Charles River Laboratories International (CRL) 10-K risk factor changes: FY2019 vs FY2018

We note that factors set forth below, individually or in the aggregate, [added: as well as additional risks and uncertainties either not presently known or that are currently believed to not be material to the business,] may cause our actual results to differ materially from expected and historical results.

[removed: A] [added: A] reduction in [removed: research and development budgets at pharmaceutical and biotechnology companies] [added: demand] may adversely affect our [removed: business.][added: business.]

Our ability to continue to grow and win new business is dependent in large part upon the ability and willingness of the pharmaceutical and biotechnology industries to continue to spend on molecules in the non-clinical phases of [removed: research and development] [added: R&D] (and in particular discovery and safety assessment) and to outsource the products and services we provide.

Fluctuations in the expenditure amounts in each phase of the [removed: research and development] [added: R&D] budgets of these researchers and their organizations could have a significant effect on the demand for our products and services.

[added: R&D budgets fluctuate due to changes in available resources, mergers of] pharmaceutical and biotechnology companies, spending priorities (including available resources of our biotechnology clients, particularly those that are cash-negative, who may be highly focused on rationing their liquid assets in a challenging funding environment), general economic conditions, institutional budgetary policies and the impact of government regulations, including potential drug pricing legislation.

Available funding for biotechnology clients in particular may be affected by the capital markets, investment objectives of venture capital [removed: investors,] [added: investors] and priorities of biopharmaceutical industry sponsors.

Our business could be adversely affected by any significant decrease in drug [removed: research and development] [added: R&D] expenditures by pharmaceutical and biotechnology companies, as well as by academic institutions, government [removed: laboratories,] [added: laboratories] or private foundations.

Similarly, economic factors and industry trends that affect our clients in these industries also affect their [removed: research and development] [added: R&D] budgets and, consequentially, our business as well.

Furthermore, our clients (particularly larger biopharmaceutical companies) continue to search for ways to maximize the return on their investments with a focus on [removed: leaner research and development] [added: lowering R&D] costs per drug candidate.

For additional discussion of the factors that we believe have recently been influencing [removed: research and development] [added: R&D] budgets at our clients, please see the sections entitled “Our Strategy” and [removed: "Management's] [added: "Management’s] Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K.

[removed: A] [added: A] reduction or delay in government funding of [removed: research and development] [added: R&D] may adversely affect our [removed: business.][added: business.]

Government funding of [removed: research and development] [added: R&D] is subject to the political process, which is inherently fluid and unpredictable.

Our revenue may be adversely affected if our clients delay purchases as a result of uncertainties surrounding the approval of government budget [removed: proposals.][added: proposals, included reduced allocations to government agencies that fund R&D activities.]

[removed: Also, government] [added: Government] proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund [removed: research] [added: R&D activities, or NIH funding may not be directed towards projects] and [removed: development activities.][added: studies that require the use of our products and services, both of which could adversely affect our business and our financial results.]

We operate large and complex [removed: computer] [added: information] systems that contain significant amounts of client data.

As a routine element of our business, we collect, [removed: analyze,] [added: analyze] and retain substantial amounts of data pertaining to the non-clinical studies we conduct for our clients.

Unauthorized third parties could attempt to gain entry to such [removed: computer] [added: information] systems [removed: for the purpose of stealing] [added: to steal] data or [removed: disrupting] [added: disrupt] the systems.

Our contracts with our clients typically contain provisions that require us to keep confidential the information generated from [removed: these studies.][added: the studies we conduct.]

[removed: We] [added: Further, we] are required to comply with the data privacy and security laws in many jurisdictions.

For example, we are required to comply with the European Union (EU) General Data Protection Regulation [removed: (GDPR)] [added: (GDPR),] which became effective on May 25, 2018 and imposes heightened obligations and enhanced penalties for noncompliance (including up to four percent (4%) of global revenue).

The cost of [removed: compliance with the GDPR] [added: compliance,] and the potential for fines and penalties [removed: in the event of a violation of the] [added: for non-compliance, with] GDPR may have a significant adverse effect on our business and operations.

We have made changes to, and investments in, our business practices and will continue to monitor developments and make appropriate [removed: changes to help attain compliance with these evolving and complex regulations.]

[removed: Contaminations] [added: Contaminations] in our animal populations can damage our inventory, harm our reputation for contaminant-free production, result in decreased sales and cause us to incur additional [removed: costs.][added: costs.]

Our research models and fertile chicken eggs must be free of certain infectious [removed: agents] [added: agents,] such as certain viruses and [removed: bacteria] [added: bacteria,] because the presence of these contaminants can distort or compromise the quality of research results and could adversely impact human or animal health.

The presence of these infectious agents in our animal production facilities and certain service operations could disrupt our contaminant-free research model and fertile egg production as well as our animal services [removed: businesses] [added: businesses,] including GEMS, harm our reputation for contaminant-free [removed: production,] [added: production] and result in decreased sales.

If they occur, contaminations typically require cleaning up, renovating, disinfecting, [removed: retesting,] [added: retesting] and restarting production or services.

In addition to microbiological contaminations, the potential for genetic mix-ups or mis-matings also exists and may require [removed: the restarting of] [added: us to restart] the applicable [removed: colonies.][added: colonies, and would likely result in inventory loss, additional start-up costs and possibly reduced sales.]

In some cases, we may produce or import animals carrying infectious agents capable of causing disease in humans; and in the case of such a contamination or undiagnosed infection, there could be a possible risk of human exposure and [removed: infection.][added: infection and liability for damages to infected persons.]

While some of these models are owned by us and maintained at our facilities, others are reserved for [removed: us,] [added: us] and maintained at sites operated by the original provider.

A contamination may require extended CDC quarantine with subsequent reduced sales as a result of lost client [removed: orders] [added: orders,] as well as the potential for complete inventory loss and disinfection of the affected quarantine rooms.

Furthermore, while we often negotiate for contractual risk indemnification, [removed: we may be exposed in] the [removed: event of such contaminations if the] third party [removed: does not] [added: may refuse to] fulfill its indemnification obligation or [removed: is] [added: may be] unable to as a result of insolvency or other impediments.

[removed: All such contaminations described above] [added: Contaminations] are unanticipated and difficult to predict and could adversely impact our financial results.

[removed: Many] [added: Further, many] of our operations are comprised of complex mechanical systems [removed: which] [added: that] are subject to periodic failure, including aging fatigue.

[removed: Any] [added: Any] failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional [removed: costs.][added: costs.]

For example, the issuance of a notice of objectionable observations or a warning [added: letter] from the FDA based on a finding of a material violation affecting data integrity by us for GLP or cGMP requirements [added: that are not addressed to the regulatory monitoring authorities’ satisfaction] could materially and adversely affect us.

In [removed: addition,] [added: recent years FDA has issued guidance that now requires submissions to be presented in a format that conforms with] the FDA’s [removed: recently applicable] SEND (Standardization for Exchange of Nonclinical Data) standards [removed: which] [added: that] apply to our clients’ NDA and IND submissions [added: and] require us to provide electronic data in specific formats that will allow for more efficient, higher quality regulatory reviews.

[removed: Non-compliance with any of these expectations] could lead to official action by a government authority, damage to our reputation and a potential loss of business.

[removed: The] [added: The] outsourcing trend in non-clinical (discovery and safety assessment) stages of drug discovery and development may decrease, which could impair our [removed: growth.][added: growth.]

For additional discussion of the factors that we believe have recently [removed: been influencing] [added: influenced] outsourcing demand from our clients, please see the section entitled “Our Strategy” included elsewhere in this Form 10-K.

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

Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties and the risks described below should be carefully considered together with the other information set forth in this report and in future documents we file with the SEC.

Further, our Research Products operations are structured to produce particular blood products based on customers’ existing demand, and perceived potential changes in demand, for these products.

Sudden or unexpected changes in demand for these products could have an adverse impact on our profitability.

Increasing demand could harm relationships with customers if we are unable to alter production capacity, or purchase products from other suppliers, to fill orders adequately.

This could result in a decrease in overall revenue and profits.

Decreases in demand may require us to make sizable investments to restructure operations away from declining products to the production of new products.

Lack of access to sufficient capital, or lack of adequate time to properly respond to such a change in demand, could result in declining revenue and profits, as customers transfer to other suppliers.

While we continue to take steps to find alternative supply channels and lock in supply with preferred sources through multi-year and/or minimum commitment contracts, such mitigating efforts may not prove successful at ensuring a steady and timely supply or may require us to pay significantly higher prices for such products

during periods of global shortage or restrictions on the transportation of products.

In addition, limited global supply or regional restrictions on transportation for certain products may require us to source products from non-preferred vendors.

Further, our Research Products business depends on the availability of appropriate donors.

If the level of donor participation declines, we may not be able to reduce costs sufficiently to maintain profitability of the Research Products business.

For example, regulations intended to reduce the risk of introducing infectious diseases in the blood supply (including coronavirus) could also result in a decreased pool of potential donors.

Due to any pandemic, epidemic or outbreak in one or more regions in which our Research Products business operates, the portion of the public that typically donates may be unable, or unwilling to donate, thereby significantly reducing the availability of research products upon which we rely.

In addition, even if suspected diseases prove to be no more virulent than other more common disease, the heightened fear among the public resulting from widespread media coverage may result in a dramatic decline in donations.

We have in the past experienced and in the future could experience an unauthorized access into our information systems.

While we have taken measures to protect them from intrusion, in March 2019, we detected evidence that an unauthorized third party, who we believe was well resourced and highly sophisticated, accessed certain of our information systems and copied data.

We worked with a leading cyber security firm to assist in our investigation and coordinated with law enforcement authorities.

Our investigation indicated that the affected information included client information.

In December 2019, we disclosed that we had completed our remediation of the incident identified in March of 2019.

While we have implemented additional security safeguards, including:

| • | remediation of the March 2019 incident; |

| • | cooperation with U.S. Federal authorities’ investigation into the incident and established an ongoing relationship to better understand the ever-changing nature of cybersecurity related threats; |

| • | additional visibility into our network and environment; |

| • | additional monitoring of our environment; |

| • | active threat hunting in our environment; |

| • | a reduction of our footprint of externally facing technology; |

| • | enhanced protection for externally facing web applications; |

| • | the addition of Multi-Factor Authentication to ingress points; |

| • | the addition of denial of service attack protection; and |

| • | increased network segmentation, |

such efforts may not be successful, in which case we could suffer significant harm.

In the event the confidentiality of such information is compromised, whether by unauthorized access or other breaches, we could be exposed to significant harm, including termination of customer contracts, damage to our customer relationships, damage to our reputation and potential legal claims from customers, employees and other parties.

In addition, we may face investigations by government regulators and agencies as a result of a breach.

Also, the California legislature passed the California Consumer Privacy Act (CCPA), which became effective January 1, 2020.

The CCPA creates new transparency requirements and grants California residents several new rights with regard their personal information.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or potential statutory or actual damages.

changes to help attain compliance with these evolving and complex regulations.

Additionally, while collecting research products from donors, we may collect, use, disclose, maintain and transmit patient information in ways that will be subject to many of the numerous state, federal and international laws and regulations governing the collection, use, disclosure, storage, transmission or confidentiality of patient-identifiable health information.

Non-compliance with any of these expectations

We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995.

Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

Research and development budgets fluctuate due to changes in available resources, mergers of

Other programs, such as homeland security or defense, or general efforts to reduce the federal budget deficit could be viewed by the U.S. government as a higher priority.

These budgetary pressures may result in reduced allocations in the future to 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.

Also, there is no guarantee that NIH funding will be directed towards projects and studies that require use of our products and services.

