Charles River Laboratories International (CRL) 10-K risk factor changes: FY2020 vs FY2019

Similarly, economic factors and industry trends that affect our clients in these industries [added: (including the COVID-19 pandemic and the impact of measures intended to reduce the spread of COVID-19)] also affect their R&D budgets and, consequentially, our business as well.

Lack of access to sufficient capital, or lack of adequate time to properly [added: (or the failure to adequately)] respond to [removed: such a change] [added: changes] in demand, could result in declining revenue and profits, as customers transfer to other suppliers.

Several of our product and service offerings are dependent on a limited source of [removed: supply, which if interrupted could] [added: supply that, when interrupted,] adversely [removed: affect] [added: affects] our business.

Disruptions to their continued supply [removed: may] [added: from time to time] arise from health problems (including as a result of the [added: COVID-19 pandemic and the] spread of [removed: diseases, such as coronavirus),] [added: other diseases),] export or import laws/restrictions or embargoes, tariffs, international trade regulations, foreign government or economic instability, severe weather conditions, increased competition among suppliers for models, disruptions to the air travel system, activist campaigns, commercial disputes, supplier [removed: insolvency] [added: insolvency, geopolitical disputes, measures intended to slow the spread of COVID-19] or other ordinary course or unanticipated events.

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 [added: (and in the past have required)] us to pay significantly higher prices for such products [added: during periods of global shortage or restrictions on the transportation of products.]

[removed: In addition, limited] [added: Limited] global supply or regional restrictions on transportation for certain products may require us to source products from non-preferred [removed: vendors.][added: vendors, which may not be successful.]

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

[removed: For example, regulations] [added: Regulations] intended to reduce the risk of introducing infectious diseases in the blood supply (including [removed: coronavirus)] [added: COVID-19)] could also result in a decreased pool of potential [removed: donors.][added: donors or integrity of inventory.]

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

Unauthorized third parties could attempt to gain entry to such information systems to steal data or disrupt the [removed: systems.][added: systems or for financial gain.]

While we have taken measures to protect [removed: them] [added: our information systems] 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.

[removed: | • |] [added: -] remediation of the March 2019 incident; [removed: |]

[removed: | • |] [added: -] 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; [removed: |]

[removed: | • |] [added: -] additional visibility into our network and environment; [removed: |]

[removed: | • |] [added: -] additional monitoring of our environment; [removed: |]

[removed: | • |] [added: -] active threat hunting in our environment; [removed: |]

[removed: | • |] [added: -] enhanced protection for externally facing web applications; [removed: |]

[removed: | • |] [added: -] the addition of Multi-Factor Authentication to ingress points; [removed: |]

[removed: | • |] [added: -] the addition of denial of service attack protection; and [removed: |]

[removed: | • |] [added: -] increased network segmentation, [removed: |]

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

[removed: Also, the California legislature passed the] [added: The] California Consumer Privacy Act [removed: (CCPA), which] [added: (CCPA)] became effective January 1, 2020.

The CCPA creates new transparency requirements [added: for companies] and grants California residents several new rights with regard their personal information.

We have made changes to, and investments in, our business practices and will continue to monitor developments and make appropriate [added: 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 [removed: patient] [added: donor] 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.

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

If our operations are found to violate any applicable law or other governmental regulations, we might be subject to civil and criminal penalties, damages and [removed: fines.][added: fines or the temporary closure of our facilities.]

Any action against us for violation of these [removed: laws,] [added: laws or regulations,] even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and damage our reputation.

[added: 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.

For additional discussion of the factors that we believe have recently influenced outsourcing demand from our clients, please see the section entitled “Our Strategy” included [removed: elsewhere] in [removed: this] [added: our] Form [removed: 10-K.][added: 10-K for the fiscal year ended December 28, 2019, filed with the Commission on February 11, 2020.]

If a counterparty terminates a contract with us, we are typically entitled under the terms of the contract to receive revenue earned to date as well as certain other costs and, in some cases, termination [removed: fees.][added: fees; however, in many cases we are not entitled to any termination fees in the event of a termination.]

Such underpricing or significant cost overruns could have an adverse effect on [removed: the] our business, results of operations, financial condition and cash flows.

During the last two decades, we have steadily expanded our business through numerous acquisitions, including our recent acquisitions of [removed: Citoxlab] [added: HemaCare, Cellero] and [removed: HemaCare.][added: Distributed Bio and our recently announced planned acquisition of Cognate BioServices, Inc. However, businesses and technologies may not be available on terms and conditions we find acceptable.]

[removed: | • |] [added: -] difficulties in achieving business and financial [removed: success; |][added: success (including as a result of COVID-19 pandemic and the long-term economic impact of the pandemic);]

[removed: | • |] [added: -] difficulties and expenses incurred in assimilating and integrating operations, services, products, [added: information technology platforms,] technologies or pre-existing relationships with our clients, distributors and suppliers; [removed: |]

[removed: | • |] [added: -] challenges with developing and operating new businesses, including those that are materially different from our existing businesses and that may require the development or acquisition of new internal capabilities and expertise; [removed: |]

[removed: | • |] [added: -] potential losses resulting from undiscovered liabilities of acquired companies that are not covered by the indemnification we may obtain from the seller or the insurance we acquire in connection with the transaction; [removed: |]

[removed: | • |] [added: -] loss of key employees; [removed: |]

[removed: | • |] [added: -] the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies; [removed: |]

[removed: | • |] [added: -] diversion of management’s attention from other business concerns; [removed: |]

Business and Operational Risks

The COVID-19 pandemic is dynamic and expanding.

The continuation of this outbreak may have, and the emergence of other epidemic or pandemic crises could have, material adverse effects on our business, results of operations, or financial condition.

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic.

The COVID-19 pandemic is dynamic and expanding, and its ultimate scope, duration and effects are uncertain.

This pandemic has and continues to result in, and any future epidemic or pandemic crises may potentially result in, direct and indirect adverse effects on our industry and customers, which in turn has (with respect to COVID-19) and may (with respect to future epidemics or crises) impact our business, results of operations and financial condition.

Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us.

Effects of the current pandemic have included, or may in the future include, among others:

- deterioration of worldwide, regional or national economic conditions and activity, which adversely affects global demand for our products and services;

- disruptions to our operations as a result of the potential health impact on our employees and crew, and on the workforces of our customers and business partners;

- temporary and/or partial closures of our facilities or the facilities of our customers (including academic institutions, government laboratories and private foundations) and third-party service providers;

- interruption of the operations of global supply chains and those of our suppliers;

- disruptions to our business from, or additional costs related to, new regulations, directives or practices implemented in response to the pandemic, such as travel restrictions, shelter in place/stay in place/work from home orders, increased inspection regimes, hygiene measures (such as quarantining and physical distancing) or increased implementation of remote working arrangements;

- reduced cash flows and financial condition, including potential liquidity constraints;

- reduced access to capital, including the ability to refinance any existing obligations, as a result of any credit tightening generally or due to declines in global financial markets, including to the prices of publicly-traded equity securities of us, our peers and of listed companies generally;

- deterioration in the financial condition and prospects of our customers or attempts by customers, suppliers or service providers to invoke force majeure contractual clauses, or the legal doctrines of impossibility or impracticability (or other similar doctrines) as a result of delays or other disruptions;

- delays in the commencement of, or the suspension or cancellation of, client studies; and

- the effects described elsewhere in these Risk Factors.

The COVID-19 pandemic has caused us to modify our business practices, including but not limited to health management of employees, customers and suppliers, management of production inventory, supply chain risk management, compensation practices and capital expenditure planning.

We have formed a tiered structure of designated COVID-19 crisis management teams throughout our organization to identify, implement and monitor such actions as required by the dynamic exigencies arising from the pandemic.

Such measures and others may not be sufficient to mitigate all the risks posed by COVID-19, and our ability to perform critical functions could be materially adversely affected.

Although disruption and effects from the COVID-19 pandemic may be temporary, given the dynamic nature of these circumstances and the worldwide nature of our business and operations, the duration of any business disruption and the related financial impact to us cannot be reasonably estimated at this time but could materially affect our business, results of operations and financial condition.

Our counterparties (including our clients who are competitors) may elect to terminate their agreements with us for various reasons including: the invocation of force majeure clauses, or the legal doctrines of impossibility or impracticability (or other similar legal doctrines), as a result of the COVID-19 pandemic; the products being tested fail to satisfy safety requirements; unexpected or undesired study results; production problems resulting in shortages of the drug being tested; a client’s decision to forego or terminate a particular study; our competitors’ establishment of alternative distribution channels; dissatisfaction with our performance under the agreement; the loss of funding for the particular research study; or general convenience/counterparty preference.

Like other companies, we have on occasion experienced, and will continue to experience, threats and incursions to our data and systems, including malicious codes and viruses, phishing, business email compromise and social engineering attacks or other cyber-attacks.

The number and complexity of these threats continue to increase over time.

Further, we are at risk of being targeted, and we have in the past been victim to, business email compromise fraud, which results in payments being made to illegitimate bank accounts.

Although these instances have not resulted in our incurring material losses, if similar instances occur in the future, we may incur such losses.

In addition, divestitures could involve additional risks, including the following: difficulties in the separation of operations, services, products, and personnel; diversion of management’s attention from other business concerns; and the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture.

