Charles River Laboratories International, Inc.: Form 10-Q for the period ended Jun 28, 2025

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 2024 as filed with the SEC on February 19, 2025. 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 leading, full service, non-clinical global drug development partner. For 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, that 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. 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 pharmaceutical 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 products and services offered within Research Models, Research Model Services, and Cell Solutions. 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: Insourcing Solutions (IS), which provides colony management of our clients’ research operations (including recruitment, training, staffing, and management services) within our clients’ facilities as well as our own vivarium space, utilizing our Charles River Accelerator and Development Lab (CRADL™) offerings, Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered models; and Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; and Cell Solutions which provides controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood and bone marrow as well as cells from disease state donors.

Our DSA segment is comprised of Discovery and Safety Assessment services. We provide regulated and non-regulated DSA services to support the discovery, development, and regulatory-required safety testing of potential new drugs, including in vitro (non-animal) and in vivo (in research models) studies, laboratory support services, including bioanalytical and strategic non-clinical consulting and program management to support product development.

Our Manufacturing reportable segment includes Microbial Solutions, which provides in vitro lot-release testing products, microbial detection products, and species identification services and Biologics Solutions (Biologics), which performs specialized testing of biologics (Biologics Testing Solutions) as well as contract development and manufacturing products and services (CDMO).

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.

U.S. Government Investigations into the Non-Human Primate Supply Chain

On February 17, 2023, we received a grand jury subpoena requesting certain documents related to an investigation by the U.S. Department of Justice (DOJ) and the U.S. Fish and Wildlife Service (USFWS) into our conduct regarding several shipments of non-human primates from Cambodia in late 2022 and early 2023 (the NHP Shipments). The DOJ also undertook a parallel civil investigation related to the NHP Shipments. As previously disclosed, we continued to care for the NHP Shipments during the pendency of the DOJ investigations. In July 2025, we were informed that USFWS had determined to clear the NHP Shipments for legal entry into the United States. Furthermore, in recent weeks we have been advised by the DOJ that both the grand jury investigation and the parallel civil investigation had been closed.

On May 16, 2023, we received an inquiry from the Enforcement Division of the U.S. Securities and Exchange Commission (SEC) requesting us to voluntarily provide information, subsequently augmented with a document subpoena and additional inquiries, primarily related to the sourcing of non-human primates and related disclosures, and we are cooperating with the requests. Our Audit Committee has retained counsel to conduct an independent investigation into certain issues raised in the investigations, and that work is ongoing. We are not able to predict what action, if any, might be taken in the future by the SEC. The SEC has not provided us with any specific timeline or indication as to when the investigation will be concluded or resolved. We cannot predict the timing, outcome or possible impact of the investigation, including without limitation any potential fines, penalties or liabilities.

Recent Government Actions

On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”), which includes changes to a broad range of tax reform provisions including accelerated tax depreciation, expensing of research and development, and the U.S. international inclusions. As a result of the enactment of the OBBBA, we anticipate an impact to our deferred tax and cash tax positions relating to bonus depreciation and full expensing of domestic research and experimental expenditures. We do not expect any material change to our ongoing effective tax rate as a result of this legislation.

In February 2025 the U.S. government announced plans to enact increased tariffs on Canada, China and Mexico, later broadening the increase to various countries within Europe, Africa and Asia. Subsequently, in April 2025, the U.S. formalized actions to delay the effective date of certain tariffs. As of the date of this report, a number of new tariffs remain in effect, including tariffs between the U.S., and countries from which we obtain significant supply, such as Vietnam, Mauritius and China. The extent and duration of these tariffs and the resulting impact on macroeconomic conditions and our business are uncertain and may depend on various factors including, but not limited to, negotiations between the U.S. and affected countries, reciprocal or retaliatory actions imposed by other countries, tariff exemptions, negative sentiment toward U.S. companies and products, and the availability of lower cost inputs that may be sourced domestically. While we plan to offset most of the estimated tariffs by passing along these higher costs, we will continue to evaluate the nature and extent of the impacts to our business and our operating results.

