Item 1. Financial Statements

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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 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Service revenue	$	869,759	$	812,894	$	2,602,016	$	2,316,206
Product revenue	156,864		176,263		513,917		560,011
Total revenue	1,026,623		989,157		3,115,933		2,876,217
Costs and expenses:
Cost of services provided (excluding amortization of intangible assets)	587,560		530,706		1,731,136		1,540,193
Cost of products sold (excluding amortization of intangible assets)	77,223		88,228		246,326		272,257
Selling, general and administrative	176,109		183,714		550,713		465,458
Amortization of intangible assets	34,229		35,533		103,419		111,144
Operating income	151,502		150,976		484,339		487,165
Other income (expense):
Interest income	1,373		122		3,605		437
Interest expense	(33,742)		(11,375)		(103,166)		(24,512)
Other expense, net	(6,260)		(16,616)		(12,200)		(85,024)
Income before income taxes	112,873		123,107		372,578		378,066
Provision for income taxes	24,852		25,495		81,160		74,564
Net income	88,021		97,612		291,418		303,502
Less: Net income attributable to noncontrolling interests	632		1,139		3,878		4,686
Net income attributable to common shareholders	$	87,389	$	96,473	$	287,540	$	298,816

Earnings per common share
Net income attributable to common shareholders:
Basic	$	1.70	$	1.90	$	5.62	$	5.88
Diluted	$	1.69	$	1.88	$	5.58	$	5.83

Weighted-average number of common shares outstanding:
Basic	51,283		50,870		51,199		50,778
Diluted	51,607		51,283		51,493		51,285

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 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net income	$	88,021	$	97,612	$	291,418	$	303,502
Other comprehensive income (loss):
Foreign currency translation adjustment and other	(63,997)		(151,294)		(17,457)		(258,103)
Amortization of net loss, settlement losses, and prior service benefit included in total cost for pension and other post-retirement benefit plans	177		731		521		2,218
Unrealized gains on hedging instruments	539		—		5,183		—
Other comprehensive loss, before income taxes	(63,281)		(150,563)		(11,753)		(255,885)
Less: Income tax expense related to items of other comprehensive income	(3,292)		(11,201)		(3,393)		(20,095)
Comprehensive income (loss), net of income taxes	28,032		(41,750)		283,058		67,712
Less: Comprehensive income (loss) related to noncontrolling interests, net of income taxes	440		(1,170)		1,527		(236)
Comprehensive income (loss) attributable to common shareholders, net of income taxes	$	27,592	$	(40,580)	$	281,531	$	67,948







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 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	157,174	$	233,912
Trade receivables and contract assets, net of allowances for credit losses of $21,187 and $11,278, respectively	799,310		752,390
Inventories	292,972		255,809
Prepaid assets	101,555		89,341
Other current assets	93,314		107,580
Total current assets	1,444,325		1,439,032
Property, plant and equipment, net	1,525,485		1,465,655
Venture capital and strategic equity investments	301,847		311,602
Operating lease right-of-use assets, net	375,322		391,762
Goodwill	2,884,602		2,849,903
Intangible assets, net	886,286		955,275
Deferred tax assets	34,264		41,262
Other assets	154,876		148,279
Total assets	$	7,607,007	$	7,602,770
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities:
Accounts payable	$	136,341	$	205,915
Accrued compensation	224,183		197,078
Deferred revenue	250,485		264,259
Accrued liabilities	198,062		219,758
Other current liabilities	184,745		204,575
Total current liabilities	993,816		1,091,585
Long-term debt, net and finance leases	2,514,217		2,707,531
Operating lease right-of-use liabilities	390,437		389,745
Deferred tax liabilities	185,310		215,582
Other long-term liabilities	172,518		174,822
Total liabilities	4,256,298		4,579,265
Commitments and contingencies (Notes 2, 8, 10, and 14)
Redeemable noncontrolling interest	39,948		42,427
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; 51,400 shares issued and 51,296 shares outstanding as of September 30, 2023, and 50,944 shares issued and outstanding as of December 31, 2022	514		509
Additional paid-in capital	1,877,120		1,804,940
Retained earnings	1,720,441		1,432,901
Treasury stock, at cost, 104 and zero shares, as of September 30, 2023 and December 31, 2022, respectively	(24,016)		—
Accumulated other comprehensive loss	(268,066)		(262,057)
Total equity attributable to common shareholders	3,305,993		2,976,293
Noncontrolling interests (nonredeemable)	4,768		4,785
Total equity	3,310,761		2,981,078
Total liabilities, redeemable noncontrolling interests and equity	$	7,607,007	$	7,602,770
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 30, 2023		September 24, 2022
Cash flows relating to operating activities
Net income	$	291,418	$	303,502
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	233,610		226,325
Stock-based compensation	52,527		51,548
Loss on debt extinguishment and amortization of other financing costs	2,975		3,054
Deferred income taxes	(28,251)		(26,323)
Loss on venture capital and strategic equity investments, net	9,246		20,068
Long-lived asset impairment charges	26,202		—