As described herein, the COVID-19 pandemic has already, and will continue to, materially disrupt our operations, though the full extent of such impact remains uncertain.

Furthermore, the habitat of certain animals used for research purposes may be located in or near certain environmentally protected areas or conservation areas.

Activities conducted by us or any of our agents within these areas may be legally challenged and result in similar negative attention and action from environmental protection activists, including advocacy for the expansion of environmental restrictions applicable to such areas.

Industry Risk Factors

The impact of measures intended to reduce the spread of COVID-19 caused us to temporarily suspend blood donations, which have since resumed, at our Research Products facilities, further limiting our ability to respond to changes in demand.

Furthermore, changes in government budgetary priorities as a result of the COVID-19 pandemic and the impact of measures intended to reduce the spread of COVID-19 could reduce government funding of R&D that is unrelated to the disease, which could adversely affect our business and our financial results.

For example, as with other industry participants, certain of our activities rely on a sufficient supply of large research models, which has seen increasing demand as compared to supply in 2020 and into 2021 due to a variety of factors.

First, the surge of research relating to COVID-19 has increased short term demand.

Second, China supplies a significant portion of certain critical large research models, which have been subject to geographic export restrictions applicable to many animal species since the beginning of the COVID-19 pandemic.

In addition, reductions in global air transportation routes may result in sourcing alternative transportation at an increased cost.

An inability to obtain a sufficient and timely supply of critical products could adversely affect our business, financial results and results of operations.

As a result of the COVID-19 pandemic and the impact of measures intended to reduce the spread of COVID-19, we temporarily suspended blood donations at one of our Research Products facilities.

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

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

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.

| | |

| --- | --- |

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

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

Non-compliance with any of these expectations

Our counterparties (including our clients who are competitors) may elect to terminate their agreements with us for various reasons including:

| • | the products being tested fail to satisfy safety requirements; |

| • | unexpected or undesired study results; |

| • | production problems resulting in shortages of the drug being tested; |

| • | a client’s decision to forego or terminate a particular study; |

| • | our competitors’ establishment of alternative distribution channels; |

| • | dissatisfaction with our performance under the agreement; |

| • | the loss of funding for the particular research study; or |

| • | general convenience/counterparty preference. |

We plan to continue to acquire businesses and technologies and form strategic alliances.

However, businesses and technologies may not be available on terms and conditions we find acceptable.

In addition, divestitures could involve additional risks, including the following:

| • | difficulties in the separation of operations, services, products, and personnel; |

| • | diversion of management’s attention from other business concerns; and |

| • | the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture. |

purpose of obtaining or retaining business.

There is an increasing push to focus on *in vitro* technologies such that employ human biospecimens, stem cell technologies and genome editing.

For example, our Discovery and Safety Assessment businesses have programs to evaluate the utility of induced pluripotent stems cells, advanced *in vitro* models, artificial intelligence and machine learning in discovery and preclinical development.

Successful commercialization of alternatives to traditional research models may not be sufficient to fully offset reduced sales or profits from research models.

annual meetings, as well as shareholder proposals we received for some of our past Annual Meetings of Shareholders.

As of December 28, 2019, we had $1.9 billion of debt.

Changes in U.S. and International Tax Law.

| • | risks that we may have errors and omissions and/or product liabilities related to our products designed to conduct |

products and services to our clients.

The U.K. Prime Minister has said that a trade agreement needs to be reached by December 31, 2020.

There is currently no mechanism to automatically extend the transition period, but there is a possibility that the transition period may be extended by agreement between the U.K. and the European Union.

In the absence of a trade deal in the short to medium term, the U.K.’s trade with the European Union and the rest of the world would be subject to tariffs and duties set by the World Trade Organization.

Our results of operations in any quarter may vary from quarter to quarter and are influenced by the risks discussed above, as well as:

| • | changes in the general global economy; |

| • | changes in the mix of our products and services; |

| • | cyclical buying patterns of our clients; |

| • | the financial performance of our venture capital investments; and |

We currently operate in over [removed: 90] [added: 100] facilities and [added: in] over 20 countries worldwide, which numbers exclude our Insourcing Solutions (IS) sites.

Our RMS reportable segment includes the Research [removed: Models and] [added: Models,] Research Model [removed: Services] [added: Services, and Research Products] businesses.

Research Model Services includes: Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered [removed: research] models; Research Animal Diagnostic Services (RADS), which provides health monitoring and diagnostics services related to research models; and Insourcing Solutions (IS), which provides colony management of our clients’ research operations (including recruitment, training, staffing, and management services).

Our Manufacturing reportable segment includes Microbial Solutions, which provides *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; [added: and] Avian Vaccine Services (Avian), which supplies specific-pathogen-free chicken eggs and [removed: 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.][added: chickens.]

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

We continued to make strategic acquisitions designed to expand our portfolio of [added: products and] services to support the drug discovery and development [removed: continuum and position us as a market leader in the outsourced discovery services market.][added: continuum.]

Our recent acquisitions [removed: and divestiture] are described below.

The acquisition of HemaCare [removed: will expand] [added: expands] 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 [removed: preliminary] purchase price of HemaCare was [removed: approximately $380] [added: $379.8] million in cash.

The acquisition [added: of HemaCare on January 3, 2020 for $379.8 million in cash] was funded through a combination of [added: available] cash [removed: on hand] and proceeds from our Credit Facility under the multi-currency revolving facility.

This business [removed: will be] [added: is] reported as part of our RMS reportable segment.

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

The purchase price for [removed: KWS BioTest] [added: Cellero] was [removed: $20.3] [added: $37.4] million in cash.

[removed: The KWS BioTest] [added: This] business is reported as part of our [removed: DSA] [added: RMS] reportable segment.

The purchase price for [removed: Brains On-Line] [added: Citoxlab] was [removed: $21.3] [added: $527.1] million in cash.

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

Small and mid-size biotechnology clients continued to be the primary driver of revenue growth as these clients benefited from [removed: the continued strength in the] [added: record] biotechnology funding [removed: environment] [added: levels] in fiscal year [removed: 2019,] [added: 2020,] from capital markets, partnering with large biopharmaceutical companies, and investment by venture [removed: capital.][added: capital, as the COVID-19 pandemic enhanced the global focus on scientific innovation and emphasized greater investment in their preclinical pipelines.]

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 [removed: Charles River,] [added: us,] and biotechnology [added: companies to assist them in bringing new drugs to market.]

[removed: Our full service, early-stage portfolio continued to lead] [added: Clients continue] to [removed: additional client discussions and new business opportunities in fiscal year 2019, as clients] seek to outsource larger portions of their early-stage drug research programs to [removed: us.][added: us, which is leading to new business opportunities as clients adopt more flexible and efficient research and development models.]

[removed: In addition to the acquisition of Citoxlab in April 2019, increased demand and pricing contributed to robust] [added: Robust] Safety Assessment revenue growth in fiscal year [removed: 2019.][added: 2020 was primarily driven by increased demand and pricing.]

We believe the [added: acquisitions of Citoxlab (2019), MPI Research (2018), and WIL Research (2016) have solidified our scientific capabilities and global scale, and the] breadth and depth of our scientific expertise, quality, and responsiveness remain key criteria when our clients make the decision to outsource to us.

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

We have accomplished this through acquisitions, including [added: Distributed Bio in December 2020 (fiscal year 2021),] 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 [removed: Distributed Bio,] BitBio, [added: Cypre,] and Fios Genomics.

[removed: Our] [added: In fiscal year 2020, demand in our Discovery Services business also increased significantly, as our] efforts to enhance our [removed: sales strategies,] [added: scientific capabilities,] provide clients with flexible partnering models, and become a trusted scientific partner for our clients’ early-stage programs have been [removed: successful, and enabled us to attract new clients.][added: successful.]

[removed: Demand] [added: Overall, demand] for our products and services that support our clients’ manufacturing activities was [removed: also robust] [added: strong] in fiscal year [removed: 2019.][added: 2020.]

Our Biologics business continued to benefit from increased demand for services associated with the growing proportion of biologic drugs in the pipeline and on the [removed: market.][added: market, including cell and gene therapies, as well as COVID-19 therapeutics.]

Demand for research models services [removed: also improved] [added: experienced very little impact from COVID-19] in fiscal year [removed: 2019,] [added: 2020, and these businesses performed very well,] particularly for our IS and GEMS businesses.

We are confident that research models and services will remain essential tools for our clients’ drug discovery and early-stage development [removed: efforts, and the RMS business will continue to be an important source of cash flow generation for us.][added: efforts.]

In [removed: 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 [removed: acquisition] [added: acquisitions] of [removed: HemaCare, a] [added: HemaCare and Cellero,] premier [removed: provider] [added: providers] of human-derived cellular products used in cell therapies.

Revenue for fiscal year [removed: 2019] [added: 2020] was [removed: $2.6] [added: $2.9] billion compared to [removed: $2.3] [added: $2.6] billion in fiscal year [removed: 2018.][added: 2019.]

The [removed: 2019] [added: 2020] increase as compared to the corresponding period in [removed: 2018] [added: 2019] was [removed: $355.1] [added: $302.7] million, or [removed: 15.7%,] [added: 11.5%,] 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: Citoxlab] [added: HemaCare] and [removed: MPI Research; partially offset] [added: Cellero in our RMS segment, and] by the [removed: negative] [added: positive] effect of changes in foreign currency exchange rates [removed: which decreased revenue] [added: when compared to the corresponding period in 2019; partially offset] by [removed: $36.1 million, or 1.5%,] [added: a reduction in RMS product revenue due to the impact of the COVID-19 pandemic] when compared to the corresponding period in [removed: 2018.][added: 2019.]

