As filed with the Securities and Exchange Commission on April 22, 2002
Registration No. 333-85894
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-139-7316
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
251 Ballardvale Street
Wilmington, MA 01887
(978) 658-6000
(Address, including zip code, and telephone number, including area
code, of Registrant's principal executive offices)
Thomas F. Ackerman
Senior Vice President and Chief Financial Officer
Charles River Laboratories International, Inc.
251 Ballardvale Street
Wilmington, MA 01887
(978) 658-6000, Ext. 1225
(978) 694-9504 (fax)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Richard D. Truesdell, Jr.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
(212) 450-4800 (fax)
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING SECURITYHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 22, 2002
PROSPECTUS
$185,000,000
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
3.50% Senior Convertible Debentures due February 1, 2022
and
Common Stock Issuable upon Conversion of the Debentures
This prospectus will be used by holders of our 3.50% Senior Convertible
Debentures due February 1, 2022 to resell their debentures or the shares of our
common stock, par value $0.01 per share, issuable upon conversion of the
debentures. We originally issued the debentures in a private placement in
January 2002. Additional debentures were issued in February 2002 as a result of
the exercise in part of the initial purchasers' option.
The debentures are senior unsecured obligations of Charles River
Laboratories International, Inc. The debentures will accrue interest at an
initial rate of 3.50%, which will be reset (but not below the initial rate of
3.50% or above 5.25%) on August 1, 2007, 2012 and 2016. We will pay interest on
the debentures on February 1 and August 1 of each year. The first interest
payment will be made on August 1, 2002. The debentures are currently designated
for trading in The Portal Market, a subsidiary of The Nasdaq Stock Market, Inc.
You may convert your debentures into shares of our common stock at the
initial conversion price of $38.87 per share of our common stock, subject to
the adjustments described in this prospectus. You may surrender your debentures
for conversion at any time before the close of business on the business day
immediately preceding the maturity date, unless previously redeemed or
purchased by us. Our common stock is listed on the New York Stock Exchange
under the symbol "CRL." On April 19, 2002, the last reported sale price of our
common stock on the NYSE was $29.67 per share.
On or after February 5, 2005, we may redeem for cash all or part of your
debentures that have not been previously converted at the redemption prices set
forth in this prospectus. You may require us to purchase for cash all or part
of your debentures on February 1, 2008, 2013 and 2017 at a price equal to 100%
of the principal amount of your debentures, plus accrued interest up to, but
not including, the date of purchase. In addition, if a change in control occurs
on or before February 1, 2022, you may require us to purchase for cash all or
part of your debentures.
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Investing in the debentures involves risks that are described in "Risk
Factors Relating to Our Debt" beginning on page 9 of this prospectus.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is , 2002
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TABLE OF CONTENTS
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Summary........................................................................1
Risk Factors...................................................................6
Forward Looking Information...................................................11
Industry and Market Data......................................................11
Use of Proceeds...............................................................12
Ratio of Earnings to Fixed Charges............................................12
Description of Debentures.....................................................13
Description of Capital Stock..................................................24
Material U.S. Federal Income Tax Considerations...............................27
Selling Securityholders.......................................................32
Plan of Distribution..........................................................37
Legal Matters.................................................................40
Experts.......................................................................40
Where You Can Find More Information...........................................41
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This prospectus is part of a registration statement that we filed with the
SEC using a "shelf" registration or continuous offering process. Under this
shelf process, selling securityholders may from time to time sell the
securities described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the securities
that the selling securityholders may offer. Each time a selling securityholder
sells securities, the selling securityholders are required to provide you with
a prospectus and/or a prospectus supplement containing specific information
about the selling securityholder and the terms of the securities being offered.
A prospectus supplement may include other special considerations applicable to
those securities. The prospectus supplement may also add, update or change
information in this prospectus. If there is any inconsistency between the
information in this prospectus and any prospectus supplement, you should rely
on the information in the prospectus supplement. You should read both this
prospectus and any prospectus supplement together with the additional
information described under the heading "Where You Can Find More Information."
The registration statement containing this prospectus, including the
exhibits to the registration statement, provides additional information about
us and the securities offered under this prospectus. You may read the
registration statement, including the exhibits, at the SEC website or at the
SEC offices mentioned under the heading "Where You Can Find More Information."
You should rely only on the information contained in this prospectus and
the information to which we have referred you. We have not authorized anyone to
provide you with information that is different. This prospectus may only be
used where it is legal to sell these securities. The information in this
prospectus may only be accurate on the date of this prospectus.
ii
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SUMMARY
The following summary may not contain all the information that may be
important to you. You should read the entire prospectus carefully, including
"Risk Factors" and our financial statements and related notes incorporated by
reference, before making an investment decision.
When used in this prospectus, the terms "Charles River," "we," "our" and
"us" refer to Charles River Laboratories International, Inc. and its
consolidated subsidiaries, unless otherwise specified.
The Company
We are a leading provider of critical research tools and integrated
support services that enable innovative and efficient drug discovery and
development. We are the global leader in providing the animal research models
required in research and development for new drugs, devices and therapies and
have been in this business for more than 50 years. Since 1992, we have built
upon our research model technologies to develop a broad and growing portfolio
of biomedical products and services. Our wide array of services enables our
customers to reduce costs, increase speed and enhance their productivity and
effectiveness in drug discovery and development. Our customer base, spanning
over 50 countries, includes all of the major pharmaceutical and biotechnology
companies, as well as many leading hospitals and academic institutions. We
currently operate 77 facilities in 15 countries worldwide. Our differentiated
products and services, supported by our global infrastructure and scientific
expertise, enable our customers to meet many challenges of early-stage life
sciences research, a large and growing market.
We are organized as a Delaware corporation. Our headquarters are located
at 251 Ballardvale Street, Wilmington, Massachusetts 01887. Our telephone
number is (978) 658-6000. Our website address is www.criver.com. The
information on our website is not incorporated in this prospectus.
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The Offering
As used in this summary of the offering, the words "Charles River,"
"we," "us" or "our" do not include any of our current or future subsidiaries.
Debentures............................ $185,000,000 aggregate principal amount
of our 3.50% Senior Convertible
Debentures due February 1, 2022.
Interest.............................. We will pay interest on the debentures
semi-annually on February 1 and August
1, beginning on August 1, 2002. The
debentures accrue interest at an
initial rate of 3.50% per annum, which
will be reset on August 1, 2007, 2012
and 2016 to a rate per annum equal to
the interest rate payable 120 days
before the reset date on 5-year U.S.
Treasury Notes minus 0.72%. However,
the interest rate will not be reset
below the initial rate of 3.50% per
annum or above 5.25% per annum.
Maturity of Debentures................ February 1, 2022.
United States Federal Income
Tax Considerations.................... Pursuant to the indenture, you agree,
for United States federal income tax
purposes, to treat your debentures as
"contingent payment debt instruments"
and to be bound by our application of
the Treasury regulations that govern
contingent payment debt instruments.
This includes our determination that
the rate at which interest is deemed to
accrue for federal income tax purposes
is 9% compounded semi-annually, which
is comparable to the rate at which we
would borrow on a noncontingent,
nonconvertible borrowing with terms and
conditions otherwise comparable to the
debentures. Accordingly, you are
required to accrue interest on a
constant yield to maturity basis at
this rate (subject to certain
adjustments), with the result that you
will recognize taxable income
significantly in excess of cash you
receive while your debentures are
outstanding. In addition, you will
recognize ordinary income on the sale,
purchase by us at your option,
conversion or redemption of your
debentures equal to the excess, if any,
of the amount realized on such sale,
purchase by us, conversion or
redemption, including the fair market
value of our common stock received upon
conversion or otherwise, over your
adjusted tax basis in the debentures.
See "Material U.S. Federal Income Tax
Considerations." However, because the
Treasury regulations that apply to
contingent payment debt instruments do
not directly address securities such as
the debentures, and there is no other
authority that addresses whether and
how these regulations would apply to
the debentures, your United States
federal income tax treatment as a
holder of debentures is uncertain in
various respects. If the agreed upon
treatment is successfully challenged by
the Internal Revenue Service, it might
be determined that, among other
differences, you (1) should have
accrued interest income at a lower
rate, (2) should not recognize income
or gain upon conversion of the
debentures, (3)
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should recognize capital gain or loss
upon a taxable disposition of your
debentures, (4) if you purchase
debentures for less than their adjusted
issue price on the acquisition date,
should either treat any gain recognized
on the sale or disposition of your
debentures as ordinary income to the
extent of the accrued market discount
or, if you so elect, include the market
discount as ordinary income as it
accrues, and (5) if you purchase
debentures for more than their adjusted
issue price on the acquisition date,
should amortize the excess, or
"premium," as a reduction of the amount
of interest income you are required to
accrue on your debentures.
YOU ARE URGED TO CONSULT YOUR TAX
ADVISER REGARDING THE TAX TREATMENT OF
THE DEBENTURES AND WHETHER A PURCHASE
OF THE DEBENTURES IS ADVISABLE IN LIGHT
OF THE AGREED UPON TAX TREATMENT AND
YOUR PARTICULAR TAX SITUATION.
Conversion Rights..................... You may convert all or part of your
debentures before the close of business
on the business day immediately before
the maturity date at a conversion price
equal to $38.87 per share of our common
stock. The number of shares deliverable
upon conversion is determined by
dividing the principal amount being
converted by the conversion price. This
initial conversion price will be
adjusted upon the occurrence of the
events specified in this prospectus.
You may only convert debentures with a
principal amount of $1,000 or multiples
of $1,000. See "Description of
Debentures--Conversion Rights."
Ranking............................... The debentures are our senior unsecured
obligations and rank equal in right of
payment with all of our existing and
future unsecured and unsubordinated
indebtedness, respectively. The
debentures are effectively subordinated
to all of our subsidiaries'
liabilities. As of December 29, 2001,
our subsidiaries had approximately
$268.9 million of total outstanding
liabilities (excluding intercompany
obligations). After giving effect to
the private placement of the debentures
and the application of a portion of the
related net proceeds, our subsidiaries'
total outstanding liabilities as of
December 29, 2001 would have been
approximately $187.3 million (excluding
intercompany obligations).
Sinking Fund.......................... None.
Redemption of Debentures at
Our Option............................ We may redeem all or part of your
debentures for cash on or after
February 5, 2005, at the redemption
prices set forth in this prospectus.
See "Description of
Debentures--Redemption of Debentures at
Our Option."
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Purchase of Debentures at the
Option of the Holder.................. You may require us to purchase all or
part of your debentures for cash on
February 1, 2008, 2013 and 2017 for a
price equal to 100% of the principal
amount of your debentures being
purchased, together with accrued
interest up to, but excluding, the date
of redemption. See "Description of
Debentures--Purchase of Debentures at
the Option of the Holder."
