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, 2022July 1, 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 StreetWilmingtonMassachusetts01887
(Address of Principal Executive Offices)(Zip Code)
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 filerAccelerated filer
Non-accelerated filerSmaller 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,July 28, 2023, there were 50,878,65651,271,357 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, 2022JULY 1, 2023

TABLE OF CONTENTS
ItemItem PageItem Page
PART I - FINANCIAL INFORMATIONPART I - FINANCIAL INFORMATIONPART I - FINANCIAL INFORMATION
11Financial Statements1Financial Statements
Condensed Consolidated Statements of Income (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021Condensed Consolidated Statements of Income (Unaudited) for the three and six months ended July 1, 2023
and June 25, 2022
Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the three and six months ended
July 1, 2023 and June 25, 2022
Condensed Consolidated Balance Sheets (Unaudited) as of September 24, 2022 and December 25, 2021Condensed Consolidated Balance Sheets (Unaudited) as of July 1, 2023 and December 31, 2022
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 24, 2022 and September 25, 2021Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended July 1, 2023
and June 25, 2022
Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and nine months ended September 24, 2022 and September 25, 2021Condensed Consolidated Statements of Changes in Equity (Unaudited) for the three and six months ended July 1, 2023
and June 25, 2022
Notes to Unaudited Condensed Consolidated Financial StatementsNotes to Unaudited Condensed Consolidated Financial Statements
22Management’s Discussion and Analysis of Financial Condition and Results of Operations2Management’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
33Quantitative and Qualitative Disclosure About Market Risk3Quantitative and Qualitative Disclosure About Market Risk
44Controls and Procedures4Controls and Procedures
PART II - OTHER INFORMATIONPART II - OTHER INFORMATIONPART II - OTHER INFORMATION
11Legal Proceedings1Legal Proceedings
1A1ARisk Factors1ARisk Factors
22Unregistered Sales of Equity Securities and Use of Proceeds2Unregistered Sales of Equity Securities and Use of Proceeds
55Other Information
66Exhibits6Exhibits
SignaturesSignaturesSignatures

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 COVID-19 pandemic, its duration, its impact onavailability of non-human primates and 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, abilitydiversify our non-human primate supply chain; the outcome of (1) the U.S. government investigations and inquiries related to timely account for assetsthe 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 our balance sheet, abilityMay 19, 2023; the timing of the development and implementation of additional procedures to efficiently implement advisable safety precautions,reasonably ensure that non-human primates imported to the United States from Cambodia are purpose-bred; changes and internal controls over financial reporting; the COVID-19 pandemic’s impact on demand,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 uncertaintiestwo Cambodian officials had been criminally charged in connection with illegally importing non-human primates into the global economy;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 meet contingent consideration financial targets;growth, our ability to fund our operations for the foreseeable future;future, the impact of unauthorized access into our information systems, including the timing and effectiveness of any enhanced security and monitoring;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 ofour expectations regarding acquisitions and divestitures;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)improvements, particularly with respect to our CDMO business); 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; our liquidity; and the impact of litigation, including our liquidity.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 savingcost-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, 2021,31, 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 Three Months EndedSix Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021 July 1, 2023June 25, 2022July 1, 2023June 25, 2022
Service revenueService revenue$812,894 $703,859 $2,316,206 $2,045,760 Service revenue$874,891 $782,827 $1,732,257 $1,503,312 
Product revenueProduct revenue176,263 192,078 560,011 589,350 Product revenue185,046 190,304 357,053 383,748 
Total revenueTotal revenue989,157 895,937 2,876,217 2,635,110 Total revenue1,059,937 973,131 2,089,310 1,887,060 
Costs and expenses:Costs and expenses:  Costs and expenses:  
Cost of services provided (excluding amortization of intangible assets)Cost of services provided (excluding amortization of intangible assets)530,706 468,659 1,540,193 1,369,396 Cost of services provided (excluding amortization of intangible assets)578,099 522,623 1,143,576 1,009,487 
Cost of products sold (excluding amortization of intangible assets)Cost of products sold (excluding amortization of intangible assets)88,228 90,051 272,257 278,188 Cost of products sold (excluding amortization of intangible assets)82,861 93,782 169,103 184,029 
Selling, general and administrativeSelling, general and administrative183,714 148,573 465,458 475,807 Selling, general and administrative199,758 131,711 374,604 281,744 
Amortization of intangible assetsAmortization of intangible assets35,533 32,852 111,144 94,664 Amortization of intangible assets34,274 37,604 69,190 75,611 
Operating incomeOperating income150,976 155,802 487,165 417,055 Operating income164,945 187,411 332,837 336,189 
Other income (expense):Other income (expense): Other income (expense): 
Interest incomeInterest income122 137 437 343 Interest income1,426 188 2,232 315 
Interest expenseInterest expense(11,375)(16,455)(24,512)(62,364)Interest expense(35,044)(3,703)(69,424)(13,137)
Other expense, netOther expense, net(16,616)(16,214)(85,024)(37,966)Other expense, net(2,663)(39,783)(5,940)(68,408)
Income before income taxesIncome before income taxes123,107 123,270 378,066 317,068 Income before income taxes128,664 144,113 259,705 254,959 
Provision for income taxesProvision for income taxes25,495 18,111 74,564 58,058 Provision for income taxes29,221 33,449 56,308 49,069 
Net incomeNet income97,612 105,159 303,502 259,010 Net income99,443 110,664 203,397 205,890 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests1,139 1,733 4,686 5,606 Less: Net income attributable to noncontrolling interests2,423 1,343 3,246 3,547 
Net income attributable to common shareholdersNet income attributable to common shareholders$96,473 $103,426 $298,816 $253,404 Net income attributable to common shareholders$97,020 $109,321 $200,151 $202,343 
Earnings per common shareEarnings per common share  Earnings per common share  
Net income attributable to common shareholders:Net income attributable to common shareholders:Net income attributable to common shareholders:
BasicBasic$1.90 $2.05 $5.88 $5.04 Basic$1.89 $2.15 $3.91 $3.99 
DilutedDiluted$1.88 $2.01 $5.83 $4.93 Diluted$1.89 $2.13 $3.90 $3.94 
Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:Weighted-average number of common shares outstanding:
BasicBasic50,870 50,425 50,778 50,234 Basic51,216 50,823 51,157 50,732 
DilutedDiluted51,283 51,558 51,285 51,360 Diluted51,467 51,283 51,382 51,293 
See Notes to Unaudited Condensed Consolidated Financial Statements.See Notes to Unaudited Condensed Consolidated Financial Statements.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.
Three Months EndedSix Months Ended
July 1, 2023June 25, 2022July 1, 2023June 25, 2022
Net income$99,443 $110,664 $203,397 $205,890 
Other comprehensive income (loss):
Foreign currency translation adjustment and other23,227 (93,857)46,540 (106,809)
Amortization of net loss, settlement losses, and prior service benefit included in total cost for pension and other post-retirement benefit plans174 741 344 1,487 
Unrealized gains on hedging instruments6,046 — 4,644 — 
Other comprehensive income (loss), before income taxes29,447 (93,116)51,528 (105,322)
Less: Income tax expense (benefit) related to items of other comprehensive income937 (6,876)(101)(8,894)
Comprehensive income, net of income taxes127,953 24,424 255,026 109,462 
Less: Comprehensive income (loss) related to noncontrolling interests, net of income taxes78 (1,275)1,087 934 
Comprehensive income attributable to common shareholders, net of income taxes$127,875 $25,699 $253,939 $108,528 
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, 2021July 1, 2023December 31, 2022
AssetsAssets Assets 
Current assets:Current assets:  Current assets:  
Cash and cash equivalentsCash and cash equivalents$193,701 $241,214 Cash and cash equivalents$200,445 $233,912 
Trade receivables and contract assets, net of allowances for credit losses of $9,827 and $7,180, respectively770,776 642,881 
Trade receivables and contract assets, net of allowances for credit losses of $18,040 and $11,278, respectivelyTrade receivables and contract assets, net of allowances for credit losses of $18,040 and $11,278, respectively800,646 752,390 
InventoriesInventories261,522 199,146 Inventories285,280 255,809 
Prepaid assetsPrepaid assets92,266 93,543 Prepaid assets105,020 89,341 
Other current assetsOther current assets97,087 97,311 Other current assets113,389 107,580 
Total current assetsTotal current assets1,415,352 1,274,095 Total current assets1,504,780 1,439,032 
Property, plant and equipment, netProperty, plant and equipment, net1,380,568 1,291,068 Property, plant and equipment, net1,529,640 1,465,655 
Venture capital and strategic equity investmentsVenture capital and strategic equity investments300,281 311,602 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net373,410 292,941 Operating lease right-of-use assets, net397,192 391,762 
GoodwillGoodwill2,776,005 2,711,881 Goodwill2,916,593 2,849,903 
Client relationships, net909,899 981,398 
Other intangible assets, net58,121 79,794 
Intangible assets, netIntangible assets, net929,890 955,275 
Deferred tax assetsDeferred tax assets39,721 40,226 Deferred tax assets38,540 41,262 
Other assetsOther assets429,693 352,889 Other assets155,465 148,279 
Total assetsTotal assets$7,382,769 $7,024,292 Total assets$7,772,381 $7,602,770 
Liabilities, Redeemable Noncontrolling Interests and EquityLiabilities, Redeemable Noncontrolling Interests and Equity  Liabilities, Redeemable Noncontrolling Interests and Equity  
Current liabilities:Current liabilities:  Current liabilities:  
Current portion of long-term debt and finance leases$2,079 $2,795 
Accounts payableAccounts payable181,629 198,130 Accounts payable140,204 205,915 
Accrued compensationAccrued compensation200,365 246,119 Accrued compensation190,802 197,078 
Deferred revenueDeferred revenue251,473 219,703 Deferred revenue257,396 264,259 
Accrued liabilitiesAccrued liabilities196,754 228,797 Accrued liabilities220,704 219,758 
Other current liabilitiesOther current liabilities181,894 137,641 Other current liabilities198,517 204,575 
Total current liabilitiesTotal current liabilities1,014,194 1,033,185 Total current liabilities1,007,623 1,091,585 
Long-term debt, net and finance leasesLong-term debt, net and finance leases2,937,056 2,663,564 Long-term debt, net and finance leases2,678,472 2,707,531 
Operating lease right-of-use liabilitiesOperating lease right-of-use liabilities368,851 252,972 Operating lease right-of-use liabilities401,628 389,745 
Deferred tax liabilitiesDeferred tax liabilities196,014 239,720 Deferred tax liabilities207,404 215,582 
Other long-term liabilitiesOther long-term liabilities194,710 242,859 Other long-term liabilities177,252 174,822 
Total liabilitiesTotal liabilities4,710,825 4,432,300 Total liabilities4,472,379 4,579,265 
Commitments and contingencies (Notes 2, 9, 11 and 13)
Redeemable noncontrolling interests39,206 53,010 
Commitments and contingencies (Notes 2, 8, 10, and 12)Commitments and contingencies (Notes 2, 8, 10, and 12)
Redeemable noncontrolling interestRedeemable noncontrolling interest42,447 42,427 
Equity:Equity:  Equity:  
Preferred stock, $0.01 par value; 20,000 shares authorized; no shares issued and outstandingPreferred stock, $0.01 par value; 20,000 shares authorized; no shares issued and outstanding— — 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, 2021510 505 
Common stock, $0.01 par value; 120,000 shares authorized; 51,370 shares issued and 51,266 shares outstanding as of July 1, 2023, and 50,944 shares issued and outstanding as of December 31, 2022Common stock, $0.01 par value; 120,000 shares authorized; 51,370 shares issued and 51,266 shares outstanding as of July 1, 2023, and 50,944 shares issued and outstanding as of December 31, 2022513 509 
Additional paid-in capitalAdditional paid-in capital1,780,876 1,718,304 Additional paid-in capital1,850,385 1,804,940 
Retained earningsRetained earnings1,279,567 980,751 Retained earnings1,633,052 1,432,901 
Treasury stock, at cost, 129 and 0 shares, as of September 24, 2022 and December 25, 2021, respectively(38,492)— 
Treasury stock, at cost, 104 and zero shares, as of July 1, 2023 and December 31, 2022, respectivelyTreasury stock, at cost, 104 and zero shares, as of July 1, 2023 and December 31, 2022, respectively(23,978)— 
Accumulated other comprehensive lossAccumulated other comprehensive loss(395,608)(164,740)Accumulated other comprehensive loss(208,269)(262,057)
Total equity attributable to common shareholdersTotal equity attributable to common shareholders2,626,853 2,534,820 Total equity attributable to common shareholders3,251,703 2,976,293 
Noncontrolling interest5,885 4,162 
Noncontrolling interests (nonredeemable)Noncontrolling interests (nonredeemable)5,852 4,785 
Total equityTotal equity2,632,738 2,538,982 Total equity3,257,555 2,981,078 
Total liabilities, redeemable noncontrolling interests and equityTotal liabilities, redeemable noncontrolling interests and equity$7,382,769 $7,024,292 Total liabilities, redeemable noncontrolling interests and equity$7,772,381 $7,602,770 
See Notes to Unaudited Condensed Consolidated Financial Statements.See Notes to Unaudited Condensed Consolidated Financial Statements.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 Six Months Ended
September 24, 2022September 25, 2021 July 1, 2023June 25, 2022
Cash flows relating to operating activitiesCash flows relating to operating activities  Cash flows relating to operating activities  
Net incomeNet income$303,502 $259,010 Net income$203,397 $205,890 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:  Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortizationDepreciation and amortization226,325 198,299 Depreciation and amortization154,740 151,720 
Stock-based compensationStock-based compensation51,548 52,289 Stock-based compensation29,730 29,549 
Loss on debt extinguishment and amortization of other financing costsLoss on debt extinguishment and amortization of other financing costs3,054 28,972 Loss on debt extinguishment and amortization of other financing costs— 1,987 
Deferred income taxesDeferred income taxes(26,323)(13,757)Deferred income taxes(16,555)(14,684)
Loss on venture capital and strategic equity investments, netLoss on venture capital and strategic equity investments, net20,068 17,277 Loss on venture capital and strategic equity investments, net5,176 23,515 
Contingent consideration, fair value changes(15,420)(10,360)
Loss on divestitures, netLoss on divestitures, net563 — 
Changes in fair value of contingent consideration arrangementsChanges in fair value of contingent consideration arrangements1,810 (15,420)
Other, netOther, net31,574 928 Other, net21,721 13,520 
Changes in assets and liabilities:Changes in assets and liabilities:  Changes in assets and liabilities:  
Trade receivables and contract assets, netTrade receivables and contract assets, net(174,169)(35,592)Trade receivables and contract assets, net(48,249)(117,642)
InventoriesInventories(76,283)(5,639)Inventories(32,671)(63,725)
Accounts payableAccounts payable5,979 11,431 Accounts payable(24,985)31,466 
Accrued compensationAccrued compensation(32,734)18,210 Accrued compensation(7,648)(38,173)
Deferred revenueDeferred revenue53,565 (9,394)Deferred revenue(6,796)27,641 
Customer contract depositsCustomer contract deposits16,234 4,850 Customer contract deposits(17,519)16,100 
Other assets and liabilities, netOther assets and liabilities, net(2,037)15,017 Other assets and liabilities, net(5,209)360 
Net cash provided by operating activitiesNet cash provided by operating activities384,883 531,541 Net cash provided by operating activities257,505 252,104 
Cash flows relating to investing activitiesCash flows relating to investing activities  Cash flows relating to investing activities  
Acquisition of businesses and assets, net of cash acquiredAcquisition of businesses and assets, net of cash acquired(283,392)(1,292,093)Acquisition of businesses and assets, net of cash acquired(50,166)(283,392)
Capital expendituresCapital expenditures(235,709)(129,997)Capital expenditures(174,258)(163,316)
Purchases of investments and contributions to venture capital investmentsPurchases of investments and contributions to venture capital investments(129,363)(31,963)Purchases of investments and contributions to venture capital investments(22,689)(108,842)
Proceeds from sale of investmentsProceeds from sale of investments3,104 5,960 Proceeds from sale of investments2,943 205 
Other, netOther, net(6,945)854 Other, net(1,057)(4,774)
Net cash used in investing activitiesNet cash used in investing activities(652,305)(1,447,239)Net cash used in investing activities(245,227)(560,119)
Cash flows relating to financing activitiesCash flows relating to financing activities  Cash flows relating to financing activities  
Proceeds from long-term debt and revolving credit facilityProceeds from long-term debt and revolving credit facility2,798,665 6,119,671 Proceeds from long-term debt and revolving credit facility281,796 2,180,511 
Proceeds from exercises of stock optionsProceeds from exercises of stock options17,710 43,314 Proceeds from exercises of stock options15,719 15,571 
Payments on long-term debt, revolving credit facility, and finance lease obligationsPayments on long-term debt, revolving credit facility, and finance lease obligations(2,524,387)(5,190,394)Payments on long-term debt, revolving credit facility, and finance lease obligations(317,049)(1,856,262)
Purchase of treasury stockPurchase of treasury stock(38,492)(40,440)Purchase of treasury stock(23,978)(38,468)
Payment of debt extinguishment and financing costs— (38,253)
Payments of contingent considerationPayments of contingent consideration(2,711)(10,356)
Purchases of additional equity interests, netPurchases of additional equity interests, net(30,533)— Purchases of additional equity interests, net— (15,438)
Payment of contingent considerations(10,356)(2,328)
Other, netOther, net(6,048)— Other, net— (17,405)
Net cash provided by financing activities206,559 891,570 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(46,223)258,153 
Effect of exchange rate changes on cash, cash equivalents, and restricted cashEffect of exchange rate changes on cash, cash equivalents, and restricted cash10,726 17,514 Effect of exchange rate changes on cash, cash equivalents, and restricted cash1,508 10,756 
Net change in cash, cash equivalents, and restricted cashNet change in cash, cash equivalents, and restricted cash(50,137)(6,614)Net change in cash, cash equivalents, and restricted cash(32,437)(39,106)
Cash, cash equivalents, and restricted cash, beginning of periodCash, cash equivalents, and restricted cash, beginning of period246,314 233,119 Cash, cash equivalents, and restricted cash, beginning of period241,214 246,314 
Cash, cash equivalents, and restricted cash, end of periodCash, cash equivalents, and restricted cash, end of period$196,177 $226,505 Cash, cash equivalents, and restricted cash, end of period$208,777 $207,208 
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.See Notes to Unaudited Condensed Consolidated Financial Statements.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, 2022December 31, 202250,944 $509 $1,804,940 $1,432,901 $(262,057) $ $2,976,293 $4,785 $2,981,078 
Net incomeNet income— — — 103,131 — — — 103,131 501 103,632 
Other comprehensive incomeOther comprehensive income— — — — 22,933 — — 22,933 — 22,933 
Issuance of stock under employee compensation plansIssuance of stock under employee compensation plans316 11,789 — — — — 11,792 — 11,792 
Purchase of treasury sharesPurchase of treasury shares— — — — — 78 (19,012)(19,012)— (19,012)
Stock-based compensationStock-based compensation— — 13,460 — — — — 13,460 — 13,460 
April 1, 2023April 1, 202351,260 512 1,830,189 1,536,032 (239,124)78 (19,012)3,108,597 5,286 3,113,883 
Net incomeNet income— — — 97,020 — — — 97,020 566 97,586 
Other comprehensive incomeOther comprehensive income— — — — 30,855 — — 30,855 — 30,855 
Issuance of stock under employee compensation plansIssuance of stock under employee compensation plans110 3,926 — — — — 3,927 — 3,927 
Purchase of treasury sharesPurchase of treasury shares— — — — — 26 (4,966)(4,966)— (4,966)
Stock-based compensationStock-based compensation— — 16,270 — — — — 16,270 — 16,270 
July 1, 2023July 1, 202351,370 $513 $1,850,385 $1,633,052 $(208,269)104 $(23,978)$3,251,703 $5,852 $3,257,555 
Common StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Equity Attributable to Common ShareholdersNoncontrolling InterestTotal EquityCommon StockAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Treasury StockTotal Equity Attributable to Common ShareholdersNoncontrolling InterestTotal Equity
SharesAmountSharesAmountSharesAmountSharesAmount
December 25, 2021December 25, 202150,480 $505 $1,718,304 $980,751 $(164,740) $ $2,534,820 $4,162 $2,538,982 December 25, 202150,480 $505 $1,718,304 $980,751 $(164,740) $ $2,534,820 $4,162 $2,538,982 
Net incomeNet income— — — 93,022 — — — 93,022 560 93,582 Net income— — — 93,022 — — — 93,022 560 93,582 
Other comprehensive lossOther comprehensive loss— — — — (10,193)— — (10,193)— (10,193)Other comprehensive loss— — — — (10,193)— — (10,193)— (10,193)
Adjustment of redeemable noncontrolling interest to redemption valueAdjustment of redeemable noncontrolling interest to redemption value— — (1,161)— — — — (1,161)— (1,161)Adjustment of redeemable noncontrolling interest to redemption value— — (1,161)— — — — (1,161)— (1,161)
Issuance of stock under employee compensation plansIssuance of stock under employee compensation plans431 13,067 — — — — 13,071 — 13,071 Issuance of stock under employee compensation plans431 13,067 — — — — 13,071 — 13,071 
Purchase of treasury sharesPurchase of treasury shares— — — — — 111 (33,994)(33,994)— (33,994)Purchase of treasury shares— — — — — 111 (33,994)(33,994)— (33,994)
Stock-based compensationStock-based compensation— — 14,619 — — — — 14,619 — 14,619 Stock-based compensation— — 14,619 — — — — 14,619 — 14,619 
March 26, 2022March 26, 202250,911 509 1,744,829 1,073,773 (174,933)111 (33,994)2,610,184 4,722 2,614,906 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 incomeNet income— — — 109,321 — — — 109,321 499 109,820 Net income— — — 109,321 — — — 109,321 499 109,820 
Other comprehensive income— — — — (83,622)— — (83,622)— (83,622)
Other comprehensive lossOther comprehensive loss— — — — (83,622)— — (83,622)— (83,622)
Adjustment of redeemable noncontrolling interest to redemption valueAdjustment of redeemable noncontrolling interest to redemption value— — (1,132)— — — — (1,132)— (1,132)Adjustment of redeemable noncontrolling interest to redemption value— — (1,132)— — — — (1,132)— (1,132)
Issuance of stock under employee compensation plansIssuance of stock under employee compensation plans79 2,498 — — — — 2,499 — 2,499 Issuance of stock under employee compensation plans79 2,498 — — — — 2,499 — 2,499 
Purchase of treasury sharesPurchase of treasury shares— — — — — 18 (4,474)(4,474)— (4,474)Purchase of treasury shares— — — — — 18 (4,474)(4,474)— (4,474)
Stock-based compensationStock-based compensation— — 14,930 — — — — 14,930 — 14,930 Stock-based compensation— — 14,930 — — — — 14,930 — 14,930 
June 25, 2022June 25, 202250,990 510 1,761,125 1,183,094 (258,555)129 (38,468)2,647,706 5,221 2,652,927 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.See Notes to Unaudited Condensed Consolidated Financial Statements.
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 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 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 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 2021.2022. 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 IssuedAdopted 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 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 restrictionsparticipates in certain supplier finance programs 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 evaluatingimmaterial to the impact this new standard will have on theunaudited condensed 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.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 2021.2022.
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 will occuroccurred 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 CellsCell 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 Researchutilizing both our Charles River Accelerator and GMP-Compliant Cells,Development Lab (CRADL™) and our Explora BioLabs options, in which we provide vivarium space to our clients; and Cell Solutions, which
8

