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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 30, 2023
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
charlesriverlablogoa03.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 Street
Wilmington, Massachusetts 01887
(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 27, 2023, there were 51,296,804 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 30, 2023

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 30, 2023
and September 24, 2022
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended
September 30, 2023 and September 24, 2022
Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2023
and September 24, 2022
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and nine months ended September 30, 2023 and September 24, 2022
Notes to Unaudited Condensed Consolidated Financial Statements
2Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Results of Operations
Liquidity and Capital Resources
Critical Accounting Policies and Estimates
Recent Accounting Pronouncements
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
5Other Information
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: our expectations regarding the availability of non-human primates and our ability to diversify our non-human primate supply chain; the outcome of (1) the U.S. government investigations and inquiries related to the NHP supply chain (including shipments of non-human primates from Cambodia received by the Company) and (2) the putative securities class action lawsuit filed against us and three current/former officers on May 19, 2023; the timing of the development and implementation of additional procedures to reasonably ensure that non-human primates imported to the United States from Cambodia are purpose-bred; changes and uncertainties in the global economy and financial markets, including any changes in business, political, or economic conditions due to the November 16, 2022 announcement by the U.S. Department of Justice through the U.S. Attorney’s Office for the Southern District of Florida that a Cambodian non-human primate supplier and two Cambodian officials had been criminally charged in connection with illegally importing non-human primates into the United States; client demand, particularly future demand for drug discovery and development products and services, including the outsourcing of these services; our expectations with respect to our ability to meet financial targets; 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 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; our expectations regarding acquisitions and divestitures, including their impact and projected timing; our expectations with respect to revenue growth and operating synergies (including the impact of specific actions intended to cause related improvements, particularly with respect to our CDMO business); 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 and the impact of operations and cost structure alignment efforts (including as estimated on an annualized basis); our expectations with respect to our study cancellation rate and the impact of such cancellations; 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; our liquidity; and the impact of litigation, including our ability to successfully defend litigation against us. 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 31, 2022, 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 30, 2023September 24, 2022September 30, 2023September 24, 2022
Service revenue$869,759 $812,894 $2,602,016 $2,316,206 
Product revenue156,864 176,263 513,917 560,011 
Total revenue1,026,623 989,157 3,115,933 2,876,217 
Costs and expenses:  
Cost of services provided (excluding amortization of intangible assets) 587,560 530,706 1,731,136 1,540,193 
Cost of products sold (excluding amortization of intangible assets)77,223 88,228 246,326 272,257 
Selling, general and administrative176,109 183,714 550,713 465,458 
Amortization of intangible assets34,229 35,533 103,419 111,144 
Operating income151,502 150,976 484,339 487,165 
Other income (expense): 
Interest income1,373 122 3,605 437 
Interest expense(33,742)(11,375)(103,166)(24,512)
Other expense, net(6,260)(16,616)(12,200)(85,024)
Income before income taxes112,873 123,107 372,578 378,066 
Provision for income taxes24,852 25,495 81,160 74,564 
Net income88,021 97,612 291,418 303,502 
Less: Net income attributable to noncontrolling interests632 1,139 3,878 4,686 
Net income attributable to common shareholders$87,389 $96,473 $287,540 $298,816 
Earnings per common share  
Net income attributable to common shareholders:
Basic$1.70 $1.90 $5.62 $5.88 
Diluted$1.69 $1.88 $5.58 $5.83 
Weighted-average number of common shares outstanding:
Basic51,283 50,870 51,199 50,778 
Diluted51,607 51,283 51,493 51,285 
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 30, 2023September 24, 2022September 30, 2023September 24, 2022
Net income$88,021 $97,612 $291,418 $303,502 
Other comprehensive income (loss):
Foreign currency translation adjustment and other(63,997)(151,294)(17,457)(258,103)
Amortization of net loss, settlement losses, and prior service benefit included in total cost for pension and other post-retirement benefit plans177 731 521 2,218 
Unrealized gains on hedging instruments539 — 5,183 — 
Other comprehensive loss, before income taxes
(63,281)(150,563)(11,753)(255,885)
Less: Income tax expense related to items of other comprehensive income
(3,292)(11,201)(3,393)(20,095)
Comprehensive income (loss), net of income taxes28,032 (41,750)283,058 67,712 
Less: Comprehensive income (loss) related to noncontrolling interests, net of income taxes440 (1,170)1,527 (236)
Comprehensive income (loss) attributable to common shareholders, net of income taxes$27,592 $(40,580)$281,531 $67,948 
See Notes to Unaudited Condensed Consolidated Financial Statements.