In April 2025, the U.S. Food and Drug Administration (FDA) announced plans to launch a pilot program to reduce animal testing in preclinical safety studies with scientifically validated cell-based and new approach methodologies (NAMs), such as organ-on-a-chip systems, computational modeling, and advanced in vitro assays. We support the FDA’s announcement as we believe the program aligns with the vision previously outlined in the FDA Modernization Act 2.0 and aims to develop a clearer regulatory pathway to streamline the drug development process and safely advance innovative technologies, including alternatives to the current animal based development process. As a leader in preclinical drug development, this vision is consistent with our long-standing mission to drive greater efficiency in the drug development process, enhance scientific innovation, and promote the responsible use of animals in biomedical research. We are continuously evaluating innovative approaches in drug development and have invested in virtual control groups for safety assessment studies and partnerships utilizing AI technologies to reduce animal use. Further, in April 2024, we launched our own Alternative Methods Advancement Project (AMAP), which is an initiative dedicated to developing alternatives to the use of animal testing within the drug development process. We remain committed to continuing to collaborate with regulatory agencies, including the FDA, the biopharmaceutical industry and other stakeholders, to help develop, validate, and implement an efficient process for our clients’ regulatory submissions that support the use of new, non-animal based technologies.

Global Market Environment

We are continuing to see a cautious spending environment from our client base, principally within our DSA segment related to our global biopharmaceutical and biotechnology clients, as they reassess their budgets, reprioritize their drug pipelines, and manage their cost structures. As we continue to navigate these challenges in the current macroeconomic environment, DSA backlog declined slightly to $1.9 billion as of June 28, 2025 from $2.0 billion as of December 28, 2024.

In response to recent trends observed across each of our businesses in the global market environment, we have undertaken and will continue to implement restructuring actions at various locations across North America, Europe and Asia. This includes workforce right-sizing actions, resulting in severance and transition costs; and costs related to the consolidation of facilities to optimize our global footprint and drive greater operating efficiency across the company, resulting in asset impairment, accelerated depreciation, and other site consolidation charges. During fiscal year 2023, we began taking restructuring actions as a result of these emerging business trends. We incurred restructuring charges of $32.2 million and $56.0 million, during the three and six months ended June 28, 2025, respectively, and $107.0 million and $29.7 million during fiscal 2024 and fiscal 2023, respectively. We expect that these effectuated actions, as well as other upcoming planned actions designed to optimize our global footprint to drive greater operating efficiency, will result in approximately $225 million of cost savings on an annualized basis, of which approximately $175 million will impact fiscal year 2025.

Results of Operations

Consolidated Results of Operations and Liquidity

Revenue for three months ended June 28, 2025 increased $6.0 million, or 0.6%, to $1,032.1 million compared to $1,026.1 million in the corresponding period in 2024. Revenue for six months ended June 28, 2025 decreased $21.4 million, or 1.0%, to $2,016.3 million compared to $2,037.7 million in the corresponding period in 2024. The increase in revenue for the three months ended June 28, 2025 was primarily attributable to our Manufacturing and RMS businesses driven by demand, partially offset by declines in our DSA business, which experienced lower volume driven by continued cautious client spending as a result of the demand environment when compared to the corresponding period in 2024. The decrease in revenue for the six months ended June 28, 2025 was driven by declines in our DSA business driven by the same market dynamics discussed above when compared to the corresponding period in 2024.

For the three months ended June 28, 2025, our operating income and operating income as a percentage of revenue were $100.1 million and 9.7% respectively, compared to $151.7 million and 14.8% respectively, in the corresponding period of 2024. For the six months ended June 28, 2025, our operating income and operating income as a percentage of revenue were $174.8 million and 8.7% respectively, compared to $277.6 million and 13.6% respectively, in the corresponding period of 2024. The decreases in operating income and operating income as a percentage of revenue for the three and six months ended June 28, 2025 were primarily driven by the acceleration of amortization expense recognized as a result of a decrease in the remaining useful life of certain CDMO client relationships due to a loss of key customers, restructuring activities, including higher asset impairments and site consolidation charges, and higher third-party legal costs and advisory costs when compared to the corresponding period in 2024.

