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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) 
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 24, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File No. 001-15943
crl-20220924_g1.jpg
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-1397316
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification No.)
251 Ballardvale StreetWilmingtonMassachusetts01887
(Address of Principal Executive Offices)(Zip Code)
(Registrant’s telephone number, including area code): (781) 222-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker symbol(s)Name of each exchange on which registered
Common stock, $0.01 par valueCRLNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files. Yes ☑ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of October 21, 2022, there were 50,878,656 shares of the Registrant’s common stock outstanding.


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 24, 2022

TABLE OF CONTENTS
Item Page
PART I - FINANCIAL INFORMATION
1Financial Statements
Condensed Consolidated Statements of Income (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021
Condensed Consolidated Balance Sheets (Unaudited) as of September 24, 2022 and December 25, 2021
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 24, 2022 and September 25, 2021
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021
Notes to Unaudited Condensed Consolidated Financial Statements
2Management’s Discussion and Analysis of Financial Condition and Results of Operations
3Quantitative and Qualitative Disclosure About Market Risk
4Controls and Procedures
PART II - OTHER INFORMATION
1Legal Proceedings
1ARisk Factors
2Unregistered Sales of Equity Securities and Use of Proceeds
6Exhibits
Signatures

1

Special Note on Factors Affecting Future Results
This Quarterly Report on Form 10-Q contains forward-looking statements regarding future events and the future results of Charles River Laboratories International, Inc. that are based on our current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expect,” “anticipate,” “target,” “goal,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “likely,” “may,” “designed,” “would,” “future,” “can,” “could,” and other similar expressions which are predictions of, indicate future events and trends or which do not relate to historical matters, are intended to identify such forward-looking statements. These statements are based on our current expectations and beliefs and involve a number of risks, uncertainties and assumptions that are difficult to predict.
For example, we may use forward-looking statements when addressing topics such as: the COVID-19 pandemic, its duration, its impact on our business, results of operations, financial condition, liquidity, use of our borrowings, business practices, operations, suppliers, inventory and supplies, third party service providers, customers, employees, industry, ability to meet future performance obligations, ability to timely account for assets on our balance sheet, ability to efficiently implement advisable safety precautions, and internal controls over financial reporting; the COVID-19 pandemic’s impact on demand, the global economy and financial markets, changes and uncertainties in the global economy; client demand, particularly future demand for drug discovery and development products and services, including the outsourcing of these services; our expectations regarding stock repurchases, including the number of shares to be repurchased, expected timing and duration, the amount of capital that may be expended and the treatment of repurchased shares; our ability to successfully execute our business strategy; our ability to timely build infrastructure to satisfy capacity needs and support business growth; our ability to meet contingent consideration financial targets; our ability to fund our operations for the foreseeable future; the impact of unauthorized access into our information systems, including the timing and effectiveness of any enhanced security and monitoring; present spending trends and other cost reduction activities by our clients; future actions by our management; the outcome of contingencies; changes in our business strategy, business practices and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; our strategic relationships with leading pharmaceutical and biotechnology companies, venture capital investments, and opportunities for future similar arrangements; our cost structure; the impact of acquisitions and divestitures; our expectations with respect to revenue growth and operating synergies (including the impact of specific actions intended to cause related improvements); the impact of implementing newly issued accounting pronouncements; the impact of specific actions intended to improve overall operating efficiencies and profitability (and our ability to accommodate future demand with our infrastructure), including gains and losses attributable to businesses we plan to close, consolidate, divest or repurpose; changes in our expectations regarding future stock option, restricted stock, performance share units, and other equity grants to employees and directors; expectations with respect to foreign currency exchange; assessing (or changing our assessment of) our tax positions for financial statement purposes; and our liquidity. In addition, these statements include the impact of economic and market conditions on us and our clients, the effects of our cost saving actions and the steps to optimize returns to shareholders on an effective and timely basis; and our ability to withstand the current market conditions.
Forward-looking statements are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document, or in the case of statements incorporated by reference, on the date of the document incorporated by reference.
Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 25, 2021, under the sections entitled “Our Strategy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in this Quarterly Report on Form 10-Q, under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors,” in our press releases, and other financial filings with the Securities and Exchange Commission. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or risks. New information, future events, or risks may cause the forward-looking events we discuss in this report not to occur.



2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
 Three Months EndedNine Months Ended
 September 24, 2022September 25, 2021September 24, 2022September 25, 2021
Service revenue$812,894 $703,859 $2,316,206 $2,045,760 
Product revenue176,263 192,078 560,011 589,350 
Total revenue989,157 895,937 2,876,217 2,635,110 
Costs and expenses:  
Cost of services provided (excluding amortization of intangible assets) 530,706 468,659 1,540,193 1,369,396 
Cost of products sold (excluding amortization of intangible assets)88,228 90,051 272,257 278,188 
Selling, general and administrative183,714 148,573 465,458 475,807 
Amortization of intangible assets35,533 32,852 111,144 94,664 
Operating income150,976 155,802 487,165 417,055 
Other income (expense): 
Interest income122 137 437 343 
Interest expense(11,375)(16,455)(24,512)(62,364)
Other expense, net(16,616)(16,214)(85,024)(37,966)
Income before income taxes123,107 123,270 378,066 317,068 
Provision for income taxes25,495 18,111 74,564 58,058 
Net income97,612 105,159 303,502 259,010 
Less: Net income attributable to noncontrolling interests1,139 1,733 4,686 5,606 
Net income attributable to common shareholders$96,473 $103,426 $298,816 $253,404 
Earnings per common share  
Net income attributable to common shareholders:
Basic$1.90 $2.05 $5.88 $5.04 
Diluted$1.88 $2.01 $5.83 $4.93 
Weighted-average number of common shares outstanding:
Basic50,870 50,425 50,778 50,234 
Diluted51,283 51,558 51,285 51,360 
See Notes to Unaudited Condensed Consolidated Financial Statements.
3

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(in thousands)
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
Net income$97,612 $105,159 $303,502 $259,010 
Other comprehensive income (loss):
Foreign currency translation adjustment(151,294)(28,909)(258,103)1,747 
Amortization of net loss and prior service benefit included in net periodic cost for pension and other post-retirement benefit plans731 991 2,218 2,972 
Comprehensive (loss) income, before income taxes related to items of other comprehensive income
(52,951)77,241 47,617 263,729 
Less: Income tax benefit related to items of other comprehensive income(11,201)(3,140)(20,095)(1,716)
Comprehensive (loss) income, net of income taxes(41,750)80,381 67,712 265,445 
Less: Comprehensive (loss) income related to noncontrolling interests, net of income taxes(1,170)1,713 (236)5,946 
Comprehensive (loss) income attributable to common shareholders, net of income taxes$(40,580)$78,668 $67,948 $259,499 
See Notes to Unaudited Condensed Consolidated Financial Statements.
4

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
September 24, 2022December 25, 2021
Assets 
Current assets:  
Cash and cash equivalents$193,701 $241,214 
Trade receivables and contract assets, net of allowances for credit losses of $9,827 and $7,180, respectively
770,776 642,881 
Inventories261,522 199,146 
Prepaid assets92,266 93,543 
Other current assets97,087 97,311 
Total current assets1,415,352 1,274,095 
Property, plant and equipment, net1,380,568 1,291,068 
Operating lease right-of-use assets, net373,410 292,941 
Goodwill2,776,005 2,711,881 
Client relationships, net909,899 981,398 
Other intangible assets, net58,121 79,794 
Deferred tax assets39,721 40,226 
Other assets429,693 352,889 
Total assets$7,382,769 $7,024,292 
Liabilities, Redeemable Noncontrolling Interests and Equity  
Current liabilities:  
Current portion of long-term debt and finance leases$2,079 $2,795 
Accounts payable181,629 198,130 
Accrued compensation200,365 246,119 
Deferred revenue251,473 219,703 
Accrued liabilities196,754 228,797 
Other current liabilities181,894 137,641 
Total current liabilities1,014,194 1,033,185 
Long-term debt, net and finance leases2,937,056 2,663,564 
Operating lease right-of-use liabilities368,851 252,972 
Deferred tax liabilities196,014 239,720 
Other long-term liabilities194,710 242,859 
Total liabilities4,710,825 4,432,300 
Commitments and contingencies (Notes 2, 9, 11 and 13)
Redeemable noncontrolling interests 39,206 53,010 
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; 51,006 shares issued and 50,877 shares outstanding as of September 24, 2022, and 50,480 shares issued and outstanding as of December 25, 2021
510 505 
Additional paid-in capital1,780,876 1,718,304 
Retained earnings1,279,567 980,751 
Treasury stock, at cost, 129 and 0 shares, as of September 24, 2022 and December 25, 2021, respectively
(38,492)— 
Accumulated other comprehensive loss(395,608)(164,740)
Total equity attributable to common shareholders2,626,853 2,534,820 
Noncontrolling interest5,885 4,162 
Total equity2,632,738 2,538,982 
Total liabilities, redeemable noncontrolling interests and equity$7,382,769 $7,024,292 
See Notes to Unaudited Condensed Consolidated Financial Statements.