Change in Control..................... Upon a change in control of Charles
River occurring on or before February
1, 2022, you may require us to purchase
all or part of your debentures for cash
at a price equal to 100% of the
principal amount of your debentures
being purchased, together with accrued
interest up to, but excluding, the date
of redemption. Under the indenture,
subject to exceptions, a "change in
control" of Charles River means that
either of the following has occurred:
o any person (other than us, our
subsidiaries or their employee
benefit plans) files a Schedule
13D or Schedule TO disclosing that
it has become the beneficial owner
of 50% or more of the voting power
of Charles River, with some
exceptions; or
o any share exchange, consolidation
or merger of Charles River is
consummated so that our common
stock is converted into cash,
securities or other property,
other than a situation in which
the holders of our common stock,
immediately before the share
exchange, consolidation or merger,
have at least a majority of the
total voting power of the
continuing or surviving
corporation, immediately after the
share exchange, consolidation or
merger.
Events of Default..................... If there is an event of default on the
debentures, the principal amount of the
debentures, plus accrued interest may
be declared immediately due and
payable. See "Description of
Debentures--Events of Default."
Use of Proceeds....................... We will not receive any of the proceeds
from the resale of the debentures by
the selling securityholders or from the
issuance of shares of our common stock
upon conversion of the debentures.
DTC Eligibility....................... The debentures were issued in
book-entry form and are represented by
permanent global certificates deposited
with a custodian for, and registered in
the name of a nominee of, DTC in New
York, New York. Your beneficial
interests in the debentures are shown
on, and transfers are effected only
through, records maintained by DTC and
its direct and indirect participants.
Your beneficial interests in the
debentures may not be exchanged for
certificated securities, except in
limited circumstances. See "Description
of Debentures--Book-Entry System."
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Trading............................... The debentures we issued in the private
placement are eligible for trading in
the PORTAL system. Debentures resold
using this prospectus, however, will no
longer be eligible for trading in the
PORTAL system. We do not intend to list
the debentures on any national
securities exchange. Our common stock
is traded on the NYSE under the symbol
"CRL."
Ratio of Earnings to Fixed Charges.... The ratios of earnings to fixed charges
for fiscal 1997, 1998, 1999, 2000 and
2001 were 15.9x, 25.1x, 3.2x, 1.6x and
3.7x, respectively.
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5
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones we face.
Additional risks not presently known to us or those we currently consider
immaterial may also impair our business operations. Any of these risks could
have a material and negative effect on our business, financial condition or
results of operations. The trading price of our common stock could decline due
to any of these risks.
Risk Factors Relating to Our Business and Industry
If we are not successful in selecting and integrating the businesses and
technologies we acquire, our business may suffer.
We have recently expanded our business through the acquisitions of
Pathology Associates International Corporation, or PAI, and Primedica
Corporation, or Primedica, and we plan to continue to grow our business through
acquisitions of businesses and technologies and the formation of alliances.
However, businesses and technologies may not be available on terms and
conditions we find acceptable. Even if completed, acquisitions and alliances
involve numerous risks which may include:
o difficulties and expenses incurred in assimilating operations,
services, products or technologies;
o difficulties in developing and operating new businesses, including
diversion of management's attention from other business concerns;
o the potential loss of key employees of an acquired business and
difficulties in attracting new employees to grow businesses;
o difficulties in assimilating differences in foreign business
practices and overcoming language barriers;
o difficulties in obtaining intellectual property protections and
skills that we and our employees currently do not have; and
o difficulties in achieving business and financial success.
In the event that the success of an acquired business or technology or an
alliance does not meet expectations, we may be required to restructure. We may
not be able to successfully integrate acquisitions into our existing business
or successfully exploit new business or technologies.
Contaminations in our animal populations can damage our inventory, harm our
reputation for contaminant-free production and result in decreased sales.
Our research models and fertile chicken eggs must be free of contaminants,
such as viruses and bacteria. The presence of contaminants can distort or
compromise the quality of research results. Contaminations in our isolated
breeding rooms or poultry houses could disrupt our contaminant-free research
model and fertile egg production, harm our reputation for contaminant-free
production and result in decreased sales.
Contaminations typically require cleaning up the contaminated room or
poultry house. This clean-up results in inventory loss, clean-up and start-up
costs, and reduced sales as a result of lost customer orders and credits for
prior shipments. These contaminations are unanticipated and difficult to
predict. We experienced several material contaminations in our animal
populations in 1996 and a few significant contaminations in 1997 that adversely
impacted our 1996 and 1997 financial results. Since then, we have made
significant capital expenditures designed to strengthen our biosecurity and
have significantly changed our operating procedures. We have not experienced
any significant contaminations since 1997.
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Many of our customers are pharmaceutical and biotechnology companies, and we
are subject to risks, uncertainties and trends that affect companies in those
industries.
Sales of our products and services are highly dependent on research and
development expenditures by pharmaceutical and biotechnology companies. We are
therefore subject to risks, uncertainties and trends that affect companies in
those industries, including government regulation, pricing pressure,
technological change and shifts in the focus and scope of research and
development expenditures. For example, over the past several years, the
pharmaceutical industry has undergone significant mergers and combinations, and
many industry experts expect this trend to continue. After recent mergers and
combinations, some customers combined or otherwise reduced their research and
development operations, resulting in fewer animal research activities. We
experienced both temporary disruptions and permanent reductions in sales of our
research models to some of these customers. Future mergers and combinations in
the pharmaceutical or biotechnology industries, or other industry-wide trends,
could adversely affect demand for or pricing of our products.
New technologies may be developed, validated and increasingly used in
biomedical research that could reduce demand for some of our products and
services.
For many years, groups within the scientific and research community have
attempted to develop models, methods and systems that would replace or
supplement the use of living animals as test subjects in biomedical research.
Companies have developed several techniques that have scientific merit,
especially in the area of cosmetics and household product testing, markets in
which we are not active. Only a few alternative test methods in the discovery
and development of effective and safe treatments for human and animal disease
conditions have been validated and successfully deployed. The principal
validated non-animal test system is the LAL, or endotoxin detection system, a
technology which we acquired and have aggressively marketed as an alternative
to testing in animals. It is our strategy to participate in some fashion with
any non-animal test method as it becomes validated as a research model
alternative or adjunct in our markets. However, these methods may not be
available to us or we may not be successful in commercializing these methods.
Even if we are successful, sales or profits from these methods may not offset
reduced sales or profits from research models.
Alternative research methods could decrease the need for research models,
and we may not be able to develop new products effectively or in a timely
manner to replace any lost sales. In addition, one of the anticipated outcomes
of genomics research is to permit the elimination of more compounds prior to
preclinical testing. While this outcome may not occur for several years, if at
all, it may reduce the demand for some of our products and services.
The outsourcing trend in the preclinical and nonclinical stages of drug
discovery and development, meaning contracting out to others functions that
were previously performed internally, may decrease, which could slow our
growth.
Some areas of our biomedical products and services business have grown
significantly as a result of the increase over the past several years in
pharmaceutical and biotechnology companies outsourcing their preclinical and
nonclinical research support activities. While industry analysts expect the
outsourcing trend to continue for the next several years, a substantial
decrease in preclinical and nonclinical outsourcing activity could result in a
diminished growth rate in the sales of one or more of our expected higher
growth areas.
Our business may be affected by changes in the Animal Welfare Act and
related regulations which may require us to alter our operations.
The United States Department of Agriculture, or USDA, has agreed, as part
of a settlement of litigation, to propose a change to the regulations issued
under the Animal Welfare Act to include rats, mice and birds, including
chickens. Congress, however, has suspended the USDA's rulemaking authority in
this area. The Animal Welfare Act imposes a wide variety of specific
regulations on producers and users of regulated species including cage size,
shipping conditions and environmental enrichment methods. Depending on whether
the final rulemaking in this area includes rats, mice and birds, including
chickens, we could be required to alter our production operations. This may
include adding production capacity, new equipment and additional employees. We
believe that application of the Animal Welfare Act to rats, mice and chickens
used in our research model and vaccine support products operations in the
United States will not result in loss of net sales, margin or market share,
since all U.S. producers and users will be subject to the same regulations.
While we do not anticipate that the addition of rats, mice and chickens to the
Animal Welfare Act would require
7
significant expenditures, changes to the regulations may be more stringent than
we expect and require more significant expenditures. Additionally, if we fail
to comply with state regulations, including general anti-cruelty legislation,
foreign laws and other anti-cruelty laws, we could face significant civil and
criminal penalties.
Factors such as exchange rate fluctuations and increased international and
U.S. regulatory requirements may increase our costs of doing business in
foreign countries.
A significant part of our net sales is derived from operations outside the
United States. Our operations and financial results could be significantly
affected by factors such as changes in foreign currency rates, uncertainties
related to regional economic circumstances and the costs of complying with a
wide variety of international and U.S. regulatory requirements.
Because the sales and expenses of our foreign operations are generally
denominated in local currencies, we are subject to exchange rate fluctuations
between local currencies and the U.S. dollar in the reported results of our
foreign operations. These fluctuations may decrease our earnings. We currently
do not hedge against the risk of exchange rate fluctuations.
We face significant competition in our business, and if we are unable to
respond to competition in our business, our revenues may decrease.
We face significant competition from different competitors in each of our
business areas. Some of our competitors in biotech safety testing and medical
device testing are larger than we are and may have greater capital, technical
or other resources than we do. We generally compete on the basis of quality,
reputation and availability of service. Expansion by our competitors into other
areas in which we operate, new entrants into our markets or changes in our
competitors' strategy could adversely affect our competitive position. Any
erosion of our competitive position may decrease our revenues or limit our
growth.
Negative attention from special interest groups may impair our business.
Our core research model activities with rats, mice and other rodents have
not historically been the subject of animal rights media attention. However,
the large animal component of our business has been the subject of adverse
attention and on-site protests. We closed our small import facility in England
due in part to protests by animal right activists, which included threats
against our facilities and employees. Future negative attention or threats
against our facilities or employees could impair our business.
One of our large animal operations is dependent on a single source of
supply, which if interrupted could adversely affect our business.
We depend on a single, international source of supply for one of our large
animal operations. Disruptions to their continued supply may arise from export
or import restrictions or embargoes, foreign government or economic
instability, or severe weather conditions. Any disruption of supply could harm
our business if we cannot remove the disruption or are unable to secure an
alternative or secondary source on comparable commercial terms.
Tax benefits we expect to be available in the future may be subject to
challenge.
