Charles River Laboratories International, Inc 10-Q for FY2021 Q1

Charles River Laboratories International, Inc. (CRL)

10-Q 2021-05-04 For: 2021-03-27

Added on April 06, 2026

About this 10-Q

Charles River Laboratories International, Inc filed this 10-Q on May 4, 2021, covering the quarter ended March 27, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 27, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $824.57M; up 16.6% from $707.06M a year earlier
Net income: $61.53M; up 21.2% from net income of $50.77M a year earlier
Diluted EPS: $1.20; up 17.6% from $1.02 a year earlier

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OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Ticker symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	CRL	New York Stock Exchange


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


Item		Page
PART I - FINANCIAL INFORMATION
1	Financial Statements
	Condensed Consolidated Statements of Income (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	4
	Condensed Consolidated Balance Sheets (Unaudited) as of March 27, 2021 and December 26, 2020	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	6
	Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three months ended March 27, 2021 and March 28, 2020	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
3	Quantitative and Qualitative Disclosure About Market Risk	39
4	Controls and Procedures	40
PART II - OTHER INFORMATION
1	Legal Proceedings	41
1A	Risk Factors	41
2	Unregistered Sales of Equity Securities and Use of Proceeds	42
6	Exhibits	44

Signatures		45


	Three Months Ended
	March 27, 2021		March 28, 2020
Service revenue	$	626,581	$	546,592
Product revenue	197,985		160,467
Total revenue	824,566		707,059
Costs and expenses:
Cost of services provided (excluding amortization of intangible assets)	423,975		372,824
Cost of products sold (excluding amortization of intangible assets)	92,313		82,174
Selling, general and administrative	155,733		129,901
Amortization of intangible assets	28,842		27,879
Operating income	123,703		94,281
Other income (expense):
Interest income	35		316
Interest expense	(29,719)		(15,067)
Other expense, net	(27,717)		(24,071)
Income from operations, before income taxes	66,302		55,459
Provision for income taxes	2,367		4,622
Net income	63,935		50,837
Less: Net income attributable to noncontrolling interests	2,405		68
Net income attributable to common shareholders	$	61,530	$	50,769

Earnings per common share
Net income attributable to common shareholders:
Basic	$	1.23	$	1.03
Diluted	$	1.20	$	1.02

Weighted-average number of common shares outstanding:
Basic	49,980		49,189
Diluted	51,075		49,966

See Notes to Unaudited Condensed Consolidated Financial Statements.


(Mark One)
☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	March 27, 2021		December 26, 2020
Assets
Current assets:
Cash and cash equivalents	$	465,411	$	228,424
Trade receivables, net of allowances for doubtful accounts of $7,278 and $6,702, respectively	610,566		617,740
Inventories	193,584		185,695
Prepaid assets	81,726		96,712
Other current assets	71,922		72,560
Total current assets	1,423,209		1,201,131
Property, plant and equipment, net	1,117,003		1,124,358
Operating lease right-of-use assets, net	197,668		178,220
Goodwill	1,890,630		1,809,168
Client relationships, net	712,384		721,505
Other intangible assets, net	83,181		66,094
Deferred tax assets	35,457		37,729
Other assets	349,431		352,626
Total assets	$	5,808,963	$	5,490,831
Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities:
Current portion of long-term debt and finance leases	$	2,932	$	50,214
Accounts payable	127,129		122,475
Accrued compensation	164,748		206,823
Deferred revenue	213,032		207,942
Accrued liabilities	198,188		149,820
Other current liabilities	97,347		102,477
Total current liabilities	803,376		839,751
Long-term debt, net and finance leases	2,202,334		1,929,571
Operating lease right-of-use liabilities	173,015		155,595
Deferred tax liabilities	207,011		217,031
Other long-term liabilities	207,008		205,215
Total liabilities	3,592,744		3,347,163
Commitments and contingencies (Notes 2, 9, 11, 12, 16 and 17)
Redeemable noncontrolling interests	28,035		25,499
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; 50,350 shares issued and 50,216 shares outstanding as of March 27, 2021, and 49,767 shares issued and outstanding as of December 26, 2020	504		498
Additional paid-in capital	1,659,524		1,627,564
Retained earnings	686,944		625,414
Treasury stock, at cost, 134 and 0 shares, as of March 27, 2021 and December 26, 2020, respectively	(36,028)		—
Accumulated other comprehensive loss	(127,017)		(138,874)
Total equity attributable to common shareholders	2,183,927		2,114,602
Noncontrolling interest	4,257		3,567
Total equity	2,188,184		2,118,169
Total liabilities, redeemable noncontrolling interests and equity	$	5,808,963	$	5,490,831
See Notes to Unaudited Condensed Consolidated Financial Statements.