In fiscal year [removed: 2019,] [added: 2020,] our operating income and operating income margin were [removed: $351.2] [added: $432.7] million and [removed: 13.4%,] [added: 14.8%,] respectively, compared with [removed: $331.4] [added: $351.2] million and [removed: 14.6%,] [added: 13.4%,] respectively, in fiscal year [removed: 2018.][added: 2019.]

Net income attributable to common shareholders increased to [removed: $252.0] [added: $364.3] million in fiscal year [removed: 2019,] [added: 2020,] from [removed: $226.4] [added: $252.0] million in the corresponding period of [removed: 2018.][added: 2019.]

During fiscal year [removed: 2019,] [added: 2020,] our cash flows from operations was [removed: $480.9] [added: $546.6] million compared with [removed: $441.1] [added: $480.9] million for fiscal year [removed: 2018.][added: 2019.]

[removed: The] [added: For fiscal year 2019, compared to fiscal year 2018, the] increase [added: in net cash provided by operating activities] was primarily driven by [removed: the] [added: an] increase [removed: to] [added: in income from continuing operations,] net [added: of] income [added: taxes] and the favorable timing of vendor and supplier payments compared to the same period in [removed: 2018,] [added: 2018;] partially offset by unfavorable changes in [removed: operating assets and liabilities,] [added: working capital items,] 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.

[removed: Our significant accounting policies are more fully described in Note 1, “Description of Business and Summary of Significant] Accounting Policies”, to our consolidated financial statements contained in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

When contract modifications change existing performance obligations, the [added: impact on the] existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis.

During fiscal year [removed: 2019, $1.6] [added: 2020, $1.8] billion, or approximately 60%, of our total revenue recognized [removed: ($2.6] [added: ($2.9] billion) is DSA service revenue transferred over time.

In preparing our consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of [removed: items for tax and financial reporting purposes.]

In making this determination, under the applicable financial accounting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected [added: future taxable income, and the effects of tax planning strategies.]

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

COVID-19

*Overview*

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, COVID-19, a global pandemic.

The COVID-19 pandemic is dynamic and expanding, and its ultimate scope, duration and effects are uncertain.

This pandemic has had and may continue to result in direct and indirect adverse effects on our industry and customers, which in turn has impacted our business, results of operations, and financial condition.

Further, the COVID-19 pandemic may also affect our operating and financial results in ways that are and are not presently known to us, or that we currently do not expect to present significant risks to our operations or financial results but which may in fact turn out to negatively affect us to a magnitude greater than anticipated.

Refer to Item 1A, “Risk Factors”, included herein for risk factors reflecting the impact of the COVID-19 pandemic.

Giving consideration to each of these risk factors, the following is our current estimate and belief of the impact of the COVID-19 pandemic during fiscal year 2020 and how it may continue to affect us in subsequent periods.

*Business continuity*

To date, we generally have not experienced significant challenges in implementing our business continuity plans.

Many government agencies have provided guidance permitting “essential” or “critical” business operations to remain open.

As of the date of this annual report, in the geographies where business restrictions have been imposed, we believe all of our business operations have satisfied the requirements to be designated to be “essential” or “critical” according to the guidance provided by government, health and other regulatory agencies with authority over such matters.

As a result, all of our operating sites remain open and adequately staffed as of the date of this annual report.

For certain operations or sites experiencing logistical delays, we have experienced some inefficiencies as it relates to completing work or fulfilling orders; however, we do not believe material expenditures will be required or material resource constraints will occur.

Logistical delays include a small number of sites that have experienced reduced operations (including as a result of increased employee absenteeism) or voluntarily closed, as well as delays in transportation activities.

We have comprehensive business continuity plans in place for each site globally and are continuously updating these to address the evolving COVID-19 pandemic situation.

We implemented our initial plans in China beginning in January 2020, and have continuously refined our plans for other regions as the virus has spread.

We have encouraged and expressed our expectations that employees work remotely whenever possible; and for those employees who need to come into our sites to fulfill their responsibilities, we are adhering to guidelines from government, health, and other regulatory agencies.

This includes social distancing, flexible scheduling such as split shifts, restricting visitors, enhanced cleaning, and providing personal protective equipment (PPE), such as masks and gloves, to employees.

Due to the nature of our business, many employees already work in biosecure environments that require PPE and adhere to other procedures to safely accomplish their daily responsibilities.

Accordingly, to date, we believe we have been able to efficiently implement the additional safety precautions.

*Supply chain*

We are focused on ensuring that we have adequate inventory and supplies on hand given the potential disruption of the COVID-19 pandemic to our suppliers and their supply chain.

Accordingly, we have and expect to continue to increase inventory and supplies in 2021.

We proactively engaged with our suppliers beginning in January 2020 to limit any potential disruption to our supply chain.

However, notwithstanding generally successful efforts to maintain supply chain continuity, we have experienced increased costs and delays throughout our supply chain during the pandemic.

*Financial condition and results of our global operations*

We are a global company that operates in over 100 facilities and in over 20 countries worldwide.

As we perform business across various borders, we are experiencing a continuum of impacts in each location as the COVID-19 pandemic has impacted the global economy in different phases.

We are continuing to see demand for products and services across all of our businesses, although as described below the impact of the COVID-19 pandemic on the level of demand varies with our different businesses.

While there is uncertainty, our clients are still in need of the products and services we provide to biomedical research to advance discovery and develop new therapies for the treatment of disease, including the COVID-19 pandemic.

Due to certain restrictions in place at the various sites of our clients and suppliers (including client and supplier site closures), there have been challenges relating to timely receiving and shipping products globally in all businesses.

Should these restrictions continue, demand/supply issues may persist and could impact revenue growth, operating income (including operating income margins) and cash flows.

We have observed some impact due to constraints from internal site restrictions, remote work, resources, and productivity.

However, we believe the impact to us has not been as significant as to companies in many other industries because of the nature of our businesses, the classification of our businesses as essential or critical, as the case may be, and our business continuity plans.

Our RMS business was meaningfully impacted by the COVID-19 pandemic during fiscal year 2020.

Demand for research models declined due primarily to the physical shutdown of our client’s facilities, principally academic institutions.

While many of our clients are deemed essential businesses as well, we experienced a slowdown, initially in China in January 2020, and then across Europe and North America later in the first fiscal quarter of 2020, as measures were implemented by various governments to slow the spread of the COVID-19 pandemic.

This trend of reduced demand for research models continued during the second fiscal quarter of 2020, which negatively impacted revenue, operating income, operating income margins, and cash flows.

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

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

The acquisition enhances our discovery expertise, with complementary offerings that provide our customers with additional tools in the active therapeutic research areas of oncology and immunology.

In addition to the initial purchase price, the transaction included aggregate, undiscounted contingent payments of up to £3.0 million based on future performance.

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.

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

Brains On-Line strategically expands our existing CNS capabilities and establishes us as a single-source provider for a broad portfolio of discovery CNS services.

In addition to the initial purchase price, the transaction included aggregate, undiscounted contingent payments of up to €6.7 million based on future performance.

During the first quarter of fiscal year 2019, the terms of these contingent payments were amended, resulting in a fixed payment of $2.6 million, which was paid during the three months ended June 29, 2019.

On February 10, 2017, we completed the divestiture of our CDMO business to Quotient Clinical Ltd., based in London, England for $75.0 million in proceeds, net of cash, cash equivalents, and working capital adjustments.

The CDMO business was acquired in April 2016 as part of the acquisition of WIL Research and was reported in our Manufacturing reportable segment.

The demand for our products and services continued to increase meaningfully in fiscal year 2019.

Our pharmaceutical and biotechnology clients continued to intensify their use of strategic outsourcing to improve their operating efficiency and to access capabilities that they do not maintain internally.

companies to assist them in bringing new drugs to market.

The primary result of these trends was robust revenue growth within our DSA reportable segment in fiscal year 2019, particularly from biotechnology clients.

Our Safety Assessment facilities remained well utilized in fiscal year 2019.

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

In fiscal year 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.

Demand from large biopharmaceutical companies also increased.

These clients continue to have significant internal discovery capabilities, on which they can choose to rely.

In order for large biopharmaceutical clients to increasingly outsource more work to us, we must continue to demonstrate that our services can augment and accelerate our clients’ drug discovery processes.

Demand for our Microbial Solutions business remained strong as manufacturers continued to increase their use of our rapid microbial testing solutions.

To support this increased demand, we continued to expand the capacity of our Biologics business.

Demand for our Research Models and Services increased in fiscal year 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 2019, as clients in this growing market continue to value our high-quality research models.

The IS business further benefited from a five-year, $95.7 million contract from the National Institute of Allergy and Infectious Diseases, or NIAID, that commenced in September 2018.

The continued effect of the consolidation of internal infrastructure within our large biopharmaceutical clients and a longer-term trend towards more efficient use of research models has led to reduced demand for research models outside of China.

