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 AND OUR UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL DATA, INCLUDING THE RELATED NOTES, CONTAINED IN OUR PROSPECTUS FILED
FEBRUARY 15, 2001.

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 50 years.

We operate in two 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 financial statements 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 costs of
products sold and costs of services provided. The following tables show the net
sales and the percentage contribution of our segments, research models and
biomedical products and services, for the past three years. It also shows costs
of products sold and services provided, selling, general and administrative
expenses and operating income for both research models and biomedical products
and services by segment and as percentages of their respective segment net
sales.

FISCAL YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30,
1998 1999 2000
------------ ------------ ------------
(DOLLARS IN MILLIONS)

Net sales:
Research models......................................... $144.9 $152.5 $187.7
Biomedical products and services........................ 60.2 78.9 118.9

Costs of products sold and services provided:
Research models......................................... $ 96.1 $ 96.5 $113.3
Biomedical products and services........................ 38.2 50.2 73.4

Selling, general and administrative expenses:
Research models......................................... $ 18.1 $ 22.2 $ 30.9
Biomedical products and services........................ 9.7 12.5 18.2

Operating income:
Research models......................................... $ 30.5 $ 33.7 $ 43.1
Biomedical products and services........................ 11.1 14.4 24.1

FISCAL YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30,
1998 1999 2000
------------ ------------ ------------
(AS A PERCENT OF NET SALES)

Net sales:
Research models......................................... 70.6% 65.9% 61.2%
Biomedical products and services........................ 29.4 34.1 38.8

Costs of products sold and services provided:
Research models......................................... 66.3% 63.3% 60.4%
Biomedical products and services........................ 63.5 63.6 61.7

Selling, general and administrative expenses:
Research models......................................... 12.5% 14.6% 16.5%
Biomedical products and services........................ 16.1 15.8 15.3

Operating income:
Research models......................................... 21.0% 22.1% 23.0%
Biomedical products and services........................ 18.4 18.3 20.3

NET SALES. We recognize revenue with respect to research models sales upon
transfer of title, when the risks and rewards of ownership pass to the customer.
Revenues with respect to services are recognized as these services are
performed. Over the past three years, unit volume of small animal research
models has increased modestly in North America and has decreased modestly in
Europe. During the same period, sales in both North America and Europe have
increased, principally as a result of price increases and a shift in mix towards
higher priced research models. In recent years, we have increased our focus on
the sale of specialty research models, such as special disease models, which
have contributed to additional sales growth.

Our customers typically place orders for research models with less than a
week's lead time. Meeting such demand requires efficient inventory management
and strong customer service support. We improved inventory availability in the
last three years through better forecasting and production mix, and most
importantly, improved biosecurity, thereby reducing contaminations.

Biomedical products and services have grown at a compounded rate of 36.3%
from 1998 to 2000. Our growth in this business demonstrated our ability to
capitalize on our core research model technology and enter into related product
development activities undertaken by our customers.

PRICING. We maintain published list prices for all of our research models,
biomedical products and some of our services. We also have pricing agreements
with our customers which provide some discounts, usually based on volume. Many
of our services are based on customized orders and are priced accordingly. While
pricing has been competitive, some of our products are priced at a premium due
to higher quality, better availability and superior customer support that our
customers associate with our products.

BIOSECURITY. Biosecurity is one of our highest operational priorities.
Prior breaches of biosecurity have adversely affected our results of operations,
and we cannot assure you that future breaches would not materially affect our
results of operations. A biosecurity breach typically results in additional
expenses from the need to clean up the contaminated room, which in turn results
in inventory loss, clean-up and start-up costs, and can reduce net sales as a
result of lost customer orders and credits for prior shipments. We experienced a
few significant contaminations in 1997 in our isolation rooms for research
models and in our poultry houses for vaccine support products. Since January 1,
1997, we have made over $8 million of capital expenditures designed to
strengthen our biosecurity, primarily by upgrading our production facilities. In
addition, we have made significant changes to our operating procedures for
isolation rooms and poultry houses designed to further minimize the risks of
contamination, including, for example, increasing the frequency of replacing
masks and gowns, and

most importantly, increasing awareness and training among our employees. These
improvements to our operating procedures increased annual ongoing
biosecurity-related expenses by approximately $0.5 million in 1999. While we
cannot assure you that we will not experience future significant isolation room
or poultry house contaminations in the future, we believe these changes have
contributed to our absence of significant contaminations during 1998, 1999 and
2000.