We could experience a breach of the confidentiality of the information we hold or of the security of our computer systems.

We believe that we have taken appropriate measures to protect them from intrusion, and we continue to improve and enhance our systems in this regard (including with respect to how we process and report any breaches), but in the event that our efforts are unsuccessful, we could suffer significant harm.

In the event the confidentiality of such information was compromised, we could suffer significant harm.

While this does not require the complete clean-up, renovation, and disinfection of the room, it would likely result in inventory loss, additional start-up costs and possibly reduced sales.

Regulatory monitoring authorities such as the FDA, Medicines and Healthcare Products Regulatory Agency and OECD have increased their emphasis on the management of computerized systems to ensure data integrity.

New guidance related to the need for data integrity compliance programs have recently been released and we may require additional efforts for validation, audit trail review and archiving activities.

To assure that we have proper regulatory oversight over our electronic records, a dedicated quality function reviews our computerized system practices to ensure that appropriate record controls are in place and that a robust audit strategy confirms requirements for compliance.

Our business involves helping pharmaceutical and biotechnology companies, among others, navigate the regulatory drug approval process.

In June 2012, the U.S. Supreme Court upheld the constitutionality of this legislation.

The Court’s decision allowed implementation of key provisions impacting drug manufacturers going forward, including, but not limited to, (1) expansion of access to health insurance coverage, (2) expansion of the Medicaid program, (3) enactment of an industry fee on pharmaceutical companies, and (4) imposition of an excise tax on the sale of medical devices.

In May 2017, the U.S. House of Representatives voted to pass the American Health Care Act (the AHCA), which would repeal many provisions of the ACA.

Although the U.S. Senate considered but failed to pass the AHCA and other comparable measures, the U.S. Congress may consider further legislation to repeal or replace elements of the ACA.

Our revenue generating agreements contain termination and service reduction provisions or may otherwise terminate according to their term, which may result in less contract revenue than we anticipate.

In April 2018, we acquired MPI Research, a non-clinical CRO, providing comprehensive testing services to biopharmaceutical and medical device companies worldwide.

This transaction was our largest acquisition since 2004.

In February 2019, we signed a binding offer to acquire Citoxlab for €448 million in cash (or approximately $510 million based on current exchange rates).

Citoxlab is a non-clinical CRO, specializing in regulated safety assessment services, non-regulated discovery services, and medical device testing.

operations.

We expect that international revenue will continue to account for a significant percentage of our total revenue for the foreseeable future.

| • | foreign currency exposure associated with differences between where we conduct business, our exposure to currency exchange rate fluctuations results from the currency translation exposure associated with the preparation of our consolidated financial statements, as well as from the exposure associated with transactions of our subsidiaries that are denominated in a currency other than the respective subsidiary's functional currency. While our financial results are reported in U.S. Dollars, the financial statements of many of our subsidiaries outside the U.S. are prepared using the local currency as the functional currency. During consolidation, these results are translated into U.S. Dollars by applying appropriate exchange rates. As a result, fluctuations in the exchange rate of the U.S. Dollar relative to the local currencies in which our foreign subsidiaries report could cause significant fluctuations in our reported results. Moreover, as exchange rates vary, revenue and other operating results may differ materially from our expectations. Adjustments resulting from financial statement translations are included as a separate component of shareholders' equity. In the year ended December 29, 2018, we recorded net losses from currency translation adjustments of $27.4 million. In the year ended December 30, 2017, we recorded net gains from currency translation adjustments of $77.1 million; |

| • | exposure to business disruption or property damage due to geographically unique natural disasters (including within the U.S.); |

Our facilities could be damaged or disrupted by natural disasters or other catastrophic events which could adversely affect our reputation, financial position, results of operations and cash flows.

While we have taken precautions to mitigate production and service interruptions at our global facilities, a major catastrophe, such as a hurricane, tornado, earthquake, flood, wildfire or other natural disaster (or other unanticipated displacement) at or near any of our facilities could result in physical damage to our properties, including closure, resulting in a prolonged interruption of our business.

In connection with our intended acquisition of Citoxlab, we anticipate increasing our debt to finance a substantial portion of the purchase price of approximately €448 million in cash (or approximately $510 million based on current exchange rates).

portion of our cash flows from operations to the repayment of debt and the interest on this debt; limiting our ability to capitalize on significant business opportunities; and making us more vulnerable to rising interest rates.

The drug discovery, development services and manufacturing support industries are highly competitive.

The drug discovery, non-clinical development, and manufacturing support services industries are highly competitive.

Service (IRS) and Treasury Department.

We have substantial operations in Canada, Ireland and the United Kingdom which currently benefit from favorable corporate tax arrangements.

There have been numerous, well-publicized instances of companies experiencing difficulties with the implementation of similar large-scale systems, which resulted in negative business consequences.

The drug discovery and development industry has a history of patent and other intellectual property litigation and these lawsuits will likely continue.

The U.K. is currently negotiating the terms of its exit from the European Union (“Brexit”) scheduled for March 29, 2019.

In November 2018, the U.K. and the European Union agreed upon a draft Withdrawal Agreement that sets out the terms of the U.K.’s departure, including commitments on citizen rights after Brexit, a financial settlement from the U.K., and a transition period from March 29, 2019 through December 31, 2020 to allow time for a future trade deal to be agreed.

[removed: Overview][added: Overview]

We currently operate in over [removed: 80] [added: 90] facilities and [removed: in approximately] [added: over] 20 countries worldwide, which numbers exclude our Insourcing Solutions (IS) sites.

[removed: Segment Reporting][added: Segment Reporting]

Our Manufacturing reportable segment includes Microbial Solutions, which provides [removed: in vitro] [added: *in vitro*] (non-animal) lot-release testing products, microbial detection products, and species identification services; Biologics Testing Services (Biologics), which performs specialized testing of biologics; Avian Vaccine Services (Avian), which supplies specific-pathogen-free chicken eggs and chickens; and contract development and manufacturing (CDMO) services, which, until we divested this business on February 10, 2017, allowed us to provide formulation design and development, manufacturing, and analytical and stability testing for small molecules.

[removed: Recent] [added: Recent] Acquisitions and [removed: Divestiture][added: Divestiture]

[removed: Citoxlab is] [added: On April 29, 2019, we acquired Citoxlab,] a non-clinical CRO, specializing in regulated safety assessment services, non-regulated discovery services, and medical device testing.

With operations in Europe and North America, the [removed: proposed] acquisition of Citoxlab [removed: would] further [removed: strengthen] [added: strengthens] our position as [removed: the] [added: a] leading, global, early-stage CRO by expanding our scientific portfolio and geographic footprint, which [removed: would enhance] [added: enhances] our ability to partner with clients across the drug discovery and development continuum.

[removed: This] [added: The] business is [removed: expected to be] reported as part of our DSA reportable segment.

The purchase price for MPI Research was $829.7 million in [removed: cash, subject to certain post-closing adjustments.][added: cash.]

The acquisition was funded by borrowings on our [removed: $2.3 billion credit facility ($2.3B] Credit [removed: Facility)] [added: Facility] as well as the issuance of $500.0 million of [removed: our senior notes.][added: 5.5% Senior Notes due 2026 (2026 Senior Notes) in an unregistered offering.]

[removed: The] MPI Research [removed: business] is reported as part of our DSA reportable segment.

On January 11, 2018, we acquired KWS BioTest Limited (KWS BioTest), a CRO specializing in [removed: in vitro] [added: *in vitro*] and [removed: in vivo] [added: *in vivo*] discovery testing services for immuno-oncology, inflammatory and infectious diseases.

The purchase price for KWS BioTest was $20.3 million in [removed: cash, subject to certain post-closing adjustments.][added: cash.]

In addition to the initial purchase price, the transaction [removed: includes] [added: included] aggregate, undiscounted contingent payments of up to £3.0 million [removed: (approximately $3.8 million] based on [removed: recent exchange rates), based on] future performance.

During the [removed: three months ended September 29, 2018,] [added: first quarter of fiscal year 2019,] the terms of these contingent payments were amended, resulting in a fixed payment of [removed: £2.0 million (approximately $2.5 million based on recent exchange rates), due in] [added: $2.6 million, which was paid during] the [removed: first quarter of fiscal year] [added: three months ended June 29,] 2019.

On August 4, 2017, we acquired Brains On-Line, a [removed: leading] CRO providing critical data that advances novel therapeutics for the treatment of central nervous system (CNS) diseases.

In addition to the initial purchase price, the transaction [removed: includes] [added: included] aggregate, undiscounted contingent payments of up to €6.7 million [removed: (approximately $7.7 million] based on [removed: recent exchange rates), based on] future [removed: performance and due in the first quarter of fiscal year 2019 if achieved.][added: performance.]

[removed: Fiscal Quarters][added: Fiscal Quarters]

[removed: Business Trends][added: Business Trends]

The demand for our products and services [removed: increased] [added: continued to increase] meaningfully in fiscal year [removed: 2018.][added: 2019.]

Many of our large biopharmaceutical clients have continued to increase investments in their drug discovery and early-stage development efforts and have strengthened their relationships with both CROs, like Charles River, and biotechnology [removed: companies to assist them in bringing new drugs to market.]

[removed: In addition, small] [added: Small] and mid-size [removed: biopharmaceutical] [added: biotechnology] clients [added: continued to be the primary driver of revenue growth as these clients] benefited from the continued strength in the biotechnology funding environment in fiscal year [removed: 2018,] [added: 2019,] from capital markets, partnering with large biopharmaceutical companies, and investment by venture capital.

Our full service, early-stage portfolio continued to lead to additional client discussions and new business opportunities in fiscal year [removed: 2018,] [added: 2019,] as clients seek to outsource larger portions of their early-stage drug research programs to us.

The primary result of these trends was robust [removed: demand for] [added: revenue growth within] our [removed: Safety Assessment services] [added: DSA reportable segment] in fiscal year [removed: 2018,] [added: 2019,] particularly from biotechnology clients.

[removed: As a result of this improvement, our] [added: Our] Safety Assessment facilities remained well utilized in fiscal year [removed: 2018.][added: 2019.]

We believe [added: the breadth and depth of] our scientific expertise, quality, and responsiveness remain key criteria when our clients make the decision to outsource to us.

[added: As biotechnology funding remains robust and our clients continue to pursue their] goal of more efficient and effective drug [removed: research,] [added: research to bring innovative new therapies to market,] they are evaluating outsourcing [removed: new areas] [added: more] of their research programs, such as discovery services.

We have enhanced our Discovery Services capabilities [removed: over the past five years] to [removed: enable us] [added: provide clients with a comprehensive portfolio that enables them] to [removed: work] [added: start working] with [removed: clients] [added: us] at the earliest stages of the discovery process.

In fiscal year [removed: 2018,] [added: 2019,] demand in our Discovery Services business also increased meaningfully, driven by biotechnology clients as many of these clients either initiated or continued to work with us on integrated programs and other projects.

Our efforts to enhance our sales [removed: strategies] [added: strategies, provide clients with flexible partnering models,] and become a trusted scientific partner for our clients’ early-stage programs have been successful, and enabled us to attract new [removed: clients for our early discovery services, including a growing base of biotechnology] clients.

Demand for our products and services that support our clients’ manufacturing activities was also robust in fiscal year [removed: 2018.][added: 2019.]

To support this increased demand, we [removed: continue] [added: continued] to expand the capacity of our Biologics business.

Demand for our Research Models and Services increased in fiscal year [removed: 2018,] [added: 2019,] driven by strong demand for research models in China, higher revenue for research model services, and improved pricing.