Net income available to Charles River Laboratories International, Inc., common shareholders decreased to $52.3 million in the three months ended June 28, 2025, from $90.0 million in the corresponding period of 2024. Net income available to Charles River Laboratories International, Inc., common shareholders decreased to $77.8 million in the six months ended June 28, 2025, from $157.3 million in the corresponding period of 2024. The decreases in net income available to common shareholders were due principally to the decreases in operating income described above.

During the six months ended June 28, 2025, our cash flows from operations were $376.3 million compared with $323.4 million for the same period in 2024. The increase was primarily driven by lower payments of variable compensation and favorable timing of payments to our suppliers and vendors, partially offset by higher purchases of inventory to support our DSA reportable segment.

Three Months Ended June 28, 2025 Compared to the Three Months Ended June 29, 2024

Revenue and Operating Income

The following tables present consolidated revenue by type and by reportable segment:

(in thousands, except percentages)

(in thousands, except percentages)

The following table presents operating income by reportable segment:

(in thousands, except percentages)

The following presents and discusses our consolidated financial results by each of our reportable segments:

RMS

(in thousands, except percentages)

RMS revenue increased $6.9 million primarily driven by an increase in large research model product revenue, notably within China and from Noveprim, an increase in Insourcing Solutions and GEMS service revenue, and the effect of changes in foreign currency exchange rates; partially offset by a decline in Cell Solutions product revenue.

RMS operating income increased $5.8 million compared to the corresponding period in 2024. RMS operating income as a percentage of revenue for the three months ended June 28, 2025 was 16.8%, an increase of 230 bps from 14.5% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue increased primarily due to the increase in revenue described above coupled with lower asset impairment charges related to recent restructuring activities compared to the corresponding period in 2024.

DSA

(in thousands, except percentages)

DSA revenue decreased $9.4 million primarily due to lower volume driven by continued cautious client spending as a result of the current demand environment; partially offset by increases in pricing of offerings and the effect of changes in foreign currency exchange rates compared to the corresponding period in 2024.

DSA operating income decreased $15.6 million during the three months ended June 28, 2025 compared to the corresponding period in 2024. DSA operating income as a percentage of revenue for the three months ended June 28, 2025 was 19.9%, a decrease of 220 bps from 22.1% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to the lower revenue described above, restructuring activities including site consolidation and asset impairment charges, and certain third-party legal and advisory costs incurred in connection with the investigations by the U.S. government into the non-human primate supply chain, compared to the corresponding period in 2024.

Manufacturing

(in thousands, except percentages)

Manufacturing revenue increased $8.5 million primarily due to increased revenue in our Microbial Solutions business, driven by an increase in identification services revenue and endotoxin product revenue and the effect of changes in foreign currency exchange rate; partially offset by lower revenue for Biologics Testing services.

Manufacturing operating income decreased $25.2 million during the three months ended June 28, 2025 compared to the corresponding period in 2024. Manufacturing operating income as a percentage of revenue for the three months ended June 28, 2025 was 6.0%, a decrease of (1,340) bps from 19.4% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to accelerated amortization expense as a result of a decrease in the remaining useful life of certain client relationships due to a loss of key customers within the CDMO business, and restructuring activities, including asset impairments and site consolidation charges, compared to the corresponding period in 2024; partially offset by the higher revenue described above.

Unallocated Corporate

(in thousands, except percentages)

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 $16.6 million, or 30.8%, compared to the corresponding period in 2024 is primarily due to higher third-party legal and advisory costs incurred in connection with execution of a Cooperation Agreement entered into with a shareholder earlier this year and higher variable compensation costs. Costs as a percentage of revenue for the three months ended June 28, 2025 was 6.8%, an increase of 150 bps from 5.3% for the corresponding period in 2024.