ACQUISITIONS. Since January 1, 1998, we have successfully acquired and
integrated four companies, which contributed $47.4 million in sales in 2000,
representing 15.5% of total sales. On September 29, 1999, we acquired Sierra for
an initial total purchase price of $23.3 million, including approximately
$17.3 million in cash paid to former shareholders and assumed debt of
approximately $6.0 million, which we immediately retired. In addition, we are
obligated to pay $2.0 million in additional purchase price due to specified
financial objectives being reached by December 30, 2000. The additional
consideration was recorded as additional goodwill in the year ended
December 30, 2000. We have also agreed to pay (a) up to $10.0 million in
performance-based bonus payments if specified financial objectives are reached
in the five years following the acquisition date, with no payment in any
individual year to exceed $2.7 million and (b) $3.0 million in retention and
non-competition payments contingent upon the continuing employment of specified
key scientific and managerial personnel through June 30, 2001. Sierra became
part of our drug safety assessment area.

The $10.0 million in performance-based bonus payments, will, if paid, be
expensed during the periods in which it becomes reasonably certain that the
financial objectives will be achieved. Approximately $1.4 million of
performance-based bonus payments were made on December 31, 2000 and were
recorded as compensation expense in the year ended December 30, 2000. We
expensed $1.4 million in fiscal 1999 and $1.0 million in fiscal 2000 of the
$3.0 million in retention and non-competition payments. The $0.6 million
remaining will be expensed ratably through June 2001.

Effective January 8, 2001 we purchased 100% of the common stock of PAI. We
paid consideration of $37 million with respect to this acquisition, consisting
of $28 million in cash and a $12 million callable convertible note.

We signed a definitive agreement on February 7, 2001 to acquire Primedica
for consideration of $52 million, subject to customary closing conditions. The
consideration will be comprised of $26 million in cash, $16.5 million in
restricted stock (which we may repurchase through July 1, 2001) and
$9.5 million in assumed debt.

JOINT VENTURES. At December 25, 1999, we had two unconsolidated joint
ventures. As of February 28, 2000, we acquired an additional 16% equity interest
in one of the joint ventures, Charles River Japan, increasing our ownership
interest to 66%. The purchase price for the 16% equity interest was 1.4 billion
yen, or $12.8 million, of which 400 million yen, or $3.7 million, was paid by a
three-year balloon promissory note secured by a pledge of the purchased
interest. The note bears interest at the long-term prime rate in Japan. Charles
River Japan is engaged principally in the research model business. Our royalty
agreement provides us with 3% of the sales of locally produced research models,
and having acquired majority ownership, we have consolidated its operations for
financial reporting purposes from the effective date of the acquisition in the
first quarter of fiscal 2000. This contributed $36.6 million in sales in 2000.
We also receive dividends based on our pro-rata share of net income. Charles
River Japan paid dividends prior to the additional equity investment amounted to
$0.7 million, $0.8 million and $0.0 million in 1998, 1999 and 2000,
respectively. Our other unconsolidated joint venture is Charles River Mexico, an
extension of our vaccine support products area, which is not significant to our
business.

ALLOCATION OF COSTS FROM BAUSCH & LOMB. Historically, B&L charged us for
some direct expenses, including insurance, information technology and other
miscellaneous expenses, based upon actual charges incurred on our behalf.
However, these charges and estimates are not necessarily indicative of

the costs and expenses which would have resulted had we incurred these costs as
a stand-alone entity. The actual amounts of expenses we incur in future periods
may vary significantly from these allocations and estimates.

THE RECAPITALIZATION AND SIERRA ACQUISITION. The recapitalization, which
was consummated on September 29, 1999, was accounted for as a leveraged
recapitalization and had no impact on the historical basis of our assets and
liabilities. The Sierra acquisition was accounted for under the purchase method
of accounting with the purchase price allocated to the assets and liabilities of
Sierra based on an estimate of their fair value, with the remainder allocated to
goodwill. We incurred various costs of approximately $22.6 million (pre-tax) in
connection with consummating the recapitalization. We have capitalized and are
amortizing the portion of these costs that represents deferred financing costs
(approximately $14.4 million) over the life of the related financing. We have
charged a portion of the expenses related to the recapitalization (approximately
$8.2 million) to retained earnings.

