indenture for Senior Notes
The Company has an indenture (Base Indenture) with MUFG Union Bank,
N.A., (Trustee). The purpose of the Indenture was to allow the
Company the ability to issue senior notes. The Company has entered
into two supplemental indentures in connection with the senior
notes described below.
2026 Senior Notes
In fiscal year 2018, the Company entered into the first
supplemental indenture (First Supplemental Indenture) with the
Trustee in connection with an offering of $500 million in aggregate
principal amount of the Company’s 5.5% Senior Notes (2026 Senior
Notes), due in 2026, in an unregistered offering. Under the terms
of the First Supplemental Indenture, interest on the Senior Notes
is payable semi-annually on April 1 and October 1, beginning on
October 1, 2018.
2028 Senior Notes
In fiscal year 2019, the Company entered into a second supplemental
indenture (Second Supplemental Indenture) with the Trustee in
connection with the offering of $500 million in aggregate principal
amount of the Company’s 4.25% Senior Notes (2028 Senior Notes), due
in 2028, in an unregistered offering. Under the terms of the Second
Supplemental Indenture, interest on the 2028 Senior Notes is
payable semi-annually on May 1 and November 1, beginning on May 1,
2020.
Letters of Credit
As of September 26, 2020 and December 28, 2019, the
Company had
$8.1 million
and $7.5 million, respectively, in outstanding letters of
credit.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. EQUITY AND NONCONTROLLING INTERESTS
Earnings Per Share
The following table reconciles the numerator and denominator in the
computations of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, 2020 |
|
September 28, 2019 |
|
September 26, 2020 |
|
September 28, 2019 |
|
(in thousands) |
|
Numerator: |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
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 |
|
Options
to purchase 0.3 million and 0.4 million shares for the three months
ended September 26, 2020 and September 28, 2019, respectively,
as well as a non-significant number of restricted stock units
(RSUs) and performance share units (PSUs), were not included in
computing diluted earnings per share because their inclusion would
have been anti-dilutive. Options to purchase 0.3 million and 0.4
million shares for the nine months ended September 26, 2020 and
September 28, 2019, respectively, as well as a non-significant
number of RSUs and PSUs, were not included in computing diluted
earnings per share because their inclusion would have been
anti-dilutive. Basic weighted-average shares outstanding for the
nine months ended September 26, 2020 and September 28, 2019
excluded the impact of 0.9 million and 1.0 million shares of
non-vested RSUs and PSUs, respectively.
Treasury Shares
During the nine months ended September 26, 2020 and
September 28, 2019, the Company did not repurchase any shares
under its authorized stock repurchase program. As of
September 26, 2020, the Company had $129.1 million remaining
on the authorized stock repurchase program.
The Company’s stock-based compensation plans permit the netting of
common stock upon vesting of RSUs and PSUs in order to satisfy
individual statutory tax withholding requirements. During the nine
months ended September 26, 2020 and September 28, 2019, the
Company acquired 0.1 million shares for $23.9 million and 0.1
million shares for $18.0 million, respectively, from such
netting.
Accumulated Other Comprehensive Income (Loss)
Changes to each component of accumulated
other comprehensive income (loss), net of income taxes, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustment
and Other |
|
Pension and Other Post-Retirement Benefit Plans |
|
Total |
|
(in thousands) |
|
December 28, 2019 |
$ |
(87,578) |
|
|
$ |
(90,441) |
|
|
$ |
(178,019) |
|
|
Other comprehensive loss before reclassifications |
(18,388) |
|
|
— |
|
|
(18,388) |
|
|
Amounts reclassified from accumulated other comprehensive
loss |
— |
|
|
4,150 |
|
|
4,150 |
|
|
Net current period other comprehensive income (loss) |
(18,388) |
|
|
4,150 |
|
|
(14,238) |
|
|
Income tax expense |
2,135 |
|
|
889 |
|
|
3,024 |
|
|
September 26, 2020 |
$ |
(108,101) |
|
|
$ |
(87,180) |
|
|
$ |
(195,281) |
|
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Nonredeemable Noncontrolling Interest
The Company has an investment in an entity whose financial results
are consolidated in the Company’s unaudited condensed consolidated
financial statements, as it has the ability to exercise control
over this entity. The interest of the noncontrolling party in this
entity has been recorded as noncontrolling interest within Equity
in the accompanying unaudited condensed consolidated balance
sheets. The activity within the nonredee