4

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share amounts)
September 30, 2023December 31, 2022
Assets 
Current assets:  
Cash and cash equivalents$157,174 $233,912 
Trade receivables and contract assets, net of allowances for credit losses of $21,187 and $11,278, respectively
799,310 752,390 
Inventories292,972 255,809 
Prepaid assets101,555 89,341 
Other current assets93,314 107,580 
Total current assets1,444,325 1,439,032 
Property, plant and equipment, net1,525,485 1,465,655 
Venture capital and strategic equity investments301,847 311,602 
Operating lease right-of-use assets, net375,322 391,762 
Goodwill2,884,602 2,849,903 
Intangible assets, net886,286 955,275 
Deferred tax assets34,264 41,262 
Other assets154,876 148,279 
Total assets$7,607,007 $7,602,770 
Liabilities, Redeemable Noncontrolling Interests and Equity  
Current liabilities:  
Accounts payable$136,341 $205,915 
Accrued compensation224,183 197,078 
Deferred revenue250,485 264,259 
Accrued liabilities198,062 219,758 
Other current liabilities184,745 204,575 
Total current liabilities993,816 1,091,585 
Long-term debt, net and finance leases2,514,217 2,707,531 
Operating lease right-of-use liabilities390,437 389,745 
Deferred tax liabilities185,310 215,582 
Other long-term liabilities172,518 174,822 
Total liabilities4,256,298 4,579,265 
Commitments and contingencies (Notes 2, 8, 10, and 14)
Redeemable noncontrolling interest39,948 42,427 
Equity:  
Preferred stock, $0.01 par value; 20,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.01 par value; 120,000 shares authorized; 51,400 shares issued and 51,296 shares outstanding as of September 30, 2023, and 50,944 shares issued and outstanding as of December 31, 2022
514 509 
Additional paid-in capital1,877,120 1,804,940 
Retained earnings1,720,441 1,432,901 
Treasury stock, at cost, 104 and zero shares, as of September 30, 2023 and December 31, 2022, respectively
(24,016)— 
Accumulated other comprehensive loss(268,066)(262,057)
Total equity attributable to common shareholders3,305,993 2,976,293 
Noncontrolling interests (nonredeemable)4,768 4,785 
Total equity3,310,761 2,981,078 
Total liabilities, redeemable noncontrolling interests and equity$7,607,007 $7,602,770 
See Notes to Unaudited Condensed Consolidated Financial Statements.
