SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)

FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001

OR

Commission File No. 333-92383

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)

(978) 658-6000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        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 [X]ý Noo

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /o

        Indicate by check mark whether the Registrant is an accelerated filer. Yesý Noo

        As of March 12,June 28, 2002, the aggregate market value of the Registrant's voting common stock held by non-affiliates of the Registrant was approximately $1,177,703,000.$1,543,056,587. As of that date, there were outstanding 44,233,60244,742,208 shares of the Registrant's common stock, $0.01 par value per share.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's Definitive Proxy Statement for its 20022003 Annual Meeting of Stockholders scheduled to be held on May 3, 20022, 2003 (the "20022003 Proxy Statement")Statement), which will be filed with the Securities and Exchange Commission not later than 120 days after December 29, 2001,28, 2002, are incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of the portions of the 20022003 Proxy Statement expressly incorporated into this Annual Report on Form 10-K by reference, such document shall not be deemed filed as part of this Form 10-K.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
FORM 10-K
ANNUAL REPORT

TABLE OF CONTENTS

PART I

Item 1. Business

General

        This Annual Report on Form 10-K (Form 10-K), contains forward-looking statements regarding future events and the future results of Charles River Laboratories International, Inc. (Charles River) that are based on current expectations, estimates, forecasts, and projections about the industries in which Charles River operates and the beliefs and assumptions of the management of Charles River. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only 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. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-K under the section entitled "Risks Related to Our Business and Industry". Charles River undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Corporate History

        Charles River has been in business for over 55 years and has undergone several business structure changes over the years. Charles River Laboratories International, Inc. was incorporated in 1994. In 2000, we completed our initial public offering of Charles River Laboratories International, Inc.. Our stock is traded on the New York Stock Exchange under the symbol "CRL" and is included in the Standard & Poor's S&P MidCap 400 Index. We are headquartered in Wilmington, Massachusetts. Our headquarters mailing address is 251 Ballardvale St., Wilmington, MA 01887, and the telephone number at that location is (978) 658-6000. Our Internet site is www.criver.com. Material contained on our Internet site is not incorporated by reference into this Form 10-K. Unless the context otherwise requires, references in this Form 10-K to "Charles River," "we," "us" or "our" refer to Charles River Laboratories International, Inc. and its subsidiaries.

        This Form 10-K, as well as all other reports filed with the Securities and Exchange Commission (SEC), are available free of charge through our Internet site as soon as practicable after we electronically file such material with, or furnish it to, the SEC. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Overview

        We are a leading provider of critical research tools and integrated support services that enable innovative and efficient drug discovery and development. We are the global leader in providing the animal research models required in research and development for new drugs, devices and therapies and have been in this business for more than 5055 years. Since 1992, we have built upon our research model technologies to develop a broaddiverse and growing portfolio of biomedical products and services. Our wide array of services enables our customers to reduce costs, increase speed and enhance their productivity and effectiveness in drug discovery and development. Our customer base spanning over 50 countries, includes all of the major pharmaceutical andcompanies, biotechnology companies, as well as many government agencies, leading hospitals, and academic institutions.institutions throughout the world. We currently operate 7782 facilities in 1516 countries worldwide. Our differentiated products and services, supported by our global infrastructure and scientific expertise, enable our customers to meet many of the challenges of early-stage life sciences

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research, a large and growing market. In 2001,2002, our net sales were $465.6$554.6 million and our operating income was $90.3$122.3 million.

        Biomedical Products and Services.    We have focused significant resources on developing a diverse portfolio of biomedical products and services directed at high growth areas of drug discovery and development.services. Our biomedical products and services business represented 58%59.7% of our 2001 net sales. We have experienced strong growth in biomedical products and services as demonstrated by our 53.6% compound annual growth rate in ourtotal net sales over the past four fiscal years.in 2002. We expect the drug discovery and development markets that we serve will continue to experience strong growth, particularly as new drug development based on advances in geneticsgenomics and proteomics continues to evolve. There are four areasbusiness units within this segment of our business:

Discovery Services.    Our discovery services are designed to assist our customers in screening drug candidates faster by providing genetically defineda variety of services related to genetically-defined research models for in-house research and by implementing efficacy screening protocols to improve the customer's drug-evaluation process. The market for discovery services is growing rapidly as pharmaceutical and biotechnology research and development increasingly focuses on selecting lead drug candidates from the enormous number of new compounds being generated. We currently offer four major categories of discovery services: transgenic services, research support services, infectious disease and genetic testing, and contract site management. Transgenicmanagement and laboratory and research support services. One of the largest contributors to this segment's growth in 2002 was our transgenic services is our highest growth area and includes model development, genetic characterizations,business, where we work alongside researchers using embryo cryopreservation, and rederivation and colony scale-up.scale-up which enables them to develop new drug targets, pathways and, ultimately, drugs. In 2002, in order to meet the growing demand for these services, we built a new, state-of-the-art, 70,000 square foot facility. Discovery services contributed 18.8% of total net sales in 2002.

Development Services.    We currently offer FDA-compliant development services in three main areas: drug safety assessment, biotech safetybiosafety testing and medical device testing. Biotech safetyBiosafety testing services include a broad range of services specifically focused on supporting biotech or protein-based drug development, including such areas as protein characterization, cell banking, methods development and release testing. Our rapidly growing development services offerings enable our customers to outsource their high-end, non-core drug development activities. In 2001,June 2002, we acquired PrimedicaBiological Laboratories Europe Limited (BioLabs) and PAI. PrimedicaSpringborn Laboratories Inc. (Springborn). BioLabs is our Ireland- based human and animal health testing company, which provides a broad range of services supporting the discovery, development and manufacture of pharmaceuticals, medical devices and animal and human health products. BioLabs' strengths include the development and conduct of bioassays under stringent regulatory conditions that test for the safety of toxins, hormones and other biologics used in medical treatments. Springborn, our Ohio-based drug safety assessment business we acquired in October 2002, is a leading provider of preclinicaltesting services for pre-clinical drug discovery and development, services toprincipally in evaluating the biopharmaceutical industry, and PAI is the world's leading providersafety of contract toxicology pathology services in research models.new drug candidates before they enter human clinical trials. The acquisitions of PrimedicaBioLabs and PAISpringborn greatly expanded our portfolio of outsourcing services by adding capabilitiesand our ability to provide services globally. In October 2002, we also formed a joint venture, Charles River Proteomics Services, Inc., which we expect will provide proteomics testing services to our pharmaceutical and biotechnology customers on a fee-for-service basis. Proteomics testing is expected to be an important contributor to new drug development in the high-demand areascoming years. Development services, our largest business unit in this segment, contributed 32.7% of pharmacokinetic and metabolic analysis, bioanalytial chemistry, pharmacology and surgery, specialty toxicology, pathology services, and biopharmaceutical production. See "—Development Services."total net sales in 2002.

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In Vitro Technology.    We have diversified our product offerings to include non-animal, orin vitro, methods for testing the safety of drugs and devices. We are strategically committed to being the leader in providing our customers within vitro alternatives as these methods become scientifically validated and commercially feasible. Our current products include endotoxin detection systems that ensure that injectable drugs and devices are free from harmful contaminants, as well as a proprietary molecular assay that is currently being validated for usecontaminants. This business unit contributed 3.3% of total net sales in the screening of new drugsin vitro for phototoxicity and photocarcinogenicity.2002.

Vaccine Support Products.    We provide vaccine manufacturers with pathogen-free fertilized chicken eggs, a critical ingredient for poultry vaccine production. We believe there may be significant potential for

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growth in this area in support of novel human vaccines, such as a nasal spray flu vaccine currently in development. This business unit contributed 4.9% of total net sales in 2002.

        Research Models.    We are the global leader in the production and sale of research models, principally genetically and virally defined purpose-bred rats and mice. These products represented 42%40.3% of our 20012002 total net sales. We offer nearly 150approximately 165 research models, one of the largest selections of small animal models of any provider worldwide. Our higher growth models include genetically defined models and models with compromised immune systems, which are increasingly in demand as early-stage research tools. The FDA and foreign regulatory bodies typically require the safety and efficacy of new drug candidates and many medical devices to be tested on research models like ours prior to testing in humans. As a result, our research models are an essential part of the drug discovery and development process. Our research models are produced in a biosecure environment designed to ensure that the animals are free of viral and bacterial agents and other contaminants that can disrupt research operations and distort results. With our biosecure production capabilities and our ability to deliver consistent, high quality research models worldwide, we are well positioned to benefit from the rapidsteady growth in research and development spending by pharmaceutical and biotechnology companies and continued research spending by government agencies such as the U.S. National Institutes of Health.Health (NIH). In 2002, for the first time in a decade, we added production space in three North America locations: Massachusetts, California and Montreal, Canada, to accommodate the sales growth in research models.

Competitive Strengths

        Our leading research models business has provided us with steadily growing revenues and strong cash flow, while our biomedical products and services business provides significant opportunities for profitable growth.        Our products and services are critical to both traditional pharmaceutical research and the rapidly growing fields of genomic,genomics, proteomics, recombinant protein, and humanized antibody research. We believe we are well positioned to compete effectively in all of these sectorsmarkets as a result of a diverse set of competitive strengths, which include:

        Critical Products and Services.    We provide critical, proven and enabling products and services that our customers rely uponon to advance their early-stage research efforts and accelerate product development. We offer a wide array of complementary research tools and discovery and development services that differentiate us from our competition and have created a sustained competitive advantage in our markets.

        Long-Standing Reputation for Scientific Excellence.    We have earned our long-standing reputation for scientific excellence by consistently delivering high-quality research models supported by exceptional technical service and support for over 5055 years. As a result, the Charles River brand name is synonymous with premium quality products and services and scientific excellence in the life sciences.biomedical research industry. We have nearly 250 science professionals on staff with D.V.M.s, Ph.D.s and M.D.s, in areas including laboratory animal medicine, molecular biology, pathology, immunology, toxicology and pharmacology.

        Extensive Global Infrastructure and Customer Relationships.    Our operations are globally integrated throughout North America, Europe and Asia. Our extensive investment in worldwide infrastructure allows us to standardize our products and services across borders when required by our multinational

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customers, while also offering a customized local presence when needed. We currently operate 7782 facilities in 1516 countries worldwide, serving a global customer base spanning more than 50 countries.base.

        Biosecurity Technology Expertise.    In our research models business, our commitment to and expert knowledge of biosecurity technology distinguishes us from our competition. We maintain rigorous biosecurity standards in all of our facilities to maintain the health profile and consistency of our research models. These qualities are crucial to the integrity and timeliness of our customers' research.

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        Platform Acquisition and Internal Development Capabilities.    We have a proven track record of successfully identifying, acquiring, and developing complementary businesses and new technologies. With this experience, we have developed internal expertise in sourcing acquisitions and further developing new technologies. We believe this expertise will continue to differentiate us from our competitors as we seek to further expand our business.

        Experienced and Incentivized Management Team.    OurMost of our senior management team has an average of nearly 20 years of experienceservice with our company, and has evidenced a strong commitment and capability to deliver reliable performance and steady growth.company. Our Chairman and Chief Executive Officer, James C. Foster, has been with us for 2627 years. As of December 29, 200128, 2002 our management team ownsowned, or hashad options to acquire, securities representing approximately 4.4%3.0% of our equity on a fully dilutedfully-diluted basis.

Our Strategy

        Our business strategy is to build upon our core research model business and to actively invest in higher growthhigher-growth opportunities where our proven capabilities and strong relationships allow us to achieve and maintain a leadership position. Our growth strategies include:

        Broaden the Scope of Our Discovery and Development Services.    Primarily through acquisitions and alliances, we have improved our ability to offer new services that complement our existing drug discovery and development services. We have targeted services that support transgenic research activities as a high growth area.business. We intend to provide the additional critical support services needed to create, define, characterize and scientifically validate new genetic models expected to arise out of the Human Genome and Mouse Genome Projects. In addition, we plan to broaden our international presence in genetic services, specialized pathology and drug efficacy analysis. We also continue to add new capabilities in the biotech safety testing area.

        Expand Our PreclinicalPre-clinical Outsourcing Services.    Many of our pharmaceutical and biotechnology customers outsource a wide variety of research activities that are not directly associated withcritical to their scientific innovation process. We believe the trend of outsourcing preclinicalpre-clinical or early-stage research will continue to increase rapidly.increase. We are well positioned to exploit both existing and new outsourcing opportunities, principally through our discovery and development services offerings. We believe our early successes in the transgenic services area have increased customer demand for outsourcing and have created significant opportunities. Our research support services provide pharmaceutical and biotechnology companies with significant cost and resource allocation advantages over their existing internal operations. We intend to focus our marketing efforts on stimulating demand for further outsourcing of preclinicalpre-clinical research. We also intend to expand our opportunities by increasing our international presence.

        Pursue Strategic Acquisitions and Alliances.    Over the past decade, we have completed 1821 acquisitions and alliances.alliances that have contributed to our financial results. Several of our operations began as platform acquisitions, which we were able to grow rapidly by developing and marketing the acquired products or services to our extensive global customer base. We intend to further pursue strategic platform acquisitions to drive our long-term growth.

