filings.toolsItem 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 | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| Service revenue | $ | 797,923 | $ | 816,862 | |||||||||||||||||||
| Product revenue | 186,245 | 194,698 | |||||||||||||||||||||
| Total revenue | 984,168 | 1,011,560 | |||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
| Cost of services provided (excluding amortization of intangible assets) | 577,428 | 578,164 | |||||||||||||||||||||
| Cost of products sold (excluding amortization of intangible assets) | 89,008 | 88,553 | |||||||||||||||||||||
| Selling, general and administrative | 177,799 | 186,291 | |||||||||||||||||||||
| Amortization of intangible assets | 65,264 | 32,575 | |||||||||||||||||||||
| Operating income | 74,669 | 125,977 | |||||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | 1,404 | 2,202 | |||||||||||||||||||||
| Interest expense | (27,884) | (35,001) | |||||||||||||||||||||
| Other income (expense), net | (12,211) | 5,833 | |||||||||||||||||||||
| Income before income taxes | 35,978 | 99,011 | |||||||||||||||||||||
| Provision for income taxes | 10,100 | 24,529 | |||||||||||||||||||||
| Net income | 25,878 | 74,482 | |||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 409 | 1,522 | |||||||||||||||||||||
| Net income attributable to Charles River Laboratories International, Inc. | $ | 25,469 | $ | 72,960 | |||||||||||||||||||
| Calculation of net income per share attributable to Charles River Laboratories International, Inc. common shareholders | |||||||||||||||||||||||
| Net income attributable to Charles River Laboratories International, Inc. | $ | 25,469 | $ | 72,960 | |||||||||||||||||||
| Less: Adjustment of redeemable noncontrolling interests | — | 401 | |||||||||||||||||||||
| Less: Incremental dividends attributed to noncontrolling interest holders | — | 5,230 | |||||||||||||||||||||
| Net income available to Charles River Laboratories International, Inc. common shareholders | $ | 25,469 | $ | 67,329 | |||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||
| Basic | $ | 0.50 | $ | 1.31 | |||||||||||||||||||
| Diluted | $ | 0.50 | $ | 1.30 | |||||||||||||||||||
| Weighted-average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 50,677 | 51,437 | |||||||||||||||||||||
| Diluted | 50,853 | 51,842 | |||||||||||||||||||||
| 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 | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| Net income | $ | 25,878 | $ | 74,482 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustment | 60,381 | (62,840) | |||||||||||||||||||||
| Amortization of net loss, settlement losses, and prior service benefit included in total cost for pension and other post-retirement benefit plans | 408 | 344 | |||||||||||||||||||||
| Unrealized gains on hedging instruments | — | 768 | |||||||||||||||||||||
| Other comprehensive income (loss), before income taxes | 60,789 | (61,728) | |||||||||||||||||||||
| Less: Income tax expense (benefit) related to items of other comprehensive income | 9,548 | (5,473) | |||||||||||||||||||||
| Comprehensive income, net of income taxes | 77,119 | 18,227 | |||||||||||||||||||||
| Less: Comprehensive loss related to noncontrolling interests, net of income taxes | (449) | (1,241) | |||||||||||||||||||||
| Comprehensive income attributable to Charles River Laboratories International, Inc., net of income taxes | $ | 77,568 | $ | 19,468 | |||||||||||||||||||
| See Notes to Unaudited Condensed Consolidated Financial Statements. |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
| March 29, 2025 | December 28, 2024 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 229,356 | $ | 194,606 | ||||||||||
| Trade receivables and contract assets, net of allowances for credit losses of $16,258 and $18,301, respectively | 756,629 | 720,915 | ||||||||||||
| Inventories | 290,156 | 278,544 | ||||||||||||
| Prepaid assets | 129,987 | 103,210 | ||||||||||||
| Other current assets | 100,230 | 105,796 | ||||||||||||
| Total current assets | 1,506,358 | 1,403,071 | ||||||||||||
| Property, plant and equipment, net | 1,587,069 | 1,604,014 | ||||||||||||
| Venture capital and strategic equity investments | 214,026 | 218,350 | ||||||||||||
| Operating lease right-of-use assets, net | 402,908 | 412,490 | ||||||||||||
| Goodwill | 2,873,402 | 2,846,608 | ||||||||||||
| Intangible assets, net | 655,705 | 723,400 | ||||||||||||
| Deferred tax assets | 48,794 | 42,179 | ||||||||||||
| Other assets | 294,104 | 278,233 | ||||||||||||
| Total assets | $ | 7,582,366 | $ | 7,528,345 | ||||||||||
| Liabilities, Redeemable Noncontrolling Interests and Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 149,334 | $ | 140,337 | ||||||||||
| Accrued compensation | 197,325 | 179,418 | ||||||||||||
| Deferred revenue | 250,462 | 248,322 | ||||||||||||
| Accrued liabilities | 242,467 | 232,010 | ||||||||||||
| Other current liabilities | 211,467 | 194,014 | ||||||||||||
| Total current liabilities | 1,051,055 | 994,101 | ||||||||||||
| Long-term debt, net and finance leases | 2,510,754 | 2,240,205 | ||||||||||||
| Operating lease right-of-use liabilities | 475,111 | 483,789 | ||||||||||||
| Deferred tax liabilities | 107,268 | 106,960 | ||||||||||||
| Other long-term liabilities | 196,396 | 195,212 | ||||||||||||
| Total liabilities | 4,340,584 | 4,020,267 | ||||||||||||
| Commitments and contingencies (Notes 10, 12, and 14) | ||||||||||||||
| Redeemable noncontrolling interests | 41,663 | 41,126 | ||||||||||||
| 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; 51,201 shares issued and 49,115 shares outstanding as of March 29, 2025, and 51,141 shares issued and outstanding as of December 28, 2024 | 512 | 511 | ||||||||||||
| Additional paid-in capital | 1,978,052 | 1,966,237 | ||||||||||||