In connection with our recapitalization, our shareholders, CRL Acquisition
LLC and Bausch & Lomb Incorporated, or B&L, made a joint election intended to
permit us to increase the depreciable and amortizable tax basis in our assets
for federal income tax purposes, thereby providing us with expected future tax
benefits. In connection with our initial public offering, CRL Acquisition LLC
reorganized, terminated its existence as a corporation for tax purposes and
distributed a substantial portion of our stock to its members. It is possible
that the IRS may contend that this reorganization and liquidating distribution
should be integrated with our original recapitalization. We believe that the
reorganization and liquidating distribution should not have any impact on the
joint election for federal income tax purposes. However, the IRS may reach a
different conclusion. If the IRS were successful, the expected future tax
benefits would not be available and we would be required to write off the
related deferred tax asset reflected in our balance sheet by recording a
non-recurring tax expense in our results of operations in an amount equal to
the deferred tax asset.
8
We depend on key personnel and may not be able to retain these employees or
recruit additional qualified personnel, which would harm our business.
Our success depends to a significant extent on the continued services of
our senior management and other members of management. James C. Foster, our
Chief Executive Officer since 1992, has held various positions with us for 25
years and recently became our Chairman. We have no employment agreement with
Mr. Foster, nor with any other executive officer. If Mr. Foster or other
members of management do not continue in their present positions, our business
may suffer.
Because of the specialized scientific nature of our business, we are
highly dependent upon qualified scientific, technical and managerial personnel.
There is intense competition for qualified personnel in the pharmaceutical and
biotechnological fields. Therefore, we may not be able to attract and retain
the qualified personnel necessary for the development of our business. The loss
of the services of existing personnel, as well as the failure to recruit
additional key scientific, technical and managerial personnel in a timely
manner, could harm our business.
Our historical financial information may not be representative of our
results as a separate company.
The historical financial information incorporated by reference in this
prospectus for the periods prior to our recapitalization may not reflect what
our results of operations, financial position and cash flows would have been
had we been a separate, stand-alone company during the periods presented. We
made some adjustments and allocations to our historical financial statements
for the periods before the recapitalization, because B&L did not account for us
as a single stand-alone business in those periods. Our adjustments and
allocations made in preparing our historical consolidated financial statements
may not appropriately reflect our operations during the periods presented as if
we had operated as a stand-alone company.
Risk Factors Relating to Our Debt
We have a significant amount of debt.
After giving effect to the private placement of the debentures and the
application of a portion of the related net proceeds, as of December 29, 2001,
we would have had (a) total consolidated debt of approximately $262.9 million;
and (b) approximately $30.0 million of borrowings available under our credit
facility, subject to customary conditions. In addition, subject to the
restrictions in our credit facility, we may incur significant additional
indebtedness, which may be secured, from time to time.
We may not be able to service our debt.
Our ability to pay or to refinance our debt will depend upon our future
operating performance, which will be affected by general economic, financial,
competitive, legislative, regulatory, business and other factors beyond our
control.
We anticipate that our operating cash flow, together with money we can
borrow under our credit facility, will be sufficient to meet anticipated future
operating cash flow requirements, fund capital expenditures and service our
debt as it becomes due. If we were still unable to meet our debt service
obligations, we could attempt to restructure or refinance our debt or seek
additional equity capital. We cannot assure you that we will be able to
accomplish those actions on satisfactory terms, if at all.
Restrictive covenants in our credit facility may adversely affect us.
Our credit facility contains restrictive covenants that prohibit us from
prepaying some of our debt, including the debentures. This credit facility also
requires us to maintain specified financial ratios and satisfy other financial
condition tests. Our ability to meet those financial ratios and tests can be
affected by events beyond our control, and we cannot assure you that we will
meet those tests. A breach of any of these covenants could result in a default
under our credit facility. The lenders could elect to declare all amounts
outstanding under the credit facility to be immediately due and payable, and
terminate all commitments to extend further credit. If we were unable to repay
those amounts, the lenders could proceed against the collateral granted to them
to secure that indebtedness. We have pledged substantially all of
9
our assets, other than assets of our foreign subsidiaries, as security under
our credit facility. If the lenders under the credit facility accelerate the
repayment of borrowings, we cannot assure you that we will have sufficient
assets to repay our credit facility and our other debt, including the
debentures.
We are dependant on our subsidiaries because of our holding company
structure.
We conduct substantially all of our business through our subsidiaries. We
are dependant on the cash flow of our subsidiaries and the related
distributions to us to meet our debt service obligations. The credit facility
restricts the ability of our subsidiaries to pay dividends. Future borrowings
by our subsidiaries may include additional restrictions. In addition, under
applicable state law, our subsidiaries may be limited in the amount they are
permitted to pay as dividends on their capital stock.
You may be subordinated to holders of debt of our subsidiaries.
Holders of debt of our subsidiaries, including our credit facility, are
effectively senior to your claims against those subsidiaries. As of December
29, 2001, our subsidiaries had approximately $268.9 million of total
outstanding liabilities (excluding intercompany obligations). After giving
effect to the private placement of the debentures and the application of the
related net proceeds, our subsidiaries' total outstanding liabilities as of
December 29, 2001 would have been approximately $187.3 million (excluding
intercompany obligations).
We do not intend to list the debentures on any national securities exchange
and, as a result, a public market for the debentures may not develop or be
maintained.
Resales of the debentures will be registered transactions under the
Securities Act. However, the debentures resold using this prospectus will no
longer be eligible for trading in the PORTAL system, and we do not intend to
list the debentures on any national securities exchange. The initial purchasers
of the debentures in the initial private placement have advised us that they
intend to make a market in the debentures. However, the initial purchasers are
not obligated to make a market in the debentures and may discontinue this
market making activity at any time without notice. As a result, a public market
for the debentures may not develop and, if one does develop, it may not be
maintained. If an active trading market for the debentures fails to develop or
be sustained, the trading price of the debentures could be adversely affected.
Future trading prices of the debentures will depend on many factors, including
prevailing interest rates, our operating results, the market price of our
common stock and the market for similar securities in general. These features
could adversely affect the value and the trading prices for your debentures.
You will be required to include in your gross income for United States
federal income tax purposes, each year, an amount of interest in excess of the
stated yield on the debentures and to recognize as ordinary interest income any
gain upon sale, purchase by us at your option, conversion or redemption of the
debentures.
You agree with us to treat your debentures as contingent payment debt
instruments for United States federal income tax purposes. Because the Treasury
regulations that apply to contingent payment debt instruments do not directly
address securities such as the debentures, and there is no other authority that
addresses whether and how these regulations would apply to the debentures, it
is uncertain whether and how the regulations will apply to the debentures.
Notwithstanding this uncertainty, as a result of your agreement with us under
the indenture, you will be required to include in your gross income, each year,
more interest than the cash you receive or the stated yield of the debentures.
You will recognize a gain or a loss on the sale, purchase by us at your option,
conversion or redemption of your debentures, in an amount equal to the
difference between the amount realized on the sale, purchase by us, conversion
or redemption (including the fair market value of our common stock received
upon conversion) and your adjusted tax basis in the debentures. Any gain you
recognize will generally be ordinary interest income; any loss will generally
be ordinary loss to the extent of interest previously included in your income
and, thereafter, capital loss. See "Material U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders."
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FORWARD LOOKING INFORMATION
We have made or incorporated by reference in this prospectus certain
"forward looking statements." These statements are based on management's
current expectations, and involve a number of risks and uncertainties that
could cause actual results to differ materially from those stated or implied by
the forward looking statements, including acquisition integration risks,
special interest groups, contaminations, industry trends, new displacement
technologies, outsourcing trends, USDA and FDA regulation, changes in law,
continued availability of products and supplies, personnel and control, and
others that are described in more detail in the Risk Factors section of this
prospectus as well as in our periodic SEC filings. We are under no duty to
update any of the forward looking statements after the date of this prospectus
to conform them to actual results.
INDUSTRY AND MARKET DATA
In this prospectus and in our periodic SEC filings incorporated by
reference in this prospectus, we rely on and refer to information and
statistics regarding the research model and biomedical products and services
industries, and our market share in the sectors in which we compete. We
obtained this information and statistics from various third party sources,
discussions with our customers and/or our own internal estimates. We believe
that these sources and estimates are reliable, but we have not independently
verified them.
11
USE OF PROCEEDS
We will not receive any of the proceeds from the resale of the debentures
by the selling securityholders or from the issuance of shares of our common
stock upon conversion of the debentures.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
each of the fiscal years indicated. Our fiscal year consists of 12 months
ending on the last Saturday on or prior to December 31.
Fiscal Year
-----------------------------------------------
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Ratio of earnings to fixed charges............... 15.9x 25.1x 3.2x 1.6x 3.7x
After giving effect to the private placement of the debentures and the
application of a portion of the related net proceeds to retire our senior
subordinated notes, the pro forma ratio of earnings to fixed charges for fiscal
2001 would have been 5.2x.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of our consolidated income before provision for income taxes,
minority interests, earnings from equity investments and extraordinary items,
plus dividends received from equity investees and fixed charges. Fixed charges
consist of interest expense on all indebtedness, amortization of deferred
financing costs and debt discounts, and one-third of rental expense from
operating leases that we believe is a reasonable approximation of the interest
component of rental expense.
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DESCRIPTION OF DEBENTURES
We issued the debentures under an indenture dated as of January 24, 2002
between us and State Street Bank and Trust Company, as trustee. The following
summarizes the material provisions of the debentures and the indenture. The
following summary does not purport to be complete and is subject to, and
qualified by reference to, all of the provisions of the indenture. We urge you
to read the indenture because it, and not this description, defines your rights
as a holder of the debentures. A copy of the indenture and the form of
certificate evidencing the debentures is available to you upon request.
As used in this description, the words "Charles River," "we," "us" or
"our" do not include any of our current or future subsidiaries.
General
We issued $175,000,000 aggregate principal amount of the debentures in a
private placement in January 2002. An additional $10,000,000 aggregate
principal amount of the debentures was issued in February 2002 as a result of
the exercise in part of the initial purchasers' option. Your debentures will
mature on February 1, 2022, and are payable at an office of the paying agent,
which is an office or agency of the trustee, or an office or agency maintained
by us for this purpose, in the Borough of Manhattan, the City of New York. The
debentures were issued in denominations of $1,000 and multiples of $1,000. You
may convert your debentures into shares of our common stock as described below
under "Conversion Rights."