Other Income (Expense)

(in thousands, except percentages)

Interest income for the three months ended June 28, 2025 was $1.1 million, a decrease of $1.9 million, or 63.6%, driven primarily from lower interest rates and interest earning asset balances.

Interest expense for the three months ended June 28, 2025 was $30.0 million, a decrease of $2.8 million, or 8.6%, compared to $32.8 million in the corresponding period in 2024 due primarily to lower average debt balances.

Other income, net for the three months ended June 28, 2025 was $0.2 million compared to Other expense, net of $2.2 million for the corresponding period in 2024 due primarily to higher net gains on our life insurance contracts coupled with lower net losses on our investments compared to the corresponding period in 2024.

Income Taxes

(in thousands, except percentages)

Income tax expense for the three months ended June 28, 2025 was $18.7 million, a decrease of $6.7 million compared to $25.4 million for the corresponding period in 2024. Our effective tax rate was 26.2% for the three months ended June 28, 2025 compared to 21.2% for the corresponding period in 2024. The tax rate increase was primarily attributable to the tax effects from stock-based compensation deductions, as well as non-taxable remeasurement gains on a previous equity investment in Noveprim during the three months ended June 29, 2024.

Six Months Ended June 28, 2025 Compared to Six Months Ended June 29, 2024

Revenue and Operating Income

The following tables present consolidated revenue by type and by reportable segment:

(in thousands, except percentages)

(in thousands, except percentages)

The following table presents operating income by reportable segment:

(in thousands, except percentages)

The following presents and discusses our consolidated financial results by each of our reportable segments:

RMS

(in thousands, except percentages)

RMS revenue decreased $1.0 million primarily driven by lower Cell Solutions product revenue and large research model product revenue due to timing of sales; partially offset by an increase in small research models product revenues principally due to price.

RMS operating income increased $6.3 million compared to the corresponding period in 2024. RMS operating income as a percentage of revenue for the six months ended June 28, 2025 was 18.6%, an increase of 150 bps from 17.1% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue increased primarily due to lower charges related to restructuring activities, including asset impairments and site consolidation charges; partially offset by higher amortization related to acquisitions and the impacts of the RMS revenue drivers described above compared to the corresponding period in 2024.

DSA

(in thousands, except percentages)

DSA revenue decreased $22.2 million primarily due to lower volume driven by continued cautious client spending as a result of the current demand environment, partially offset by the effect of changes in foreign currency exchange rates.

DSA operating income decreased $36.5 million compared to the corresponding period in 2024. DSA operating income as a percentage of revenue for the six months ended June 28, 2025 was 17.9%, a decrease of 260 bps from 20.5% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to the lower revenue described above, restructuring activities, including asset impairments and site consolidation charges, and certain third-party legal costs incurred in connection with the investigations by the U.S. government into the non-human primate supply chain compared to the corresponding period in 2024.

Manufacturing

(in thousands, except percentages)

Manufacturing revenue increased $1.8 million primarily due to an increase in our Microbial Solutions business driven by higher product revenue associated with endotoxin product revenue and identification services revenue and the effect of changes in foreign currency exchange rate; partially offset by decreased revenue in our Biologics Solutions business, driven by decreased demand for CDMO and Biologics Testing services.

Manufacturing operating income decreased $67.5 million compared to the corresponding period in 2024. Manufacturing operating income as a percentage of revenue for the six months ended June 28, 2025 was 0.9%, a decrease of 1790 bps from 18.8% for the corresponding period in 2024. Operating income and operating income as a percentage of revenue decreased primarily due to accelerated amortization expense as a result of a decrease in the remaining useful life of certain client relationships due to a loss of key customers within the CDMO business and restructuring activities, including asset impairments and site consolidation charges, compared to the corresponding period in 2024; partially offset by the higher revenue described above.