| Retained earnings | 1,837,569 | 1,812,100 | ||||||||||||
| Treasury stock, at cost, 2,086 and zero shares, as of March 29, 2025 and December 28, 2024, respectively | (356,551) | — | ||||||||||||
| Accumulated other comprehensive loss | (265,246) | (317,345) | ||||||||||||
| Total Charles River Laboratories International, Inc. equity | 3,194,336 | 3,461,503 | ||||||||||||
| Nonredeemable noncontrolling interest | 5,783 | 5,449 | ||||||||||||
| Total equity | 3,200,119 | 3,466,952 | ||||||||||||
| Total liabilities, noncontrolling interests and equity | $ | 7,582,366 | $ | 7,528,345 | ||||||||||
| See Notes to Unaudited Condensed Consolidated Financial Statements. |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| Cash flows relating to operating activities | |||||||||||
| Net income | $ | 25,878 | $ | 74,482 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 120,364 | 85,357 | |||||||||
| Long-lived asset impairments | 10,576 | 5,432 | |||||||||
| Stock-based compensation | 13,135 | 16,738 | |||||||||
| Deferred income taxes | (19,041) | (987) | |||||||||
| Write down of inventories | 6,762 | 1,790 | |||||||||
| (Gain) loss on venture capital and strategic equity investments, net | 10,374 | (5,880) | |||||||||
| Provision for credit losses | 2,007 | 839 | |||||||||
| (Gain) loss on divestitures, net | (3,376) | 659 | |||||||||
| Other, net | 3,731 | (450) | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Trade receivables and contract assets, net | (29,353) | (17,281) | |||||||||
| Inventories | (21,882) | 5,600 | |||||||||
| Accounts payable | 25,251 | (8,541) | |||||||||
| Accrued compensation | 15,263 | (20,945) | |||||||||
| Deferred revenue | (1,213) | 19,957 | |||||||||
| Customer contract deposits | 9,167 | 6,140 | |||||||||
| Other assets and liabilities, net | 4,054 | (33,022) | |||||||||
| Net cash provided by operating activities | 171,697 | 129,888 | |||||||||
| Cash flows relating to investing activities | |||||||||||
| Capital expenditures | (59,324) | (79,144) | |||||||||
| Purchases of investments and contributions to venture capital investments | (5,302) | (13,867) | |||||||||
| Proceeds from sale of investments | 1,602 | 7,502 | |||||||||
| Proceeds from sale of businesses and assets, net | 17,441 | — | |||||||||
| Other, net | 104 | (283) | |||||||||
| Net cash used in investing activities | (45,479) | (85,792) | |||||||||
| Cash flows relating to financing activities | |||||||||||
| Proceeds from long-term debt and revolving credit facility | 416,341 | 300,882 | |||||||||
| Payments on long-term debt, revolving credit facility, and finance lease obligations | (149,394) | (292,482) | |||||||||
| Proceeds from exercises of stock options | — | 21,505 | |||||||||
| Purchase of treasury stock | (353,132) | (9,351) | |||||||||
| Purchase of remaining equity interest of other redeemable noncontrolling interest | (19,140) | — | |||||||||
| Other, net | — | (2,208) | |||||||||
| Net cash (used in) provided by financing activities | (105,325) | 18,346 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 5,265 | (8,387) | |||||||||
| Net change in cash, cash equivalents, and restricted cash | 26,158 | 54,055 | |||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 205,570 | 284,480 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 231,728 | $ | 338,535 | |||||||
| 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 28, 2024 | $ | 41,126 | 51,141 | $ | 511 | $ | 1,966,237 | $ | 1,812,100 | $ | (317,345) | — | $ | — | $ | 3,461,503 | $ | 5,449 | $ | 3,466,952 | ||||||||||||||||||||||||||||||||||||||||||
| Net income | 75 | — | — | — | 25,469 | — | — | — | 25,469 | 334 | 25,803 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | (858) | — | — | — | — | 52,099 | — | — | 52,099 | — | 52,099 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of redeemable noncontrolling interests to redemption value | 1,320 | — | — | (1,320) | — | — | — | — | (1,320) | — | (1,320) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock under employee compensation plans | — | 60 | 1 | — | — | — | — | — | 1 | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Purchase of treasury shares | — | — | — | — | — | — | 2,086 | (353,132) | (353,132) | — | (353,132) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Share repurchase excise tax | — | — | — | — | — | — | — | (3,419) | (3,419) | — | (3,419) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 13,135 | — | — | — | — | 13,135 | — | 13,135 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| March 29, 2025 | $ | 41,663 | 51,201 | $ | 512 | $ | 1,978,052 | $ | 1,837,569 | $ | (265,246) | 2,086 | $ | (356,551) | $ | 3,194,336 | $ | 5,783 | $ | 3,200,119 | ||||||||||||||||||||||||||||||||||||||||||
| 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 income (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 declared 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 | ||||||||||||||||||||||||||||||||||||||||||
| 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 2024 as filed with the SEC on February 19, 2025. 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 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (Subtopic 220-40)” which requires enhanced disclosure of income statement expense categories to improve transparency and provide financial statement users with more detailed information about the nature, amount and timing of expenses impacting financial performance. This new guidance is effective for the Company for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The amendments in this ASU may be adopted using the prospective or retrospective methods. The Company is currently evaluating the impact this new standard will have on the related disclosures in the consolidated financial statements.