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        Expand Our Non-Animal Technologies.    In vitro testing technologies are in their early stages of development, but we plan to continue to acquire and introduce newin vitro products and services as they become scientifically validated and commercially viable. We are particularly focused on acquiring new technologies that allow for high through-put screening and testing of new drug candidates in the early stages of development, using such techniques as cell and tissue cultures.

        Acquire New Technologies in Research Models.    We have acquired and intend to acquire novel technologies in transgenics and cloning to increase sales in our research models business and related transgenic services operations. We also expect to offer additional genetically modified models for research of specific disease conditions. These higher-value research models are often highly specialized and are priced to reflect their greater intrinsic value. In particular, we intend to acquire and develop transgenic rat technology, where development has been slow compared to mice. We believe thereour approach to acquisitions is a growing need for genetically engineered rats, whichdisciplined one that seeks to focus on businesses that are largera sound strategic fit and more accessible research models than mice.that offer the prospect of enhancing stockholder value. This strategy may include geographic expansion of an existing core service or strengthening of one of our core services.

Business Segments

        Our business is divided into two segments: Biomedical Products and Services, and Research Models.

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Biomedical Products and ServicesBIOMEDICAL PRODUCTS AND SERVICES

        Our biomedical products and services business segment consists of our newer, higher growth operations, which we organize as follows:the following operations:

Discovery Services

        Discovery represents the earliest stages of research and development in the life sciences, directed to the identification (discovery) and selection of a lead compound for future drug development. Discovery is followed by development activities, which are directed at validation of the selected drug candidates. Discovery and development represent most of the preclinicalpre-clinical activities in drug development.

        Initiated in 1995, the discovery services area of our business addresses the growing need among pharmaceutical and biotechnology companies to outsource the non-core aspects of their drug discovery activities. These discovery services capitalize on the technologies and relationships developed through our research model business. We currently offer four major categories of discovery services: transgenic services, research support services, infectious disease and genetic testing, and contract site management.management, and laboratory and research support services.

        Transgenic Services.    In this rapidly growing area of our business, we assist our customers in validating, maintaining, improving, breeding and testing research models purchased or created by them for

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biomedical research activities. While the creation of a transgenic knock-out or cloned model can be a critical scientific event, it is only the first step in the discovery process. Productive utilization of research models requires significant additional technical expertise. We provide transgenic breeding expertise, model characterization and colony development, genetic characterization, quarantine, embryo cryopreservation, embryo transfer, rederivation, and health and genetic monitoring. We provide these services to nearly 200 laboratories around the world from pharmaceutical and biotechnology companies to hospitals and universities. We maintain more than 1,000 different types of naturally occurring or experimentally manipulated research models for our customers. We expect that the demand for our services will grow as the use of transgenic knock-out and cloned animal models continues to grow within the research community.

        Research Support Services.    Our research support services provide advanced or specialized research model studies In 2002, in order to meet the growing demand for our customers. These projects capitalize on our strong research model capabilities and also exploit more recently developed capabilities in protocol development, animal micro-surgery, dosing techniques, drug effectiveness testing and data management and analysis. We believe these services, particularlywe built a new, state-of-the-art, 70,000-square-foot facility in oncology and cardiovascular studies, offer added value to our research customers, who rely on our extensive expertise, infrastructure and resources. We also manage under contract a genetically defined, biosecure herd of miniature swine to provide organs for human transplantation research, known as xenotransplantation.Wilmington, MA.

        Infectious Disease and Genetic Testing.    We assist our customers in monitoring and analyzing the health and genetics of the research models used in their research protocols. We developed this capability internally by building upon the scientific foundation created by the diagnostic laboratory needs of our research model business. Depending upon a customer's needs, we may serve as its sole sourcesole-source testing laboratory, or as an alternative source supporting its internal laboratory capabilities.

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We believe that the continued growth in development and utilization of transgenic knock-out and cloned models will drive our future growth as the reference laboratory of choice for genetic testing of special models.

        Contract Site Management.    Building upon our core capabilitiescapability as a leading provider of high qualityhigh-quality research models, we manage animal care operations on behalf of government, academic, pharmaceutical and biotechnology organizations. Increasing demandDemand for our services reflects the growing necessity of these large institutions to outsource internal functions or activities that are not critical to the core scientific innovation and discovery process,process. In addition, we believe that our expertise in managing the laboratory animal environment enhances the productivity and quality of our customers' research facilities. This area leads to additional opportunities for us to provide other products and services to our customers. Site management does not require us to make any incremental investment, thereby generating a favorable return on deployed assets.

        Laboratory and Research Support Services.    Our laboratory and research support services provide advanced or specialized research model studies for our customers. These projects capitalize on our strong research model capabilities and also utilize more recently developed capabilities in protocol development, animal micro-surgery, dosing techniques, drug effectiveness testing and data management and analysis. We believe these services, particularly strong return.in oncology and cardiovascular studies, offer added value to our research customers, who rely on our extensive expertise, infrastructure and resources.

Development Services

        Our development services enable our customers to outsource their non-core drug development activities to us. These activities are typically required for the identificationdiscovery of the lead compound and to support the regulatory filings necessary to obtain FDA approval. The demand for these services is driven by the growing outsourcing trend in preclinicalto outsource certain pre-clinical drug development.development work. We currently offer development services in eight main areas: pharmacokinetic and metabolic analysis, bioanalytialbioanalytical chemistry, pharmacologic surgery, general and specialty toxicology, medical device testing, pathology services, biopharmaceutical production,biosafety testing and biotech safetyproteomics testing.

        Pharmacokinetic and Metabolic Analysis.    Charles River'sOur scientists conduct pharmacokinetic studies to determine the mechanisms by which drugs function in mammalian systems to produce therapeutic effects, as well as to understand how drugs may produce undesirable or toxic effects. Our scientists also conduct metabolic studies to reveal how drugs are broken down and excreted, and the duration that drugs or their byproducts remain in various organs and tissues. These studies can be

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performed as part of the drug screening process to help identifydiscover lead compounds, as well as later in the development process to provide information regarding safety and efficacy.

        BioanalytialBioanalytical Chemistry.    Our bioanalytical chemistry services support all phases of drug development from discovery to non-clinical studies and clinical trials. Our researchers design and conduct lead-optimization projects, develop and validate methods used to analyze samples and conduct protein binding studies, and perform dose formulation analysis.studies.

        Pharmacologic Surgery.    Many sophisticated drugs are designed to be administered directly to a precise location within the body using surgical, or "invasive," techniques. The development of these and certain other drugs requires the use of surgical techniques to administer a drug, or to observe its effects in various tissues. Charles River's Pharmacologic SurgeryOur pharmacologic surgery program offers extensive capabilities in this area, and has developed numerous research models in collaboration with world-renowned experts in the fields of cardiology, inflammation, and pathology at leading academic institutions.

        General and Specialty Toxicology.    Our team of scientists, including toxicologists, pathologists, and regulatory specialists, designs and performs highly specializedgeneral and highly-specialized studies to evaluate the safety and toxicity of new pharmaceutical compounds and materials used in medical devices. Charles River isWe are an

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industry leader in the fields of reproductive and developmental toxicology, photobiology, and other specialty toxicological assessments.

        Medical Device Testing.    The FDA requires companies introducing medical devices to test the biocompatibility of any new materials that have not previously been approved for contact with human tissue. We provide a wide variety of medical device testing services from prototype feasibility testing to long-term GLP, or good laboratory practices, studies, primarily in large research models. These services include cardiovascular surgery, biomaterial reactivity studies, orthopedic studies and related laboratory services. We maintain state-of-the-art surgical suites where our skilled professional staff implement custom surgery protocols provided by our customers.

        Pathology Services.    In the drug development process, the ability to identify and characterize pathologic changes within tissues and cells is critical in determining the safety of a new compound. Charles River employs highly trainedWe employ highly-trained pathologists who use state-of-the-art techniques to revealidentify pathology within tissues and cells, as well as at the molecular level. Frequently, decisions regarding continued product development are dependent on these pathology findings.

        Biotech SafetyBiosafety Testing.    We provide specialized non-clinical quality control testing that is frequently outsourced by both pharmaceutical and biotechnology companies. These services allow our customers to determine if the human protein drug candidates, or the process for manufacturing those products, are essentially free of residual biological materials. The bulk of this testing work is required by the FDA for obtaining new drug approval, maintaining an FDA-licensed manufacturing capabilityfacility or releasing approved products for use onin patients. Our scientific staff consults with customers in the areas of process development, validation, manufacturing scale-up and biological testing. As more biotechnology drug candidates with stronger potential enter and exit the development pipeline, we expectWe also provide, on a very small scale, services to continue to experience strong demand for these testing services.

        Biopharmaceutical Production.    Charles River has the capability to cost-effectively develop and manufacture drugs in small quantities that are needed for early-early and mid-stage clinical trials. We maintain multiple cleanroom processing suites designed

        Proteomics Testing.    In October 2002, we established a joint venture, 80% owned by us, that will provide leading-edge proteomics testing and analysis services on a fee-for-service contract basis to the pharmaceutical and biotechnology industries. Proteomics testing involves the separation, identification and characterization of proteins present in a tissue or other biological samples. By comparing the proteins in samples from animal models and humans affected by a particular disease with those present in samples from healthy models and individuals, it is possible for the productiondrug discovery customer to identify directly those proteins that are potentially related to that disease, condition or treatment. These proteins would then have commercial potential as targets for the development of clinical productsnew drugs, as wellnovel therapeutics, or as integrated testing services for in-processdiagnostics and product release testing. Our manufacturing facilities operate under strict cGMP guidelines and are supported by a strong quality assurance, control, and regulatory compliance system.biomarkers.

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In Vitro Technology

        While the scientific community does not foresee significant replacement of animal models fromwith the use ofin vitro techniques, we believe that these techniques may offer a strong refinement or complement to animal test systems after the extended period of scientific validation is successfully completed. We intend to pursue this area to the extent alternatives become commercially viable.

        Endotoxin Detection Systems.    We are a market leader in endotoxin testing, which is used to test quality control samples of injectable drugs and devices, their components and the processes under which they are manufactured, for the presence of endotoxins. Endotoxins are fever producingfever-producing pathogens or compounds that are highly toxic to humans when sufficient quantities are introduced into the body. Quality control testing for endotoxin contamination by our customers is an FDA requirement for injectable drugs and devices, and the manufacture of the test kits and reagents is regulated by the FDA as a medical device. Endotoxin testing uses a processed extract from the blood of the horseshoe crab, known as limulus amebocyte lysate or LAL.(LAL). The LAL test is the first and only major FDA-validatedin vitro alternative to an animal model test for endotoxin detection in pharmaceutical

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and medical device manufacturing. The process of extracting blood is not harmful to the crabs, which are subsequently returned to their natural ocean environment. We produce and distribute test kits, reagents, software, accessories, instruments and associated services to pharmaceutical and biotechnology companies for medical devices and other products worldwide. We have recently received a patent relating to our next generation of endotoxin testing technology.

        In Vitro Safety Screening.    In 2002, Charles River acquired Dak Dak, anWe provide a non-animalin vitro technology platform that can help researchers predict whethersafety screening test, Endosafe® iPT. The Endosafe iPT test, which is aimed at the active ingredients$50 million market for lot-release testing of products derived from human blood and biologicals, is used for detecting harmful microbial contamination in skin care productsdrugs, medical devices and cosmetics are likely to be effective in preventing skin aging caused by sunlight. The platform includes a molecular assay that measures the activitywide range of the human gene for elastin, a protein produced within skin cells following their exposure to sunlight.therapeutic products. We are currently workingalso intending to validateexpand ourin vitro market opportunity with a new, portable version of our highly successful endotoxin testing platform. The Endosafe Portable Testing System (Endosafe PTS) allows endotoxin testing in the technology for use as a rapid screening tool to help identify drugs that are likely to make patients more susceptible to skin cancerfield, affording researchers accurate and other sun-induced skin problems.timely results.

Vaccine Support Products

        Animal Health.    We are the global leader for the supply of specific pathogen-free, or SPF, chickens and fertile chicken eggs. SPF chicken embryos are used by animal health companies as self-contained "bioreactors" for the manufacturing of live and killed viruses. These viruses are used as a raw material in poultry and potential human vaccine applications. The production of SPF eggs is done under biosecure conditions, similar to our research model production. We have a worldwide presence that includes several SPF egg production facilities in the United States, as well as facilities in Germany and in Australia. We have a joint venture in Mexico and a franchise in India. We also operate a specialized avian laboratory in the United States, which provides in-house testing and support services to our customers.

        Human Health.    We are also applying our SPF egg technology to human vaccine markets. We have entered into an agreement with a company that is in the late stages of the FDA approval process for a nasal spray-delivered vaccine for human flu. If FDA-approved and commercially successful, we expect this human flu vaccine may significantly increase demand for our SPF eggs.

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Research ModelsRESEARCH MODELS

        Research models isrepresent our historical core business and accounted for 42%40.3% of our 2001total net sales.sales in 2002. The business is comprised of the commercial production and sale of animal research models, principally purpose-bred rats, mice and other rodents for use by researchers. We are the commercial leader in the small animal research model area, supplying rodents for research since 1947. Our research models include:

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outbred animals, which have genetic characteristics of a random population;are genetically heterogeneous;



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inbred animals, which have essentially identical genes;are genetically identical;



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other genetically-modified research models, such as consomics;



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hybrid animals, which are the offspring of two different inbred parents;



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spontaneous mutant animals, which contain a naturally occurringnaturally-occurring genetic mutation (such as immune deficiency); and



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transgenic animals, which contain genetic material transferred from another source.