Interest on your debentures accrues at the initial rate of 3.50% per annum
and is payable to you semiannually in arrears on February 1 and August 1,
beginning on August 1, 2002. The record dates for the payment of interest are
January 15 and July 15. On August 1, 2007, 2012 and 2016, the interest rate on
your debentures will be reset to a rate per annum equal to the interest rate
payable 120 days before the reset date on 5-year U.S. Treasury Notes minus
0.72%. However, in no event will the interest rate be reset below the initial
rate of 3.50% per annum or above 5.25% per annum. Interest on your debentures
accrues from the most recent date to which interest has been paid or, if no
interest has been paid, from January 24, 2002. We will calculate interest on
the basis of a 360-day year composed of twelve 30-day months. We may, at our
option, pay interest on your debentures by check mailed to you. However, if you
hold a principal amount of the debentures in excess of $2,000,000, you may
elect to be paid by wire transfer in immediately available funds.
Interest will cease to accrue on your debentures upon their maturity,
conversion, purchase by us or redemption. We may not reissue your debentures if
they have matured or been converted, purchased by us, redeemed or otherwise
cancelled, except for the registration of transfer, exchange or replacement of
that debenture.
You may present your debentures for conversion at the office of the
conversion agent and may present debentures for registration of transfer at the
office of the trustee.
Pursuant to the indenture, you agree, for United States federal income tax
purposes, to treat your debentures as "contingent payment debt instruments" and
to be bound by our application of the Treasury regulations that govern
contingent payment debt instruments. This includes our determination that the
rate at which interest is deemed to accrue for federal income tax purposes is
9% compounded semi-annually, which is comparable to the rate at which we would
borrow on a noncontingent, nonconvertible borrowing with terms and conditions
otherwise comparable to the debentures. Accordingly, you are required to accrue
interest on a constant yield to maturity basis at this rate (subject to certain
adjustments), with the result that you will recognize taxable income
significantly in excess of cash you receive while your debentures are
outstanding. In addition, you will recognize ordinary income on the sale,
purchase by us at your option, conversion or redemption of your debentures
equal to the excess, if any, of the amount realized on such sale, purchase by
us, conversion or redemption, including the fair market value of our common
stock received upon conversion or otherwise, over your adjusted tax basis in
the debentures. See "Material U.S. Federal Income Tax Considerations." However,
because the Treasury regulations that apply to contingent payment debt
instruments do not directly address securities such as the debentures, and
there is no other authority that addresses whether and how these regulations
would apply to the debentures, your United States federal income tax treatment
as a holder of debentures is uncertain in various respects. If the agreed upon
treatment is successfully challenged by the Internal Revenue Service, it might
be determined that, among other differences, you (1) should have accrued
interest income at a lower rate, (2) should not recognize income or gain upon
conversion of the debentures, (3) should recognize capital gain or loss upon
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a taxable disposition of your debentures, (4) if you purchase debentures for
less than their adjusted issue price on the acquisition date, should either
treat any gain recognized on the sale or disposition of your debentures as
ordinary income to the extent of the accrued market discount or, if you so
elect, include the market discount as ordinary income as it accrues, and (5) if
you purchase debentures for more than their adjusted issue price on the
acquisition date, should amortize the excess, or "premium," as a reduction of
the amount of interest income you are required to accrue on your debentures.
YOU ARE URGED TO CONSULT YOUR TAX ADVISER REGARDING THE TAX TREATMENT OF
THE DEBENTURES AND WHETHER A PURCHASE OF THE DEBENTURES IS ADVISABLE IN LIGHT
OF THE AGREED UPON TAX TREATMENT AND YOUR PARTICULAR TAX SITUATION.
Ranking of Debentures
The debentures are our senior unsecured obligations. The debentures rank
equal in right of payment with all of our existing and future unsecured and
unsubordinated indebtedness. The debentures are effectively subordinated to all
of our subsidiaries' liabilities. As of December 29, 2001, our subsidiaries had
approximately $268.9 million of total outstanding liabilities (excluding
intercompany obligations). After giving effect to the private placement of the
debentures and the application of a portion of the related net proceeds, our
subsidiaries' total outstanding liabilities as of December 29, 2001 would have
been approximately $187.3 million (excluding intercompany obligations).
Conversion Rights
You have the right, at your option, to convert your debentures into shares
of our common stock at any time before the close of business on the business
day immediately preceding the maturity date, unless previously redeemed or
purchased. You may only convert debentures with a principal amount of $1,000 or
multiples of $1,000. The initial conversion price is $38.87 per share of our
common stock, subject to adjustment upon the occurrence of events described
below. The number of shares of our common stock deliverable upon conversion of
your debentures is determined by dividing the principal amount of your
debentures being converted by the conversion price in effect on the day the
debenture is properly surrendered for conversion. If you are otherwise entitled
to a fractional share, you will receive cash equal to the then-current market
value of that fractional share.
As soon as practicable after conversion of your debentures, you will
receive a certificate for the number of full shares of our common stock
deliverable upon the conversion, together with any cash payment for your
fractional shares. Except as described below, no payment or adjustment will be
made for accrued interest or liquidated damages, if any, on a converted
security.
We will not adjust the conversion price for accrued interest. We will
adjust the conversion price for:
o dividends or distributions on our common stock payable in common
stock or our other capital stock;
o subdivisions, combinations or reclassifications of our common stock;
o distributions to all holders of our common stock of rights entitling
them to purchase shares of common stock for a period expiring within
60 days at less than the quoted price per share at the time; and
o distributions to all holders of our common stock of our assets or
debt securities or rights to purchase our securities, but excluding
cash dividends or other cash distributions unless the amount thereof,
together with all other cash distributions paid during the previous
12-month period, per share exceeds 5% of the closing per share sale
price of our common stock on the day before the date of declaration
of the dividend or other distribution.
We will not adjust the conversion price, however, if you are to
participate in the transaction without conversion, or in other cases specified
in the indenture.
The indenture permits us to decrease the conversion price from time to
time at our discretion.
14
If you surrender your debentures for conversion during the period from the
close of business on a regular record date to the opening of business on the
next interest payment date, you will be required to pay us the interest payable
on the converted principal amount of your debentures at the time of surrender.
However, you will not be required to pay us the interest payable on the
converted principal amount of your debentures if:
o you surrender debentures (1) called for redemption by us, (2) subject
to purchase by us after a change in control or (3) presented for
conversion before the occurrence of specified corporate transactions;
and
o the redemption date, purchase date or ex-dividend date relating to
the specified corporate transaction occurs during the period from the
close of business on a record date and ending on the first business
day after the next interest payment date (or if this interest payment
date is not a business day, the second business day after the
interest payment date).
The specified corporate transactions referred to in the previous paragraph
include our election to:
o distribute to all holders of our common stock rights entitling them
to purchase, for a period expiring within 60 days, common stock at
less than the quoted price of the common stock at that time; and
o distribute to all holders of our common stock any assets, debt
securities or rights to purchase our securities, which distribution
has a per share value exceeding 15% of the closing per share sale
price of our common stock on the day before the declaration date for
the distribution.
We must notify you at least 20 days before the ex-dividend date for the
distribution.
If we are a party to a consolidation, merger or binding share exchange so
that our common stock is converted into cash, securities or other property,
then at the effective time of the transaction, your right to convert your
debenture into shares of our common stock will be changed into a right to
convert it into the kind and amount of cash, securities or other property which
you would have received if you had converted your debenture immediately before
the transaction. If the transaction also constitutes a "change in control," as
defined below, you may require us to purchase your debentures as described
under "Change in Control Permits Purchase of Debentures at the Option of the
Holder."
In the event of:
o a taxable distribution to holders of our common stock which results
in an adjustment of the conversion price; or
o a decrease in the conversion price at our discretion,
you may be deemed to have received a distribution subject to United States
federal income tax as a dividend. See "Material U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders--Constructive
Dividends."
Redemption of Debentures at Our Option
No sinking fund is provided for your debentures. Before February 5, 2005,
we cannot redeem your debentures. Beginning on February 5, 2005, we may redeem
your debentures for cash, in whole at any time, or in part from time to time.
We will give you at least 20 days, but not more than 60 days, notice of
redemption by mail.
The table below shows redemption prices (which are expressed as
percentages of the principal amount of the debenture redeemed) of a debenture
on February 5, 2005 and in subsequent periods to maturity. Upon redemption, you
will receive in exchange for your debentures, the redemption price, together
with accrued and unpaid interest up to, but not including, the redemption date
and liquidated damages, if any. If the redemption date is on or after an
interest record date, but on or before the related interest payment date,
interest will be paid to you on the relevant record date.
15
Period Redemption Price
- ------ ----------------
Beginning February 5, 2005 and ending on January 31, 2006...... 100.875%
Beginning February 1, 2006 and subsequently.................... 100.000
If we redeem less than all of the outstanding debentures, the trustee will
select your debentures to be redeemed on a pro rata basis in principal amounts
of $1,000 or multiples of $1,000. If part of your debentures are selected for
redemption and you convert part of your debentures, the converted part will be
deemed to be the part selected for redemption.
Purchase of Debentures at the Option of the Holder
On February 1, 2008, 2013 and 2017, you may require us to purchase your
debentures, for which you have properly delivered and not withdrawn a written
purchase notice, subject to the conditions specified in the indenture. You may
submit your debentures for purchase to the paying agent from the 20th business
day before the purchase date until the fifth business day before the purchase
date.
We will purchase each debenture, for which you have properly delivered and
not withdrawn a written purchase notice, at a purchase price equal to 100% of
the principal amount of that debenture, together with accrued and unpaid
interest up to, but not including, the redemption date and liquidated damages,
if any. If the purchase date is on or after an interest record date, but on or
before the related interest payment date, interest will be paid to you on the
relevant record date.
We will pay the purchase price in cash. For a discussion of your tax
treatment if you receive cash, see "Material U.S. Federal Income Tax
Considerations--Tax Consequences to United States Holders--Sale, Exchange,
Conversion or Retirement of Debentures."
At least 20 business days before each purchase date, we must give you
notice at your address, as shown in the register of the registrar, stating,
among other things, the procedures that you must follow to require us to
purchase your debentures.
Your purchase notice electing to require us to purchase your debentures
must be received by the paying agent no later than the fifth business day
before the purchase date. Your purchase notice must state:
o the certificate numbers of your debentures to be delivered for
purchase;
o the principal amount of debentures to be purchased; and
o that we are to purchase your debentures according to the applicable
provisions of the debentures.
You may withdraw your purchase notice by delivering a written notice of
withdrawal to the paying agent before the purchase date and must state:
o the certificate numbers of your debentures being withdrawn;
o the principal amount of debentures being withdrawn; and
o the principal amount, if any, of debentures that remain subject to
your purchase notice.
In connection with any purchase offer, we will:
o comply in all material respects with the provisions of Rule 13e-4,
Rule 14e-1 and any other tender offer rules under the Exchange Act
which may then apply; and
o file Schedule TO or any other required schedule under the Exchange
Act.