5

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Nine Months Ended
 September 24, 2022September 25, 2021
Cash flows relating to operating activities  
Net income$303,502 $259,010 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization226,325 198,299 
Stock-based compensation51,548 52,289 
Loss on debt extinguishment and amortization of other financing costs3,054 28,972 
Deferred income taxes(26,323)(13,757)
Loss on venture capital and strategic equity investments, net20,068 17,277 
Contingent consideration, fair value changes(15,420)(10,360)
Other, net31,574 928 
Changes in assets and liabilities:  
Trade receivables and contract assets, net(174,169)(35,592)
Inventories(76,283)(5,639)
Accounts payable5,979 11,431 
Accrued compensation(32,734)18,210 
Deferred revenue53,565 (9,394)
Customer contract deposits16,234 4,850 
Other assets and liabilities, net(2,037)15,017 
Net cash provided by operating activities384,883 531,541 
Cash flows relating to investing activities  
Acquisition of businesses and assets, net of cash acquired(283,392)(1,292,093)
Capital expenditures(235,709)(129,997)
Purchases of investments and contributions to venture capital investments(129,363)(31,963)
Proceeds from sale of investments3,104 5,960 
Other, net(6,945)854 
Net cash used in investing activities(652,305)(1,447,239)
Cash flows relating to financing activities  
Proceeds from long-term debt and revolving credit facility2,798,665 6,119,671 
Proceeds from exercises of stock options17,710 43,314 
Payments on long-term debt, revolving credit facility, and finance lease obligations(2,524,387)(5,190,394)
Purchase of treasury stock(38,492)(40,440)
Payment of debt extinguishment and financing costs— (38,253)
Purchases of additional equity interests, net(30,533)— 
Payment of contingent considerations(10,356)(2,328)
Other, net(6,048)— 
Net cash provided by financing activities206,559 891,570 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash10,726 17,514 
Net change in cash, cash equivalents, and restricted cash(50,137)(6,614)
Cash, cash equivalents, and restricted cash, beginning of period246,314 233,119 
Cash, cash equivalents, and restricted cash, end of period$196,177 $226,505 
Supplemental cash flow information:
Cash and cash equivalents$193,701 $212,539 
Cash classified within current assets held for sale— 8,612 
Restricted cash included in Other current assets1,376 4,275 
Restricted cash included in Other assets1,100 1,079 
Cash, cash equivalents, and restricted cash, end of period$196,177 $226,505 
See Notes to Unaudited Condensed Consolidated Financial Statements.
