Charles River Laboratories Announces Fourth-Quarter and Full-Year 2019 Results and Provides 2020 Guidance - Fourth-Quarter Revenue of $691.1 Million and Full-Year Revenue of $2.62 Billion - - Fourth-Quarter GAAP Earnings

- Fourth-Quarter Revenue of $691.1 Million and Full-Year Revenue of $2.62 Billion -

- Fourth-Quarter GAAP Earnings per Share of $1.61 and Non-GAAP Earnings per Share of $2.01 -

- Full-Year GAAP Earnings per Share of $5.07 and Non-GAAP Earnings per Share of $6.73 -

- Provides 2020 Guidance -

WILMINGTON, Mass.--(BUSINESS WIRE)--February 11, 2020--Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the fourth-quarter and full-year 2019 and provided guidance for 2020. For the quarter, revenue

was $691.1 million, an increase of 14.9% from $601.5 million in the fourth quarter of 2018.

The acquisition of Citoxlab contributed 8.1% to consolidated fourth-quarter revenue growth. The impact of foreign currency translation reduced reported revenue growth by 0.6%. Excluding the effect of these items, organic revenue growth of

7.4% was driven by all three business segments, particularly the Discovery and Safety Assessment segment.

On a GAAP basis, fourth-quarter net income from continuing operations attributable to common shareholders was $80.3 million, an increase of 34.7% from net income of $59.7 million for the same period in 2018. Fourth-quarter diluted earnings

per share on a GAAP basis were $1.61, an increase of 33.1% from $1.21 for the fourth quarter of 2018. The increases in GAAP net income and earnings per share were primarily driven by the Company's venture capital investments, which

represented a gain of $0.22 per share in the fourth quarter of 2019, compared to a loss of $0.10 per share for the same period in 2018. As previously disclosed, the Company's venture capital investment performance has been excluded from

On a non-GAAP basis, net income from continuing operations was $100.1 million for the fourth quarter of 2019, an increase of 27.8% from $78.3 million for the same period in 2018. Fourth-quarter diluted earnings per share on a non-GAAP basis

were $2.01, an increase of 26.4% from $1.59 per share for the fourth quarter of 2018. The non-GAAP net income and earnings per share increases were driven primarily by higher revenue, including the contribution from the Citoxlab acquisition,

and operating margin improvement.

James C. Foster, Chairman, President and Chief Executive Officer, said, "We are very pleased with our strong fourth-quarter results, which generally exceeded our prior expectations. Fourth-quarter reported revenue growth was in the

mid-teens, organic growth was in the high-single-digits, and earnings per share growth was firmly in double-digits. We believe the excellent finish to 2019 demonstrates that the breadth of our leading, early-stage portfolio is resonating with

clients, as they increasingly choose to adopt our flexible and efficient outsourcing model. The investments we have made in our scientific capabilities, staff, and capacity, along with our efforts to build a more scalable organization to

drive operating efficiency, are having the intended outcome. Our Company is the strongest it has ever been, and we are well positioned to drive profitable revenue growth in 2020 and in the future."

"We are optimistic as we turn the page to 2020. Our outlook is based on execution of our strategy to strengthen our position as the leading, early-stage CRO and deliver value to our clients, while leveraging our position in robust

end-markets, our attractive growth profile, and the incremental value that will be derived from achieving our stated goal of meaningful operating margin improvement," Mr. Foster concluded.

Fourth-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $131.3 million in the fourth quarter of 2019, an increase of 2.2% from $128.5 million in the fourth quarter of 2018. Organic revenue growth was 2.8%, driven primarily by increased demand for research models

in China, as well as higher revenue for research model services, principally the Insourcing Solutions (IS) business. The revenue increase was partially offset by lower sales volume for research models outside of China, particularly to large

biopharmaceutical clients.

In the fourth quarter of 2019, the RMS segment's GAAP operating margin decreased to 23.0% from 24.6% in the fourth quarter of 2018. On a non-GAAP basis, the operating margin decreased to 24.6% from 25.1% in the fourth quarter of 2018. The

GAAP and non-GAAP operating margin decreases were driven primarily by the research models business outside of China.

Discovery and Safety Assessment (DSA)

Revenue for the DSA segment was $439.2 million in the fourth quarter of 2019, an increase of 22.6% from $358.2 million in the fourth quarter of 2018. The Citoxlab acquisition contributed 13.6% to DSA revenue growth. Organic revenue growth

of 9.4% was primarily driven by robust demand from biotechnology clients across both the Safety Assessment and Discovery Services businesses.