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Equity Attributable to Common Shareholders		Noncontrolling Interest		Total Equity
	Shares	Amount								Shares	Amount
December 26, 2020	49,767	$	498	$	1,627,564	$	625,414	$	(138,874)	—	$	—	$	2,114,602	$	3,567	$	2,118,169
Net income	—	—		—		61,530		—		—	—		61,530		690		62,220
Other comprehensive income	—	—		—		—		11,857		—	—		11,857		—		11,857
Adjustment of redeemable noncontrolling interest to redemption value	—	—		(835)		—		—		—	—		(835)		—		(835)
Issuance of stock under employee compensation plans	583	6		19,606		—		—		—	—		19,612		—		19,612
Acquisition of treasury shares	—	—		—		—		—		134	(36,028)		(36,028)		—		(36,028)
Stock-based compensation	—	—		13,189		—		—		—	—		13,189		—		13,189
March 27, 2021	50,350	$	504	$	1,659,524	$	686,944	$	(127,017)	134	$	(36,028)	$	2,183,927	$	4,257	$	2,188,184













	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock			Total Equity Attributable to Common Shareholders		Noncontrolling Interest		Total Equity
	Shares	Amount								Shares	Amount
December 28, 2019	48,936	$	489	$	1,531,785	$	280,329	$	(178,019)	—	$	—	$	1,634,584	$	3,244	$	1,637,828
Net income	—	—		—		50,769		—		—	—		50,769		399		51,168
Other comprehensive loss	—	—		—		—		(40,898)		—	—		(40,898)		—		(40,898)
Buy-out and contingent consideration recognition in connection with redeemable noncontrolling interest	—	—		(2,379)		—		—		—	—		(2,379)		—		(2,379)
Issuance of stock under employee compensation plans	694	7		22,616		—		—		—	—		22,623		—		22,623
Acquisition of treasury shares	—	—		—		—		—		144	(23,675)		(23,675)		—		(23,675)
Stock-based compensation	—	—		10,960		—		—		—	—		10,960		—		10,960
March 28, 2020	49,630	$	496	$	1,562,982	$	331,098	$	(218,917)	144	$	(23,675)	$	1,651,984	$	3,643	$	1,655,627


























See Notes to Unaudited Condensed Consolidated Financial Statements.


	December 31, 2020
	(in thousands)
Trade receivables	$	2,722
Other current assets (excluding cash)	221
Property, plant and equipment	2,382
Goodwill	71,585
Definite-lived intangible assets	24,540
Other long-term assets	2,055
Current liabilities	(2,823)
Deferred tax liabilities	(2,529)
Other long-term liabilities	(1,123)
Total purchase price allocation	$	97,030


	Definite-Lived Intangible Assets		Weighted Average Amortization Life
	(in thousands)		(in years)
Client relationships	$	16,080	9
Developed technology	3,940		5
Other intangible assets	4,520		4
Total definite-lived intangible assets	$	24,540	7


	August 6, 2020
	(in thousands)
Trade receivables	$	1,500
Inventories	551
Other current assets (excluding cash)	182
Property, plant and equipment	1,648
Goodwill	19,457
Definite-lived intangible assets	16,230
Other long-term assets	849
Current liabilities	(1,360)
Deferred tax liabilities	(1,467)
Other long-term liabilities	(740)
Total purchase price allocation	$	36,850


	January 3, 2020
	(in thousands)
Trade receivables	$	6,451
Inventories	8,468
Other current assets (excluding cash)	3,494
Property, plant and equipment	10,033
Goodwill	210,196
Definite-lived intangible assets	183,540
Other long-term assets	5,920
Current liabilities	(5,188)
Deferred tax liabilities	(38,529)
Other long-term liabilities	(7,664)
Total purchase price allocation	$	376,721


	Revenue Expected to be Recognized in Future Periods
	Less than 1 Year		1 to 3 Years		4 to 5 Years		Beyond 5 Years		Total
	(in thousands)
DSA	$	212,919	$	120,893	$	4,404	$	122	$	338,338
Manufacturing	8,724		3,170		—		—		11,894
Total	$	221,643	$	124,063	$	4,404	$	122	$	350,232


	Operating Income				Depreciation and Amortization				Capital Expenditures
	March 27, 2021		March 28, 2020		March 27, 2021		March 28, 2020		March 27, 2021		March 28, 2020
	(in thousands)
Three Months Ended:
Total reportable segments	$	185,321	$	140,768	$	60,856	$	56,448	$	27,133	$	25,302
Unallocated corporate	(61,618)		(46,487)		652		812		897		419
Total consolidated	$	123,703	$	94,281	$	61,508	$	57,260	$	28,030	$	25,721