Demand for research models in China continued to be robust in fiscal year [removed: 2018,] [added: 2019,] as clients in this growing market continue to value our high-quality research [removed: models and we expanded our geographic footprint.][added: models.]

Demand for research models services also improved in fiscal year [removed: 2018,] [added: 2019,] particularly for our IS and GEMS businesses.

The IS business further benefited from [removed: being awarded] a five-year, $95.7 million contract from the National Institute of Allergy and Infectious Diseases, or NIAID, [removed: which] [added: that] commenced in September 2018.

[removed: Overview] [added: Overview] of Results of Operations and [removed: Liquidity][added: Liquidity]

Revenue for fiscal year [removed: 2018] [added: 2019] was [removed: $2.3] [added: $2.6] billion compared to [removed: $1.9] [added: $2.3] billion in fiscal year [removed: 2017.][added: 2018.]

The [removed: 2018] [added: 2019] increase as compared to the corresponding period in [removed: 2017] [added: 2018] was [removed: $408.5] [added: $355.1] million, or [removed: 22.0%,] [added: 15.7%,] and was primarily due to both growth in our DSA and Manufacturing segments, as discussed in the above “Business Trends” section, as well as the recent acquisitions of [removed: MPI Research, KWS BioTest,] [added: Citoxlab] and [removed: Brains On-Line.][added: MPI Research; partially offset by the negative effect of changes in foreign currency exchange rates which decreased revenue by $36.1 million, or 1.5%, when compared to the corresponding period in 2018.]

In fiscal year [removed: 2018,] [added: 2019,] our operating income and operating income margin were [removed: $331.4] [added: $351.2] million and [removed: 14.6%,] [added: 13.4%,] respectively, compared with [removed: $288.3] [added: $331.4] million and [removed: 15.5%,] [added: 14.6%,] respectively, in fiscal year [removed: 2017.][added: 2018.]

On January 3, 2020, we acquired HemaCare Corporation (HemaCare), a business specializing in the production of human-derived cellular products for the cell therapy market.

The acquisition of HemaCare will expand our comprehensive portfolio of early-stage research and manufacturing support solutions to encompass the production and customization of high-quality, human derived cellular products to better support clients’ cell therapy programs.

The preliminary purchase price of HemaCare was approximately $380 million in cash.

The acquisition was funded through a combination of cash on hand and proceeds from our Credit Facility under the multi-currency revolving facility.

This business will be reported as part of our RMS reportable segment.

On August 28, 2019, we acquired an 80% ownership interest in a supplier that supports our DSA reportable segment.

The remaining 20% interest is a redeemable non-controlling interest.

The preliminary purchase price was $23.4 million, net of a $4.0 million pre-existing relationship for a supply agreement settled upon acquisition, and subject to certain post-closing adjustments that may change the purchase price.

The acquisition was funded through a combination of cash on hand and proceeds from our Credit Facility under the multi-currency revolving facility.

The preliminary purchase price for Citoxlab was $527.7 million in cash, subject to certain post-closing adjustments that may change the purchase price.

The acquisition was funded through a combination of cash on hand and proceeds from our Credit Facility under the multi-currency revolving facility.

Citoxlab is reported as part of our DSA reportable segment.

During the three months ended September 29, 2018, the terms of these contingent payments were amended, resulting in a fixed payment of £2.0 million, or $2.6 million, which was paid during the three months ended March 30, 2019.

companies to assist them in bringing new drugs to market.

In addition to the acquisition of Citoxlab in April 2019, increased demand and pricing contributed to robust Safety Assessment revenue growth in fiscal year 2019.

Recent acquisitions (most notably Citoxlab and MPI) added modest amounts of available capacity to accommodate increasing client demand.

We have accomplished this through acquisitions, including Citoxlab’s discovery services, KWS BioTest in January 2018 and Brains On-Line in August 2017, and through adding cutting-edge capabilities to our discovery toolkit through partnerships, such as Distributed Bio, BitBio, and Fios Genomics.

In addition, in January 2020, we enhanced the RMS business’ growth profile and portfolio of critical research tools that we are able to supply through the acquisition of HemaCare, a premier provider of human-derived cellular products used in cell therapies.

infrastructure projects.

The increase in net income attributable to common shareholders of $25.6 million was primarily due to the increase in operating income described above, as well as a lower income tax rate due to recognizing a $20.6 million deferred tax asset in fiscal year 2019 for net operating losses expected to be utilized in the future due to changes in the Company’s international financing structure.

The increase was primarily driven by the increase to net income and the favorable timing of vendor and supplier payments compared to the same period in 2018, partially offset by unfavorable changes in operating assets and liabilities, specifically related to the timing of net contract balances from contracts with customers (collectively trade receivables, net; deferred revenue; and customer contract deposits), increases in inventory levels in response to customer demand, and higher compensation payments compared to the prior year period.

Interest on the 2028 Senior Notes is payable semi-annually on May 1 and November 1, beginning on May 1, 2020.

Net proceeds from the 2028 Senior Notes of approximately $494 million, along with available cash, was used to prepay $500.0 million of our term loan under our Credit Facility.

Additionally, on November 4, 2019, we amended and restated our Credit Facility by increasing the amount of our multi-currency revolving facility by $500.0 million, from $1.55 billion to $2.05 billion.

In March 2019, we detected unauthorized access into portions of our information systems and commenced an investigation into the incident, coordinated with U.S. federal law enforcement and leading cyber security experts, and promptly implemented a comprehensive containment and remediation plan.

In December 2019, we completed our remediation of this incident.

The financial impact of the March 2019 event is not material.

Risk Factors in this Annual Report on Form 10-K for further details on the results of the remediation efforts.

Our contracts do not generally contain significant financing components.

During fiscal year 2019, $1.6 billion, or approximately 60%, of our total revenue recognized ($2.6 billion) is DSA service revenue transferred over time.

future taxable income, and the effects of tax planning strategies.

Our valuation allowance increased by $300.2 million from $9.8 million as of December 29, 2018 to $310.0 million as of December 28, 2019.

The increase is primarily related to the recognition of $315.5 million of net operating loss deferred tax assets due to changes in our financing structure, $294.9 million of which we do not believe is more likely than not to be utilized.

In our recent acquisitions, customer relationship intangible assets (also referred to as client relationships) have been the most significant identifiable assets acquired.

To determine the fair value of the acquired client relationships, we utilized the multiple period excess earnings model (a commonly accepted valuation technique), which includes the following key assumptions: projections of cash flows from the acquired entities, which included future revenue growth rates, operating income margins, and customer attrition rates; as well as discount rates based on an analysis of the acquired entities’ weighted average cost of capital.

The value of client relationships acquired were $134.6 million for Citoxlab in fiscal year 2019 and $264.9 million for MPI Research in fiscal year 2018.

Actual cash flows arising from a particular intangible asset could vary from

No impairments were recognized during 2019, 2018 or 2017.

This

As part of the planned termination, we re-balanced assets to better match the characteristics of the liabilities.

On February 13, 2019, we announced that we signed a binding offer to acquire Citoxlab for €448 million in cash (or approximately $510 million based on current exchange rates), subject to customary closing adjustments.

The proposed transaction is expected to close in the second quarter of 2019, subject to labor consultations, regulatory requirements, and customary closing

conditions.

Upon completion of the labor consultations, Citoxlab’s shareholders are expected to enter into a definitive purchase agreement.

The proposed acquisition and associated fees are expected to be financed through our existing revolving credit facility and cash.

In the event the agreement is terminated under specified circumstances, we may be required to pay a termination fee of €18.2 million.

In order to accommodate increasing client demand, we continued to open modest amounts of capacity at legacy sites, and gained additional capacity through the acquisition of MPI Research in April 2018.

Price also improved slightly in fiscal year 2018, as we believe industry capacity utilization continued to increase, as well.

As our clients continue to pursue their

Demand for our in vivo discovery services continued to increase in fiscal year 2018, and we acquired KWS BioTest in January 2018 to enhance our discovery expertise and provide immuno-oncology capabilities to our clients.

The positive effect of changes in foreign currency exchange rates increased revenue by $23.7 million, or 1.3%, when compared to the corresponding period in 2017.

The increase in net income attributable to common shareholders of $103.0 million was primarily due to the increase in operating income discussed above and a lower effective tax rate driven primarily by net benefits of U.S. Tax Reform; partially offset by lower gains on our venture capital and life insurance policy investments, higher interest expense related to higher debt balances to support our recent acquisitions, and the absence of a gain recorded in other income, net on the CDMO divestiture in 2017.

and liabilities resulting from an increase in our deferred revenue and customer contract deposits as well as improved collections of our receivables.

On March 26, 2018, we amended and restated our credit facility creating a $2.3B Credit Facility.

The term loan facility matures in 19 quarterly installments with the last installment due March 26, 2023.

The revolving facility matures on March 26, 2023, and requires no scheduled payment before that date.

None of our contracts contained a significant financing component during fiscal year 2018.

recognized prospectively.

The cumulative effect of applying ASC 606 to all contracts with customers that were not completed as of December 30, 2017 was immaterial.

In March 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-05, “Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SAB 118).” This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of U.S. Tax Reform pursuant to SAB 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the enactment date of U.S. Tax Reform.

This standard is effective upon issuance and we have complied with the amendments.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The standard allows for reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate to 21% from 35%.

We elected to early adopt this standard in fiscal year 2018 as permitted on a prospective basis, resulting in a reclassification of $3.3 million from Accumulated other comprehensive income to Retained earnings as a result of remeasuring our deferred tax liabilities related to our pension and other post-retirement benefit plan gains and losses.

Our policy is to release material stranded tax effects on a specific identification basis.

the carrying value of goodwill is not recoverable, the quantitative two-step impairment test is required; otherwise, no further testing is required.

As part of the planned termination, we re-balanced assets to a target asset allocation of 100% fixed income investments.

The change in U.S. Pension Plan investments is intended to provide for a better matching of assets to the characteristics of the liabilities.

We intend to take further actions to reduce the volatility of the value of pension assets relative to pension liabilities and to settle remaining liabilities.

This includes making such contributions to the U.S. Pension Plan as may be necessary to settle all liabilities, including making lump sum distributions to U.S. Pension Plan participants and purchasing annuity contracts to cover vested benefits for participants who decline to elect a lump sum distribution.

with the realignment of our research model production site in Maryland in 2018 compared to 2017.

levels and hourly wage increase), facility expansions (primarily in Microbial Solutions and Biologics), and increased investments in technology to support research and development efforts (primarily in Microbial Solutions).

| Service revenue | $ | 1,298.3 | | | $ | 1,130.7 | | | $ | 167.6 | | | 14.8 | % |

| Product revenue | 559.3 | | | | 550.7 | | | | 8.6 | | | | 1.6 | % |

| Total revenue | $ | 1,857.6 | | | $ | 1,681.4 | | | $ | 176.2 | | | 10.5 | % |

| RMS | $ | 493.6 | | | $ | 494.0 | | | $ | (0.4 | ) | | (0.1 | )% | | (0.2 | )% |

| DSA | 980.0 | | | | 836.6 | | | | 143.4 | | | | 17.1 | % | | (0.2 | )% |

| Manufacturing | 384.0 | | | | 350.8 | | | | 33.2 | | | | 9.5 | % | | 0.7 | % |

| Total revenue | $ | 1,857.6 | | | $ | 1,681.4 | | | $ | 176.2 | | | 10.5 | % | | 0.0 | % |

| RMS | $ | 114.6 | | | $ | 136.4 | | | $ | (21.8 | ) | | (16.0 | )% |

| DSA | 182.8 | | | | 135.4 | | | | 47.4 | | | | 35.0 | % |

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

As of December [removed: 29, 2018,] [added: 28, 2019,] our debt portfolio was comprised primarily of floating interest rate borrowings.