16
Our obligation to pay the purchase price for debentures, for which you
have delivered and not validly withdrawn a purchase notice, is conditioned on
you delivering your debentures, together with necessary endorsements, to the
paying agent after delivery of your purchase notice. We will pay the purchase
price for your debentures promptly following the later of (1) the purchase date
or (2) your delivery of your debentures.
If the paying agent holds money or securities sufficient to pay the
purchase price of your debentures on the business day following the purchase
date according to the terms of the indenture, then, immediately after the
purchase date, your debentures will cease to be outstanding and interest will
cease to accrue, whether or not you deliver your debentures to the paying
agent. After the debentures cease to be outstanding, all of your rights under
the debentures will terminate, other than your right to receive the purchase
price on delivery of the debentures.
The terms of our borrowing agreements may limit our ability to purchase
your debentures.
We may not purchase your debentures if an event of default with respect to
the debentures, other than a default in the payment of the purchase price, has
occurred and is continuing.
Change in Control Permits Purchase of Debentures at the Option of the Holder
In the event of a "change in control," as defined below, occurring on or
before February 1, 2022, you may, subject to the terms and conditions of the
indenture, require us to purchase for cash all or part of your debentures, in
multiples of $1,000 principal amount. The purchase price for your debentures
will equal the principal amount of your debentures, plus accrued interest to,
but excluding, the date of purchase and liquidated damages, if any. We will be
required to purchase your debentures within 45 business days after a change in
control. We refer to this date in this prospectus as the "change in control
purchase date."
Within 30 days after a change in control, we must mail a notice regarding
the change in control to the trustee and to you at your address, as shown in
the register of the registrar. The notice must state, among other things:
o the events causing a change in control;
o the date of the change in control;
o the last date on which you may exercise your right to require us to
purchase your debentures;
o the change in control purchase price;
o the change in control purchase date;
o the name and address of the paying agent and the conversion agent;
o the conversion price and any adjustments to the conversion price;
o that if you deliver a change in control purchase notice, you may
convert your debentures only if you withdraw your change in control
purchase notice according to the terms of the indenture; and
o the procedures that you must follow to exercise your right.
To exercise your right, your change in control purchase notice must be
received by the paying agent no later than the fifth business day before the
change in control purchase date. Your change in control purchase notice must
state:
o the certificate numbers of your debentures to be delivered for
purchase;
o the principal amount of debentures to be purchased; and
o that we are to purchase your debentures according to the applicable
provisions of the debentures.
17
You may withdraw your change in control purchase notice by delivering a
written notice of withdrawal to the paying agent before the change in control
purchase date. Your notice of withdrawal must state:
o the certificate numbers of your debentures being withdrawn;
o the principal amount of debentures being withdrawn; and
o the principal amount, if any, of debentures that remain subject to
your change in control purchase notice.
Our obligation to pay the change in control purchase price for debentures,
for which you have delivered and not validly withdrawn a change in control
purchase notice, is conditioned on you delivering your debentures, together
with necessary endorsements, to the paying agent after delivery of your change
in control purchase notice. We will pay the change in control purchase price
for your debentures promptly following the later of the change in control
purchase date or your delivery of your debentures.
If the paying agent holds money sufficient to pay the change in control
purchase price of your debentures on the change in control purchase date
according to the terms of the indenture, then, immediately after the change in
control purchase date, your debentures will cease to be outstanding and
interest will cease to accrue, whether or not you deliver your debentures to
the paying agent. After the debentures cease to be outstanding, all of your
rights under the debentures will terminate, other than your right to receive
the change in control purchase price on delivery of the debentures.
Under the indenture, a "change in control" is deemed to have occurred if:
o any person, including our affiliates and associates (other than us,
our subsidiaries or their employee benefit plans) files a Schedule
13D or Schedule TO, or any successor schedule, form or report under
the Exchange Act, disclosing that such person has become the
beneficial owner of 50% or more of the voting power of our common
stock or other capital stock into which our common stock is
reclassified or changed, with certain exceptions; or
o any share exchange, consolidation or merger is consummated pursuant
to which our common stock would be converted into cash, securities or
other property, in each case other than any share exchange,
consolidation or merger of our company in which the holders of our
common stock immediately prior to the share exchange, consolidation
or merger have, directly or indirectly, at least a majority of the
total voting power in the aggregate of all classes of capital stock
of the continuing or surviving corporation immediately after the
share exchange, consolidation or merger.
However, a change in control will be deemed not to have occurred if:
o the sale price of our common stock for any five trading days within:
(a) the period of ten consecutive trading days ending
immediately after the later of the change in control and
the public announcement of the change in control, in the
case of a change in control under the first bullet point
above, or
(b) the period of ten consecutive trading days ending
immediately before the change in control, in the case of a
change in control under the second bullet point above,
equals or exceeds 105% of the conversion price of the debentures in
effect on each of these trading days; or
o at least 90% of the consideration in the transaction constituting a
change in control consists of shares of common stock traded or to be
traded immediately following the change in control on a national
securities exchange or the Nasdaq National Market and, as a result of
the transaction, the debentures become convertible solely into common
stock (and any rights attached to that common stock).
The indenture does not permit our board of directors to waive its
obligation to purchase your debentures in the event of a change in control.
18
In connection with any purchase offer in the event of a change in control,
we will:
o comply in all material respects with the provisions of Rule 13e-4,
Rule 14e-1 and any other tender offer rules under the Exchange Act
which may then be applicable; and
o file Schedule TO or any other required schedule under the Exchange
Act.
The change in control purchase feature of your debentures may make more
difficult or discourage a takeover of Charles River. The change in control
purchase feature, however, is not the result of our knowledge of any specific
effort:
o to accumulate our common stock;
o to obtain control of Charles River by means of a merger, tender
offer, solicitation or otherwise; or
o by management to adopt a series of anti-takeover provisions.
Instead, the change in control purchase feature is a standard term
contained in other debenture offerings that have been marketed by Credit Suisse
First Boston Corporation, an initial purchaser of the debentures. The terms of
the change in control purchase feature resulted from our negotiations with
Credit Suisse First Boston Corporation.
We could, in the future, enter into transactions, including
recapitalizations, that would not constitute a change in control with respect
to the change in control purchase feature of your debentures, but that would
increase the amount of our or our subsidiaries' outstanding indebtedness.
We may not purchase your debentures upon a change in control if an event
of default with respect to the debentures, other than a default in the payment
of the change in control purchase price, has occurred and is continuing.
Merger and Sale of Assets by Charles River
The indenture provides that we may not consolidate or merge with or into
any other person or convey, transfer or lease our properties and assets
substantially as an entirety to another person, unless among other items:
o we are the surviving person; or the resulting, surviving or
transferee person, if other than us, is organized and existing under
the laws of:
(a) the United States, any state thereof or the District of
Columbia; or
(b) any other country, if the merger, consolidation or other
transaction would not impair your rights;
o the successor person assumes all of our obligations under the
debentures and the indenture; and
o we or the successor person will not be in default under the indenture
immediately after the transaction.
If a person assumes our obligations in these circumstances, subject to
some exceptions, we will be discharged from all obligations under the
debentures and the indenture. Although the indenture permits these
transactions, some of the transactions described above which occur on or before
February 1, 2022 could constitute a change in control of Charles River and
permit you to require us to purchase your debentures as described above.
Events of Default
The following are events of default for the debentures:
o default in payment of accrued interest, the principal amount,
redemption price, purchase price or change in control purchase price
with respect to any debenture when that amount becomes due and
payable;
o our failure to comply with any of our other agreements in the
debentures or the indenture upon our receipt of notice of the default
by the trustee or by holders of not less than 25% in principal amount
of the debentures
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then outstanding and the failure to cure (or obtain a waiver of) the
default within 90 days after receipt of notice;
o our default in the payment at final maturity, after the expiration of
any applicable grace period, of principal of, or premium, if any, on
indebtedness for money borrowed, other than non-recourse
indebtedness, in the principal amount then outstanding of $25.0
million or more, or acceleration of any indebtedness in the principal
amount so that it becomes due and payable before the date on which it
would otherwise have become due and payable, and the acceleration is
not rescinded within 10 business days after notice to us according to
the indenture; and
o specified events of bankruptcy, insolvency or reorganization
affecting us.
If an event of default happens and continues, either the trustee or the
holders of not less than 25% in aggregate principal amount of the debentures
then outstanding may declare the principal amount, plus interest accrued
through the declaration date, to be immediately due and payable. In the case of
events of bankruptcy or insolvency affecting us, the principal amount, plus
interest accrued through the occurrence of that event, will automatically
become due and payable. However, so long as any indebtedness under the credit
facility is outstanding, that acceleration will not be effective until the
earlier of:
o an acceleration of any indebtedness under the credit facility; or
o five business days after we and the administrative agent under the
credit facility receive written notice of that acceleration.
Except as stated in the previous sentence, upon any declaration, the
debentures will become due and payable immediately.
However, in the case of an event of default relating to specified events
of bankruptcy or insolvency affecting us, all outstanding debentures will
become due and payable without further action or notice. You may not enforce
the indenture or the debentures except as provided in the indenture.
The holders of a majority in principal amount of the then outstanding
debentures by written notice to the trustee may, on your behalf, rescind an
acceleration and its consequences if:
o the rescission would not conflict with any judgment or decree; and
o all existing events of default (except nonpayment of principal,
interest, premium or liquidated damages, if any, that became due
solely because of the acceleration) have been cured or waived.
However, in the event of a declaration of acceleration of the debentures
because an event of default has occurred and is continuing as a result of the
acceleration of any indebtedness described above, the declaration of
acceleration of the debentures will be automatically annulled if:
o the holders of any indebtedness described above have rescinded the
declaration of acceleration in respect of that indebtedness within 30
days of that declaration;
o the annulment of the acceleration of the debentures would not
conflict with any judgment or decree of a court of competent
jurisdiction; and
o all existing events of default (except nonpayment of principal or
interest that became due solely because of the acceleration) have
been cured or waived.
Modification
We, together with the trustee, may enter into supplemental indentures that
add, change or eliminate provisions of the indenture, or modify your rights,
with the consent of holders of at least a majority in principal amount of the
debentures then outstanding. However, without your consent, no supplemental
indenture may:
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o change the record or payment dates for interest payments, reduce the
rate of interest on any debenture or extend the time of payment;
o extend the stated maturity of any debenture;
o reduce the principal amount, redemption price, purchase price or
change in control purchase price with respect to any debenture;
o make any debenture payable in money or securities other than that
stated in the debenture;
o make any change that adversely affects your right to convert your
debentures;
o make any change that adversely affects your right to require us to
purchase your debentures;
o impair your right to convert, or receive payment with respect to,
your debentures, or your right to institute suit for the enforcement
of payment with respect to, or conversion of, your debentures; and
o change the provisions in the indenture that relate to modifying or
amending the indenture.