Loss on divestitures, net	995		—
Changes in fair value of contingent consideration arrangements	1,810		(15,420)
Other, net	13,192		31,574
Changes in assets and liabilities:
Trade receivables and contract assets, net	(59,081)		(174,169)
Inventories	(44,126)		(76,283)
Accounts payable	(26,531)		5,979
Accrued compensation	28,438		(32,734)
Deferred revenue	(9,997)		53,565
Customer contract deposits	(21,534)		16,234
Other assets and liabilities, net	(7,938)		(2,037)
Net cash provided by operating activities	462,955		384,883
Cash flows relating to investing activities
Acquisition of businesses and assets, net of cash acquired	(50,166)		(283,392)
Capital expenditures	(240,205)		(235,709)
Purchases of investments and contributions to venture capital investments	(36,322)		(129,363)
Proceeds from sale of investments	3,953		3,104
Other, net	(2,044)		(6,945)
Net cash used in investing activities	(324,784)		(652,305)
Cash flows relating to financing activities
Proceeds from long-term debt and revolving credit facility	333,034		2,798,665
Proceeds from exercises of stock options	19,658		17,710
Payments on long-term debt, revolving credit facility, and finance lease obligations	(530,909)		(2,524,387)
Purchase of treasury stock	(24,016)		(38,492)
Payments of contingent consideration	(2,711)		(10,356)
Purchases of additional equity interests, net	—		(30,533)
Other, net	(4,145)		(6,048)
Net cash (used in) provided by financing activities	(209,089)		206,559
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(4,680)		10,726
Net change in cash, cash equivalents, and restricted cash	(75,598)		(50,137)
Cash, cash equivalents, and restricted cash, beginning of period	241,214		246,314
Cash, cash equivalents, and restricted cash, end of period	$	165,616	$	196,177











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 31, 2022	50,944		$	509	$	1,804,940	$	1,432,901	$	(262,057)	—	$	—	$	2,976,293	$	4,785	$	2,981,078
Net income	—		—		—		103,131		—		—	—		103,131		501		103,632
Other comprehensive income	—		—		—		—		22,933		—	—		22,933		—		22,933

Issuance of stock under employee compensation plans	316		3		11,789		—		—		—	—		11,792		—		11,792
Purchase of treasury shares	—		—		—		—		—		78	(19,012)		(19,012)		—		(19,012)
Stock-based compensation	—		—		13,460		—		—		—	—		13,460		—		13,460
April 1, 2023	51,260		512		1,830,189		1,536,032		(239,124)		78	(19,012)		3,108,597		5,286		3,113,883
Net income	—		—		—		97,020		—		—	—		97,020		566		97,586
Other comprehensive income	—		—		—		—		30,855		—	—		30,855		—		30,855

Issuance of stock under employee compensation plans	110		1		3,926		—		—		—	—		3,927		—		3,927
Purchase of treasury shares	—		—		—		—		—		26	(4,966)		(4,966)		—		(4,966)
Stock-based compensation	—		—		16,270		—		—		—	—		16,270		—		16,270
July 1, 2023	51,370		513		1,850,385		1,633,052		(208,269)		104	(23,978)		3,251,703		5,852		3,257,555
Net income	—		—		—		87,389		—		—	—		87,389		561		87,950
Other comprehensive income	—		—		—		—		(59,797)		—	—		(59,797)		—		(59,797)
Dividends declared to noncontrolling interest	—		—		—		—		—		—	—		—		(1,645)		(1,645)

Issuance of stock under employee compensation plans	30		1		3,938		—		—		—	—		3,939		—		3,939
Purchase of treasury shares	—		—		—		—		—		—	(38)		(38)		—		(38)
Stock-based compensation	—		—		22,797		—		—		—	—		22,797		—		22,797
September 30, 2023	51,400		$	514	$	1,877,120	$	1,720,441	$	(268,066)	104	$	(24,016)	$	3,305,993	$	4,768	$	3,310,761



	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 25, 2021	50,480		505		1,718,304		980,751		(164,740)		—	—		2,534,820		4,162		2,538,982
Net income	—		—		—		93,022		—		—	—		93,022		560		93,582
Other comprehensive loss	—		—		—		—		(10,193)		—	—		(10,193)		—		(10,193)
Adjustment of redeemable noncontrolling interest to redemption value	—		—		(1,161)		—		—		—	—		(1,161)		—		(1,161)
Issuance of stock under employee compensation plans	431		4		13,067		—		—		—	—		13,071		—		13,071
Purchase of treasury shares	—		—		—		—		—		111	(33,994)		(33,994)		—		(33,994)
Stock-based compensation	—		—		14,619		—		—		—	—		14,619		—		14,619
March 26, 2022	50,911		509		1,744,829		1,073,773		(174,933)		111	(33,994)		2,610,184		4,722		2,614,906
Net income	—		—		—		109,321		—		—	—		109,321		499		109,820
Other comprehensive loss	—		—		—		—		(83,622)		—	—		(83,622)		—		(83,622)
Adjustment of redeemable noncontrolling interest to redemption value	—		—		(1,132)		—		—		—	—		(1,132)		—		(1,132)
Issuance of stock under employee compensation plans	79		1		2,498		—		—		—	—		2,499		—		2,499
Purchase of treasury shares	—		—		—		—		—		18	(4,474)		(4,474)		—		(4,474)
Stock-based compensation	—		—		14,930		—		—		—	—		14,930		—		14,930
June 25, 2022	50,990		510		1,761,125		1,183,094		(258,555)		129	(38,468)		2,647,706		5,221		2,652,927
Net income	—		—		—		96,473		—		—	—		96,473		664		97,137
Other comprehensive loss	—		—		—		—		(137,053)		—	—		(137,053)		—		(137,053)
Adjustment of redeemable noncontrolling interest to redemption value	—		—		(4,388)		—		—		—	—		(4,388)		—		(4,388)
Issuance of stock under employee compensation plans	16		—		2,140		—		—		—	—		2,140		—		2,140
Purchase of treasury shares	—		—		—		—		—		—	(24)		(24)		—		(24)
Stock-based compensation	—		—		21,999		—		—		—	—		21,999		—		21,999
September 24, 2022	51,006		$	510	$	1,780,876	$	1,279,567	$	(395,608)	129	$	(38,492)	$	2,626,853	$	5,885	$	2,632,738

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 2022. 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.