6

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
    (in thousands)
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Equity Attributable to Common ShareholdersNoncontrolling InterestTotal Equity
SharesAmountSharesAmount
December 25, 202150,480 $505 $1,718,304 $980,751 $(164,740)— $— $2,534,820 $4,162 $2,538,982 
Net income— — — 93,022 — — — 93,022 560 93,582 
Other comprehensive loss— — — — (10,193)— — (10,193)— (10,193)
Adjustment of redeemable noncontrolling interest to redemption value— — (1,161)— — — — (1,161)— (1,161)
Issuance of stock under employee compensation plans431 4 13,067 — — — — 13,071 — 13,071 
Purchase of treasury shares— — — — — 111 (33,994)(33,994)— (33,994)
Stock-based compensation— — 14,619 — — — — 14,619 — 14,619 
March 26, 202250,911 509 1,744,829 1,073,773 (174,933)111 (33,994)2,610,184 4,722 2,614,906 
Net income— — — 109,321 — — — 109,321 499 109,820 
Other comprehensive income— — — — (83,622)— — (83,622)— (83,622)
Adjustment of redeemable noncontrolling interest to redemption value— — (1,132)— — — — (1,132)— (1,132)
Issuance of stock under employee compensation plans79 1 2,498 — — — — 2,499 — 2,499 
Purchase of treasury shares— — — — — 18 (4,474)(4,474)— (4,474)
Stock-based compensation— — 14,930 — — — — 14,930 — 14,930 
June 25, 202250,990 510 1,761,125 1,183,094 (258,555)129 (38,468)2,647,706 5,221 2,652,927 
Net income— — — 96,473 — — — 96,473 664 97,137 
Other comprehensive loss— — — — (137,053)— — (137,053)— (137,053)
Adjustment of redeemable noncontrolling interest to redemption value— — (4,388)— — — — (4,388)— (4,388)
Issuance of stock under employee compensation plans16 — 2,140 — — — — 2,140 — 2,140 
Purchase of treasury shares— — — — — — (24)(24)— (24)
Stock-based compensation— — 21,999 — — — — 21,999 — 21,999 
September 24, 202251,006 $510 $1,780,876 $1,279,567 $(395,608)129 $(38,492)$2,626,853 $5,885 $2,632,738 
7

Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Equity Attributable to Common ShareholdersNoncontrolling InterestTotal Equity
SharesAmountSharesAmount
December 26, 202049,767 $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 plans583 6 19,606 — — — — 19,612 — 19,612 
Purchase of treasury shares— — — — — 134 (36,028)(36,028)— (36,028)
Stock-based compensation— — 13,189 — — — — 13,189 — 13,189 
March 27, 202150,350 504 1,659,524 686,944 (127,017)134 (36,028)2,183,927 4,257 2,188,184 
Net income— — — 88,448 — — — 88,448 583 89,031 
Other comprehensive income— — — — 18,996 — — 18,996 — 18,996 
Adjustment of redeemable noncontrolling interest to redemption value— — (1,506)— — — — (1,506)— (1,506)
Issuance of stock under employee compensation plans188 1 15,766 — — — — 15,767 — 15,767 
Purchase of treasury shares— — — — — 13 (4,269)(4,269)— (4,269)
Stock-based compensation— — 17,077 — — — — 17,077 — 17,077 
June 26, 202150,538 505 1,690,861 775,392 (108,021)147 (40,297)2,318,440 4,840 2,323,280 
Net income— — — 103,426 — — — 103,426 659 104,085 
Other comprehensive loss— — — — (24,758)— — (24,758)— (24,758)
Adjustment of redeemable noncontrolling interest to redemption value— — (702)— — — — (702)— (702)
Issuance of stock under employee compensation plans69 1 8,279 — — — — 8,280 — 8,280 
Purchase of treasury shares— — — — — — (143)(143)— (143)
Stock-based compensation— — 22,023 — — — — 22,023 — 22,023 
September 26, 202150,607 $506 $1,720,461 $878,818 $(132,779)147 $(40,440)$2,426,566 $5,499 $2,432,065 
See Notes to Unaudited Condensed Consolidated Financial Statements.
8
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 2021. 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 September 2022, the FASB issued ASU 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” ASU 2022-04 requires quantitative and qualitative disclosures about the use of supplier finance programs. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for selected disclosures, and will be applied on a prospective basis. The Company is currently evaluating the impact this new standard will have on the related disclosures of the consolidated financial statements, but does not believe there will be a material impact.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” ASU 2022-03 sets disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. The ASU also clarifies that contractual sale restrictions should not be considered when measuring fair value of equity securities. The ASU is effective for fiscal years beginning after December 15, 2023 and will be applied on a prospective basis. The Company is currently evaluating the impact this new standard will have on the consolidated financial statements and related disclosures, but does not believe there will be a material impact.