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 services required to take a drug through the early development process including discovery services, which aretwo businesses: Discovery Services and Safety Assessment. The Company provides regulated and non-regulated DSA services to assist clients withsupport the identification, screening, and selection of a lead compound for drugresearch, development, and regulatedregulatory-required safety testing of potential new drugs, including therapeutic discovery and nonregulated (GLPoptimization plus in vitro and non-GLP) safety assessment services. 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;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 suppliessupplied 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 preliminary 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.
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
109

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTESINC.
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
SAMDI (1)
Explora BioLabs
April 5, 2022June 28, 2021March 30, 2021March 29, 2021December 31, 2020January 27, 2023April 5, 2022
(in thousands)(in thousands)
Trade receivablesTrade receivables$7,679 $3,548 $2,266 $18,566 $2,722 Trade receivables$513 $7,679 
Other current assets (excluding cash)Other current assets (excluding cash)1,067 1,657 209 14,128 221 Other current assets (excluding cash)75 1,067 
Property, plant and equipmentProperty, plant and equipment37,369 7,649 400 52,082 2,382 Property, plant and equipment593 37,369 
Operating lease right-of-use asset, netOperating lease right-of-use asset, net48,613 22,507 1,385 34,349 1,586 Operating lease right-of-use asset, net— 48,613 
Goodwill (2)
Goodwill (2)
215,752 239,681 34,489 611,555 71,585 
Goodwill (2)
37,129 215,752 
Definite-lived intangible assetsDefinite-lived intangible assets70,100 93,900 22,126 270,900 24,540 Definite-lived intangible assets33,070 70,100 
Other long-term assetsOther long-term assets556 694 — 6,098 469 Other long-term assets556 
Deferred revenueDeferred revenue(3,507)(4,260)(434)(20,539)(1,319)Deferred revenue(43)(3,507)
Other current liabilities (3)
Other current liabilities (3)
(15,507)(6,319)(1,141)(45,388)(1,504)
Other current liabilities (3)
(351)(15,507)
Operating lease right-of-use liabilities (Long-term)Operating lease right-of-use liabilities (Long-term)(57,193)(21,220)(1,205)(31,383)(1,123)Operating lease right-of-use liabilities (Long-term)— (57,193)
Deferred tax liabilitiesDeferred tax liabilities(18,601)(13,958)(4,174)(32,503)(2,529)Deferred tax liabilities(8,191)(18,601)
Other long-term liabilitiesOther long-term liabilities(1,807)— — — — Other long-term liabilities— (1,807)
Total purchase price allocationTotal purchase price allocation$284,521 $323,879 $53,921 $877,865 $97,030 Total purchase price allocation$62,801 $284,521 
(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.
(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.
(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) 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 not deductible for tax purposes.
(3) In connection with its acquisitions of businesses, the Company routinely records liabilities related to indirect state and local taxes for preacquisition periods when such liabilities are estimable and deemed probable. The Company may or may not be indemnified for such indirect tax liabilities under terms of the acquisitions. As these indirect tax contingencies are resolved, actual obligations, and any indemnifications, may differ from the recorded amounts and any differences are reflected in reported results in the period in which these are resolved. Specifically for Cognate, as of March 29, 2021, the Company recorded an estimated liability of $17.0 million pertaining to indirect state sales taxes. During the nine months ended September 24, 2022, the Company received a favorable ruling from the applicable state in which the indirect state sales tax liability arose and, accordingly, this liability was reduced in full, resulting in a gain recorded through selling, general and administrative expenses in the period.
(2) The goodwill resulting from these transactions is primarily attributable to the potential growth of the Company’s segments from new customers introduced to the acquired businesses 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.
(2) The goodwill resulting from these transactions is primarily attributable to the potential growth of the Company’s segments from new customers introduced to the acquired businesses 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.
The definite-lived intangible assets acquired were as follows:
Explora BioLabsVigeneRetrogenixCognateDistributed BioSAMDIExplora BioLabs
Definite-Lived Intangible AssetsDefinite-Lived Intangible Assets(in thousands)Definite-Lived Intangible Assets(in thousands)
Client relationshipsClient relationships$64,000 $87,500 $17,340 $257,200 $16,080 Client relationships$23,400 $64,000 
Other intangible assetsOther intangible assets6,100 6,400 4,786 13,700 8,460 Other intangible assets9,670 6,100 
Total definite-lived intangible assetsTotal definite-lived intangible assets$70,100 $93,900 $22,126 $270,900 $24,540 Total definite-lived intangible assets$33,070 $70,100 
Weighted Average Amortization LifeWeighted Average Amortization Life(in years)Weighted Average Amortization Life(in years)
Client relationshipsClient relationships131213139Client relationships1513
Other intangible assetsOther intangible assets42324Other intangible assets74
Total definite-lived intangible assetsTotal definite-lived intangible assets121111137Total definite-lived intangible assets12
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Three Months EndedSix Months Ended
July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(in thousands)
Transaction and Integration Costs
Selling, general and administrative expenses$1,224 $4,426 $2,288 $11,539 
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
Transaction and Integration Costs
Selling, general and administrative expenses$3,065 $6,343 $14,604 $29,754 
Pro forma informationDivestitures
The following selected unaudited pro forma consolidated resultsCompany routinely evaluates the strategic fit and fundamental performance of its global businesses, divesting operations are presented as if the Cognate and Vigene acquisitions had occurred as of the beginning of the period immediately preceding the period of acquisition, which is December 29, 2019, after giving effect to certain adjustments. For the three and nine months ended September 25, 2021, these adjustments included additional amortization of intangible assets and depreciation of fixed assets of $4.3 million and $17.6 million, additional interest expense on borrowing of none and $5.6 million, elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments. All other acquisitions have not been included because that information is not material to the consolidated financial statements.
September 25, 2021
Three Months EndedNine Months Ended
(in thousands)
(unaudited)
Revenue$895,937 $2,678,596 
Net income attributable to common shareholders106,288 238,775 
These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicativemeet key business criteria. As part of this ongoing assessment, the results of operations that actually would have resulted had the acquisition occurred on the dates indicated or that may result in the future. No effect has been given for synergies, if any, that may be realized through the acquisition.
RMS Japan Divestiture
On October 12, 2021, the Company sold its RMS Japan operations to The Jackson Laboratory for a purchase price of $70.9 million, which included $7.9 million in cash, $3.8 million pension over funding, and certain post-closing adjustments.
The RMS Japan business was reported in the Company’s RMS reportable segment. The Company determined that the RMS Japan business was not optimized within the Company’s portfolio at its current scale, and that thecertain capital could be better deployed in other long-term growth opportunities.
CDMO Sweden DivestitureAvian Vaccine Services
On October 12, 2021,December 20, 2022, the Company sold its gene therapy CDMO site in SwedenAvian Vaccine Services business (Avian) to a private investor group for a preliminary purchase price of $59.6 million, net of $0.2$167.3 million in cash, and other post-closing adjustments thatsubject to certain customary closing adjustments. The Company may impactalso earn up to $30.0 million of contingent payments, which are tied to certain annual results of the purchase price. Included in the purchase price areAvian business from January 2024 through December 2027. The contingent payments have been fair valued at $15.3$10.3 million which were estimated using a discounted probability weighted model (the maximum contingent contractual payments are up to $25.0 million based on future performance), as well as a purchase obligation of approximately $10.0 million between the parties. As of September 24, 2022, the fair value of the contingent payments was reduced to $7.5 million as certain financial targets are not expected to be achieved.
model. The CDMO SwedenAvian business was acquired in March 2021 as part of the acquisition of Cognate and was reported in the Company’s Manufacturing reportable segment. The Company routinely evaluates the strategic fit and fundamental performance of our acquisitions integrated within our global infrastructure. As part of this assessment, the Company determined that this capital could be better deployed in other long-term growth opportunities.During fiscal year
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTESINC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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:
October 12, 2021
RMS JapanCDMO Sweden
(in thousands)
Assets
Current assets$26,524 $8,187 
Property, plant, and equipment, net17,379 14,339 
Operating lease right-of-use assets, net— 19,733 
Goodwill4,129 27,764 
Intangible assets, net— 14,089 
Other assets3,695 — 
Total assets$51,727 $84,112 
Liabilities
Current liabilities$8,705 $6,386 
Operating lease right-of-use liabilities— 18,221 
Long-term liabilities94 — 
Total liabilities$8,799 $24,607 
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 
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 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time$88,174 $65,805 $243,901 $197,035 
Services and products transferred at a point in time91,940 105,453 299,165 327,827 
Total RMS revenue180,114 171,258 543,066 524,862 
DSA
Services and products transferred over time618,270 531,637 1,749,977 1,571,895 
Services and products transferred at a point in time1,193 186 5,662 1,200 
Total DSA revenue619,463 531,823 1,755,639 1,573,095 
Manufacturing
Services and products transferred over time89,173 93,473 276,993 240,015 
Services and products transferred at a point in time100,407 99,383 300,519 297,138 
Total Manufacturing revenue189,580 192,856 577,512 537,153 
Total revenue$989,157 $895,937 $2,876,217 $2,635,110 
RMS
The RMS business generates revenue through the commercial production and sale of research models, research and GMP-compliant cells (cell supply), and the provision of services related to the maintenance and monitoring of research models and management of clients’ research operations. Revenue from the sale of research models and cell supply is recognized at a point in time when the customer obtains control of the product, which may be upon shipment or upon delivery based on the shipping terms of a contract. Revenue generated from research models services is recognized over time and is typically based on a right-to-invoice measure of progress (output method) as invoiced amounts correspond directly to the value of the Company’s performance to date.
Three Months EndedSix Months Ended
July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(in thousands)
Timing of Revenue Recognition:
RMS
Services and products transferred over time$94,458 $85,803 $188,097 $155,727 
Services and products transferred at a point in time115,490 100,607 221,617 207,225 
Total RMS revenue209,948 186,410 409,714 362,952 
DSA
Services and products transferred over time662,653 589,371 1,324,489 1,131,707 
Services and products transferred at a point in time804 2,546 1,321 4,469 
Total DSA revenue663,457 591,917 1,325,810 1,136,176 
Manufacturing
Services and products transferred over time100,460 92,811 186,546 187,820 
Services and products transferred at a point in time86,072 101,993 167,240 200,112 
Total Manufacturing revenue186,532 194,804 353,786 387,932 
Total revenue$1,059,937 $973,131 $2,089,310 $1,887,060 
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTESINC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DSAContract Balances from Contracts with Customers
The DSA businessfollowing table provides a full suiteinformation about client receivables, contract assets, and contract liabilities from contracts with customers:
July 1, 2023December 31, 2022
(in thousands)
Assets from contracts with customers
Client receivables$591,006 $559,410 
Unbilled revenue227,680 204,258 
Total818,686 763,668 
Less: Allowance for credit losses(18,040)(11,278)
Trade receivables and contract assets, net$800,646 $752,390 
Liabilities from contracts with customers
Current deferred revenue$257,396 $264,259 
Long-term deferred revenue (included in Other long-term liabilities)29,533 25,795 
Customer contract deposits (included in Other current-liabilities)77,422 91,640 
Approximately 85% of integrated drug discovery services directed atunbilled revenue as of December 31, 2022, which was $204 million, was billed during the identification, screening and selectionsix months ended July 1, 2023. Approximately 75% of a lead compound for drug development and offers a full rangeunbilled revenue as of safety assessment services including bioanalysis, drug metabolism, pharmacokinetics, toxicology and pathology. DSA servicesDecember 25, 2021, which was $161 million, was billed during the six months ended June 25, 2022.
Approximately 75% of contract liabilities as of December 31, 2022, which was $290 million, were recognized as revenue is generallyduring the six months ended July 1, 2023. Approximately 75% of contract liabilities as of December 25, 2021, which was $240 million, were recognized over time usingas revenue during the cost-to-cost orsix months ended June 25, 2022.
When the Company does not have the unconditional right to invoice measuresadvanced 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 $42 million and $54 million of progress, primarily representing fixed fee service contractsunpaid advanced client billings from both client receivables and per unit service contracts,deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of July 1, 2023 and December 31, 2022, respectively.
Manufacturing
The Manufacturing business includes Microbial Solutions, which provides invitro (non-animal) lot-release testing products, microbial detection products, Net provisions of $9.1 million and species identification services; Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development$0.4 million were recorded to the allowance for credit losses for the six months ended July 1, 2023 and manufacturing products and services (CDMO); and Avian Vaccine Services (Avian), which supplies specific-pathogen-free chicken eggs and chickens. Species identification service revenue is generally recognized at a point in time as identifications are completed by the Company. Biologics service revenue is generally recognized over time using the cost-to-cost measure of progress. Microbial Solutions and Avian product sales are generally recognized at a point in time when the customer obtains control of the product, which may be upon shipment or upon delivery based on the contractual shipping terms of a contract.June 25, 2022, respectively.
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 24, 2022.July 1, 2023. Excluded from the disclosure is the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized at the amount to which the Company has the right to invoice for services performed, and (iii) service revenue recognized in accordance with ASC 842, “Leases” (see additional disclosure.The aggregate amount of transaction price allocated to the remaining performance obligations for Other Performance Obligations).
all open customer contracts as of July 1, 2023 was $1,029.1 million. The following table includes estimated revenueCompany will recognize revenues for these performance obligations as they are satisfied, approximately 50% of which is expected to be recognized inoccur within the future related to performance obligations that are unsatisfied (or partially satisfied) as of September 24, 2022:
Revenue Expected to be Recognized in Future Periods
Less than 1 Year1 to 3 Years4 to 5 YearsBeyond 5 YearsTotal
(in thousands)
DSA$609,960 $461,386 $72,772 $4,130 $1,148,248 
Manufacturing113 — — 121 
Total$610,073 $461,394 $72,772 $4,130 $1,148,369 
Contract Balances from Contracts with Customers
The timing of revenue recognition, billings and cash collections results in billed receivables (client receivables), contract assets (unbilled revenue), and contract liabilities (current and long-term deferred revenue and customer contract deposits) on the unaudited condensed consolidated balance sheets. The Company’s payment terms are generally 30 days in the United States and consistent with prevailing practice in international markets. A contract asset is recorded when a right to consideration in exchange for goods or services transferred to a customer is conditioned other than the passage of time. Client receivables are recorded separately from contract assets since only the passage of time is required before consideration is due. A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.
The following table provides information about client receivables, contract assets, and contract liabilities from contracts with customers:
September 24, 2022December 25, 2021
(in thousands)
Balances from contracts with customers:
Client receivables$580,626 $489,452 
Contract assets (unbilled revenue)199,977 160,609 
Contract liabilities (current and long-term deferred revenue)275,634 240,281 
Contract liabilities (customer contract deposits)76,904 59,512 
When the Company does not have the unconditional right to advanced billings, both advanced client payments and unpaid
15