The increase in operating income was primarily due to increased revenues discussed above and contributions from our recent acquisitions of Citoxlab and MPI Research; partially offset by the following, which decreased the operating income margin: increased amortization expense and costs related to our recent acquisition activity; increased costs incurred in connection with certain global restructuring initiatives, continued investments to support future growth of the businesses, which includes increased investments in personnel (staffing levels and hourly wage increases) and facility expansions (primarily in the RMS and Biologics businesses), and company-wide IT and

infrastructure projects.

Offsetting the decreases in operating income margin were the realization of improved volume, mix, and pricing across our products and services portfolio as well as the impact of recent productivity initiatives across all businesses.

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.

On October 23, 2019, we issued $500.0 million of 4.25% Senior Notes due in 2028 (2028 Senior Notes) in an unregistered offering.

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.

Under specified circumstances, we have the ability to increase the term loan and/or revolving facility by up to $1.0 billion in the aggregate.

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.

As of December [removed: 28, 2019,] [added: 26, 2020,] 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: $8.7] [added: $9.6] million.

During fiscal year [removed: 2019,] [added: 2020,] the most significant drivers of foreign currency translation adjustment the Company recorded as part of other comprehensive income (loss) were the [removed: Canadian Dollar,] [added: Euro,] British Pound, [removed: Hungarian Forint, Euro, and] [added: Canadian Dollar,] Chinese Yuan [removed: Renminbi.][added: Renminbi, Japanese Yen and Brazilian Real.]

[removed: For fiscal year 2019, our revenue would] have increased by [removed: $90.5] [added: $96.1] million and our operating income would have increased by [removed: $2.0] [added: $0.4] million, if the U.S. dollar exchange rate had strengthened by 10%, with all other variables held constant.

During fiscal years [added: 2020,] 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.

For fiscal year 2020, our revenue would

For example, we may use forward-looking statements when addressing topics such as: 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 [added: and in-process acquisitions 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.

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

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.

Various studies and reports estimate that it takes between 10 to 15 years, up to [removed: $2.0] [added: $2.5] billion excluding time costs and exploration of between 10,000 and 15,000 drug molecules to produce a single Food and Drug Administration (FDA)-approved drug.

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 establish drug safety prior to and in support of human clinical trials.

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.

It is estimated that the market for regulated safety assessment services is [removed: over 55% outsourced,] [added: 60% outsourced or more,] while emerging growth areas such as discovery and certain research model services are currently believed to be less outsourced.

We currently operate in over [removed: 90] [added: 100] facilities and in over 20 countries worldwide (excluding our Insourcing Solutions sites).

In [removed: 2019,] [added: 2020,] our total revenue was [removed: $2.6] [added: $2.9] billion and our operating income from continuing operations, before income taxes, was [removed: $304.1] [added: $447.1] million.

Through our RMS segment, we have [removed: been supplying] [added: supplied] research models to the drug development industry since 1947.

We maintain multiple production centers, including barrier rooms [removed: and/or] [added: and] isolator facilities, on three continents (North America, Europe, and Asia).

In [removed: 2019,] [added: 2020,] RMS accounted for [removed: 20.5%] [added: 19.6%] of our total revenue and approximately [removed: 3,600] [added: 3,900] of our employees, including approximately [removed: 170] [added: 220] science professionals with advanced degrees.

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

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, [added: vaccines,] industrial and agricultural chemicals, consumer products, veterinary medicines and medical devices.

These entities may choose to outsource their discovery, development and safety activities to reduce fixed costs and to gain [added: access to additional scientific expertise and capabilities.]

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

In [removed: 2019,] [added: 2020,] our DSA segment represented [removed: 61.8%] [added: 62.8%] of our total revenue and employed approximately [removed: 10,900] [added: 11,600] of our employees including approximately [removed: 1,500] [added: 2,000] science professionals with advanced degrees.

[removed: Through] [added: Within] our Manufacturing segment, we help ensure the safe production and release of products manufactured by our clients.

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

In [removed: 2019,] [added: 2020,] Manufacturing accounted for [removed: 17.7%] [added: 17.6%] of our total revenue from continuing operations and approximately [removed: 1,900] [added: 2,000] of our employees, including approximately [removed: 150] [added: 180] science professionals with advanced degrees.

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

[removed: Our rodent species] [added: The research models we supply] have been, and continue to be, some of the most extensively used [removed: research models] in the world, largely as a result of our geographic footprint and continuous commitment to innovation and quality.

[removed: | • |] [added: -] inbred, which are bred to be homogeneous; [removed: |]

[removed: | • |] [added: -] hybrid, which are the offspring of parents from two different genotypes; [removed: |]

[removed: | • |] [added: -] outbred, which are purposefully bred for heterogeneity; [removed: |]

[removed: | • |] [added: -] spontaneous mutant, whose genotype results in a naturally occurring genetic mutation (such as immune deficiency); and [removed: |]

[removed: | • |] [added: -] other genetically modified research models, such as knock-out models with one or more disabled genes and transgenic models. [removed: |]

Certain of our research models are proprietary rodent models used to research treatments in several therapeutic [removed: areas, such as diabetes, obesity, cardiovascular, cancer, central nervous system (CNS) and kidney disease.][added: areas.]

These services address the need among pharmaceutical and biotechnology [added: companies to outsource the non-core aspects of their drug discovery activities.]

Our services include those related to the maintenance and monitoring of research models, and managing research operations for government entities, academic [removed: organizations, and commercial clients.]

We provide breeding expertise and colony [removed: development,] [added: expansion,] quarantine, health and genetic testing and monitoring, germplasm cryopreservation and rederivation, including assisted reproduction and model creation.

We manage the research operations of government entities, academic organizations and commercial clients (including recruitment, training, staffing and management services) [removed: in] [added: both within] our clients’ facilities [added: and] utilizing our Charles River Accelerator and Development Lab (CRADL™) option, in which we lease space to our clients.

We offer a full spectrum of discovery services from identification and validation of novel [removed: targets and] [added: targets,] chemical compounds with actual or potential intellectual property value through [added: to] delivery of non-clinical drug and therapeutic candidates ready for safety assessment.

Our Discovery Services [removed: include] [added: business includes] Early [removed: Discovery, *In Vitro*] Discovery and *In Vivo* [added: and *In Vitro*] Discovery businesses to streamline and enhance the integrated support we can provide for clients’ [removed: integrated] drug discovery programs.

This seamless discovery organization [removed: also] allows us to better engage with clients at any stage of their drug discovery [added: programs] and support their complex scientific needs.

Our discovery services business unit focuses on [removed: several] [added: all of the major] therapeutic areas, [removed: including] [added: with a strategic focus on] oncology, [removed: CNS, immunology, inflammation] [added: immunology] and [removed: metabolic diseases.][added: neuroscience.]

We believe there are [removed: emerging] [added: growing] opportunities to assist our clients in a variety of drug discovery applications and platforms from target discovery to candidate selection and across [removed: a] [added: the full] range of modalities, including small molecules and large molecules [removed: (including oligonucleotides, antibodies, proteins)] and cell and gene therapy [removed: drug] candidates.

[removed: | • |] [added: -] target discovery and validation; [removed: |]

[removed: | • |] [added: -] hit identification and optimization to deliver candidate [removed: molecules; |][added: molecules, including computer-aided drug design;]

[removed: | • |] [added: -] 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 [removed: |]

In addition, in 2020, we added new services in our Research Products business through the acquisition of HemaCare Corporation (HemaCare) and Cellero, LLC (Cellero).

organizations, and commercial clients.

In August 2020, we acquired Cellero, a provider of cellular products for cell therapy developers and manufacturers worldwide as part of our Research Products business.

The addition of Cellero enhances our unique, comprehensive solutions for the high-growth cell therapy market, strengthening the ability to help accelerate clients’ critical programs from basic research and proof-of-concept to regulatory approval and commercialization.

*Early Discovery.* We are a global leader in integrated drug discovery services.

- target deconvolution through proteomics;

In December 2020, we acquired Distributed Bio, a next-generation antibody discovery company.

The acquisition expands Charles River’s scientific capabilities with an innovative, large-molecule discovery platform.

The transaction combines Distributed Bio’s antibody libraries and immuno-engineering platform with our extensive drug discovery and non-clinical development expertise to create an integrated, end-to-end platform for therapeutic antibody and cell and gene therapy discovery and development.

evaluation of fluid, tissue and cellular changes that our experts identify and interpret for our clients.

We have worked closely with the Department of Natural Resources to protect the horseshoe crab and, in the regions where those protections are in place, the horseshoe crab population is growing.

Celsis® products utilize bioluminescence technology for the rapid detection of microbial contamination delivering definitive results for some applications as fast as 24 hours.

The product range includes reagent kits, instruments, software and services.

The Celsis Advance II™ and Celsis Accel™ instruments and software automate the for rapid microbial detection.

In 2020, we launched the Celsis Complete™ and Celsis Advantage™ services.

The Celsis Complete™ services supply both the documentation and testing required as part of a client sterility technology validation process.

This assists customers to complete their validation process very quickly without utilizing their own personnel resources.

The Celsis Advantage product supplies the required documentation needed for the clients to conduct their own internal validation.

- For DSA, both our Discovery Services and Safety Assessment businesses have numerous competitors.

Discovery Services has hundreds of competitors, but three main competitors: two are public companies in China and one is a public company in Europe.

- For Manufacturing, each of our underlying businesses has several competitors.