        With nearly 150approximately 165 research models, we offer one of the largest selections of small animal models and provide our customers with high volumehigh-volume and high qualityhigh-quality production. Our rats, mice and other rodent species such as guinea pigs and hamsters have been and continue to be some of the most extensively used research models in the world, largely as a result of our continuous commitment to innovation and quality in the breeding process. We provide our small animal models to numerous customers around the world, including all major pharmaceutical andcompanies, biotechnology companies as well as many government agencies, leading hospitals, and academic institutions. With our acquisition of Genetic Models, Inc. in 2001, we acquired new and proprietary, disease-specific rat models used to find new treatments for diseases such as diabetes, obesity, cardiovascular disease, and kidney disease.

        The use of animal models is critical to both the discovery and development of a new drug. The FDA requires safethat a drug be tested for safety and effective testingefficacy on two species of animal models, one small and one large, before moving into the clinic for testing on humans. Animal testing is used in order to identify, define, characterize and assess the safety of new drug candidates. Increasingly, genetically defined rats and mice are the modelmodels of choice in early discovery and development work as a more specifically targeted research tool. Outbred rats are frequently used in safety assessment studies. Our models are also used in life science research withinin universities, hospitals and other research institutions. Unlike drug discovery, these uses are generally not specifically mandated by regulatory agencies such as the FDA, but instead are governed by the terms of government grants, institutional protocols, as well as the scientific inquiry and peer review publication processes. We also provide larger animal models, including miniature swinerabbits and primates, to the research community, principally for use in drug development and testing studies.

        We believe that over the next several years, many new research models will be developed and used in biomedical research, such as transgenic models cloned models with identical genes, knock-out models with one or more disabled genes, and models that incorporate or exclude a particular mouse, rat or human gene. These more highly definedhighly-defined and characterized models will allow researchers to further focus their investigations into disease conditions and potential new therapies or interventions. We intend to build upon our position as the leader in transgenic services to expand our presence in this market for higher value models, through internal development, licensing, partnerships and alliances, and acquisitions.higher-value models.

        In 2001 we entered into aThrough our strategic partnership with The Jackson Laboratory, ("Jackson"), an internationally renowned research institution that develops unique genetically engineered mouse models for use in medical research, drug discovery and development work. Under this partnership, Charles River willwork, we produce and distribute Jackson'sThe Jackson Laboratory's research models in Europe and Asia. The partnership combines Jackson'sThe Jackson Laboratory's strength in genetic science with the our

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global production and distribution capabilities of Charles River.capabilities. We view this relationship as an important step toward broadening the scope of our research models business.

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        Also in 2001 Charles River acquired Genetic Models, Inc., which has developed proprietary and disease-specific rat models used to find new treatments for diseases such as diabetes, obesity, cardiovascular disease, and kidney disease. The acquisition is part of an ongoing effort to strengthen Charles River's portfolio of disease-specific animal research models.

Customers

        Our customers consist primarily of large pharmaceutical companies, including the 10 largest pharmaceutical companies based on 2001 revenues, as well as biotechnology, animal health, medical device and diagnostic companies and hospitals, academic institutions, and government agencies.agencies and other life sciences companies. We have many long-term, stable relationships with our customers as evidenced by the fact that all of our top 20 customers in 1990 remain our customers today.customers.

        During 2001,2002, in both our research models and our biomedical products and services businesses, more than three-quarters of our sales were to pharmaceutical and biotechnology companies, and the balance were to hospitals, universities and the government. Ourgovernment agencies. No single customer accounted for 3% or more of our total net sales in 2002 and our top 20 global commercial customers represent only about 30.0%accounted for 31.1% of total net sales in 2002.

        For net sales and long-lived assets attributable to each of our 2001business segments for the last three fiscal years, please review Note 15 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

        For net sales with no individual customer accountingand long-lived assets attributable to operations in the United States, Japan, France and other countries for more than 3.0%each of net sales.the last three fiscal years, please review Note 15 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

Sales, Marketing and Customer Support

        We sell our products and services principally through our direct sales force, the majority of whom work in the United States, with the balance working in Europe and Japan. The direct sales force is supplemented by a network of international distributors for some areas of our biomedical products and services business.

        Our internal marketing groups support the field sales staff while developing and implementing programs to create close working relationships with customers in the biomedical research industry. Our webWe believe our Internet site, www.criver.com, is an effective marketing tool, and has become recognized as a valuable resource in the laboratory animal field by a broad spectrum of industry leaders, recording over several hundred thousand hits each month.leaders.

        We maintain both customer service and technical assistance departments, which service our customers' routine and more specialized needs. We frequently assist our customers in solving problems related to animal husbandry, health and genetics, biosecurity, protocol development and other areas in which our expertise is recognized as a valuable customer resource.

Research and Development

        We do not maintain a fully dedicatedfully-dedicated research and development staff. Rather, this work is done on an individual project basis or through collaborations with universities or other institutions. Our dedicated research and development spending was $0.5 million in 1999, $0.9 million in 2000 and $1.9 million in 2001. Our approach to developing new products or services is to extend our base technologies into new applications and fields, and to license or acquire technologies to serve as a platformplatforms for the development of new businesses that service our existing customer base. Our research and development focus is principally on developing projects that improve our productivity or processes.

        In 2001 we entered into R&D collaborations with two universities and two biotechnology companies:

•

Medical College of Wisconsin, to distribute their proprietary consomic rat models. These research models are generated by substituting whole chromosomes into a rat strain, allowing multiple genes on the chromosome to be studied for their combined role in conditions such as hypertension, myocardial infarction and renal disease.

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•

Sangamo BioSciences, Inc., to apply Sangamo's novel gene regulation technologies to the creation of transgenic rat research models for use in developing new drugs and therapies for cancer.



•

Tufts University School of Veterinary Medicine, to develop a novel cloning technology applied to immunodeficient mice, and Advanced Cell Technology, Inc., to develop cloned and transgenic rat models.

Industry Support and Animal Welfare

        Among the shared values of our employees is a concern for and commitment to animal welfare. We have been in the forefront of animal welfare improvements in our industry, and continue to

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demonstrate our commitment with special recognition programs for employees who demonstrate an extraordinary commitment in this critical area of our business.

        We support a wide variety of organizations and individuals working to further animal welfare as well as the interests of the biomedical research community. We fund internships in laboratory animal medicine, provide financial support to non-profit institutions that educate the public about the benefits of animal research and provide awards and prizes to outstanding leaders in the laboratory animal medicine field. One of our businesses dedicates a portion of its net sales, through a royalty, to support similar programs and initiatives.

Employees

        As of December 29, 2001,28, 2002, we had more than 4,000approximately 5,000 employees, including nearly 250 science professionals with advanced degrees including D.V.M.s, Ph.D.s and M.D.s. Our employees are not unionized in the United States, although employees are unionized inat some of our European locales,facilities, consistent with local custom for our industry. We believeOur annual satisfaction surveys indicate that we have a good relationship with our employees.

Competition

        Our strategy is to be thebecome a leader in each of the markets in which we participate. Our competitors are generally different in each of our business and geographic areas.

        In our research models business division, our main competitors include three smaller competitors in North America, several smaller ones in Europe, and two smaller ones in Japan. Of our main United States competitors, two are privately heldprivately-held businesses and the third is a government-financed,government-funded, non-profit institution. We believe that none of our competitors for research models has our comparable global reach, financial strength, breadth of product and services offerings and pharmaceutical and biotechnology industry relationships.

        We have many competitors in our biomedical products and services business division.segment. A few of our competitors in our biomedical products and services business are larger than we are and may have greater capital, technical or other resources than we do;do, however, many are smaller and more regionalized. We have a small relative share in the biotech safetybiosafety testing market, where the market leader is a well-established company, and in medical device testing, where there are many larger competitors.

        We generally compete in the marketplace on the basis of quality, reputation and availability, which is supported by our international presence with strategically located facilities.

Regulatory Matters

        The Animal Welfare Act ("AWA")(AWA) governs the treatment of particular species intended for use in research. The AWA imposes a wide variety of specific regulations on producers and users of these

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species, most notably cage size, shipping conditions, sanitation and environmental enrichment methods. We comply with licensing and registration requirement standards set by the USDAUnited States Department of Agriculture (USDA) for handling regulated species, including breeding, maintenance and transportation. However, rats, mice and chickens are not currently regulated under the AWA. Congress is consideringrecently adopted legislation which would permanently excludeexcludes these species from regulation under the AWA. As a result, most of our United States small animal research model activities and our vaccine support services operations are not subject to regulation under the AWA. Our animal production facilities in the United States are accredited by a highly regarded member association known as AAALAC, which maintains standards that often exceed those of the USDA.

        Our biomedical products and services business is also generally regulated by the USDA, and in the case of our endotoxin detection systems, the FDA. Our manufacture of test kits and reagents for

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endotoxin testing is subject to regulation by the FDA under the authority of the Federal Food, Drug, and Cosmetic Act. We are required to register with the FDA as a device manufacturer and are subject to inspection on a routine basis for compliance with the FDA's Quality System Regulations and Good Manufacturing Practices. These regulations require that we manufacture our products and maintain our documents in a prescribed manner with respect to manufacturing, testing and control activities. In 1999, we received

Corporate Governance

        We are committed to operating our business with integrity and accountability. Last summer, the New York Stock Exchange (NYSE) submitted a "warning letter" fromset of corporate governance standards to the FDASEC for quality control deficiencies with regardapproval. We either already had in place or have since implemented the relevant standards proposed by the NYSE. For example, seven of our eight Board members are independent and have no financial, personal or significant business ties to the Company or management, and all of our Charleston, South Carolina facility.Board committees, other than the Executive Committee, are composed of independent directors. The Board adopted corporate governance guidelines and a Code of Business Conduct and Ethics which has been communicated to employees and posted on our website. We have since taken corrective action satisfactoryalways been diligent in complying with established accounting principles and are committed to providing financial information that is transparent, timely and accurate. We have established a process through which employees, either directly or anonymously, can notify us (and the FDA with respect to these deficiencies.

Factors Affecting Future Operating Results

        This Annual Report on Form 10-K includes forward-looking statements. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial condition or state "forward-looking" information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from those discussed as a result of various factors, including, but not limited to, our success in selecting and integrating businesses and technology we acquire, contaminations at our facilities, changes in the pharmaceutical or biotechnology industries, competition and changes in government regulations or general economic or market conditions. These factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. We are under no duty to update anyAudit Committee of the forward-looking statements afterBoard of Directors) of alleged accounting and auditing concerns or violations. We created an internal disclosure committee and adopted disclosure procedures and guidelines to help ensure that our public disclosures are accurate and timely, as recommended by the date of this annual report or to conform these statements to actual results.SEC.

Industry and Market Data

        In this Annual Report on Form 10-K, we rely on and refer to information and statistics regarding the research model and biomedical products and services industries, and our market share in the sectorsmarkets in which we compete. We obtained this information and statistics from various third partythird-party sources, none of which should be considered definitive, discussions with our customers and/or our own internal estimates. We believe that these sources and estimates are reliable, but we have not independently verified them.

Risks Related to Our Business and Industry

        Set forth below and elsewhere in this Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Form 10-K.

Our business is subject to risks relating to operating internationally.

        A significant part of our net sales is derived from operations outside the United States. Our international revenues, which include revenues from our non-U.S. subsidiaries, represented 27.4% of our total net sales in 2002, 27.3% in 2001 and 37.1% in 2000. We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future. There are a number of risks arising from our international business, including:

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foreign currencies we receive for sales outside the U.S. could be subject to unfavorable exchange rates with the U.S. dollar and reduce the amount of revenue that we recognize;



•

general economic and political conditions in the markets in which we operate;



•

potential increased costs associated with overlapping tax structures;



•

potential trade restrictions and exchange controls;



•

more limited protection for intellectual property rights in some countries;

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•

difficulties and costs associated with staffing and managing foreign operations;



•

unexpected changes in regulatory requirements;



•

the difficulties of compliance with a wide variety of foreign laws and regulations;



•

longer accounts receivable cycles in certain foreign countries; and



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import and export licensing requirements.

        Our operations and financial results could be significantly affected by the above mentioned risks. For example, because the sales and expenses of our foreign operations are generally denominated in local currencies, we are subject to exchange rate fluctuations between local currencies and the U.S. dollar in the reported results of our foreign operations. These fluctuations may decrease our earnings. We currently do not hedge against the risk of exchange rate fluctuations. The economic situation in some of the foreign countries in which we operate may result in slower payments of outstanding receivable balances. Our financial results could be adversely affected by weakness in the economies and currencies in these regions.

Threat of future terrorist activity or related U.S. military action may have a negative impact on the economy and our business.

        The current political and business turmoil in many parts of the world, including the threat of future terrorist attacks on the U.S. and other parts of the world and related U.S. military action, continues to put severe pressure on global economic conditions, and the U.S. economy. Such an effect may have a negative affect on research and development outsourcing and spending, which would adversely impact our business.

A reduction or delay in government funding of research and development, or in research and development budgets, may adversely affect our business.