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 $36 million of unpaid advanced client billings from both client receivables and deferred revenue in the accompanying unaudited condensed consolidated balance sheets as of September 24, 2022 and December 25, 2021, respectively. Advanced client payments of approximately $77 million and $60 million have been presented as customer contract deposits within other current liabilities in the accompanying unaudited condensed consolidated balance sheets as of September 24, 2022 and December 25, 2021, respectively.
Other changes in the contract assetnext twelve months and the contract liability balancesremainder recognized thereafter during the nine months ended September 24, 2022 and September 25, 2021 were as follows:
(i) Changes due to acquisitions and divestitures:
See Note 2 “Acquisitions and Divestitures” for the Company’s recent acquisitions.
(ii) Cumulative catch-up adjustments to revenue that affect the correspondingremaining contract asset or contract liability, including adjustments arising from a change in the measure of progress, a change in an estimate of the transaction price (including any changes in the assessment of whether an estimate of variable consideration is constrained), or a contract modification:
During the nine months ended September 24, 2022 and September 25, 2021, immaterial cumulative catch-up adjustments to revenue were recorded.
(iii) A change in the time frame for a right to consideration to become unconditional (that is, for a contract asset to be recorded as a client receivable):
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 85% of unbilled revenue as of December 26, 2020, which was $135 million, was billed during the nine months ended September 25, 2021.
(iv) A change in the time frame for a performance obligation to be satisfied (that is, for the recognition of revenue arising from a contract liability):
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. Approximately 85% of contract liabilities as of December 26, 2020, which was $227 million, were recognized as revenue during the nine months ended September 25, 2021.term.
Other Performance Obligations
As part of the Company’s service offerings, primarily in the Manufacturing and RMS segments, 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. For the three months ended September 24, 2022 and September 25, 2021, the Company recognized lease revenue of $15.8 million and $5.3 million, which is recorded within service revenue, which is transferred over time, within the unaudited condensed consolidated statements of income. For the nine months ended September 24, 2022 and September 25, 2021, the Company recognized lease revenue of $37.6 million and $11.6 million within the unaudited condensed consolidated statements of income. Due to the nature of these arrangements and timing of the contractual lease term, the remaining revenue to be recognized related to these lease performance obligations is not material to the unaudited condensed consolidated financial statements.
Three Months EndedSix Months Ended
July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(in thousands)Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
Lease revenue$23,891 $13,912 $47,981 $21,768 Service revenue
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTESINC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. SEGMENT AND GEOGRAPHIC INFORMATION
The following table presents revenue and other financial information by reportable segment:
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
RMS  
Revenue$180,114 $171,258 $543,066 $524,862 
Operating income35,891 39,111 123,299 126,626 
Depreciation and amortization13,128 9,927 35,825 29,450 
Capital expenditures10,743 18,026 33,239 29,521 
DSA
Revenue$619,463 $531,823 $1,755,639 $1,573,095 
Operating income142,143 116,548 375,922 312,011 
Depreciation and amortization43,913 44,072 135,328 132,268 
Capital expenditures43,400 23,270 133,908 60,783 
Manufacturing
Revenue$189,580 $192,856 $577,512 $537,153 
Operating income31,479 48,563 140,350 154,717 
Depreciation and amortization17,005 13,953 53,487 34,474 
Capital expenditures18,137 13,296 65,396 34,008 
The following tables present reconciliations of segment operating income, depreciation and amortization, and capital expenditures to the respective consolidated amounts:
Operating IncomeDepreciation and AmortizationCapital Expenditures
September 24, 2022September 25, 2021September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
Three Months Ended:
Total reportable segments$209,513 $204,222 $74,046 $67,952 $72,280 $54,592 
Unallocated corporate(58,537)(48,420)559 734 113 944 
Total consolidated$150,976 $155,802 $74,605 $68,686 $72,393 $55,536 
Nine Months Ended
Total reportable segments$639,571 $593,354 $224,640 $196,192 $232,543 $124,312 
Unallocated corporate(152,406)(176,299)1,685 2,107 3,166 5,685 
Total consolidated$487,165 $417,055 $226,325 $198,299 $235,709 $129,997 

Revenue for each significant product or service offering is as follows:
 Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
RMS$180,114 $171,258 $543,066 $524,862 
DSA619,463 531,823 1,755,639 1,573,095 
Manufacturing189,580 192,856 577,512 537,153 
Total revenue$989,157 $895,937 $2,876,217 $2,635,110 
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of unallocated corporate expense consists of the following:
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
Stock-based compensation$13,381 $13,258 $30,415 $31,317 
Compensation, benefits, and other employee-related expenses28,313 17,249 77,456 70,535 
External consulting and other service expenses4,144 6,670 13,190 20,327 
Information technology4,359 4,074 9,912 12,286 
Depreciation559 734 1,685 2,107 
Acquisition and integration1,059 3,392 9,899 28,988 
Other general unallocated corporate6,722 3,043 9,849 10,739 
Total unallocated corporate expense$58,537 $48,420 $152,406 $176,299 
Other general unallocated corporate expense consists of costs associated with departments such as senior executives, corporate accounting, legal, tax, human resources, treasury, and investor relations.
Three Months EndedSix Months Ended
July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(in thousands)
RMS  
Revenue$209,948 $186,410 $409,714 $362,952 
Operating income48,918 39,526 89,327 87,408 
Depreciation and amortization13,949 13,228 27,438 22,697 
Capital expenditures7,493 13,850 26,577 22,496 
DSA
Revenue$663,457 $591,917 $1,325,810 $1,136,176 
Operating income161,538 128,793 332,969 233,779 
Depreciation and amortization43,124 44,626 85,574 91,415 
Capital expenditures48,326 41,578 113,510 90,508 
Manufacturing
Revenue$186,532 $194,804 $353,786 $387,932 
Operating income24,403 62,503 26,509 108,871 
Depreciation and amortization19,523 18,000 39,607 36,482 
Capital expenditures10,862 24,431 32,600 47,259 
Unallocated Corporate
Operating income (1)
(69,914)(43,411)$(115,968)$(93,869)
Depreciation and amortization1,075 567 2,121 1,126 
Capital expenditures702 2,993 1,571 3,053 
Consolidated
Revenue1,059,937 973,131 $2,089,310 $1,887,060 
Operating income164,945 187,411 332,837 336,189 
Depreciation and amortization77,671 76,421 154,740 151,720 
Capital expenditures67,383 82,852 174,258 163,316 
(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 24, 2022$595,265 $245,928 $101,601 $43,803 $2,560 $989,157 
September 25, 2021493,564 258,353 85,252 56,607 2,161 895,937 
Nine Months Ended:
September 24, 2022$1,688,731 $760,599 $280,541 $138,988 $7,358 $2,876,217 
September 25, 20211,433,665 771,594 252,924 171,186 5,741 2,635,110 
U.S.EuropeCanadaAsia PacificOtherConsolidated
(in thousands)
Three Months Ended:
July 1, 2023$606,775 $272,976 $117,647 $59,864 $2,675 $1,059,937 
June 25, 2022566,917 263,584 93,694 46,239 2,697 973,131 
Six Months Ended:
July 1, 2023$1,212,216 $540,679 $228,253 $102,677 $5,485 $2,089,310 
June 25, 20221,093,466 514,671 178,940 95,185 4,798 1,887,060 
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.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. SUPPLEMENTAL BALANCE SHEET INFORMATIONINVENTORY
The composition of trade receivables and contract assets, net is as follows:
September 24, 2022December 25, 2021
(in thousands)
Client receivables$580,626 $489,452 
Unbilled revenue199,977 160,609 
Total780,603 650,061 
Less: Allowance for credit losses(9,827)(7,180)
Trade receivables and contract assets, net$770,776 $642,881 
Inventories
The composition of inventories is as follows:
September 24, 2022December 25, 2021
(in thousands)
Raw materials and supplies$35,597 $33,118 
Work in process41,357 40,268 
Finished products184,568 125,760 
Inventories$261,522 $199,146 
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The composition of other current assets is as follows:
September 24, 2022December 25, 2021
(in thousands)
Prepaid income tax$87,038 $84,725 
Short-term investments950 1,063 
Restricted cash1,376 4,023 
Other receivables7,723 7,500 
Other current assets$97,087 $97,311 
The composition of other assets is as follows:
September 24, 2022December 25, 2021
(in thousands)
Venture capital investments$131,515 $149,640 
Strategic equity investments158,582 51,712 
Life insurance policies39,938 51,048 
Long-term pension assets33,491 39,582 
Other long-term income tax assets15,088 18,690 
Restricted cash1,100 1,077 
Other49,979 41,140 
Other assets$429,693 $352,889 
The composition of other current liabilities is as follows:
September 24, 2022December 25, 2021
(in thousands)
Current portion of operating lease right-of-use liabilities$44,613 $33,267 
Customer contract deposits76,904 59,512 
Accrued income taxes47,036 26,161 
Other13,341 18,701 
Other current liabilities$181,894 $137,641 
The composition of other long-term liabilities is as follows:
September 24, 2022December 25, 2021
(in thousands)
Long-term pension liability, accrued executive supplemental life insurance retirement plan and deferred compensation plans$100,552 $104,944 
U.S. Transition Tax32,324 43,057 
Long-term deferred revenue24,161 20,578 
Other37,673 74,280 
Other long-term liabilities$194,710 $242,859 
July 1, 2023December 31, 2022
(in thousands)
Raw materials and supplies$42,130 $38,892 
Work in process40,396 48,367 
Finished products202,754 168,550 
Inventories$285,280 $255,809 
6. VENTURE CAPITAL AND STRATEGIC EQUITY INVESTMENTS
Venture capital investments were $131.5 million and $149.6 million as of September 24, 2022 and December 25, 2021, respectively. The Company’s total commitment to the venture capital funds as of September 24, 2022 was $190.3 million, of which the Company funded $125.1 million through that date. The Company received distributions totaling $3.7 million and $10.2 million for the three months ended September 24, 2022 and September 25, 2021, respectively. The Company received distributions totaling $7.7 million and $37.7 million for the nine months ended September 24, 2022 and September 25, 2021, respectively.are summarized below:
The Company recognized net gains on venture capital investments of $3.0 million and net losses of $10.3 million for the three months ended September 24, 2022 and September 25, 2021, respectively, both of which were driven primarily by publicly-held investments. The Company recognized net losses on venture capital investments of $20.1 million for the nine months ended
Six Months Ended
July 1, 2023June 25, 2022
(in thousands)
Beginning balance$129,012 $149,640 
Capital contributions8,702 6,384 
Distributions(9,679)(4,042)
Losses(8,429)(23,050)
Foreign currency translation466 (1,065)
Ending balance$120,072 $127,867 
19

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 24, 2022, driven by the decrease in the fair value of publicly-held investments offset by increases from private investments, and net losses of $15.6 million for the nine months ended September 25, 2021, which were driven by publicly-held and private investments.
The Company also invests, with minority positions, directly in equity of privately-heldpredominantly privately held companies. Strategic equity investments were $158.6 million and $51.7 million as of September 24, 2022 and December 25, 2021, respectively. are summarized below:
Six Months Ended
July 1, 2023June 25, 2022
(in thousands)
Beginning balance$182,590 $51,712 
Purchase of investments13,710 102,220 
Distributions(4,146)(151)
Gain (loss)3,253 (465)
Reduction for acquisition of entity(12,635)— 
Foreign currency translation(2,563)(2,112)
Ending balance$180,209 $151,204 
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. The total allocable basis of the investment exceeds 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.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 recognizes its proportional sharewill 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 Investee’s earnings, adjusted for the amortizationexpiration of the intangible assets over their useful lives and any intra-entity eliminations, undercall option, a 12-month put option will be triggered giving the equity method of accounting on a three-month lag within other income (expense), net inseller the accompanying consolidated statements of income. Summarized financial information for this equity method Investee is not presented as such information is not materialright to the Company’s financial statements. The Company purchased additional strategic equity investments of $33.0 million during the nine months ended September 24, 2022 and recognized insignificant gains and losses for the three and nine months ended September 24, 2022 and September 25, 2021. Additionally, in October 2022require the Company purchased anto acquire shares of the Investee from the seller. The consummation of the acquisition of the additional interest in an existing strategic41% equity investment for $25 million.is subject to regulatory approval and closing conditions being satisfied. Accordingly, the timing of close is uncertain.
14

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. FAIR VALUE
The Company has certain financial assets and liabilities recorded at fair value, which have been classified as Level 1, 2, or 3 within the fair value hierarchy. Assets and liabilities measured at fair value on a recurring basis are summarized below:
September 24, 2022 July 1, 2023
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Current assets measured at fair value:Current assets measured at fair value:(in thousands)Current assets measured at fair value:(in thousands)
Cash equivalentsCash equivalents$— $77 $— $77 Cash equivalents$— $28 $— $28 
Other assets:Other assets:Other assets:
Life insurance policiesLife insurance policies— 32,738 — 32,738 Life insurance policies— 38,308 — 38,308 
Interest rate swapInterest rate swap— 3,121 — 3,121 
Total assets measured at fair valueTotal assets measured at fair value$— $32,815 $— $32,815 Total assets measured at fair value$— $41,457 $— $41,457 
Accrued liabilities measured at fair value:
Contingent consideration$— $— $8,661 $8,661 
Total liabilities measured at fair value$— $— $8,661 $8,661 
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. During the ninesix months ended September 24,July 1, 2023, there were no transfers between levels.
 December 31, 2022
Level 1Level 2Level 3Total
Current assets measured at fair value:(in thousands)
Cash equivalents$— $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 $14,954 
During the year ended December 31, 2022, there were no transfers between levels.
 December 25, 2021
Level 1Level 2Level 3Total
Current assets measured at fair value:(in thousands)
Cash equivalents$— $893 $— $893 
Other assets:
Life insurance policies— 42,918 — 42,918 
Total assets measured at fair value$— $43,811 $— $43,811 
Accrued liabilities measured at fair value:
Contingent consideration$— $— $11,794 $11,794 
Other long-term liabilities measured at fair value:
Contingent consideration— — 25,450 25,450 
Total liabilities measured at fair value$— $— $37,244 $37,244 
During the year ended December 25, 2021, there were no transfers between levels.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contingent Consideration
The following table provides a rollforward of the contingent consideration related to the Company’s acquisitions.
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021July 1, 2023June 25, 2022
(in thousands)(in thousands)
Beginning balanceBeginning balance$37,244 $2,328 Beginning balance$13,431 $37,244 
Additions— 72,476 
PaymentsPayments(11,476)(2,889)Payments(15,130)(11,476)
Total gains or losses (realized/unrealized):Total gains or losses (realized/unrealized):Total gains or losses (realized/unrealized):
Adjustment of previously recorded contingent liabilityAdjustment of previously recorded contingent liability(15,340)(10,360)Adjustment of previously recorded contingent liability1,810 (15,340)
Foreign currency translationForeign currency translation(1,767)(226)Foreign currency translation(111)(878)
Ending balanceEnding balance$8,661 $61,329 Ending balance$— $9,550 
The Company estimates the fair value of contingent consideration obligations through valuation models, such as probability-weighted and option pricing models, that incorporate probability adjusted assumptions and simulations related to the achievement of the milestones and the likelihood of making related payments. The unobservable inputs used in the fair value measurements include the probabilities of successful achievement of certain financial targets, forecasted results or targets, volatility, and discount rates. The remaining maximum potential payments are approximately $53$43 million, of which the value accrued as of September 24, 2022July 1, 2023 is approximately $9 million. The weighted averagezero as the probability of achieving the maximum target is approximately 16%estimated to be 0%. The average volatility and weighted average cost of capital areis approximately 40% and 16%, respectively. Increases or decreases in these assumptions may result in a higher or lower fair value measurement, respectively.
15