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance.” ASU 2021-10 requires disclosures about transactions with a government that have been accounted for by a grant or contribution accounting model to increase transparency about the types of transactions, the accounting for the transactions, and the effect on the financial statements. The ASU is an annual disclosure effective for fiscal years beginning after December 15, 2021 and will be applied on a prospective basis. The Company is currently evaluating the impact this new standard will have on the consolidated financial statements and related disclosures, but does not believe there will be a material impact.
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 2021.
Consolidation
The Company’s unaudited condensed consolidated financial statements reflect its financial statements and those of its subsidiaries in which the Company holds a controlling financial interest. For consolidated entities in which the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and transactions are eliminated in consolidation.
The Company’s fiscal year is typically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, March 31, June 30, September 30, and December 31. A 53rd week in the fourth quarter of the fiscal year is occasionally necessary to align with a December 31 calendar year-end, which will occur in this fiscal year 2022.
9
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Segment Reporting
The Company reports its results in three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing). The Company’s RMS reportable segment includes the Research Models, Research Model Services, and Research and GMP-Compliant Cells businesses. Research Models includes the commercial production and sale of small research models, as well as the supply of large research models. Research Model Services includes: Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; Insourcing Solutions (IS), which provides colony management of its clients’ research operations (including recruitment, training, staffing, and management services); and Research and GMP-Compliant Cells, which supplies controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood, bone marrow, and cord blood. The Company’s DSA reportable segment includes services required to take a drug through the early development process including discovery services, which are non-regulated services to assist clients with the identification, screening, and selection of a lead compound for drug development, and regulated and nonregulated (GLP and non-GLP) safety assessment services. The Company’s Manufacturing reportable segment includes Microbial Solutions, which provides in vitro (non-animal) lot-release testing products, microbial detection products, and species identification services; Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development and manufacturing products and services (CDMO); Avian Vaccine Services (Avian), which supplies specific-pathogen-free chicken eggs and chickens.
2. ACQUISITIONS AND DIVESTITURES
Fiscal 2022 Acquisition
Explora BioLabs Holdings, Inc.
On April 5, 2022, the Company acquired Explora BioLabs Holdings, Inc. (Explora BioLabs), a provider of contract vivarium research services, providing biopharmaceutical clients with turnkey in vivo vivarium facilities, management and related services to efficiently conduct their early-stage research activities. The acquisition of Explora BioLabs complements the Company’s existing Insourcing Solutions business, specifically the CRADL (Charles River Accelerator and Development Lab) footprint, and offers incremental opportunities to partner with an emerging client base, many of which are engaged in cell and gene therapy development. The purchase price of Explora BioLabs was $284.5 million, net of $6.6 million in cash. The acquisition was funded through proceeds from the Company’s credit facility (Credit Facility). This business is reported as part of the Company’s RMS reportable segment.
Fiscal 2021 Acquisitions
Vigene Biosciences, Inc.
On June 28, 2021, the Company acquired Vigene Biosciences, Inc. (Vigene), a gene therapy CDMO, providing viral vector-based gene delivery solutions. The acquisition enables clients to seamlessly conduct analytical testing, process development, and manufacturing for advanced modalities with the same scientific partner. The purchase price of Vigene was $323.9 million, net of $2.7 million in cash. Included in the purchase price are contingent payments fair valued at $34.5 million, which was estimated using a Monte Carlo Simulation model (the maximum contingent contractual payments are up to $57.5 million based on future performance). The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s Manufacturing reportable segment. As of September 24, 2022, the fair value of the contingent consideration was zero as certain financial targets have not and are not expected to be achieved.
Retrogenix Limited
On March 30, 2021, the Company acquired Retrogenix Limited (Retrogenix), an outsourced discovery services provider specializing in bioanalytical services utilizing its proprietary cell microarray technology. The acquisition of Retrogenix enhances the Company’s scientific expertise with additional large molecule and cell therapy discovery capabilities. The purchase price of Retrogenix was $53.9 million, net of $8.5 million in cash. Included in the purchase price are contingent payments fair valued at $6.9 million, which is the maximum potential payout, and was based on a probability-weighted approach. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s DSA reportable segment.