Newly Adopted Accounting Pronouncements

In September 2022, the FASB issued ASU 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” ASU 2022-04 requires quantitative and qualitative disclosures about the use of supplier finance programs. The ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years for selected disclosures, and will be applied on a prospective basis. The Company participates in certain supplier finance programs that are immaterial to the unaudited condensed consolidated financial statements and related disclosures.

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 2022.

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 unaudited condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Redeemable noncontrolling interests, where the noncontrolling interest holders have the ability to sell the remaining interests, are classified in the mezzanine section of the unaudited condensed consolidated balance sheets, which is presented above the equity section and below liabilities. 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. A 53rd week in the fourth quarter of the fiscal year is occasionally necessary to align with a December 31 calendar year-end, which occurred in fiscal year 2022.

Segment Reporting

The Company reports its results in three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing).

The Company’s RMS reportable segment includes the Research Models, Research Model Services, and Cell Solutions 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; Insourcing Solutions (IS), which provides colony management of its clients’ research operations (including recruitment, training, staffing, and management services) within our clients’ facilities and utilizing both our Charles River Accelerator and Development Lab (CRADL™) and our Explora BioLabs options, in which we provide vivarium space to our clients; and Cell Solutions, which

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 two businesses: Discovery Services and Safety Assessment. The Company provides regulated and non-regulated DSA services to support the research, development, and regulatory-required safety testing of potential new drugs, including therapeutic discovery and optimization plus in vitro and in vivo studies, laboratory support services, and strategic non-clinical consulting and program management to support product development.

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 services and Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development and manufacturing products and services (CDMO). In December of 2022, the Company sold the Avian Vaccine Services business (Avian), previously reported in the Manufacturing segment, which supplied specific-pathogen-free chicken eggs and chickens.

2. ACQUISITIONS AND DIVESTITURES

Fiscal 2023 Acquisition

SAMDI Tech, Inc.

On January 27, 2023, the Company acquired SAMDI Tech, Inc., (SAMDI), a leading provider of high-quality, label-free high-throughput screening (HTS) solutions for drug discovery research. The acquisition of SAMDI will provide clients with seamless access to the premier, label-free HTS MS platform and create a comprehensive, library of drug discovery solutions. The purchase price of SAMDI was $62.8 million, net of $0.4 million in cash, inclusive of a 20% strategic equity interest previously owned by the Company of $12.6 million. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s DSA reportable segment.

Fiscal 2022 Acquisition

Explora BioLabs Holdings, Inc.

On April 5, 2022, the Company acquired Explora BioLabs Holdings, Inc. (Explora BioLabs), a provider of contract vivarium research services, providing biopharmaceutical clients with turnkey in vivo vivarium facilities, management and related services to efficiently conduct their early-stage research activities. The acquisition of Explora BioLabs complements the Company’s existing Insourcing Solutions business, specifically the CRADL (Charles River Accelerator and Development Lab) footprint, and offers incremental opportunities to partner with an emerging client base, many of which are engaged in cell and gene therapy development. The purchase price of Explora BioLabs was $284.5 million, net of $6.6 million in cash. The acquisition was funded through proceeds from the Company’s credit facility (Credit Facility). This business is reported as part of the Company’s RMS reportable segment.

Purchase price information

The purchase price allocation was as follows:


	SAMDI		Explora BioLabs
	January 27, 2023		April 5, 2022
	(in thousands)
Trade receivables	$	513	$	7,679
Other current assets (excluding cash)	75		1,067
Property, plant and equipment	593		37,369
Operating lease right-of-use asset, net	—		48,613
Goodwill (1)	37,129		215,752
Definite-lived intangible assets	33,070		70,100
Other long-term assets	6		556
Deferred revenue	(43)		(3,507)
Other current liabilities	(351)		(15,507)
Operating lease right-of-use liabilities (Long-term)	—		(57,193)
Deferred tax liabilities	(8,191)		(18,601)
Other long-term liabilities	—		(1,807)
Total purchase price allocation	$	62,801	$	284,521


(1) The goodwill resulting from these transactions is primarily attributable to the potential growth of the Company’s segments from new customers introduced to the acquired businesses and the assembled workforce of the acquirees, thus is not deductible for tax purposes. Explora BioLabs had $5.0 million of goodwill due to a prior asset acquisition that is deductible for tax purposes.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The definite-lived intangible assets acquired were as follows:


	SAMDI		Explora BioLabs
Definite-Lived Intangible Assets	(in thousands)
Client relationships	$	23,400	$	64,000
Other intangible assets	9,670		6,100
Total definite-lived intangible assets	$	33,070	$	70,100

Weighted Average Amortization Life	(in years)
Client relationships	15		13
Other intangible assets	7		4
Total definite-lived intangible assets	12		12


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)
Transaction and Integration Costs
Selling, general and administrative expenses	$	1,040	$	3,065	$	3,328	$	14,604

Divestitures

The Company routinely evaluates the strategic fit and fundamental performance of its global businesses, divesting operations that do not meet key business criteria. As part of this ongoing assessment, the Company determined that certain capital could be better deployed in other long-term growth opportunities.