5

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 Nine Months Ended
 September 30, 2023September 24, 2022
Cash flows relating to operating activities  
Net income$291,418 $303,502 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization233,610 226,325 
Stock-based compensation52,527 51,548 
Loss on debt extinguishment and amortization of other financing costs2,975 3,054 
Deferred income taxes(28,251)(26,323)
Loss on venture capital and strategic equity investments, net9,246 20,068 
Long-lived asset impairment charges26,202 — 
Loss on divestitures, net995 — 
Changes in fair value of contingent consideration arrangements1,810 (15,420)
Other, net13,192 31,574 
Changes in assets and liabilities:  
Trade receivables and contract assets, net(59,081)(174,169)
Inventories(44,126)(76,283)
Accounts payable(26,531)5,979 
Accrued compensation28,438 (32,734)
Deferred revenue(9,997)53,565 
Customer contract deposits(21,534)16,234 
Other assets and liabilities, net(7,938)(2,037)
Net cash provided by operating activities462,955 384,883 
Cash flows relating to investing activities  
Acquisition of businesses and assets, net of cash acquired(50,166)(283,392)
Capital expenditures(240,205)(235,709)
Purchases of investments and contributions to venture capital investments(36,322)(129,363)
Proceeds from sale of investments3,953 3,104 
Other, net(2,044)(6,945)
Net cash used in investing activities(324,784)(652,305)
Cash flows relating to financing activities  
Proceeds from long-term debt and revolving credit facility333,034 2,798,665 
Proceeds from exercises of stock options19,658 17,710 
Payments on long-term debt, revolving credit facility, and finance lease obligations(530,909)(2,524,387)
Purchase of treasury stock(24,016)(38,492)
Payments of contingent consideration(2,711)(10,356)
Purchases of additional equity interests, net— (30,533)
Other, net(4,145)(6,048)
Net cash (used in) provided by financing activities(209,089)206,559 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(4,680)10,726 
Net change in cash, cash equivalents, and restricted cash(75,598)(50,137)
Cash, cash equivalents, and restricted cash, beginning of period241,214 246,314 
Cash, cash equivalents, and restricted cash, end of period$165,616 $196,177 
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 31, 202250,944 $509 $1,804,940 $1,432,901 $(262,057)— $— $2,976,293 $4,785 $2,981,078 
Net income— — — 103,131 — — — 103,131 501 103,632 
Other comprehensive income— — — — 22,933 — — 22,933 — 22,933 
Issuance of stock under employee compensation plans316 3 11,789 — — — — 11,792 — 11,792 
Purchase of treasury shares— — — — — 78 (19,012)(19,012)— (19,012)
Stock-based compensation— — 13,460 — — — — 13,460 — 13,460 
April 1, 202351,260 512 1,830,189 1,536,032 (239,124)78 (19,012)3,108,597 5,286 3,113,883 
Net income— — — 97,020 — — — 97,020 566 97,586 
Other comprehensive income— — — — 30,855 — — 30,855 — 30,855 
Issuance of stock under employee compensation plans110 1 3,926 — — — — 3,927 — 3,927 
Purchase of treasury shares— — — — — 26 (4,966)(4,966)— (4,966)
Stock-based compensation— — 16,270 — — — — 16,270 — 16,270 
July 1, 202351,370 513 1,850,385 1,633,052 (208,269)104 (23,978)3,251,703 5,852 3,257,555 
Net income— — — 87,389 — — — 87,389 561 87,950 
Other comprehensive income— — — — (59,797)— — (59,797)— (59,797)
Dividends declared to noncontrolling interest— — — — — — — — (1,645)(1,645)
Issuance of stock under employee compensation plans30 1 3,938 — — — — 3,939 — 3,939 
Purchase of treasury shares— — — — — — (38)(38)— (38)
Stock-based compensation— — 22,797 — — — — 22,797 — 22,797 
September 30, 202351,400 $514 $1,877,120 $1,720,441 $(268,066)104 $(24,016)$3,305,993 $4,768 $3,310,761 
7

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 loss— — — — (83,622)— — (83,622)— (83,622)
Adjustment of redeemable noncontrolling interest to redemption value— — (1,132)— — — — (1,132)— (1,132)
Issuance of stock under employee compensation 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 
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 2022. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position and results of operations.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires that the Company make estimates and judgments that may affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, judgments, and methodologies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.
Newly Adopted Accounting Pronouncements
In September 2022, the FASB issued ASU 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” ASU 2022-04 requires quantitative and qualitative disclosures about the use of supplier finance programs. The ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years for selected disclosures, and will be applied on a prospective basis. The Company participates in certain supplier finance programs that are immaterial to the unaudited condensed consolidated financial statements and related disclosures.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for fiscal year 2022.
Consolidation
The Company’s unaudited condensed consolidated financial statements reflect its financial statements and those of its subsidiaries in which the Company holds a controlling financial interest. For consolidated entities in which the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its unaudited condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Redeemable noncontrolling interests, where the noncontrolling interest holders have the ability to sell the remaining interests, are classified in the mezzanine section of the unaudited condensed consolidated balance sheets, which is presented above the equity section and below liabilities. Intercompany balances and transactions are eliminated in consolidation.
