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 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Service revenue			$	832,463					$	869,759					$	2,492,225					$	2,602,016
Product revenue			177,300						156,864						555,215						513,917
Total revenue			1,009,763						1,026,623						3,047,440						3,115,933
Costs and expenses
Cost of services provided (excluding amortization of intangible assets)			568,699						587,560						1,724,246						1,731,136
Cost of products sold (excluding amortization of intangible assets)			92,043						77,223						275,617						246,326
Selling, general and administrative			199,213						176,109						555,295						550,713
Amortization of intangible assets			32,403						34,229						97,248						103,419
Operating income			117,405						151,502						395,034						484,339
Other income (expense)
Interest income			1,528						1,373						6,740						3,605
Interest expense			(30,284)						(33,742)						(98,054)						(103,166)
Other income (expense), net			2,592						(6,260)						6,185						(12,200)
Income before income taxes			91,241						112,873						309,905						372,578
Provision for income taxes			20,946						24,852						70,867						81,160
Net income			70,295						88,021						239,038						291,418
Less: Net income attributable to noncontrolling interests			638						632						2,340						3,878
Net income attributable to Charles River Laboratories International Inc.			$	69,657					$	87,389					$	236,698					$	287,540
Calculation of net income per share attributable to Charles River Laboratories International Inc. common shareholders
Net income attributable to Charles River Laboratories International Inc.			$	69,657					$	87,389					$	236,698					$	287,540
Less: Adjustment of redeemable noncontrolling interest			379						—						1,081						—
Less: Incremental dividends attributed to noncontrolling interest holders			599						—						9,621						—
Net income available to Charles River Laboratories International Inc. common shareholders			$	68,679					$	87,389					$	225,996					$	287,540
Earnings per common share
Basic			$	1.34					$	1.70					$	4.39					$	5.62
Diluted			$	1.33					$	1.69					$	4.37					$	5.58
Weighted-average number of common shares outstanding
Basic			51,394						51,283						51,461						51,199
Diluted			51,583						51,607						51,713						51,493
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 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
Net income			$	70,295					$	88,021					$	239,038					$	291,418
Other comprehensive income (loss):
Foreign currency translation adjustment			85,018						(63,997)						500						(17,457)
Amortization of net loss, settlement losses, and prior service benefit included in total cost for pension and other post-retirement benefit plans			352						177						1,038						521
Unrealized gains (losses) on hedging instruments			(1,060)						539						(688)						5,183
Other comprehensive income (loss), before income taxes			84,310						(63,281)						850						(11,753)
Less: Income tax expense (benefit) related to items of other comprehensive income			8,348						(3,292)						848						(3,393)
Comprehensive income, net of income taxes			146,257						28,032						239,040						283,058
Less: Comprehensive income (loss) related to noncontrolling interests, net of income taxes			(238)						440						(1,214)						1,527
Comprehensive income attributable to Charles River Laboratories International, Inc., net of income taxes			$	146,495					$	27,592					$	240,254					$	281,531
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 28, 2024						December 30, 2023
Assets
Current assets:
Cash and cash equivalents			$	210,171					$	276,771
Trade receivables and contract assets, net of allowances for credit losses of $23,877 and $25,722, respectively			754,207						780,375
Inventories			336,200						380,259
Prepaid assets			92,631						87,879
Other current assets			101,514						83,378
Total current assets			1,494,723						1,608,662
Property, plant and equipment, net			1,639,978						1,639,741
Venture capital and strategic equity investments			235,987						243,811
Operating lease right-of-use assets, net			385,133						394,029
Goodwill			3,124,592						3,095,045
Intangible assets, net			778,461						864,051
Deferred tax assets			37,963						40,279
Other assets			307,005						309,383
Total assets			$	8,003,842					$	8,195,001
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities:
Accounts payable			$	135,963					$	168,937
Accrued compensation			211,077						213,290
Deferred revenue			251,968						241,820
Accrued liabilities			208,124						227,825
Other current liabilities			205,089						203,210
Total current liabilities			1,012,221						1,055,082
Long-term debt, net and finance leases			2,326,653						2,647,147
Operating lease right-of-use liabilities			432,836						419,234
Deferred tax liabilities			167,746						191,349
Other long-term liabilities			236,669						223,191
Total liabilities			4,176,125						4,536,003
Commitments and contingencies (Notes 2, 11, 13, and 15)
Redeemable noncontrolling interest			40,590						56,722
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; 51,718 shares issued and 51,134 shares outstanding as of September 28, 2024, and 51,338 shares issued and outstanding as of December 30, 2023			517						513
Additional paid-in capital			1,971,413						1,905,578
Retained earnings			2,122,835						1,887,218
Treasury stock, at cost, 584 and zero shares, as of September 28, 2024 and December 30, 2023, respectively			(119,621)						—
Accumulated other comprehensive loss			(192,871)						(196,427)
Total Charles River Laboratories International, Inc. equity			3,782,273						3,596,882
Nonredeemable noncontrolling interests			4,854						5,394
Total equity			3,787,127						3,602,276
Total liabilities, noncontrolling interests and equity			$	8,003,842					$	8,195,001
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 28, 2024						September 30, 2023
Cash flows relating to operating activities
Net income			$	239,038					$	291,418
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			259,637						233,610
Stock-based compensation			52,656						52,527
Deferred income taxes			(25,988)						(28,251)
Long-lived asset impairment charges			17,339						26,202
(Gain) loss on venture capital & strategic equity investments, net			(8,788)						9,246
Provision for credit losses			8,223						11,030
Loss on divestitures, net			659						995
Other, net			20,372						6,947
Changes in assets and liabilities:
Trade receivables and contract assets, net			18,300						(59,081)
Inventories			13,789						(44,126)
Accounts payable			(7,095)						(26,531)
Accrued compensation			(1,981)						28,438
Deferred revenue			13,583						(9,997)
Customer contract deposits			14,707						(21,534)
Other assets and liabilities, net			(39,236)						(7,938)
Net cash provided by operating activities			575,215						462,955
Cash flows relating to investing activities
Acquisition of businesses and assets, net of cash acquired			(5,479)						(50,166)
Capital expenditures			(157,351)						(240,205)
Purchases of investments and contributions to venture capital investments			(45,264)						(36,322)
Proceeds from sale of investments			39,470						3,953
Other, net			(358)						(2,044)
Net cash used in investing activities			(168,982)						(324,784)
Cash flows relating to financing activities
Proceeds from long-term debt and revolving credit facility			976,783						333,034
Proceeds from exercises of stock options			23,110						19,658
Payments on long-term debt, revolving credit facility, and finance lease obligations			(1,316,990)						(530,909)
Purchase of treasury stock			(119,051)						(24,016)
Payments of contingent consideration			—						(2,711)
Purchase of remaining equity interest of other redeemable noncontrolling interest			(12,000)						—
Other, net			(26,900)						(4,145)
Net cash used in financing activities			(475,048)						(209,089)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(4,025)						(4,680)
Net change in cash, cash equivalents, and restricted cash			(72,840)						(75,598)
Cash, cash equivalents, and restricted cash, beginning of period			284,480						241,214
Cash, cash equivalents, and restricted cash, end of period			$	211,640					$	165,616
See Notes to Unaudited Condensed Consolidated Financial Statements.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (UNAUDITED)