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 2024 as filed with the SEC on February 19, 2025.
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.
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).
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s RMS reportable segment includes products and services offered within 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™) offerings, which provide 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 as well as cells from disease state donors.
The Company’s DSA reportable segment includes discovery and safety assessment services. The Company provides regulated and non-regulated DSA services to support the discovery, development, and regulatory-required safety testing of potential new drugs, including in vitro (non-animal) and in vivo (in research models) studies, laboratory support services, including bioanalytical 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. 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 | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Timing of Revenue Recognition: | |||||||||||||||||||||||
| RMS | |||||||||||||||||||||||
| Services and products transferred over time | $ | 97,004 | $ | 97,049 | |||||||||||||||||||
| Services and products transferred at a point in time | 116,069 | 123,858 | |||||||||||||||||||||
| Total RMS revenue | 213,073 | 220,907 | |||||||||||||||||||||
| DSA | |||||||||||||||||||||||
| Services and products transferred over time | 591,520 | 604,125 | |||||||||||||||||||||
| Services and products transferred at a point in time | 1,089 | 1,327 | |||||||||||||||||||||
| Total DSA revenue | 592,609 | 605,452 | |||||||||||||||||||||
| Manufacturing | |||||||||||||||||||||||
| Services and products transferred over time | 91,467 | 100,058 | |||||||||||||||||||||
| Services and products transferred at a point in time | 87,019 | 85,143 | |||||||||||||||||||||
| Total Manufacturing revenue | 178,486 | 185,201 | |||||||||||||||||||||
| Total revenue | $ | 984,168 | $ | 1,011,560 |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contract Balances from Contracts with Customers
The following table provides information about client receivables, contract assets, and contract liabilities from contracts with customers:
| March 29, 2025 | December 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Assets from contracts with customers | |||||||||||
| Client receivables | $ | 556,937 | $ | 527,705 | |||||||
| Unbilled revenue | 215,950 | 211,511 | |||||||||
| Total | 772,887 | 739,216 | |||||||||
| Less: Allowance for credit losses | (16,258) | (18,301) | |||||||||
| Trade receivables and contract assets, net | $ | 756,629 | $ | 720,915 | |||||||
| Liabilities from contracts with customers | |||||||||||
| Current deferred revenue | $ | 250,462 | $ | 248,322 | |||||||
| Long-term deferred revenue (included in Other long-term liabilities) | 33,945 | 34,291 | |||||||||
| Customer contract deposits (included in Other current liabilities) | 99,654 | 89,446 |
Approximately 70% of unbilled revenue as of December 28, 2024, which was $212 million, was billed during the three months ended March 29, 2025. Approximately 70% of unbilled revenue as of December 30, 2023, which was $228 million, was billed during the three months ended March 30, 2024.
Approximately 60% of contract liabilities as of December 28, 2024, which was $283 million, were recognized as revenue during the three months ended March 29, 2025. Approximately 60% of contract liabilities as of December 30, 2023, which was $273 million, were recognized as revenue during the three months ended March 30, 2024.
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 $39 million and $38 million of unpaid advanced client billings from both client receivables and deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of March 29, 2025 and December 28, 2024, respectively.
Allowance for Credit Losses
The following is a summary of the activity of the Company’s allowance for credit losses:
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Beginning balance | $ | 18,301 | $ | 25,722 | |||||||||||||||||||
| Provisions | 2,007 | 934 | |||||||||||||||||||||
| Reductions | (4,050) | (1,249) | |||||||||||||||||||||
| Ending balance | $ | 16,258 | $ | 25,407 |
Net provision expenses were $1.5 million and $0.8 million during the three months ended March 29, 2025 and March 30, 2024, 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 March 29, 2025. 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 March 29, 2025 was $781.9 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.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, and recorded within service revenue. The Company recognized $11.6 million and $21.0 million in lease revenue during the three months ended March 29, 2025 and March 30, 2024. Due to the nature of these arrangements and timing of the contractual lease term, the remaining revenue to be recognized related to these lease performance obligations is not material to the unaudited condensed consolidated financial statements.
3. SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in three reportable segments: RMS, DSA, and Manufacturing. The reportable segments comprise the structure used by the Company’s Chief Executive Officer, who is the Chief Operating Decision Maker (CODM), to make key operating decisions and assess performance. These segments are strategic business units with differing products and services.