The Company’s fiscal year is typically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, March 31, June 30, September 30, and December 31. A 53rd week in the fourth quarter of the fiscal year is occasionally necessary to align with a December 31 calendar year-end, which occurred in fiscal year 2022.
Segment Reporting
The Company reports its results in three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing).
The Company’s RMS reportable segment includes the Research Models, Research Model Services, and Cell Solutions businesses. Research Models includes the commercial production and sale of small research models, as well as the supply of large research models. Research Model Services includes: Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; Insourcing Solutions (IS), which provides colony management of its clients’ research operations (including recruitment, training, staffing, and management services) within our clients’ facilities and utilizing both our Charles River Accelerator and Development Lab (CRADL™) and our Explora BioLabs options, in which we provide vivarium space to our clients; and Cell Solutions, which
9
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
supplies controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood, bone marrow, and cord blood.
The Company’s DSA reportable segment includes two businesses: Discovery Services and Safety Assessment. The Company provides regulated and non-regulated DSA services to support the research, development, and regulatory-required safety testing of potential new drugs, including therapeutic discovery and optimization plus in vitro and in vivo studies, laboratory support services, and strategic non-clinical consulting and program management to support product development.
The Company’s Manufacturing reportable segment includes Microbial Solutions, which provides in vitro (non-animal) lot-release testing products, microbial detection products, and species identification services and Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development and manufacturing products and services (CDMO). In December of 2022, the Company sold the Avian Vaccine Services business (Avian), previously reported in the Manufacturing segment, which supplied specific-pathogen-free chicken eggs and chickens.
2. ACQUISITIONS AND DIVESTITURES
Fiscal 2023 Acquisition
SAMDI Tech, Inc.
On January 27, 2023, the Company acquired SAMDI Tech, Inc., (SAMDI), a leading provider of high-quality, label-free high-throughput screening (HTS) solutions for drug discovery research. The acquisition of SAMDI will provide clients with seamless access to the premier, label-free HTS MS platform and create a comprehensive, library of drug discovery solutions. The purchase price of SAMDI was $62.8 million, net of $0.4 million in cash, inclusive of a 20% strategic equity interest previously owned by the Company of $12.6 million. The acquisition was funded through a combination of available cash and proceeds from the Company’s Credit Facility. This business is reported as part of the Company’s DSA reportable segment.
Fiscal 2022 Acquisition
Explora BioLabs Holdings, Inc.
On April 5, 2022, the Company acquired Explora BioLabs Holdings, Inc. (Explora BioLabs), a provider of contract vivarium research services, providing biopharmaceutical clients with turnkey in vivo vivarium facilities, management and related services to efficiently conduct their early-stage research activities. The acquisition of Explora BioLabs complements the Company’s existing Insourcing Solutions business, specifically the CRADL (Charles River Accelerator and Development Lab) footprint, and offers incremental opportunities to partner with an emerging client base, many of which are engaged in cell and gene therapy development. The purchase price of Explora BioLabs was $284.5 million, net of $6.6 million in cash. The acquisition was funded through proceeds from the Company’s credit facility (Credit Facility). This business is reported as part of the Company’s RMS reportable segment.
Purchase price information
The purchase price allocation was as follows:
SAMDIExplora BioLabs
January 27, 2023April 5, 2022
(in thousands)
Trade receivables$513 $7,679 
Other current assets (excluding cash)75 1,067 
Property, plant and equipment593 37,369 
Operating lease right-of-use asset, net— 48,613 
Goodwill (1)
37,129 215,752 
Definite-lived intangible assets33,070 70,100 
Other long-term assets6 556 
Deferred revenue(43)(3,507)
Other current liabilities(351)(15,507)
Operating lease right-of-use liabilities (Long-term)— (57,193)
Deferred tax liabilities(8,191)(18,601)
Other long-term liabilities— (1,807)
Total purchase price allocation$62,801 $284,521 
(1) The goodwill resulting from these transactions is primarily attributable to the potential growth of the Company’s segments from new customers introduced to the acquired businesses and the assembled workforce of the acquirees, thus is not deductible for tax purposes. Explora BioLabs had $5.0 million of goodwill due to a prior asset acquisition that is deductible for tax purposes.