(in thousands)

			Redeemable Noncontrolling Interests			Common Stock												Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Treasury Stock												Total Charles River Laboratories, Inc. Equity						Noncontrolling Interest						Total Equity
Shares						Amount															Shares						Amount
December 30, 2023			$	56,722		51,338						$	513					$	1,905,578					$	1,887,218					$	(196,427)					—						$	—					$	3,596,882					$	5,394					$	3,602,276
Net income			1,201			—						—						—						72,960						—						—						—						72,960						321						73,281
Other comprehensive (loss), net of tax			(2,763)			—						—						—						—						(53,492)						—						—						(53,492)						—						(53,492)
Adjustment of redeemable noncontrolling interests to redemption value			4,807			—						—						(4,406)						(401)						—						—						—						(4,807)						—						(4,807)
Dividends to noncontrolling interests			(2,192)			—						—						—						—						—						—						—						—						—						—
Issuance of stock under employee compensation plans			—			214						2						21,503						—						—						—						—						21,505						—						21,505
Purchase of treasury shares			—			—						—						—						—						—						42						(9,351)						(9,351)						—						(9,351)
Stock-based compensation			—			—						—						16,738						—						—						—						—						16,738						—						16,738
March 30, 2024			57,775			51,552						515						1,939,413						1,959,777						(249,919)						42						(9,351)						3,640,435						5,715						3,646,150
Net income			(332)			—						—						—						94,081						—						—						—						94,081						512						94,593
Other comprehensive income (loss), net of tax			85			—						—						—						—						(19,790)						—						—						(19,790)						—						(19,790)
Adjustment of redeemable noncontrolling interest to redemption value			496			—						—						(195)						(301)						—						—						—						(496)						—						(496)
Dividends to noncontrolling interests			—			—						—						—						—						—						—						—						—						(1,938)						(1,938)
Purchase of remaining equity interest of other redeemable noncontrolling interest			(12,000)			—						—						—						—						—						—						—						—						—						—
Adjustment of purchase price of Noveprim redeemable noncontrolling interest			52			—						—						—						—						—						—						—						—						—						—
Issuance of stock under employee compensation plans			—			144						2						824						—						—						—						—						826						—						826
Purchase of treasury shares			—			—						—						—						—						—						41						(8,914)						(8,914)						—						(8,914)
Stock-based compensation			—			—						—						16,587						—						—						—						—						16,587						—						16,587
June 29, 2024			46,076			51,696						517						1,956,629						2,053,557						(269,709)						83						(18,265)						3,722,729						4,289						3,727,018
Net income			73			—						—						—						69,657						—						—						—						69,657						565						70,222
Other comprehensive (loss) income, net of tax			(876)			—						—						—						—						76,838						—						—						76,838						—						76,838
Adjustment of redeemable noncontrolling interest to redemption value			5,705			—						—						(5,326)						(379)						—						—						—						(5,705)						—						(5,705)
Dividends to noncontrolling interest			(10,388)			—						—						—						—						—						—						—						—						—						—
Issuance of stock under employee compensation plans			—			22						—						779						—						—						—						—						779						—						779
Purchase of treasury shares			—			—						—						—						—						—						501						(100,786)						(100,786)						—						(100,786)
Share repurchase excise tax			—			—						—						—						—						—						—						(570)						(570)						—						(570)
Stock-based compensation			—			—						—						19,331						—						—						—						—						19,331						—						19,331
September 28, 2024			$	40,590		51,718						$	517					$	1,971,413					$	2,122,835					$	(192,871)					584						$	(119,621)					$	3,782,273					$	4,854					$	3,787,127
See Notes to Unaudited Condensed Consolidated Financial Statements.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND REDEEMABLE NONCONTROLLING INTERESTS (UNAUDITED)

(continued; in thousands)