The Company’s CODM evaluates the segments operating performance based on operating income. Operating income is the measure of profit or loss regularly provided to and used by the CODM to assess performance and allocate resources. Operating income is defined as revenue less costs of revenue; selling, general, and administrative expenses; amortization of intangible assets; and goodwill impairments. For each segment, the CODM uses operating income in the annual budgeting and quarterly forecasting process when comparing to actual results. Asset information on a reportable segment basis is not disclosed as this information is not separately identified and internally reported to the Company’s CODM. The following table presents the results of operations by reportable segment:
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| RMS | |||||||||||||||||||||||
| Revenue | $ | 213,073 | $ | 220,907 | |||||||||||||||||||
| Cost of revenue (excluding amortization of intangible assets) | 139,296 | 140,925 | |||||||||||||||||||||
| Selling, general and administrative | 24,206 | 30,893 | |||||||||||||||||||||
| Amortization of intangible assets | 5,966 | 5,940 | |||||||||||||||||||||
| Operating income | $ | 43,605 | $ | 43,149 | |||||||||||||||||||
| DSA | |||||||||||||||||||||||
| Revenue | $ | 592,609 | $ | 605,452 | |||||||||||||||||||
| Cost of revenue (excluding amortization of intangible assets) | 420,143 | 417,912 | |||||||||||||||||||||
| Selling, general and administrative | 65,293 | 56,859 | |||||||||||||||||||||
| Amortization of intangible assets | 13,221 | 15,842 | |||||||||||||||||||||
| Operating income | $ | 93,952 | $ | 114,839 | |||||||||||||||||||
| Manufacturing | |||||||||||||||||||||||
| Revenue | $ | 178,486 | $ | 185,201 | |||||||||||||||||||
| Cost of revenue (excluding amortization of intangible assets) | 106,997 | 107,880 | |||||||||||||||||||||
| Selling, general and administrative | 34,032 | 32,847 | |||||||||||||||||||||
| Amortization of intangible assets | 46,077 | 10,793 | |||||||||||||||||||||
| Operating income (loss) | $ | (8,620) | $ | 33,681 | |||||||||||||||||||
| Unallocated Corporate (1) | |||||||||||||||||||||||
| Selling, general and administrative | $ | 54,268 | $ | 65,692 | |||||||||||||||||||
| Operating loss | $ | (54,268) | $ | (65,692) | |||||||||||||||||||
| (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
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| RMS | $ | 213,073 | $ | 220,907 | |||||||||||||||||||
| DSA | 592,609 | 605,452 | |||||||||||||||||||||
| Manufacturing | 178,486 | 185,201 | |||||||||||||||||||||
| Total revenue | $ | 984,168 | $ | 1,011,560 | |||||||||||||||||||
| Operating Income (Loss) | |||||||||||||||||||||||
| RMS | $ | 43,605 | $ | 43,149 | |||||||||||||||||||
| DSA | 93,952 | 114,839 | |||||||||||||||||||||
| Manufacturing | (8,620) | 33,681 | |||||||||||||||||||||
| Segment operating income | 128,937 | 191,669 | |||||||||||||||||||||
| Unallocated Corporate | (54,268) | (65,692) | |||||||||||||||||||||
| Operating income | $ | 74,669 | $ | 125,977 | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 1,404 | 2,202 | |||||||||||||||||||||
| Interest expense | (27,884) | (35,001) | |||||||||||||||||||||
| Other income (expense), net | (12,211) | 5,833 | |||||||||||||||||||||
| Income before income taxes | $ | 35,978 | $ | 99,011 |
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: | |||||||||||||||||||||||||||||
| March 29, 2025 | $ | 7,286 | $ | 34,521 | $ | 17,279 | $ | 238 | $ | 59,324 | |||||||||||||||||||
| March 30, 2024 | 20,044 | 48,959 | 8,862 | 1,279 | 79,144 | ||||||||||||||||||||||||
| Depreciation and amortization (1) | |||||||||||||||||||||||||||||
| Three Months Ended: | |||||||||||||||||||||||||||||
| March 29, 2025 | $ | 21,761 | $ | 42,084 | $ | 54,623 | $ | 1,896 | $ | 120,364 | |||||||||||||||||||
| March 30, 2024 | 18,123 | 45,789 | 19,805 | 1,640 | 85,357 | ||||||||||||||||||||||||
| (1) Depreciation and amortization includes both inventory step up amortization expense and biological assets amortization expense. | |||||||||||||||||||||||||||||
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: | |||||||||||||||||||||||||||||||||||
| March 29, 2025 | $ | 536,955 | $ | 263,250 | $ | 125,353 | $ | 41,942 | $ | 16,668 | $ | 984,168 | |||||||||||||||||||||||
| March 30, 2024 | 562,317 | 276,319 | 110,401 | 45,772 | 16,751 | 1,011,560 | |||||||||||||||||||||||||||||
| (1) The Other category represents operations located in Brazil, Israel, and Mauritius. | |||||||||||||||||||||||||||||||||||
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 | |||||||||||||||||||||||||||||||||||
| March 29, 2025 | $ | 908,579 | $ | 427,205 | $ | 148,614 | $ | 64,716 | $ | 37,955 | $ | 1,587,069 | |||||||||||||||||||||||
| December 28, 2024 | 941,621 | 412,967 | 147,039 | 66,046 | 36,341 | 1,604,014 | |||||||||||||||||||||||||||||
4. SUPPLEMENTAL CASH FLOW INFORMATION
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Cash paid for income taxes | $ | 17,324 | $ | 18,728 | |||||||
| Cash paid for interest | 29,088 | 38,258 | |||||||||
| Non-cash investing activities: | |||||||||||
| Purchases of Property, plant and equipment included in Accounts payable and Accrued liabilities | $ | 22,391 | $ | 23,911 | |||||||
| Assets acquired under finance leases | — | 3,159 |
Cash, cash equivalents and restricted cash is included in the accompanying unaudited condensed consolidated balance sheets as follows:
| March 29, 2025 | March 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Supplemental cash flow information: | |||||||||||
| Cash and cash equivalents | $ | 229,356 | $ | 327,039 | |||||||
| Restricted cash included in Other current assets | 904 | 10,327 | |||||||||
| Restricted cash included in Other assets | 1,468 | 1,169 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 231,728 | $ | 338,535 |
5. INVENTORY
Inventories
The composition of inventories is as follows:
| March 29, 2025 | December 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Raw materials and supplies | $ | 42,228 | $ | 43,041 | |||||||
| Work in process | 55,543 | 51,785 | |||||||||
| Finished products | 192,385 | 183,718 | |||||||||
| Inventories | $ | 290,156 | $ | 278,544 |
Inventory step up amortization expense for the three months ended March 29, 2025 and March 30, 2024 was $6.2 million and $5.8 million, respectively.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. PROPERTY, PLANT AND EQUIPMENT, NET
The composition of property, plant and equipment, net is as follows:
| March 29, 2025 | December 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Land | $ | 70,602 | $ | 71,736 | |||||||
| Buildings (1) | 1,045,379 | 1,069,667 | |||||||||
| Machinery and equipment (1) | 1,044,254 | 1,029,424 | |||||||||
| Leasehold improvements | 429,052 | 438,746 | |||||||||
| Furniture and fixtures | 30,697 | 30,413 | |||||||||
| Computer hardware and software (1) | 276,353 | 268,032 | |||||||||
| Vehicles (1) | 7,030 | 6,800 | |||||||||
| Construction in progress | 146,327 | 143,306 | |||||||||
| Total | 3,049,694 | 3,058,124 | |||||||||
| Less: Accumulated depreciation | (1,462,625) | (1,454,110) | |||||||||
| Property, plant and equipment, net | $ | 1,587,069 | $ | 1,604,014 | |||||||
| (1) These balances include assets under finance leases. |
As of March 29, 2025, the Company included approximately $20 million of certain property, plant and equipment primarily related to corporate assets as held for sale within other assets on the unaudited condensed consolidated balance sheets.
Depreciation expense in the three months ended March 29, 2025 and March 30, 2024 was $43.4 million and $45.7 million, respectively.
Change in estimated useful lives
In accordance with its policy, the Company reviews the estimated useful lives of its property, plant and equipment on an ongoing basis. This review indicated that the actual lives of certain assets were longer than the estimated useful lives used for depreciation purposes in the Company’s financial reporting. As a result, effective December 29, 2024, the first day of fiscal 2025, the Company changed certain estimates of the useful lives to better reflect the estimated periods during which these assets will remain in service. The estimated useful lives of machinery and equipment, which was previously 5 years increased to 7 years, and building improvements that was previously 10 years increased to 15 years. The effect of this change in estimate reduced depreciation expense by $4.5 million during the three months ended March 29, 2025, increasing net income available to Charles River Laboratories International, Inc. common shareholders by $3.4 million and basic and diluted earnings per share by approximately $0.07.
7. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS
Venture capital investments are summarized below:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Beginning balance | $ | 116,561 | $ | 121,158 | |||||||
| Capital contributions | 5,216 | 3,829 | |||||||||
| Distributions | (2,653) | (9,353) | |||||||||
| Gains (losses) | (8,634) | 8,174 | |||||||||
| Foreign currency translation | 551 | (100) | |||||||||
| Ending balance | $ | 111,041 | $ | 123,708 |
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company also invests, with minority positions, directly in equity of predominantly privately held companies. Strategic investments are summarized below:
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Beginning balance | $ | 101,790 | $ | 122,653 | |||||||
| Purchase of investments | 2,241 | — | |||||||||
| Gain (loss) | (1,740) | (2,294) | |||||||||
| Foreign currency translation | 694 | (524) | |||||||||
| Ending balance | $ | 102,985 | $ | 119,835 | |||||||
8. FAIR VALUE
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| March 29, 2025 | |||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||
| Current assets measured at fair value: | (in thousands) | ||||||||||||||||||||||||||||||||||
| Cash equivalents | $ | — | $ | 31 | $ | — | $ | 31 | |||||||||||||||||||||||||||
| Other assets: | |||||||||||||||||||||||||||||||||||
| Life insurance policies | — | 46,052 | — | 46,052 | |||||||||||||||||||||||||||||||
| Total assets measured at fair value | $ | — | $ | 46,083 | $ | — | $ | 46,083 | |||||||||||||||||||||||||||
| Accrued liabilities measured at fair value: | |||||||||||||||||||||||||||||||||||
| Contingent consideration | $ | — | $ | — | $ | 25,000 | $ | 25,000 | |||||||||||||||||||||||||||
| Other long-term liabilities measured at fair value: | |||||||||||||||||||||||||||||||||||
| Contingent consideration | $ | — | $ | — | $ | 25,220 | $ | 25,220 | |||||||||||||||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | — | $ | 50,220 | $ | 50,220 |
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the three months ended March 29, 2025, there were no transfers between levels.