Unallocated Corporate

(in thousands, except percentages)

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 $5.2 million, or 4.3%, compared to the corresponding period in 2024 is primarily due to higher third-party legal and advisory costs incurred in connection with execution of the Cooperation Agreement. Costs as a percentage of revenue for the six months ended June 28, 2025 were 6.2%, an increase of 30 bps from 5.9% for the corresponding period in 2024.

Other Income (Expense)

(in thousands, except percentages)

Interest income for the six months ended June 28, 2025 was $2.5 million, a decrease of $2.7 million, or 52.0%, driven primarily from lower interest rates and interest earning asset balances.

Interest expense for the six months ended June 28, 2025 was $57.9 million, a decrease of $9.9 million, or 14.6%, compared to $67.8 million in the corresponding period in 2024 due primarily to lower average debt balances.

Other expense, net for the six months ended June 28, 2025 was $12.1 million compared to Other income, net of $3.6 million for the corresponding period in 2024 due primarily to venture capital investment losses of $9.0 million as compared to gains of $1.8 million in the corresponding period in 2024.

Income Taxes

(in thousands, except percentages)

Income tax expense for the six months ended June 28, 2025 was $28.8 million, a decrease of $21.1 million compared to $49.9 million for the corresponding period in 2024. Our effective tax rate was 26.8% for the six months ended June 28, 2025 compared to 22.8% for the corresponding period in 2024. The increase in our effective tax rate in the six months ended June 28, 2025 compared to the corresponding period in 2024 was primarily attributable to the tax effects from stock-based compensation deductions, as well as non-taxable remeasurement gains on a previous equity investment in Noveprim during the six months ended June 29, 2024.

Liquidity and Capital Resources

Liquidity and Cash Flows

In general we require cash to fund our working capital needs, capital expansion, acquisitions, debt payments, lease payments, venture capital investment, restructuring initiatives, 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.

The following table presents our cash, cash equivalents and short-term investments:

(in thousands)

34

The following table presents our net cash provided by operating activities:

(in thousands)

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-cash operating items such as depreciation and amortization, stock-based compensation, goodwill impairment, debt financing costs, deferred income taxes, write downs of inventories, provisions of credit losses, long-lived asset impairment changes, gains and/or losses on venture capital and strategic equity investments, gains and/or losses on divestitures, changes in fair value of 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.

During the six months ended June 28, 2025, our cash flows from operations were $376.3 million compared with $323.4 million for the same period in 2024. The increase was primarily driven by lower payments of variable compensation and favorable timing of payments to our suppliers and vendors, partially offset by higher purchases of inventory to support our DSA reportable segment.

The following table presents our net cash used in investing activities:

(in thousands)

Investing activities primarily consist of cash used to fund capital expenditures to support the growth of our business, purchases and sales of investments related to our venture capital and strategic equity investment portfolios, and asset and business acquisitions, periodically offset by cash from divestitures.

For the six months ended June 28, 2025, cash used in investing activities was primarily driven by capital expenditures partially offset by proceeds from divestitures of certain site and business assets. Capital expenditures decreased for the six months ended June 28, 2025 as compared to the same period in 2024, as a result of disciplined spend management in light of the global economic environment.

For the six months ended June 29, 2024, cash used in investing activities was primarily driven by capital expenditures to support the growth of the business, an immaterial asset acquisition, and investments in certain venture capital and strategic equity investments.

The following table presents our net cash (used in) provided by financing activities:

(in thousands)

Financing activities primarily consist of the proceeds and repayments of debt and certain equity related transactions including treasury stock purchases and employee stock option exercises.

For the six months ended June 28, 2025, net cash used in financing activities was primarily driven by the following activity:

• Net proceeds of $85.7 million from our Credit Facility
• Treasury stock purchases of $350.0 million associated with our stock repurchase program and $9.9 million due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements
• Payment of $21.8 million associated with contingent consideration related to the acquisition of Noveprim
• Payment of $19.1 million for the remaining 8% equity interest in Vital River

For the six months ended June 29, 2024, net cash provided by financing activities was primarily driven by the following activity:

• Net repayments of $252.4 million from our Credit Facility
• Net proceeds from exercises of employee stock options of $22.3 million
• Treasury stock purchases of $18.3 million made due to the netting of common stock upon vesting of stock-based awards in order to satisfy individual statutory tax withholding requirements
• Payment of $12.0 million for the remaining 10% equity interest in an other redeemable noncontrolling interest

Financing and Market Risk

We are exposed 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 our exposure to these risks through our regular operating and financing activities.