        A substantial portion of net sales in our Research Models segment is derived from customers 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. Although the level of government research funding has increased during the past several years, we believe this increase may not continue in the short term. Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable. Our sales may be adversely affected if our customers delay purchases as a result of uncertainties surrounding the approval of government budget proposals. Also, government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund research and development activities. A reduction in government funding for the NIH or other government research agencies could adversely affect our business and our financial results. Our customers generally receive funds from approved grants at particular times of the year, as determined by the U.S. federal government. In the past, grants have been frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. The timing of the receipt of grant funds affects the timing of purchase decisions by our customers and, as a result, can cause fluctuations in our sales and operating results.

        Our customers also include researchers at pharmaceutical and biotechnology companies. Our ability to continue to grow and win new business is dependent upon the ability and willingness of the pharmaceutical and biotechnology industries to continue to spend on research and development at rates close to or at historical levels and to outsource the products and services we provide. Fluctuations in the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products and services. Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology

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companies, spending priorities and institutional budgetary policies. Our business could be adversely affected by any significant decrease in life sciences research and development expenditures by pharmaceutical and biotechnology companies, as well as by academic institutions, government laboratories or private foundations.

Our customer contracts are generally terminable on little or no notice. Termination of a large contract for services or multiple contracts for services could adversely affect our sales and profitability.

        Generally, our agreements with our customers provide that the customer can terminate the agreements or reduce the scope of services under the agreements on little or no notice. Customers may elect to terminate their agreements with us for various reasons, including: unexpected or undesired study results; production problems resulting in shortages of the drug being tested; the customer's decision to forego or terminate a particular study; or the loss of funding for the particular research study. If a customer terminates a contract with us, we are entitled under the terms of the contract to receive revenue earned to date as well as certain other costs. Primarily in our biomedical products and services segment, cancellation of a large contract or simultaneous cancellation of multiple contracts could materially adversely affect that segment's business and, therefore, may adversely affect our operating results.

If we are not successful in selecting and integrating the businesses and technologies we acquire, our business may suffer.

        WeDuring the past two years, we have recently expanded our business through the acquisitions of Pathology Associates International Corporation, or PAI, and Primedica Corporation, or Primedica, and wefour significant acquisitions. We plan to continue

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to grow our business through acquisitions of businesses and technologies and the formation of alliances. However, businesses and technologies may not be available on terms and conditions we find acceptable. Even if completed, acquisitions and alliances involve numerous risks which may include:

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difficulties and expenses incurred in assimilating operations, services, products or technologies;



•

difficulties in developing and operating new businesses, including diversion of management's attention from other business concerns;



•

the potential loss of key employees of an acquired business and difficulties in attracting new employees to grow businesses;



•

difficulties in assimilating differences in foreign business practices and overcoming language barriers;



•

difficulties in obtaining intellectual property protections and skills that we and our employees currently do not have; and



•

difficulties in achieving business and financial success.

        In the event that the success of an acquired business or technology or an alliance does not meet expectations, weour results of operations may be required to restructure.adversely affected. We may not be able to successfully integrate acquisitions into our existing business or successfully exploit new business or technologies.

Contaminations in our animal populations can damage our inventory, harm our reputation for contaminant-free production and result in decreased sales.

        Our research models and fertile chicken eggs must be free of contaminants such as viruses and bacteria. Thebacteria because the presence of contaminants can distort or compromise the quality of research results. Contaminations in our isolated breeding rooms or poultry houses could disrupt our contaminant-free research model and fertile egg production, harm our reputation for contaminant-free production and result in decreased sales.

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        Contaminations typically require cleaning up the contaminated room or poultry house. This clean-up results in inventory loss, clean-up and start-up costs, and reduced sales as a result of lost customer orders and credits for prior shipments. These contaminations are unanticipated and difficult to predict. WeSeveral years ago, we experienced severala number of material contaminations in our animal populations in 1996 and a few significant contaminations in 1997 that adversely impacted our 1996 and 1997 financial results. Since then,those experiences, we have made significant capital expenditures designed to strengthen our biosecurity and have significantly changed our operating procedures. WeSince making such changes, we have not experienced any significant contaminations since 1997.contaminations.

Many of our customers are pharmaceutical and biotechnology companies, and we are subject to risks, uncertainties and trends that affect companies in those industries.

        Sales of our products and services are highly dependent on research and development expenditures by pharmaceutical and biotechnology companies. We are therefore subject to risks, uncertainties and trends that affect companies in those industries, including government regulation, pricing pressure, technological change and shifts in the focus and scope of research and development expenditures. For example, over the past several years, the pharmaceutical industry has undergone significant mergers and combinations, and many industry experts expect this trend to continue. After recent mergers and combinations, some customers combined or otherwise reduced their research and development operations, resulting in fewer animal research activities. We experienced both temporary disruptions and permanent reductions in sales of our research models to some of these customers. Future mergers and combinations in the pharmaceutical or biotechnology industries, or other industry-wide trends, could adversely affect demand for or pricing of our products.

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

        For many years, groups within the scientific and research communitycommunities have attempted to develop models, methods and systems that would replace or supplement the use of living animals as test subjects in biomedical research. Companies have developed several techniques that have scientific merit, especially in the area of cosmetics and household product testing, markets in which we are not active. Only a few alternative test methods in the discovery and development of effective and safe treatments for human and animal disease conditions have been validated and successfully deployed. The principal validated non-animal test system is the LAL, or endotoxin detection system, a technology which we acquired and have aggressively marketed as an alternative to testing in animals. It is our strategy to participate in some fashion with any non-animal test method as it becomes validated as a research model alternative or adjunct in our markets. However, these methods may not be available to us or we may not be successful in commercializing these methods. Even if we are successful, sales or profits from these methods may not offset reduced sales or profits from research models.

Alternative research methods could decrease the need for research models, and we may not be able to develop new products effectively or in a timely manner to replace any lost sales. In addition, one of the anticipated outcomes of genomics research is to permit the elimination of more compounds prior to preclinical testing. While this outcome may not occur for several years, if at all, it may reduce the demand for some of our products and services.

The outsourcing trend in the preclinicalpre-clinical and nonclinicalnon-clinical stages of drug discovery and development, meaning contracting out to others functions that were previously performed internally, may decrease, which could slow our growth.

        Some areas of our biomedical products and services business have grown significantly as a result of the increase over the past several years in pharmaceutical and biotechnology companies outsourcing their preclinicalpre-clinical and nonclinicalnon-clinical research support activities. While industry analysts expect the outsourcing trend to continue for the next several years, a substantial decrease in preclinicalpre-clinical and nonclinicalnon-clinical outsourcing activity could result in a diminished growth rate in the sales of one or more of our expected higher growthhigher-growth areas.

Our business may be affected by changes in the Animal Welfare Act and related regulations which may require us to alter our operations.

        The United States Department of Agriculture, or USDA, has agreed, as part of a settlement of litigation, to propose a change to the regulations issued under the Animal Welfare Act to include rats, mice and birds, including chickens. Congress, however, has suspended the USDA's rulemaking authority in this area and is considering legislation which would permanently exclude these species from regulation under the Animal Welfare Act. The Animal Welfare Act imposes a wide variety of specific regulations on producers and users of regulated species including cage size, shipping conditions and environmental enrichment methods. Depending on whether the final rulemaking in this area includes rats, mice and birds, including chickens, we could be required to alter our production operations. This may include adding production capacity, new equipment and additional employees. We believe that application of the Animal Welfare Act to rats, mice and chickens used in our research model and vaccine support products operations in the United States will not result in loss of net sales, margin or market share, since all U.S. producers and users will be subject to the same regulations. While we do not anticipate that the addition of rats, mice and chickens to the Animal Welfare Act would require significant expenditures, changes to the regulations may be more stringent than we expect and require more significant expenditures. Additionally, if we fail to comply with state regulations, including general anti-cruelty legislation, foreign laws and other anti-cruelty laws, we could face significant civil and criminal penalties.

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Factors such as exchange rate fluctuations and increased international and U.S. regulatory requirements may increase our costs of doing business in foreign countries.

        A significant part of our net sales is derived from operations outside the United States. Our operations and financial results could be significantly affected by factors such as changes in foreign currency rates, uncertainties related to regional economic circumstances and the costs of complying with a wide variety of international and U.S. regulatory requirements.

        Because the sales and expenses of our foreign operations are generally denominated in local currencies, we are subject to exchange rate fluctuations between local currencies and the U.S. dollar in the reported results of our foreign operations. These fluctuations may decrease our earnings. We currently do not hedge against the risk of exchange rate fluctuations.

We face significant competition in our business, and if we are unable to respond to competition in our business, our revenues may decrease.

        We face significant competition from different competitors in each of our business areas.units. Some of our competitors in biotech safety testing and medical device testing are larger than we are and may have greater capital, technical or other resources than we do. We generally compete on the basis of quality, reputation and availability of service. Expansion by our competitors into other areas in which we operate, new entrants into our markets or changes in our competitors' strategystrategies could adversely affect our competitive position. Any erosion of our competitive position may decrease our revenues or limit our growth.

Negative attention from special interest groups may impair our business.

        Our core research model activities with rats, mice and other rodents have not historically been the subject of animal rights media attention. However, the large animal component of our business has been the subject of adverse attention and on-site protests. We closedwe did close our small import facility in England in 2000 due in part to protests by animal right activists, which included threats against our facilities and

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employees. Future negative attention or threats against our facilities or employees could impairadversely affect our business.

One of our large animal operations is dependent on a single source of supply, which if interrupted could adversely affect our business.

        We depend on a single, international source of supply for one of our large animal operations. Disruptions to their continued supply may arise from export or import restrictions or embargoes, foreign government or economic instability, or severe weather conditions. Any disruption of supply could harm our business if we cannot remove the disruption or are unable to secure an alternative or secondary source on comparable commercial terms.

Tax benefits we expect to be available in the future may be subject to challenge.

        In connection with theour 1999 recapitalization, our then current shareholders, CRL Acquisition LLC (CRL Acquisition) and Bausch & Lomb Incorporated or B&L,(B&L), made a joint election intended to permit us to increase the depreciable and amortizable tax basis in our assets for federal income tax purposes, thereby providing us with expected future tax benefits. In connection with our initial public offering in 2000, CRL Acquisition LLC reorganized, terminated its existence as a corporation for tax purposes and distributed a substantial portion of our stock to its members. ItWe believe that the reorganization and liquidating distribution should not have any impact on the election for federal income tax purposes. However, it is possible that the Internal Revenue Service (IRS) may contend that this reorganization and liquidating distribution should be integrated with our original recapitalization. We believe that the reorganization and liquidating distribution should not have any impact upon the election for federal income tax purposes. However, the Internal Revenue Service may reach a different conclusion. If the Internal Revenue ServiceIRS were to be successful with this contention, the expected future tax benefits at the time of the recapitalization would not

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be available and we would be required to write off the related deferred tax asset reflected in our balance sheet by recording a non-recurring tax expense in our results of operations in an amount equal to such deferred tax asset.

We depend on key personnel and may not be able to retain these employees or recruit additional qualified personnel, which would harm our business.

        Our success depends to a significant extent on the continued services of our senior management and other members of management. James C. Foster, our Chief Executive Officer since 1992, has held various positions with Charles Riverus for 2527 years and recently becameis our Chairman. We have no employment agreement with Mr. Foster, nor with any other executive officer. If Mr. Foster or other members of management do not continue in their present positions, our business may suffer.

        Because of the specialized scientific nature of our business, we are highly dependent upon qualified scientific, technical and managerial personnel. There is intensestrong competition for qualified personnel in the pharmaceutical and biotechnologicalbiotechnology fields. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key scientific, technical and managerial personnel in a timely manner, could harm our business.

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 such factors as the number and scope of ongoing customer engagements, the commencement, postponement, completion or cancellation of customer contracts in the quarter, changes in the mix of our products and services, the extent of cost overruns, holiday patterns of our customers, budget cycles of our customers, and exchange rate fluctuations. 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.

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Our historical financial information prior to December 25, 1999 may not be representative of our results as a separate company.

        On September 29, 1999, CRL Acquisition, a limited liability company owned by affiliates of DLJ Merchant Banking Partners, II, L.P., our management and other investors, together with our former parent company, B&L, completed a recapitalization transaction. The historical financial information in this Annual Report on Form 10-K for the periods prior to the recapitalization may not reflect what our results of operations, financial position and cash flows would have been had we been a separate, stand-alone company duringprior to the periods presented.recapitalization. We made some adjustments and allocations to the historical financial statements for the periods prior to the recapitalization included in this Annual Report on Form 10-K because B&L did not account for us as a single stand-alone business in those periods. Our adjustments and allocations made in preparing our historical consolidated financial statements may not appropriately reflect our operations during the periods presented as if we had operated as a stand-alone company.

Item 2. Properties

        The following charts provide summary information on our properties. The first chart lists the sites we own, and the second chart lists the sites we lease. Most of our material leases expire from 20022003 to 2005.2006. None of these leases are material to our business operations and many have option to renew. We believe that we will be able to successfully renew expiring leases on terms satisfactory to us.