Avian has one main competitor to its SPF eggs business, which is a private company in Europe, and numerous competitors for specialized avian laboratory services.

We maintain a quarterly award recognizing our

Human Capital Resources

Our workforce was distributed geographically approximately as follows: 63% in North America, 30% in Europe, and 7% in Asia, and less than 1% in any other region.

In order to support, attract and retain such great talent, we provide our employees with opportunities for skill building and career advancement.

Our talent management approach is highly collaborative, encourages ownership, and provides the opportunity for everyone to contribute and develop through regular performance conversations, annual goal setting, ongoing coaching and feedback.

Furthermore, we have created a global learning strategy that includes technical training, mentoring and coaching programs, tuition reimbursement, rotational programs, leadership development programs, and on-the-job training.

In fiscal 2020, we hired over 3,700 people and our voluntary turnover was below 9%.

In addition to growth opportunities, we strive to attract, motivate, and retain top talent by providing competitive compensation programs while rewarding outcomes and behaviors that align with our performance, culture, and values.

Pay equity audits are performed in countries where they are legally required, and we are embarking on a larger pay equity analysis as part of our continuing efforts to be competitive in the marketplace.

Furthermore, we continue to build on a global job architecture that allows for aligning pay by job role with market rates and serves as a career path tool to encourage a culture of upward mobility.

We also promote a healthy and safe workplace for our employees.

We maintain a Global Policy on Safety & Sustainability and, as part of our efforts to promote our goals of working safely and sustainably, in early 2020 we implemented a management systems approach to improve our safety performance, which involves both employee and management engagement in and ownership of our site-level environment, health, safety, and sustainability programs globally.

At every Charles River site globally, we have health and safety leaders that promote employee health and safety and keep site management engaged in their health and safety programs.

The COVID-19 pandemic has further underscored for us the importance of keeping our employees safe and healthy.

In response to the pandemic, we have taken actions to protect its workforce so they can more safely and effectively perform their work.

Charles River established a global crisis management team, which includes a team of internal and external experts who have been closely monitoring the COVID-19 outbreak and its impact on employee safety and our business operations.

As we navigate the pandemic and focus on keeping people safe, we continue to establish stringent safety protocols at our operating sites.

As always, our goal is to provide a safe work environment for our employees, while still meeting our client’s needs for their research solutions.

access to additional scientific expertise and capabilities.

| | |

| --- | --- |

companies to outsource the non-core aspects of their drug discovery activities.

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.

We also provide expertise in the growing area of rare and orphan diseases, which are typically diseases of high unmet medical need in smaller patient populations.

*Early Discovery.* We are a global leader in integrated drug discovery services, with a predominant focus on the integration of *in vitro* biology, medicinal chemistry and *in vivo* pharmacology capabilities.

commencement of first-in-human clinical trials.

Our toxicology services feature:

| • | a broad offering of *in vitro* and *in vivo* capabilities and study types designed to identify possible safety risks; |

| • | a broad offering of *in vitro* and *in vivo* studies in support of general toxicology (acute, sub-acute and chronic studies), genetic toxicology, reproductive and developmental toxicology, environmental toxicology and carcinogenicity bioassays that are required for regulatory submissions supporting the registration of industrial chemicals, agrochemicals and biocides; |

| • | expertise in standard and specialty routes of administration (e.g., infusion, intravitreal, intrathecal and inhalation) that are important not only for the testing of potential pharmaceuticals and biopharmaceuticals, but also for the safety testing of medical devices, nutraceuticals, animal health products and other materials; |

| • | expertise in the conduct and assessment of reproductive, developmental and juvenile toxicology studies (in support of larger-scale and later-stage human clinical trials or chemical registration); |

| • | expertise in environmental toxicology (aquatic and terrestrial) and regulatory submissions required for chemical and agrochemical registration; |

| • | services in important specialty areas such as ocular, bone, juvenile/neonatal, immune-toxicology, ototoxicology, photobiology, inhalation, drug abuse liability, seizure liability testing, radiation biology, surgery, genomic analysis, imaging capabilities and dermal testing; |

| • | expertise in determining the potential for abuse of human pharmaceuticals (Drug Abuse Liability Testing); |

| • | expertise in testing of medical devices in the assessment of those devices and surrounding tissues; |

| • | expertise in immunology and immunotoxicology, including cell therapy products; |

| • | expertise in all major therapeutic areas, particularly in cell and gene therapy, and orphan drugs; |

| • | study design and strategic advice to our clients based on our wealth of experience and scientific expertise in support of drug development and chemical registration; and |

| • | a strong history of assisting our clients in achieving their regulatory and/or internal milestones for the safety testing of numerous therapy types including cell-based therapies, vaccines, gene therapies, proteins, antibodies, drug conjugates, oligonucleotide biotherapeutics, small molecules, medical devices, chemicals and agrochemicals. |

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

These areas of disease focus and expertise include oncology, metabolism and obesity, immunology, respiratory, bone and musculoskeletal, diabetes, cardiovascular, otology, ophthalmology and CNS.

areas of functional expertise, it includes synthetic and medicinal chemistry, cell line development, *in vitro* and *in vivo* assay development screening, non-clinical imaging, structural biology, process chemistry, reproductive and general toxicology, safety pharmacology, veterinary pathology, bioanalysis, scale up and formulation development, cell and gene therapy, drug abuse liability and medical device testing.

They will continue to

We believe the acquisition of Citoxlab enhanced our position as a leading global early stage CRO by strengthening our ability to partner with clients across the drug discovery and development continuum.

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.

During 2019, no single commercial

Employees

We believe we have good relationships with our employees, based on a number of factors including employee retention.

payments.

to fulfill their validation requirements, as applicable.

community are complete, accurate and timely.

David P.

Johst, age 58, joined us in 1991 as Corporate Counsel and was named Vice President, Human Resources in 1995.

He became Vice President, Human Resources and Administration in 1996, a Senior Vice President in 1999, and a Corporate Executive Vice President in 2005.

He currently serves as our General Counsel and Chief Administrative Officer and is responsible for overseeing our corporate legal function and several other corporate staff departments.

Prior to joining us, Mr. Johst was in private practice at the law firm of Hale and Dorr (now WilmerHale).

On August 2, 2019, we announced that Mr. Johst will retire in May 2020.

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

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

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

FOR THE FISCAL YEAR [removed: ENDED December 28, 2019][added: ENDED December 26, 2020]

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

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

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

[removed: ][added: ]

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

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

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

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

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

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

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

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

| Large accelerated filer | [added: | |] ☑ | [added: | |] Accelerated filer | [added: | |] ☐ | [added: | |]

| Non-accelerated filer | [added: | |] ☐ | [added: | |] Smaller reporting company | [added: | |] ☐ | [added: | |]

| | | [added: | | | |] Emerging growth company | [added: | |] ☐ | [added: | |]

On June [removed: 29, 2019,] [added: 27, 2020,] the aggregate market value of the registrant’s voting common stock held by non-affiliates of the registrant was approximately [removed: $6,796,882,148.][added: $8,333,378,287.]

As of January [removed: 24, 2020,] [added: 22, 2021,] there were [removed: 48,959,576] [added: 49,776,227] shares of the registrant’s common stock outstanding, $0.01 par value per share.

Portions of the registrant’s definitive Proxy Statement for its [removed: 2020] [added: 2021] Annual Meeting of Shareholders scheduled to be held on May 6, [removed: 2020,] [added: 2021,] which will be filed with the Securities and Exchange Commission (SEC) not later than 120 days after December [removed: 28, 2019,] [added: 26, 2020,] are incorporated by reference into Part III of this Annual Report on Form 10-K.

With the exception of the portions of the [removed: 2020] [added: 2021] 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.

FOR FISCAL [removed: YEAR 2019][added: YEAR 2020]

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

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

| 1A | [added: | |] [Risk [removed: Factors](#sC0499FFEB37E550BA1FBE25443AA1C96)] [added: Factors](#i9272c3bc8e81459da82f0056b2a89930_16)] | [removed: [15](#sC0499FFEB37E550BA1FBE25443AA1C96)] | [added: | [16](#i9272c3bc8e81459da82f0056b2a89930_16) | | |]

| 1B | [added: | |] [Unresolved Staff [removed: Comments](#s806EA85DEA8959238295B8C79E7FA316)] [added: Comments](#i9272c3bc8e81459da82f0056b2a89930_19)] | [removed: [28](#s806EA85DEA8959238295B8C79E7FA316)] | [added: | [30](#i9272c3bc8e81459da82f0056b2a89930_19) | | |]

| 3 | [added: | |] [Legal [removed: Proceedings](#sFFC1D8094BDE5C4ABDE40A78CE2DA3A2)] [added: Proceedings](#i9272c3bc8e81459da82f0056b2a89930_25)] | [removed: [28](#sFFC1D8094BDE5C4ABDE40A78CE2DA3A2)] | [added: | [31](#i9272c3bc8e81459da82f0056b2a89930_25) | | |]

| 4 | [added: | |] Mine Safety Disclosures | [removed: [28](#s52AF6B57CF175257954CC57B60E306FA)] | [added: | [31](#i9272c3bc8e81459da82f0056b2a89930_28) | | |]