Amounts outstanding under our Credit Facility and our Senior Notes were as follows:

(in thousands)

36

The Credit Facility provides for up to $2.0 billion of multi-currency revolving credit and has a maturity date of December 2029, with no required scheduled payment before that date. The interest rates applicable to the revolving 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 SOFR rate plus 1.0%) or the adjusted SOFR 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.

Our off-balance sheet commitments related to our outstanding letters of credit as of June 28, 2025 and December 28, 2024 were $22.0 million and $22.4 million, respectively.

Foreign Currency Exchange Rate Risk

We operate on a global basis and have exposure to 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 our foreign subsidiaries are the Euro, British Pound, Canadian Dollar, Chinese Yuan Renminbi, and Mauritian Rupee. During the six months ended June 28, 2025, the most significant drivers of foreign currency translation adjustment we recorded as part of Other comprehensive income (loss) were the Euro, British Pound, Canadian Dollar, Mauritian Rupee, 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 six months ended June 28, 2025, our revenue would have decreased by $65.5 million, and our operating income would have decreased by $1.7 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.

Repurchases of Common Stock

On August 2, 2024, our Board of Directors approved a stock repurchase authorization of $1 billion. During the six months ended June 28, 2025, we repurchased 2.1 million shares of common stock for $350.0 million under the new stock repurchase program. As of June 28, 2025, we had $549.3 million remaining on the current 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. During the six months ended June 28, 2025, we acquired 0.1 million shares for $9.9 million through 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 the 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal year 2024 as filed with the SEC on February 19, 2025. There have been no changes in the Company’s critical accounting policies during the six months ended June 28, 2025.

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 six months ended June 28, 2025 that had a significant effect on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

The Company’s exposure to market risk from changes in interest rates and currency exchange rates has not changed materially from its exposure discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2024 as filed with the SEC on February 19, 2025. Our interest rate and currency exchange rate risks are fully described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” of our Annual Report on Form 10-K for fiscal year 2024 and in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” herein.

(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 June 28, 2025, 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 our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgement in evaluating the benefits of our controls and procedures relative to their costs.

(b) Changes in Internal Controls Over Financial Reporting

There were no 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 June 28, 2025 that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

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 2024, 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 2024 as filed with the SEC on February 19, 2025, except as disclosed below.

Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition can have an adverse effect on our business and financial statements.

Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition, including laws and policies in areas such as trade, manufacturing, government purchasing, healthcare, intellectual property, regulatory enforcement and investment/development, can adversely affect our business and financial statements. The U.S. has experienced a rapid increase in new government regulations, including tariffs and proposed tariffs on imports from a wide range of markets and geographies, including some in which we operate. These tariffs/proposed tariffs have prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the U.S. and other countries. In early April 2025, actions were taken by the U.S. and certain other countries to delay the effective date of certain of these tariffs, but as of the date of this report a number of new tariffs remain in effect, including significant tariffs between the U.S. and countries from which we obtain significant supply, such as Vietnam, Mauritius, and China. Collectively, this may adversely impact our operating margin and results of operations, for example, our costs and expenses related to our business activities and those of our customers and suppliers; demand for our products and our competitive positioning; the availability to us of certain products in certain countries; and our supply chain operations. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the impact of these tariffs. Though the risks identified above in certain cases have already adversely impacted part of our business, the full impact of these tariffs and other actions on the Company and on our business partners remains highly uncertain and subject to rapid change.

A reduction or delay in government funding of R&D may adversely affect our business.