Sites—Owned

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Sites—Leased

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Item 3. Legal Proceedings

        Our operations and properties are subject to extensive foreign and federal, state and local environmental protection and health and safety laws and regulations. These laws and regulations govern, among other things, the generation, storage, handling, use and transportation of hazardous materials and the handling and disposal of hazardous and biohazardous waste generated at our facilities. Under such laws and regulations, we are required to obtain permits from governmental authorities for some of our operations. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. Under some environmental laws and regulations, we could also be held responsible for all of the costs relating to any contamination at our past or present facilities and at third party waste disposal sites. As a result of disputes with federal, state and local authorities and private environmental groups regarding damage to mangrove plants on two islands in the Florida Keys, we agreed to refoliate the islands at our cost. Although we have not been able to completely replant, principally due to the presence of a free-range animal population and storms, we believe that the cost of refoliation will not have a material adverse effect on our business.

        Although we believe that our costs of complying with current and future environmental laws, and our liabilities arising from past or future releases of, or exposure to, hazardous substances will not materially adversely affect our business, results of operations or financial condition, we cannot assure you that they will not do so.

        We are not a party to any other material legal proceedings, other than ordinary routine litigation incidental to our business that is not material to our business or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

        The Company held its Annual MeetingNone.

Supplementary Item. Executive Officers of Shareholders on May 8, 2001. As described in the 2001 Proxy Statement,Registrant pursuant to Instruction 3 to Item 401(b) of Regulation S-K.

        Below are the following actions were taken:

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The ten nominees for directors were elected.



•

The appointment of PricewaterhouseCoopers LLP as independent auditorsnames, ages and principal occupations for the Fiscal year 2001last five years of each our current executive officers. All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal.

Thomas F. Ackerman, age 48, joined us in 1988 with over eleven years of combined public accounting and international finance experience. He was ratified.



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The increasenamed Controller, North America in 1992 and became our Vice President and Chief Financial Officer in 1996. In 1999, he was named a Senior Vice President. He is currently responsible for overseeing our Accounting and Finance Department, as well as our Information Technology Group. Prior to joining us, Mr. Ackerman was an accountant at Arthur Andersen & Co. Mr. Ackerman received a B.A. in Accounting from the aggregate numberUniversity of shares that may be deliveredMassachusetts and is a certified public accountant.

Christophe Berthoux, age 41, joined us in satisfaction1991 as Sales and Marketing Director in France and became General Manager of awards underour French operations in 1997. Mr. Berthoux became Vice President of our European operations in 1999, assuming our Southern Europe operations including Italy, Spain, France, and Belgium. In 2002, Mr. Berthoux was promoted to Corporate Vice President and, in addition to his European duties, assumed responsibility for Transgenic Services and Laboratory and Research Services worldwide. Mr. Berthoux received a DVM degree from Lyon Veterinary School in 1987 and an Executive MBA from Purdue University's Krannert Graduate School of Management in 1999.

James C. Foster, age 52, joined us in 1976 as General Counsel. Over the past 25 years, Mr. Foster has held various staff and managerial positions, and was named our President in 1991, Chief Executive Officer in 1992 and our Chairman in 2000. Mr. Foster received a B.A. from Lake Forest College, a M.S. from the Sloan School of Management at the Massachusetts Institute of Technology, and a J.D. from Boston University School of Law.

Jörg M. Geller, age 48, joined us in 1986 as a production manager in our animal production facility in Germany and has had various management positions since then. In 1994, Mr. Geller became Vice President, Charles River Europe, responsible for our activities in Germany and Northern and Eastern Europe. In 1997, Mr. Geller assumed responsibility for our avian production unit (SPAFAS). Mr. Geller graduated from the veterinary school in Giessen and received his PhD. from the University of Hanover in 1984. He attended the Advanced Executive Program at the Kellogg School of Management, Northwestern University, in 1994.

Nancy Gillett, age 47, joined us in September 1999 with the acquisition of Sierra Biomedical. Dr. Gillett has 18 years of experience as an ACVP board certified pathologist and scientific manager. In 1999, she became Senior Vice President and General Manager of our Sierra Biomedical division with responsibilities for Sierra's ongoing business operations. In 2002, Dr. Gillett became interim Corporate Vice President of Discovery & Development Services and President & General Manager of Sierra Biomedical overseeing operations for our Argus Laboratories, PAI, Redfield Laboratories, Springborn Laboratories and Worcester Laboratories divisions. In 2003, Dr. Gillett became Corporate

18

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Vice President and General Manager of Drug Discovery and Development. Dr. Gillett received her D.V.M from Washington State University and her Ph.D. from the University of California, Davis.

David P. Johst, age 41, joined us in 1991 as Corporate Counsel and was named Vice President, Human Resources in 1995. He became Vice President, Human Resources and Administration in 1996, and a Senior Vice President in 1999. He is responsible for overseeing our Human Resources department, our contract staffing business unit and several other corporate staff departments. Prior to joining the Company, Mr. Johst was a corporate associate at Boston's Hale and Dorr. Mr. Johst is a graduate of Dartmouth College, holds an M.B.A. from Northeastern University and received his J.D. from Harvard University Law School.

Real H. Renaud, age 55, joined us in 1964 and has 36 years of small animal production and related management experience. In 1986, Mr. Renaud became Vice President of Production, with responsibility for overseeing the Company's 2000 Incentive PlanNorth American small animal operations, and was approved.

16Dennis R. Shaughnessy, age 45, joined us in 1988 as Corporate Counsel and was named Vice President, Business Affairs in 1991. He became Vice President, Corporate Development and General Counsel in 1994 and is responsible for overseeing the Company's business development initiatives on a worldwide basis, as well as handling the Company's overall legal affairs. He became a Senior Vice President in 1999. Mr. Shaughnessy also serves as our Corporate Secretary. Prior to joining us, Mr. Shaughnessy was a corporate associate at Boston's Testa, Hurwitz & Thibeault and previously served in government policy positions. Mr. Shaughnessy has a B.A. from The Pennsylvania State University, an M.S. from The University of Michigan, an M.B.A. from Northeastern University, and a J.D. from The University of Maryland School of Law.

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The votes were as follows:

        For approval of the increase in the aggregate number of shares that may be delivered in satisfaction of awards under the Company's 2000 Incentive Plan:

24,985,117 shares voted for; 7,787,578 shares voted against; 25,625 shares abstained from voting.

        For ratification of independent auditors:

34,274,456 shares voted for; 16,616 shares voted against; 1,415 shares abstained from voting.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        The Company'sOur common stock began trading on the New York Stock Exchange (NYSE) on June 23, 2000 under the symbol "CRL"."CRL." The following table sets forth for the periods indicated below closing prices for our common stock, as reported on the NYSE Composite Tape.

StockholdersShareholders

        As of March 12, 2002,14, 2003, there were approximately 116 stockholders of record157 registered shareholders of the outstanding shares of common stock.

Dividends

        We have not declared or paid any cash dividends on shares of our common stock in the past three years, except to our former parent companycompanies, and we do not intend to pay cash dividends in the foreseeable future. We currently intend to retain any earnings to finance future operations and expansionexpansion.

Securities Authorized for Issuance Under Equity Compensation Plans

        The information required by Item 201(d) will be included in the 2003 Proxy Statement under the section captioned "Executive Compensation" and to reduce indebtedness. We are a holding company and are dependent on distributions from our subsidiaries to meet our cash requirements. The terms of the indenture governing our senior subordinated notes and our credit facility restrict the ability of our subsidiaries to make distributions to us and, consequently, restrict our ability to pay dividends on our common stock.is incorporated herein by reference thereto.

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Item 6. Selected Consolidated Financial Data

        The following table presents our selected consolidated financial data and other data as of and for the fiscal years ended December 28, 2002, December 29, 2001, December 30, 2000, December 25, 1999 and December 26, 1998. The Statement of Income Data and Other Data for the fiscal years ended December 28, 2002, December 29, 2001 and December 30, 2000 and the Balance Sheet Data at December 28, 2002 and December 29, 2001 have been derived from the audited Consolidated Financial Statements for such years, included elsewhere in this Form 10-K. The Statement of Income Data and Other Data for the fiscal years ended December 25, 1999 and December 26, 1998 and the Balance Sheet Data at December 27, 1997.20, 2000, December 25, 1999 and December 26, 1998 have been derived from the audited Consolidated Financial Statements for such years, not included in this Form 10-K. You should read the informationselected consolidated financial data contained in this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes.

(1)

Our fiscal year consists of 12 months ending on the last Saturday on, or prior to, December 31.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion should be read in conjunction with our consolidated financial statements.statements and the related notes.

Overview

        We are a leading provider of critical research tools and integrated support services that enable innovative and efficient drug discovery and development. We are the global leader in providing the animal research models required in research and development for new drugs, devices and therapies and have been in this business for more than 5055 years. We have two segments for financial reporting purposes: biomedical products and services, and research models.

        In 2002, total net sales grew 19.1% to $554.6 million. Significantly higher sales yielded a gross margin of 37.7%. Higher sales, operating efficiencies and the implementation of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," resulted in operating income of $122.3 million, a 35.4% increase over 2001 and a 22.0% operating margin, compared to 19.4% in 2001. Our Biomedical Products and Services business segment contributed significantly to our performance, achieving growth of 23.4% in net sales for the year. Sales from our research models segment grew 13.3% in 2002. For 2002, net income before extraordinary item was $68.4 million, a 68.2% increase over 2001, and diluted earnings per share (EPS) before extraordinary item grew 54.3% to $1.42. The adoption of SFAS No. 142 impacted EPS by $0.09 per diluted share in 2002.

        Our products and services are currently marketed throughout the world. Our international revenues, which include revenues from our non-U.S. subsidiaries, represented 27.4% of our total net sales in 2002, 27.3% in 2001 and 37.1% in 2000. We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future.

        Our biomedical products and services segment contributed 59.7% of total net sales in 2002. One of the largest contributors to this segment's growth in 2002 was our transgenic services business, where we work alongside researchers using our technologies which enable them to develop new targets, pathways and, ultimately, drugs. Our new 70,000 square foot state-of-the-art facility, located at our headquarters in Wilmington, Massachusetts, is rapidly filling to accommodate this segment's greater than 50% revenue growth in 2002. Another contributor to this segment's growth in 2002 was our acquisitions of Biological Laboratories Europe Limited (BioLabs) and Springborn Laboratories Inc. (Springborn). We acquired BioLabs, our Ireland-based human and animal health testing company, in June 2002, and Springborn, our Ohio-based drug safety assessment business, in October 2002.

        During 2002, our biomedical products and services segment was negatively impacted by several events, all of which occurred in our development services business unit. In late 2002, we evaluated two of our smaller, non-strategic development businesses that had experienced lower net sales than expected. Both units, analytical chemistry and biopharmaceutical production, were part of Primedica Corporation, which we acquired in 2001. We consolidated the Primedica analytical chemistry business with our existing business and determined to divest certain assets associated with our niche biopharmaceutical production business. In total, these two businesses accounted for approximately 2% of total net sales in 2002. Our development business was also adversely affected by the performance of two of the smallest service areas which accounted for approximately 5% of total net sales in 2002, due to ineffective local management, moderating demand and uneven study execution. We have since reorganized development services under a senior executive officer and are making structural changes at the local level. We believe these changes will improve operating performance in our development services business by the end of 2003.

        Our research models segment contributed 40.3% of our total net sales in 2002. The 13.3% gain in net sales for this business segment reflected increased customer demand for our animal research

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models and, in particular, higher sales of our specialty models, such as diabetic rats and immunodeficient mice, and in our standard outbred toxicology models. This year was the first time in over a decade that worldwide research model sales increased at double-digit levels. In order to accommodate this growth, we added production space in three North America locations. Due to the high level of fixed costs in our research model segment, incremental sales in this segment are very profitable. Although we increased our infrastructure costs, the net sales increase drove a 39.4% improvement in operating income and this business continued to generate strong cash flow.

        Based on conversations with some of our key customers, we believe there has been a recent trend for the pharmaceutical and biotechnology drug companies to focus much of their efforts on early compound screening and on the late-stage discovery phase. This trend towards increasing spending on early screening drove a demand for our research models in 2002 that was greater than at any time in the last decade. We believe this trend will continue at least through 2003. The early screening of compounds has resulted in a large number of short-term, acute toxicology studies, rather than the longer-term, sub-chronic and chronic studies that enhanced our services mix in the first three quarters of 2002. The trend towards increasing spending on late-stage discovery led in part to less spending on our development services business in the fourth quarter of 2002 and we expect that it will continue to do so at least through the first three quarters of 2003.

        Continued research and development spending by pharmaceutical companies, biotechnology companies and research institutions, and funding of research by government agencies, is critical to our continued success. A substantial portion of our net sales in our Research Models segment is derived from customers at academic and research laboratories whose funding is partially dependent on funding from government sources, such as the U.S. National Institutes of Health (NIH) and similar domestic and international agencies. We also derive revenue directly from government agencies. Continued growth in funding of research by these government agencies is important to our continued growth. Our customers also include researchers at pharmaceutical and biotechnology companies. Our ability to continue to grow is also dependent upon the ability and willingness of these industries to continue to spend on research and development at rates close to or at historical levels and to outsource the products and services we provide. While we believe that research and development spending will continue in 2003 at least consistent with the increases of the past two years, our business could be adversely affected by any significant decrease in life sciences research and development expenditures by these industries, academic institutions and government agencies.