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Flow Hedge
The Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. In November 2022, the Company entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuation related to floating rate borrowings under the Credit Facility, at a fixed rate of 4.700%.
In March 2023 and in conjunction with an amendment of the Credit Agreement (Second Amendment), the Company modified the variable rate on its interest rate swap from 1-month LIBOR to 1-month adjusted term SOFR. Effective with the modification, the Company will pay a fixed rate of 4.65% on its swap maturing November 2, 2024. The Company elected to apply the optional expedient in ASC 848, Reference Rate Reform, in connection with modifying its interest rate swap from LIBOR to SOFR that enabled it to consider the modification a continuation of the existing contract. As a result, the transition did not have an impact on the Company’s hedge accounting or a material impact to the Company’s financial statements.
Debt Instruments
The book value of the Company’s term and revolving loans, which are variable rate loans carried at amortized cost, approximates the fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2 within the fair value hierarchy.
The book value of the Company’s Senior Notes are fixed rate obligations carried at amortized cost. Fair value is based on quoted market prices as well as borrowing rates available to the Company. As the fair value is based on significant other observable outputs, it is deemed to be Level 2 within the fair value hierarchy. The book value and fair value of the Company’s Senior Notes is summarized below:
July 1, 2023December 31, 2022
September 24, 2022December 25, 2021Book ValueFair ValueBook ValueFair Value
Book ValueFair ValueBook ValueFair Value(in thousands)
4.25% Senior Notes due 20284.25% Senior Notes due 2028$500,000 $446,250 $500,000 $521,250 4.25% Senior Notes due 2028$500,000 $457,500 $500,000 $460,450 
3.75% Senior Notes due 20293.75% Senior Notes due 2029500,000 422,500 500,000 506,700 3.75% Senior Notes due 2029500,000 440,000 500,000 442,200 
4.0% Senior Notes due 2031500,000 413,750 500,000 507,500 
4.00% Senior Notes due 20314.00% Senior Notes due 2031500,000 433,750 500,000 432,500 
Derivative Instrument
Early8. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table provides a rollforward of the Company’s goodwill:
RMS
DSA (1)
ManufacturingTotal
(in thousands)
December 31, 2022$497,710 $1,433,601 $918,592 $2,849,903 
Acquisitions— 37,129 — 37,129 
Foreign exchange(656)14,969 15,248 29,561 
July 1, 2023$497,054 $1,485,699 $933,840 $2,916,593 
(1) DSA includes accumulated impairment losses of $1 billion, which were recognized in fiscal years 2008 and 2010.
The increase in November 2022,goodwill during the Company entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuationsix months ended July 1, 2023 related to floating rate borrowings under the Credit Facility, at a fixed rateacquisition of 4.700% makingSAMDI in the total interest rate 5.825% at our current spread. The Company designated this derivative instrument as a cash flow hedge at the inception of the contract and expects it to be highly effective.DSA reportable segment.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table provides a rollforward of the Company’s goodwill:
 Adjustments to Goodwill 
December 25, 2021Acquisition RelatedForeign ExchangeSeptember 24, 2022
(in thousands)
RMS$283,524 $215,752 $(2,528)$496,748 
DSA1,472,506 — (81,136)1,391,370 
Manufacturing955,851 (592)(67,372)887,887 
Goodwill$2,711,881 $215,160 $(151,036)$2,776,005 
The increase in goodwill during the nine months ended September 24, 2022 related primarily to the acquisition of Explora BioLabs in the RMS reportable segment.
Intangible Assets, Net
The following table displays intangible assets, net by major class:
September 24, 2022December 25, 2021 July 1, 2023December 31, 2022
GrossAccumulated AmortizationNetGrossAccumulated AmortizationNetGrossAccumulated AmortizationNetGrossAccumulated AmortizationNet
(in thousands)(in thousands)
Client relationshipsClient relationships$1,534,069 $(659,955)$874,114 $1,491,926 $(591,417)$900,509 
TechnologyTechnology141,716 (107,312)34,404 129,626 (101,655)27,971 
BacklogBacklog$14,810 $(11,800)$3,010 $12,577 $(9,517)$3,060 Backlog15,441 (13,903)1,538 15,236 (12,512)2,724 
Technology123,169 (95,545)27,624 135,764 (95,454)40,310 
Trademarks and trade namesTrademarks and trade names12,164 (3,981)8,184 13,086 (3,448)9,638 Trademarks and trade names12,835 (5,021)7,814 12,617 (4,410)8,207 
OtherOther37,900 (18,597)19,303 35,231 (8,445)26,786 Other38,079 (26,059)12,020 37,985 (22,121)15,864 
Other intangible assets188,043 (129,923)58,121 196,658 (116,864)79,794 
Client relationships1,456,032 (546,133)909,899 1,475,757 (494,359)981,398 
Intangible assetsIntangible assets$1,644,075 $(676,056)$968,020 $1,672,415 $(611,223)$1,061,192 Intangible assets$1,742,140 $(812,250)$929,890 $1,687,390 $(732,115)$955,275 
The decrease in intangible assets, net during the ninesix months ended September 24, 2022July 1, 2023 related primarily to normal amortization over the useful lives, offset by the acquisition of Explora BioLabs.SAMDI.
22

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT AND OTHER FINANCING ARRANGEMENTS
Long-term debt, net and finance leases consists of the following:
September 24, 2022December 25, 2021
(in thousands)July 1, 2023December 31, 2022
(in thousands)
Revolving facilityRevolving facility$1,429,154 $1,161,431 Revolving facility$1,168,052 $1,197,586 
4.25% Senior Notes due 20284.25% Senior Notes due 2028500,000 500,000 4.25% Senior Notes due 2028500,000 500,000 
3.75% Senior Notes due 20293.75% Senior Notes due 2029500,000 500,000 3.75% Senior Notes due 2029500,000 500,000 
4.00% Senior Notes due 20314.00% Senior Notes due 2031500,000 500,000 4.00% Senior Notes due 2031500,000 500,000 
Other debtOther debt239 368 Other debt1,423 1,594 
Finance leasesFinance leases29,428 27,223 Finance leases29,354 30,646 
Total debt and finance leasesTotal debt and finance leases2,958,821 2,689,022 Total debt and finance leases2,698,829 2,729,826 
Less:Less:Less:
Current portion of long-term debtCurrent portion of long-term debt— 101 Current portion of long-term debt1,188 1,347 
Current portion of finance leasesCurrent portion of finance leases2,079 2,694 Current portion of finance leases2,535 2,330 
Current portion of long-term debt and finance leasesCurrent portion of long-term debt and finance leases2,079 2,795 Current portion of long-term debt and finance leases3,723 3,677 
Long-term debt and finance leasesLong-term debt and finance leases2,956,742 2,686,227 Long-term debt and finance leases2,695,106 2,726,149 
Debt discount and debt issuance costsDebt discount and debt issuance costs(19,686)(22,663)Debt discount and debt issuance costs(16,634)(18,618)
Long-term debt, net and finance leasesLong-term debt, net and finance leases$2,937,056 $2,663,564 Long-term debt, net and finance leases$2,678,472 $2,707,531 
As of September 24, 2022July 1, 2023 and December 25, 2021,31, 2022, the weighted average interest rate on the Company’s debt was 3.85%4.89% and 2.78%4.58%, respectively. During the nine months ended September 25, 2021, the Company prepaid $500 million of Senior Notes due in 2026 along with $21 million of related debt extinguishment costs and $13 million of accrued interest using proceeds from additional senior notes issued on the same day. The payment of the 2026 Senior Notes was accounted for as a debt extinguishment. Approximately $21 million of debt extinguishment costs and $5 million of deferred financing costs write-offs were recorded in Interest expense for the nine months ended September 25, 2021.
Foreign currency transactions
During the three and ninesix months ended September 24,June 25, 2022, and September 25, 2021, the Company had multiple U.S. dollar denominated loans borrowed by a non-U.S. Euro functional currency entity under the Credit Facility, which were between $250 million andapproximately $400 million each. To limit this foreign currency exposure, the Company entered into foreign exchange forward contracts, which are not designated as hedging instruments. The Company did not have any U.S. dollar denominated loans borrowed by a non-U.S. Euro functional currency entity under the Credit Facility during the three and six months ended July 1, 2023.
The gains and losses incurred on these transactions were as follows:
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021Affected Line Item in the Consolidated Statements of Income
(in thousands)
Loss on foreign debt remeasurement$(16,006)$(4,417)$(46,529)$(22,680)Other expense, net
Gain on foreign exchange forward contract17,406 5,048 49,712 24,380 Interest expense

Letters of Credit
As of September 24, 2022 and December 25, 2021, the Company had $17.7 million in outstanding letters of credit.
Three Months EndedSix Months Ended
June 25, 2022June 25, 2022Affected Line Item in the Unaudited Condensed Consolidated Statements of Income
(in thousands)
Loss on foreign debt remeasurement(19,423)(30,523)Other expense, net
Gain on foreign exchange forward contract20,522 32,306 Interest expense
2317