Without your consent, we, together with the trustee, may enter into
supplemental indentures for any of the following purposes:
o to evidence our successor and the assumption by that successor of our
obligations under the indenture and the debentures;
o to add to our covenants for your benefit or to surrender any right or
power conferred upon us;
o to secure our obligations in respect of the debentures;
o to make any changes or modifications to the indenture necessary in
connection with the registration of the debentures under the
Securities Act and the qualification of the debentures under the
Trust Indenture Act as contemplated by the indenture;
o to cure any ambiguity, defect or inconsistency in the indenture.
No supplemental indenture entered into according to the second, third,
fourth or fifth bullets of the previous paragraph may be entered into without
the consent of holders of a majority in principal amount of the debentures, if
the supplemental indenture may materially and adversely affect your interests.
The holders of a majority in principal amount of the outstanding
debentures may, on your behalf:
o waive our compliance with restrictive provisions of the indenture, as
detailed in the indenture; and
o waive any past default under the indenture and its consequences,
except a default in the payment of interest, principal amount,
redemption price, purchase price or change in control purchase price
or obligation to deliver common stock upon conversion with respect to
any debenture, or in respect of any provision which under the
indenture cannot be modified or amended without your consent.
Registration Rights
The registration statement of which this prospectus forms a part has been
filed under the terms of a registration rights agreement which we entered into
with the initial purchasers of the debentures. In the registration rights
agreement we agreed, for your benefit and at our expense, to:
o file with the SEC a registration statement covering resale of the
debentures and of the shares of our common stock issuable upon
conversion of the debentures as soon as practicable, but no later
than 90 days after January 24, 2002;
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o use our reasonable efforts to cause the shelf registration statement
to be declared effective as soon as practicable, but no later than
180 days after January 24, 2002; and
o use our reasonable efforts to keep the shelf registration statement
effective until the earlier of (1) the sale pursuant to the shelf
registration statement of all the securities registered and (2) the
expiration of the holding period applicable to securities held by
persons that are not our affiliates under Rule 144(k) of the
Securities Act, with some exceptions.
We are permitted to suspend the use of this prospectus under circumstances
relating to pending corporate developments, public filings with the SEC and
similar events for periods not exceeding 45 days in any three-month period or
120 days in any 12-month period.
We agreed to pay predetermined liquidated damages to you if the shelf
registration statement is not timely filed or made effective or if the
prospectus is unavailable for periods exceeding those permitted above. These
liquidated damages accrue until the failure to file or become effective or
unavailability is cured according to the following:
o in respect of each $1,000 principal amount of debentures, at a rate
per year equal to 0.5% of such principal amount, plus accrued
interest to the date of determination; and
o in respect of any common stock issued upon conversion of each $1,000
principal amount of debentures, at a rate per year equal to 0.5% of
such principal amount, plus accrued interest to the date of
determination, divided by the conversion price.
So long as the failure to file or become effective or the unavailability
continues, we will pay you liquidated damages in cash on February 1 and August
1 of each year, if you are the record holder on the immediately preceding
January 15 or July 15. When the registration default is cured, we will pay you
accrued and unpaid liquidated damages in cash on the next interest payment
date, if you are the record holder on the date of the cure.
A holder who sells debentures and the underlying shares of our common
stock under the shelf registration statement is required to be named as a
selling securityholder in this prospectus, deliver a prospectus to purchasers
and is bound by the provisions of the registration rights agreement, including
indemnification provisions. We will pay all expenses of the shelf registration
statement, provide each selling securityholder with copies of this prospectus
and take certain other actions required to permit, subject to the above,
unrestricted resales of the debentures and the underlying shares of our common
stock.
We provided initial holders with a form of selling securityholder notice
and questionnaire, which we refer to as the questionnaire. No holder of
registrable securities is entitled to be named as a selling securityholder in
this prospectus or to use this prospectus for offers and resales of registrable
securities at any time, unless the holder has returned a completed and signed
questionnaire to us. Following our receipt of a completed and signed
questionnaire, we will include the registrable securities in the shelf
registration statement, subject to restrictions on the timing and number of
supplements to this prospectus provided in the registration rights agreement.
This summary of the material provisions of the registration rights
agreement may not contain all of the information important to you. You should
review the registration rights agreement.
Governing Law
The indenture and the debentures are governed by, and will be construed
according to, the law of the State of New York.
Information Concerning the Trustee
State Street Bank and Trust Company is the trustee, registrar, paying
agent and conversion agent.
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Book-Entry System
The debentures were issued in the form of global securities held in
book-entry form. DTC or its nominee is the sole registered holder of the
debentures for all purposes under the indenture. As an owner of beneficial
interests in the debentures represented by global securities, you hold your
interests according to the procedures and practices of DTC. As a result, your
beneficial interests in the debentures are shown on, and transfers are effected
only through, records maintained by DTC and its direct and indirect
participants. Your interests may not be exchanged for certificated securities,
except in limited circumstances. You must exercise your rights in respect of
your interests, including your rights to convert or require purchase of your
interests in the debentures, according to the procedures and practices of DTC.
As a beneficial owner, you are neither a holder of the debentures nor entitled
to any rights under the global securities or the indenture. We and the trustee,
and our respective agents, may treat DTC as the sole holder and registered
owner of the global securities.
Exchange of Global Securities
The debentures, represented by a global security, are exchangeable for
certificated securities with the same terms only if:
o DTC is unwilling or unable to continue as depositary, or if DTC
ceases to be a clearing agency registered under the Exchange Act, and
we do not appoint a successor depositary within 90 days;
o we decide to discontinue use of the system of book-entry transfer
through DTC or any successor depositary; or
o a default under the indenture occurs and is continuing.
DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency" for
registered participants. DTC facilitates the settlement of transactions among
its participants in those securities through electronic computerized book-entry
changes in participants' accounts, eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the initial purchasers), banks, trust companies, clearing
corporations and other organizations, some of whom and/or whose representatives
own DTC. Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
23
DESCRIPTION OF CAPITAL STOCK
General Matters
Our authorized capital stock consists of 120,000,000 shares of common
stock, $0.01 par value per share, and 20,000,000 shares of preferred stock,
$0.01 par value per share, to be issued from time to time in one or more
series, with designations, powers, preferences, rights, qualifications,
limitations and restrictions as our board of directors may determine. As of
December 29, 2001, we had outstanding 44,189,650 shares of common stock and no
shares of preferred stock. As of December 29, 2001, we had outstanding options
to purchase 2,749,148 shares of our common stock, of which 1,556,275 were
exercisable. The following summary of provisions of our capital stock describes
all material provisions of, but does not purport to be complete and is subject
to, and qualified in its entirety by, our restated certificate of incorporation
and our amended and restated by-laws, which are included as exhibits to our
Annual Report on Form 10-K for the year ended December 29, 2001 which is
incorporated by reference in this prospectus.
Common Stock
Our issued and outstanding shares of common stock are validly issued,
fully paid and nonassessable. Holders of our common stock are entitled to share
equally, share for share, if dividends are declared on our common stock,
whether payable in cash, property or our securities. Our shares of common stock
are not convertible and holders have no preemptive or subscription rights to
purchase any of our securities. Upon liquidation, dissolution or winding up of
Charles River, the holders of common stock are entitled to share equally, share
for share, in our assets which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of any series of preferred stock then outstanding. Each outstanding
share of common stock is entitled to one vote on all matters submitted to a
vote of stockholders. There is no cumulative voting. Except as otherwise
required by law or our restated certificate of incorporation, the holders of
common stock vote together as a single class on all matters submitted to a vote
of stockholders.
Our common stock is listed on the New York Stock Exchange under the symbol
"CRL."
Preferred Stock
Our board of directors may, without further action by our stockholders,
from time to time, direct the issuance of shares of preferred stock in series
and may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of preferred stock would reduce the amount of funds
available for the payment of dividends on shares of common stock. Holders of
shares of preferred stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of Charles River before
any payment is made to the holders of shares of common stock. In some
circumstances, the issuance of shares of preferred stock may render more
difficult or tend to discourage (1) a merger, tender offer or proxy contest,
(2) the assumption of control by a holder of a large block of our securities or
(3) the removal of incumbent management. Upon the affirmative vote of a
majority of the total number of directors then in office, our board of
directors, without stockholder approval, may issue shares of preferred stock
with voting and conversion rights which could adversely affect the holders of
shares of common stock.
We have no current intention to issue any of our unissued, authorized
shares of preferred stock. However, the issuance of any shares of preferred
stock in the future could adversely affect the rights of holders of common
stock.
Warrants
As of December 29, 2001, we had outstanding warrants to purchase 969,881
shares of common stock at an exercise price of $5.19 per share, subject to
customary antidilution adjustment. The warrants are exercisable before 5:00
p.m., New York City time, on October 1, 2009.
As of December 29, 2001, we also had outstanding warrants to purchase
97,387 shares of common stock at an exercise price of not less than $0.01 per
share subject to customary antidilution provisions (which differ in some
respects from the warrants discussed in the preceding paragraph) and other
customary terms. These warrants are exercisable before 5:00 p.m., New York City
time, on April 1, 2010.
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Registration Rights
Certain entities are entitled to particular registration rights related to
their warrants. We have agreed to indemnify all holders whose shares are
registered according to the exercise of these rights against specified
liabilities, including liabilities under the Securities Act, and to pay their
expenses in connection with these registrations.
Provisions of Delaware Law Governing Business Combinations
We are subject to the "business combination" provisions of the Delaware
General Corporation Law. In general, these provisions prohibit a publicly held
Delaware corporation from engaging in various "business combination"
transactions with any "interested stockholder" for a period of three years
after the date of the transaction in which the person became an "interested
stockholder," unless:
o the transaction is approved by the board of directors before the date
the "interested stockholder" obtained this status;
o upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and
also officers and (b) employee stock plans in which employee
participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender
or exchange offer; or
o on or after the date the "business combination" is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
outstanding voting stock which is not owned by the "interested
stockholder."
A "business combination" is defined to include mergers, asset sales and
other transactions resulting in financial benefit to a stockholder. In general,
an "interested stockholder" is a person who, together with affiliates and
associates, (1) owns 15% or more of a corporation's voting stock or (2) within
three years did own 15% or more of a corporation's voting stock. The statute
could prohibit or delay mergers or other takeover or change in control
attempts.
Charter and Bylaw Provisions Relating to Changes in Control
Our certificate of incorporation and bylaws contain provisions that could
have the effect of delaying, deterring or preventing the acquisition of control
of us by means of tender offer, open market purchases, proxy contest or
otherwise. Set forth below is a description of those provisions.