| December 28, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Current assets measured at fair value: | (in thousands) | ||||||||||||||||||||||
| Cash equivalents | $ | — | $ | 30 | $ | — | $ | 30 | |||||||||||||||
| Other assets: | |||||||||||||||||||||||
| Life insurance policies | — | 48,152 | — | 48,152 | |||||||||||||||||||
| Total assets measured at fair value | $ | — | $ | 48,182 | $ | — | $ | 48,182 | |||||||||||||||
| Accrued liabilities measured at fair value: | |||||||||||||||||||||||
| Contingent consideration | $ | — | $ | — | $ | 25,000 | $ | 25,000 | |||||||||||||||
| Other long-term liabilities measured at fair value | |||||||||||||||||||||||
| Contingent consideration | $ | — | $ | — | $ | 24,311 | $ | 24,311 | |||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | — | $ | 49,311 | $ | 49,311 |
During the year ended December 28, 2024, there were no transfers between levels.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.
| Three Months Ended | |||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Beginning balance | $ | 49,311 | $ | 33,265 | |||||||
| Total gains or losses (realized/unrealized): | |||||||||||
| Adjustment of previously recorded contingent liability | 909 | — | |||||||||
| Ending balance | $ | 50,220 | $ | 33,265 |
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 March 29, 2025 is $50.2 million as the probability of achieving the maximum target is estimated to be 91%. The volatility and weighted average cost of capital is approximately 20% and 8%, respectively. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively.
Debt Instruments
The book value of the Company’s revolving loans are variable rate loans carried at amortized cost which approximates the fair value. 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:
| March 29, 2025 | December 28, 2024 | ||||||||||||||||||||||
| Book Value | Fair Value | Book Value | Fair Value | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| 4.25% Senior Notes due 2028 | $ | 500,000 | $ | 478,750 | $ | 500,000 | $ | 473,750 | |||||||||||||||
| 3.75% Senior Notes due 2029 | 500,000 | 458,100 | 500,000 | 456,250 | |||||||||||||||||||
| 4.00% Senior Notes due 2031 | 500,000 | 448,600 | 500,000 | 441,250 |
9. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table provides a rollforward of the Company’s goodwill:
| RMS | DSA (1) | Manufacturing (2) | Total | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| December 28, 2024 | $ | 496,740 | $ | 1,635,651 | $ | 714,217 | $ | 2,846,608 | |||||||||||||||
| Divestitures | — | (4,000) | — | (4,000) | |||||||||||||||||||
| Foreign exchange | 12,675 | 7,944 | 10,175 | 30,794 | |||||||||||||||||||
| March 29, 2025 | $ | 509,415 | $ | 1,639,595 | $ | 724,392 | $ | 2,873,402 | |||||||||||||||
| (1) DSA includes accumulated impairment losses of $1 billion, which were recognized in fiscal years 2008 and 2010. | |||||||||||||||||||||||
| (2) Manufacturing includes an accumulated impairment loss of $215 million, which was recognized in fiscal year 2024. |
As of the beginning of fiscal 2025, the Company has combined the Discovery Services and Safety Assessment reporting units into a single reporting unit consistent with recent changes to the DSA integrated operating structure.
The increase in goodwill during the three months ended March 29, 2025 is primarily related to the effect of foreign exchange; partially offset by a divestiture of a site in the DSA reportable segment.
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:
| March 29, 2025 | December 28, 2024 | ||||||||||||||||||||||||||||||||||
| Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||||
| Client relationships | $ | 1,503,906 | $ | (887,114) | $ | 616,792 | $ | 1,505,871 | $ | (823,903) | $ | 681,968 | |||||||||||||||||||||||
| Technology | 137,616 | (116,720) | 20,896 | 139,335 | (116,536) | 22,799 | |||||||||||||||||||||||||||||
| Trademarks and trade names | 11,948 | (5,992) | 5,956 | 11,827 | (5,630) | 6,197 | |||||||||||||||||||||||||||||
| Other | 20,959 | (8,898) | 12,061 | 39,819 | (27,383) | 12,436 | |||||||||||||||||||||||||||||
| Intangible assets | $ | 1,674,429 | $ | (1,018,724) | $ | 655,705 | $ | 1,696,852 | $ | (973,452) | $ | 723,400 |
The decrease in intangible assets for the three months ended March 29, 2025 related primarily to the accelerated amortization of certain CDMO client relationships in the Biologics Solutions reporting unit, normal amortization over the useful lives, and a divestiture of a site in the DSA reportable segment.
Amortization expense of definite-lived intangible assets for three months ended March 29, 2025 and March 30, 2024 was $65.3 million and $32.6 million, respectively. Amortization expense for the three months ended March 29, 2025 includes $35.5 million of accelerated amortization expense as a result of a decrease in the remaining useful life of certain client relationships due to a loss of key customers in 2025 which was identified in fiscal year 2024.