Avian Vaccine Services

On December 20, 2022, the Company sold its Avian Vaccine Services business (Avian) to a private investor group for a purchase price of $167.3 million in cash. The Company may also earn up to $30.0 million of contingent payments, which are tied to certain annual results of the Avian business from January 2024 through December 2027. The contingent payments have been fair valued at $10.3 million using a discounted probability weighted model. The Avian business was reported in the Company’s Manufacturing reportable segment. During fiscal year 2022, the Company recorded a gain on the divestiture of Avian of $123.4 million within Other income (expense) on the Company’s condensed consolidated statements of income.

The carrying amounts of the major classes of assets and liabilities associated with the divestitures of the businesses were as follows:


	December 19, 2022
	Avian
	(in thousands)
Assets
Current assets	$	30,545
Property, plant, and equipment, net	24,602
Operating lease right-of-use assets, net	611
Goodwill	3,168
Intangible assets, net	1,629
Other assets	10
Total assets	$	60,565

Liabilities
Current liabilities	$	8,139
Operating lease right-of-use liabilities	331
Total liabilities	$	8,470

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of Revenue

The following table disaggregates the Company’s revenue by major business line and timing of transfer of products or services:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time	$	94,883	$	88,174	$	282,980	$	243,901
Services and products transferred at a point in time	91,965		91,940		313,582		299,165
Total RMS revenue	186,848		180,114		596,562		543,066
DSA
Services and products transferred over time	663,128		618,270		1,987,617		1,749,977
Services and products transferred at a point in time	900		1,193		2,221		5,662
Total DSA revenue	664,028		619,463		1,989,838		1,755,639
Manufacturing
Services and products transferred over time	94,446		89,173		280,992		276,993
Services and products transferred at a point in time	81,301		100,407		248,541		300,519
Total Manufacturing revenue	175,747		189,580		529,533		577,512
Total revenue	$	1,026,623	$	989,157	$	3,115,933	$	2,876,217

Contract Balances from Contracts with Customers

The following table provides information about client receivables, contract assets, and contract liabilities from contracts with customers:


	September 30, 2023		December 31, 2022
	(in thousands)
Assets from contracts with customers
Client receivables	$	591,979	$	559,410
Unbilled revenue	228,518		204,258
Total	820,497		763,668
Less: Allowance for credit losses	(21,187)		(11,278)
Trade receivables and contract assets, net	$	799,310	$	752,390

Liabilities from contracts with customers
Current deferred revenue	$	250,485	$	264,259
Long-term deferred revenue (included in Other long-term liabilities)	29,391		25,795
Customer contract deposits (included in Other current liabilities)	69,847		91,640

Approximately 90% of unbilled revenue as of December 31, 2022, which was $204 million, was billed during the nine months ended September 30, 2023. Approximately 85% of unbilled revenue as of December 25, 2021, which was $161 million, was billed during the nine months ended September 24, 2022.

Approximately 80% of contract liabilities as of December 31, 2022, which was $290 million, were recognized as revenue during the nine months ended September 30, 2023. Approximately 85% of contract liabilities as of December 25, 2021, which was $240 million, were recognized as revenue during the nine months ended September 24, 2022.

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 $52 million and $54 million of unpaid advanced client billings from both client receivables and deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. Net provisions of $10.2 million and $4.4 million were recorded to the allowance for credit losses for the nine months ended September 30, 2023 and September 24, 2022, respectively.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 30, 2023. Excluded from the disclosure is the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed, and service revenue recognized in accordance with ASC 842, “Leases”. The aggregate amount of transaction price allocated to the remaining performance obligations for all open customer contracts as of September 30, 2023 was $957.7 million. The Company will recognize revenues for these performance obligations as they are satisfied, approximately 50% of which is expected to occur within the next twelve months and the remainder recognized thereafter during the remaining contract term.

Other Performance Obligation****s

As part of the Company’s service offerings, the Company has identified performance obligations related to leasing Company owned assets. In certain arrangements, customers obtain substantially all of the economic benefits of the identified assets, which may include manufacturing suites and related equipment, and have the right to direct the assets’ use over the term of the contract. The associated revenue is recognized on a straight-line basis over the term of the lease, which is generally less than one year.