			Redeemable Noncontrolling Interests			Common Stock												Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Treasury Stock												Total Charles River Laboratories, Inc. Equity						Noncontrolling Interest						Total Equity
Shares						Amount															Shares						Amount
December 31, 2022			$	42,427		50,944						$	509					$	1,804,940					$	1,432,901					$	(262,057)					—						$	—					$	2,976,293					$	4,785					$	2,981,078
Net income			322			—						—						—						103,131						—						—						—						103,131						501						103,632
Other comprehensive income (loss), net of tax			186			—						—						—						—						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			42,935			51,260						512						1,830,189						1,536,032						(239,124)						78						(19,012)						3,108,597						5,286						3,113,883
Net income			1,857			—						—						—						97,020						—						—						—						97,020						566						97,586
Other comprehensive income (loss), net of tax			(2,345)			—						—						—						—						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			42,447			51,370						513						1,850,385						1,633,052						(208,269)						104						(23,978)						3,251,703						5,852						3,257,555
Net income			71			—						—						—						87,389						—						—						—						87,389						561						87,950
Other comprehensive income (loss), net of tax			(192)			—						—						—						—						(59,797)						—						—						(59,797)						—						(59,797)
Dividends to noncontrolling interest			(2,378)			—						—						—						—						—						—						—						—						(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			$	39,948		51,400						$	514					$	1,877,120					$	1,720,441					$	(268,066)					104						$	(24,016)					$	3,305,993					$	4,768					$	3,310,761
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 2023 as filed with the SEC on February 14, 2024. Certain reclassifications of prior year amounts have been made to conform to the current year presentation. 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 Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)”. ASU 2023-07 modifies reportable segment disclosure requirements, primarily through enhanced disclosures about segment expenses categorized as significant or regularly provided to the Chief Operating Decision Maker (CODM). In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. The Company is currently evaluating the impact this new standard will have on the related disclosures on the consolidated financial statements, but does not believe there will be a material impact.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures (Topic 740)”. ASU 2023-09 requires enhanced disclosures on income taxes paid, adds disaggregation of continuing operations before income taxes between foreign and domestic earnings and defines specific categories for the reconciliation of jurisdictional tax rate to effective tax rate. This ASU is effective for fiscal years beginning after December 15, 2024, and can be applied on a prospective basis. The Company is currently evaluating the impact this new standard will have on the related disclosures on the consolidated financial statements.

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 2023 as filed with the SEC on February 14, 2024.

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 require the Company to purchase 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.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 products and services offered within the Research Models, Research Model Services, and Cell Solutions. 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: Insourcing Solutions (IS), which provides colony management of clients’ research operations (including recruitment, training, staffing, and management services) within the clients’ facilities and utilizing the Charles River Accelerator and Development Lab (CRADL™) offering, which provides vivarium space to clients, Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models, and Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; and Cell Solutions, which supplies controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood and bone marrow.

The Company’s DSA reportable segment includes Discovery Services and Safety Assessment services. 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 (non-animal) and in vivo (in research models) 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 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).

2. ACQUISITIONS AND DIVESTITURES

Fiscal 2023 Acquisition

Noveprim Group

On November 30, 2023, the Company completed the acquisition of an additional 41% equity interest of Noveprim Group (Noveprim), a leading supplier of non-human primates (NHPs) located in Mauritius, resulting in a 90% controlling interest. The Company had previously acquired a 49% equity interest in 2022 for $90.0 million plus additional contingent payments up to $5.0 million based on future performance. The total consideration allocable to the Noveprim acquisition is $392.4 million, which includes $144.6 million additional cash paid for the 41% equity interest, elimination of historical activity and intercompany balances of $209.5 million which includes a remeasurement gain on the 49% equity investment of $113.0 million, contingent consideration of $33.3 million, deferred purchase price of $12.0 million payable from 2024 through 2027, offset by estimated post-closing adjustments for working capital of $7.0 million. The purchase price reflected an agreement with seller on working capital and debt, which was adjusted from $13.8 million to $7.0 million during the nine months ended September 28, 2024. As a result of measurement period adjustments to the purchase price, goodwill and remeasurement gains on the previous 49% equity investment for the nine months ended September 28, 2024, were increased by $17.6 million and $9.8 million, respectively. Remeasurement gains are recorded in Other income (expense), net, within the unaudited condensed consolidated statements of income. The contingent consideration fair value is estimated using a Monte Carlo Simulation model and the maximum contingent contractual payments are up to $55.0 million based on future performance and milestone achievements in fiscal years 2023 through 2025. The Company has the call option right to purchase the remaining 10% equity interest up until one month after the sixth anniversary of closing the 41% equity interest. 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 the remaining shares of the seller. The redemption price for the call/put is fixed and ranges from $47.0 million to $54.0 million depending on when exercised. The noncontrolling interest is classified as a redeemable noncontrolling interest in the mezzanine section of the unaudited condensed consolidated balance sheets. 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 for NHPs vertically integrated into the DSA supply chain and the RMS reportable segment for those NHPs sold to third party customers. The Company incurred transaction and integration costs in connection with the acquisition of $0.3 million and $0.7 million for the three months ended September 28, 2024 and September 30, 2023, respectively, which was 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 $1.2 million and $2.9 million for the nine months ended September 28, 2024 and September 30, 2023, respectively, which was primarily included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. No significant transaction and integration costs were incurred with the acquisition for the three and nine months ended September 28, 2024. The Company incurred transaction and integration costs in connection with the acquisition of $0.5 million and $0.8 million for the three and nine months ended September 30, 2023, respectively, which was primarily included in Selling, general and administrative expenses within the unaudited condensed consolidated statements of income.

Purchase price information

The purchase price allocation was as follows:

			Noveprim Group**(1)**						SAMDI Tech, Inc.
			November 30, 2023						January 27, 2023
			(in thousands)
Trade receivables			$	1,308					$	513
Inventories			66,500						—
Other current assets (excluding cash)			3,261						75
Property, plant and equipment			36,154						593
Operating lease right-of-use asset, net			104						—
Goodwill (2)			190,024						37,129
Definite-lived intangible assets			9,500						33,070
Other long-term assets (3)			167,907						6
Deferred revenue			—						(43)
Other current liabilities			(16,268)						(351)
Operating lease right-of-use liabilities (Long-term)			(97)						—
Deferred tax liabilities			(12,984)						(8,191)
Other long-term liabilities			(7,579)						—
Redeemable noncontrolling interest (4)			(45,426)						—
Total purchase price allocation			$	392,404					$	62,801
(1) Purchase price allocation is preliminary and 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, obligations, and finalization of any working capital adjustments. 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.
(2) 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 or synergies to be realized from acquiring an internal supplier servicing the DSA business and the assembled workforce of the acquirees, thus is not deductible for tax purposes.
(3) Other long-term assets acquired from the Noveprim acquisition include $167.8 million of biological assets, which will be amortized over an estimated eight-year useful life.
(4) Refer to Note 12 – Equity and Noncontrolling Interests for further a description of the 10% noncontrolling interest fair value.