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

| 5 | [added: | |] Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | [removed: [28](#sF7404F2E23DC5FC1B39915F5DEB79D93)] | [added: | [31](#i9272c3bc8e81459da82f0056b2a89930_34) | | |]

| 6 | [added: | |] [Selected Consolidated Financial [removed: Data](#s32F442EF01915CADB05EC84F72F529CD)] [added: Data](#i9272c3bc8e81459da82f0056b2a89930_37)] | [removed: [31](#s32F442EF01915CADB05EC84F72F529CD)] | [added: | [33](#i9272c3bc8e81459da82f0056b2a89930_37) | | |]

| 7 | [added: | |] [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sB96DB9A5C8015237AF01C7E736BA66BC)] [added: Operations](#i9272c3bc8e81459da82f0056b2a89930_46)] | [removed: [32](#s603E089B9AB05C7382B1AC98FF3E012E)] | [added: | [34](#i9272c3bc8e81459da82f0056b2a89930_40) | | |]

| 7A | [added: | |] [Quantitative and Qualitative [removed: Disclosures](#s2BC3DBE9CF955956A51B3EF9ED0C6E11)] [added: Disclosures](#i9272c3bc8e81459da82f0056b2a89930_55)] about Market Risk | [removed: [50](#s2BC3DBE9CF955956A51B3EF9ED0C6E11)] | [added: | [54](#i9272c3bc8e81459da82f0056b2a89930_55) | | |]

| 8 | [added: | |] [Financial Statements and Supplementary [removed: Data](#s0852109254935FBA83B1F520AC88D8E4)] [added: Data](#i9272c3bc8e81459da82f0056b2a89930_58)] | [removed: [51](#s0852109254935FBA83B1F520AC88D8E4)] | [added: | [56](#i9272c3bc8e81459da82f0056b2a89930_58) | | |]

| 9 | [added: | |] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s260809D45DA45E0388C1EAE7A7199BBA)] [added: Disclosure](#i9272c3bc8e81459da82f0056b2a89930_166)] | [removed: [110](#s260809D45DA45E0388C1EAE7A7199BBA)] | [added: | [110](#i9272c3bc8e81459da82f0056b2a89930_166) | | |]

| 9A | [added: | |] [Controls and [removed: Procedures](#s535639B6B9C85357A3123428A907DFEE)] [added: Procedures](#i9272c3bc8e81459da82f0056b2a89930_169)] | [removed: [110](#s535639B6B9C85357A3123428A907DFEE)] | [added: | [110](#i9272c3bc8e81459da82f0056b2a89930_169) | | |]

| 9B | [added: | |] [Other [removed: Information](#s8B6A959F529C5F5AB1AA74DFC511B5EA)] [added: Information](#i9272c3bc8e81459da82f0056b2a89930_172)] | [removed: [111](#s8B6A959F529C5F5AB1AA74DFC511B5EA)] | [added: | [111](#i9272c3bc8e81459da82f0056b2a89930_172) | | |]

| | [added: | |] PART III | | [added: | | | |]

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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| 1 | | | [Business](#i9272c3bc8e81459da82f0056b2a89930_13) | | | [1](#i9272c3bc8e81459da82f0056b2a89930_13) | | |

| 2 | | | [Properties](#i9272c3bc8e81459da82f0056b2a89930_22) | | | [30](#i9272c3bc8e81459da82f0056b2a89930_22) | | |

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| Exhibit Index | | | | | | [116](#i9272c3bc8e81459da82f0056b2a89930_205) | | |

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

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

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

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

We own large Manufacturing facilities in the [removed: U.S.] [added: U.S., Ireland] and China.

[added: We lease large Manufacturing facilities in France and the U.S.] None of our leases is individually material to our business operations.

large RMS facilities in China.

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: 2019.][added: 2020.]

As of January [removed: 24, 2020,] [added: 22, 2021,] there were [removed: 90] [added: 84] registered shareholders of the outstanding shares of common stock.

The following table provides information relating to our purchases of shares of our common stock during the fourth quarter of fiscal [removed: 2019:][added: 2020:]

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

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

| September [removed: 29, 2019] [added: 27, 2020] to October [removed: 26, 2019] [added: 24, 2020] | [removed: 174] | | [added: 177] | [added: | | | | |] $ | [removed: 128.16] [added: 230.68] | | | [added: | |] — | | | [added: | | |] $ | 129,105 | |

| October [removed: 27, 2019] [added: 25, 2020] to November [removed: 23, 2019] [added: 21, 2020] | [removed: 48] | | [added: 47] | [removed: 129.98] | | | | [added: | 227.70 | | | | | |] — | | | [added: | | |] 129,105 | | |

| November [removed: 24, 2019] [added: 22, 2020] to December [removed: 28, 2019] [added: 26, 2020] | [removed: 168] | | [added: 98] | [removed: 145.25] | | | | [added: | 235.06 | | | | | |] — | | | [added: | | |] 129,105 | | |

During the fourth quarter of fiscal year [removed: 2019,] [added: 2020,] we did not repurchase any shares of common stock under our stock repurchase program or in open market trading.

As of December [removed: 28, 2019,] [added: 26, 2020,] we had $129.1 million remaining on the authorized stock repurchase program.

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: 27, 2014] [added: 26, 2015] and ending on December [removed: 28, 2019] [added: 26, 2020] (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.

[removed: ][added: ]

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

| | [removed: 2014] | | [added: 2015] | | [removed: 2015] | | | | 2016 | | | | [added: | |] 2017 | | | | [added: | |] 2018 | | | | [added: | |] 2019 | | | [added: | | | 2020 | | |]

| Charles River Laboratories International, Inc. | [added: | |] $ | 100 | | | [added: | |] $ | [removed: 125] [added: 95] | | | [added: | |] $ | [removed: 119] [added: 137] | | | [added: | |] $ | [removed: 170] [added: 140] | | | [added: | |] $ | [removed: 174] [added: 190] | | | [added: | |] $ | [removed: 236] [added: 314] | |

| Total | | | 322 | | | | | | | | | | | | — | | | | | | | | |

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| S&P 500 | | | 100 | | | | | | 112 | | | | | | 136 | | | | | | 130 | | | | | | 171 | | | | | | 203 | | |

| S&P 500 Health Care | | | 100 | | | | | | 97 | | | | | | 119 | | | | | | 126 | | | | | | 153 | | | | | | 173 | | |

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

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

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

The selected financial data presented below for the fiscal years ended [added: 2020,] 2019, [removed: 2018,] and [removed: 2017] [added: 2018] and as of the fiscal years ended [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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.

The selected financial data presented below for the fiscal years ended [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] and as of the fiscal years ended [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015,] [added: 2016,] is derived from our audited consolidated financial statements within previously filed Annual Reports on Form 10-K.

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

| | [added: | | 2020 | | | | | |] 2019 | | | | [added: | |] 2018 | | | | [removed: 2017] | | [added: 2017] | | [removed: 2016] | | | | [removed: 2015] [added: 2016] | | |

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

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

| Total revenue | [added: | |] $ | [removed: 2,621,226] [added: 2,923,933] | | | [added: | |] $ | [removed: 2,266,096] [added: 2,621,226] | | | [added: | |] $ | [removed: 1,857,601] [added: 2,266,096] | | | [added: | |] $ | [removed: 1,681,432] [added: 1,857,601] | | | [added: | |] $ | [removed: 1,363,302] [added: 1,681,432] | |

| Income from continuing operations, net of income taxes | [added: | | 365,306 | | | | | |] 254,061 | | | | [added: | |] 227,218 | | | | [removed: 125,586] | | [added: 125,586] | | [removed: 156,086] | | | | [removed: 152,037] [added: 156,086] | | |

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

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

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

| Basic | [added: | |] $ | [removed: 5.17] [added: 7.35] | | | [added: | |] $ | [removed: 4.69] [added: 5.17] | | | [added: | |] $ | [removed: 2.60] [added: 4.69] | | | [added: | |] $ | [removed: 3.28] [added: 2.60] | | | [added: | |] $ | [removed: 3.23] [added: 3.28] | |

| Diluted | [added: | |] $ | [removed: 5.07] [added: 7.20] | | | [added: | |] $ | [removed: 4.59] [added: 5.07] | | | [added: | |] $ | [removed: 2.54] [added: 4.59] | | | [added: | |] $ | [removed: 3.22] [added: 2.54] | | | [added: | |] $ | [removed: 3.15] [added: 3.22] | |

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

| Depreciation and amortization | [added: | |] $ | [removed: 198,095] [added: 234,924] | | | [added: | |] $ | [removed: 161,779] [added: 198,095] | | | [added: | |] $ | [removed: 131,159] [added: 161,779] | | | [added: | |] $ | [removed: 126,658] [added: 131,159] | | | [added: | |] $ | [removed: 94,881] [added: 126,658] | |

| Capital expenditures | [added: | | 166,560 | | | | | |] 140,514 | | | | [added: | |] 140,054 | | | | [removed: 82,431] | | [added: 82,431] | | [removed: 55,288] | | | | [removed: 63,252] [added: 55,288] | | |