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)								Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
Lease revenue	$	22,254	$	15,790	$	70,235	$	37,558	Service revenue

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT AND GEOGRAPHIC INFORMATION

The following table presents revenue and other financial information by reportable segment:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)
RMS
Revenue	$	186,848	$	180,114	$	596,562	$	543,066
Operating income	28,326		35,891		117,653		123,299
Depreciation and amortization	13,872		13,128		41,310		35,825
Capital expenditures	9,192		10,743		35,769		33,239
DSA
Revenue	$	664,028	$	619,463	$	1,989,838	$	1,755,639
Operating income	146,819		142,143		479,788		375,922
Depreciation and amortization	44,088		43,913		129,662		135,328
Capital expenditures	41,967		43,400		155,477		133,908
Manufacturing
Revenue	$	175,747	$	189,580	$	529,533	$	577,512
Operating income	26,275		31,479		52,784		140,350
Depreciation and amortization	20,070		17,005		59,677		53,487
Capital expenditures	14,349		18,137		46,949		65,396
Unallocated Corporate
Operating income (1)	$	(49,918)	$	(58,537)	$	(165,886)	$	(152,406)
Depreciation and amortization	840		559		2,961		1,685
Capital expenditures	439		113		2,010		3,166
Consolidated
Revenue	$	1,026,623	$	989,157	$	3,115,933	$	2,876,217
Operating income	151,502		150,976		484,339		487,165
Depreciation and amortization	78,870		74,605		233,610		226,325
Capital expenditures	65,947		72,393		240,205		235,709

(1) Operating income for 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 30, 2023	$	590,316	$	264,787	$	129,023	$	40,233	$	2,264	$	1,026,623
September 24, 2022	595,265		245,928		101,601		43,803		2,560		989,157

Nine Months Ended:
September 30, 2023	$	1,802,532	$	805,466	$	357,276	$	142,910	$	7,749	$	3,115,933
September 24, 2022	1,688,731		760,599		280,541		138,988		7,358		2,876,217

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.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. INVENTORY

Inventories

The composition of inventories is as follows:


	September 30, 2023		December 31, 2022
	(in thousands)
Raw materials and supplies	$	40,669	$	38,892
Work in process	46,544		48,367
Finished products	205,759		168,550
Inventories	$	292,972	$	255,809

6. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS

Venture capital investments are summarized below:


	Nine Months Ended
	September 30, 2023		September 24, 2022
	(in thousands)
Beginning balance	$	129,012	$	149,640
Capital contributions	12,056		11,815
Distributions	(12,972)		(7,733)
Losses	(14,258)		(20,063)
Foreign currency translation	260		(2,149)
Ending balance	$	114,098	$	131,510

The Company also invests, with minority positions, directly in equity of predominantly privately held companies. Strategic investments are summarized below:


	Nine Months Ended
	September 30, 2023		September 24, 2022
	(in thousands)
Beginning balance	$	182,590	$	51,712
Purchase of investments	21,489		117,220
Distributions	(7,493)		(1,710)
Gain (loss)	5,012		(5)
Reduction for acquisition of entity	(12,635)		—
Foreign currency translation	(1,214)		(8,636)
Ending balance	$	187,749	$	158,581

In April 2022, the Company acquired a 49% equity interest in a supplier supporting the DSA reportable segment (the Investee) for $90.0 million up front and an additional future contingent payment of up to $5.0 million based upon the Investee’s future performance. In August 2023, a contingent payment of $2.5 million was made to the Investee, with an additional $2.5 million to be earned based on future performance. The total allocable basis of the investment exceeded the proportional interest in the Investee’s underlying net assets by $86.7 million, which has been allocated primarily to goodwill, intangible assets (client relationships and backlog), and deferred tax liabilities in the amount of $26.2 million, $71.2 million, and $10.7 million respectively. On July 28, 2023, the Company signed an agreement to acquire an additional 41% equity stake in the supplier, which upon closing, will result in ownership of 90%. The preliminary purchase price for the 41% equity is $143 million in cash, subject to customary closing adjustments, with additional contingent payments of up to $55 million based on future performance over a 3-year period. The Company will have the call option right to purchase the remaining 10% equity up until one month after the sixth anniversary of closing. On the first anniversary of the expiration of the call option, a 12-month put option will be triggered giving the seller the right to require the Company to acquire shares of the Investee from the seller. The consummation of the acquisition of the additional 41% equity is subject to regulatory approval and closing conditions being satisfied. Accordingly, the timing of close is uncertain.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. FAIR VALUE

Assets and liabilities measured at fair value on a recurring basis are summarized below:


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Current assets measured at fair value:	(in thousands)
Cash equivalents	$	—	$	564	$	—	$	564
Other assets:
Life insurance policies	—		36,672		—		36,672
Interest rate swap	—		3,660		—		3,660
Total assets measured at fair value	$	—	$	40,896	$	—	$	40,896

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 30, 2023, there were no transfers between levels.


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Current assets measured at fair value:	(in thousands)
Cash equivalents	$	—	$	78	$	—	$	78
Other assets:
Life insurance policies	—		34,527		—		34,527
Total assets measured at fair value	$	—	$	34,605	$	—	$	34,605

Accrued liabilities measured at fair value:
Contingent consideration	$	—	$	—	$	13,431	$	13,431
Other long-term liabilities measured at fair value:
Interest rate swap	—		1,523		—		1,523
Total liabilities measured at fair value	$	—	$	1,523	$	13,431	$	14,954

During the year ended December 31, 2022, there were no transfers between levels.

Contingent Consideration

The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.