DEFERRED TAX ASSETS. In conjunction with the recapitalization, CRL
Acquisition LLC and B&L made a joint election under section 338(h)(10) of the
Internal Revenue Code of 1986, as amended. Such election resulted in a step-up
in the tax basis of the underlying assets and a net deferred tax asset of
$99.5 million was recorded in the consolidated financial statements. The tax
purchase price allocation related to the election was not finalized until the
second quarter of 2000, and an adjustment of $4.5 million was recorded in that
quarter to reduce the net deferred tax asset balance and capital in excess of
par in accordance with the final allocation. In addition, we have used the
proceeds from our initial public offering, to repay a portion of our outstanding
debt and expect to be more profitable in the future, due to reduced interest
costs. We therefore reassessed the need for a valuation allowance associated
with the deferred asset balance discussed above and reduced this valuation
allowance by $4.8 million. This reduction in valuation allowance was recorded as
a tax benefit in the second quarter of 2000. The net deferred tax asset
pertaining to the election under section 338(h)(10) of the Internal Revenue Code
as of December 30, 2000 of approximately $92.3 million is expected to be
realized over 15 years through future tax deductions which are expected to
reduce future tax payments. It is possible that the Internal Revenue Service may
challenge the availability of the section 338(h)(10) election. If the Internal
Revenue Service were successful, the expected future tax benefits from the
election would not be available, and we would be required to write off the
related deferred tax assets by recording a non-recurring expense in our results
of operations in an amount equal to such deferred tax assets. See Note (8) to
the consolidated financial statements. 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. See "Risk Factors--Tax benefits we expect to be available
in the future may be subject to challenge."

INITIAL PUBLIC OFFERING. The net proceeds of our initial public offering
were used to repay approximately $204.7 million in outstanding indebtedness,
including issuance discounts, in the third quarter of 2000. In connection with
this repayment we also have paid premiums and written off deferred financing
costs. We recorded an extraordinary loss of $29.1 million, net of tax benefits
of $15.7 million, in the third quarter of 2000.

RESULTS OF OPERATIONS

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

FISCAL YEAR ENDED
------------------------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30,
1998 1999 2000
------------ ------------ ------------

Net sales............................................... 100.0% 100.0% 100.0%
Costs of products sold and services provided............ 65.5 63.4 60.9
Selling, general and administrative expenses............ 16.6 17.2 16.7
Amortization of goodwill and other intangibles.......... 0.6 0.8 1.2
Interest income......................................... 0.5 0.2 0.5
Interest expense........................................ 0.2 5.5 13.3
Provision for income taxes.............................. 6.9 6.7 2.6
Earnings from equity investment......................... 0.8 0.9 0.3
Minority interests...................................... -- -- 0.5
----- ----- -----
Net income.............................................. 11.4% 7.4% 5.8%
===== ===== =====

FISCAL 2000 COMPARED TO FISCAL 1999

YEAR ENDED DECEMBER 30, 2000 COMPARED TO YEAR ENDED DECEMBER 25, 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, which include the
acquisition of Sierra in September 1999 and the acquisition of control of our
Japanese joint venture in February 2000, reflect a 10% increase for the year,
12.4% excluding the impact of foreign currencies.

RESEARCH MODELS. Net sales of research models in 2000 were $187.7 million,
an increase of $35.2 million, or 23.1%, from $152.5 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 lab 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 $118.9 million, an increase of $40.0 million, or 50.7%,
from $78.9 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 18.3% 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.

RESEARCH MODELS. Cost of products sold and services provided for research
models in 2000 was $113.3 million, an increase of $16.8 million, or 17.4%,
compared to $96.5 million in 1999. Cost of products sold and services provided
in 2000 was 60.4% of net sales compared to 63.3% 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 $73.4 million, an
increase of $23.2 million, or 46.2%, compared to $50.2 million in 1999. Cost of
products sold and services provided as a percentage of net sales in 2000 was
61.7%, an improvement from 63.6% in 1999. The favorable cost of products sold
and services provided as a percent 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 $30.9 million, an increase of $8.7 million, or 39.2%,
compared to $22.2 million in 1999. The $8.7 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 models 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 $18.2 million, an
increase of $5.7 million, or 45.6%, compared to $12.5 million in 1999. The
acquisition of Sierra in the fourth quarter of 1999 accounts for $2.9 million of
the increase. Selling, general and administrative expenses in 2000 decreased to
15.3% of net sales, compared to 15.8% of net sales in 1999, due to greater
economies of scale realized though 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
$43.1 million, an increase of $9.4 million, or 27.9%, from $33.7 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 $24.1 million, an increase of $9.7 million, or
67.4%, from $14.4 million in 1999. Operating income from sales of biomedical
products and services in 2000 increased to 20.3% of net sales, compared to 18.3%
of net sales in 1999. The increase is attributable to our acquisition of Sierra
as well as our increased sales.