        We have two reportable segments for financial reporting purposes: research models and biomedical products and services. In addition, since services represent over 10% of our net sales, our consolidated statements of income also provide a breakdown of net sales between net sales related to products, which include both research models and biomedical products, and net sales related to services, which reflect biomedical services, and a breakdown of costs between costscost of products sold and costscost of services provided. The following tables show the net sales and the percentage contribution of our reportable segments for the past three years. They also show costs

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cost of products sold and services provided, selling, general and administrative expenses and operating income by segment and as percentages of their respective segment net sales.

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RESULTS OF OPERATIONS
Results of Operations

        The following table summarizes historical results of operations as a percentage of net sales for the periods shown:

Critical Accounting Policies and Estimates

        Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the consolidated financial statements of Charles River Laboratories International, Inc., which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and use assumptions that effectaffect the reported amounts of revenues and expenses during the reporting period. On an on-goingongoing basis, management evaluates its estimates and judgements, including those related to bad debts, inventories, intangible assets, income taxes, financing obligations, restructuring costs, retirement benefits and litigation.assumptions. Management bases its estimates and judgementsassumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgementsjudgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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        The following        Our significant accounting policies are described in Note 1 to the consolidated financial statements. A summary of those accounting policies and estimates that we believe are most critical to fully understanding and evaluating our financial results is set forth below. This summary should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Form 10-K. We believe our most critical accounting policies:policies and estimates include the following:

•

We currently have significant deferred tax assets, which are subject to periodic recoverability assessments. Realization of our deferred tax assets is principally dependent upon our achievement of projected future taxable income. Our judgements regarding future profitability may change due to future market conditions, our ability to continue to successfully execute our strategyGoodwill and other factors.intangible assets



•

WeRevenue recognition



•

Pension plan accounting



•

Income taxes and deferred tax assets



•

Allowance for doubtful accounts

        Goodwill and Other Intangible Assets.    As a result of businesses we have significantacquired, we have material intangible assets, related toincluding goodwill and other identifiable finite and indefinite-lived acquired intangibles. The identification and valuation of these intangible assets and the determination of relatedthe estimated useful lives at the time of acquisition, as well as the completion of annual impairment tests, require significant management judgments and whether or not these assetsestimates. These estimates are impaired involves significant judgements.made based on, among others, consultations with an accredited independent valuation consultant, reviews of projected future

25

income and statutory regulations. Changes in business strategy and/or market conditions may significantly impact these judgementsjudgments and require adjustmentadjustments to the recorded asset balances.

Fiscal 2001 Compared to Fiscal 2000

        Net Sales.    Net sales in 2001 were $465.6 million, an increase of $159.0 million, or 51.9%, from $306.6 million in 2000. On a pro forma basis, sales increased 15.0% in 2001, or 17.1%, excluding the negative impact from currency translation. Pro forma sales includesinclude net sales of our acquisitions as if they had occurred at the beginning of fiscal 2000.

        Biomedical Products and Services.    Net sales of biomedical products and services in 2001 were $268.1 million, an increase of $139.5 million, or 108.5%, compared to $128.6 million in 2000. Pro forma sales of biomedical products and services increased 20.9% in 2001 compared to 2000. We acquired two businesses during the first quarter of 2001, Pathology Associates International Corporation (PAI) on January 8 and Primedica Corporation (Primedica) on February 27, which contributed $118.0 million of sales in 2001. On a pro forma basis, PAI and Primedica net sales increased 25.2% over last year.

        Research Models.    Net sales of research models in 2001 were $197.5 million, an increase of $19.5 million, or 11.0%, from $178.0 million in 2000. Small animal research model sales increased in North America by 12.2% due to improved pricing, a shift to higher pricedhigher-priced specialty unitsresearch models and an increase in unit volume. Excluding the negative impact from currency translation of $1.9 million, small animal research model sales in Europe increased 13.2%, driven in part by increased

29

equipment sales as well as a shift to higher pricedhigher-priced specialty unitsresearch models and an increase in unit volume. On a pro forma basis, small animal research model sales in Japan increased 14.7% in 2001, excluding the negative impact from currency translation. Our large animal breeding and import conditioning business sales decreased by $2.0 million in 2001 due to the closure of our conditioning facility in the UK during the second quarter of 2000 and the sale of our Florida breeding colony which was sold in the first quarter of 2000.

        Biomedical Products and Services.    Net sales of biomedical products and services in 2001 were $268.1 million, an increase of $139.5 million, or 108.5%, compared to $128.6 million in 2000. Pro forma sales of biomedical products and services increased 20.9% in 2001 compared to 2000. We acquired two businesses during the first quarter of 2001, Pathology Associates International Corporation ("PAI") on January 8 and Primedica Corporation ("Primedica") on February 27, which contributed $118.0 million of sales in 2001. On a pro forma basis, PAI and Primedica net sales increased 25.2% over last year.

        Cost of Products Sold and Services Provided.    Cost of products sold and services provided in 2001 was $298.3 million, an increase of $111.6 million, or 59.8%, from $186.7 million in 2000. Cost of products sold and services provided in 2001 werewas 64.1% of the net sales, compared to 60.9% in 2000.

        Research Models.    Cost of products sold and services provided for research models in 2001 was $117.4 million, an increase of $10.0 million, or 9.3%, compared to $107.4 million in 2000. Cost of products sold and services provided in 2001 improved to 59.4% of net sales compared to 60.3% of net

22

sales in 2000. Cost of products sold and services provided increased at a lower rate than net sales due to increased sales which resulted in improved capacity utilization and improved efficiencies.

        Biomedical Products and Services.    Cost of products sold and services provided for biomedical products and services in 2001 was $180.9 million, an increase of $101.6 million compared to $79.3 million in 2000. Cost of products sold and services provided as a percentage of net sales increased to 67.5% in 2001 from 61.7% in 2000. Cost of products sold and services provided increased as a percentage of net sales in 2001 primarily due to the additionadditions of PAI and Primedica, both of which operated at lower gross margins than the remainder of our biomedical products and services businesses.

        Research Models.    Cost of products sold and services provided for research models in 2001 was $117.4 million, an increase of $10.0 million, or 9.3%, compared to $107.4 million in 2000. Cost of products sold and services provided in 2001 improved to 59.4% of net sales compared to 60.3% of net sales in 2000. Cost of products sold and services provided increased at a lower rate than net sales due to increased sales which resulted in improved capacity utilization and improved efficiencies.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses in 2001 were $68.3 million, an increase of $17.1 million, or 33.4%, from $51.2 million in 2000. Selling, general and administrative expenses in 2001 were 14.7% of net sales compared to 16.7% of net sales in 2000.

        Research Models.    Selling, general and administrative expenses for research models in 2001 were $28.6 million, a decrease of $0.7 million compared to $29.3 million in 2000. Selling, general and administrative expenses in 2001 were 14.5% of net sales, compared to 16.5% in 2000, principally due to economies of scale. We recorded a charge of $1.5 million and $1.3 million, respectively, in 2001 and 2000 associated with the closing of a France facility.

        Biomedical Products and Services.    Selling, general and administrative expenses for biomedical products and services in 2001 were $32.5 million, an increase of $12.7 million, or 64.1%, compared to $19.8 million in 2000. Selling, general and administrative expenses in 2001 decreased to 12.1% of net sales, compared to 15.4% of net sales in 2000, due to cost savings from greater economies of scale and cost reductions realized through our acquisitions of PAI and Primedica. During the fourth quarter of 2001, we recorded a charge of $1.8 million in selling, general and administrative expenses associated with the closingclosure of our San Diego, California, facility.

        Research Models.    Selling, general and administrative expenses for research models in 2001 were $28.6 million, a decrease of $0.7 million compared to $29.3 million in 2000. Selling, general and administrative expenses in 2001 were 14.5% of net sales, compared to 16.5% in 2000, principally due to economies of scale. We recorded a charge of $1.5 million and $1.3 million, respectively, in 2001 and 2000, associated with the closure of one of our facilities in France.

        Unallocated Corporate Overhead.    Unallocated corporate overhead, which consists of various corporate expenses, was $7.2 million in 2001, compared to $2.1 million in 2000. The change was caused by increased research and development expenses resulting from our technology arrangements, increased administrative expenses and decreased pension income.

        Amortization of Goodwill and Other Intangibles.    Amortization of goodwill and other intangibles in 2001 was $8.7 million, an increase of $5.0 million from $3.7 million in 2000. The increase was due to the effectacquisitions of additional amortization of goodwill and other intangibles resulting from our PAI and Primedica acquisitions.Primedica.

        Operating Income.    Operating income in 2001 was $90.3 million, an increase of $25.2 million, or 38.7%, from $65.1 million in 2000. Operating income in 2001 was 19.4% of net sales, compared to 21.2% of net sales in 2000.

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        Biomedical Products and Services.    Operating income from sales of biomedical products and services in 2001 was $46.6 million, an increase of $20.3 million, or 77.2%, from $26.3 million in 2000. Operating income from sales of biomedical products and services in 2001 decreased to 17.4% of net sales, compared to 20.5% of net sales in 2000, due to the lower operating margins associated with PAI and Primedica, the additional amortization expenses resulting from the acquisitions and the charge associated with the closure of our San Diego, California, facility partially offset by the lower selling, general and administrative expenses due to the economies of scale realized.

        Research Models.    Operating income from sales of research models in 2001 was $50.9 million, an increase of $10.0 million, or 24.4%, from $40.9 million in 2000. Operating income from sales of research models in 2001 was 25.8% of net sales, compared to 23.0% in 2000, due to increased sales and higher gross margins primarily from improved capacity utilization.

        Biomedical Products and Services.    Operating income from sales of biomedical products and services in 2001 was $46.6 million, an increase of $20.3 million, or 77.2%, from $26.3 million in 2000. Operating income from sales of biomedical products and services in 2001 decreased to 17.4% of net sales, compared to 20.5% of net sales in 2000, due to the lower margins from the acquisitions of PAI and Primedica, the additional amortization expenses resulting from the acquisitions and the charge associated with the closure of our San Diego, California facility partially off-set by the lower selling, general and administrative expenses due to the economies of scale realized.

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        Interest Expense.    Interest expense in 2001 was $22.8 million, compared to $40.7 million in 2000. The $17.9 million decrease iswas primarily due to the reductions of debt in 20002001 and 20012000 with proceeds from our equity offerings as well as the impact of lower interest rates on our variable ratevariable-rate debt.

        Other Income.    During 2001, we received insurance proceeds relating to damaged production facilities, which resulted in a net gain of $0.5 million.

        Income Taxes.    The effective tax rate in 2001 of 39.0% comparescompared favorably to the effective tax rate of 48.3% in 2000, excluding the $4.8 million reversal of a portion of the deferred tax valuation allowance in 2000. In 2001, the increased operating income along withand the impact of reduced leverage increased our pre-tax income. The greater pre-tax income decreased the impact of the permanent differences on the tax rate and leadled to better utilization of the foreign tax credits.

        Income before Extraordinary Loss.Item.    Income before extraordinary loss in 2001 was $40.7 million, an increase of $22.8 million from $17.9 million in 2000. The improvement iswas driven by the increase in operating income and the decrease in interest expense, and is offset by increased income taxes.

        Extraordinary Loss.    We recorded an extraordinary loss of $5.2 million in 2001. The pre-tax loss of $8.0 million iswas the result of a premium associated with the debt repayments and the write-off of deferred financing costs and original issuance discounts. The related tax benefit was $2.8 million. In 2000, we recorded an extraordinary loss of $29.1 million, net of a tax benefit of $15.7 million, as a result of the early repayment of debt.

        Net Income/Loss.    Net income in 2001 was $35.4 million, an increase of $46.6 million from a loss of $11.2 million in 2000.

Fiscal 2000 Compared to Fiscal 1999

        Net Sales.    Net sales in 2000 were $306.6 million, an increase of $75.2 million, or 32.5%, from $231.4 million in 1999. Results for 2000 and 1999 on a pro forma basis for the strategic transactions include the acquisition of SBI Holdings Inc., which we refer to as Sierra, in September 1999 and the acquisition of our Japanese joint venture in February 2000, and reflect a 10.0% increase for the year, 12.4% excluding the impact of foreign currencies.

        Research Models.    Net sales of research models in 2000 were $178.0 million, an increase of $34.9 million, or 24.4%, from $143.1 million in 1999. Small animal research model sales increased in North America by 12.3% due to continued improved pricing, a shift to higher priced specialty units and an increase in unit volume. Excluding negative currency translation of $7.6 million and the reduction in laboratory equipment sales of $1.8 million which tends to be variable, European small animal research model sales increased by 3.2%. Small animal research model sales in Japan, which we began consolidating during the first quarter of 2000, were $36.2 million in 2000. We also experienced an increase during 2000 in our large animal import and conditioning business of 5.2%. Our large animal breeding colony in Florida, which was sold in the first quarter of 2000, accounted for $2.8 million of sales in 1999.

        Biomedical Products and Services.    Net sales of biomedical products and services in 2000 were $128.6 million, an increase of $40.3 million, or 45.6%, from $88.3 million in 1999. Sierra contributed $26.8 million of sales growth in 2000 due to the full year impact of its acquisition. The remaining product lines increased 16.7% in total in 2000 primarily due to increased outsourcing by our customers.