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Letters of Credit
As of July 1, 2023 and December 31, 2022, the Company had $21.6 million and $18.6 million, respectively, in outstanding letters of credit.
10. EQUITY AND NONCONTROLLING INTERESTS
Earnings Per Share
The following table reconciles the numerator and denominator in the computations of basic and diluted earnings per share:
Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021July 1, 2023June 25, 2022July 1, 2023June 25, 2022
(in thousands)(in thousands)
Numerator:Numerator:  Numerator:  
Net incomeNet income$97,612 $105,159 $303,502 $259,010 Net income$99,443 $110,664 $203,397 $205,890 
Less: Net income attributable to noncontrolling interestsLess: Net income attributable to noncontrolling interests1,139 1,733 4,686 5,606 Less: Net income attributable to noncontrolling interests2,423 1,343 3,246 3,547 
Net income attributable to common shareholdersNet income attributable to common shareholders$96,473 $103,426 $298,816 $253,404 Net income attributable to common shareholders$97,020 $109,321 $200,151 $202,343 
Denominator:Denominator:  Denominator:  
Weighted-average shares outstanding - BasicWeighted-average shares outstanding - Basic50,870 50,425 50,778 50,234 Weighted-average shares outstanding - Basic51,216 50,823 51,157 50,732 
Effect of dilutive securities:Effect of dilutive securities:Effect of dilutive securities:
Stock options, restricted stock units and performance share unitsStock options, restricted stock units and performance share units413 1,133 507 1,126 Stock options, restricted stock units and performance share units251 460 225 561 
Weighted-average shares outstanding - DilutedWeighted-average shares outstanding - Diluted51,283 51,558 51,285 51,360 Weighted-average shares outstanding - Diluted51,467 51,283 51,382 51,293 
Anti-dilutive common stock equivalents(1)
Anti-dilutive common stock equivalents(1)
571 154 568 158 
Anti-dilutive common stock equivalents (1)
594 597 589 550 
(1) These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
(1) These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
(1) These common stock equivalents were outstanding for the periods presented, but were not included in the computation of diluted EPS for those periods because their inclusion would have had an anti-dilutive effect.
Treasury Shares
During the nine months ended September 24, 2022 and September 25, 2021, the Company did not repurchase any shares under itsThe Company’s Board of Directors has authorized a $1.3 billion stock repurchase program. As of September 24, 2022,July 1, 2023, the Company had $129.1 million remaining on the authorized stock repurchase program.
The Company’s stock-based compensation plans permit the netting of common stock upon vesting of restricted stock unitsRSUs and performance share unitsPSUs in order to satisfy individual statutory tax withholding requirements. DuringThe Company acquired shares of 0.1 million in the ninesix months ended September 24,July 1, 2023 and six months ended June 25, 2022, and September 25, 2021, the Company acquired 0.1 million shares for $38.5$24.0 million and 0.1 million shares for $40.4$38.5 million, respectively, from such netting.
Accumulated Other Comprehensive Income (Loss)
Changes to each component of accumulated other comprehensive income (loss), net of income taxes, are as follows:
Foreign Currency Translation Adjustment
and Other
Pension and Other Post-Retirement Benefit PlansTotal
(in thousands)
December 25, 2021$(98,173)$(66,567)$(164,740)
Other comprehensive loss before reclassifications(253,181)— (253,181)
Amounts reclassified from accumulated other comprehensive income— 2,218 2,218 
Net current period other comprehensive (loss) income(253,181)2,218 (250,963)
Income tax (benefit) expense(20,645)550 (20,095)
September 24, 2022$(330,709)$(64,899)$(395,608)
Foreign Currency Translation Adjustment
and Other
Pension and Other Post-Retirement Benefit PlansNet Unrealized (Loss) Gain on Cash Flow HedgeTotal
(in thousands)
December 31, 2022$(217,785)$(43,114)$(1,158)$(262,057)
Other comprehensive income before reclassifications48,699 344 4,644 53,687 
Net current period other comprehensive income48,699 344 4,644 53,687 
Income tax expense (benefit)807 209 (1,117)(101)
July 1, 2023$(169,893)$(42,979)$4,603 $(208,269)
Nonredeemable Noncontrolling Interest
The Company has an investment in an entity whose financial results are consolidated in the Company’s unaudited condensed consolidated financial statements, as it has the ability to exercise control over this entity. The interest of the noncontrolling party in this entity has been recorded as noncontrolling interest within Equity in the accompanying unaudited condensed consolidated balance sheets. The activity within the nonredeemable noncontrolling interest was not significant during the three and ninesix months ended September 24, 2022July 1, 2023 and SeptemberJune 25, 2021.2022.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Redeemable Noncontrolling Interests
The Company hasholds a 92% equityownership interest in Vital River, with an 8% redeemable noncontrolling interest.a commercial provider of research models and related services in China as of July 1, 2023. The Companycompany has the right to purchase, and the noncontrolling interest holders have the right to sell, the remaining 8% equity interest at a contractually defined redemption value, subject to a redemption floor, which represents a derivative embedded within the equity instrument. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value ($24.2 million24.4 million) as of September 24, 2022)July 1, 2023 and the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. As the noncontrolling interest holders have the ability to require the Company to purchase the remaining 8% interest, the noncontrolling interest is classified in the mezzanine section of the unaudited condensed consolidated balance sheets, which is presented above the equity section and below liabilities. The amount that the Company could be required to pay to purchase the remaining 8% equity interest is not limited.
Prior to June During the fourth quarter of fiscal 2022, the Company hadexercised its option to acquire the remaining 8%, which is subject to customary closing conditions. The Company expects the transaction to close prior to the end of fiscal year 2023.
In 2019, the Company acquired an 80% equity interest in a subsidiary withthat is fully consolidated under the voting interest model, which includes a 20% redeemable noncontrolling interest. In June 2022, the Company purchased an additional 10% interest in the subsidiary for $15.0 million.million, resulting in a remaining noncontrolling interest of 10%. Beginning in 2024, the Company has the right to purchase, and the noncontrolling interest holders have the right to sell (Put/call option), the remaining 10% equity interest at its appraised value ($15.017.0 million as of September 24, 2022)July 1, 2023). The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the appraised value and the carrying amount adjusted for net income (loss) attributable to the noncontrolling interest or a predetermined floor value. As the noncontrolling interest holders have the ability to require the Company to purchase the remaining 10% interest, the noncontrolling interest is classified in the mezzanine section of the unaudited condensed consolidated balance sheets, which is presented above the equity section and below liabilities. The amount that the Company could be required to pay to purchase the remaining 10% equity interest is not limited.
The following table provides a rollforward of the activity related to the Company’s redeemable noncontrolling interests:
Nine Months Ended
September 24, 2022September 25, 2021
(in thousands)
Beginning balance$53,010 $25,499 
Purchase of a 10% redeemable noncontrolling interest(15,000)— 
Adjustments of noncontrolling interests to redemption values6,681 3,043 
Net income attributable to noncontrolling interests2,963 3,674 
Dividend to redeemable noncontrolling interest(3,525)— 
Foreign currency translation(4,923)340 
Ending balance$39,206 $32,556 
Six Months Ended
July 1, 2023June 25, 2022
(in thousands)
Beginning balance$42,427 $53,010 
Adjustments to redemption value— 2,293 
Additional purchases— (15,000)
Net income (loss)2,179 2,487 
Foreign currency translation(2,159)(2,613)
Ending balance$42,447 $40,177 
11. INCOME TAXES
The Company’s effective tax rates remained relatively consistent for the three months ended September 24,July 1, 2023 and June 25, 2022 at 22.7% and September 25, 2021 were 20.7% and 14.7%23.2%, respectively. The Company’s effective tax rates for the ninesix months ended September 24,July 1, 2023 and June 25, 2022 were 21.7% and September 25, 2021 were 19.7% and 18.3%19.2%, respectively. The increase in the threesix month effective tax rates from the prior year period was primarily attributable to a decreased tax benefit from stock-based compensation deductions as well as lower research and development tax credits due to a discrete benefit in the threesix months ended September 25, 2021. The increase in the nine month effective tax rates is attributable primarily to the same reasons as above, partially offset with the deferred tax impact of tax law changes enacted during the nine months ended September 25, 2021.July 1, 2023.
For the three months ended September 24, 2022,July 1, 2023, the Company’s unrecognized tax benefits decreasedincreased by $1.2$1.1 million to $33.3$25.6 million, primarily due to favorable foreign exchange, and the lapse of statutes of limitations, partially offset by increases in research and development tax credit reserves. For the three months ended September 24, 2022,July 1, 2023, the amount of unrecognized income tax benefits that would impact the effective tax rate decreasedincreased by $1.5$0.6 million to $29.6$21.8 million for the same reasons discussed above. The accrued interest on unrecognized tax benefits was $1.1$1.0 million as of September 24, 2022.July 1, 2023. The Company estimates that it is reasonably possible that the unrecognized tax benefits will decrease by approximately $10.6$4 million over the next twelve-month period, primarily due to audit settlements and expiring statutes of limitations.
The Company’s prepaid and accrued tax positions are as follows:
July 1, 2023December 31, 2022Affected Line Item in the Unaudited Condensed Consolidated Balance Sheets
(in thousands)
Prepaid income tax$87,718 $88,550 Other current assets
Accrued income taxes44,813 39,854 Other current liabilities
The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the U.S., the U.K., China, France, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2018.2019.
The Company and certain of its subsidiaries have ongoing tax controversies in the U.S., Canada, France,the U.K., Germany, and India. The Company does not anticipate resolution of these audits will have a material impact on its consolidated financial statements.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. RESTRUCTURING AND ASSET IMPAIRMENTSSUPPLEMENTAL CASH FLOW INFORMATION
In recent fiscal years, the Company has undertaken productivity improvement initiatives within all reportable segments at various locations across the U.S., Canada,
Six Months Ended
July 1, 2023June 25, 2022
(in thousands)
Non-cash investing activities:
Purchases of Property, plant and equipment included in Accounts payable and Accrued liabilities$47,850 $51,776 
Cash, cash equivalents and Europe. This includes workforce right-sizing and scalability initiatives, resulting in severance and transition costs; and cost related to the consolidation of facilities, resulting in asset impairment and accelerated depreciation charges. The Company does not have any significant remaining lease obligations for facilities associated with restructuring activities. The following table presents a summary of restructuring costs related to these initiatives within the unaudited condensed consolidated statements of income:
Three Months EndedNine Months Ended
September 24, 2022September 25, 2021September 24, 2022September 25, 2021
(in thousands)
RMS$(110)$— $1,017 $
DSA71 815 687 2,449 
Manufacturing1,165 1,516 1,543 2,385 
Unallocated corporate(23)— 1,231 (151)
Total$1,103 $2,331 $4,478 $4,690 
As of September 24, 2022 and September 25, 2021, $1.7 million and $3.4 million, respectively, of severance and other personnel related costs liabilities and lease obligation liabilities wererestricted cash is included in accrued compensation and accrued liabilities within the Company’saccompanying unaudited condensed consolidated balance sheets.sheet as follows:
July 1, 2023December 31, 2022
(in thousands)
Supplemental cash flow information:
Cash and cash equivalents$200,445 $233,912 
Restricted cash included in Other current assets7,136 6,192 
Restricted cash included in Other assets1,196 1,110 
Cash, cash equivalents, and restricted cash, end of period$208,777 $241,214 
13. COMMITMENTS AND CONTINGENCIES
Litigation
Various lawsuits,On February 16, 2023, the Company was informed by the U.S. Department of Justice (DOJ) that in conjunction with the U.S. Fish and Wildlife Service (USFWS), it had commenced an investigation into the Company’s conduct regarding several shipments of non-human primates from Cambodia. On February 17, 2023 the Company received a grand jury subpoena requesting certain documents related to such investigation. The Company is aware of a parallel civil investigation being undertaken by the DOJ and USFWS. The Company is cooperating with the DOJ and the USFWS and believes that the concerns raised with respect to the Company’s conduct are without merit. The Company maintains a global supplier onboarding and oversight program incorporating risk-based due diligence, auditing, and monitoring practices to help ensure the quality of our supplier relationships and compliance with applicable U.S. and international laws and regulations, and has operated under the belief that all shipments of non-human primates it received satisfied the material requirements, documentation and related processes and procedures of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) documentation and related processes and procedures, which guides the release of each import by USFWS. Notwithstanding our efforts and good-faith belief, in connection with the civil investigation, the Company has voluntarily suspended future shipments of non-human primates from Cambodia to the United States until such time that the Company and USFWS can agree upon and implement additional procedures to reasonably ensure that non-human primates imported from Cambodia are purpose-bred. The Company continues to care for the Cambodia-sourced non-human primates from certain recent shipments in the United States. The carrying value of the inventory related to these shipments is approximately $20 million. On May 16, 2023, the Company received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting it to voluntarily provide information primarily related to the sourcing of non-human primates in Asia, and the Company is cooperating with the request. The Company is not able to predict what action, if any, might be taken in the future by the DOJ, USFWS, SEC or other governmental authorities as a result of the investigations. None of the DOJ, USFWS or SEC has provided the Company with any specific timeline or indication as to when these investigations or, specific to the DOJ and USFWS, discussions regarding future processes and procedures, will be concluded or resolved. The Company cannot predict the timing, outcome or possible impact of the investigations, including without limitation any potential fines, penalties or liabilities.
A putative securities class action was filed on May 19, 2023 against the Company and three of its current/former officers (James Foster, the Chief Executive Officer; David R. Smith, the former Chief Financial Officer; and Flavia Pease, the current Chief Financial Officer) in the United States District Court for the District of Massachusetts. The case, which is captioned Coleman v. Charles River Laboratories International, Inc., et al., Case No. 23-cv-11132, asserts claims under §§ 10(b) and proceedings20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") on behalf of a putative class of purchasers of Company securities from May 5, 2020 through February 21, 2023. The Complaint alleges that certain of the Company’s disclosures about its practices with respect to the importation of non-human primates made during the putative class period were materially false or misleading. A lead plaintiff has yet to be appointed and the Company intends to file a motion to dismiss. While the Company cannot predict the outcome of this matter, it believes the class action to be without merit and plans to vigorously defend against it. The Company cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for this matter.
Aside from the matter above, the Company believes there are no other matters pending against the Company. While the outcome of any of these proceedings cannot be accurately predicted, the Company does not believe the ultimate resolution of any of these existing matters wouldthat could have a material adverse effectimpact on the Company’s business, financial condition, or financial condition.
14. SUBSEQUENT EVENT
Avian Vaccine Services Divestiture
On November 1, 2022, the Company signed an agreement with a private investor group to sell its Avian Vaccine Services business (“Avian”) for approximately $170 million in cash, subject to certain customary closing adjustments, and future contingent payments up to an additional $30 million. The Company is in the processresults of evaluating the transaction and its impact on the consolidated financial statements. The proposed transaction is expected to close in the fourth quarter of fiscal 2022.operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes of this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for fiscal year 2021.2022. The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in Item 1A, “Risk Factors” included elsewhere within this Form 10-Q. Certain percentage changes may not recalculate due to rounding.
Overview
We are a full service, leading, non-clinical global non-clinical drug development partner. WeFor over 75 years, we have been in the business of providing the research models required in the research and development of new drugs, devices, and therapies. Over this time, we have built upon our original core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, which is able to supportthat supports our clients from target identification through non-clinical development. We also provide a suite of products and services to support our clients’ manufacturing activities, including our recently acquired contract development and manufacturing organization (CDMO) business. Utilizing our broad portfolio of products and services enables our clients to create a more efficient and flexible drug development model, which reduces their costs, enhances their productivity and effectiveness, and increases speed to market.
Our client base includes major global biopharmaceuticalpharmaceutical companies, many biotechnology companies; agricultural and industrial chemical, life science, veterinary medicine, medical device, diagnostic and consumer product companies; contract research and contract manufacturing organizations; and other commercial entities, as well as leading hospitals, academic institutions, and government agencies around the world.
Segment Reporting
Our three reportable segments are Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing).
Our RMS reportable segment includes the Research Models, Research Model Services, and Research and GMP-Compliant CellsCell 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; and Insourcing Solutions (IS), which provides colony management of our clients’ research operations (including recruitment, training, staffing, and management services). Research within our clients’ facilities as well as our own vivarium space, utilizing both our Charles River Accelerator and GMP-Compliant Cells suppliesDevelopment Lab (CRADL) and our Explora BioLabs options. Cell Solutions provides controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood, bone marrow, and cord blood.
Our 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,is comprised of two businesses: Discovery Services and selection of a lead compound for drug development, andSafety Assessment. We provide regulated and non-regulated (GLPDSA services to support the research, development, and non-GLP)regulatory-required safety assessment services. 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.
Our Manufacturing reportable segment includes Microbial Solutions, which provides in vitro (non-animal) lot-release testing products, microbial detection products, and species identification services;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); and. In December of 2022, we sold the Avian Vaccine Services (Avian), business, reported in the Manufacturing segment, which suppliessupplied specific-pathogen-free chicken eggs and chickens.
Russia-Ukraine ConflictU.S. Government Investigations into the Non-Human Primate Supply Chain
On February 16, 2023, we were informed by the U.S. Department of Justice (DOJ) that in conjunction with the U.S. Fish and Wildlife Service (USFWS), it had commenced an investigation into our conduct regarding several shipments of non-human primates from Cambodia. On February 17, 2023 we received a grand jury subpoena requesting certain documents related to such investigation. We are aware of a parallel civil investigation being undertaken by the DOJ and USFWS. We are cooperating with the DOJ and the USFWS and believe that the concerns raised with respect to our conduct are without merit. We maintain a global supplier onboarding and oversight program incorporating risk-based due diligence, auditing, and monitoring practices to help ensure the quality of our supplier relationships and compliance with applicable U.S. and international laws and regulations, and have operated under the belief that all shipments of non-human primates we received satisfied the material requirements, documentation and related processes and procedures of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) documentation and related processes and procedures, which guides the release of each import by
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USFWS. Notwithstanding our efforts and good-faith belief, in connection with the civil investigation, we have voluntarily suspended future shipments of non-human primates from Cambodia to the United States until such time that we and USFWS can agree upon and implement additional procedures to reasonably ensure that non-human primates imported from Cambodia are purpose-bred. We continue to care for the Cambodia-sourced non-human primates from certain recent shipments in the United States. The carrying value of the inventory related to these shipments is approximately $20 million. On May 16, 2023, we received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting to voluntarily provide information primarily related to the sourcing of non-human primates in Asia, and we are cooperating with the request. We are not able to predict what action, if any, might be taken in the future by the DOJ, USFWS or other governmental authorities as a result of the investigations. None of the DOJ, USFWS or SEC has provided us with any specific timeline or indication as to when these investigations or, specific to the DOJ and USFWS, discussions regarding future processes and procedures, will be concluded or resolved. We cannot predict the timing, outcome or possible impact of the investigations, including without limitation any potential fines, penalties or liabilities. For our assessment of risk factors surrounding the aforementioned matter refer to Item 1A, “Risk Factors” and Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for fiscal year 2022.
Global Economic Environment
In March 2023, the global economy experienced a series of banking crises, which sparked a period of widespread investor concerns regarding the U.S. and international financial systems, particularly access to capital. We do not hold cash deposits or securities at any of the impacted banks. Our banking relationships are assessed as we believe necessary and appropriate and our access to cash and funding is secure and diversified. We believe there are no material impacts to our Company as of July 1, 2023 based on the current situation. We will continue to monitor the global banking markets as they evolve for potential impacts to our operating and financial results such as increased interest rates, commercial financing terms or costs, and liquidity concerns in the broader market or business partners.
We are seeing a more cautious spending environment from biopharmaceutical clients with a decrease in DSA backlog to $2.76 billion as of July 1, 2023 from $3.15 billion as of December 31, 2022, but continue to see stability in our client’s drug development activity as they are moving their promising drug candidates forward. We will continue to monitor the market trends carefully for potential impacts to our operating and financial results and there are no material impacts to our Company as of July 1, 2023.
Our global operations make the effective tax rate sensitive to significant tax law changes. Several countries have begun to enact legislation to implement the Organization for Economic Cooperation and Development’s (OECD) international tax framework, including the Pillar II global minimum tax regime with effect from January 1, 2024 or later. We are currently monitoring these developments and are in the process of evaluating the potential impact on our results of operations.
In February 2022, the Russian Federation launched an invasion of the country of Ukraine resulting in conflict in the region and a variety of sanctions against the Russian Federation enacted by several governments, including the U.S, United Kingdom,U.K., Canada and European Union. The conflict has had and continues to have, direct and indirect adverse effects on financial markets and global supply chain disruptions. We do not have any direct operations in either Russia or Ukraine and there were no material impacts to our financial statements for the three and nine months ended September 24,during fiscal year 2022 as a result of the situation. We will continue to monitor the situation as it evolves for potential impacts to our operating and financial results such as increased inflationary,inflation, supply chain, or cybersecurity risks in subsequent periods. Refer to Item 1A, Risk Factors disclosed herein and in“Risk Factors” of our Annual Report on Form 10-K for fiscal 2021year 2022 for our assessment of risk factors surrounding inflationary, supply chain and cybersecurity risks.
Recent Acquisitions
Our strategy is to augment internal growth of existing businesses with complementary acquisitions. Our recent acquisitions are described below.
Fiscal Year 2023 Acquisition
On January 27, 2023, we 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 preliminary purchase price of SAMDI was $62.8 million, inclusive of a 20% strategic equity interest previously owned by us. The acquisition was funded through a combination of available cash and proceeds from our Credit Facility. This business is reported as part of our DSA reportable segment.