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 THE EXTRAORDINARY LOSS. Income before the 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
repayments 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 operating
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.

FISCAL 1999 COMPARED TO FISCAL 1998

NET SALES. Net sales in 1999 were $231.4 million, an increase of
$26.3 million, or 12.8%, from $205.1 million in 1998.

RESEARCH MODELS. Net sales of research models in 1999 were $152.5 million,
an increase of $7.6 million, or 5.2%, from $144.9 million in 1998. Sales
increased due to the increase in small animal research model sales in North
America and Europe of $7.1 million, resulting from improved pricing, a more
favorable product mix (meaning a shift to higher priced units) and an increase
in unit volume. We also experienced an increase in the large animal import and
conditioning area of $0.6 million, mainly due to pricing.

BIOMEDICAL PRODUCTS AND SERVICES. Net sales of biomedical products and
services in 1999 were $78.9 million, an increase of $18.7 million, or 31.1%,
from $60.2 million in 1998. At the beginning of the second quarter of 1998, we
made two acquisitions that contributed $3.4 million of this sales growth, and on
September 29, 1999, we acquired Sierra which had sales of $5.9 million in the
fourth quarter. The remaining increase was due to significant sales increases of
transgenic and research support services of $2.9 million and endotoxin detection
systems of $2.2 million, and sales from our contract site management services of
$1.8 million, primarily due to better customer awareness of our outsourcing
solutions.

COST OF PRODUCTS SOLD AND SERVICES PROVIDED. Cost of products sold and
services provided in 1999 was $146.7 million, an increase of $12.4 million, or
9.2%, from $134.3 million in 1998.

RESEARCH MODELS. Cost of products sold and services provided for research
models in 1999 was $96.5 million, an increase of $0.4 million, or 0.4%, compared
to $96.1 million in 1998. Cost of products sold and services provided in 1999
was 63.3% of net sales compared to 66.3% of net sales in 1998. Cost

of products sold and services provided increased at a lower rate than net sales
due to the more favorable product mix and better pricing, as well as improved
capacity utilization.

BIOMEDICAL PRODUCTS AND SERVICES. Cost of products sold and services
provided for biomedical products and services in 1999 was $50.2 million, an
increase of $12.0 million, or 31.4%, compared to $38.2 million in 1998. Cost of
products sold and services provided as a percentage of net sales was essentially
unchanged at 63.6% in 1999 compared to 63.5% in 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in 1999 were $39.8 million, an increase of
$5.7 million, or 16.7%, from $34.1 million in 1998. Selling, general and
administrative expenses in 1999 were 17.2% of net sales compared to 16.6% of net
sales in 1998. Selling, general and administrative expenses also included
research and development expense of $0.5 million in 1999 compared to
$1.4 million in 1998.

RESEARCH MODELS. Selling, general and administrative expenses for research
models in 1999 were $22.2 million, an increase of $4.1 million, or 22.7%,
compared to $18.1 million in 1998. Selling, general and administrative expenses
in 1999 were 14.6% of net sales, compared to 12.5% in 1998. The increase was
attributable to additional worldwide marketing efforts, additional salespeople
in the United States and the impact of selling efforts in Europe for ESD, a
business acquired at the end of 1998.

BIOMEDICAL PRODUCTS AND SERVICES. Selling, general and administrative
expenses for biomedical products and services in 1999 were $12.5 million, an
increase of $2.8 million, or 28.9%, compared to $9.7 million in 1998. Selling,
general and administrative expenses in 1999 decreased to 15.8% of net sales,
compared to 16.1% of net sales in 1998, due to greater economies of scale.

UNALLOCATED CORPORATE OVERHEAD. Unallocated corporate overhead, which
consists of various corporate expenses, was $5.1 million in 1999, a decrease of
$1.2 million, or 19.0%, compared to $6.3 million in 1998. The decrease was
principally from the increase in cash surrender value associated with our
supplemental executive retirement program.

AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles in 1999 was $2.0 million, an increase of $0.7 million, or
53.8%, from $1.3 million in 1998. The increase was due to the effect of
additional amortization of intangibles resulting from four recent acquisitions,
two in April 1998, one in December 1998, and Sierra in September 1999.

RESTRUCTURING CHARGES. There were no restructuring charges in 1999 or 1998.
During 1999, we charged $1.1 million against the previously recorded
restructuring reserves, bringing the balance at year-end to zero.

OPERATING INCOME. Operating income in 1999 was $43.0 million, an increase
of $7.7 million, or 21.8%, from $35.3 million in 1998. Operating income in 1999
was 18.6% of net sales, compared to 17.2% of net sales in 1998. Operating income
increased in total and as a percentage of net sales for the reasons described
above.

RESEARCH MODELS. Operating income from sales of research models in 1999 was
$33.7 million, an increase of $3.2 million, or 10.5%, from $30.5 million in
1998. Operating income from sales of research models in 1999 was 22.1% of net
sales, compared to 21.0% in 1998. The increase was attributable to the factors
described above.

BIOMEDICAL PRODUCTS AND SERVICES. Operating income from sales of biomedical
products and services in 1999 was $14.4 million, an increase of $3.3 million, or
29.7%, from $11.1 million in 1998. Operating income from sales of biomedical
products and services in 1999 decreased to 18.3% of net sales, compared to 18.4%
of net sales in 1998. This was primarily due to the acquisition of Sierra, and
the impact of additional amortization of intangibles.

OTHER INCOME. We recorded a $1.4 million gain on the sale of two small
facilities, one located in Florida, and the other located in the Netherlands,
and a charge of $1.3 million for stock compensation expense.

INTEREST EXPENSE. Interest expense for 1999 was $12.8 million compared to
$0.4 million for 1998. The $12.4 million increase was primarily due to the
additional debt incurred in the recapitalization.

INCOME TAXES. The effective tax rate of 50.7% in 1999 as compared to 39.5%
in 1998 reflects the remittance of cash dividends of $20.7 million from our
foreign subsidiaries which, in turn, were remitted to B&L. The related amounts
were previously considered permanently reinvested in the foreign jurisdictions
for U.S. income tax reporting purposes. Therefore, we were required to provide
additional taxes upon their repatriation to the United States. In addition, in
1999, an election was made by B&L to treat some foreign entities as branches for
U.S. income tax purposes. As a result, all previously untaxed accumulated
earnings of such entities became immediately subject to tax in the United
States. The receipt of the cash dividends from the foreign subsidiaries and the
foreign tax elections made resulted in incremental United States taxes of
$2.0 million, net of foreign tax credits, in 1999.

NET INCOME. Net income in 1999 was $17.1 million, a decrease of
$6.3 million, or 26.9%, from $23.4 million in 1998. The decrease was
attributable to the increased interest expense.

LIQUIDITY AND CAPITAL RESOURCES

Historically, our principal sources of liquidity were cash flow from
operations, borrowings under our credit facility and proceeds from our initial
public offering.

In September 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 with warrants to purchase common stock
and $150.0 million units consisting of senior subordinated notes due in 2009
with warrants to purchase common stock, and borrowed $162.0 million under our
senior secured credit facility. We redeemed 87.5% of our outstanding capital
stock held by B&L for $400.0 million and a $43.0 million subordinated discount
note. We simultaneously acquired Sierra for an initial purchase price of
$23.3 million including $17.3 million paid to its former stockholders and
$6.0 million of assumed debt which we immediately retired.

Borrowings under the credit facility bear 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 terminate six years after the date of the initial funding of the
credit facility. The revolving credit facility may be increased by up to
$25.0 million at our request, which will only be available to us under some
circumstances, under the same terms and conditions of the original
$30.0 million revolving credit facility. The term loan facility under the credit
facility consists of a $40.0 million term loan A facility and a $120.0 million
term loan B facility. The term loan A facility matures six years after the
closing date of the facility and the term loan B facility matures eight years
after the closing date of the facility. In February, 2001, in connection with
the anticipated Primedica acquisition, we amended our credit facility to add a
$25 million term C loan facility. The interest rate on the term A loan facility
also increased to LIBOR plus 2.00% from LIBOR plus 1.75%. As of January 30,
2001, the interest rate on the term A loan facility was 8.1375%, the interest
rate on the term B loan facility was 10.3875%, the interest rate on the term C
loan facility was 8.1375% and there was an aggregate of $116.1 million
outstanding under our loan facilities. The credit facility contains customary
covenants and events of default, including substantial restrictions on our
subsidiary's ability to declare dividends 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.