10
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The definite-lived intangible assets acquired were as follows:
SAMDIExplora BioLabs
Definite-Lived Intangible Assets(in thousands)
Client relationships$23,400 $64,000 
Other intangible assets9,670 6,100 
Total definite-lived intangible assets$33,070 $70,100 
Weighted Average Amortization Life(in years)
Client relationships1513
Other intangible assets74
Total definite-lived intangible assets1212
Three Months EndedNine Months Ended
September 30, 2023September 24, 2022September 30, 2023September 24, 2022
(in thousands)
Transaction and Integration Costs
Selling, general and administrative expenses$1,040 $3,065 $3,328 $14,604 
Divestitures
The Company routinely evaluates the strategic fit and fundamental performance of its global businesses, divesting operations that do not meet key business criteria. As part of this ongoing assessment, the Company determined that certain capital could be better deployed in other long-term growth opportunities.
Avian Vaccine Services
On December 20, 2022, the Company sold its Avian Vaccine Services business (Avian) to a private investor group for a purchase price of $167.3 million in cash. The Company may also earn up to $30.0 million of contingent payments, which are tied to certain annual results of the Avian business from January 2024 through December 2027. The contingent payments have been fair valued at $10.3 million using a discounted probability weighted model. The Avian business was reported in the Company’s Manufacturing reportable segment. During fiscal year 2022, the Company recorded a gain on the divestiture of Avian of $123.4 million within Other income (expense) on the Company’s condensed consolidated statements of income.
The carrying amounts of the major classes of assets and liabilities associated with the divestitures of the businesses were as follows:
December 19, 2022
Avian
(in thousands)
Assets
Current assets
$30,545 
Property, plant, and equipment, net24,602 
Operating lease right-of-use assets, net611 
Goodwill3,168 
Intangible assets, net1,629 
Other assets10 
Total assets$60,565 
Liabilities
Current liabilities$8,139 
Operating lease right-of-use liabilities331 
Total liabilities$8,470 
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
The following table disaggregates the Company’s revenue by major business line and timing of transfer of products or services:
Three Months EndedNine Months Ended
September 30, 2023September 24, 2022September 30, 2023September 24, 2022
(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time$94,883 $88,174 $282,980 $243,901 
Services and products transferred at a point in time91,965 91,940 313,582 299,165 
Total RMS revenue186,848 180,114 596,562 543,066 
DSA
Services and products transferred over time663,128 618,270 1,987,617 1,749,977 
Services and products transferred at a point in time900 1,193 2,221 5,662 
Total DSA revenue664,028 619,463 1,989,838 1,755,639 
Manufacturing
Services and products transferred over time94,446 89,173 280,992 276,993 
Services and products transferred at a point in time81,301 100,407 248,541 300,519 
Total Manufacturing revenue175,747 189,580 529,533 577,512 
Total revenue$1,026,623 $989,157 $3,115,933 $2,876,217 
Contract Balances from Contracts with Customers
The following table provides information about client receivables, contract assets, and contract liabilities from contracts with customers:
September 30, 2023December 31, 2022
(in thousands)
Assets from contracts with customers
Client receivables$591,979 $559,410 
Unbilled revenue228,518 204,258 
Total820,497 763,668 
Less: Allowance for credit losses(21,187)(11,278)
Trade receivables and contract assets, net$799,310 $752,390 
Liabilities from contracts with customers
Current deferred revenue$250,485 $264,259 
Long-term deferred revenue (included in Other long-term liabilities)29,391 25,795 
Customer contract deposits (included in Other current liabilities)69,847 91,640 
Approximately 90% of unbilled revenue as of December 31, 2022, which was $204 million, was billed during the nine months ended September 30, 2023. Approximately 85% of unbilled revenue as of December 25, 2021, which was $161 million, was billed during the nine months ended September 24, 2022.