The definite-lived intangible assets acquired were as follows:

			Noveprim Group						SAMDI Tech, Inc.
Definite-Lived Intangible Assets			(in thousands)
Client relationships			$	—					$	23,400
Other intangible assets			9,500						9,670
Total definite-lived intangible assets			$	9,500					$	33,070
Weighted Average Amortization Life			(in years)
Client relationships			—						15
Other intangible assets			7						7
Total definite-lived intangible assets			7						12

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 reportable segment and timing of transfer of products or services:

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
			(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time			$	93,446					$	94,883					$	285,794					$	282,980
Services and products transferred at a point in time			104,378						91,965						339,326						313,582
Total RMS revenue			197,824						186,848						625,120						596,562
DSA
Services and products transferred over time			613,388						663,128						1,844,298						1,987,617
Services and products transferred at a point in time			1,672						900						3,633						2,221
Total DSA revenue			615,060						664,028						1,847,931						1,989,838
Manufacturing
Services and products transferred over time			107,284						94,446						311,823						280,992
Services and products transferred at a point in time			89,595						81,301						262,566						248,541
Total Manufacturing revenue			196,879						175,747						574,389						529,533
Total revenue			$	1,009,763					$	1,026,623					$	3,047,440					$	3,115,933

Contract Balances from Contracts with Customers

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

			September 28, 2024						December 30, 2023
			(in thousands)
Assets from contracts with customers
Client receivables			$	557,761					$	578,077
Unbilled revenue			220,323						228,020
Total			778,084						806,097
Less: Allowance for credit losses			(23,877)						(25,722)
Trade receivables and contract assets, net			$	754,207					$	780,375
Liabilities from contracts with customers
Current deferred revenue			$	251,968					$	241,820
Long-term deferred revenue (included in Other long-term liabilities)			34,915						30,919
Customer contract deposits (included in Other current liabilities)			99,455						85,554

Approximately 90% of unbilled revenue as of December 30, 2023, which was $228 million, was billed during the nine months ended September 28, 2024. 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 80% of contract liabilities as of December 30, 2023, which was $273 million, were recognized as revenue during the nine months ended September 28, 2024. 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.

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

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

receivables. The Company excluded approximately $36 million and $41 million of unpaid advanced client billings from both client receivables and deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of September 28, 2024 and December 30, 2023, respectively.

Allowance for Credit Losses

The following is a summary of the activity of the Company’s allowance for credit losses:

									Nine Months Ended
															September 28, 2024						September 30, 2023
															(in thousands)
Beginning balance															$	25,722					$	11,278
Provisions															8,223						11,030
Reductions															(10,068)						(1,121)
Ending balance															$	23,877					$	21,187

Net provision expenses were $7.2 million and $10.2 million during the nine months ended September 28, 2024 and September 30, 2023, respectively and include recoveries of balances previously written off, which are excluded from the table above.

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 28, 2024. 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 28, 2024 was $803.5 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 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023						Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
			(in thousands)
Lease revenue			$	16,622					$	22,254					$	54,312					$	70,235					Service revenue

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in three reportable segments, RMS, DSA and Manufacturing. Asset information on a reportable segment basis is not disclosed as this information is not separately identified and internally reported to the Company’s Chief Operating Decision Maker (CODM). The following table presents the results of operations by reportable segment:

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
			(in thousands)
RMS
Revenue			$	197,824					$	186,848					$	625,120					$	596,562
Cost of revenue (excluding amortization of intangible assets)			137,906						126,640						421,773						381,332
Selling, general and administrative			26,453						26,483						84,943						81,194
Amortization of intangible assets			5,921						5,399						17,763						16,383
Operating income			$	27,544					$	28,326					$	100,641					$	117,653
DSA
Revenue			$	615,060					$	664,028					$	1,847,931					$	1,989,838
Cost of revenue (excluding amortization of intangible assets)			409,684						436,174						1,246,560						1,268,248
Selling, general and administrative			63,260						63,369						174,598						189,076
Amortization of intangible assets			15,680						17,666						47,122						52,726
Operating income			$	126,436					$	146,819					$	379,651					$	479,788
Manufacturing
Revenue			$	196,879					$	175,747					$	574,389					$	529,533
Cost of revenue (excluding amortization of intangible assets)			113,152						101,968						331,530						327,882
Selling, general and administrative			32,737						36,338						99,397						114,556
Amortization of intangible assets			10,802						11,166						32,363						34,311
Operating income			$	40,188					$	26,275					$	111,099					$	52,784
Unallocated Corporate
Selling, general and administrative			$	76,763					$	49,918					$	196,357					$	165,886
Operating income (1)			$	(76,763)					$	(49,918)					$	(196,357)					$	(165,886)
Consolidated
Revenue			$	1,009,763					$	1,026,623					$	3,047,440					$	3,115,933
Cost of revenue (excluding amortization of intangible assets)			660,742						664,783						1,999,863						1,977,462
Selling, general and administrative			199,213						176,109						555,295						550,713
Amortization of intangible assets			32,403						34,229						97,248						103,419
Operating income			$	117,405					$	151,502					$	395,034					$	484,339
(1) Operating income for unallocated corporate consists of costs associated with departments such as senior executives, corporate accounting, legal, tax, human resources, treasury, and investor relations.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capital expenditures and depreciation and amortization (related to both intangible assets and certain assets acquired in business combinations) by reportable segment are as follows:

			RMS						DSA						Manufacturing						Unallocated Corporate						Consolidated
			(in thousands)
Capital Expenditures
Three Months Ended:
September 28, 2024			$	7,186					$	22,773					$	8,735					$	27					$	38,721
September 30, 2023			9,192						41,967						14,349						439						65,947
Nine Months Ended:
September 28, 2024			$	36,543					$	91,176					$	28,180					$	1,452					$	157,351
September 30, 2023			35,769						155,477						46,949						2,010						240,205
Depreciation and amortization
Three Months Ended:
September 28, 2024			$	18,389					$	47,751					$	20,298					$	1,760					$	88,198
September 30, 2023			13,872						44,088						20,070						840						78,870
Nine Months Ended:
September 28, 2024			$	53,050					$	141,269					$	60,176					$	5,142					$	259,637
September 30, 2023			41,310						129,662						59,677						2,961						233,610