In February 2000, the 13.5% senior subordinated notes were exchanged for
registered notes having the same financial terms and covenants as the notes
issued in September 1999. Interest on the notes is

payable semi-annually in cash. The notes contain customary covenants and events
of default, including covenants that limit our ability to incur debt, pay
dividends and make particular investments.

In the third quarter of 2000, we consummated an initial public offering of
16,100,000 shares of our common stock at a price of $16.00 per share. We used
the net proceeds from the offering of approximately $236 million to redeem a
portion of the outstanding senior subordinated notes, including associated
premiums and to repay our senior discount debentures, subordinated discount note
and a portion of our bank debt.

We anticipate that our operating cash flow, 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.
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.

FISCAL 2000 COMPARED TO FISCAL 1999

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents of Charles River totaled $33.1 million at
December 30, 2000 compared with $15.0 million at December 25, 1999. Our
principal sources 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 activities 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% of the equity (340,840 common shares) 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 closing 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% of the common stock of Sierra 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 expenditures in the year 2000 were $15.6 million
compared to $13.0 million in 1999.

Net cash provided by financing activities during 2000 was $0.8 million
compared to cash used of $11.5 million in 1999. We received $236.0 million from
our initial public offering of which we used $204.4 million to pay down our
existing debt, including issuance discounts, and $31.5 million to pay premiums
associated with the early repayment 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
was retired in full in 2000, with warrants to purchase common stock. During 1999
we also issued $150.0 million units consisting of senior subordinated notes, of
which $52.5 million was retired in 2000, with warrants to purchase common stock.
Furthermore in 1999 we borrowed $162.0 million under our senior secured credit
facility and paid off $63.9 million in 2000. In 1999 we redeemed 87.5% of our
outstanding capital stock held by B&L for $400.0 million and 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.

FISCAL 1999 COMPARED TO FISCAL 1998

Cash flow from operating activities in 1999 was $37.6 million compared to
$37.4 million in 1998. Net cash used in investing activities in 1999 was
$34.2 million compared to $23.0 million in 1998. The increase was primarily due
to the acquisition of Sierra for $23.3 million. Capital expenditures in 1999
were $13.0 million versus $11.9 million in 1998.

Net cash used in financing activities in 1999 was $11.5 million versus
$8.0 million in 1998. The activity in 1999 consisted of payments for deferred
financing costs of $14.4 million and transactions costs of $8.2 million
associated with the recapitalization. We also paid a dividend of $29.4 million
to B&L, which was excess cash at the time of the recapitalization, and the
recapitalization consideration was $400.0 million. The above was offset by the
proceeds from the issuance of long-term debt of $339.0 million, the issuance of
warrants of $10.6 million, and the issuance of common stock of $92.4 million.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risks arising from changes in interest rates and
foreign currency exchange rates. Our primary interest rate exposure results from
changes in LIBOR or the base rate which are used to determine the applicable
interest rates under our term loans and revolving credit facility. We have
entered into an interest rate protection agreement designed to protect us
against fluctuations in interest rates with respect to at least 50% of the
aggregate principal amount of the term loans and the senior subordinated notes.
Interest rate swaps have the effect of converting variable rate obligations to
fixed or other interest rate obligations. Our potential loss over one year that
would result from a hypothetical, instantaneous and unfavorable change of 100
basis points in the interest rate on all of our variable rate obligations would
be approximately $1.3 million. Fluctuations in interest rates will not affect
the interest payable on the senior subordinated notes, which is fixed.

We 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, and it is not our intention to repatriate earnings prospectively.
Currently, we do not engage in any foreign currency hedging activities as we do
not believe that our foreign currency exchange rate risk is material.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
either an asset or liability measured at its fair value. This statement also
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. SFAS 133 is
effective for fiscal years beginning after June 30, 1999. However, Statement of
Financial Accounting Standards No. 137, "Deferral of the Effective Date of SFAS
No. 133," was issued to defer adoption of SFAS No. 133 to fiscal years beginning
after June 30, 2000. We do not expect that the adoption of SFAS No. 133 will
have a material effect on our consolidated financial statements.