Special Meetings of Stockholders. Our certificate of incorporation
provides that special meetings of stockholders may be called only by (1) the
chairman of the board of directors, (2) the chief executive officer (or, if
there is no chief executive officer, the president) or (3) the board of
directors, according to a written resolution passed by a majority of the
directors then in office. Stockholders are not permitted to call a special
meeting or to require that the board of directors call a special meeting. The
business permitted to be conducted at any special meeting of stockholders is
limited to matters relating to purposes stated in the notice of meeting. As a
result, a stockholder could not force stockholder consideration of a proposal
over the opposition of the board of directors by calling a special meeting of
stockholders before (1) the next annual meeting or (2) the time that the board
of directors believes consideration to be appropriate. This change limits a
potential acquirer's ability to choose an advantageous time to launch a
takeover bid.
No Action by Stockholder Consent. Our bylaws provide that actions required
or permitted to be taken at any annual or special meeting of the stockholders
may not be taken by written consent of the stockholders. This provision
prevents holders of the requisite voting power of our common stock from using
the written consent procedure to take stockholder action without a meeting.
This provision may effectively deter or delay actions by a person or a group
acquiring a substantial percentage of our stock, even though these actions may
be desired by, or beneficial to, the holders of a majority of our common stock.
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Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation limits the liability of our directors to
the fullest extent permitted by the Delaware General Corporation Law. In
addition, our certificate of incorporation provides that we will indemnify our
directors and officers to the fullest extent permitted by law. We have entered
into indemnification agreements with our current directors and executive
officers, and expect to enter into similar agreements with any new directors or
executive officers. We have obtained directors' and officers' insurance.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EquiServe Trust
Company, NA.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion, subject to the qualifications and limitations
described below, is the opinion of Davis Polk & Wardwell and sets forth the
material U.S. federal income tax consequences of the ownership and disposition
of the debentures. This discussion applies only to debentures that are held as
capital assets.
This discussion does not describe the U.S. federal income tax consequences
of the ownership or disposition of our common stock, nor does it describe all
of the tax consequences that may be relevant to you in light of your particular
circumstances. This discussion does not apply to you if you are a member of a
class of holders subject to special rules, such as:
o financial institutions;
o insurance companies;
o dealers in securities or foreign currencies;
o persons holding debentures as part of a "straddle," "hedge" or
"conversion" transaction;
o United States Holders (as defined below) whose functional currency is
not the U.S. dollar;
o former citizens or residents of the United States;
o partnerships or other entities classified as partnerships for U.S.
federal income tax purposes; and
o persons subject to the alternative minimum tax.
This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, changes to any of which after the
date of this prospectus may affect the tax consequences described herein,
possibly with retroactive effect.
Persons considering the purchase of debentures are urged to consult their
tax advisers with regard to the application of the United States federal income
tax laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
Classification of Debentures
We are treating the debentures as indebtedness for United States federal
income tax purposes that is subject to the Treasury regulations governing
contingent payment debt instruments (the "contingent debt regulations").
Pursuant to the terms of the indenture, you agree with us (in the absence of an
administrative determination or judicial ruling to the contrary) to treat the
debentures as debt instruments that are subject to the contingent debt
regulations and to be bound by our application of the contingent debt
regulations to the debentures, including our determination of the rate at which
interest will be deemed to accrue on your debentures for U.S. federal income
tax purposes.
The contingent debt regulations do not directly address securities such as
the debentures and there is no other authority that addresses whether and how
these regulations would apply to the debentures. It is therefore uncertain
whether and how the regulations will apply to the debentures. If it is
nonetheless determined that the contingent debt regulations do not apply to
your debentures, such determination could affect the amount, timing, source and
character of income, gain or loss with respect to your investment in the
debentures. In particular, it might be determined that:
o you should have accrued interest income at a lower rate;
o you should not have recognized income or gain upon the conversion of
a debenture;
o you should have recognized capital gain or loss upon a taxable
disposition of your debentures;
27
o if you purchase debentures for less than their adjusted issue price
on the acquisition date, either you should treat any gain recognized
on the sale or disposition of your debentures as ordinary income to
the extent of the accrued market discount or, if you so elect, you
should include the market discount as ordinary income as it accrues;
and
o if you purchase debentures for more than their adjusted issue price
on the acquisition date, you should amortize the excess, or
"premium", as a reduction of the amount of interest income you are
required to accrue on your debentures.
As a result, you are urged to consult your tax adviser regarding the U.S.
federal income tax consequences of an investment in the debentures (including
alternative characterizations of the debentures) and with respect to any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
The remainder of this discussion is based on our treatment of the
debentures as debt instruments subject to the contingent debt regulations as
described above.
Tax Consequences to United States Holders
This discussion applies to United States Holders. You are a United States
Holder if you are a beneficial owner of a debenture and you are for United
States federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or of any political subdivision thereof; or
o an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
Interest Accruals on Debentures
Under the contingent debt regulations, regardless of your method of
accounting for U.S. federal income tax purposes, you are required to accrue
interest income on your debentures on a constant yield basis at an assumed
yield that we refer to as the "comparable yield." As a result, you will be
required to include interest in income in each year in excess of any interest
payments actually received by you in that year.
At the time the debentures were issued, we were required to determine the
comparable yield for the debentures that takes into account the yield at which
we could have issued a non-convertible fixed rate debt instrument with no
contingent payments, but with terms otherwise similar to those of the
debentures. As a result, we determined the comparable yield to be 9% compounded
semi-annually, which is higher than the stated yield of the debentures.
Solely for purposes of determining the amount of interest income that you
are required to accrue, we have constructed a "projected payment schedule" in
respect of the debentures representing a series of payments the amount and
timing of which would produce a yield to maturity on the debentures equal to
the comparable yield. The projected payment schedule for the debentures
includes estimates for payments of interest and for a payment at maturity
taking into account the anticipated value of our common stock at the time. The
comparable yield is set forth in the indenture. You may obtain the projected
payment schedule by submitting a written request for it to us at Charles River
Laboratories International, Inc., 251 Ballardvale Street, Wilmington, MA 01887,
Attention: Corporate Secretary.
Neither the comparable yield nor the projected payment schedule
constitutes a representation by us regarding the actual amount that your
debentures will pay, or the value at any time of the common stock into which
your debentures may be converted.
For U.S. federal income tax purposes, you are required to use the
comparable yield and the projected payment schedule established by us in
determining interest accruals and adjustments in respect of your debentures,
unless you timely disclose and justify the use of a different comparable yield
and projected payment schedule to the IRS.
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Subject to the discussion on basis-issue price differences below, based on
the comparable yield and the issue price of the debentures, and regardless of
your accounting method, you are required to accrue as interest the sum of the
daily portions of interest on the debentures for each day in the taxable year
on which you hold the debentures, adjusted upward or downward to reflect the
difference, if any, between the actual and the projected amount of any
contingent payments on the debentures (as set forth below).
The daily portions of interest in respect of a debenture are determined by
allocating to each day in an accrual period the ratable portion of interest on
the debenture that accrues in the accrual period. The amount of interest on a
debenture that accrues in an accrual period is the product of the comparable
yield on the debenture (adjusted to reflect the length of the accrual period)
and the adjusted issue price of the debenture. The adjusted issue price of a
debenture at the beginning of the first accrual period will equal its issue
price and for any subsequent accrual periods will be (x) the sum of the issue
price of the debenture and any interest previously accrued thereon
(disregarding any positive or negative adjustments) minus (y) the amount of any
projected payments on the debentures for previous accrual periods.
In addition to the interest accrual discussed above, you are required to
recognize interest income equal to the amount of the excess of actual payments
over projected payments (a "positive adjustment") in respect of a debenture for
a taxable year. For this purpose, the payments in a taxable year include the
fair market value of property (including our common stock) received in that
year. If you receive actual payments that are less than the projected payments
in respect of a debenture for a taxable year, you will incur a "negative
adjustment" equal to the amount of the difference. This negative adjustment
will (i) first reduce the amount of interest in respect of the debenture that
you would otherwise be required to include in the taxable year and (ii) to the
extent of any excess, will give rise to an ordinary loss equal to that portion
of the excess that does not exceed the excess of (A) the amount of all previous
inclusions under the debenture over (B) the total amount of your net negative
adjustments treated as ordinary loss on the debenture in prior taxable years. A
net negative adjustment is not subject to the two percent floor limitation
imposed on miscellaneous deductions under Section 67 of the Code. Any negative
adjustment in excess of the amounts described in (i) and (ii) will be carried
forward to offset future interest income in respect of the debentures or to
reduce the amount realized on a sale, exchange or retirement of the debentures.
If you purchase debentures for more or less than the adjusted issue price
of the debentures on the acquisition date you must, upon acquiring the
debentures, reasonably allocate the difference between your tax basis and the
adjusted issue price to daily portions of interest or projected payments over
the remaining term of the debentures. We urge you to consult your tax adviser
regarding these allocations.
If your basis in the debentures is greater than their adjusted issue
price, the amount of the difference allocated to a daily portion of interest or
to a projected payment is treated as a negative adjustment on the date the
daily portion accrues or the payment is made. On the date of the adjustment,
your adjusted basis in the debentures is reduced by the amount you treat as a
negative adjustment.
If your basis in the debentures is less than their adjusted issue price,
the amount of the difference allocated to a daily portion of interest or to a
projected payment is treated as a positive adjustment on the date the daily
portion accrues or the payment is made. On the date of the adjustment, your
adjusted basis in the debentures is increased by the amount you treat as a
positive adjustment.
Sale, Exchange, Conversion or Retirement of Debentures
Upon a sale, exchange or retirement of a debenture for cash, you will
generally recognize gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and your adjusted tax basis in the
debenture. Your adjusted tax basis in a debenture will generally be equal to
your purchase price for the debenture, increased by any interest income
previously accrued by you (determined without regard to any positive or
negative adjustments to interest accruals described above, other than
adjustments resulting from the purchase by you of the debentures for more or
less than their adjusted issue price on the acquisition date) and decreased by
the amount of any projected payments on your debentures for previous accrual
periods. You generally will treat any gain as interest income and any loss as
ordinary loss to the extent of the excess of your previous interest inclusions
over the total negative adjustments previously taken into account by you as
ordinary loss, and the balance as capital loss. The deductibility of capital
losses is subject to limitations.
29
In addition, as described above, our calculation of the comparable yield
and the projected payment schedule for the debentures includes the receipt of
stock upon conversion of debentures into our common stock as a contingent
payment in respect of the debentures. As a result, we intend to treat the
delivery of our common stock upon the conversion of a debenture as a contingent
payment. As described above, you are generally bound by our determination of
the comparable yield and the projected payment schedule. Under this treatment,
a conversion of a debenture into common stock will also result in taxable gain
or loss to you under the rules described in the previous paragraph. For this
purpose, the amount realized by you will equal the fair market value of the
common stock received upon conversion, plus any cash received.