Revenue represents sales originating in entities physically located in the identified geographic area. Revenue by geographic area is as follows:

			U.S.						Europe						Canada						Asia Pacific						Other (1)						Consolidated
			(in thousands)
Three Months Ended:
September 28, 2024			$	559,277					$	267,123					$	127,088					$	45,009					$	11,266					$	1,009,763
September 30, 2023			590,316						264,787						129,023						40,233						2,264						1,026,623
Nine Months Ended:
September 28, 2024			$	1,693,021					$	814,819					$	362,733					$	141,168					$	35,699					$	3,047,440
September 30, 2023			1,802,532						805,466						357,276						142,910						7,749						3,115,933
(1) The Other category represents operations located in Brazil, Israel, and Mauritius.

Long-lived assets consist of property, plant, and equipment, net. Long-lived assets by geographic area are as follows:

			U.S.						Europe						Canada						Asia Pacific						Other						Consolidated
			(in thousands)
Long-lived assets
September 28, 2024			$	953,412					$	425,967					$	152,980					$	70,816					$	36,803					$	1,639,978
December 30, 2023			964,176						407,375						157,483						74,605						36,102						1,639,741

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. SUPPLEMENTAL CASH FLOW INFORMATION

			Nine Months Ended
			September 28, 2024						September 30, 2023
			(in thousands)
Cash paid for income taxes			$	94,609					$	75,783
Cash paid for interest			98,572						106,014
Non-cash investing activities:
Purchases of Property, plant and equipment included in Accounts payable and Accrued liabilities			$	32,764					$	41,526
Assets acquired under finance leases			3,159						154

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

			September 28, 2024						September 30, 2023
			(in thousands)
Supplemental cash flow information:
Cash and cash equivalents			$	210,171					$	157,174
Restricted cash included in Other current assets			323						6,586
Restricted cash included in Other assets			1,146						1,856
Cash, cash equivalents, and restricted cash, end of period			$	211,640					$	165,616

6. INVENTORY

Inventories

The composition of inventories is as follows:

			September 28, 2024						December 30, 2023
			(in thousands)
Raw materials and supplies			$	45,264					$	42,296
Work in process			46,976						59,727
Finished products			243,960						278,236
Inventories			$	336,200					$	380,259

Inventory step up amortization expense incurred for the three and nine months ended September 28, 2024 was $5.9 million and $16.5 million, respectively.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7. PROPERTY, PLANT AND EQUIPMENT, NET

The composition of property, plant and equipment, net is as follows:

			September 28, 2024						December 30, 2023
			(in thousands)
Land			$	79,670					$	79,546
Buildings (1)			1,097,064						1,053,915
Machinery and equipment (1)			1,040,195						984,867
Leasehold improvements			404,442						366,556
Furniture and fixtures			32,640						31,284
Computer hardware and software (1)			265,392						254,413
Vehicles (1)			7,502						6,746
Construction in progress			176,541						197,723
Total			3,103,446						2,975,050
Less: Accumulated depreciation			(1,463,468)						(1,335,309)
Property, plant and equipment, net			$	1,639,978					$	1,639,741
(1) These balances include assets under finance leases.

Depreciation expense in the three months ended September 28, 2024 and September 30, 2023 was $48.5 million and $44.6 million, respectively. Depreciation expense in the nine months ended September 28, 2024 and September 30, 2023 was $141.8 million and $130.2 million, respectively.

8. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS

Venture capital investments are summarized below:

			Nine Months Ended
			September 28, 2024						September 30, 2023
			(in thousands)
Beginning balance			$	121,158					$	129,012
Capital contributions			16,205						12,056
Distributions			(20,324)						(12,972)
Gains (losses)			8,439						(14,258)
Foreign currency translation			466						260
Ending balance			$	125,944					$	114,098

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

			Nine Months Ended
			September 28, 2024						September 30, 2023
			(in thousands)
Beginning balance			$	122,653					$	182,590
Purchase of investments			2,140						21,489
Distributions			—						(7,493)
Gain (loss)			(9,430)						5,012
Reduction for acquisition of entity (1)			—						(12,635)
Other investment activity			(5,540)						—
Foreign currency translation			220						(1,214)
Ending balance			$	110,043					$	187,749
(1) Refer to Note 2 – Acquisitions and Divestitures for further discussion on the acquisition of SAMDI.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. FAIR VALUE

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

			September 28, 2024
			Level 1						Level 2						Level 3						Total
Current assets measured at fair value:			(in thousands)
Cash equivalents			$	—					$	30					$	—					$	30
Interest rate swap			—						278						—						278
Other assets:
Life insurance policies			—						47,734						—						47,734
Total assets measured at fair value			$	—					$	48,042					$	—					$	48,042
Other long-term liabilities measured at fair value:
Contingent consideration			$	—					$	—					$	39,893					$	39,893
Total liabilities measured at fair value			$	—					$	—					$	39,893					$	39,893

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 28, 2024, there were no transfers between levels.