Fiscal Year 2022 Acquisition
On April 5, 2022, we acquired Explora BioLabs Holdings, Inc. (Explora BioLabs), a provider of contract vivarium research
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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 our existing IS business, specifically our 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
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purchase price of Explora BioLabs was $284.5 million, net of $6.6 million in cash. The acquisition was funded through proceeds from our Credit Facility. This business is reported as part of our RMS reportable segment.
Fiscal Year 2021 Acquisitions
On June 28, 2021, we 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, and included $34.5 million of contingent consideration (maximum contingent payments of up to $57.5 million based on future performance). The acquisition was funded through a combination of available cash and proceeds from our Credit Facility. This business is reported as part of our 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.
On March 30, 2021, we acquired Retrogenix Limited (Retrogenix), an outsourced discovery services provider specializing in bioanalytical services utilizing its proprietary cell microarray technology. The acquisition of Retrogenix enhances our 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 additional payments up to $6.9 million, which are contingent on future performance. The acquisition was funded through a combination of available cash and proceeds from our Credit Facility. This business is reported as part of our DSA reportable segment.
On March 29, 2021, we 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 us as a scientific partner for cell and gene therapy development, testing, and manufacturing, providing clients with an integrated solution from basic research and discovery 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 our Credit Facility and Senior Notes issued in fiscal 2021. This business is reported as part of our Manufacturing reportable segment.
On March 3, 2021, we acquired certain assets from a distributor that supports our 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 (the maximum contingent contractual payments are up to $17.5 million). The business is reported as part of our DSA reportable segment. As of September 24, 2022, the fair value of the contingent consideration was zero as certain operational targets were not achieved.
On December 31, 2020, we 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 our 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 us during prior fiscal years, and $14.1 million of contingent consideration (the maximum contingent contractual payments are up to $21.0 million). The acquisition was funded through a combination of available cash and proceeds from our Credit Facility. This business is reported as part of our 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. Other financial targets associated with the contingent consideration were not met and the fair value of the remaining contingent consideration is zero as of September 24, 2022.
Recent Divestitures
We routinely evaluate strategic fit and fundamental performance of our global infrastructure and divest operations that do not meet key business criteria or where we believe capital could be better deployed in long-term growth opportunities. On November 1,December 20, 2022, we signed an agreement withcompleted the sale of our Avian Vaccine Services (Avian) business to a private investor group to sell our Avian Vaccine Services business (“Avian”) for approximately $170a preliminary purchase price of $167 million in cash, subject to certain customary closing adjustments, and future contingent payments up to an additional $30 million. We areThis business was reported in the process of evaluating the transaction and its impact on the consolidated financial statements. The proposed transaction is expected to close in the fourth quarter of fiscal 2022.
On October 12, 2021, we completed two separate divestitures. We sold our RMS Japan operations to The Jackson Laboratory for a purchase price of $70.9 million, which included $7.9 million in cash, $3.8 million pension over funding, and certain post-closing adjustments. We also sold our gene therapy CDMO site in Sweden to a private investor group for a purchase price of $59.6 million, net of $0.2 million in cash and certain post-closing adjustments. Included in the purchase price are contingent payments fair valued at $15.3 million, (the maximum contingent contractual payments are up to $25.0 million based on future performance), as well as a purchase obligation of approximately $10 million between the parties. As of September 24, 2022, the
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fair value of the contingent payments was reduced to $7.5 million as certain financial targets are not expected to be achieved. We routinely evaluate the strategic fit and fundamental performance of our businesses. As part of this assessment, we determined that the above capital could be better deployed in other long-term growth opportunities.Manufacturing reportable segment.
Fiscal Quarters
Our 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 occuroccurred in this fiscal year 2022.
Overview of Results of Operations and Liquidity
Revenue for the three months ended September 24, 2022July 1, 2023 increased $93.3$86.8 million, or 10.4%8.9%, to $989.2$1,059.9 million compared to $895.9$973.1 million in the corresponding period in 2021.2022. Revenue for the ninesix months ended September 24, 2022July 1, 2023 increased $241.1$202.3 million, or 9.1%10.7%, to $2.9 billion$2,089.3 million compared to $2.6 billion$1,887.1 million in the corresponding period in 2021.2022. The increase in revenue in both periods was primarily due to increased demandvolume and pricing within our DSA segmentSafety Assessment business and our recent acquisition of Explora BioLabs; partially offset by the divestituresdivestiture of RMS Japan and CDMO Swedenour Avian business and the negative effect of changes in foreign currency exchange rates when compared to the corresponding three and ninesix month periods in 2021.2022.
In the three months ended September 24, 2022,July 1, 2023, our operating income and operating income margin were $151.0$164.9 million and 15.3%15.6%, respectively, compared with $155.8$187.4 million and 17.4%19.3%, respectively, in the corresponding period of 2021.2022. In the ninesix months ended September 24, 2022,July 1, 2023, our operating income and operating income margin were $487.2$332.8 million and 16.9%,15.9% respectively, compared with $417.1$336.2 million and 15.8%17.8%, respectively, in the corresponding period of 2021.2022. The decreases in operating income and operating margin for the three months ended September 24, 2022 was primarily due to higher operating costs associated with our CDMO business, higher staffing costs and modest inflationary pressures. The increases in operating income and operating income margin for the ninethree and six months ended September 24, 2022July 1, 2023 was primarily due to the contributionlower operating income within our Manufacturing segment, principally our Biologics Solutions businesses which included higher operating costs, an asset impairment charge, and income in 2022 from a favorable ruling from tax authorities on certain indirect tax positions which did not reoccur; partially offset by contributions of higher revenue described above, lower acquisition related costs, changes in contingent consideration; partially offset by higher operating costs associated with our CDMO business, higher staffing costs and modest inflationary pressures.above.
Net income attributable to common shareholders decreased to $96.5$97.0 million in the three months ended September 24, 2022,July 1, 2023, from $103.4$109.3 million in the corresponding period of 2021.2022. Net income attributable to common shareholders decreased to $200.2 million in the six months ended July 1, 2023, from $202.3 million in the corresponding period of 2022. The decrease in Net income attributable to common shareholders was primarily due to decreases inlower operating income described above, and a decreased tax benefit from stock-based compensation deductions.
Net income attributable to common shareholders increased to $298.8 million in the nine months ended September 24, 2022, from $253.4 million in the corresponding period of 2021. The increase in Net income attributable to common shareholders was primarilyhigher interest expense due to the increase in operating income described above and by the absence of debt extinguishment costs associated with the repayment of the 2026 Senior Notes and related write-off of deferred financing costs incurred in 2021; partially offset by higher provision for income taxes and higher lossesinterest rates on our investmentsvariable debt, compared to the corresponding period in 2021.of 2022.
During the ninesix months ended September 24, 2022,July 1, 2023, our cash flows from operations was $384.9$257.5 million compared with $531.5$252.1 million for the same period in 2021.2022. The decreaseincrease was driven by timing and amount of our working capital balances, principally collections of net contract balances from customers (collectively trade receivables and contract assets, net; deferred revenue; and customer contract deposits), inventory purchases, andlower variable compensation payments.payments; partially offset by timing of our vendor and supplier payments compared to the same period in 2022.
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Results of Operations
Three Months Ended September 24, 2022July 1, 2023 Compared to the Three Months Ended SeptemberJune 25, 20212022
Revenue and Operating Income
The following tables present consolidated revenue by type and by reportable segment:
Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeJuly 1, 2023June 25, 2022$ change% change
(in millions, except percentages)(in thousands, except percentages)
Service revenueService revenue$812.9 $703.8 $109.1 15.5 %Service revenue$874,891 $782,827 $92,064 11.8 %
Product revenueProduct revenue176.3 192.1 (15.8)(8.2)%Product revenue185,046 190,304 (5,258)(2.8)%
Total revenueTotal revenue$989.2 $895.9 $93.3 10.4 %Total revenue$1,059,937 $973,131 $86,806 8.9 %
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Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RMSRMS$180.1 $171.3 $8.8 5.2 %(4.0)%RMS$209,948 $186,410 $23,538 12.6 %(1.3)%
DSADSA619.5 531.8 87.7 16.5 %(4.3)%DSA663,457 591,917 71,540 12.1 %0.1 %
ManufacturingManufacturing189.6 192.8 (3.2)(1.7)%(5.4)%Manufacturing186,532 194,804 (8,272)(4.2)%— %
Total revenueTotal revenue$989.2 $895.9 $93.3 10.4 %(4.5)%Total revenue$1,059,937 $973,131 $86,806 8.9 %(0.2)%
The following table presents operating income by reportable segment:
Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RMSRMS$35.9 $39.1 $(3.2)(8.2)%(4.8)%RMS$48,918 $39,526 $9,392 23.8 %(3.9)%
DSADSA142.1 116.5 25.6 22.0 %(1.6)%DSA161,538 128,793 32,745 25.4 %2.5 %
ManufacturingManufacturing31.5 48.6 (17.1)(35.2)%(9.3)%Manufacturing24,403 62,503 (38,100)(61.0)%0.7 %
Unallocated corporateUnallocated corporate(58.5)(48.4)(10.1)20.9 %(1.7)%Unallocated corporate(69,914)(43,411)(26,503)61.1 %(0.1)%
Total operating incomeTotal operating income$151.0 $155.8 $(4.8)(3.1)%(5.0)%Total operating income$164,945 $187,411 $(22,466)(12.0)%1.2 %
Operating income % of revenueOperating income % of revenue15.3 %17.4 %(210) bpsOperating income % of revenue15.6 %19.3 %(370) bps
The following presents and discusses our consolidated financial results by each of our reportable segments:
RMS
Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RevenueRevenue$180.1 $171.3 $8.8 5.2 %(4.0)%Revenue$209,948 $186,410 $23,538 12.6 %(1.3)%
Cost of revenue (excluding amortization of intangible assets)Cost of revenue (excluding amortization of intangible assets)113.2 103.8 9.4 9.1 %Cost of revenue (excluding amortization of intangible assets)127,888 114,788 13,100 11.4 %
Selling, general and administrativeSelling, general and administrative25.5 24.3 1.2 5.1 %Selling, general and administrative27,653 26,623 1,030 3.9 %
Amortization of intangible assetsAmortization of intangible assets5.5 4.1 1.4 34.2 %Amortization of intangible assets5,489 5,473 16 0.3 %
Operating incomeOperating income$35.9 $39.1 $(3.2)(8.2)%(4.8)%Operating income$48,918 $39,526 $9,392 23.8 %(3.9)%
Operating income % of revenueOperating income % of revenue19.9 %22.8 %(290) bpsOperating income % of revenue23.3 %21.2 %210 bps
RMS revenue increased $8.8$23.5 million due primarily to higher smallthe timing of large research model product revenuesales in North AmericaChina and China, higher research model services revenue, specifically the Insourcing Solutions business, which included the acquisition of Explora BioLabs contributing $15.1 million;business; partially offset by the divestiture of RMS Japan, which decreased product revenue by $12.1 million and the effect of changes in foreign currency exchange rates.
RMS operating income decreased $3.2increased $9.4 million compared to the corresponding period in 2021.2022. RMS operating income as a percentage of revenue for the three months ended September 24, 2022July 1, 2023 was 19.9%23.3%, a decreasean increase of 290210 bps from 22.8%21.2% for the corresponding period in 2021.2022. Operating income and operating income as a percentage of revenue decreasedincreased primarily due to revenue mix andthe timing of large research model sales in China; partially offset by higher operating and staffing costs, in China, as well as expansion costs related to new CRADL and Explora sites in the Insourcing Solutions business.foreign exchange impact discussed above.
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DSA
Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RevenueRevenue$619.5 $531.8 $87.7 16.5 %(4.3)%Revenue$663,457 $591,917 $71,540 12.1 %0.1 %
Cost of revenue (excluding amortization of intangible assets)Cost of revenue (excluding amortization of intangible assets)400.5 356.6 43.9 12.3 %Cost of revenue (excluding amortization of intangible assets)420,551 391,225 29,326 7.5 %
Selling, general and administrativeSelling, general and administrative56.9 37.8 19.1 50.7 %Selling, general and administrative63,709 51,140 12,569 24.6 %
Amortization of intangible assetsAmortization of intangible assets20.0 20.9 (0.9)(4.5)%Amortization of intangible assets17,659 20,759 (3,100)(14.9)%
Operating incomeOperating income$142.1 $116.5 $25.6 22.0 %(1.6)%Operating income$161,538 $128,793 $32,745 25.4 %2.5 %
Operating income % of revenueOperating income % of revenue22.9 %21.9 %100 bpsOperating income % of revenue24.3 %21.8 %250 bps
DSA revenue increased $87.7$71.5 million due primarily to service revenue which increased in both thevolume and pricing increases within our Safety Assessment business principally in pharmaceutical clients, and Discovery Services businesses due principallythe acquisition of SAMDI which contributed $1.7 million to increased demand and pricing of services;service revenue; partially offset by decrease in the effect of changes in foreign currency exchange rates.Discovery Business.
DSA operating income increased $25.6$32.7 million during the three months ended September 24, 2022July 1, 2023 compared to the corresponding period in 2021.2022. DSA operating income as a percentage of revenue for the three months ended September 24, 2022July 1, 2023 was 22.9%24.3%, an increase of 100250 bps from 21.9%21.8% for the corresponding period in 2021.2022. Operating income and operating income as a percentage of revenue increased primarily due to the contribution of higher revenue described above partially offset by higher staffing costs, modest inflationary pressures, and the absence of adjustments to contingent considerations arrangements related to certain acquisition compared to the same period in 2021.
Manufacturing
Three Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FX
(in millions, except percentages)
Revenue$189.6 $192.8 $(3.2)(1.7)%(5.4)%
Cost of revenue (excluding amortization of intangible assets)105.3 98.2 7.1 7.2 %
Selling, general and administrative42.7 38.2 4.5 11.9 %
Amortization of intangible assets10.1 7.8 2.3 28.2 %
Operating income$31.5 $48.6 $(17.1)(35.2)%(9.3)%
Operating income % of revenue16.6 %25.2 %(860) bps
Manufacturing revenue decreased $3.2 million due primarily to the divestiture of the CDMO Sweden business, which decreased revenue by $4.2 million, a reduction within our CDMO business, and the effect of changes in foreign currency exchange rates; partially offset by higher servicelegal costs incurred in connection with the investigations by the U.S. government into the non-human primate supply chain and the absence of certain favorable acquisition-related adjustments to contingent consideration arrangements incurred during 2022, which are recorded in selling, general and administrative cost.
Manufacturing
Three Months Ended
July 1, 2023June 25, 2022$ change% changeImpact of FX
(in thousands, except percentages)
Revenue$186,532 $194,804 $(8,272)(4.2)%— %
Cost of revenue (excluding amortization of intangible assets)112,522 110,390 2,132 1.9 %
Selling, general and administrative38,481 10,537 27,944 265.2 %
Amortization of intangible assets11,126 11,374 (248)(2.2)%
Operating income$24,403 $62,503 $(38,100)(61.0)%0.7%
Operating income % of revenue13.1 %32.1 %(1,900) bps
Manufacturing revenue decreased $8.3 million due primarily to the divestiture of our Avian business, which decreased revenue by $19.8 million, and lower services revenue from our Biologics Testing businesses; offset by higher revenue within our Biologics Testing Solutions business,CDMO businesses and an increased demand for endotoxin products in our Microbial Solutions business.businesses.
Manufacturing operating income decreased $17.1$38.1 million during the three months ended September 24, 2022July 1, 2023 compared to the corresponding period in 2021.2022. Manufacturing operating income as a percentage of revenue for the three months ended September 24, 2022July 1, 2023 was 16.6%13.1%, a decrease of 8601,900 bps from 25.2%32.1% for the corresponding period in 2021. The decrease in operating2022. Operating income and operating income as a percentage of revenue wasdecreased primarily due to the divestiture of our Avian business, and lower revenue described above, adjustments to contingent consideration arrangements related to certain acquisitions, and operating income within our Biologics Solutions business, including higher operating costs associated with ourwithin both the Biologics Testing and CDMO business.businesses, and the absence of a $19 million impact from a favorable ruling from tax authorities on certain indirect tax positions recorded within selling, general and administrative expenses in the corresponding period in 2022.
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Unallocated Corporate
Three Months EndedThree Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
Unallocated corporateUnallocated corporate$58.5 $48.4 $10.1 20.9 %(1.7)%Unallocated corporate$69,914 $43,411 $26,503 61.1 %(0.1)%
Unallocated corporate % of revenueUnallocated corporate % of revenue5.9 %5.4 %50 bpsUnallocated corporate % of revenue6.6 %4.5 %210 bps
Unallocated corporate costs consist of selling, general and administrative expenses that are not directly related or allocated to the reportable segments. The increase in unallocated corporate costs of $10.1$26.5 million, or 20.9%61.1%, compared to the corresponding period in 20212022 is primarily related to highertiming of variable compensation expenses and benefit expenses.digital investments. Costs as a percentage of revenue for the three months ended September 24, 2022July 1, 2023 was 5.9%6.6%, an increase of 50210 bps from 5.4%4.5% for the corresponding period in 2021.2022.
InterestOther Income (Expense)
Three Months Ended
July 1, 2023June 25, 2022$ change% change
(in thousands, except percentages)
Other income (expense):
Interest income$1,426 $188 $1,238 658.5 %
Interest expense(35,044)(3,703)(31,341)846.4 %
Other income (expense), net(2,663)(39,783)37,120 (93.3)%
Total other expense, net$(36,281)$(43,298)$7,017 (16.2)%
Interest income, which represents earnings on cash, cash equivalents, and time deposits was $0.1 millionexpense for both the three months ended September 24, 2022 andJuly 1, 2023 was $35.0 million, an increase of $31.3 million, or 846.4%, compared to $3.7 million in the corresponding period in 2021.
Interest Expense
Interest expense for thethree months ended September 24, 2022 was $11.4 million, a decrease of $5.1 million, or 30.9%, compared to $16.5 million for the corresponding period in 2021.2022. The decreaseincrease was due primarily to a higher foreign currency gaininterest rates, and the absence of $20.5 million of gains recognized in connection with a debt-related foreign exchange forward contract in the three months ended September 24, 2022, partially offset by higher interest rates on our variable debt as compared to the corresponding period in 2021.
Other Expense, Net2022.
Other expense, net was $16.6 million for the three months ended September 24, 2022, an increaseJuly 1, 2023 was $2.7 million, a decrease of $0.4$37.1 million, or 93.3%, compared to $16.2Other expense, net of $39.8 million for the corresponding period in 2021.2022. The increase in the three months ended September 24, 2022decrease was due primarily to higherthe absence of $19.4 million of foreign currency losses recognized in connection with a U.S. dollar denominated loan borrowed by a non-U.S. entity with a different functional currency, and lower net losses incurred on our venture capital investments as compared to the corresponding period in 2021, offset by venture capital investment gains compared to losses incurred for the corresponding period in 2021.fiscal year 2022.
Income Taxes
Three Months Ended
July 1, 2023June 25, 2022$ change% change
(in thousands, except percentages)
Provision for income taxes$29,221 $33,449 $(4,228)(12.6)%
Effective tax rate22.7 %23.2 %(50) bps
Income tax expense for the three months ended September 24, 2022July 1, 2023 was $25.5$29.2 million, an increasea decrease of $7.4$4.2 million compared to $18.1$33.4 million for the corresponding period in 2021.2022. Our effective tax rate was 20.7%22.7% for the three months ended September 24, 2022,July 1, 2023, which was relatively consistent compared to 14.7%23.2% for the corresponding period in 2021. The increase in our effective tax rate in the 2022 period compared to the 2021 period was primarily attributable to decreased tax benefit from stock-based compensation deductions, as well as lower research and development tax credits due to a discrete benefit in the three months ended September 25, 2021.2022.
NineSix Months Ended September 24, 2022July 1, 2023 Compared to the NineSix Months Ended SeptemberJune 25, 20212022
Revenue and Operating Income
The following tables present consolidated revenue by type and by reportable segment:
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeJuly 1, 2023June 25, 2022$ change% change
(in millions, except percentages)(in thousands, except percentages)
Service revenueService revenue$2,316.2 $2,045.8 $270.4 13.2 %Service revenue$1,732,257 $1,503,312 $228,945 15.2 %
Product revenueProduct revenue560.0 589.3 (29.3)(5.0)%Product revenue357,053 383,748 (26,695)(7.0)%
Total revenueTotal revenue$2,876.2 $2,635.1 $241.1 9.1 %Total revenue$2,089,310 $1,887,060 $202,250 10.7 %
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Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RMSRMS$543.1 $524.9 $18.2 3.5 %(2.7)%RMS$409,714 $362,952 $46,762 12.9 %(1.9)%
DSADSA1,755.6 1,573.1 182.5 11.6 %(3.1)%DSA1,325,810 1,136,176 189,634 16.7 %(1.0)%
ManufacturingManufacturing577.5 537.1 40.4 7.5 %(4.2)%Manufacturing353,786 387,932 (34,146)(8.8)%(0.9)%
Total revenueTotal revenue$2,876.2 $2,635.1 $241.1 9.1 %(3.2)%Total revenue$2,089,310 $1,887,060 $202,250 10.7 %(1.1)%
The following table presents operating income by reportable segment:
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RMSRMS$123.3 $126.6 $(3.3)(2.6)%(3.0)%RMS$89,327 $87,408 $1,919 2.2 %(3.3)%
DSADSA375.9 312.0 63.9 20.5 %(1.1)%DSA332,969 233,779 99,190 42.4 %2.5 %
ManufacturingManufacturing140.4 154.7 (14.3)(9.3)%(6.4)%Manufacturing26,509 108,871 (82,362)(75.7)%(0.5)%
Unallocated corporateUnallocated corporate(152.4)(176.2)23.8 (13.6)%(0.8)%Unallocated corporate(115,968)(93,869)(22,099)23.5 %(0.7)%
Total operating incomeTotal operating income$487.2 $417.1 $70.1 16.8 %(3.8)%Total operating income$332,837 $336,189 $(3,352)(1.0)%1.0 %
Operating income % of revenueOperating income % of revenue16.9 %15.8 %110 bpsOperating income % of revenue15.9 %17.8 %(190) bps
The following presents and discusses our consolidated financial results by each of our reportable segments:
RMS
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RevenueRevenue$543.1 $524.9 $18.2 3.5 %(2.7)%Revenue$409,714 $362,952 $46,762 12.9 %(1.9)%
Cost of revenue (excluding amortization of intangible assets)Cost of revenue (excluding amortization of intangible assets)330.5 315.2 15.3 4.9 %Cost of revenue (excluding amortization of intangible assets)254,692 217,248 37,444 17.2 %
Selling, general and administrativeSelling, general and administrative74.5 70.9 3.6 5.1 %Selling, general and administrative54,711 48,986 5,725 11.7 %
Amortization of intangible assetsAmortization of intangible assets14.8 12.2 2.6 20.9 %Amortization of intangible assets10,984 9,310 1,674 18.0 %
Operating incomeOperating income$123.3 $126.6 $(3.3)(2.6)%(3.0)%Operating income$89,327 $87,408 $1,919 2.2 %(3.3)%
Operating income % of revenueOperating income % of revenue22.7 %24.1 %(140) bpsOperating income % of revenue21.8 %24.1 %(230) bps
RMS revenue increased $18.2$46.8 million due primarily to higher research model product revenue in North America and China, however China was negatively impacted by COVID-related restrictions that affected client order activity, higher research model services revenue, specifically the Insourcing Solutions business, which included the acquisition of Explora BioLabs contributing $27.8 million;$15.6 million and higher research model product revenue in North America and China, higher revenue in the Cell Solutions business; partially offset by the divestiture of RMS Japan, which decreased product revenue by $36.4 million and the effect of changes inby foreign currency exchange rates.
RMS operating income decreased $3.3increased $1.9 million compared to the corresponding period in 2021.2022, primarily due to the contribution of higher revenue described above. RMS operating income as a percentage of revenue for the ninesix months ended September 24, 2022July 1, 2023 was 22.7%21.8%, a decrease of 140230 bpsfrom 24.1% for the corresponding period in 2021.2022. Operating income and operating income as a percentage of revenue decreased primarilydue to higher amortization, operating, and staffing costs due to the divestitureacquisition of RMS JapanExplora BioLabs and the COVID-related revenueby foreign exchange impact in China.