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

| Cash and cash equivalents | [added: | |] $ | [removed: 238,014] [added: 228,424] | | | [added: | |] $ | [removed: 195,442] [added: 238,014] | | | [added: | |] $ | [removed: 163,794] [added: 195,442] | | | [added: | |] $ | [removed: 117,626] [added: 163,794] | | | [added: | |] $ | [removed: 117,947] [added: 117,626] | |

| Total assets | [added: | | 5,490,831 | | | | | |] 4,692,790 | | | | [added: | |] 3,855,879 | | | | [removed: 2,929,922] | | [added: 2,929,922] | | [removed: 2,711,800] | | | | [removed: 2,068,497] [added: 2,711,800] | | |

| Long-term debt, net and finance leases | [added: | | 1,929,571 | | | | | |] 1,849,666 | | | | [added: | |] 1,636,598 | | | | [removed: 1,114,105] | | [added: 1,114,105] | | [removed: 1,207,696] | | | | [removed: 845,997] [added: 1,207,696] | | |

| Redeemable noncontrolling interests | [added: | | 25,499 | | | | | |] 28,647 | | | | [added: | |] 18,525 | | | | [removed: 16,609] | | [added: 16,609] | | [removed: 14,659] | | | | [removed: 28,008] [added: 14,659] | | |

Refer to the following included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K [added: as well as within previously filed Annual Reports on Form 10-K] for additional information:

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

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

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

[removed: | • |] [added: -] Note [added: 1, “Description of Business and Summary of Significant Accounting Policies” and Note] 16, “Leases” concerning the impact of adopting Accounting Standards Codification 842, “Leases” beginning in fiscal year 2019. [removed: |]

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| [Report of Independent Registered Public Accounting [removed: Firm](#sA986EED1B0FC5E9EA5CD7FAC953E45E4)] [added: Firm](#i9272c3bc8e81459da82f0056b2a89930_61)] | [removed: [52](#sA986EED1B0FC5E9EA5CD7FAC953E45E4)] | [added: | [57](#i9272c3bc8e81459da82f0056b2a89930_61) | | |]

| Consolidated Statements of Income for fiscal years [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [55](#s4B8466E37C3D5524B14729147D189FD6)] | [added: | [60](#i9272c3bc8e81459da82f0056b2a89930_64) | | |]

| Consolidated Statements of Comprehensive Income for fiscal years [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [56](#sDA3FFB0E7E105CABBE2476A4E31A1443)] | [added: | [61](#i9272c3bc8e81459da82f0056b2a89930_67) | | |]

| Consolidated Balance Sheets as of December [removed: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018] [added: 28, 2019] | [removed: [57](#sEE4B367BD9AF5128A6690F93F586D548)] | [added: | [62](#i9272c3bc8e81459da82f0056b2a89930_70) | | |]

| Consolidated Statements of Cash Flows for fiscal years [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [58](#sBA62A388247357FBB1BB1A9B4B2DB811)] | [added: | [63](#i9272c3bc8e81459da82f0056b2a89930_76) | | |]

| Consolidated Statements of Changes in Equity for fiscal years [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] | [removed: [60](#s34B22AC735645AD49E66D4A7C10EDA31)] | [added: | [65](#i9272c3bc8e81459da82f0056b2a89930_79) | | |]

| [Notes to Consolidated Financial [removed: Statements](#s9CC729AF78AD5CF3A269AB3130A7326B)] [added: Statements](#i9272c3bc8e81459da82f0056b2a89930_82)] | [removed: [61](#s9CC729AF78AD5CF3A269AB3130A7326B)] | [added: | [66](#i9272c3bc8e81459da82f0056b2a89930_82) | | |]

We have audited the accompanying consolidated balance sheets of Charles River Laboratories International, Inc. and its subsidiaries (the “Company”) as of December [removed: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018,] [added: 28, 2019,] and the related consolidated statements of income, of comprehensive income, of changes in equity and of cash flows for each of the three [removed: fiscal] years in the period ended December [removed: 28, 2019,] [added: 26, 2020,] 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: 28, 2019,] [added: 26, 2020,] 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: 28, 2019] [added: 26, 2020] and December [removed: 29, 2018,] [added: 28, 2019,] and the results of its operations and its cash flows for each of the three [removed: fiscal] years in the period ended December [removed: 28, 2019] [added: 26, 2020] 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: 28, 2019,] [added: 26, 2020,] based on criteria established in [removed: *Internal] [added: Internal] Control - Integrated [removed: Framework*] [added: Framework] (2013) issued by the COSO.

As described in Management’s Report on Internal Control [removed: over] [added: Over] Financial Reporting, management has excluded [removed: Citoxlab] [added: HemaCare] and [removed: the acquisition of a DSA supplier] [added: Cellero] from its assessment of internal control over financial reporting as of December [removed: 28, 2019] [added: 26, 2020] because they were acquired by the Company in purchase business combinations during [removed: 2019.][added: 2020.]

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

[removed: Citoxlab] [added: HemaCare] and [removed: the DSA supplier] [added: Cellero are wholly-owned subsidiaries] whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting [added: collectively] represent [removed: 5.0%] [added: 1.0%] and [removed: 4.7%,] [added: 1.6%,] respectively, of the related consolidated financial statement amounts as of and for the [removed: fiscal] year ended December [removed: 28, 2019.][added: 26, 2020.]

*Acquisition of [removed: Citoxlab] [added: HemaCare Corporation] - Valuation of Acquired Customer Relationship Intangible [removed: Assets*][added: Asset*]

As described in Notes 1 and 2 to the consolidated financial statements, the Company completed the acquisition of [removed: Citoxlab] [added: HemaCare Corporation] on [removed: April 29, 2019.][added: January 3, 2020.]

The preliminary purchase price allocation included [added: a] customer relationship intangible [removed: assets] [added: asset] (also referred to as client relationships) of [removed: $134.6] [added: $170.4] million.

[removed: The] [added: As disclosed by management, the] determination of the fair value of [added: the] intangible [removed: assets,] [added: asset,] which [removed: represent] [added: represents] a significant portion of the purchase price, requires the use of significant judgment [added: by management] with regard to (i) the fair value; and (ii) the period and the method by which the intangible [removed: assets] [added: asset] 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 [removed: entities,] [added: entity,] which include future revenue growth rates, operating income margins, and [added: the] customer attrition [removed: rates,] [added: rate,] as well as [added: the] discount [removed: rates] [added: rate] based on an analysis of the [added: acquired entity’s] weighted average cost of capital.

The principal considerations for our determination that performing procedures relating to the acquisition of [removed: Citoxlab] [added: HemaCare Corporation] - valuation of acquired customer relationship intangible [removed: assets] [added: asset] is a critical audit matter are (i) [removed: there was a] [added: the] high degree of auditor judgment and subjectivity in applying procedures relating to the fair value measurement of [added: the] customer relationship intangible [removed: assets] [added: asset] 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, [removed: including] [added: such as the] future revenue growth rates, operating income margins, customer attrition [removed: rates,] [added: rate,] and discount [removed: 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,] [added: rate] and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

These procedures included testing the effectiveness of controls relating to the valuation of acquired customer relationship intangible [removed: assets,] [added: asset,] 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 [removed: assets.][added: asset.]

[removed: 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] [added: Evaluating] the reasonableness of the estimated future revenue growth rates, operating [removed: margins and] [added: income margins,] customer attrition [added: rate, and discount] rate assumptions [removed: by evaluating] [added: involved considering] their consistency with data from external sources, past performance of the acquired business, and evidence obtained in other areas of the [removed: audit, and (iii) evaluating the reasonableness of the economic useful life over which cash flow projections are estimated.][added: audit.]

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation model and [removed: certain] [added: management] significant [removed: assumptions, including] [added: assumptions related to] customer attrition and the discount [removed: rates.][added: rate.]

As described in Notes 1 and 3 to the consolidated financial statements, the Company recognized revenue of [removed: $1,619.0] [added: $1,837.4] million in its Discovery and Safety Assessment (DSA) segment in [removed: 2019,] [added: 2020,] of which [removed: $1,618.3] [added: $1,836.5] 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 [added: (output method)] measures of [removed: progress (output method).][added: progress.]

The principal considerations for our determination that performing procedures relating to DSA revenue recognized over time is a critical audit matter are [removed: there was a] [added: the] high degree of auditor [added: judgment,] subjectivity and effort in performing procedures [removed: to evaluate the calculation of DSA revenue recognized over time, including the estimates of] [added: and in evaluating] the [removed: variables within] [added: audit evidence obtained related to] the [removed: calculation] [added: extent] of [added: progress towards completion, actual costs incurred, and management’s assumptions used in determining] the [removed: forecasted cost of service contracts, such as] [added: total estimated costs at completion related to] labor hours, allocation of overhead costs, research model costs, and subcontractor costs.

These procedures included testing the effectiveness of controls relating to DSA revenue recognized over time, including controls over the [added: extent of progress towards completion, actual costs incurred and determination of total estimated costs at completion,] review of agreements, [removed: development of the forecasted costs, the] review of budget versus actual costs incurred and [removed: 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 [removed: contracts selected for testing,] [added: contracts,] (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 [removed: forecasted] [added: the estimates of] costs [added: and management’s assumptions related to labor hours, allocation of overhead costs, research model costs, and subcontractor 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.