Approximately 80% of contract liabilities as of December 31, 2022, which was $290 million, were recognized as revenue during the nine months ended September 30, 2023. Approximately 85% of contract liabilities as of December 25, 2021, which was $240 million, were recognized as revenue during the nine months ended September 24, 2022.
When the Company does not have the unconditional right to advanced billings, both advanced client payments and unpaid advanced client billings are excluded from deferred revenue, with the advanced billings also being excluded from client receivables. The Company excluded approximately $52 million and $54 million of unpaid advanced client billings from both client receivables and deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively. Net provisions of $10.2 million and $4.4 million were recorded to the allowance for credit losses for the nine months ended September 30, 2023 and September 24, 2022, respectively.
12
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Transaction Price Allocated to Future Performance Obligations
The Company discloses the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of September 30, 2023. Excluded from the disclosure is the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed, and service revenue recognized in accordance with ASC 842, “Leases”. The aggregate amount of transaction price allocated to the remaining performance obligations for all open customer contracts as of September 30, 2023 was $957.7 million. The Company will recognize revenues for these performance obligations as they are satisfied, approximately 50% of which is expected to occur within the next twelve months and the remainder recognized thereafter during the remaining contract term.
Other Performance Obligations
As part of the Company’s service offerings, the Company has identified performance obligations related to leasing Company owned assets. In certain arrangements, customers obtain substantially all of the economic benefits of the identified assets, which may include manufacturing suites and related equipment, and have the right to direct the assets’ use over the term of the contract. The associated revenue is recognized on a straight-line basis over the term of the lease, which is generally less than one year.
Three Months EndedNine Months Ended
September 30, 2023September 24, 2022September 30, 2023September 24, 2022
(in thousands)Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
Lease revenue$22,254 $15,790 $70,235 $37,558 Service revenue
13
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. SEGMENT AND GEOGRAPHIC INFORMATION
The following table presents revenue and other financial information by reportable segment:
Three Months EndedNine Months Ended
September 30, 2023September 24, 2022September 30, 2023September 24, 2022
(in thousands)
RMS  
Revenue$186,848 $180,114 $596,562 $543,066 
Operating income28,326 35,891 117,653 123,299 
Depreciation and amortization13,872 13,128 41,310 35,825 
Capital expenditures9,192 10,743 35,769 33,239 
DSA
Revenue$664,028 $619,463 $1,989,838 $1,755,639 
Operating income146,819 142,143 479,788 375,922 
Depreciation and amortization44,088 43,913 129,662 135,328 
Capital expenditures41,967 43,400 155,477 133,908 
Manufacturing
Revenue$175,747 $189,580 $529,533 $577,512 
Operating income26,275 31,479 52,784 140,350 
Depreciation and amortization20,070 17,005 59,677 53,487 
Capital expenditures14,349 18,137 46,949 65,396 
Unallocated Corporate
Operating income (1)
$(49,918)$(58,537)$(165,886)$(152,406)
Depreciation and amortization840 559 2,961 1,685 
Capital expenditures439 113 2,010 3,166 
Consolidated
Revenue$1,026,623 $989,157 $3,115,933 $2,876,217 
Operating income151,502 150,976 484,339 487,165 
Depreciation and amortization78,870 74,605 233,610 226,325 
Capital expenditures65,947 72,393 240,205 235,709 
(1) Operating income for unallocated corporate expense consists of costs associated with departments such as senior executives, corporate accounting, legal, tax, human resources, treasury, and investor relations.
Revenue by geographic area is as follows:
U.S.EuropeCanadaAsia PacificOtherConsolidated
(in thousands)
Three Months Ended:
September 30, 2023$590,316 $264,787 $129,023 $40,233 $2,264 $1,026,623 
September 24, 2022595,265 245,928 101,601 43,803 2,560 989,157 
Nine Months Ended:
September 30, 2023$1,802,532 $805,466 $357,276 $142,910 $7,749 $3,115,933 
September 24, 20221,688,731 760,599 280,541 138,988 7,358 2,876,217 
Included in the Other category above are operations located in Brazil and Israel. Revenue represents sales originating in entities physically located in the identified geographic area.