A 100-basis point increase in interest rates would increase our annual pre-tax interest expense by [removed: $11.3] [added: $8.7] million.

[removed: Foreign] [added: Foreign] Currency Exchange Rate [removed: Risk][added: Risk]

The principal functional currencies of the Company’s foreign subsidiaries are the Euro, British Pound, Canadian Dollar, [added: and] Chinese Yuan [removed: Renminbi, and Japanese Yen.][added: Renminbi.]

During fiscal year [removed: 2018,] [added: 2019,] the most significant drivers of foreign currency translation adjustment the Company recorded as part of other comprehensive income (loss) were the [removed: Euro, British Pound,] Canadian Dollar, [added: British Pound, Hungarian Forint, Euro,] and Chinese Yuan Renminbi.

[added: For fiscal year 2019, our revenue would] have increased by [removed: approximately $81.8] [added: $90.5] million and our operating income would have increased by [removed: approximately $7.0] [added: $2.0] million, if the U.S. dollar exchange rate had strengthened by 10%, with all other variables held constant.

During fiscal [removed: year] [added: years 2019 and] 2018, we entered into foreign exchange forward contracts to limit our foreign currency exposure related to both intercompany loans and a U.S. dollar denominated loan borrowed by a non-U.S. Euro functional currency entity under our Credit Facility.

Refer to Note 14, “Foreign Currency Contracts,” to our consolidated financial statements contained in Item 8, “Financial Statements and Supplementary Data,” in this Annual Report on Form 10-K for further details regarding these types of forward contracts.

For fiscal year 2018, our revenue would

We did not have any foreign currency contracts open related to intercompany loans as of December 29, 2018.

[removed: General][added: General]

For example, we may use forward-looking statements when addressing topics such as: [added: trends in our business and industry;] goodwill and asset impairments still under review; future demand for drug discovery and development products and services, including the outsourcing of these services; our expectations regarding stock repurchases, including the number of shares to be repurchased, expected timing and duration, the amount of capital that may be expended and the treatment of repurchased shares; present spending trends and other cost reduction activities by our clients; future actions by our management; the outcome of contingencies; changes in our business strategy, business practices and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; our strategic relationships with leading pharmaceutical companies and venture capital limited partnerships, and opportunities for future similar arrangements; our cost structure; the impact of completed [removed: and in-process acquisitions (including Argenta, BioFocus, VivoPath, ChanTest, Sunrise, Celsis, Oncotest, WIL Research, Blue Stream, Agilux, Brains On-Line, KWS BioTest, MPI Research, and Citoxlab) and the timing of closing of in-process] acquisitions; our expectations with respect to revenue growth and operating synergies (including the impact of specific actions intended to cause related improvements); the impact of specific actions intended to improve overall operating efficiencies and profitability (and our ability to accommodate future demand with our infrastructure), including gains and losses attributable to businesses we plan to close, consolidate or divest; changes in our expectations regarding future stock option, restricted stock, performance share units and other equity grants to employees and directors; expectations with respect to foreign currency exchange; assessing (or changing our assessment of) our tax positions for financial statement purposes; and our liquidity.

In addition, these statements include the impact of economic and market conditions on us and our [removed: clients;] [added: clients,] the effects of our cost-saving actions and the steps to optimize returns to shareholders on an effective and timely basis.

[removed: You should not rely on forward-looking] [added: Forward-looking] statements [removed: because they] are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document [removed: or] [added: or,] in the case of statements incorporated by reference, on the date of the document incorporated by reference.

Factors that might cause or contribute to such differences [removed: include, but are not limited to,] [added: include] those discussed in this Form 10-K under the sections entitled “Our Strategy,” “Risk Factors,” [removed: "Management's] [added: “Management's] Discussion and Analysis of Financial Condition and Results of Operations,” in our press releases and other financial filings with the SEC.

[removed: Corporate History][added: Corporate History]

We began operating in 1947 [removed: and] [added: and,] since then, we have undergone several changes to our business structure.

Charles River Laboratories International, Inc. was incorporated in 1994 and [removed: in 2000] we completed our initial public [removed: offering.][added: offering in 2000.]

Our stock is traded on the New York Stock Exchange under the symbol “CRL” and is included in the Standard & [removed: Poor's] [added: Poor’s 1000,] MidCap [removed: 400, 1000] [added: 400] and Composite 1500 indices, the Dow Jones U.S. Health Care Index, the NYSE Arca Biotechnology Index, the NYSE [removed: Composite,] [added: Composite] and many of the Russell indices, among others.

Unless the context otherwise requires, references in this Form 10-K to “Charles River,” “we,” [removed: “us”] [added: “us,”] “the Company” 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 SEC, is available free of charge through the Investor Relations section of our Internet site (www.criver.com) as soon as practicable after we electronically file such material with, or furnish it [added: to, the SEC.]

[removed: Overview][added: Overview]

We have built upon our [added: original] core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, which is able to support our clients from target identification through non-clinical development.

Utilizing our broad portfolio of products and services enables our clients to create a more flexible drug development model, which reduces their costs, enhances their productivity and [removed: effectiveness,] [added: effectiveness] and increases speed to market.

Discovery activities typically extend anywhere from 4 to 6 years in conventional pharmaceutical research and development [added: (R&D)] timelines.

Development activities, which follow, and which can take up to 7 to 10 years, are directed at demonstrating the safety, [removed: tolerability,] [added: tolerability] and clinical efficacy of the selected drug candidates.

During the non-clinical stage of the development process, a drug candidate is tested [removed: in vitro] [added: *in vitro*] (non-animal, typically on a cellular or sub-cellular level in a test tube or multi-well petri plate) and [removed: in vivo] [added: *in vivo*] (in research models) to [added: establish drug safety prior to and in] support [added: of] human clinical trials.

Various studies and reports estimate that it takes between 10 to 15 years, up to $2.0 billion excluding time [removed: costs,] [added: costs] and exploration of between 10,000 and 15,000 drug molecules to produce a single Food and Drug Administration (FDA)-approved drug.

For over 70 years, we have been in the business of providing the research models required in [added: the] research and development of new drugs, [removed: devices,] [added: devices] and therapies.

Over this time, we have built upon our core competency of [removed: in vivo] [added: *in vivo*] biology to develop a diverse and expanding portfolio of products and services, which now encompasses the broader early-stage drug research process.

Our client base includes global pharmaceutical companies, [added: a broad range of] biotechnology companies, [added: and many] government agencies, [removed: and] hospitals and academic institutions around the world.

We currently operate in over [removed: 80] [added: 90] facilities and in [removed: approximately] [added: over] 20 countries [removed: worldwide, which numbers exclude] [added: worldwide (excluding] our Insourcing Solutions [removed: (IS) sites.][added: sites).]

In [removed: 2018,] [added: 2019,] our total revenue was [removed: $2.3] [added: $2.6] billion and our operating income from continuing operations, before income taxes, was [removed: $281.7] [added: $304.1] million.

We have three reporting segments: Research Models and Services (RMS), Discovery and Safety Assessment [removed: (DSA),] [added: (DSA)] and Manufacturing Support (Manufacturing).

With over 150 different [added: stocks and] strains, we continue to maintain our position as a global leader in the production and sale of the most widely used rodent research model strains and purpose-bred rats and mice.

We also provide a variety of related services that are designed to [removed: assist] [added: support] our clients in [removed: supporting] the use of research models in drug discovery and development.

In [removed: 2018,] [added: 2019,] RMS accounted for [removed: 22.9%] [added: 20.5%] of our total revenue and approximately 3,600 of our employees, including approximately [removed: 130] [added: 170] science professionals with advanced degrees.

Our DSA business segment provides services that enable our clients to outsource their innovative drug discovery research, their related drug development activities, and their regulatory-required safety testing of potential new drugs, industrial and agricultural [removed: chemicals] [added: chemicals, consumer products, veterinary medicines] and medical [removed: devices to us.][added: devices.]

The demand for these services is driven by the needs of large global pharmaceutical companies that have exceeded their internal capacity or that [removed: are, or who are transitioning,] [added: continue] to [added: transition to] an [removed: outsourcing model of] [added: outsourced] drug [removed: development,] [added: development model,] as well as by the needs of small biotechnology [added: companies, chemical] companies and non-governmental organizations [removed: who] [added: that] rely on outsourcing for most of their discovery, development and safety testing programs.

We are the largest provider of drug discovery, non-clinical [removed: development,] [added: development] and safety testing services [removed: worldwide and offer a comprehensive portfolio of services required for the development and regulatory submission of pharmaceuticals and industrial and agricultural chemicals.][added: worldwide.]

We have extensive expertise in the discovery of clinical candidates and in the design, [removed: execution,] [added: execution] and reporting of safety assessment studies for numerous types of compounds including small and large molecule pharmaceuticals, industrial and agricultural chemicals, [added: consumer products, veterinary medicines, cell and gene therapies,] biocides and medical devices.

[removed: Our] [added: In 2019, our] DSA segment represented [removed: 58.1%] [added: 61.8%] of our total revenue [removed: in 2018] and employed approximately [removed: 8,800] [added: 10,900] of our employees including approximately [removed: 1,300] [added: 1,500] science professionals with advanced degrees.

Our Microbial Solutions [removed: business provides in vitro] [added: products and services businesses provide *in vitro*] methods for conventional and rapid quality control testing of sterile and non-sterile pharmaceuticals and consumer products.

In [removed: 2018,] [added: 2019,] Manufacturing accounted for [removed: 19.0%] [added: 17.7%] of our total revenue from continuing operations and approximately [removed: 1,800] [added: 1,900] of our employees, including approximately [removed: 140] [added: 150] science professionals with advanced degrees.

It is estimated that the market for regulated safety assessment services is [removed: at least 50%] [added: over 55%] outsourced, while emerging growth areas such as discovery and certain research model services are currently believed to be less outsourced.

[removed: Research] [added: Research] Models and [removed: Services (RMS).][added: Services.]

Our RMS segment is comprised of [removed: (1)] [added: three businesses:] Research [removed: Models and (2)] [added: Models,] Research Model [removed: Services.][added: Services and Research Products.]

We provide our rodent models to numerous clients around the world, including most pharmaceutical companies, a broad range of biotechnology companies, [added: other contract research organizations] and many government agencies, hospitals, and academic institutions.

Our research models include [removed: standard stocks and strains and] [added: commonly used laboratory strains,] disease models [removed: such as those] [added: and specialized strains] with compromised immune systems, which are in demand as early-stage [removed: research tools.][added: tools in the drug discovery and development process.]

In addition, in January 2020, we acquired HemaCare Corporation (HemaCare), a leading global provider of human-derived cellular materials used in the development and production of cell therapies, as part of our Research Products business.

These entities may choose to outsource their discovery, development and safety activities to reduce fixed costs and to gain

access to additional scientific expertise and capabilities.

Our Manufacturing Segment is comprised of three businesses: Microbial Solutions, Biologics Testing Solutions and Avian Vaccine Services.

Research Models.

These services address the need among pharmaceutical and biotechnology

Research Products.

In January 2020, we acquired HemaCare, a leading global provider of human-derived cellular materials used in the development of production of cell therapies, as part of our Research Products business.

The business supplies controlled, consistent, customized primary cells and blood components derived from normal and mobilized peripheral blood, bone marrow, and cord blood.

Research Products supports biotechnology and pharmaceutical companies, academic institutions and other research organizations who rely on high-quality, viable and functional human primary cells and blood components for biomedical and drug discovery research and cell therapy development.

Our DSA segment is comprised of two businesses: Discovery Services and Safety Assessment.