	U.S.		Europe		Canada		Asia Pacific		Other		Consolidated
	(in thousands)
Three Months Ended:
March 27, 2021	$	448,482	$	237,535	$	77,107	$	59,446	$	1,996	$	824,566
March 28, 2020	406,712		190,262		76,633		31,829		1,623		707,059


	Three Months Ended
	March 27, 2021		March 28, 2020
Cash flows relating to operating activities
Net income	$	63,935	$	50,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	61,508		57,260
Stock-based compensation	13,189		10,960
Debt extinguishment and financing costs	26,907		—
Deferred income taxes	(9,125)		(2,973)
Loss on venture capital and strategic equity investments, net	16,719		12,035
Other, net	496		10,495
Changes in assets and liabilities:
Trade receivables, net	5,598		(32,136)
Inventories	(11,404)		4,076
Accounts payable	9,622		(10,003)
Accrued compensation	(37,360)		(45,245)
Deferred revenue	5,006		6,065
Customer contract deposits	(5,446)		4,454
Other assets and liabilities, net	30,584		2,765
Net cash provided by operating activities	170,229		68,590
Cash flows relating to investing activities
Acquisition of businesses and assets, net of cash acquired	(94,197)		(382,250)
Capital expenditures	(28,030)		(25,721)
Purchases of investments and contributions to venture capital investments	(16,550)		(7,121)
Proceeds from sale of investments	—		2,504
Other, net	781		(1,097)
Net cash used in investing activities	(137,996)		(413,685)
Cash flows relating to financing activities
Proceeds from long-term debt and revolving credit facility	1,954,011		1,409,793
Proceeds from exercises of stock options	19,612		22,608
Payments on long-term debt, revolving credit facility, and finance lease obligations	(1,714,195)		(925,109)
Purchase of treasury stock	(36,028)		(23,675)
Payment of debt extinguishment and financing costs	(28,680)		—
Other, net	—		(4,405)
Net cash provided by financing activities	194,720		479,212
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	10,953		290
Net change in cash, cash equivalents, and restricted cash	237,906		134,407
Cash, cash equivalents, and restricted cash, beginning of period	233,119		240,046
Cash, cash equivalents, and restricted cash, end of period	$	471,025	$	374,453


	Three Months Ended
	March 27, 2021		March 28, 2020
	(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time	$	64,896	$	60,041
Services and products transferred at a point in time	112,014		85,955
Total RMS revenue	176,910		145,996
DSA
Services and products transferred over time	500,468		438,564
Services and products transferred at a point in time	710		119
Total DSA revenue	501,178		438,683
Manufacturing
Services and products transferred over time	50,568		37,314
Services and products transferred at a point in time	95,910		85,066
Total Manufacturing revenue	146,478		122,380
Total revenue	$	824,566	$	707,059


	March 27, 2021		December 26, 2020
	(in thousands)
Balances from contracts with customers:
Client receivables	$	463,800	$	489,042
Contract assets (unbilled revenue)	154,044		135,400
Contract liabilities (current and long-term deferred revenue)	233,075		227,417
Contract liabilities (customer contract deposits)	36,652		42,244


	March 27, 2021		December 26, 2020
	(in thousands)
U.S. Transition Tax	$	48,781	$	48,781
Long-term pension liability, accrued executive supplemental life insurance retirement plan and deferred compensation plan	74,223		74,233
Long-term deferred revenue	20,043		19,475
Other	63,961		62,726
Other long-term liabilities	$	207,008	$	205,215


	March 27, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Cash equivalents	$	—	$	6,172	$	—	$	6,172
Other assets:
Life insurance policies	—		38,250		—		38,250
Total assets measured at fair value	$	—	$	44,422	$	—	$	44,422

Other liabilities measured at fair value:
Contingent consideration	$	—	$	—	$	33,163	$	33,163
Total liabilities measured at fair value	$	—	$	—	$	33,163	$	33,163


	March 27, 2021				December 26, 2020
	Book Value		Fair Value		Book Value		Fair Value
5.5% Senior Notes due 2026	$	—	$	—	$	500,000	$	523,100
4.25% Senior Notes due 2028	500,000		513,750		500,000		523,750
3.75% Senior Notes due 2029	500,000		501,250		—		—
4.0% Senior Notes due 2031	500,000		504,350		—		—