	Nine Months Ended
	September 30, 2023		September 24, 2022
	(in thousands)
Beginning balance	$	13,431	$	37,244

Payments	(15,130)		(11,476)
Total gains or losses (realized/unrealized):
Adjustment of previously recorded contingent liability	1,810		(15,340)
Foreign currency translation	(111)		(1,767)
Ending balance	$	—	$	8,661

The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, which incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain financial targets, forecasted results or targets, volatility, and discount rates. The remaining maximum potential payments are approximately $43 million, of which the value accrued as of September 30, 2023 is zero as the probability of achieving the maximum target is estimated to be 0%. The volatility and weighted average cost of capital is approximately 40% and 16%, respectively. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Flow Hedge

The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. In November 2022, the Company entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuation related to floating rate borrowings under the Credit Facility, at a fixed rate of 4.700%.

In March 2023 and in conjunction with an amendment of the Credit Agreement (Second Amendment), the Company modified the variable rate on its interest rate swap from 1-month LIBOR to 1-month adjusted term SOFR. Effective with the modification, the Company will pay a fixed rate of 4.65% on its swap maturing November 2, 2024. The Company elected to apply the optional expedient in ASC 848, Reference Rate Reform, in connection with modifying its interest rate swap from LIBOR to SOFR that enabled it to consider the modification a continuation of the existing contract. As a result, the transition did not have an impact on the Company’s hedge accounting or a material impact to the Company’s financial statements.

Debt Instruments

The book value of the Company’s 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 Senior Notes are fixed rate obligations 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 Senior Notes is summarized below:


	September 30, 2023				December 31, 2022
	Book Value		Fair Value		Book Value		Fair Value
	(in thousands)
4.25% Senior Notes due 2028	$	500,000	$	448,350	$	500,000	$	460,450
3.75% Senior Notes due 2029	500,000		427,500		500,000		442,200
4.00% Senior Notes due 2031	500,000		423,100		500,000		432,500

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table provides a rollforward of the Company’s goodwill:


	RMS		DSA (1)		Manufacturing		Total
	(in thousands)
December 31, 2022	$	497,710	$	1,433,601	$	918,592	$	2,849,903
Acquisitions	—		37,129		—		37,129

Foreign exchange	(893)		(3,518)		1,981		(2,430)
September 30, 2023	$	496,817	$	1,467,212	$	920,573	$	2,884,602
(1) DSA includes accumulated impairment losses of $1 billion, which were recognized in fiscal years 2008 and 2010.

The increase in goodwill during the nine months ended September 30, 2023 related to the acquisition of SAMDI in the DSA reportable segment.

Intangible Assets, Net

The following table displays intangible assets, net by major class:


	September 30, 2023						December 31, 2022
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	(in thousands)
Client relationships	$	1,515,254	$	(679,587)	$	835,667	$	1,491,926	$	(591,417)	$	900,509
Technology	139,124		(107,488)		31,636		129,626		(101,655)		27,971
Backlog	15,272		(14,041)		1,231		15,236		(12,512)		2,724
Trademarks and trade names	12,655		(5,183)		7,472		12,617		(4,410)		8,207
Other	37,994		(27,714)		10,280		37,985		(22,121)		15,864
Intangible assets	$	1,720,299	$	(834,013)	$	886,286	$	1,687,390	$	(732,115)	$	955,275

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The decrease in intangible assets, net during the nine months ended September 30, 2023 related primarily to normal amortization over the useful lives, offset by the acquisition of SAMDI.

9. DEBT AND OTHER FINANCING ARRANGEMENTS

Long-term debt, net and finance leases consists of the following:


	September 30, 2023		December 31, 2022
	(in thousands)
Revolving facility	$	1,003,744	$	1,197,586
4.25% Senior Notes due 2028	500,000		500,000
3.75% Senior Notes due 2029	500,000		500,000
4.00% Senior Notes due 2031	500,000		500,000
Other debt	797		1,594
Finance leases	27,995		30,646
Total debt and finance leases	2,532,536		2,729,826
Less:
Current portion of long-term debt	797		1,347
Current portion of finance leases	1,880		2,330
Current portion of long-term debt and finance leases	2,677		3,677
Long-term debt and finance leases	2,529,859		2,726,149
Debt discount and debt issuance costs	(15,642)		(18,618)
Long-term debt, net and finance leases	$	2,514,217	$	2,707,531

As of September 30, 2023 and December 31, 2022, the weighted average interest rate on the Company’s debt was 4.88% and 4.58%, respectively.

During the three and nine months ended September 24, 2022, the Company had multiple U.S. dollar denominated loans borrowed by a non-U.S. Euro functional currency entity under the Credit Facility, which were between $250 million and $400 million each. To limit this foreign currency exposure, the Company entered into foreign exchange forward contracts, which were not designated as hedging instruments. The Company did not have any U.S. dollar denominated loans borrowed by a non-U.S. Euro functional currency entity under the Credit Facility during the three and nine months ended September 30, 2023.

The gains and losses incurred on these transactions were as follows:


	Three Months Ended		Nine Months Ended
		September 24, 2022	September 24, 2022	Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
	(in thousands)
Loss on foreign debt remeasurement		(16,006)	(46,529)	Other expense, net
Gain on foreign exchange forward contract		17,406	49,712	Interest expense

Letters of Credit

As of September 30, 2023 and December 31, 2022, the Company had $21.6 million and $18.6 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 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)
Numerator:
Net income	$	88,021	$	97,612	$	291,418	$	303,502
Less: Net income attributable to noncontrolling interests	632		1,139		3,878		4,686
Net income attributable to common shareholders	$	87,389	$	96,473	$	287,540	$	298,816

Denominator:
Weighted-average shares outstanding - Basic	51,283		50,870		51,199		50,778
Effect of dilutive securities:
Stock options, restricted stock units and performance share units	324		413		294		507
Weighted-average shares outstanding - Diluted	51,607		51,283		51,493		51,285

Anti-dilutive common stock equivalents (1)	588		571		514		568

(1) These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.