Discovery Services.

Our discovery services business unit focuses on several therapeutic areas, including oncology, CNS, immunology, inflammation and metabolic diseases.

implementations of their research programs, and to stay with them through the entire drug discovery process.

| • | early nonclinical pharmacokinetic and pharmacodynamic studies, transporter-mediated drug-drug interaction, and *in vitro* and *in vivo* assays to assess mechanism, bioavailability and metabolism as required for regulatory approval of new drugs; and |

Through strategic partnerships we also offer an ultra-high throughput screening laboratory, a human antibody discovery and development platform, an artificial intelligence drug design platform and a human stem cell model platform.

In recent years, we have made key acquisitions designed to augment our Discovery Services offerings, including businesses that provide critical data to advance novel therapeutics for the treatment of CNS diseases, immune (including oncology), inflammatory and infectious diseases, as well as drug transporter assays and kits.

Safety Assessment.

Our safety assessment business also provides expertise in several therapeutic areas, including respiratory, fibrotic, cardiovascular, gastrointestinal, genitourinary diseases, anti-infectives and ophthalmology indications, as well as the development of surgically implanted medical devices.

commencement of first-in-human clinical trials.

*Toxicology.* We have expertise in the design and execution of development programs in support of a broad diversity of therapeutic modalities, including small organics, peptides, proteins, oligonucleotides, antibody-based platforms, and many other innovative pharmaceutical products.

Our Manufacturing Support segment is comprised of three businesses: Microbial Solutions, Biologics Testing Solutions and Avian Vaccine Services.

Microbial Solutions.

*Endosafe*®.

We are a market leader in endotoxin testing products and services, which are used for FDA-required quality control testing of injectable drugs and medical devices, their components, and the processes by which they are manufactured.

*Celsis*®.

In 2019, we launched a suite of products focused on sterility testing.

Sterility testing is required prior to the release of sterile injectable products.

The legacy method required a 14-day sample incubation period and was subjective.

Using the Celsis® protocol and instrumentation, clients can detect contamination within 6 days and make definitive product release decisions.

*Accugenix*®.

immunochemistry, microbiology, cell biology, *in vivo* studies and related services.

In the

Our clients’ R&D needs continue to evolve.

They will continue to

reassess their core differentiators from R&D to commercialization, and which aspects of their drug discovery, development and manufacturing processes they will choose to outsource.

The evolving biopharmaceutical R&D business model, coupled with a robust funding environment, have also led to the emergence of a significant number of new biotechnology companies in recent years that are discovering innovative new therapies.

Further, we believe the acquisition of HemaCare enhances our ability to provide a comprehensive cell therapy solution from discovery through commercialization, which we believe will enhance our clients’ efficiency and accelerate their speed-to-market.

In particular, our focus has been to drive differentiation through technologies that enhance the speed to develop a clinical candidate and allow biopharmaceutical companies to make earlier go/no-go decisions.

Our ability to thoroughly assess these nascent technologies and market opportunities may later result in an acquisition.

to, the SEC.

Global pharmaceutical, biotechnology, and chemical companies choose to outsource their discovery, development, and safety activities because outsourcing reduces the significant investment in personnel, facilities and capital resources necessary to efficiently and effectively conduct required scientific studies.

Additionally, outsourcing to Charles River provides companies access to scientific expertise that they may not have internally or otherwise available to them.

Research Models.

Research Model Services.

Discovery Services.

We support a variety of therapeutic areas including oncology, CNS, immunology, bone and musculoskeletal, inflammation, metabolic diseases, respiratory and fibrotic diseases, cardiovascular, gastrointestinal, genito-urinary, anti-infectives, and ophthalmology.

Early Discovery.

Our knowledge and expertise allow us to support our clients as they drive their molecules forward through design and implementation of clear program plans.

Our genome editing capabilities enable us to develop more translationally relevant research models designed to enhance scientific understanding and improve the efficiency and effectiveness of the drug discovery process.

These services extend from the early discovery screening process through to in vitro GLP safety assessment testing.

In October 2018, we entered into an exclusive partnership with Distributed Bio, Inc., a leader in the computational design and optimization of antibody platforms.

This partnership will enable our clients to access Distributed Bio’s extensive antibody libraries and integrated antibody optimization technologies.

The combination of Distributed Bio’s antibody libraries with our extensive biologics development expertise creates a unique end-to-end platform for therapeutic antibody discovery and development.

In recent years we have made key acquisitions designed to augment our In Vivo Discovery Services offerings.

In August 2017, we acquired Brains On-Line (BOL), a leading CRO that provides critical data that advances novel therapeutics for the treatment of CNS diseases.

In January 2018, we acquired KWS BioTest (KWS), a leading CRO specializing in in vitro and in vivo discovery testing services for immuno-oncology and inflammatory and infectious diseases.

Through partnerships, we are also expanding towards the integrated discovery and pre-clinical development of therapeutic antibodies.

Safety Assessment.

Safety Pharmacology.

Toxicology.

We have expertise in the design and execution of development programs in support of essentially all modalities of chemically-derived and biotechnology-derived pharmaceuticals.

Pathology Services.

identify potential test compound-related changes.

In April 2018, we acquired MPI Research (MPI), a premier non-clinical contract research organization providing comprehensive testing services to biopharmaceutical and medical device companies worldwide.

The MPI business we acquired reports through our Discovery and Safety Assessment segment.

Microbial Solutions.

The Celsis Advance II™ and Celsis Accel™ systems for rapid microbial detection applications complement our PTS-Micro™, a rapid endotoxin detection system for sterile biopharmaceutical applications.

In addition, we believe we can improve and augment drug discovery and early-stage development effectiveness by coordinating the dialog between large pharmaceutical, biotechnology, academic and non-governmental organizations, and venture capitalists.

Pharmaceutical Manufacturing Support Portfolio.

where outsourcing provides major benefits for our clients and where we could provide significant benefits given our unique early development portfolio and global footprint.

For example, during the past year we were awarded a large multi-year contract in our RMS segment with the National Institute of Allergy and Infectious Diseases (NIAID), one of the NIH’s largest institutes, to manage NIAID’s research model operations.

We also extended our long-standing collaboration with The Michael J.

Fox Foundation for Parkinson’s Research (MJFF).

Since 2011, we have worked together with MJFF to accelerate the discovery of therapies for Parkinson’s disease.

Our clients' research and development needs continue to evolve, particularly with regard to larger biopharmaceutical companies.

They will continue to reassess what are core differentiators from research and development to commercialization.

This should lead to more opportunities for strategic

In addition, with one of the largest and most experienced SEND team in the industry, we believe that our services, quality and ability to navigate the complex world of electronic data for submission is an unmatched competitive advantage to be shared with all our clients.

As a result, we believe that we are well positioned to exploit both existing and new outsourcing opportunities.

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

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: (Mark One)] [added: (Mark One)] | | [added: |]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: |]

[removed: | FOR] [added: FOR] THE FISCAL YEAR [removed: ENDED DECEMBER 29, 2018 | |][added: ENDED December 28, 2019]

| [removed: o] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] | [added: | | |]

| [removed: FOR] [added: FOR] THE TRANSITION PERIOD FROM [removed: TO] [added: TO] | | [added: | | |]

[removed: Commission] [added: Commission] File [removed: No. 001-15943][added: No. 001-15943]

[removed: ][added: ]

[removed: CHARLES] [added: CHARLES] RIVER LABORATORIES INTERNATIONAL, [removed: INC.][added: INC.]

| [removed: Delaware] [added: Delaware] | | [removed: 06-1397316] | [added: 06-1397316 |]

| (State or Other Jurisdiction of Incorporation or Organization) | | [added: |] (I.R.S. Employer Identification No.) |

| [removed: 251] [added: 251] Ballardvale [removed: Street Wilmington, Massachusetts] [added: Street] | [added: Wilmington] | [removed: 01887] [added: Massachusetts] | [added: 01887 |]

| (Address of Principal Executive Offices) | | [added: |] (Zip Code) |

(Registrant’s telephone number, including area code): [removed: (781) 222-6000][added: (781) 222-6000]

[removed: Securities] [added: | Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act: | | |]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Ticker symbol(s)] | [removed: Name] [added: Name] of each exchange on which [removed: registered] [added: registered] |

| Common [removed: Stock,] [added: stock,] $0.01 par value | [added: CRL] | New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the Act: [removed: None][added: Yes ☐ No ☒]

Yes [removed: ý] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: ý][added: ☒]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes [removed: ý] [added: ☒] No [removed: o][added: ☐]

| Large accelerated filer [removed: ý] | [added: ☑] | Accelerated filer [removed: o] | [removed: | Non-accelerated filer o] [added: ☐] |

| [removed: Smaller reporting company o] | | Emerging growth company [removed: o] | [removed: |] [added: ☐] |

On June [removed: 30, 2018,] [added: 29, 2019,] the aggregate market value of the [removed: Registrant’s] [added: registrant’s] voting common stock held by non-affiliates of the [removed: Registrant] [added: registrant] was approximately [removed: $5,286,825,427.][added: $6,796,882,148.]

As of January [removed: 25, 2019,] [added: 24, 2020,] there were [removed: 48,226,323] [added: 48,959,576] shares of the [removed: Registrant’s] [added: registrant’s] common stock outstanding, $0.01 par value per share.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the [removed: Registrant’s] [added: registrant’s] definitive Proxy Statement for its [removed: 2019] [added: 2020] Annual Meeting of Shareholders scheduled to be held on May [removed: 21, 2019,] [added: 6, 2020,] which will be filed with the Securities and Exchange Commission (SEC) not later than 120 days after December [removed: 29, 2018,] [added: 28, 2019,] are incorporated by reference into Part III of this Annual Report on Form 10-K.

With the exception of the portions of the [removed: 2019] [added: 2020] 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.

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: FOR] [added: FOR] FISCAL [removed: YEAR 2018][added: YEAR 2019]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| [removed: Item] [added: Item] | | [removed: Page] [added: Page] |

| | [removed: PART I] [added: PART I] | |

| 1A | [Risk [removed: Factors](#sBC58CDA292A9588DB4A4AEB18C53C9AB)] [added: Factors](#sC0499FFEB37E550BA1FBE25443AA1C96)] | [removed: [15](#sBC58CDA292A9588DB4A4AEB18C53C9AB)] [added: [15](#sC0499FFEB37E550BA1FBE25443AA1C96)] |

| 1B | [Unresolved Staff [removed: Comments](#s16DED8AD752556849B4FA4B039F939E7)] [added: Comments](#s806EA85DEA8959238295B8C79E7FA316)] | [removed: [26](#s16DED8AD752556849B4FA4B039F939E7)] [added: [28](#s806EA85DEA8959238295B8C79E7FA316)] |

| 3 | [Legal [removed: Proceedings](#s161DE2A7DDE757C1B050C6D5EA228489)] [added: Proceedings](#sFFC1D8094BDE5C4ABDE40A78CE2DA3A2)] | [removed: [26](#s161DE2A7DDE757C1B050C6D5EA228489)] [added: [28](#sFFC1D8094BDE5C4ABDE40A78CE2DA3A2)] |

| 4 | Mine Safety Disclosures | [removed: [27](#s4AAF21206131591CB5D7B2BDB8BC5E44)] [added: [28](#s52AF6B57CF175257954CC57B60E306FA)] |

| | [removed: PART II] [added: PART II] | |

| OR | | | | |

| | | | |

| --- | --- | --- | --- |

| | | | |

____________________________________________________________________________

Yes ☒ No ☐

| | | | |

| --- | --- | --- | --- |

| | | | |

| Non-accelerated filer | ☐ | Smaller reporting company | ☐ |

Yes ☐ No ☒

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

| 1 | [Business](#s7CA30D94BB9B54FA8D76E278F6ABA8ED) | [1](#s7CA30D94BB9B54FA8D76E278F6ABA8ED) |

| 2 | [Properties](#sABD384154F6A5018AF2D0B24F7871CFA) | [28](#sABD384154F6A5018AF2D0B24F7871CFA) |

| 9B | [Other Information](#s8B6A959F529C5F5AB1AA74DFC511B5EA) | [111](#s8B6A959F529C5F5AB1AA74DFC511B5EA) |

| 11 | [Executive Compensation](#s1FB6A58D34375B3FB353394D6B56AD1E) | [112](#s1FB6A58D34375B3FB353394D6B56AD1E) |

| 16 | Form 10-K Summary | [113](#sD7AEEEBDA4115BCEA6E15754BDFC0A9F) |

| Signatures | | [114](#sCDE255A2C1285593B37FCE239DD39C04) |

| Exhibit Index | | [115](#s1A06E20F77F85E51BA158867C4B8762D) |

10-K 1 crl1229201810-k.htm 10-K

| | |

| --- | --- |

| OR | |

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.