10. DEBT AND OTHER FINANCING ARRANGEMENTS
Long-term debt, net and finance leases consists of the following:
| March 29, 2025 | December 28, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Revolving facility | $ | 984,650 | $ | 714,948 | |||||||
| 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 | 15,526 | 15,603 | |||||||||
| Finance leases | 29,060 | 28,444 | |||||||||
| Total debt and finance leases | 2,529,236 | 2,258,995 | |||||||||
| Less: | |||||||||||
| Current portion of long-term debt | 121 | 155 | |||||||||
| Current portion of finance leases | 3,348 | 2,774 | |||||||||
| Current portion of long-term debt and finance leases | 3,469 | 2,929 | |||||||||
| Long-term debt and finance leases | 2,525,767 | 2,256,066 | |||||||||
| Debt discount and debt issuance costs | (15,013) | (15,861) | |||||||||
| Long-term debt, net and finance leases | $ | 2,510,754 | $ | 2,240,205 |
As of March 29, 2025 and December 28, 2024, the weighted average interest rate on the Company’s debt was 4.59% and 4.48%, respectively.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Revolving Credit Facility
The Company has a revolving credit facility “Credit Facility” that provides for up to $2.0 billion of multi-currency revolving credit. The Credit Facility has a maturity date of December 2029, with no required scheduled payment before that date. The interest rates applicable to the revolving facility are equal to (A) for revolving loans denominated in U.S. dollars, at the Company’s option, either the base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.50%, or (3) the one-month adjusted SOFR rate plus 1.0%) or the adjusted SOFR rate, (B) for revolving loans denominated in euros, the adjusted EURIBOR rate and (C) for revolving loans denominated in sterling, the daily simple SONIA rate, in each case, plus an interest rate margin based upon the Company’s leverage ratio.
Letters of Credit
As of March 29, 2025 and December 28, 2024, the Company had $22.1 million and $22.4 million, respectively, in outstanding letters of credit.
11. 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 | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 25,878 | $ | 74,482 | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 409 | 1,522 | |||||||||||||||||||||
| Net income attributable to Charles River Laboratories International, Inc. | 25,469 | 72,960 | |||||||||||||||||||||
| Calculation of net income per share attributable to Charles River Laboratories International, Inc. common shareholders | |||||||||||||||||||||||
| Net income attributable to Charles River Laboratories International, Inc. | $ | 25,469 | $ | 72,960 | |||||||||||||||||||
| Less: Adjustment of redeemable noncontrolling interest (1) | — | 401 | |||||||||||||||||||||
| Less: Incremental dividends attributable to noncontrolling interest holders (2) | — | 5,230 | |||||||||||||||||||||
| Net income available to Charles River Laboratories International, Inc. common shareholders | $ | 25,469 | $ | 67,329 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding - Basic | 50,677 | 51,437 | |||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Stock options, restricted stock units and performance share units | 176 | 405 | |||||||||||||||||||||
| Weighted-average shares outstanding - Diluted | 50,853 | 51,842 | |||||||||||||||||||||
| Anti-dilutive common stock equivalents (3) | 958 | 448 | |||||||||||||||||||||
| (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. During the three months ended March 29, 2025, the Company repurchased 2.1 million shares of common stock for $350.0 million under the new stock repurchase program. As of March 29, 2025, the Company had $549.3 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 less than 0.1 million during the three months ended March 29, 2025 and 0.1 million in the three months ended March 30, 2024, for $3.1 million and $9.4 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 | Total | |||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| December 28, 2024 | $ | (261,471) | $ | (55,874) | $ | (317,345) | |||||||||||||||||
| Other comprehensive income before reclassifications | 61,239 | 408 | 61,647 | ||||||||||||||||||||
| Net current period other comprehensive income | 61,239 | 408 | 61,647 | ||||||||||||||||||||
| Income tax expense | 9,449 | 99 | 9,548 | ||||||||||||||||||||
| March 29, 2025 | $ | (209,681) | $ | (55,565) | $ | (265,246) |
Redeemable Noncontrolling Interests
The Company has held and continues to hold 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 were eligible 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. The redemption value is accreted to the put purchase price of $54.0 million using the interest method through December 2030. As of March 29, 2025, the redemption value of $41.7 million exceeded the carrying value, resulting in an adjustment to additional paid in capital of $1.3 million for the three months ended March 29, 2025. As of March 30, 2024, the redemption value of $45.8 million exceeded both the carrying value and fair value, resulting in both an adjustment to additional paid in capital of $1.7 million and an adjustment to retained earnings of $0.4 million, respectively.
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 fiscal year 2023, the Company acquired the remaining 8% for a total sale amount of $24.4 million. The remaining purchase price payable of $19.1 million was included in Accrued liabilities within the Company’s consolidated balance sheet as of December 28, 2024 and was paid during the three months ended March 29, 2025.
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 months ended March 29, 2025 and March 30, 2024.
12. INCOME TAXES
The Company’s effective tax rates for the three months ended March 29, 2025 and March 30, 2024 were 28.1% and 24.8%, respectively. The increase in the effective tax rate for the three months ended March 29, 2025 compared to the corresponding prior year period was primarily attributable to the tax impact of jurisdictional mix of income.