14
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. INVENTORY
Inventories
The composition of inventories is as follows:
September 30, 2023December 31, 2022
(in thousands)
Raw materials and supplies$40,669 $38,892 
Work in process46,544 48,367 
Finished products205,759 168,550 
Inventories$292,972 $255,809 
6. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS
Venture capital investments are summarized below:
Nine Months Ended
September 30, 2023September 24, 2022
(in thousands)
Beginning balance$129,012 $149,640 
Capital contributions12,056 11,815 
Distributions(12,972)(7,733)
Losses(14,258)(20,063)
Foreign currency translation260 (2,149)
Ending balance$114,098 $131,510 
The Company also invests, with minority positions, directly in equity of predominantly privately held companies. Strategic investments are summarized below:
Nine Months Ended
September 30, 2023September 24, 2022
(in thousands)
Beginning balance$182,590 $51,712 
Purchase of investments21,489 117,220 
Distributions(7,493)(1,710)
Gain (loss)5,012 (5)
Reduction for acquisition of entity
(12,635)— 
Foreign currency translation(1,214)(8,636)
Ending balance$187,749 $158,581 
In April 2022, the Company acquired a 49% equity interest in a supplier supporting the DSA reportable segment (the Investee) for $90.0 million up front and an additional future contingent payment of up to $5.0 million based upon the Investee’s future performance. In August 2023, a contingent payment of $2.5 million was made to the Investee, with an additional $2.5 million to be earned based on future performance. The total allocable basis of the investment exceeded the proportional interest in the Investee’s underlying net assets by $86.7 million, which has been allocated primarily to goodwill, intangible assets (client relationships and backlog), and deferred tax liabilities in the amount of $26.2 million, $71.2 million, and $10.7 million respectively. On July 28, 2023, the Company signed an agreement to acquire an additional 41% equity stake in the supplier, which upon closing, will result in ownership of 90%. The preliminary purchase price for the 41% equity is $143 million in cash, subject to customary closing adjustments, with additional contingent payments of up to $55 million based on future performance over a 3-year period. The Company will have the call option right to purchase the remaining 10% equity up until one month after the sixth anniversary of closing. On the first anniversary of the expiration of the call option, a 12-month put option will be triggered giving the seller the right to require the Company to acquire shares of the Investee from the seller. The consummation of the acquisition of the additional 41% equity is subject to regulatory approval and closing conditions being satisfied. Accordingly, the timing of close is uncertain.
15
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. FAIR VALUE
Assets and liabilities measured at fair value on a recurring basis are summarized below:
 September 30, 2023
Level 1Level 2Level 3Total
Current assets measured at fair value:(in thousands)
Cash equivalents$— $564 $— $564 
Other assets:
Life insurance policies— 36,672 — 36,672 
Interest rate swap— 3,660 — 3,660 
Total assets measured at fair value$— $40,896 $— $40,896 
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the nine months ended September 30, 2023, there were no transfers between levels.
 December 31, 2022
Level 1Level 2Level 3Total
Current assets measured at fair value:(in thousands)
Cash equivalents$— $78 $— $78 
Other assets:
Life insurance policies— 34,527 — 34,527 
Total assets measured at fair value$— $34,605 $— $34,605 
Accrued liabilities measured at fair value:
Contingent consideration$— $— $13,431 $13,431 
Other long-term liabilities measured at fair value:
Interest rate swap— 1,523 — 1,523 
Total liabilities measured at fair value$— $1,523 $13,431 $14,954 
During the year ended December 31, 2022, there were no transfers between levels.
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.
Nine Months Ended
September 30, 2023September 24, 2022
(in thousands)
Beginning balance$13,431 $37,244 
Payments(15,130)(11,476)
Total gains or losses (realized/unrealized):
Adjustment of previously recorded contingent liability1,810 (15,340)
Foreign currency translation(111)(1,767)
Ending balance$— $8,661 
The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, which incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used