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

| | [removed: 2019] | | [added: 2019] | | [removed: 2018] | | | | [removed: 2017] [added: 2018] | | |

| Service revenue | [added: | |] $ | [removed: 2,029,371] [added: 2,296,156] | | | [added: | |] $ | [removed: 1,687,941] [added: 2,029,371] | | | [added: | |] $ | [removed: 1,298,298] [added: 1,687,941] | |

| Product revenue | [removed: 591,855] | | [added: 627,777] | | [removed: 578,155] | | | | [removed: 559,303] [added: 591,855] | | | [added: | | | 578,155 | | |]

| Total revenue | [removed: 2,621,226] | | [added: 2,923,933] | | [removed: 2,266,096] | | | | [removed: 1,857,601] [added: 2,621,226] | | | [added: | | | 2,266,096 | | |]

| Costs and expenses: | | | | | | | | | | | | [added: | | | | | |]

| Cost of services provided (excluding amortization of intangible assets) | [removed: 1,371,699] | | [added: 1,533,230] | | [removed: 1,150,371] | | | | [removed: 867,014] [added: 1,371,699] | | | [added: | | | 1,150,371 | | |]

| Cost of products sold (excluding amortization of intangible assets) | [removed: 291,216] | | [added: 317,162] | | [removed: 275,658] | | | | [removed: 289,669] [added: 291,216] | | | [added: | | | 275,658 | | |]

| Selling, general and administrative | [removed: 517,622] | | [added: 528,935] | | [removed: 443,854] | | | | [removed: 371,266] [added: 517,622] | | | [added: | | | 443,854 | | |]

| Amortization of intangible assets | [removed: 89,538] | | [added: 111,877] | | [removed: 64,830] | | | | [removed: 41,370] [added: 89,538] | | | [added: | | | 64,830 | | |]

| Operating income | [removed: 351,151] | | [added: 432,729] | | [removed: 331,383] | | | | [removed: 288,282] [added: 351,151] | | | [added: | | | 331,383 | | |]

| Other income (expense): | | | | | | | | | | | | [added: | | | | | |]

| Interest income | [removed: 1,522] | | [added: 834] | | [removed: 812] | | | | [removed: 690] [added: 1,522] | | | [added: | | | 812 | | |]

These procedures also included, among others, (i) reading the purchase agreement and (ii) testing management’s process for estimating the fair value of customer relationship intangible asset.

Testing management’s process included evaluating the appropriateness of the valuation model, testing the completeness and accuracy of data provided by management, and evaluating reasonableness of significant assumptions related to the estimated future revenue growth rates, operating income margins, customer attrition rate, and discount rate.

February 17, 2021

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February 11, 2020

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

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| Gain on divestiture | — | | | | — | | | | (10,577 | | ) |

| Impairment charges | — | | | | — | | | | 17,239 | | |

| Long-term payable on Transition Tax (Notes 5 and 11) | — | | | | (8,974 | | ) | | 61,038 | | |

| Proceeds from divestiture | — | | | | — | | | | 72,462 | | |

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| December 31, 2016 | 86,301 | | | $ | 863 | | | $ | 2,477,371 | | | $ | 165,303 | | | $ | (253,764 | ) | | 38,938 | | | $ | (1,553,005 | ) | | $ | 836,768 | | | $ | 2,357 | | | $ | 839,125 | |

| Net income | — | | | — | | | | — | | | | 123,355 | | | | — | | | | — | | | — | | | | 123,355 | | | | 1,179 | | | | 124,534 | | |

| Acquisition of treasury shares | — | | | — | | | | — | | | | — | | | | — | | | | 1,155 | | | (106,909 | | ) | | (106,909 | | ) | | — | | | | (106,909 | | ) |

If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

Other Investments

or is not at the Company’s option.

Accounting Standard Codification Topic 606, “Revenue from Contracts with Customers” (ASC 606) became effective for the Company on December 31, 2017 and was adopted using the modified retrospective method for all contracts not completed as of the date of adoption.

For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with the practical expedient, which did not have a material effect on the cumulative impact of adopting ASC 606.

The reported results for fiscal years 2019 and 2018 reflect the application of ASC 606 guidance while the historical results for fiscal year 2017 was prepared under the guidance of ASC 605, “Revenue Recognition” (ASC 605).

There is no material difference in the reporting of revenue during fiscal years 2019 and 2018 in accordance with ASC 606 when compared to fiscal year 2017 in accordance with ASC 605.

foreign exchange rates for the period.

Refer to Note 12.

“Employee Benefit Plans” for further discussion of the U.S. Pension Plan termination and expected settlement in fiscal 2020.

In June 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, “Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” ASU 2018-07 aligns the accounting for share-based payment awards issued to employees and nonemployees as well as improves financial reporting for share-based payments to nonemployees.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 refines and expands hedge accounting for both financial and commodity risks.

It also creates more transparency around how economic results are presented, both on the face of the financial statements and in the disclosures.

In addition, this ASU makes certain targeted improvements to simplify the application of hedge accounting guidance.

In February 2016, the FASB issued ASU 2016-02, “Leases.” The standard, including subsequently issued amendments, collectively referred to as Accounting Standards Codification (ASC) 842, “Leases”, established the principles that lessees and lessors will apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease.

The Company adopted this standard using the modified retrospective transition approach as applied to leases existing as of or entered into after the adoption date (December 30, 2018) in fiscal year 2019.

Early adoption is permitted.

The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures, but does not believe there will be a material impact upon adoption.

In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax).

The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied either retrospectively or prospectively.

The ASU is effective for fiscal years ending after December 15, 2020 and will be applied on a retrospective basis to all periods presented.

In addition, the ASU adds the disclosure requirements for changes in unrealized gains and losses included in

The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years and will be applied on a retrospective basis to all periods presented.

This standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and will be applied on a prospective basis.

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: 28, 2019,] [added: 26, 2020,] 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.

[added: 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: (b) Management’s] Report on Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in [removed: Internal] [added: *Internal] Control-Integrated [removed: Framework] [added: Framework*] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December [removed: 28, 2019.][added: 26, 2020.]

We have excluded the business acquisitions completed during fiscal year [removed: 2019,] [added: 2020,] including [removed: Citoxlab] [added: HemaCare] and [removed: the acquisition of a DSA supplier,] [added: Cellero,] from the assessment of the effectiveness of internal control over financial reporting as of December [removed: 28, 2019.][added: 26, 2020.]

Total assets and total revenue of the acquired businesses collectively represent [removed: 5.0%] [added: 1.0%] and [removed: 4.7%,] [added: 1.6%,] respectively, of the related consolidated financial statement amounts as of and for fiscal year ended December [removed: 28, 2019.][added: 26, 2020.]

The effectiveness of our internal control over financial reporting as of December [removed: 28, 2019,] [added: 26, 2020,] 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: (c)] Changes in Internal [removed: Controls][added: Controls Over Financial Reporting]

During fiscal year [removed: 2019,] [added: 2020,] 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: 2019] [added: 2020] 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

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: 2020] [added: 2021] Proxy Statement under the sections captioned “Nominees for Directors” and “Delinquent Section 16(a) Reports” and is incorporated herein by reference thereto.

The information required by this Item regarding our corporate governance will be included in the [removed: 2020] [added: 2021] Proxy Statement under the section captioned “Corporate Governance” and is incorporated herein by reference thereto.

The information required by this Item regarding the audit committee of the Board of Directors and financial experts will be included in the [removed: 2020] [added: 2021] 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.

To obtain a copy, please mail a request to the [added: Corporate] Secretary, Charles River Laboratories International, Inc., 251 Ballardvale Street, Wilmington, MA 01887.

The information required by this Item will be included in the [removed: 2020] [added: 2021] Proxy Statement under the sections captioned [removed: “2019] [added: “2020] 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: 2020] [added: 2021] 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: 2020] [added: 2021] 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: 2020] [added: 2021] Proxy Statement under the section captioned “Statement of Fees Paid to Independent Registered Public Accounting Firm” and is incorporated herein by reference thereto.

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

| February [removed: 11, 2020] [added: 17, 2021] | [added: | |] By: | [added: | |] /s/ DAVID R. SMITH | [added: | |]

| | [added: | |] David R. Smith | | [added: | | | |]

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

| Signatures | | [added: | | | |] Title | [added: | |] Date | [added: | |]

| By: | [added: | |] /s/ JAMES C. FOSTER | [added: | |] *Chairman, President and Chief Executive Officer* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

| | [added: | |] James C. Foster | | | [added: | | | | | |]

| By: | [added: | |] /s/ DAVID R. SMITH | [added: | |] *Corporate Executive Vice President and* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

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

| By: | [added: | |] /s/ MICHAEL G. KNELL | [added: | |] *Corporate Senior Vice President and* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

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

| By: | [added: | |] /s/ ROBERT J. BERTOLINI | [added: | |] *Director* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

| | [added: | |] Robert J. Bertolini | | | [added: | | | | | |]

| By: | [added: | |] /s/ STEPHEN D. CHUBB | [added: | |] *Director* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

| | [added: | |] Stephen D. Chubb | | | [added: | | | | | |]

| By: | [added: | |] /s/ DEBORAH T. KOCHEVAR | [added: | |] *Director* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

| | [added: | |] Deborah T. Kochevar | | | [added: | | | | | |]

| By: | [added: | |] /s/ MARTIN MACKAY | [added: | |] *Director* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]

| | [added: | |] Martin Mackay | | | [added: | | | | | |]

| By: | [added: | |] /s/ GEORGE E. MASSARO | [added: | |] *Director* | [added: | |] February [removed: 11, 2020] [added: 17, 2021] | [added: | |]