			December 30, 2023
			Level 1						Level 2						Level 3						Total
Current assets measured at fair value:			(in thousands)
Cash equivalents			$	—					$	29					$	—					$	29
Other assets:
Life insurance policies			—						40,912						—						40,912
Interest rate swap			—						966						—						966
Total assets measured at fair value			$	—					$	41,907					$	—					$	41,907
Other long-term liabilities measured at fair value
Contingent consideration			$	—					$	—					$	33,265					$	33,265
Total liabilities measured at fair value			$	—					$	—					$	33,265					$	33,265

During the year ended December 30, 2023, 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 28, 2024						September 30, 2023
			(in thousands)
Beginning balance			$	33,265					$	13,431
Payments			—						(15,130)
Total gains or losses (realized/unrealized):
Adjustment of previously recorded contingent liability			6,628						1,810
Foreign currency translation			—						(111)
Ending balance			$	39,893					$	—

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 $55.0 million, of which the value accrued as of September 28, 2024 is $39.9 million as the probability of achieving the maximum target is estimated to be 73%. The volatility and weighted average cost of capital is approximately 5% and 8%, 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

Cash Flow Hedge

The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. The Company had an interest rate swap with a notional amount of $500 million maturing November 2, 2024 to manage interest rate fluctuation related to floating rate borrowings under the Credit Facility, at a fixed rate of 4.65%.

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 28, 2024												December 30, 2023
			Book Value						Fair Value						Book Value						Fair Value
			(in thousands)
4.25% Senior Notes due 2028			$	500,000					$	484,350					$	500,000					$	478,100
3.75% Senior Notes due 2029			500,000						470,100						500,000						458,100
4.00% Senior Notes due 2031			500,000						459,350						500,000						449,350

10. GOODWILL AND INTANGIBLE ASSETS

Goodwill

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

			RMS						DSA (1)						Manufacturing						Total
			(in thousands)
December 30, 2023			$	497,474					$	1,662,434					$	935,137					$	3,095,045
Acquisitions			—						17,675						—						17,675
Foreign exchange			203						(4,480)						16,149						11,872
September 28, 2024			$	497,677					$	1,675,629					$	951,286					$	3,124,592
(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 28, 2024 is related to measurement period adjustments related to the acquisition of Noveprim in the DSA reportable segment and foreign exchange in Manufacturing.

During the third quarter ended September 28, 2024, a triggering event was identified for the Discovery Services reporting unit (part of the DSA reportable segment). This resulted from a continuous decline in market conditions and operational challenges, ultimately resulting in a reduction of Discovery Services’ long range financial outlook. In response, management conducted a quantitative impairment test for goodwill to determine if the goodwill in the Discovery Services reporting unit was impaired. Upon completion of a quantitative impairment test, it was determined that the fair value of the reporting unit exceeded its carrying value by approximately 22%, and no impairment was recognized as of September 28, 2024. While the Discovery Services reporting unit is not currently impaired, the Company will continue to closely monitor future performance and any potential impacts on the value of the reporting unit.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets, Net

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

			September 28, 2024																		December 30, 2023
			Gross						Accumulated Amortization						Net						Gross						Accumulated Amortization						Net
			(in thousands)
Client relationships			$	1,541,032					$	(808,507)					$	732,525					$	1,528,780					$	(721,322)					$	807,458
Technology			144,241						(118,793)						25,448						142,190						(111,764)						30,426
Trademarks and trade names			12,091						(5,505)						6,586						11,878						(4,568)						7,310
Backlog			3,100						(3,100)						—						3,100						(2,177)						923
Other			43,185						(29,283)						13,902						43,611						(25,677)						17,934
Intangible assets			$	1,743,649					$	(965,188)					$	778,461					$	1,729,559					$	(865,508)					$	864,051

The decrease in intangible assets, net during the nine months ended September 28, 2024 related to normal amortization over the useful lives.

Amortization expense of definite-lived intangible assets for the three months ended September 28, 2024 and September 30, 2023 was $32.4 million and $34.2 million, respectively. Amortization expense of definite-lived intangible assets for nine months ended September 28, 2024 and September 30, 2023 was $97.2 million and $103.4 million, respectively.

11. DEBT AND OTHER FINANCING ARRANGEMENTS

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

			September 28, 2024						December 30, 2023
			(in thousands)
Revolving facility			$	794,290					$	1,129,243
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			16,122						9,575
Finance leases			31,116						28,550
Total debt and finance leases			2,341,528						2,667,368
Less:
Current portion of long-term debt			157						3,172
Current portion of finance leases			3,043						2,398
Current portion of long-term debt and finance leases			3,200						5,570
Long-term debt and finance leases			2,338,328						2,661,798
Debt discount and debt issuance costs			(11,675)						(14,651)
Long-term debt, net and finance leases			$	2,326,653					$	2,647,147

As of September 28, 2024 and December 30, 2023, the weighted average interest rate on the Company’s debt was 4.59% and 4.93%, respectively.

Letters of Credit

As of September 28, 2024 and December 30, 2023, the Company had $21.2 million and $21.6 million, respectively, in outstanding letters of credit.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. 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 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
			(in thousands)
Numerator:
Net income			$	70,295					$	88,021					$	239,038					$	291,418
Less: Net income attributable to noncontrolling interests			638						632						2,340						3,878
Net income attributable to Charles River Laboratories International Inc.			69,657						87,389						236,698						287,540
Calculation of net income per share attributable to Charles River Laboratories International Inc. common shareholders
Net income attributable to Charles River Laboratories International Inc.			$	69,657					$	87,389					$	236,698					$	287,540
Less: Adjustment of redeemable noncontrolling interest (1)			379						—						1,081						—
Less: Incremental dividends attributable to noncontrolling interest holders (2)			599						—						9,621						—
Net income available to Charles River Laboratories International Inc. common shareholders			$	68,679					$	87,389					$	225,996					$	287,540
Denominator:
Weighted-average shares outstanding - Basic			51,394						51,283						51,461						51,199
Effect of dilutive securities:
Stock options, restricted stock units and performance share units			189						324						252						294
Weighted-average shares outstanding - Diluted			51,583						51,607						51,713						51,493
Anti-dilutive common stock equivalents (3)			746						588						505						514
(1) Represents adjustments of redeemable noncontrolling interest that impact retained earnings.
(2) Represents incremental declared and undeclared dividends attributable to Noveprim noncontrolling interest holders who are entitled to preferential dividends for fiscal year 2024.
(3) 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