In the fourth quarter of 2019, the DSA segment's GAAP operating margin increased to 19.1% from 18.8% in the fourth quarter of 2018. The GAAP operating margin increase was driven primarily by operating leverage from higher revenue, partially

offset by acquisition-related costs primarily related to the Citoxlab acquisition, including amortization of intangible assets. On a non-GAAP basis, the operating margin increased to 25.6% from 23.2% in the fourth quarter of 2018. The

non-GAAP operating margin increase was driven primarily by operating leverage from higher revenue in both the Discovery Services and Safety Assessment businesses, as well as the Company's continued focus on operating efficiency initiatives.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $120.6 million in the fourth quarter of 2019, an increase of 5.0% from $114.9 million in the fourth quarter of 2018. Organic revenue growth was 6.3%, driven primarily by continued robust demand for

the Biologics Testing Solutions business. Revenue for the Microbial Solutions business also increased in the fourth quarter, but at a lower growth rate than in the first three quarters of 2019.

In the fourth quarter of 2019, the Manufacturing segment's GAAP operating margin decreased to 34.4% from 35.1% in the fourth quarter of 2018. On a non-GAAP basis, the operating margin decreased to 37.2% from 37.4% in the fourth quarter of

2018. The GAAP and non-GAAP operating margin decreases were driven primarily by the Biologics Testing Solutions business.

For 2019, revenue increased by 15.7% to $2.62 billion from $2.27 billion in 2018. Organic revenue growth was 8.5%.

On a GAAP basis, net income from continuing operations attributable to common shareholders was $252.0 million in 2019, an increase of 12.1% from $224.9 million in 2018. Diluted earnings per share on a GAAP basis in 2019 were $5.07, an

increase of 10.5% from $4.59 in 2018. On a GAAP basis, the Company recorded a gain from venture capital investments totaling $0.30 per share in 2019, compared to a gain of $0.23 in 2018.

On a non-GAAP basis, net income from continuing operations was $334.4 million in 2019, an increase of 17.8% from $283.9 million in 2018. Diluted earnings per share on a non-GAAP basis in 2019 were $6.73, an increase of 16.0% from $5.80 in

Research Models and Services (RMS)

For 2019, RMS revenue was $537.1 million, an increase of 3.3% from $519.7 million in 2018. Organic revenue growth was 5.2%.

On a GAAP basis, the RMS segment operating margin decreased to 24.9% in 2019 from 26.3% in 2018. On a non-GAAP basis, the operating margin decreased to 26.2% in 2019 from 26.9% in 2018.

Discovery and Safety Assessment (DSA)

For 2019, DSA revenue was $1.62 billion, an increase of 22.9% from $1.32 billion in 2018. Organic revenue growth was 9.1%.

On a GAAP basis, the DSA segment operating margin decreased to 16.0% in 2019 from 17.3% in 2018. On a non-GAAP basis, the operating margin increased to 22.0% in 2019 from 21.7% in 2018.

Manufacturing Support (Manufacturing)

For 2019, Manufacturing revenue was $465.1 million, an increase of 8.3% from $429.6 million in 2018. Organic revenue growth was 10.8%.

On a GAAP basis, the Manufacturing segment operating margin decreased to 31.3% in 2019 from 31.7% in 2018. On a non-GAAP basis, the operating margin decreased to 33.9% in 2019 from 34.2% in 2018.

The Company is providing the following revenue, earnings per share, and free cash flow guidance for 2020. Earnings per share in 2020 are expected to benefit from higher revenue, driven primarily by continued robust client

demand, and meaningful operating margin improvement. Year-over-year earnings per share growth is expected to be 2.5% to 5.5% on a GAAP basis, and 10.5% to 13.0% on a non-GAAP basis in 2020.

Footnotes to Guidance Table:

(1) The contribution from acquisitions reflects only those acquisitions that have been completed.

(2) Organic revenue growth is defined as reported revenue growth adjusted for acquisitions and foreign currency translation.

(3) GAAP EPS guidance does not include an estimate for future gains or losses from venture capital investments. Potential gains or losses are expected in 2020, but the Company does not forecast the future performance of its venture capital

investments. Any future gains or losses would be excluded from non-GAAP results.

(4) Amortization of intangible assets includes an estimate of $0.30-$0.35 for the impact of the HemaCare acquisition because the preliminary purchase price allocation has not been completed.