discussed above.
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DSA
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RevenueRevenue$1,755.6 $1,573.1 $182.5 11.6 %(3.1)%Revenue$1,325,810 $1,136,176 $189,634 16.7 %(1.0)%
Cost of revenue (excluding amortization of intangible assets)Cost of revenue (excluding amortization of intangible assets)1,164.8 1,062.6 102.2 9.6 %Cost of revenue (excluding amortization of intangible assets)832,074 764,366 67,708 8.9 %
Selling, general and administrativeSelling, general and administrative151.9 134.0 17.9 13.4 %Selling, general and administrative125,707 95,000 30,707 32.3 %
Amortization of intangible assetsAmortization of intangible assets63.0 64.5 (1.5)(2.4)%Amortization of intangible assets35,060 43,031 (7,971)(18.5)%
Operating incomeOperating income$375.9 $312.0 $63.9 20.5 %(1.1)%Operating income$332,969 $233,779 $99,190 42.4 %2.5 %
Operating income % of revenueOperating income % of revenue21.4 %19.8 %160 bpsOperating income % of revenue25.1 %20.6 %450 bps
DSA revenue increased $182.5$189.6 million due primarily to service revenue which increased in both the Safety Assessment and Discovery Services businessesbusiness due principally to increased demand, andprincipally pharmaceutical clients, pricing of services;services, and the acquisition of Retrogenix which contributed $3.3SAMDI contributing $2.8 million to Discovery Servicesservice revenue; partially offset by the effect of changes in foreign currency exchange rates.
DSA operating income increased $63.9$99.2 million during the nine months ended September 24, 2022 compared to the corresponding period in 2021.2022. DSA operating income as a percentage of revenue for the ninesix months ended September 24, 2022July 1, 2023 was 21.4%25.1%, an increase of 160450 bps from 19.8%20.6% for the corresponding period in 2021.2022. Operating income and operating income as a percentage of revenue increased primarily due to the contribution of higher revenue described above as well as lower acquisition relatedabove; partially offset by higher legal costs incurred in connection with investigations by the U.S government into the non-human primate supply chain and the absence of certain favorable acquisition-related adjustments to contingent consideration arrangements related to certain acquisitions; partially offset by higher staffing costsincurred during 2022, which are recorded in selling, general and modest inflationary pressures compared to the same period in 2021.administrative costs.
Manufacturing
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
RevenueRevenue$577.5 $537.1 $40.4 7.5 %(4.2)%Revenue$353,786 $387,932 $(34,146)(8.8)%(0.9)%
Cost of revenue (excluding amortization of intangible assets)Cost of revenue (excluding amortization of intangible assets)317.2 269.6 47.6 17.7 %Cost of revenue (excluding amortization of intangible assets)225,914 211,902 14,012 6.6 %
Selling, general and administrativeSelling, general and administrative86.6 94.9 (8.3)(8.8)%Selling, general and administrative78,218 43,887 34,331 78.2 %
Amortization of intangible assetsAmortization of intangible assets33.3 17.9 15.4 86.4 %Amortization of intangible assets23,145 23,272 (127)(0.5)%
Operating incomeOperating income$140.4 $154.7 $(14.3)(9.3)%(6.4)%Operating income$26,509 $108,871 $(82,362)(75.7)%(0.5)%
Operating income % of revenueOperating income % of revenue24.3 %28.8 %(450) bpsOperating income % of revenue7.5 %28.1 %(2,060) bps
Manufacturing revenue increased $40.4decreased $34.1 million due primarily to our Biologics Solutions business, which includes the CDMO business acquisitions of Cognate and Vigene, which collectively contributed $43.9 million, and higher service revenue within our Biologics Testing Solutions business, as well as increased revenue in our Microbial Solutions business; partially offset by the divestiture of the CDMO Swedenour Avian business, which decreased revenue by $9.0$39.0 million, lower services revenue from our Biologics Testing business, and the effect of changes in foreign currency exchange rates.rates; partially offset by increased revenue in our CDMO and Microbial Solutions businesses.
Manufacturing operating income decreased $14.3$82.4 million during the nine months ended September 24, 2022 compared to the corresponding period in 2021, which2022. Manufacturing operating income as a percentage of revenue for the six months ended July 1, 2023 was 7.5%, a decrease of 2,060 bps from 28.1% for the corresponding period in 2022. Operating income and operating income as a percentage of revenue decreased primarily due to the divestiture of our Avian business and lower operating income within our Biologics Solutions business which included higher amortizationoperating costs in both our Biologics Testing and CDMO businesses, an asset impairment charge, and absence of intangible asset costs; partially offset by a favorable adjustment related to a contingent consideration arrangement and$19 million impact of a favorable ruling from tax authorities on certain indirect tax positions recorded within selling, general and administrative expense. Manufacturing operating income as a percentage of revenue for the nine months ended September 24, 2022 was 24.3%, a decrease of 450 bps from 28.8% forexpense in the corresponding period in 2021, primarily due to higher operating costs associated with our CDMO acquisitions.