        Cost of Products Sold and Services Provided.    Cost of products sold and services provided in 2000 was $186.7 million, an increase of $40.0 million, or 27.3%, from $146.7 million in 1999. Cost of products sold and services provided in 2000 was 60.9% of net sales compared to 63.4% of net sales in 1999.

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        Research Models.    Cost of products sold and services provided for research models in 2000 was $107.4 million, an increase of $16.6 million, or 18.3% compared to $90.8 million in 1999. Cost of products sold and services provided in 2000 was 60.3% of net sales compared to 63.5% of net sales in 1999. Cost of products sold and services provided increased at a lower rate than net sales due to increased sales volume resulting in improved capacity utilization.

        Biomedical Products and Services.    Cost of products sold and services provided for biomedical products and services in 2000 was $79.3 million, an increase of $23.4 million, or 41.9%, compared to $55.9 million in 1999. Cost of products sold and services provided as a percentage of net sales in 2000 was 61.7%, compared to 63.3% in 1999. The favorable cost of products sold and services provided as a percentage of net sales in 2000 is attributable to our increased sales and improved Sierra profitability.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses in 2000 were $51.2 million, an increase of $11.4 million, or 28.6%, from $39.8 million in 1999. Selling, general and administrative expenses for 2000 were 16.7% of net sales compared to 17.2% of net sales in 1999.

        Research Models.    Selling, general and administrative expenses for research models in 2000 were $29.3 million, an increase of $8.4 million, or 40.2%, compared to $20.9 million in 1999. The $8.4 million increase is mainly due to consolidation of Charles River Japan in the first quarter of 2000 along with a $1.3 million restructuring charge for a plant closing and personnel reductions in one of our small animal research model locations in France. Selling, general and administrative expenses for 2000 were 16.5% of net sales, compared to 14.6% for 1999.

        Biomedical Products and Services.    Selling, general and administrative expenses for biomedical products and services in 2000 were $19.8 million, an increase of $6.0 million, or 43.5%, compared to $13.8 million in 1999. Selling, general and administrative expenses in 2000 decreased to 15.4% of net sales, compared to 15.6% of net sales in 1999, due to greater economics of scale realized through our acquisition of Sierra and increased sales.

        Unallocated Corporate Overhead.    Unallocated corporate overhead, which consists of various corporate expenses, was $2.1 million in 2000 compared to $5.1 million in 1999. Unallocated corporate overhead has decreased mainly due to pension income from favorable investment returns.

        Amortization of Goodwill and Other Intangibles.    Amortization of goodwill and other intangibles in 2000 was $3.7 million, an increase of $1.7 million from $2.0 million in 1999. The increase was due mainly to the full year effect of the amortization of intangibles from our Sierra acquisition.

        Operating Income.    Operating income in 2000 was $65.1 million, an increase of $22.1 million, or 51.4%, from $43.0 million in 1999. Operating income in 2000 was 21.2% of net sales, compared to 18.6% of net sales in 1999. Operating income increased in total and as a percentage of net sales due to our sales growth, acquisition of Sierra and improved capacity utilization.

        Research Models.    Operating income from sales of research models in 2000 was $40.9 million, an increase of $9.3 million, or 29.4%, from $31.6 million in 1999. Operating income from sales of research models in 2000 was 23.0% of net sales, compared to 22.1% in 1999. The increased operating income was attributable to the growth in sales coupled with improved capacity utilization.

        Biomedical Products and Services.    Operating income from sales of biomedical products and services in 2000 was $26.3 million, an increase of $9.8 million, or 59.4%, from $16.5 million in 1999. Operating income from sales of biomedical products and services in 2000 increased to 20.5% of net sales, compared to 18.7% of net sales in 1999. The increase is attributable to our acquisition of Sierra as well as our increased sales.

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        Interest Expense.    Interest expense in 2000 was $40.7 million, compared to $12.8 million in 1999. The $27.9 million increase from 1999 was primarily due to the additional debt incurred as a result of the recapitalization which occurred on September 29, 1999 partially offset by the debt repayment in the third quarter.

        Income Taxes.    The effective tax rate in 2000 excluding the reversal of the deferred tax valuation allowance of $4.8 million was 48.3% as compared to 50.7% in 1999. The impact of leverage in the first half of the year had an unfavorable impact on our tax rate by lowering our pre-tax income, and increasing the impact of the permanent timing differences on the tax rate. The effective tax rate did improve in the last six months. The $4.8 million reversal of the valuation allowance associated with the deferred tax asset was recorded as a tax benefit in the second quarter of 2000 due to a reassessment of the need for a valuation allowance following our initial public offering.

        Income before Extraordinary Loss.    Income before extraordinary loss in 2000 was $17.9 million, an increase of $0.8 million from $17.1 million in 1999. The increase is driven by the increase in operating income and the reversal of the deferred tax valuation allowance, which is partially offset by the full year impact of interest expense.

        Extraordinary Loss.    We recorded an extraordinary loss of $29.1 million during the third quarter of 2000. The pre-tax loss of $44.8 million is the result of premiums related to the early repayment of debt and the write off of deferred financing costs and issuance discounts associated with the debt repayment and is recorded net of tax benefits of $15.7 million.

        Net Income/Loss.    The loss in 2000 was $11.2 million, a decrease of $28.3 million from net income of $17.1 million in 1999. The increased income from operations and the reversal of the deferred tax valuation allowance was offset by the extraordinary loss associated with the debt repayment and the full year impact of interest expense.

Liquidity and Capital Resources

        Historically, ourOur principal sources of liquidity have beenare cash flowflows from operations borrowings under our credit facility and proceeds from our publicdebt and equity offerings.

        Borrowings underIn connection with the credit facility bearacquisition of Springborn (see Note 4 to the consolidated financial statements), we entered into a $6.0 million three-year unsecured subordinated note. The note is payable in three equal annual installments of principal, together with interest at a rate per year equal to a margin over either a base rate or LIBOR. The $30.0 million revolving loan commitment will matureaccrued in arrears commencing on October 1, 2005.2003. Interest is payable based on the one-month LIBOR rate plus 1%, which equaled 2.81% at December 28, 2002.

        On January 24, 2002, we issued $175.0 million par value of senior convertible debentures through a private placement offering. On February 11, 2002, we issued an additional $10.0 million par value of the senior convertible debentures through the additional purchase option. The revolving credit facility may be increased by up to $25.0 millionsenior convertible debentures accrue interest at our request,an initial annual rate of 3.5% which will only be available to us under some circumstances, underreset (but not below the same termsinitial rate of 3.50% or above 5.25%) on August 1, 2007, August 1, 2012 and conditionsAugust 1, 2016. Interest is

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payable semi-annually in arrears, beginning August 1, 2002. The senior convertible debentures will mature in 2022 and are convertible into shares of our common stock at a fixed conversion price of $38.87. On or after February 5, 2005, we may redeem for cash all or part of the original $30.0 million revolving credit facility. The term loan facility underdebentures that have not been previously converted at the credit facility consistsredemption prices set forth in the purchase agreement. Holders may require us to repurchase for cash all or part of their debentures on February 1, 2008, February 1, 2013 or February 1, 2017 at a $40.0 million term loan A facility and a $120.0 million term loan B facility. The term loan A facility matures on October 1, 2005 andprice equal to 100% of the term loan B facility matures on October 1, 2007. In February 2001, in connection with the anticipated Primedica acquisition, we amended our credit facility to add a $25 million term loan C facility, which will mature on October 14, 2007, and increased the interest rate on the term loan A facility to LIBOR plus 1.75% from LIBOR plus 1.5%. As of December 29, 2001, the interest rate on the term loan A facility was 3.68%, the interest rate on the term loan B facility was 5.68%, the interest rate on the term loan C facility was 5.36%. There was an aggregateprincipal amount of $68.6 million outstanding underthe debentures plus accrued interest. In addition, upon a change in control of our loan facilities. The credit facility contains customary covenants and events of default, including substantial restrictionscompany occurring on our subsidiary's abilityor prior to declare dividendsFebruary 1, 2022, each holder may require us to repurchase all or make distributions. The term loans are subject to mandatory prepayment with the proceeds of certain asset sales and a portion of our excess cash flow.such holder's debentures for cash. In 2002, we used a portion of the net proceeds from the senior convertible debenture offering to retire all of the 13.5% senior subordinated notes through a tender offer.

        In the third quarter of 2000,On July 25, 2001, we consummated an initiala public offering of 16,100,0002,000,000 shares of our common stock at a price of $16.00$29.00 per share. In the offering, 6,000,000 shares of common stock were sold by existing shareholders. On July 20, 2001, existing shareholders sold an additional 724,700 shares of common stock through the exercise of the over-allotment option. We used thereceived net proceeds from the offering of approximately $236.0$54.5 million, to redeem a portion of the outstanding 13.5% senior subordinated notes, including associated premiums, andwhich we used to repay our senior discount note and a portion of our bank debt.indebtedness and retire obligations incurred in connection with acquisitions made in 2001.

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        On March 21, 2001, we consummated a public offering of 3,500,000 shares of our common stock at a price of $19.00 per share. In the offering, 4,550,000 shares of common stock, which included the exercise of the underwriters' over-allotment option of 1,050,000 shares, were also sold by existing shareholders. We received net proceeds of approximately $62.2 million, which we used to repay a portion of our indebtedness and retire obligations incurred in connection with recent acquisitions.acquisitions made in 2001.

        On July 25,Effective January 2, 2003, we acquired an additional 19% of the equity (404,321 common shares) of our 66% equity joint venture company, Charles River Japan, from Ajinomoto Company, Inc. The purchase price for the equity was 1.3 billion yen, or $10.4 million, which was paid in cash. We are in the process of estimating the fair value of the incremental net assets acquired.

        Historically, our senior secured credit facilities have also provided liquidity. However, during 2002, we repaid our outstanding senior secured term loan facilities and terminated our revolving credit facility. We are currently negotiating a $100-125 million line of credit, which we expect to close in March 2003. As a result of the termination of our revolving credit facility, we were required to transfer $5 million into a separate bank account to support outstanding letters of credit. This amount is reported as restricted cash in our consolidated financial statements. As of December 28, 2002 and December 29, 2001, we consummatedhad approximately $4.1 million and $2.5 million, respectively, outstanding under letters of credit.

        Additionally, we are pursuing the sale of certain assets associated with our contract production business which should have a public offeringfavorable, but immaterial, effect on 2003 cash flow. As consideration for the BioLabs acquisition, we will pay $1.8 million to certain former shareholders of 2,000,000 sharesBioLabs over a three-year period, of our common stock at a price of $29.00 per share.which $0.6 million is due in 2003. In the offering, 6,000,000 shares of common stock were sold by existing shareholders. On July 30, 2001, existing shareholders sold an additional 724,700 shares of common stock through the exercise of the over-allotment option. We received net proceeds of approximately $54.5 million, which2003, we usedexpect capital expenditures, pension contributions and dividends paid to repay a portion of our indebtedness and retire obligations incurred in the connectionminority interests to be consistent with recent acquisitions.

        On January 24, 2002, we issued $175.0 million par value of senior convertible debentures through a private placement offering. On February 11, 2002, we issued an additional $10.0 million par value of senior convertible debentures through the additional purchase option. The senior convertible debentures will accrue interest at an initial annual rate of 3.5%, payable semi-annually in arrears, beginning August 1, 2002. The senior convertible debentures will mature in 2022 and are convertible into shares of the Company's common stock at a conversion price of $38.87, subject to adjustment under certain circumstances. On or after February 5, 2005, we may redeem for cash all or part of the debentures that have not been previously converted at the redemption prices set forth in the purchase agreement. Holders may require the Company to repurchase for cash all or part of their debentures on February 1, 2008, February 1, 2013 or February 1, 2017 at a price equal to 100% of the principal amount of the debentures plus accrued interest. In addition, upon a change in control of our Company occurring on or prior to February 1, 2022, each holder may require us to repurchase all or a portion of such holder's debentures for cash. We have used a portion of the net proceeds from the senior convertible debenture offering to retire all of the 13.5% senior subordinated notes through a tender offer.

        On February 14, 2002, we completed a tender offer for $79,728 par value of all of the 13.5% senior subordinated notes at a premium of approximately 29.5%. The repayment of the 13.5% senior subordinated notes and related extraordinary loss will be recorded in the first quarter of 2002.years.

        We anticipate that our operating cash flows together with borrowings under our credit facility, will be sufficient to meet our anticipated future operating expenses, capital expenditures and debt service obligations as they become due. We currently intend to retain any earnings to finance future operations and expansion. However, Charles River Laboratories International, Inc. is a holding company with no operations or assets other than its ownership of 100% of the common stock of its subsidiary, Charles River Laboratories, Inc. We have no source of liquidity other than dividends from our subsidiary.

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Fiscal 2002 Compared to Fiscal 2001

        Cash and cash equivalents totaled $122.5 million at December 28, 2002, compared to $58.3 million at December 29, 2001.

        Net cash provided by operating activities in 2002 and 2001 was $133.7 million and $71.3 million, respectively. The increase in cash provided by operations was primarily a result of improved performance during 2002 and our reduction of accounts receivable. Our days sales outstanding decreased to 64 days as of December 28, 2002, from 74 days as of December 29, 2001, primarily due to improved collection efforts.