On August 2, 2024, the Company’s Board of Directors approved a stock repurchase authorization of $1.0 billion. This authorization fully replaces a prior stock repurchase authorization of $1.3 billion that had $129.1 million remaining when it was terminated. During the three and nine months ended September 28, 2024, the Company repurchased 0.5 million shares of common stock for $100.7 million under the new stock repurchase program. As of September 28, 2024, the Company had $899.3 million remaining on the current 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 approximately 0.1 million in the nine months ended September 28, 2024 and nine months ended September 30, 2023, for $18.4 million and $24.0 million, respectively, from such netting.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 30, 2023			$	(149,999)					$	(47,167)					$	739					$	(196,427)
Other comprehensive income (loss) before reclassifications			4,054						1,038						(688)						4,404
Net current period other comprehensive income (loss)			4,054						1,038						(688)						4,404
Income tax expense (benefit)			757						256						(165)						848
September 28, 2024			$	(146,702)					$	(46,385)					$	216					$	(192,871)

Redeemable Noncontrolling Interests

Through September 28, 2024, the Company holds several redeemable noncontrolling interests. Since the Company has the right to purchase, and the noncontrolling interest holders have the right to require the Company to purchase the remaining interest, which represents a derivative embedded within the equity instrument, the noncontrolling interest is classified in the mezzanine section of the unaudited condensed consolidated balance sheets, which is presented above the equity section and below liabilities.

The redeemable noncontrolling interests are measured at the greater of (i) the redemption amount or (ii) the historical value resulting from the original acquisition date fair value, increased or decreased for the noncontrolling interest’s share of net income (loss), equity capital contributions and distributions. The fair value of the redeemable noncontrolling interest is determined using the income approach, with key assumptions being projected cash flows and discount rates based on market participant’s weighted average cost of capital. To the extent redemption value exceeds carrying value, adjustments are recorded to additional paid-in capital, with any cumulative excess of redemption value over fair value recorded in retained earnings, which impacts net income available to common shareholders used in the calculation of earnings per common share.

Noveprim

The Company holds a 90% ownership interest in Noveprim. The Company has the right to purchase, and the noncontrolling interest holders have the right to sell, the remaining 10% equity interest at a fixed redemption value that ranges from $47.0 million to $54.0 million depending on when exercised. The Company has the call option right to purchase the remaining 10% equity up until one month after the sixth anniversary of closing the 41% equity stake (December 2029). On the first anniversary of the expiration of the call option (December 2030), a 12-month put option will be triggered giving the seller the right to require the Company to acquire the remaining shares of the seller for $54.0 million. Additionally, during fiscal year 2024 the 10% noncontrolling interest holders have and may continue to receive a dividend disproportionate to their equity ownership, of which the fair value of $8.0 million as of the acquisition date was recorded within the redeemable noncontrolling interest. Through September 28, 2024, incremental dividends based on Noveprim statutory net income attributed to the redeemable noncontrolling interest holders of $9.6 million reduced net income available to common shareholders used in the calculation of earnings per common share. The redemption value is accreted to the put purchase price of $54.0 million using the interest method through December 2030. As of September 28, 2024, the redemption value of $40.6 million exceeded both the carrying value and fair value, resulting in both an adjustment to additional paid in capital of $7.2 million and an adjustment to retained earnings of $1.1 million, respectively, for the nine months ended September 28, 2024.

Other redeemable noncontrolling interest

In 2019, the Company acquired an 80% equity interest in a subsidiary, which included 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 had the right to purchase, and the noncontrolling interest holders had the right to sell, the remaining 10% equity interest at its appraised value. The redemption value was measured at the greater of the appraised value or a predetermined floor. The amount that the Company could be required to pay to purchase the remaining 10% equity interest was not limited. As of March 30, 2024, the redemption value of $12.0 million exceeded the carrying value, resulting in an adjustment to additional paid in capital of $2.8 million. During the second quarter of fiscal 2024, the Company acquired the remaining 10% for $12.0 million.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Vital River

The Company held a 92% ownership interest in Vital River, a commercial provider of research models and related services in China as of December 31, 2022. The Company had the right to purchase, and the noncontrolling interest holders had the right to sell, the remaining 8% equity interest at a contractually defined redemption value, subject to a redemption floor. The amount that the Company could be required to pay to purchase the remaining 8% equity interest was not limited. During 2023, the Company acquired the remaining 8% and paid $4.8 million of the total $24.4 million due. The remaining purchase price payable was included in Accrued liabilities within the Company’s unaudited condensed consolidated balance sheet as of September 28, 2024 and December 30, 2023 and is expected to be paid during fiscal year 2024.

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 nonredeemable noncontrolling interest within Equity in the accompanying unaudited condensed consolidated balance sheets. The activity within the nonredeemable noncontrolling interest was not material during the three and nine months ended September 28, 2024 and September 30, 2023.

13. INCOME TAXES

The Company’s effective tax rates for the three months ended September 28, 2024 and September 30, 2023 were 23.0% and 22.0%, respectively. The increase in the effective tax rate for the three months ended September 28, 2024 compared to the corresponding prior year period was primarily attributable to the deferred tax impact of tax law changes enacted during the three months ended September 28, 2024, offset by jurisdictional earnings mix.

The Company’s effective tax rates for the nine months ended September 28, 2024 and September 30, 2023 were 22.9% and 21.8%, respectively. The increase in the effective tax rate for the nine months ended September 28, 2024 compared to the same prior year period is primarily attributable the same reason as above, as well as decreased tax benefit from stock-based compensation deductions in nine months ended September 28, 2024.

For the three months ended September 28, 2024, the Company’s unrecognized tax benefits increased by $1.2 million to $25.2 million, primarily due to increases in research and development tax credit reserves, as well as unfavorable foreign exchange movement. For the three months ended September 28, 2024, the amount of unrecognized income tax benefits that would impact the effective tax rate increased by $1.0 million to $22.1 million for the same reasons discussed above. The accrued interest on unrecognized tax benefits was $1.8 million as of September 28, 2024. The Company estimates that it is reasonably possible that the unrecognized tax benefits will decrease by approximately $5.1 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 28, 2024						December 30, 2023						Affected Line Item in the Unaudited Condensed Consolidated Balance Sheets
			(in thousands)
Prepaid income tax			$	82,153					$	59,715					Other current assets
Accrued income taxes			39,673						38,819						Other current liabilities

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 2020.