			Adjustments to Goodwill
	December 26, 2020		Acquisitions		Foreign Exchange		March 27, 2021
	(in thousands)
RMS	$	287,759	$	—	$	(169)	$	287,590
DSA	1,378,130		88,611		(7,726)		1,459,015
Manufacturing	143,279		—		746		144,025
Goodwill	$	1,809,168	$	88,611	$	(7,149)	$	1,890,630


	March 27, 2021						December 26, 2020
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	(in thousands)
Backlog	$	610	$	(152)	$	458	$	29,233	$	(29,233)	$	—
Technology	133,667		(85,610)		48,057		130,907		(81,305)		49,602
Trademarks and trade names	12,231		(2,112)		10,119		15,870		(5,648)		10,222
Other	28,736		(4,189)		24,547		20,903		(14,633)		6,270
Other intangible assets	175,244		(92,063)		83,181		196,913		(130,819)		66,094
Client relationships	1,152,499		(440,115)		712,384		1,137,331		(415,826)		721,505
Intangible assets	$	1,327,743	$	(532,178)	$	795,565	$	1,334,244	$	(546,645)	$	787,599


	Principal
	(in thousands)
2021 (excluding the three months ended March 27, 2021)	$	109
2022	—
2023	—
2024	260
2025	—
Thereafter	2,194,135
Total	$	2,194,504


	Foreign Currency Translation Adjustment and Other		Pension and Other Post-Retirement Benefit Plans		Total
	(in thousands)
December 26, 2020	$	(73,884)	$	(64,990)	$	(138,874)
Other comprehensive income before reclassifications	9,844		—		9,844
Amounts reclassified from accumulated other comprehensive income	—		988		988
Net current period other comprehensive income	9,844		988		10,832
Income tax (benefit) expense	(1,270)		245		(1,025)
March 27, 2021	$	(62,770)	$	(64,247)	$	(127,017)


	March 27, 2021				March 28, 2020
Location of gain (loss)	Financial statement caption amount		Amount of gain (loss)		Financial statement caption amount		Amount of gain (loss)
	(in thousands)
Three Months Ended:
Interest expense	$	(29,719)	$	13,977	$	(15,067)	$	6,067


	As of		As of
	March 27, 2021		March 28, 2020
Weighted-average remaining lease term (in years)
Operating lease	8.7		8.4
Finance lease	12.4		12.7
Weighted-average discount rate
Operating lease	3.9	%	4.2	%
Finance lease	4.5	%	4.5	%


	Operating Leases		Finance Leases
	(in thousands)
2021 (excluding the three months ended March 27, 2021)	$	24,996	$	3,078
2022	30,659		3,738
2023	28,248		3,411
2024	27,113		3,181
2025	24,635		2,902
Thereafter	101,665		21,597
Total minimum future lease payments	237,316		37,907
Less: Imputed interest	38,433		9,063
Total lease liabilities	$	198,883	$	28,844


	March 27, 2021		December 26, 2020
	(in millions)
Cash and cash equivalents:
Held in U.S. entities	$	218.9	$	11.8
Held in non-U.S. entities	246.5		216.6
Total cash and cash equivalents	465.4		228.4
Short-term investments:
Held in non-U.S. entities	1.0		1.0
Total cash, cash equivalents and short-term investments	$	466.4	$	229.4


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
					(in thousands)
December 27, 2020 to January 23, 2021	—	$	—	—	$	129,105
January 24, 2021 to February 20, 2021	91,179	260.87		—	129,105
February 21, 2021 to March 27, 2021	42,882	285.47		—	129,105
Total	134,061			—


(a) Exhibits			Description of Exhibits
10.1*			Agreement between David Ross Smith and Charles River Discovery Research Services UK Limited effective December 1, 2020
10.2*			Executive Incentive Compensation Program effective January 1, 2021
10.3*			Charles River Laboratories amended and restated Deferred Compensation Plan, as amended
31.1+			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2+			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1+			Certification of the Principal Executive Officer and the Principal Financial Officer required by Rule 13a-14(a) of 15d-14(a) of the Exchange Act
101.INS			eXtensible Business Reporting Language (XBRL) Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Calculation Linkbase Document
101.DEF			XBRL Taxonomy Definition Linkbase Document
101.LAB			XBRL Taxonomy Label Linkbase Document
101.PRE			XBRL Taxonomy Presentation Linkbase Document

* Management contract or compensatory plan, contract or arrangement.
+ Furnished herein.


						CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

			May 4, 2021			/s/ JAMES C. FOSTER
						James C. Foster Chairman, President and Chief Executive Officer

			May 4, 2021			/s/ DAVID R. SMITH
						David R. Smith Corporate Executive Vice President and Chief Financial Officer