        Net cash used in investing activities in 2002 and 2001 was $78.9 million and $91.9 million, respectively. The net cash used in investing activities in 2002 represented cash of $42.5 million used to acquire BioLabs and Springborn and capital expenditures of $37.5 million. This compared to 2001 during which we used net cash of $55.3 million to acquire PAI, Primedica and GMI and $36.4 million for capital expenditures.

        Net cash provided by financing activities in 2002 and 2001 was $5.2 million and $47.2 million, respectively. During 2002, we issued $185.0 million par value of senior convertible debentures. We used $79.7 million of the proceeds to repay all of the 13.5% senior subordinated notes. During 2002, we used $68.6 million to repay our outstanding senior secured credit facilities. This compared to 2001 when net cash included $116.7 million of proceeds from our public offerings and $40 million from our bank financing, partially offset by repayment of debt.

        Minimum future payments of our contractual obligations at December 28, 2002 are as follows:

Fiscal 2001 Compared to Fiscal 2000

        Cash and cash equivalents of the Company totaled $58.3 million at December 29, 2001 compared with $33.1 million at December 30, 2000. Our principal sources of liquidity arewere cash flows from operations in addition toand proceeds from our public offerings.

        Net cash provided by operating activities in 2001 and 2000 was $71.3 million and $33.8 million respectively. The increase in cash provided by operations iswas primarily a result of improved performance during 2001.

        Net cash used in investing activities in 2001 and 2000 was $91.9 million and $14.6 million, respectively. The increase in cash used iswas a result of our business acquisitions. During 2001, we used net cash of $55.3 million to acquire PAI, Primedica and GMI. In the first quarter of 2000, we used net cash of $6.0 million to acquire an additional 16% of equity in Charles River Japan. Also, in order to grow

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our existing businesses, we have incurred capital expenditures in 2001 and 2000 of $36.4 million and $15.6 million, respectively.

        Net cash provided by financing activities in 2001 and 2000 was $47.2 million and $0.8 million, respectively. During 2001, we consummated two follow-on stock offerings which provided $116.7 million in net proceeds. We used $104.5 million of the proceeds to repay portions of our existing debt and

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capital lease obligations. Also the Company received $40.0 million from our bank financing which was used in the purchases of PAI and Primedica.

        Minimum future paymentsRecent Accounting Pronouncements

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure," which amended SFAS No. 123 "Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 also amends SFAS No. 123 disclosure requirements to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the Company's contractual obligations atmethod used on reported results. The annual disclosure requirements of SFAS No. 123 are effective for us as of December 29, 2001 are as follows:

        We anticipate that our operating cash flow, along with borrowings under our credit facility,28, 2002 and the interim disclosure requirements will be sufficienteffective during the first quarter of fiscal year 2003. As permitted under both SFAS No. 123 and SFAS No. 148, we continue to meet our anticipated future operating expenses, capital expendituresfollow the intrinsic value method of accounting under Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees."

        On November 25, 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and debt service obligations as they become due.

Fiscal 2000 ComparedDisclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34." FIN 45 clarifies the requirements of FASB Statement No. 5, "Accounting for Contingencies," relating to Fiscal 1999

        Cashthe guarantor's accounting for, and cash equivalentsdisclosure of, the Company totaled $33.1 million at December 30, 2000 compared with $15.0 million at December 25, 1999. Our principal sourcesissuance of liquidity were cash flow from operations, borrowings under our credit facilities and cash provided by our initial public offering.

        Net cash provided by operating activitiescertain types of guarantees. FIN 45 requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the year 2000 was $33.8 million compared to net cash provided of $37.6 million in 1999. Net loss for the year 2000 was $11.2 million compared to net income of $17.1 million in 1999. Net income was impacted by the extraordinary loss of $29.1 million net of tax benefits of $15.7 million.

        Net cash used in investing activities during the year 2000 was $14.6 million compared to $34.2 million in 1999. On February 28, 2000, we acquired an additional 16%fair value of the obligation. FIN 45 is applicable to guarantees that encompass guarantees based on changes in an underlying asset, liability or equity (340,840 common shares)security, guarantees that are made on behalf of our 50% equity joint venture, Charles River Japan, from Ajinomoto Co., Inc. The purchase price for the equity was 1.4 billion yen or $12.8 million. One billion yen, or $9.2 million, was paid at closinganother entity's performance, certain indemnification agreements and the balance of 400 million yen, or $3.7 million, was deferred pursuant to a three year balloon promissory note. In addition, we acquired $3.2 million in cash. In January of 2000 we sold our primate colony in Florida for $7.0 million. In September of 1999 we purchased 100%indirect guarantees of the common stockindebtedness of Sierraothers. The recognition and measurement provisions of FIN 45 are effective prospectively for $23.3 million including $17.3 million paid to Sierra's former stockholders and $6.0 million of assumed debt which was immediately retired. Capital expendituresguarantees issued or modified after December 31, 2002. The disclosure requirements are effective for reporting periods ending after December 15, 2002. We have made the required disclosures in the year 2000 were $15.6 million comparedconsolidated financial statements as of December 28, 2002 and are in the process of assessing the impact of FIN 45 recognition and measurement provisions on the consolidated financial statements.

        In November 2002, the Emerging Issues Task Force (EITF) reached final consensus on EITF Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 addresses certain aspects of a vendor's accounting for arrangements under which it will perform multiple revenue-generating activities. It provides additional guidance as to $13.0 millionhow revenue should be measured and allocated to the separate units of accounting. EITF Issue No. 00-21 is effective prospectively for revenue arrangements entered into during fiscal periods beginning after June 15, 2003. We are in 1999.the process of assessing the impact of EITF Issue No. 00-21 on our consolidated financial statements.

        Net cash provided by financing activities during 2000 was $0.8 million comparedIn July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to cash used of $11.5 millionExit an Activity (including Certain Costs Incurred in 1999. We received $236.0 million from our initial public offering of which we used $204.4 million to paydown our existing debt, including issuance discounts, and $31.5 million to pay premiumsa Restructuring)." SFAS No. 146 requires a liability for a cost associated with an exit or disposal activity be recognized and measured initially at its fair value in the early repaymentperiod in which the liability is incurred. If fair value cannot be reasonably estimated, the liability shall be recognized initially in the period in which fair value can be reasonably estimated. In periods subsequent to the initial measurement, changes to the liability resulting from a revision to either the timing or the amount of estimated cash flows shall be recognized as an adjustment to the liability in the period of the debt. In 1999, we received a $92.4 million equity investment from DLJMB and affiliated funds, management and some other investors, we issued $37.6 million senior discount debentures, which we retired in full in 2000, with warrants to purchase common stock. During 1999 we also issued $150.0 million units consistingchange. The provisions of senior subordinated notes, of which $52.5 million was retired in 2000 with warrants to purchase common stock. Furthermore, inSFAS No. 146 will be effective for us prospectively for exit or disposal

2834

1999 we borrowed $162.0 million underactivities initiated after December 28, 2002. We are in the process of assessing the impact of SFAS No. 146 on our senior secured credit facilityconsolidated financial statements.

        In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and paid off $63.9 million64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect. However, an entity would not be prohibited from classifying such gains and losses as extraordinary items so long as they are both unusual in 2000.nature and infrequent in occurrence. This provision of SFAS No. 145 will be effective for the Company as of the beginning of fiscal year 2003. The Company expects to reclassify losses on extinguishment of debt that have been classified as an extraordinary item in prior periods presented.

        In 1999 we redeemed 87.5%July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires entities to record the fair value of our outstanding capital stock helda liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity is required to capitalize the cost by Bausch & Lomb Incorporated ("B&L")increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. SFAS No. 143 is effective for $400.0 millionfiscal years beginning after June 15, 2002 and will be adopted by the Company effective fiscal 2003. The Company believes adoption of this standard will not have a $43.0 million subordinated discount note, which we repaid in 2000. Net activity with B&L, our 100% shareholder up until the recapitalization in 1999, was $29.4 million in net payments to B&L.material effect on its consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosure aboutAbout Market Risk

        WeCertain of our financial instruments are subject to market risks, arising from changes inincluding interest ratesrate risk and foreign currency exchange rates. Our primary

        The fair value of long-term fixed interest rate exposure results from changes in LIBOR ordebt is subject to interest rate risk. Generally, the basefair market value of fixed interest rate which are used to determine the applicabledebt will increase as interest rates underrise and decrease as interest rates fall. In addition, the fair value of our term loanssenior convertible debentures would be impacted by our stock price. The estimated fair value of our long-term debt at December 28, 2002 was $236.7 million. Fair values were determined from available market prices, using current interest rates and terms to maturity.

        During 2002, we terminated our revolving credit facility. Our potential loss over one year that would result from a hypothetical, instantaneousfacility and unfavorable change of 100 basis points in the interest rate onrepaid all of our variablevariable-rate term loans. Our senior convertible debentures accrue interest at an initial rate obligations wouldof 3.50%, which will be approximately $0.7 million.reset (but not below the initial rate of 3.50% or above 5.25%) on August 1, 2007, August 1, 2012 and August 1, 2016. Fluctuations in interest rates will not affect the interest payable on the senior subordinated notes,convertible debentures, which is fixed.fixed through August 1, 2007.

        We generally do not use financial instruments for trading or other speculative purposes.

        We also have exposure to some foreign currency exchange rate fluctuations for the cash flows received from our foreign affiliates. This risk is mitigated by the fact that their operations are conducted in their respective local currencies. Currently, we do not engage in any foreign currency hedging activities.

Recent Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (FAS 141) and No. 142, "Goodwill and Other Intangible Assets" (FAS 142). FAS 141 supersedes Accounting Principles Board Opinion (APB) No. 16, "Business Combination." The provisions of FAS 141 (i) require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (ii) provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill, and (iii) require that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. FAS 141 also requires that upon adoption of FAS 142 the Company reclassify the carrying amounts of certain intangible assets into or out of goodwill, based on certain criteria. FAS 142 supersedes APB 17, "Intangible Assets," and is effective for fiscal years beginning after December 15, 2001. FAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of FAS 142 (i) prohibit the amortization of goodwill and indefinite-lived intangible assets, (ii) require that goodwill and indefinite-live intangible assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired), (iii) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill, and (iv) remove the forty-year limitation on the amortization period of intangible assets that have finite lives.

        The Company will adopt the provisions of FAS 142 in its first quarter ended March 30, 2002. The Company is in the process of preparing for its adoption of FAS 142 and is making the determinations as to what its reporting units are and what amounts of goodwill, intangible assets, other assets, and liabilities should be allocated to those reporting units. In connection with the adoption of FAS 142, the Company will reclassify approximately $17.4 million of assembled workforce from other intangible assets into goodwill and will no longer record approximately $6.3 million of amortization relating to its existing goodwill and indefinite-lived intangibles.

        FAS 142 requires that goodwill be tested annually for impairment using a two-step process. The first step is to identify a potential impairment and, in transition, this step must be measured as of the

2935

beginning of the fiscal year. However, a company has six months from the date of adoption to complete the first step. The Company expects to complete that first step of the goodwill impairment test during the second quarter of 2002. The second step of the goodwill impairment test measures the amount of the impairment loss (measured as of the beginning of the year of adoption), if any, and must be completed by the end of the Company's fiscal year. Intangible assets deemed to have an indefinite life will be tested for impairment using a one-step process which compares the fair value to the carrying amount of the asset as of the beginning of the fiscal year, and pursuant to the requirements of FAS 142 will be completed during the first quarter of 2002. Any impairment loss resulting from the transitional impairment tests will be reflected as the cumulative effect of a change in accounting principle in the second quarter of 2002. The Company has not yet determined what effect these impairment tests will have on the Company's earnings and financial position.

        In July 2001, the FASB issued Statement of Financial Accounting Standards No.143, "Accounting for Asset Retirement Obligations" (FAS143). FAS 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity is required to capitalize the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. FAS143 is effective for fiscal years beginning after June 15, 2002 and will be adopted by the Company effective fiscal 2003. The Company believes adoption of this standard will not have a material effect on its consolidated financial statements.

        In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" (FAS 144), which supersedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of" (FAS 121), and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30), for the disposal of a segment of a business. Because FAS 121 did not address the accounting for a segment of a business accounted for as a discontinued operation under APB 30, two accounting models existed for long-lived assets to be disposed. FAS 144 establishes a single accounting model, based on the framework established in FAS 121, for long-lived assets to be disposed. It also addresses certain significant implementation issues under FAS 121. The provisions of FAS 144 will be effective for the Company as of the beginning of fiscal year 2002. The Company believes adoption of this standard will not have a material effect on its consolidated financial statements.

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Item 8. Financial Statements and Supplementary Data

INDEX

3136

Report of Independent Accountants

To the Board of Directors and Shareholders of
Charles River Laboratories International, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Charles River Laboratories International, Inc. and its subsidiaries at December 29, 200128, 2002 and December 30, 2000,29, 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 200128, 2002 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," and changed its method of accounting for goodwill and other intangible assets as of December 30, 2001.

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 1, 2002, except as to Note 16 which is as of February 14, 20023, 2003

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share amounts)

See Notes to Consolidated Financial Statements.

3338

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)