| 1 | [Business](#s00C7A97BB402589488D90BF6310DAE90) | [1](#s00C7A97BB402589488D90BF6310DAE90) |

| 2 | [Properties](#sDECE6B40F1B65F419E38ECAEE945AD44) | [26](#sDECE6B40F1B65F419E38ECAEE945AD44) |

| 9B | [Other Information](#s938E2549472C5A0E8CDC580C17FFCA49) | [103](#s938E2549472C5A0E8CDC580C17FFCA49) |

| 11 | [Executive Compensation](#s2D14B95E2965506EBCD6E7990A8CA070) | [104](#s2D14B95E2965506EBCD6E7990A8CA070) |

| 16 | Form 10-K Summary | [105](#sF92394E3EDF256CBB69B0FA353D19622) |

| Signatures | | [106](#s92EB2B004CD35E229C6A22A42E3E1ABE) |

| Exhibit Index | | [107](#sB3B1207C3F775711B2EAE9CD2FA82A95) |

We own large facilities (facilities over 50,000 square feet) for our DSA businesses in Canada, [added: Denmark,] France, [added: Hungary,] Ireland, Netherlands, [removed: Scotland,] [added: Scotland] and the U.S. and lease large facilities in England and the U.S. We own large RMS facilities in Canada, France, Germany, Italy, Japan, [removed: England,] [added: England] and the U.S. We lease large RMS facilities in China.

For additional information, see Note [removed: 9, “Long-Term Debt and Capital Lease Obligations” and Note] 16, [removed: “Commitments and Contingencies”] [added: “Leases”] included in Item 8, “Financial Statements and Supplementary Data” in this [removed: Annual Report on] Form 10-K.

We track room utilization on an ongoing basis [removed: and] [added: and,] depending on the needs of our clients at given times, we may need to execute on [removed: contingent] [added: contingency] plans for expansion, which average between six and fifteen months to complete.

Sites and leases added to the portfolio by way of acquisition are integrated into our overall real estate strategy.

[removed: PART II][added: PART II]

Our common stock began trading on the New York Stock Exchange on June 23, 2000 under the symbol “CRL.” There were no equity securities that were not registered under the Securities Act of 1933, as amended, sold during fiscal year [removed: 2018.][added: 2019.]

[removed: Shareholders][added: Shareholders]

As of January [removed: 25, 2019,] [added: 24, 2020,] there were [removed: 92] [added: 90] registered shareholders of the outstanding shares of common stock.

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

The following table provides information relating to our purchases of shares of our common stock during the fourth quarter of fiscal [removed: 2018:][added: 2019:]

| | [removed: Total] [added: Total] Number of Shares [removed: Purchased] [added: Purchased] | | | [removed: Average] [added: Average] Price Paid per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs] [added: Programs] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares That May Yet Be Purchased Under the Plans or [removed: Programs] [added: Programs] | | |

| | | | | | | | | | | | [removed: (in thousands)] [added: (in thousands)] | | |

| September [removed: 30, 2018] [added: 29, 2019] to October [removed: 27, 2018] [added: 26, 2019] | [removed: 173] [added: 174] | | | $ | [removed: 133.55] [added: 128.16] | | | — | | | $ | 129,105 | |

| October [removed: 28, 2018] [added: 27, 2019] to November [removed: 24, 2018] [added: 23, 2019] | [removed: 46] [added: 48] | | | [removed: 121.82] [added: 129.98] | | | | — | | | 129,105 | | |

| November [removed: 25, 2018] [added: 24, 2019] to December [removed: 29, 2018] [added: 28, 2019] | [removed: 194] [added: 168] | | | [removed: 134.85] [added: 145.25] | | | | — | | | 129,105 | | |

During the fourth quarter of fiscal year [removed: 2018,] [added: 2019,] we did not repurchase any shares of common stock under our stock repurchase program or in open market trading.

As of December [removed: 29, 2018,] [added: 28, 2019,] we had $129.1 million remaining on the authorized stock repurchase program.

[removed: Comparison] [added: Comparison] of 5-Year Cumulative Total [removed: Return][added: Return]

The following stock performance graph compares the annual percentage change in the Company’s cumulative total shareholder return on its Common Stock during a period commencing on December [removed: 28, 2013] [added: 27, 2014] and ending on December [removed: 29, 2018] [added: 28, 2019] (as measured by dividing (1) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the Company’s share price at the end and the beginning of the measurement period; by (2) the share price at the beginning of the measurement period) with the cumulative total return of the S&P 500 Index and the S&P 500 Health Care Index during such period.

Information used in the graph was obtained from Standards & Poor’s Institutional Market Services, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such [removed: information][added: information.]

[removed: ][added: ]

| | [removed: Fiscal Year] [added: Fiscal Year] | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: 2013] [added: 2014] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2018] [added: 2019] | | |

| Total | 390 | | | | | | | — | | | | | |

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

| Charles River Laboratories International, Inc. | $ | 100 | | | $ | 125 | | | $ | 119 | | | $ | 170 | | | $ | 174 | | | $ | 236 | |

| S&P 500 | 100 | | | | 101 | | | | 114 | | | | 138 | | | | 132 | | | | 174 | | |

| S&P 500 Health Care | 100 | | | | 107 | | | | 104 | | | | 127 | | | | 135 | | | | 163 | | |

| Total | 413 | | | | | | | — | | | | | |

| Charles River Laboratories International, Inc. | $ | 100 | | | $ | 121 | | | $ | 150 | | | $ | 143 | | | $ | 205 | | | $ | 209 | |

| S&P 500 | 100 | | | | 114 | | | | 115 | | | | 129 | | | | 157 | | | | 150 | | |

| S&P 500 Health Care | 100 | | | | 125 | | | | 134 | | | | 130 | | | | 159 | | | | 169 | | |

The selected financial data presented below [added: for the fiscal years ended 2019, 2018, and 2017 and as of the fiscal years ended 2019 and 2018,] is derived from our audited consolidated financial statements and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Item 7 and “Financial Statements and Supplementary Data” contained in Item 8 of this Annual Report on Form 10-K.

| | [removed: Fiscal Year] [added: Fiscal Year] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | [removed: (in] [added: (in] thousands, except per share [removed: amounts)] [added: amounts)] | | | | | | | | | | | | | | | | | | |

| [removed: Statement] [added: Statement] of Income [removed: Data] [added: Data] | | | | | | | | | | | | | | | | | | | |

| Total revenue | $ | [removed: 2,266,096] [added: 2,621,226] | | | $ | [removed: 1,857,601] [added: 2,266,096] | | | $ | [removed: 1,681,432] [added: 1,857,601] | | | $ | [removed: 1,363,302] [added: 1,681,432] | | | $ | [removed: 1,297,662] [added: 1,363,302] | |

| Income from continuing operations, net of income taxes | [removed: 227,218] [added: 254,061] | | | | [removed: 125,586] [added: 227,218] | | | | [removed: 156,086] [added: 125,586] | | | | [removed: 152,037] [added: 156,086] | | | | [removed: 129,924] [added: 152,037] | | |

| Income (loss) from discontinued operations, net of income taxes | [added: — | | | |] 1,506 | | | | (137 | | ) | | 280 | | | | (950 | | ) | [removed: | (1,726 | | ) |]

| [removed: Common] [added: Common] Share [removed: Data] [added: Data] | | | | | | | | | | | | | | | | | | | |

| Earnings per common share from continuing [removed: operations:] [added: operations attributable to common shareholders:] | | | | | | | | | | | | | | | | | | | |

| Basic | $ | [removed: 4.69] [added: 5.17] | | | $ | [removed: 2.60] [added: 4.69] | | | $ | [removed: 3.28] [added: 2.60] | | | $ | [removed: 3.23] [added: 3.28] | | | $ | [removed: 2.76] [added: 3.23] | |

| Diluted | $ | [removed: 4.59] [added: 5.07] | | | $ | [removed: 2.54] [added: 4.59] | | | $ | [removed: 3.22] [added: 2.54] | | | $ | [removed: 3.15] [added: 3.22] | | | $ | [removed: 2.70] [added: 3.15] | |

| [removed: Other Data] [added: Other Data] | | | | | | | | | | | | | | | | | | | |

| Depreciation and amortization | $ | [removed: 161,779] [added: 198,095] | | | $ | [removed: 131,159] [added: 161,779] | | | $ | [removed: 126,658] [added: 131,159] | | | $ | [removed: 94,881] [added: 126,658] | | | $ | [removed: 96,445] [added: 94,881] | |

| Capital expenditures | [removed: 140,054] [added: 140,514] | | | | [removed: 82,431] [added: 140,054] | | | | [removed: 55,288] [added: 82,431] | | | | [removed: 63,252] [added: 55,288] | | | | [removed: 56,925] [added: 63,252] | | |

| [removed: Balance] [added: Balance] Sheet Data (as of period [removed: end)] [added: end)] | | | | | | | | | | | | | | | | | | | |

| Cash and cash equivalents | $ | [removed: 195,442] [added: 238,014] | | | $ | [removed: 163,794] [added: 195,442] | | | $ | [removed: 117,626] [added: 163,794] | | | $ | [removed: 117,947] [added: 117,626] | | | $ | [removed: 160,023] [added: 117,947] | |

| Total assets | [removed: 3,855,879] [added: 4,692,790] | | | | [removed: 2,929,922] [added: 3,855,879] | | | | [removed: 2,711,800] [added: 2,929,922] | | | | [removed: 2,068,497] [added: 2,711,800] | | | | [removed: 1,870,578] [added: 2,068,497] | | |

| Long-term debt, net and [removed: capital] [added: finance] leases | [removed: 1,636,598] [added: 1,849,666] | | | | [removed: 1,114,105] [added: 1,636,598] | | | | [removed: 1,207,696] [added: 1,114,105] | | | | [removed: 845,997] [added: 1,207,696] | | | | [removed: 740,557] [added: 845,997] | | |

| Redeemable noncontrolling [removed: interest] [added: interests] | [removed: 18,525] [added: 28,647] | | | | [removed: 16,609] [added: 18,525] | | | | [removed: 14,659] [added: 16,609] | | | | [removed: 28,008] [added: 14,659] | | | | [removed: 28,419] [added: 28,008] | | |

Refer to [removed: Note 2, “Business Acquisitions and Divestiture”] [added: the following] included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional [removed: information concerning the impact of our recent acquisitions.][added: information:]

The selected financial data presented below for the fiscal years ended 2016 and 2015 and as of the fiscal years ended 2017, 2016 and 2015, is derived from our audited consolidated financial statements within previously filed Annual Reports on Form 10-K.