(5) These charges, which primarily include severance and other costs, relate primarily to the Company's planned efficiency initiatives. Other projects in support of global productivity and efficiency initiatives are expected, but these

charges reflect only the decisions that have already been finalized.

(6) These adjustments are related to the evaluation and integration of acquisitions, and primarily include transaction, advisory, and certain third-party integration costs, as well as certain costs associated with acquisition-related

efficiency initiatives.

(7) These items primarily relate to charges of $0.15-$0.22 associated with the planned termination of the Company's U.S. pension plan in the second half of 2020, as well as charges of approximately $0.10 associated with U.S. and

international tax legislation that necessitated changes to the Company's international financing structure.

(8) The reconciliation of the current 2020 free cash flow guidance is as follows: Cash flow from operating activities of $500-$510 million, less capital expenditures of approximately $150 million, equates to free cash flow of $350-$360

Charles River has scheduled a live webcast on Tuesday, February 11th, at 8:30 a.m. EST to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link.

You can also find the associated slide presentation and reconciliations of GAAP financial measures to non-GAAP financial measures on the website.

Non-GAAP Reconciliations/Discontinued Operations

The Company reports non-GAAP results in this press release, which exclude often-one-time charges and other items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the

schedules at the end of this press release. In addition, the Company reports results from continuing operations, which exclude results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a

discontinued operation.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as non-GAAP earnings per diluted share, which exclude the amortization of intangible assets, and other charges related to our acquisitions; expenses associated with evaluating

and integrating acquisitions and divestitures, as well as fair value adjustments associated with contingent consideration; charges, gains, and losses attributable to businesses or properties we plan to close, consolidate, or divest; severance

and other costs associated with our efficiency initiatives; the write-off of deferred financing costs and fees related to debt financing; third-party costs associated with the remediation of unauthorized access into our information systems

detected in March 2019; the non-cash tax benefit related to our international financing structure; charges related to the planned settlement of our U.S. pension plan; charges recorded in connection with the modification of our option to

purchase equity in one of our joint ventures; and investment gains or losses associated with our venture capital investments. This press release also refers to our revenue in both a GAAP and non-GAAP basis: "constant currency," which we

define as reported revenue growth adjusted for the impact of foreign currency translation, and "organic revenue growth," which we define as reported revenue growth adjusted for foreign currency translation, acquisitions, and divestitures. We

exclude these items from the non-GAAP financial measures because they are outside our normal operations. Commencing in the first quarter of 2019, we exclude the performance of our venture capital investments due to the determination that such

investment gains or losses are not core to our overall operations. There are limitations in using non-GAAP financial measures, as they are not presented in accordance with generally accepted accounting principles, and may be different than

non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating

results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. We

believe that the financial impact of our acquisitions and divestitures (and in certain cases, the evaluation of such acquisitions and divestitures, whether or not ultimately consummated) is often large relative to our overall financial

performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities and their underlying associated costs, such as business acquisitions, generally occur periodically but on an

unpredictable basis. We calculate non-GAAP integration costs to include third-party integration costs incurred post-acquisition. Presenting revenue on an organic basis allows investors to measure our revenue growth exclusive of acquisitions,

divestitures, and foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company's operations against the financial results of other companies in the industry who similarly provide non-GAAP

results. The non-GAAP financial measures included in this press release are not meant to be considered superior to or a substitute for results of operations presented in accordance with GAAP. The Company intends to continue to assess the

potential value of reporting non-GAAP results consistent with applicable rules and regulations. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set

forth in this press release, and can also be found on the Company's website at ir.criver.com.

Caution Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate," "believe," "expect,"

"intend," "will," "would," "may," "estimate," "plan," "outlook," and "project," and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements also include

statements regarding the projected future financial performance of Charles River and our specific businesses; the future demand for drug discovery and development products and services, including our expectations for future revenue trends;

our expectations with respect to the impact of acquisitions, including the acquisition of HemaCare, on the Company, our service offerings, client perception, strategic relationships, revenue, revenue growth rates, and earnings; the

development and performance of our services and products, including our investments in our portfolio; market and industry conditions including the outsourcing of services and spending trends by our clients; the potential outcome of and impact

to our business and financial operations due to litigation and legal proceedings; and Charles River's future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to revenue, the impact of

foreign exchange, and enhanced efficiency initiatives. Forward-looking statements are based on Charles River's current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could