Treasury Shares

The Company’s Board of Directors has authorized a $1.3 billion stock repurchase program. As of September 30, 2023, 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. The Company acquired shares of 0.1 million in the nine months ended September 30, 2023 and nine months ended September 24, 2022, for $24.0 million and $38.5 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		Net Unrealized (Loss) Gain on Cash Flow Hedge		Total
	(in thousands)
December 31, 2022	$	(217,785)	$	(43,114)	$	(1,158)	$	(262,057)
Other comprehensive income before reclassifications	(15,106)		521		5,183		(9,402)

Net current period other comprehensive income	(15,106)		521		5,183		(9,402)
Income tax expense (benefit)	(4,883)		248		1,242		(3,393)
September 30, 2023	$	(228,008)	$	(42,841)	$	2,783	$	(268,066)

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 nonredeemable noncontrolling interest was not significant during the three and nine months ended September 30, 2023 and September 24, 2022.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Redeemable Noncontrolling Interests

The Company holds a 92% ownership interest in Vital River, a commercial provider of research models and related services in China as of September 30, 2023. The Company has the right to purchase, and the noncontrolling interest holders have the right to sell, the remaining 8% equity interest at a contractually defined redemption value, subject to a redemption floor, which represents a derivative embedded within the equity instrument. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value and the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest ($24.7 million as of September 30, 2023). The amount that the Company could be required to pay to purchase the remaining 8% equity interest is not limited. During the fourth quarter of fiscal 2022, the Company exercised its option to acquire the remaining 8%, which is subject to customary closing conditions. The Company expects the transaction to close prior to the end of fiscal year 2023.

In 2019, the Company acquired an 80% equity interest in a subsidiary that is fully consolidated under the voting interest model, which includes a 20% redeemable noncontrolling interest. In June 2022, the Company purchased an additional 10% interest in the subsidiary for $15.0 million, resulting in a remaining noncontrolling interest of 10%. Beginning in 2024, the Company has the right to purchase, and the noncontrolling interest holders have the right to sell (Put/call option), the remaining 10% equity interest at its appraised value. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the appraised value and the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest ($15.3 million as of September 30, 2023) or a predetermined floor value. The amount that the Company could be required to pay to purchase the remaining 10% equity interest is not limited.

The following table provides a rollforward of the activity related to the Company’s redeemable noncontrolling interests:


	Nine Months Ended
	September 30, 2023		September 24, 2022
	(in thousands)
Beginning balance	$	42,427	$	53,010
Adjustments to redemption value	—		6,681
Additional purchases	—		(15,000)
Net income	2,250		2,963
Dividends	(2,378)		(3,525)
Foreign currency translation	(2,351)		(4,923)
Ending balance	$	39,948	$	39,206

11. INCOME TAXES

The Company’s effective tax rates for the three months ended September 30, 2023 and September 24, 2022 were 22.0% and 20.7%, respectively. The increase in the three month effective tax rates is attributable primarily to jurisdictional earnings mix and an increase in net U.S. taxation of foreign operations. The Company’s effective tax rates for the nine months ended September 30, 2023 and September 24, 2022 were 21.8% and 19.7%, respectively. The increase in the nine month effective tax rates from the prior year period was primarily attributable to a decreased tax benefit from stock-based compensation deductions in the nine months ended September 30, 2023.

For the three months ended September 30, 2023, the Company’s unrecognized tax benefits increased by $0.4 million to $26.0 million, primarily due to increases in research and development tax credit reserves. For the three months ended September 30, 2023, the amount of unrecognized income tax benefits that would impact the effective tax rate increased by $0.6 million to $22.4 million for the same reasons discussed above. The accrued interest on unrecognized tax benefits was $1.1 million as of September 30, 2023. The Company estimates that it is reasonably possible that the unrecognized tax benefits will decrease by approximately $4 million over the next twelve-month period, primarily due to audit settlements and expiring statutes of limitations.

The Company’s prepaid and accrued tax positions are as follows:


	September 30, 2023		December 31, 2022		Affected Line Item in the Unaudited Condensed Consolidated Balance Sheets
	(in thousands)
Prepaid income tax	$	76,675	$	88,550	Other current assets
Accrued income taxes	44,873		39,854		Other current liabilities

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the U.S., the U.K., China, France, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2019.

The Company and certain of its subsidiaries have ongoing tax controversies in the U.S., Canada, and India. The Company does not anticipate resolution of these audits will have a material impact on its consolidated financial statements.

12. RESTRUCTURING AND ASSET IMPAIRMENTS

The Company has undertaken restructuring actions impacting the reportable segments at various locations across North America, Europe and Asia. This includes workforce right-sizing actions resulting in severance and transition costs; and costs related to the consolidation of facilities resulting in asset impairment and accelerated depreciation charges.