| | |

| --- | --- |

| • | Note 2, “Business Combinations and Divestiture” concerning the impact of our recent acquisitions, including revenue, operating income, assets acquired and liabilities assumed, and related acquisition and integration costs; |

| | |

| --- | --- |

| • | Note 9, “Long-Term Debt and Finance Lease Obligations” concerning the impact of debt related activities in connection with our recent acquisitions; |

| | |

| --- | --- |

| • | Note 11, “Income Taxes” concerning the impact of U.S. Tax Reform in fiscal year ended 2017; and |

| | |

| --- | --- |

| • | Note 16, “Leases” concerning the impact of adopting Accounting Standards Codification 842, “Leases” beginning in fiscal year 2019. |

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

[removed: | [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#sACED2226FC245E8BADBC4CD5E693EE5C) | [49](#sACED2226FC245E8BADBC4CD5E693EE5C) |][added: Firm]

| Consolidated Statements of Income for fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [51](#s0BCF4D90F1A350A487478276620ACFCE)] [added: [55](#s4B8466E37C3D5524B14729147D189FD6)] |

| Consolidated Statements of Comprehensive Income for fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [52](#s93BCFD444E285190BF6FA33C17C65B31)] [added: [56](#sDA3FFB0E7E105CABBE2476A4E31A1443)] |

| Consolidated Balance Sheets as of December [removed: 29, 2018] [added: 28, 2019] and December [removed: 30, 2017] [added: 29, 2018] | [removed: [53](#s0BAA5AED934353A59E7AED11AE3E33AE)] [added: [57](#sEE4B367BD9AF5128A6690F93F586D548)] |

| Consolidated Statements of Cash Flows for fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [54](#s005D0C30DE145B27AC42154F8A9D2740)] [added: [58](#sBA62A388247357FBB1BB1A9B4B2DB811)] |

| Consolidated Statements of Changes in Equity for fiscal years [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [56](#s0355B3DCFF315178A565AC05446BEE1D)] [added: [60](#s34B22AC735645AD49E66D4A7C10EDA31)] |

[removed: | [Notes to Consolidated Financial Statements](#s1725686765285889BF798805F451060D) | [57](#s1725686765285889BF798805F451060D) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: Report] [added: | [Report] of Independent Registered Public Accounting [removed: Firm][added: Firm](#sA986EED1B0FC5E9EA5CD7FAC953E45E4) | [52](#sA986EED1B0FC5E9EA5CD7FAC953E45E4) |]

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance sheets of Charles River Laboratories International, Inc. and its subsidiaries (the “Company”) as of December [removed: 29, 2018] [added: 28, 2019] and December [removed: 30, 2017,] [added: 29, 2018,] and the related consolidated statements of income, [added: of] comprehensive income, [added: of] changes in equity and [added: of] cash flows for each of the three [added: fiscal] years in the period ended December [removed: 29, 2018,] [added: 28, 2019,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December [removed: 29, 2018,] [added: 28, 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December [removed: 29, 2018] [added: 28, 2019] and December [removed: 30, 2017,] [added: 29, 2018,] and the results of its operations and its cash flows for each of the three [added: fiscal] years in the period ended December [removed: 29, 2018] [added: 28, 2019] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December [removed: 29, 2018,] [added: 28, 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the COSO.

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded [removed: MPI Research] [added: Citoxlab] and [removed: KWS BioTest] [added: the acquisition of a DSA supplier] from its assessment of internal control over financial reporting as of December [removed: 29, 2018] [added: 28, 2019] because they were acquired by the Company in purchase business combinations during [removed: 2018.][added: 2019.]

We have also excluded [removed: MPI Research] [added: Citoxlab] and [removed: KWS BioTest] [added: the acquisition of the DSA supplier] from our audit of internal control over financial reporting.

[removed: MPI Research] [added: Citoxlab] and [removed: KWS BioTest are wholly-owned subsidiaries] [added: the DSA supplier] whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent [removed: 5.4%] [added: 5.0%] and [removed: 9.6%] [added: 4.7%,] respectively, of the related consolidated financial statement amounts as of and for the [added: fiscal] year ended December [removed: 29, 2018.][added: 28, 2019.]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

[added: A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and] dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

[removed: CHARLES] [added: CHARLES] RIVER LABORATORIES INTERNATIONAL, [removed: INC.][added: INC.]

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENTS OF [removed: INCOME][added: INCOME]

[removed: (in] [added: (in] thousands, except per share [removed: amounts)][added: amounts)]

| | [removed: Fiscal Year] [added: Fiscal Year] | | | | | | | | | | |

| | [removed: 2018 | | | | 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Service revenue | $ | [removed: 1,687,941] [added: 2,029,371] | | | $ | [removed: 1,298,298] [added: 1,687,941] | | | $ | [removed: 1,130,733] [added: 1,298,298] | |

| Product revenue | [removed: 578,155] [added: 591,855] | | | | [removed: 559,303] [added: 578,155] | | | | [removed: 550,699] [added: 559,303] | | |

| Total revenue | [removed: 2,266,096] [added: 2,621,226] | | | | [removed: 1,857,601] [added: 2,266,096] | | | | [removed: 1,681,432] [added: 1,857,601] | | |

| Cost of services provided (excluding amortization of intangible assets) | [removed: 1,150,371] [added: 1,371,699] | | | | [removed: 867,014] [added: 1,150,371] | | | | [removed: 760,439] [added: 867,014] | | |

| Cost of products sold (excluding amortization of intangible assets) | [removed: 275,658] [added: 291,216] | | | | [removed: 289,669] [added: 275,658] | | | | [removed: 277,034] [added: 289,669] | | |

| Selling, general and administrative | [removed: 443,854] [added: 517,622] | | | | [removed: 371,266] [added: 443,854] | | | | [removed: 364,708] [added: 371,266] | | |

| Amortization of intangible assets | [removed: 64,830] [added: 89,538] | | | | [removed: 41,370] [added: 64,830] | | | | [removed: 41,699] [added: 41,370] | | |

| Operating income | [removed: 331,383] [added: 351,151] | | | | [removed: 288,282] [added: 331,383] | | | | [removed: 237,552] [added: 288,282] | | |

| Interest income | [removed: 812] [added: 1,522] | | | | [removed: 690] [added: 812] | | | | [removed: 1,314] [added: 690] | | |

| Interest expense | [removed: (63,772] [added: (60,882] | | ) | | [removed: (29,777] [added: (63,772] | | ) | | [removed: (27,709] [added: (29,777] | | ) |

| Other income, net | [removed: 13,258] [added: 12,293] | | | | [removed: 37,760] [added: 13,258] | | | | [removed: 11,764] [added: 37,760] | | |

| Income from continuing operations, before income taxes | [removed: 281,681] [added: 304,084] | | | | [removed: 296,955] [added: 281,681] | | | | [removed: 222,921] [added: 296,955] | | |

| Provision for income taxes | [removed: 54,463] [added: 50,023] | | | | [removed: 171,369] [added: 54,463] | | | | [removed: 66,835] [added: 171,369] | | |

| Income from continuing operations, net of income taxes | [removed: 227,218] [added: 254,061] | | | | [removed: 125,586] [added: 227,218] | | | | [removed: 156,086] [added: 125,586] | | |

| Income (loss) from discontinued operations, net of income taxes | [removed: 1,506] [added: —] | | | | [removed: (137] [added: 1,506] | | [removed: )] | | [removed: 280] [added: (137] | | [added: )] |

*Change in Accounting Principle*

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

*Acquisition of Citoxlab - Valuation of Acquired Customer Relationship Intangible Assets*

As described in Notes 1 and 2 to the consolidated financial statements, the Company completed the acquisition of Citoxlab on April 29, 2019.

The preliminary purchase price allocation included customer relationship intangible assets (also referred to as client relationships) of $134.6 million.

The determination of the fair value of intangible assets, which represent a significant portion of the purchase price, requires the use of significant judgment with regard to (i) the fair value; and (ii) the period and the method by which the intangible assets will be amortized.

To determine the fair value of the acquired client relationships, management utilized the multiple period excess earnings model (a commonly accepted valuation technique), which includes the following key assumptions: projections of cash flows from the acquired entities, which include future revenue growth rates, operating income margins, and customer attrition rates, as well as discount rates based on an analysis of the weighted average cost of capital.

The principal considerations for our determination that performing procedures relating to the acquisition of Citoxlab - valuation of acquired customer relationship intangible assets is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of customer relationship intangible assets acquired due to the significant amount of judgment and estimation by management when developing the estimate, (ii) significant audit effort was required in evaluating the key assumptions relating to the estimate, including future revenue growth rates, operating income margins, customer attrition rates, and discount rates, and in evaluating audit evidence relating to the economic useful life over which cash flow projections were estimated in the valuation of the customer relationship intangible assets, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the valuation of acquired customer relationship intangible assets, including controls over the review of the valuation methodology, the key assumptions underlying the valuation, and the useful lives of the acquired customer relationship intangible assets.

These procedures also included, among others, (i) reading the purchase agreement, (ii) testing management’s process for estimating the fair value of customer relationship intangible assets and evaluating the reasonableness of the estimated future revenue growth rates, operating margins and customer attrition rate assumptions by evaluating their consistency with data from external sources, past performance of the acquired business, and evidence obtained in other areas of the audit, and (iii) evaluating the reasonableness of the economic useful life over which cash flow projections are estimated.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation model and certain significant assumptions, including customer attrition and the discount rates.

*Discovery and Safety Assessment Revenue Recognized Over Time*

As described in Notes 1 and 3 to the consolidated financial statements, the Company recognized revenue of $1,619.0 million in its Discovery and Safety Assessment (DSA) segment in 2019, of which $1,618.3 million was recognized over time as services are delivered to the customer based on the extent of progress towards completion of the performance obligation using either the cost-to-cost (input method) or right to invoice measures of progress (output method).

Management uses the cost-to-cost measure of progress when it best depicts the transfer of value to the customer, which occurs as the Company incurs costs on its contract, generally related to fixed fee service contracts.

The principal considerations for our determination that performing procedures relating to DSA revenue recognized over time is a critical audit matter are there was a high degree of auditor subjectivity and effort in performing procedures to evaluate the calculation of DSA revenue recognized over time, including the estimates of the variables within the calculation of the forecasted cost of service contracts, such as labor hours, allocation of overhead costs, research model costs, and subcontractor costs.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to DSA revenue recognized over time, including controls over the review of agreements, development of the forecasted costs, the review of budget versus actual costs incurred and the review of revenue recognition.

These procedures also included, among others, (i) reading agreements and reports describing the results of services provided for a sample of service contracts selected for testing, (ii) evaluating and testing management’s process for determining the amount of revenue recognized for a sample of service contracts, which included evaluating the reasonableness of forecasted costs through a comparison of actual current year project costs to historical management cost estimates for completed service contracts, and (iii) testing actual costs incurred for a sample of in-process service contracts by examining evidence of costs incurred, including invoices, time cards, human resources documents, and the completeness and accuracy of overhead allocations.