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 unaudited condensed consolidated financial statements.

14. 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, accelerated depreciation charges, and certain other costs. Generally, these actions are in response to recent macroeconomic impacts on the Company. During fiscal year 2023, the Company began to take restructuring actions as a result of these emerging business trends. The Company incurred restructuring charges of $30.6 million and $65.6 million during the three and nine months ended September 28, 2024, respectively and approximately $95 million since the beginning of fiscal year 2023 through September 28, 2024.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents restructuring costs by reportable segment:

			Three Months Ended												Nine Months Ended
			September 28, 2024						September 30, 2023						September 28, 2024						September 30, 2023
			(in thousands)
RMS			$	4,965					$	965					$	22,580					$	965
DSA			13,866						13,220						24,123						13,218
Manufacturing			5,372						975						9,660						7,162
Unallocated corporate			6,443						—						9,237						—
Total			$	30,646					$	15,160					$	65,600					$	21,345

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

			September 28, 2024																		September 30, 2023
			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)			$	12,830					$	3,482					$	16,312					$	2,160					$	11,418					$	13,578
Cost of products sold (excluding amortization of intangible assets)			1,783						650						2,433						480						174						654
Selling, general and administrative			11,923						(22)						11,901						937						(9)						928
Total restructuring costs			$	26,536					$	4,110					$	30,646					$	3,577					$	11,583					$	15,160
Nine Months Ended
Cost of services provided (excluding amortization of intangible assets)			$	20,510					$	6,516					$	27,026					$	5,088					$	11,418					$	16,506
Cost of products sold (excluding amortization of intangible assets)			2,530						11,134						13,664						534						2,920						3,454
Selling, general and administrative			18,430						6,480						24,910						1,386						(1)						1,385
Total restructuring costs			$	41,470					$	24,130					$	65,600					$	7,008					$	14,337					$	21,345

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Rollforward of Restructuring Activities

The following table provides a rollforward for the Company’s accrued restructuring costs related to all restructuring activities:

			Severance and Transition Costs						Asset Impairments						Other Costs						Total
			(in thousands)
Nine Months Ended September 28, 2024
Beginning balance			$	4,175					$	—					$	875					$	5,050
Expense			41,470						15,999						8,131						65,600
Payments / utilization			(17,920)						—						(6,762)						(24,682)
Other non-cash adjustments			—						(15,999)						(1,369)						(17,368)
Foreign currency adjustments			57						—						—						57
Ending Balance			$	27,782					$	—					$	875					$	28,657
Nine Months Ended September 30, 2023
Beginning balance			$	356					$	—					$	944					$	1,300
Expense			7,008						13,269						1,068						21,345
Payments / utilization			(3,179)						—						(710)						(3,889)
Other non-cash adjustments			—						(13,269)						(427)						(13,696)
Foreign currency adjustments			(42)						—						—						(42)
Ending Balance			$	4,143					$	—					$	875					$	5,018

As of September 28, 2024 and December 30, 2023, $28.7 million and $5.1 million, respectively, of severance and other personnel related costs liabilities were included in accrued compensation and accrued liabilities within the Company’s unaudited condensed consolidated balance sheets.

15. 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 the Company’s 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), which guides the release of each import by USFWS. Notwithstanding the Company’s 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 shipments in the United States. The carrying value of the inventory related to these shipments was approximately $27 million as of September 28, 2024, which reflects the value of the shipments in accordance with the Company’s inventory accounting policy. 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 with a document subpoena and additional inquiries, primarily related to the sourcing of non-human primates and related disclosures, and the Company is cooperating with these requests. 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 (Securities Class Action) was filed on May 19, 2023 against the Company and a number of its current/former officers in the United States District Court for the District of Massachusetts. On August 31, 2023, the court

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

appointed the State Teachers Retirement System of Ohio as lead plaintiff. An amended complaint was filed on November 14, 2023 that, among other things, included only James Foster, the Chief Executive Officer and David R. Smith, the former Chief Financial Officer as defendants along with the Company. The amended 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, alleging 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 July 1, 2024, the court dismissed the complaint, denied the plaintiff’s informal request for leave to amend, and entered judgment for defendants. On July 30, 2024, the plaintiff filed a notice of appeal in the United States Court of Appeals for the First Circuit. While the Company cannot predict the final 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.

On November 8, 2023, a stockholder filed a derivative lawsuit in the U.S. District Court of the District of Delaware asserting claims on the Company’s behalf against the members of the Company’s Board of Directors and certain of the Company’s 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). The complaint alleges that the defendants breached their fiduciary duties to the Company and its stockholders because certain of the Company’s disclosures about its practices with respect to the importation of non-human primates were materially false or misleading. The complaint also alleges that the defendants breached their fiduciary duties by causing the Company to fail to maintain adequate internal controls over securities disclosure and compliance with applicable law and by failing to comply with the company’s Code of Business Conduct and Ethics. The lawsuit is currently stayed by agreement of the parties pending further developments in the Securities Class Action pending in the United States Court of Appeals for the First Circuit. On August 2, 2024, a different stockholder filed a lawsuit in the U.S. District Court of Delaware asserting similar derivative claims on the Company’s behalf against members of the Company’s current and former Board of Directors and the same current/former officers based on similar allegations of purportedly misleading disclosures and non-compliance with legal rules and ethics standards in respect of the importation of non-human primates, as well as insider-trading claims against certain of the defendants. The lawsuit is currently stayed by agreement of the parties pending further developments in the Securities Class Action pending in the United States Court of Appeals for the First Circuit. While the Company cannot predict the outcome of these matters, it believes the derivative lawsuits to be without merit and plans to vigorously defend against them. The Company cannot reasonably estimate the maximum potential exposure or the range of possible loss in association with these matters.

Aside from the matters 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.