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2022.
Unallocated Corporate
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021$ change% changeImpact of FXJuly 1, 2023June 25, 2022$ change% changeImpact of FX
(in millions, except percentages)(in thousands, except percentages)
Unallocated corporateUnallocated corporate$152.4 $176.2 $(23.8)(13.6)%(0.8)%Unallocated corporate$115,968 $93,869 $22,099 23.5 %(0.7)%
Unallocated corporate % of revenueUnallocated corporate % of revenue5.3 %6.7 %(140) bpsUnallocated corporate % of revenue5.6 %5.0 %60 bps
Unallocated corporate costs consist of selling, general and administrative expenses that are not directly related or allocated to the reportable segments. The decreaseincrease in unallocated corporate costs of $23.8$22.1 million, or 13.6%23.5%, compared to the
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corresponding period in 20212022 is primarily related to decreased costs associated with the evaluationtiming of variable compensation expenses and integration of our acquisition activity.digital investments. Costs as a percentage of revenue for the ninesix months ended September 24, 2022July 1, 2023 was 5.3%5.6%, a decreasean increase of 14060 bps from 6.7%5.0% for the corresponding period in 2021.2022.
Other Income (Expense)
Six Months Ended
July 1, 2023June 25, 2022$ change% change
(in thousands, except percentages)
Other income (expense):
Interest income$2,232 $315 $1,917 608.6 %
Interest expense(69,424)(13,137)(56,287)428.5 %
Other income (expense), net(5,940)(68,408)62,468 (91.3)%
Total other expense, net$(73,132)$(81,230)$8,098 (10.0)%
Interest Income
Interest income, which represents earnings on cash, cash equivalents, and time deposits was $0.4 million and $0.3 millionexpense for the ninesix months ended September 24, 2022 andJuly 1, 2023 was $69.4 million, an increase of $56.3 million, or 428.5%, compared to $13.1 million in the corresponding period in 2021, respectively.
Interest Expense
Interest expense for thenine months ended September 24, 2022 was $24.5 million, a decrease of $37.9 million, or 60.7%, compared to $62.4 million for the corresponding period in 2021.2022. The decreaseincrease was due primarily to higher interest rates, and the absence of $26$32.3 million of debt extinguishment costs associated with the repayment of the 2026 Senior Notes and related write-off of deferred financing costs incurred in the nine months ended September 25, 2021, higher foreign currency gains recognized in connection with a debt-related foreign exchange forward contract partially offset by higher interest rates on our variable debt in the nine months ended September 24, 2022 compared to the corresponding period in 2021.
Other Expense, Net2022.
Other expense, net was $85.0 million for the ninesix months ended September 24, 2022, an increaseJuly 1, 2023 was $5.9 million, a decrease of $47.0$62.5 million, or 91.3%, compared to $38.0Other expense, net of $68.4 million for the corresponding period in 2021.2022. The increasedecrease was due primarily to higherthe absence of $30.5 million of foreign currency losses recognized in connection with a U.S. dollar denominated loan borrowed by a non-U.S. entity with a different functional currency, in the nine months ended September 24, 2022 as compared to the corresponding period in 2021 and increasedlower net losses incurred on our venture capital investments,and strategic equity investments and life insurance investments for the nine months ended September 24, 2022 as compared to the corresponding period in 2021.fiscal year 2022.
Income Taxes
Six Months Ended
July 1, 2023June 25, 2022$ change% change
(in thousands, except percentages)
Provision for income taxes$56,308 $49,069 $7,239 14.8 %
Effective tax rate21.7 %19.2 %250 bps
Income tax expense for the ninesix months ended September 24, 2022July 1, 2023 was $74.6$56.3 million, an increase of $16.5$7.2 million compared to $58.1$49.1 million for the corresponding period in 2021.2022. Our effective tax rate was 19.7%21.7% for the ninesix months ended September 24, 2022July 1, 2023 compared to 18.3%19.2% for the corresponding period in 2021.2022. The increase in our effective tax rate in the 2022 periodsix months ended July 1, 2023 compared to the 2021corresponding period in 2022 was primarily attributable to a decreased tax benefit from stock-based compensation deductions as well as lower research and development tax credits due to a discrete benefit in the threesix months ended September 25, 2021; partially offset with the deferred tax impact of tax law changes enacted during the nine months ended September 25, 2021.July 1, 2023.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Liquidity and Capital Resources
Liquidity and Cash Flows
We currently require cash to fund our working capital needs, capital expansion, acquisitions, and to pay our debt, lease, venture capital investment, and pension obligations. Our principal sources of liquidity have been our cash flows from operations, supplemented by long-term borrowings. Based on our current business plan, we believe that our existing funds, when combined with cash generated from operations and our access to financing resources, are sufficient to fund our operations for the foreseeable future.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
The following table presents our cash, cash equivalents and short-term investments:
September 24, 2022December 25, 2021
(in millions)
Cash and cash equivalents:
Held in U.S. entities$18.3 $28.2 
Held in non-U.S. entities175.4 213.0 
Total cash and cash equivalents193.7 241.2 
Short-term investments:
Held in non-U.S. entities1.0 1.1 
Total cash, cash equivalents and short-term investments$194.7 $242.3 
Borrowings
Amounts outstanding under our Credit Facility and our Senior Notes were as follows:
September 24, 2022December 25, 2021
(in millions)
Revolving facility$1,429.2 $1,161.4 
4.25% Senior Notes due 2028500.0 500.0 
3.75% Senior Notes due 2029500.0 500.0 
4.00% Senior Notes due 2031500.0 500.0 
Total$2,929.2 $2,661.4 
The interest rates applicable to the Credit Facility are equal to (A) for revolving loans denominated in U.S. dollars, at our option, either the base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.50%, or (3) the one-month adjusted LIBOR rate plus 1%) or the adjusted LIBOR rate, (B) for revolving loans denominated in euros, the adjusted EURIBOR rate and (C) for revolving loans denominated in sterling, the daily simple SONIA rate, in each case, plus an interest rate margin based upon our leverage ratio.
Early in November 2022, we entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuation related to our floating rate borrowings under the Credit Facility, at a fixed rate of 4.700% making the total interest rate 5.825% at our current spread. We designated this derivative instrument as a cash flow hedge at the inception of the contract and expect it to be highly effective.
Our off-balance sheet commitments related to our outstanding letters of credit as of September 24, 2022 were $17.7 million.
Repurchases of Common Stock
During the nine months ended September 24, 2022, we did not repurchase any shares under our authorized stock repurchase program. As of September 24, 2022, we had $129.1 million remaining on the authorized $1.3 billion stock repurchase program. Our stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, restricted stock units, and performance share units in order to satisfy individual statutory tax withholding requirements. During the nine months ended September 24, 2022, we acquired 0.1 million shares for $38.5 million through such netting.
Cash Flows
July 1, 2023December 31, 2022
(in thousands)
Cash and cash equivalents:
Held in U.S. entities$16,321 $15,813 
Held in non-U.S. entities184,124 218,099 
Total cash and cash equivalents200,445 233,912 
Short-term investments:
Held in non-U.S. entities951 998 
Total cash, cash equivalents and short-term investments$201,396 $234,910 
The following table presents our net cash provided by operating activities:
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021July 1, 2023June 25, 2022
(in millions)(in thousands)
Net incomeNet income$303.5 $259.0 Net income$203,397 $205,890 
Adjustments to reconcile net income to net cash provided by operating activitiesAdjustments to reconcile net income to net cash provided by operating activities290.8 273.6 Adjustments to reconcile net income to net cash provided by operating activities197,185 190,187 
Changes in assets and liabilitiesChanges in assets and liabilities(209.4)(1.1)Changes in assets and liabilities(143,077)(143,973)
Net cash provided by operating activitiesNet cash provided by operating activities$384.9 $531.5 Net cash provided by operating activities$257,505 $252,104 
Net cash provided by cash flows from operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for (1) non-
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
cashnon-cash operating items such as depreciation and amortization, stock-based compensation, loss on debt extinguishment and other financing costs, deferred income taxes, gains and/or losses on venture capital and strategic equity investments, gains and/or losses on divestitures, contingent consideration, as well as (2) changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations. For the ninesix months ended September 24, 2022,July 1, 2023, compared to the ninesix months ended SeptemberJune 25, 2021,2022, the decreaseincrease in net cash provided by operating activities was driven by timing and amount of our working capital balances, principally collections of net contract balances from customers (collectively trade receivables and contract assets, net; deferred revenue; and customer contract deposits), inventory purchases, andlower variable compensation payments.payments; partially offset by timing of our vendor and supplier payments compared to the same period in 2022.
The following table presents our net cash used in investing activities:
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021July 1, 2023June 25, 2022
(in millions)(in thousands)
Acquisition of businesses and assets, net of cash acquiredAcquisition of businesses and assets, net of cash acquired$(283.4)$(1,292.1)Acquisition of businesses and assets, net of cash acquired$(50,166)$(283,392)
Capital expendituresCapital expenditures(235.7)(130.0)Capital expenditures(174,258)(163,316)
Investments, netInvestments, net(126.3)(26.0)Investments, net(19,746)(108,637)
Other, netOther, net(6.8)0.9 Other, net(1,057)(4,774)
Net cash used in investing activitiesNet cash used in investing activities$(652.3)$(1,447.2)Net cash used in investing activities$(245,227)$(560,119)
For the ninesix months ended September 24,July 1, 2023, the primary use of cash used in investing activities related to capital expenditures to support the growth of the business, the acquisition of SAMDI, and investments in certain venture capital and strategic equity investments. For the six months ended June 25, 2022, the primary use of cash used in investing activities related to the acquisition of Explora BioLabs, capital expenditures to support the growth of the business and investments in certain venture capital and strategic equity investments. For the nine months ended September 25, 2021, the primary use of cash used in investing activities related to the acquisitions of Cognate, Vigene, Distributed Bio, Retrogenix, and certain assets from a distributor, capital expenditures to support the growth of the business, and investments in certain venture capital and strategic equity investments.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
The following table presents our net cash provided byused in financing activities:
Nine Months EndedSix Months Ended
September 24, 2022September 25, 2021July 1, 2023June 25, 2022
(in millions)(in thousands)
Proceeds from long-term debt and revolving credit facilityProceeds from long-term debt and revolving credit facility$2,798.7 $6,119.7 Proceeds from long-term debt and revolving credit facility$281,796 $2,180,511 
Payments on long-term debt, revolving credit facility, and finance lease obligationsPayments on long-term debt, revolving credit facility, and finance lease obligations(2,524.4)(5,190.4)Payments on long-term debt, revolving credit facility, and finance lease obligations(317,049)(1,856,262)
Proceeds from exercises of stock optionsProceeds from exercises of stock options17.7 43.3 Proceeds from exercises of stock options15,719 15,571 
Purchase of treasury stockPurchase of treasury stock(38.5)(40.4)Purchase of treasury stock(23,978)(38,468)
Payment of debt extinguishment and financing costs— (38.3)
Purchases of additional equity interests, netPurchases of additional equity interests, net(30.5)— Purchases of additional equity interests, net— (15,438)
Payment of contingent considerationsPayment of contingent considerations(10.4)(2.3)Payment of contingent considerations(2,711)(10,356)
Other, netOther, net(6.0)— Other, net— (17,405)
Net cash provided by financing activities$206.6 $891.6 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities$(46,223)$258,153 
For the ninesix months ended September 24,July 1, 2023, net cash used in financing activities reflected the net borrowings of $35.3 million on our Credit Facility and finance lease obligations. Included in the net borrowings are net repayments of $33 million from our Credit Facility throughout the six months ended July 1, 2023.
Net cash used in financing activities also reflected treasury stock purchases of $24.0 million made due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements, and $2.7 million of contingent consideration payments; partially offset by proceeds from exercises of employee stock options of $15.7 million.
For the six months ended June 25, 2022, net cash provided by financing activities reflected the net proceeds of $274.3$324.2 million on our Credit Facility, Senior Notes, andand finance lease obligations. Included in the net proceeds are the following amounts:
Borrowings under our Credit Facility of $300 million, which were used primarily for the acquisition of Explora BioLabs;
Net borrowings of $153 million frommade to our Credit Facility throughout the ninesix months ended September 24,June 25, 2022;
Payments of $2.0$1.5 billion partially offset by $1.9$1.4 billion of proceeds in connection with a non-U.S. Euro functional currency entity repaying Euro loans and replacing the Euro loans with U.S. dollar denominated loans. A series of forward currency contracts were executed to mitigate any foreign currency gains or losses on the U.S. dollar denominated loans. These proceeds and payments are presented as gross financing activities.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Net cash provided byused in financing activities also reflected treasury stock purchases of $38.5 million made due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements, approximately $15 million payment to purchase an additional 10% interest in a subsidiary, $15.7 million payment to acquire the remaining 2% ownership interest in Cognate, and $10.4 million of contingent consideration payments; partially offset by proceeds from exercises of employee stock options of $17.7$15.6 million.
For the nine months ended September 25, 2021, net cash provided byFinancing and Market Risk
We are exposed to market risk from changes in interest rates and currency exchange rates, which could affect our future result of operations and financial condition. We manage our exposure to these risks through our regular operating and financing activities reflected the net proceeds of $929.3 million our Credit Facility, Senior Notes, and finance lease obligations. Included in the net proceeds are the following amounts:activities.
Payments of approximately $147 million on our term loan;
Proceeds of $1.0 billion from the issuance of the 2029 and 2031 Senior Notes, which were used to prepay our $500 million 2026 Senior Notes;
BorrowingsAmounts outstanding under our Credit Facility and our Senior Notes were as follows:
July 1, 2023December 31, 2022
(in thousands)
Revolving facility$1,168,052 $1,197,586 
4.25% Senior Notes due 2028500,000 500,000 
3.75% Senior Notes due 2029500,000 500,000 
4.00% Senior Notes due 2031500,000 500,000 
Total$2,668,052 $2,697,586 
The interest rates applicable to the Credit Facility are equal to (A) for revolving loans denominated in U.S. dollars, at our option, either the base rate (which is the higher of $1.2 billion, which were used primarily(1) the prime rate, (2) the federal funds rate plus 0.50%, or (3) the one-month adjusted term SOFR rate plus 1%) or the adjusted term SOFR rate, (B) for revolving loans denominated in euros, the acquisitions of Cognate, Vigene, Distributed Bio, Retrogenixadjusted EURIBOR rate and certain assets from a distributor;(C) for revolving loans denominated in sterling, the daily simple SONIA rate, in each case, plus an interest
Payments of $544 million made to
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
rate margin based upon our leverage ratio. In March 2023 and in conjunction with the Second Amendment we modified the variable rate on our Credit Facility throughoutfrom adjusted LIBOR to adjusted term SOFR. All outstanding U.S. dollar borrowings remained at adjusted LIBOR through their respective interest reset periods in April 2023 and were then set to term SOFR.
During the ninefourth fiscal quarter of 2022, we entered into an interest rate swap with a notional amount of $500 million to manage interest rate fluctuation related to our floating rate borrowings under the Credit Facility, at a fixed rate of 4.700%. In March 2023 and in conjunction with the Second Amendment, we modified the variable rate on our interest rate swap from 1-month LIBOR to 1-month term SOFR. Effective with the modification we will pay a fixed rate of 4.65% on our swap maturing November 2, 2024. The transition did not have an impact on our hedge accounting or a material impact to our financial statements.
Our off-balance sheet commitments related to our outstanding letters of credit as of July 1, 2023 and December 31, 2022 were $21.6 million and $18.6 million, respectively.
Foreign Currency Exchange Rate Risk
We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our financial position, results of operations, and cash flows.
While the financial results of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations in their respective local currency. The principal functional currencies of the Company’s foreign subsidiaries are the Euro, British Pound and Canadian Dollar. During the six months ended September 25, 2021;
Gross proceeds and borrowingsJuly 1, 2023, the most significant drivers of $1.5 billion, but having a net impact of zero, were incurredforeign currency translation adjustment the Company recorded as part of amendingOther comprehensive income (loss) were the British Pound, Euro, Canadian Dollar, and restatingHungarian Forint.
Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our Credit Facility;financial position, results of operations, and cash flows. As the U.S. dollar strengthens against other currencies, the value of our non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally decline when reported in U.S. dollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the value of non-U.S. expenses, which will decline when reported in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally increase when reported in U.S. dollars. For the six months ended July 1, 2023, our revenue would have decreased by $63.9 million and our operating income would have decreased by $3.5 million, if the U.S. dollar exchange rate had strengthened by 10%, with all other variables held constant.
Gross proceedsWe attempt to minimize this exposure by using certain financial instruments in accordance with our overall risk management and payments of approximately $2.2 billion in connection withour hedge policy. We do not enter into speculative derivative agreements.
During the three months ended June 25, 2022, we entered into foreign exchange forward contracts to limit our foreign currency exposure related to both intercompany loans and a U.S. dollar denominated loan borrowed by a non-U.S. Euro functional currency entity repaying Euro loansunder our Credit Facility. Refer to Note 9, “Debt and replacing the Euro loans with U.S. dollar denominated loans. A seriesOther Financing Arrangements” in this Quarterly Report on Form 10-Q for additional information regarding these types of forward currency contracts were executed to mitigatecontracts.
Repurchases of Common Stock
During the six months ended July 1, 2023, we did not repurchase any foreign currency gains or lossesshares under our authorized stock repurchase program. As of July 1, 2023, we had $129.1 million remaining on the U.S. dollar denominated loans. These proceeds and payments are presented as gross financing activities.
Net cash provided by financing activities also reflected proceeds from exercises of employeeauthorized $1.3 billion stock options of $43.3 million, offset by treasury stock purchases of $40.4 million made due torepurchase program. Our stock-based compensation plans permit the netting of common stock upon vesting of stock-based awardsrestricted stock, restricted stock units, and performance share units in order to satisfy individual statutory tax withholding requirements. AdditionallyDuring the six months ended July 1, 2023, we paid $21acquired 0.1 million of debt extinguishment costs associated with the 2026 Senior Notes repayment and $17 million of debt financing costs associated with the 2029 and 2031 Senior Notes issuances.
Off-Balance Sheet and Other Arrangements
There have been no material changes from the off-balance sheet and other arrangements previously disclosed in our Annual Report on Form 10-Kshares for fiscal 2021 other than the changes described in Note 2, “Acquisitions and Divestitures,” Note 7, “Fair Value,” Note 9, “Debt and Other Financing Arrangements,”, and Note 13, “Commitments and Contingencies,” in our notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Venture Capital Investments
We invest in several venture capital funds that invest in start-up companies, primarily in the life sciences industry. Our total commitment to the funds as of September 24, 2022 was $190.3 million, of which we funded $125.1$24.0 million through September 24, 2022. Refer to Note 6, “Venture Capital and Strategic Equity Investments” in this Quarterly Report on Form 10-Q for additional information.such netting.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reported periods and related disclosures. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on our historical experience, trends in the industry, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.
We believe that the application of our accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 1, “DescriptionItem 7, “Management’s Discussion and Analysis of BusinessFinancial
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Condition and SummaryResults of Significant Accounting Policies” toOperations” of our Annual Report on Form 10-K for fiscal year 2021.2022. There have been no changes in the Company’s critical accounting policies during the six months ended July 1, 2023.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements please refer to Note 1, “Basis of Presentation,” in this Quarterly Report on Form 10-Q. Other than as discussed in Note 1, “Basis of Presentation,” we did not adopt any other new accounting pronouncements during the ninesix months ended September 24, 2022July 1, 2023 that had a significant effect on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposedThe Company’s exposure to market risk from changes in interest rates and currency exchange rates which could affect our future results of operations and financial condition. We manage ourhas not changed materially from its exposure to these risks through our regular operating and financing activities.
Interest Rate Risk
We are exposed to changesdiscussed in interest rates while conducting normal business operations as a result of ongoing financing activities. As of September 24, 2022, our debt portfolio was comprised of fixed and floatingthe Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Our interest rate borrowings. A 100-basis point increase in interest rates on our floating rate borrowings would increase our annual pre-tax interest expense by $14.3 million.
Foreign Currency Exchange Rate Risk
We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our financial position, resultsrisks are fully described in Item 7, “Management’s Discussion and Analysis of operations,Financial Condition and cash flows.
While the financial resultsResults of Operations - Liquidity and Capital Resources” of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations in their respective local currency. The principal functional currencies of the Company’s foreign subsidiaries are the Euro, British Pound and Canadian Dollar. During the nine months ended September 24, 2022, the most significant drivers of foreign currency translation adjustment the Company recorded as part of Other comprehensive income (loss) were the Euro, British Pound, Canadian Dollar, and Hungarian Forint.
Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our financial position, results of operations, and cash flows. As the U.S. dollar strengthens against other currencies, the value of our non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally decline when reported in U.S. dollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the value of non-U.S. expenses, which will decline when reported in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally increase when reported in U.S. dollars. For the nine months ended September 24, 2022, our revenue would have decreased by $86.9 million and our operating income would have decreased by $2.0 million, if the U.S. dollar exchange rate had strengthened by 10%, with all other variables held constant.
We attempt to minimize this exposure by using certain financial instruments in accordance with our overall risk management and our hedge policy. We do not enter into speculative derivative agreements.
During the nine months ended September 24, 2022, we entered into foreign exchange forward contracts to limit our foreign currency exposure related to both intercompany loans and a U.S. dollar denominated loan borrowed by a non-U.S. Euro functional currency entity under our Credit Facility. Refer to Note 9, “Debt and Other Financing Arrangements” in this QuarterlyAnnual Report on Form 10-Q10-K for additional information regarding these typesfiscal year 2022 and in Item 2, “Management’s Discussion and Analysis of forward contracts.Financial Condition and Results of Operations - Liquidity and Capital Resources” herein.
Item 4. Controls and Procedures
(a)  Evaluation of Disclosure Controls and Procedures
Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15, promulgated by the Securities Exchange Act of 1934, as amended (Exchange Act), the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, are effective, at a reasonable assurance level, as of September 24, 2022,July 1, 2023, to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(b) Changes in Internal Controls Over Financial Reporting
The Company continued to execute a plan to centralize certain accounting transaction processing functions to internal shared service centers during the three months ended September 24, 2022. There were no other material changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of the Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended September 24, 2022July 1, 2023 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Please referOn February 16, 2023, the Company was informed by the U.S. Department of Justice (DOJ) that in conjunction with the U.S. Fish and Wildlife Service (USFWS), it had commenced an investigation into the Company’s conduct regarding several shipments of non-human primates from Cambodia. On February 17, 2023 the Company received a grand jury subpoena requesting certain documents related to Note 13 “Commitmentssuch investigation. The Company is aware of a parallel civil investigation being undertaken by the DOJ and Contingencies” in our notesUSFWS. The Company is cooperating with the DOJ and the USFWS and believes that the concerns raised with respect to the unaudited condensed consolidated financial statementsCompany’s conduct are without merit. The Company maintains a global supplier onboarding and oversight program incorporating risk-based due diligence, auditing, and monitoring practices to help ensure the quality of our supplier relationships and compliance with applicable U.S. and international laws and regulations, and has operated under the belief that all shipments of non-human primates it received satisfied the material requirements, documentation and related processes and procedures of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) documentation and related processes and procedures, which guides the release of each import by USFWS. Notwithstanding our efforts and good-faith belief, in connection with the civil investigation, the Company has voluntarily suspended future shipments of non-human primates from Cambodia to the United States until such time that the Company and USFWS can agree upon and implement additional procedures to reasonably ensure that non-human primates imported from Cambodia are purpose-bred. The Company continues to care for the Cambodia-sourced non-human primates from certain recent shipments in the United States. The carrying value of the inventory related to these shipments is approximately $20 million. On May 16, 2023, the Company received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting it to voluntarily provide information primarily related to the sourcing of non-human primates in Asia, and the Company is cooperating with the request. We are not able to predict what action, if any, might be taken in the future by the DOJ, USFWS, SEC or other governmental authorities as a result of the investigations. None of the DOJ, USFWS or SEC has provided the Company with any specific timeline or indication as to when these investigations or, specific to the DOJ and USFWS, discussions regarding future processes and procedures, will be concluded or resolved. The Company cannot predict the timing, outcome or possible impact of the investigations, including without limitation any potential fines, penalties or liabilities.
A putative securities class action was filed on May 19, 2023 against the Company and three of its current/former officers (James Foster, the Chief Executive Officer; David R. Smith, the former Chief Financial Officer; and Flavia Pease, the current Chief Financial Officer) in the United States District Court for the District of Massachusetts. The case, which is captioned Coleman v. Charles River Laboratories International, Inc., et al., Case No. 23-cv-11132, asserts claims under §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act") on behalf of a putative class of purchasers of Company securities from May 5, 2020 through February 21, 2023. The Complaint alleges that certain of the Company’s disclosures about its practices with respect to the importation of non-human primates made during the putative class period were materially false or misleading. A lead plaintiff has yet to be appointed and the Company intends to file a motion to dismiss. While the Company cannot predict the outcome of this Quarterly Report on Form 10-Q.matter, it believes the class action to be without merit and plans to vigorously defend against it. The Company cannot reasonably estimate the maximum potential exposure or the range of possible loss in excess of amounts accrued for this matter.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for fiscal year 2021,2022, which could materially affect our business, financial condition, and/or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for fiscal year 2021, except as disclosed below.2022.
Our business, results of operations, or financial condition could be adversely affected by disruptions in the global economy caused by the ongoing conflict between the Russian Federation and Ukraine.
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In February 2022, the Russian Federation launched an invasion of the country of Ukraine, resulting in negative impacts to the global economy. Furthermore, governments in the U.S., Canada, the United Kingdom, and European Union have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. Although we have no operations in Russia or Ukraine, we have ceased doing business with our Russian customers and distributors. Additional risks to our business that may emerge as a result of the armed conflict include, among others, shortages in materials; increased costs for transportation, energy, and raw materials; increased trade barriers or restrictions on global trade; cyberattacks; supply disruptions; lower consumer demand; and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information relating to the purchases of shares of our common stock during the three months ended September 24, 2022.July 1, 2023.
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)
June 26, 2022 to July 23, 2022138 $214.41 — $129,105 
July 24, 2022 to August 20, 2022249.68 — 129,105 
August 21, 2022 to September 24, 2022205.25 — 129,105 
Total151  —  
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)
April 2, 2023 to April 29, 2023— $— — $129,105 
April 30, 2023 to May 27, 202310 194.09 — 129,105 
May 28, 2023 to July 1, 202316 194.13 — 129,105 
Total26  —  
Our Board of Directors have authorized up to an aggregate amount of $1.3 billion for our stock repurchase program. During the three months ended September 24, 2022,July 1, 2023, we did not repurchase any shares of common stock under our stock repurchase program or in open market trading. As of September 24, 2022,July 1, 2023, we had $129.1 million remaining on the authorized stock repurchase program.
Additionally, our stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, restricted stock units, and performance share units in order to satisfy individual statutory tax withholding requirements.
Item 5. Other Information
During the quarter ended July 1, 2023, none of our officers or directors adopted or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408(c)of Regulation S-K.
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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Item 6. Exhibits
(a) ExhibitsDescription of Exhibits
31.1+
31.2+
32.1+
101.INSeXtensible 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.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Calculation Linkbase Document
101.DEFXBRL Taxonomy Definition Linkbase Document
101.LABXBRL Taxonomy Label Linkbase Document
101.PREXBRL Taxonomy Presentation Linkbase Document
+ Furnished herein.

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SIGNATURES
    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
    
 CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
November 2, 2022August 9, 2023/s/ JAMES C. FOSTER
James C. Foster
Chairman, President and Chief Executive Officer
November 2, 2022August 9, 2023/s/ FLAVIA H. PEASE
Flavia H. Pease
Corporate Executive Vice President and Chief Financial Officer

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