February 11, 2020

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

| Operating lease right-of-use assets, net | 140,085 | | | | — | | |

| Goodwill | 1,540,565 | | | | 1,247,133 | | |

| Operating lease right-of-use liabilities | 116,252 | | | | — | | |

| Redeemable noncontrolling interests | 28,647 | | | | 18,525 | | |

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

| Net income | $ | 254,061 | | | $ | 228,724 | | | $ | 125,449 | |

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

| | 2019 | | | | 2018 | | | | 2017 | | |

| Cash, cash equivalents, and restricted cash, end of period | $ | 240,046 | | | $ | 197,318 | | | $ | 166,331 | |

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

| Net income | — | | | — | | | | — | | | | 252,019 | | | | — | | | | — | | | — | | | | 252,019 | | | | 2,084 | | | | 254,103 | | |

| Other comprehensive loss | — | | | — | | | | — | | | | — | | | | (5,316 | | ) | | — | | | — | | | | (5,316 | | ) | | — | | | | (5,316 | | ) |

| Retirement of treasury shares | (140 | ) | | (1 | | ) | | (4,355 | | ) | | (13,786 | | ) | | — | | | | (140 | ) | | 18,142 | | | | — | | | | — | | | | — | | |

| Stock-based compensation | — | | | — | | | | 57,271 | | | | — | | | | — | | | | — | | | — | | | | 57,271 | | | | — | | | | 57,271 | | |

| December 28, 2019 | 48,936 | | | $ | 489 | | | $ | 1,531,785 | | | $ | 280,329 | | | $ | (178,019 | ) | | — | | | $ | — | | | $ | 1,634,584 | | | $ | 3,244 | | | $ | 1,637,828 | |

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

February 13, 2019

| Long-term liabilities of discontinued operations | — | | | | 3,942 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| December 26, 2015 | 85,464 | | | $ | 855 | | | $ | 2,397,960 | | | $ | 10,538 | | | $ | (135,548 | ) | | 38,766 | | | $ | (1,540,738 | ) | | $ | 733,067 | | | $ | 4,489 | | | $ | 737,556 | |

| Net income | — | | | — | | | | — | | | | 154,765 | | | | — | | | | — | | | — | | | | 154,765 | | | | 924 | | | | 155,689 | | |

| Other comprehensive loss | — | | | — | | | | — | | | | — | | | | (118,216 | | ) | | — | | | — | | | | (118,216 | | ) | | (154 | | ) | | (118,370 | | ) |

| Tax benefit associated with stock issued under employee compensation plans | — | | | — | | | | 9,274 | | | | — | | | | — | | | | — | | | — | | | | 9,274 | | | | — | | | | 9,274 | | |

1.

A 53rd week was included in the fourth quarter of fiscal year 2016, which is occasionally necessary to align with a December 31 calendar year-end.

Reclassifications

Certain reclassifications have been made in the consolidated statements of income for prior periods to conform to the current year presentation.

Marketable securities are reported at fair value.

Gains and losses on marketable securities are included in other income, net and are determined using the specific identification method.

| • | Mutual funds - Valued at the unadjusted quoted net asset value of shares held by the Company; |

Business Acquisitions

None of the Company’s contracts contained a significant financing component during fiscal year 2018.

If the standalone selling price is not observable through past transactions,

Advertising Costs

Advertising costs are expensed as incurred.

For fiscal years 2018, 2017 and 2016, advertising costs totaled $1.9 million, $1.6 million and $1.4 million, respectively.

In fiscal year 2018, the Company made an accounting policy election to treat taxes due on the Global Intangible Low-Taxed Income (GILTI) inclusion as a current period expense.

See Note 11, “Income Taxes” for further discussion.

In fiscal year 2017, new mortality improvement scales were issued in the U.S. reflecting a decline in longevity projection from the 2016 releases that the Company adopted, which decreased the Company’s benefit obligations by $5.2 million as of December 30, 2017.

In March 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-05, “Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (SAB 118).” This standard amends Accounting Standards Codification 740, Income Taxes (ASC 740) to provide guidance on accounting for the tax effects of U.S. Tax Reform pursuant to SAB 118, which allows companies to complete the accounting under ASC 740 within a one-year measurement period from the enactment date of U.S. Tax Reform.

This standard is effective upon issuance and the Company has complied with the amendments.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The standard allows for reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects arising from the change in the reduction of the U.S. federal statutory income tax rate to 21% from 35%.

The Company elected to early adopt this standard in fiscal year 2018 as permitted on a prospective basis, resulting in a reclassification of $3.3 million from Accumulated other comprehensive income to Retained earnings as a result of remeasuring the Company’s deferred tax liabilities related to its pension and other post-retirement benefit plan gains and losses.

The Company’s policy is to release material stranded tax effects on a specific identification basis.

In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The standard requires an employer to disaggregate the service cost component from the other components of net benefit cost and provides explicit guidance on the presentation of the service cost component and the other components of net benefit cost in the statements of income.

The Company adopted this standard in fiscal year 2018 and applied the changes retrospectively to the presentation of the service cost component and the other components of net periodic pension cost in the consolidated statements of income for all periods presented as required.

The adoption of this standard had no impact on Net income, however increased Operating income by $0.8 million and $0.1 million during fiscal years 2017 and 2016, respectively.

In connection with the impact of Operating income to the Company’s reportable segments for fiscal year 2017, Research Models and Services (RMS) decreased by $0.1 million, Discovery and Safety Assessment (DSA) decreased by $1.3 million, Manufacturing Support (Manufacturing) decreased by less than $0.1 million, and Unallocated corporate increased by $2.2 million.

For fiscal year 2016, Operating income for RMS increased by $0.1 million, DSA decreased by $2.8 million, Manufacturing increased by less than $0.1 million, and Unallocated corporate increased by $2.8 million.

In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business.” The standard clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions of assets or businesses.

In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” The standard requires the immediate recognition of tax effects for an intra-entity asset transfer other than inventory.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Liabilities.” This standard, including a subsequently issued amendment under ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities”, requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in net income, simplifies the impairment assessment of certain equity investments, and updates certain presentation and disclosure requirements.

The Company adopted this standard in fiscal year 2018, resulting in an increase of $1.9 million to Other assets with a corresponding increase to Retained earnings and Deferred taxes of $1.4 million and $0.5 million, respectively.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The standard, including subsequently issued amendments, collectively referred to Accounting Standard Codification (ASC) 606, “Revenue From Contracts With Customers”, replaced most existing revenue recognition guidance in U.S. GAAP and permits the use of either a modified retrospective or cumulative effect transition method.

The Company elected the modified retrospective transition method.

[removed: (a)] [added: (a)] Evaluation of Disclosure Controls and [removed: Procedures][added: Procedures]

Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15, promulgated by the Securities Exchange Act of 1934, as amended (Exchange Act), the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, are effective, at a reasonable assurance level, as of December [removed: 29, 2018,] [added: 28, 2019,] to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms.

[removed: Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the] reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

[removed: Management’s] [added: Management’s] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December [removed: 29, 2018.][added: 28, 2019.]

We have excluded the business acquisitions completed during fiscal year [removed: 2018,] [added: 2019,] including [removed: MPI Research] [added: Citoxlab] and [removed: KWS BioTest,] [added: the acquisition of a DSA supplier,] from the assessment of the effectiveness of internal control over financial reporting as of December [removed: 29, 2018.][added: 28, 2019.]

[removed: The acquired businesses are wholly-owned subsidiaries whose total] [added: Total] assets and total revenue [added: of the acquired businesses] collectively represent [removed: 5.4%] [added: 5.0%] and [removed: 9.6%,] [added: 4.7%,] respectively, of the related consolidated financial statement amounts as of and for fiscal year ended December [removed: 29, 2018.][added: 28, 2019.]

The effectiveness of our internal control over financial reporting as of December [removed: 29, 2018,] [added: 28, 2019,] has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which appears in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

[removed: (b)] [added: (b)] Changes in Internal [removed: Controls][added: Controls]

During fiscal year [removed: 2018,] [added: 2019,] the Company continued to execute a plan to centralize certain accounting transaction processing functions to internal shared service centers.

There were no other material changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of the Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter of [removed: 2018] [added: 2019] that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the

[removed: PART III][added: PART III]

Directors and Compliance with Section 16(a) of the Exchange [removed: Act][added: Act]

[removed: The] [added: Any] information required by this Item regarding our directors and compliance with Section 16(a) of the Exchange Act by our officers and directors will be included in the [removed: 2019] [added: 2020] Proxy Statement under the sections captioned “Nominees for Directors” and [removed: “Section] [added: “Delinquent Section] 16(a) [removed: Beneficial Ownership Reporting Compliance”] [added: Reports”] and is incorporated herein by reference thereto.

The information required by this Item regarding our corporate governance will be included in the [removed: 2019] [added: 2020] Proxy Statement under the section captioned “Corporate Governance” and is incorporated herein by reference thereto.

Our Executive [removed: Officers][added: Officers]

Audit Committee Financial [removed: Expert][added: Expert]

The information required by this Item regarding the audit committee of the Board of Directors and financial experts will be included in the [removed: 2019] [added: 2020] Proxy Statement under the section captioned “The Board of Directors and its Committees-Audit Committee and Financial Experts” and is incorporated herein by reference thereto.

Code of [removed: Ethics][added: Ethics]

Changes to Board Nomination [removed: Procedures][added: Procedures]

A.

B.

C.

D.

E.

A.

B.

C.

D.

E.

The information required by this Item will be included in the [removed: 2019] [added: 2020] Proxy Statement under the sections captioned [removed: “2018] [added: “2019] Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation and Related Information,” “Compensation Committee Interlocks and Insider Participation” and “Report of Compensation Committee,” and is incorporated herein by reference thereto.

The information required by this Item will be included in the [removed: 2019] [added: 2020] Proxy Statement under the sections captioned “Beneficial Ownership of Securities” and “Equity Compensation Plan Information” and is incorporated herein by reference thereto.

The information required by this Item will be included in the [removed: 2019] [added: 2020] Proxy Statement under the sections captioned “Related Person Transaction Policy” and “Corporate Governance-Director Qualification Standards; Director Independence” and is incorporated herein by reference thereto.

The information required by this Item will be included in the [removed: 2019] [added: 2020] Proxy Statement under the section captioned “Statement of Fees Paid to Independent Registered Public Accounting Firm” and is incorporated herein by reference thereto.

[removed: PART IV][added: PART IV]

[removed: Item] [added: Item] 15.

Exhibits and Financial Statement [removed: Schedules][added: Schedules]

[removed: Item] [added: Item] 15(a)(3) and Item 15(b) [removed: Exhibits][added: Exhibits]

[removed: SIGNATURES][added: SIGNATURES]

| February [removed: 13, 2019] [added: 11, 2020] | By: | /s/ DAVID R. SMITH |

| | [removed: Corporate] [added: *Corporate] Executive Vice President and Chief Financial [removed: Officer] [added: Officer*] | |

| By: | /s/ JAMES C. FOSTER | [removed: Chairman,] [added: *Chairman,] President and Chief Executive [removed: Officer] [added: Officer*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ DAVID R. SMITH | [removed: Corporate] [added: *Corporate] Executive Vice President [removed: and] [added: and*] | February [removed: 13, 2019] [added: 11, 2020] |

| | David R. Smith | [removed: Chief] [added: *Chief] Financial [removed: Officer] [added: Officer*] | |

| By: | /s/ MICHAEL G. KNELL | [removed: Corporate] [added: *Corporate] Senior Vice President [removed: and] [added: and*] | February [removed: 13, 2019] [added: 11, 2020] |

| | Michael G. Knell | [removed: Chief] [added: *Chief] Accounting [removed: Officer] [added: Officer*] | |

| By: | /s/ ROBERT J. BERTOLINI | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ STEPHEN D. CHUBB | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ DEBORAH T. KOCHEVAR | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ MARTIN MACKAY | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ JEAN-PAUL MANGEOLLE | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ GEORGE E. MASSARO | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |

| By: | /s/ GEORGE M. MILNE, JR. | [removed: Director] [added: *Director*] | February [removed: 13, 2019] [added: 11, 2020] |