A portion of revenue, predominantly in our RMS segment, is derived from clients at academic institutions and research laboratories whose funding is partially dependent on both the level and timing of funding from government sources such as the U.S. National Institutes of Health (NIH) and similar domestic and international agencies, which can be difficult to forecast. We also sell directly to the NIH and these other agencies. Government funding of R&D is subject to the political process, which is inherently fluid and unpredictable. For example, the NIH announced on February 7, 2025, a policy significantly reducing research grants by limiting payments for indirect overhead. While, as of the date of this filing, the order is subject to a preliminary injunction, there can be no assurance that a permanent injunction will be granted or that other adverse actions will not be taken. Our revenue may be adversely affected if our clients delay purchases as a result of uncertainties surrounding the approval of government budget proposals, included reduced allocations to government agencies that fund R&D activities. Government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund R&D activities, or NIH funding may not be directed towards projects and studies that require the use of our products and services, both of which could adversely affect our business and our financial results.

Changes in government regulation or in practices relating to the pharmaceutical or biotechnology industries, including potential healthcare reform, could decrease the need for the services we provide.

Governmental agencies throughout the world strictly regulate the drug development process. Our business involves helping our customers navigate these regulatory processes. Accordingly, many regulations, and often new regulations, are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of streamlined or expedited drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services.

For example: in December 2022, the FDA Modernization Act 2.0 was passed, which clarifies methods manufacturers and sponsors can use to investigate the safety and efficacy of a drug; and in April 2025 the FDA announced its intention to reduce animal testing in preclinical safety studies with scientifically validated cell-based and new approach methodologies (NAMs), such as organ-on-a-chip systems, computational modeling, and advanced in vitro assays. Eliminating the use of animals in research may have material adverse effects on our business, results of operations, or financial condition. While there have been significant advancements in the development of alternative methods, the complete elimination of animals in research will be a gradual process that may take many years to achieve. While we are committed to working with the industry to support development and to provide the best translational models to supplement or replace traditional models as part of our Replacement, Reduction, and Refinement (3Rs) initiative and our Alternative Methods Advancement Project (AMAP), the use of animals in research is highly regulated and proposed changes to current regulations will need to be carefully evaluated to ensure that they do not compromise the safety and efficacy of new drugs and medical treatments.

Although we believe we are currently in compliance in all material respects with applicable national, regional and local laws, as well as other accepted guidance used by oversight bodies (including the USDA, the standards set by the International Air Transport Association, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, USFWS, The Centers for Disease Control, the Department of Transportation, the Department of State, the office of Laboratory Animal Welfare of NIH, the Drug Enforcement Agency, as well as numerous other oversight agencies in the jurisdictions in which we operate), failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions. For additional discussion of the factors specifically affecting our non-human primates including related oversight trade compliance agencies, please see the sections entitled “Item 1A. Risk Factors – Industry Risk Factors - Several of our product and service offerings, including our non-human primate supply, are dependent on a limited source of supply that, when interrupted, adversely affects our business”, included within our Annual Report on Form 10-K for fiscal year 2024 as filed with the SEC on February 19, 2025 and “Item 1. Legal Proceedings” above. In addition, if regulatory authorities were to mandate a significant reduction in safety assessment procedures that utilize research animals (as has been advocated by certain groups), certain segments of our business could be materially adversely affected.

Implementation of healthcare reform legislation, such as certain provisions of the Inflation Reduction Act, may have certain benefits, but also may contain costs that could limit the profits that can be made from the development of new drugs. This could adversely affect R&D expenditures by pharmaceutical and biotechnology companies, which could in turn decrease the business opportunities available to us both in the U.S. and abroad. In addition, new laws or regulations may create a risk of liability, increase our costs or limit our service offerings. Furthermore, if health insurers were to change their practices with respect to reimbursements for pharmaceutical products, our clients may spend less or reduce their growth in spending on R&D.

