Company: CRL
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001100682-25-000011
Chunk: 107

Company: CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Filing Date: 2025-02-19
Form: 10-K
Item: Item 7
Chunk 107
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 was determined that the fair value of the reporting unit exceeded its carrying value by approximately 22%, and no impairment was recognized as of September 28, 2024. As of the annual impairment test date, the fair value of the reporting unit exceeded its carrying value by approximately 16% and no impairment was recognized as of December 28, 2024. While the Discovery Services reporting unit is not currently impaired, we will continue to closely monitor future performance and any potential impacts on the value of the reporting unit. If the estimated future cash flows decrease below our current expectations, specifically as a result of lower revenue growth rates or lower operating income margins, or due to an increase of the weighted-average cost of capital, the fair value may decrease below the carrying value, which may result in a material goodwill impairment.

During the fourth quarter ended December 28, 2024, a triggering event was identified for the Biologics Solutions reporting unit after the annual impairment assessment. This resulted from a loss of key customers, ultimately resulting in a reduction in Biologics Solutions’ long range financial outlook. In response, we conducted a quantitative impairment test for goodwill to determine if the goodwill in the Biologics Solutions reporting unit was impaired. The fair value of the Biologics Solutions reporting unit tested for impairment during 2024 was determined based on a discounted cash flow model (an income approach) and earnings multiples (a market approach) based on the guideline public company method. Significant assumptions used in the determination of fair value of the Biologics Solutions reporting unit generally include forecasted cash flows, discount rates, terminal growth rates and earnings multiples. The discounted cash flow model used to determine the fair value of the Biologics Solutions reporting unit as of the impairment triggering date reflected assumptions related to revenue growth rates, operating income margins, discount rate and terminal growth rate. The Biologics Solutions reporting unit fair value measurement is classified as Level 3 in the fair value hierarchy because they involve significant unobservable inputs.

Upon completion of a quantitative impairment test, it was determined that the fair value of the reporting unit was below its carrying value, resulting in a goodwill impairment of approximately $215.0 million. We will continue to closely monitor future performance and any potential impacts on the value of the reporting unit. If the estimated future cash flows decrease below our current expectations, specifically as a result of lower revenue growth rates or operating income margins, or due to an increase of the weighted-average cost of capital, the fair value may further decrease resulting in an incremental material goodwill impairment