The following table presents restructuring costs by reportable segment:


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
	(in thousands)
RMS	$	965	$	(110)	$	965	$	1,017
DSA	13,220		71		13,218		687
Manufacturing	975		1,165		7,162		1,543
Unallocated corporate	—		(23)		—		1,231
Total	$	15,160	$	1,103	$	21,345	$	4,478

The following table presents restructuring costs as included within the Company’s unaudited condensed consolidated statements of income:


	September 30, 2023						September 24, 2022
	Severance and Transition Costs		Asset Impairments and Other Costs		Total		Severance and Transition Costs		Asset Impairments and Other Costs		Total
	(in thousands)
Three Months Ended
Cost of services provided (excluding amortization of intangible assets)	$	2,160	$	11,418	$	13,578	$	243	$	685	$	928
Cost of products sold (excluding amortization of intangible assets)	480		174		654		(42)		239		197
Selling, general and administrative	937		(9)		928		(129)		107		(22)
Total restructuring costs	$	3,577	$	11,583	$	15,160	$	72	$	1,031	$	1,103

Nine Months Ended
Cost of services provided (excluding amortization of intangible assets)	$	5,088	$	11,418	$	16,506	$	876	$	685	$	1,561
Cost of products sold (excluding amortization of intangible assets)	534		2,920		3,454		336		239		575
Selling, general and administrative	1,386		(1)		1,385		1,760		582		2,342
Total restructuring costs	$	7,008	$	14,337	$	21,345	$	2,972	$	1,506	$	4,478

As of September 30, 2023 and December 31, 2022, $5.0 million and $1.3 million, respectively, of severance and other personnel related costs liabilities and facilities related costs liabilities were included in accrued compensation and accrued liabilities within the Company’s unaudited condensed consolidated balance sheets.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. SUPPLEMENTAL CASH FLOW INFORMATION


	Nine Months Ended
	September 30, 2023		September 24, 2022
	(in thousands)
Non-cash investing activities:
Purchases of Property, plant and equipment included in Accounts payable and Accrued liabilities	$	41,526	$	51,772

Cash, cash equivalents and restricted cash is included in the accompanying unaudited balance sheet as follows:


	September 30, 2023		December 31, 2022
	(in thousands)
Supplemental cash flow information:
Cash and cash equivalents	$	157,174	$	233,912

Restricted cash included in Other current assets	6,586		6,192
Restricted cash included in Other assets	1,856		1,110
Cash, cash equivalents, and restricted cash, end of period	$	165,616	$	241,214

14. COMMITMENTS AND CONTINGENCIES

Litigation

On February 16, 2023, the Company was informed by the U.S. Department of Justice (DOJ) that in conjunction with the U.S. Fish and Wildlife Service (USFWS), it had commenced an investigation into the Company’s conduct regarding several shipments of non-human primates from Cambodia. On February 17, 2023 the Company received a grand jury subpoena requesting certain documents related to such investigation. The Company is aware of a parallel civil investigation being undertaken by the DOJ and USFWS. The Company is cooperating with the DOJ and the USFWS and believes that the concerns raised with respect to the Company’s conduct are without merit. The Company maintains a global supplier onboarding and oversight program incorporating risk-based due diligence, auditing, and monitoring practices to help ensure the quality of our supplier relationships and compliance with applicable U.S. and international laws and regulations, and has operated under the belief that all shipments of non-human primates it received satisfied the material requirements, documentation and related processes and procedures of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) documentation and related processes and procedures, which guides the release of each import by USFWS. Notwithstanding our efforts and good-faith belief, in connection with the civil investigation, the Company has voluntarily suspended future shipments of non-human primates from Cambodia to the United States until such time that the Company and USFWS can agree upon and implement additional procedures to reasonably ensure that non-human primates imported from Cambodia are purpose-bred. The Company continues to care for the Cambodia-sourced non-human primates from certain recent shipments in the United States. The carrying value of the inventory related to these shipments is approximately $20 million. On May 16, 2023, the Company received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting it to voluntarily provide information, subsequently augmented by a document subpoena, primarily related to the sourcing of non-human primates, and the Company is cooperating with the request. The Company is not able to predict what action, if any, might be taken in the future by the DOJ, USFWS, SEC or other governmental authorities as a result of the investigations. None of the DOJ, USFWS or SEC has provided the Company with any specific timeline or indication as to when these investigations or, specific to the DOJ and USFWS, discussions regarding future processes and procedures, will be concluded or resolved. The Company cannot predict the timing, outcome or possible impact of the investigations, including without limitation any potential fines, penalties or liabilities.

A putative securities class action was filed on May 19, 2023 against the Company and three of its current/former officers (James Foster, the Chief Executive Officer; David R. Smith, the former Chief Financial Officer; and Flavia Pease, the current Chief Financial Officer) in the United States District Court for the District of Massachusetts. The complaint asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") on behalf of a putative class of purchasers of Company securities from May 5, 2020 through February 21, 2023. The complaint alleges that certain of the Company’s disclosures about its practices with respect to the importation of non-human primates made during the putative class period were materially false or misleading. On August 31, 2023, the court appointed the State Teachers Retirement System of Ohio as lead plaintiff, and the Company intends to file a motion to dismiss. While the Company cannot predict the outcome of this matter, it believes the class action to be without merit and plans to vigorously defend against it. The Company cannot reasonably estimate the maximum potential exposure or the range of possible loss in association with this matter.

Aside from the matter above, the Company believes there are no other matters pending against the Company that could have a material impact on the Company’s business, financial condition, or results of operations.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

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