For the three months ended March 29, 2025, the Company’s unrecognized tax benefits increased by $2.3 million to $27.3 million, primarily due to increases in research and development tax credit reserves, as well as unfavorable foreign exchange movement. For the three months ended March 29, 2025, the amount of unrecognized income tax benefits that would impact the effective tax rate increased by $0.9 million to $22.9 million for the same reasons discussed above. The accrued interest on unrecognized tax benefits was $2.2 million as of March 29, 2025. The Company estimates that it is reasonably possible that the unrecognized tax benefits will decrease by approximately $8.9 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:
| March 29, 2025 | December 28, 2024 | Affected Line Item in the Unaudited Condensed Consolidated Balance Sheets | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Prepaid income tax | $ | 90,181 | $ | 82,995 | Other current assets | ||||||||||||
| Accrued income taxes | 41,409 | 31,872 | 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, France, China, Hungary, Israel, Ireland, and India. The Company does not anticipate resolution of these audits will have a material impact on its unaudited condensed consolidated financial statements.
13. RESTRUCTURING AND ASSET IMPAIRMENTS
The Company has undertaken restructuring actions impacting the reportable segments at various locations across North America, Europe and Asia to manage the Company through the current demand environment, including appropriately right-sizing the Company’s infrastructure, optimizing operations, and driving efficiency. This includes workforce right-sizing actions resulting in severance and transition costs; and costs related to the consolidation of facilities resulting in long-lived asset impairments (principally property, plant, and equipment and right-of-use assets), accelerated depreciation charges, and certain other costs. Generally, these actions are in response to recent macroeconomic impacts on the Company.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents restructuring costs by reportable segment:
| Three Months Ended | |||||||||||||||||||||||
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| RMS | $ | 1,424 | $ | 7,387 | |||||||||||||||||||
| DSA | 17,542 | 6,491 | |||||||||||||||||||||
| Manufacturing | 3,711 | 1,631 | |||||||||||||||||||||
| Unallocated corporate | 1,168 | 1,490 | |||||||||||||||||||||
| Total | $ | 23,845 | $ | 16,999 |
The following table presents restructuring costs as included within the Company’s unaudited condensed consolidated statements of income:
| March 29, 2025 | March 30, 2024 | ||||||||||||||||||||||||||||||||||
| 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) | $ | 7,698 | $ | 13,173 | $ | 20,871 | $ | 4,810 | $ | 1,108 | $ | 5,918 | |||||||||||||||||||||||
| Cost of products sold (excluding amortization of intangible assets) | 263 | 1,233 | 1,496 | 678 | 1,330 | 2,008 | |||||||||||||||||||||||||||||
| Selling, general and administrative | 453 | 1,025 | 1,478 | 3,549 | 5,524 | 9,073 | |||||||||||||||||||||||||||||
| Total restructuring costs | $ | 8,414 | $ | 15,431 | $ | 23,845 | $ | 9,037 | $ | 7,962 | $ | 16,999 | |||||||||||||||||||||||
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) | |||||||||||||||||||||||
| Three Months Ended March 29, 2025 | |||||||||||||||||||||||
| Beginning balance | $ | 24,469 | $ | — | $ | 875 | $ | 25,344 | |||||||||||||||
| Expense | 8,414 | 10,306 | 5,125 | 23,845 | |||||||||||||||||||
| Payments / utilization | (9,052) | — | (5,268) | (14,320) | |||||||||||||||||||
| Other non-cash adjustments | — | (10,306) | 143 | (10,163) | |||||||||||||||||||
| Foreign currency adjustments | 93 | — | — | 93 | |||||||||||||||||||
| Ending Balance | $ | 23,924 | $ | — | $ | 875 | $ | 24,799 | |||||||||||||||
| Three Months Ended March 30, 2024 | |||||||||||||||||||||||
| Beginning balance | $ | 4,175 | $ | — | $ | 875 | $ | 5,050 | |||||||||||||||
| Expense | 9,037 | 5,251 | 2,711 | 16,999 | |||||||||||||||||||
| Payments / utilization | (3,235) | — | (2,499) | (5,734) | |||||||||||||||||||
| Other non-cash adjustments | — | (5,251) | (212) | (5,463) | |||||||||||||||||||
| Foreign currency adjustments | (40) | — | — | (40) | |||||||||||||||||||
| Ending Balance | $ | 9,937 | $ | — | $ | 875 | $ | 10,812 |
As of March 29, 2025 and December 28, 2024, $24.8 million and $25.3 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.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14. COMMITMENTS AND CONTINGENCIES
Litigation
On February 17, 2023, the Company received a grand jury subpoena requesting certain documents related to an investigation by the U.S. Department of Justice (DOJ) and the U.S. Fish and Wildlife Service (USFWS) into the Company’s conduct regarding several shipments of non-human primates from Cambodia. That investigation remains ongoing and the Company is continuing to cooperate with the investigation. As also previously disclosed, a parallel civil investigation is being undertaken by the DOJ and USFWS. The Company is also cooperating with that investigation, and although the Company continues to dispute the merits of certain positions taken by the DOJ and USFWS in the civil investigation, the Company has discussed a potential resolution of that matter with the DOJ and USFWS. Those discussions are ongoing. Although 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, including the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), 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. Due to a number of factors, including the age of these NHP’s during the fourth quarter of fiscal year 2024, the Company recorded a charge of $27 million to costs of products sold to reflect the reduction in carrying value of this inventory to zero. 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 the requests. The Company’s Audit Committee has retained counsel to conduct an independent investigation into certain issues raised in the investigations, and that work is ongoing. 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. 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 resolution and 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 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, the plaintiff filed a notice of appeal in the United States Court of Appeals for the First Circuit. Oral arguments took place on May 5, 2025. 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. 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. Both of these lawsuits are 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.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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.
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