Cognate BioServices, Inc.
On March 29, 2021, the Company acquired Cognate BioServices, Inc. (Cognate), a cell and gene therapy CDMO offering comprehensive manufacturing solutions for cell therapies, as well as for the production of plasmid DNA and other inputs in the CDMO value chain. The acquisition of Cognate establishes the Company as a scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research and discovery
10
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
through cGMP production. The purchase price of Cognate was $877.9 million, net of $70.5 million in cash and includes $15.7 million of consideration for an approximate 2% ownership interest not acquired, which was redeemed in April 2022 with the ultimate payout tied to performance in 2021. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility and senior notes (Senior Notes) issued in fiscal 2021. This business is reported as part of the Company’s Manufacturing reportable segment.
Distributed Bio, Inc.
On December 31, 2020, the Company acquired Distributed Bio, Inc. (Distributed Bio), a next-generation antibody discovery company with technologies specializing in enhancing the probability of success for delivering high-quality, readily formattable antibody fragments to support antibody and cell and gene therapy candidates to biopharmaceutical clients. The acquisition of Distributed Bio expands the Company’s capabilities with an innovative, large-molecule discovery platform, and creates an integrated, end-to-end platform for therapeutic antibody and cell and gene therapy discovery and development. The purchase price of Distributed Bio was $97.0 million, net of $0.8 million in cash. The total consideration includes $80.8 million cash paid, settlement of $3.0 million in convertible promissory notes previously issued by the Company during prior fiscal years, and $14.1 million of contingent consideration, which was estimated using a Monte Carlo Simulation model (the maximum contingent contractual payments are up to $21.0 million based on future performance and milestone achievements over a one-year period). The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s DSA reportable segment. During the nine months ended September 24, 2022, $7.0 million of contingent consideration was paid as certain operational milestones were achieved. As of September 24, 2022, other financial targets associated with the contingent consideration were not met and the fair value of the remaining contingent consideration is zero.
Other Acquisition
On March 3, 2021, the Company acquired certain assets from a distributor that supports the Company’s DSA reportable segment. The purchase price was $35.4 million, which includes $19.5 million in cash paid ($5.5 million of which was paid in fiscal 2020), and $15.9 million of contingent consideration, which was estimated using a Monte Carlo Simulation model (the maximum contingent contractual payments are up to $17.5 million based on future performance over a three-year period). The fair value of the net assets acquired included $17.3 million of goodwill, $15.2 million attributed to supplier relationships (to be amortized over a 4-year period), and $3.0 million of property, plant, and equipment. The business is reported as part of the Company’s DSA reportable segment. As of September 24, 2022, the fair value of the contingent consideration was zero as certain operational targets were not achieved.
11
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Purchase price information
The purchase price allocation was as follows:
Explora BioLabs (1)
VigeneRetrogenixCognateDistributed Bio
April 5, 2022June 28, 2021March 30, 2021March 29, 2021December 31, 2020
(in thousands)
Trade receivables$7,679 $3,548 $2,266 $18,566 $2,722 
Other current assets (excluding cash)1,067 1,657 209 14,128 221 
Property, plant and equipment37,369 7,649 400 52,082 2,382 
Operating lease right-of-use asset, net48,613 22,507 1,385 34,349 1,586 
Goodwill (2)
215,752 239,681 34,489 611,555 71,585 
Definite-lived intangible assets70,100 93,900 22,126 270,900 24,540 
Other long-term assets556 694 — 6,098 469 
Deferred revenue(3,507)(4,260)(434)(20,539)(1,319)
Other current liabilities (3)
(15,507)(6,319)(1,141)(45,388)(1,504)
Operating lease right-of-use liabilities (Long-term)(57,193)(21,220)(1,205)(31,383)(1,123)
Deferred tax liabilities(18,601)(13,958)(4,174)(32,503)(2,529)
Other long-term liabilities(1,807)— — — — 
Total purchase price allocation$284,521 $323,879 $53,921 $877,865 $97,030 
(1) Purchase price allocation is preliminary and subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed, including certain contracts and obligations. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.
(2)