While it is not possible to predict whether and when any such changes will occur, changes at the local, state or federal level, or in laws and regulations in effect in foreign jurisdictions in which we operate or have business relationships, may significantly impact our domestic and foreign businesses and/or those of our clients. Furthermore, modifications to international trade policy, public company reporting requirements, environmental regulation and antitrust enforcement may have a materially adverse impact on us, our suppliers or our clients.

New technologies may be developed, validated and increasingly used in biomedical research, which could reduce demand for some of our products and services.

The scientific community continues to develop NAMs, which do not involve working with animal models and are designed to increase the translation from findings in early-stage discovery and pre-clinical studies to human studies, and vice-versa. As these methods continue to advance, they may supplement, and in some cases possibly replace or supplant methodologies that are currently in use, such as the use of traditional living animals in biomedical research. For example, in April 2025, the FDA announced its intention to reduce animal testing in preclinical safety studies with NAMs, such as organ-on-a-chip systems, computational modeling, and advanced in vitro assays. In addition, technological improvements, such as imaging and other translational biomarker technologies, could impact demand for animal research models. Further, manufacturers, including Charles River, have recently introduced recombinant versions of LAL, which has been historically derived from live animals. It is our strategy to explore new technologies to refine and potentially reduce the use of animal models and animal derived products as new in vitro and in silico methods become available and synthetically-manufactured products become validated with sufficient data to ensure public safety. For information regarding our efforts to support development and to provide the best translational models to supplement or replace traditional models, see “Our Strategy” included within our Annual Report on Form 10-K for fiscal year 2024 as filed with the SEC on February 19, 2025. However, we may not be able to develop new products, inputs or processes effectively or in a timely manner to replace any lost sales. Lastly, other companies or entities may develop research models, inputs or processes with characteristics different from those that we produce, and that may be viewed as more desirable by some of our clients.

Our quarterly operating results may vary, which could negatively affect the market price of our common stock.

Our results of operations in any quarter may vary from quarter to quarter and are influenced by the risks discussed above, as well as: changes in the general global economy; changes in the mix of our products and services; changes in government regulation or in practices related to the pharmaceutical or biotechnology industries, including with respect to the use of NAMs; cyclical buying patterns of our clients; the financial performance of our strategic and venture capital investments; certain acquisition-related adjustments, including change in fair value of contingent payments both receivable from or payable to counterparties; and the occasional extra week (“53rd week”) that we recognize in a fiscal year (and fourth fiscal quarter thereof), including 2022, due to our fiscal year ending on the last Saturday in December. We believe that operating results for any particular quarter are not necessarily a meaningful indication of future results. Nonetheless, fluctuations in our quarterly operating results could negatively affect the market price of our common stock.

Our review of potential strategic alternatives may not result in an executed or consummated transaction or other strategic alternative, and the process of reviewing strategic alternatives or the outcome could adversely affect our business.

On May 6, 2025, in connection with a Cooperation Agreement entered into with a large shareholder of the Company, we agreed, among other things, to have the Strategic Partnership and Capital Allocation Committee of our Board of Directors oversee and direct a comprehensive strategic review and evaluation of the Company’s business and prospects, including an examination of various alternatives to enhance long-term stockholder value. There is no assurance that the process will result in the approval or completion of any specific transaction or outcome. Further, there is no guarantee that any transaction resulting from the strategic review will ultimately benefit our stockholders.

The process of reviewing potential strategic and operational alternatives is time consuming and costly and may divert management’s attention. It may also be disruptive to our business operations and long-term planning, which may cause concern to our current or potential investors, customers, employees, strategic partners, vendors and other stakeholders and may have a material impact on our operating results or result in increased volatility in our stock price.

Any potential transaction or other strategic alternative would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, regulatory approvals, and the availability of financing for a potential transaction on favorable terms. There can be no assurance that any potential transaction or other strategic alternative will be successfully implemented, achieve the intended benefits or provide greater value to our stockholders than that reflected in the current price of our common stock. Until the review process is concluded, perceived uncertainties related to our future may result in the loss of potential business opportunities, volatility in the market price of our common stock and difficulty attracting and retaining qualified talent and business partners.