Your tax basis in our common stock received upon a conversion of a
debenture will equal the then current fair market value of the common stock.
Your holding period for the common stock received will commence on the day
immediately following the date of conversion.
Constructive Dividends
If we decrease the conversion price, either at our discretion, or in
connection with a distribution of property to our stockholders that would be
taxable to the stockholders as a dividend for U.S. federal income tax purposes
(in accordance with the anti-dilution provisions of the debentures), the
decrease may be deemed to be the payment of a taxable dividend to you. For
example, a decrease in the conversion price in the event of distributions of
our evidences of indebtedness or our assets will generally result in deemed
dividend treatment to you to the extent of our current or accumulated earnings
and profits as determined under U.S. federal income tax principles.
Generally, a reasonable decrease in the conversion price in the event of
stock dividends or distributions of rights to subscribe for our common stock
will not be a taxable dividend.
Tax Consequences to Non-United States Holders
This discussion applies to Non-United States Holders. You are a Non-United
States Holder if you are a beneficial owner of a debenture and you are, for
U.S. federal income tax purposes:
o an individual who is classified as a nonresident alien for U.S.
federal income tax purposes;
o a foreign corporation; or
o a nonresident alien fiduciary of a foreign estate or trust.
All payments on the debentures made to you, and any gain realized by you
on a sale, exchange or conversion of the debentures, will be exempt from U.S.
federal income and withholding tax, provided that: (i) you do not own, actually
or constructively, 10% or more of the total combined voting power of all
classes of our stock entitled to vote, you are not a controlled foreign
corporation related, directly or indirectly, to us through stock ownership and
you are not a bank receiving specific types of interest, (ii) the certification
requirement described below has been fulfilled with respect to you, (iii) the
payments and gain are not effectively connected with your conduct of a trade or
business in the United States, and (iv) with respect only to gain realized by
you on a sale, exchange or conversion of the debentures, we have not been,
within the shorter of the five year period before the sale, exchange or
conversion and the period you held the debenture, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
The tax relating to debentures in a United States real property holding
corporation does not apply to you if, during the five-year period before the
sale, exchange or conversion, you owned debentures having a fair market value
equal to 5% or less of the fair market value of the total amount of the
debentures, provided that our debentures and common stock are both "regularly
traded" on an "established securities market." Generally, a corporation is a
"United States real property holding corporation" if the fair market value of
its United States real property interests, as defined in the Code and
applicable regulations, equals or exceeds 50% of the aggregate fair market
value of its worldwide real property interests and its other assets used or
held for use in a trade or business. We may be, or may become before your
disposition of the debentures, a "United States real property holding
corporation." If you own more than 5% of the debentures, you are urged to
consult your tax adviser regarding the possible application of the tax relating
to convertible debentures of United States real property holding corporations.
30
The certification requirement referred to in the second preceding
paragraph will be fulfilled if the beneficial owner of a debenture certifies on
IRS Form W-8BEN, under penalties of perjury, that it is not a U.S. person and
provides its name and address.
If you are engaged in a trade or business in the United States, and if
payments on the debenture are effectively connected with the conduct of this
trade or business, then although exempt from U.S. withholding tax, you will
generally be taxed in the same manner as a United States Holder (see "Tax
Consequences to United States Holders" above), except that you will be required
to provide a properly executed IRS Form W-8ECI in order to claim an exemption
from withholding tax. In that event, you are urged to consult your tax adviser
with respect to other U.S. tax consequences of the ownership and disposition of
debentures, including the possible imposition of a 30% branch profits tax.
Constructive Dividends
The conversion price of the debentures is subject to adjustment in some
circumstances. This adjustment could, in some circumstances, give rise to a
deemed distribution to you (see "Tax Consequences to United States
Holders--Constructive Dividends," above). In that event, the deemed
distribution would constitute a dividend for U.S. federal income tax purposes
to the extent of our current or accumulated earnings and profits as determined
under U.S. federal income tax principles. Such deemed dividend would generally
be subject to U.S. withholding tax at a 30% rate, subject to reduction under an
applicable treaty. If you are subject to withholding tax under these
circumstances, you are urged to consult your tax adviser as to whether you may
obtain a refund for all or a portion of the withholding tax.
Backup Withholding and Information Reporting
Information returns may be filed with the IRS in connection with payments
on the debentures and the proceeds from a sale or other disposition of the
debentures. If you are a United States Holder, you may be subject to United
States backup withholding tax at a rate of up to 31% on these payments if you
fail to provide your taxpayer identification number to the paying agent and to
comply with certification procedures or otherwise to establish an exemption
from backup withholding. If you are a Non-United States Holder, you may be
subject to U.S. backup withholding tax at a rate of up to 31% on these payments
unless you comply with certification procedures to establish that you are not a
U.S. person. The certification procedures required to claim the exemption from
withholding tax on payments on the debentures, described above, will satisfy
the certification requirements necessary to avoid the backup withholding tax as
well. The amount of any backup withholding from a payment will be allowed as a
credit against your United States federal income tax liability and may entitle
you to a refund, provided that the required information is timely furnished to
the IRS.
31
SELLING SECURITYHOLDERS
We originally issued the debentures in a private placement in January
2002. The debentures were resold by the initial purchasers to qualified
institutional buyers within the meaning of Rule 144A under the Securities Act
in transactions exempt from registration under the Securities Act. The
debentures and the underlying common stock that may be offered with this
prospectus will be offered by the selling securityholders, which includes their
transferees, pledgees, donees, assignees or successors.
The table below sets forth information concerning the principal amount of
debentures beneficially owned by each selling securityholder and the number of
shares of common stock into which the debentures are convertible, each of which
may be offered from time to time with this prospectus. Unless set forth below,
none of the selling securityholders has, or within the past three years has
had, any position, office or other material relationship with us or any of our
predecessors or affiliates. Jefferies & Company, Inc., Lehman Brothers Inc. and
SG Cowen Securities Corp. were initial purchasers in connection with the
private placement of the debentures and, along with certain of their
affiliates, have engaged and may engage in investment banking transactions with
us. In addition to the shares of common stock issuable upon conversion of the
debentures, BNP Paribas Equity Strategies, SNC and Variable Insurance Products
Fund III: Mid Cap Portfolio beneficially own 41,382 and 291,900 shares of our
common stock, respectively,
The number of shares of common stock shown in the table below assumes
conversion of the full amount of debentures held by the selling securityholder
at the initial conversion price of $38.87 per share of our common stock.
However, this conversion price is subject to adjustments as described under
"Description of Debentures--Conversion Rights." As a result, the number of
shares of common stock issuable upon conversion of the debentures may increase
or decrease from time to time. Under the terms of the indenture, fractional
shares will not be issued upon conversion of the debentures. Cash will be paid
instead of fractional shares, if any.
We have prepared the table below based on information given to us by the
selling securityholders on or before the date of this prospectus. However, any
or all of the debentures or the shares of common stock listed below may be
offered for sale with this prospectus by the selling securityholders from time
to time. As a result, no estimate may be given as to the amount of debentures
or shares of common stock that will be held by the selling securityholders upon
consummation of any sales. In addition, the selling securityholders listed in
the table below may have acquired, sold or transferred, in transactions exempt
from the registration requirements of the Securities Act, some or all of their
debentures since the date as of which the information was last provided to us.
Information about the selling securityholders may change over time. Any
changed information will be set forth in prospectus supplements, as required.
From time to time, additional information concerning ownership of the
debentures and the shares of common stock may rest with holders of debentures
or shares of common stock not named in the table below and of whom we are
unaware.
Only selling securityholders identified below who beneficially own the
debentures set forth opposite each selling securityholder's name on the
effective date of the registration statement of which this prospectus forms a
part may sell the debentures under this registration statement. Before any use
of this prospectus in connection with an offering of the debentures and/or the
shares of common stock by any holder not identified below, this prospectus will
be supplemented to set forth the name and other information about the selling
securityholder intending to sell the debentures and/or common stock. The
prospectus supplement will also disclose whether any selling securityholder
selling in connection with the prospectus supplement has held any position,
office or other material relationship with us or any of our affiliates during
the three years before the date of the prospectus supplement.
Number of
Principal Amount of Percentage of Underlying Shares Percentage of
Debentures Owned and Debentures of Common Stock that Common Stock
Name that May be Sold Outstanding May be Sold Outstanding(1)
- ------------------------------------------- -------------------- ------------- -------------------- --------------
Akela Capital Master Fund, Ltd. $ 2,000,000 1.08% 51,453.56 *
Alpine Associates 7,275,000 3.93% 187,162.34 *
Alpine Partners, L.P. 975,000 * 25,083.61 *
American Samoa Government 37,000 * 951.89 *
32
Number of
Principal Amount of Percentage of Underlying Shares Percentage of
Debentures Owned and Debentures of Common Stock that Common Stock
Name that May be Sold Outstanding May be Sold Outstanding(1)
- ------------------------------------------- -------------------- ------------- -------------------- --------------
Arbitex Master Fund LP $ 16,750,000 9.05% 430,923.59 *
Argent Classic Convertible Arbitrage
Fund (Bermuda) Ltd. 1,000,000 * 25,726.78 *
Argent Classic Convertible Arbitrage
Fund L.P. 500,000 * 12,863.39 *
AXP Bond Fund, Inc. 2,720,000 1.47% 69,976.85 *
AXP Variable Portfolio-Bond Fund, a
series of AXP Variable Portfolio
Income Series, Inc. 1,140,000 * 29,328.53 *
AXP Variable Portfolio-Managed
Fund, a series of AXP Variable
Portfolio Managed Series, Inc. 510,000 * 13,120.66 *
Baird, Patrick & Co., Inc. 500,000 * 12,863.39 *
BNP Paribas Equity Strategies, SNC 700,000 * 18,008.75 *
BP Amoco PLC Master Trust 1,422,000 * 36,583.48 *
Btes-Convertible Arb 1,000,000 * 25,726.78 *
Btpd-Growth vs. Value 4,000,000 2.16% 102,907.13 *
Chrysler Corporation Master
Retirement Trust 4,490,000 2.43% 115,513.25 *
Citicorp Life Insurance Company 14,000 * 360.17 *
CooperNeff Convertible Strategies
Fund, L.P. 210,000 * 5,402.62 *
DaimlerChrysler Corp. Emp #1
Pension Plan dtd 4/1/89 5,845,000 3.16% 150,373.04 *
Deephaven Domestic Convertible
Trading Ltd. 2,000,000 1.08% 51,453.56 *
Delta Air Lines Master Trust (c/o
Oaktree Capital Management, LLC) 1,240,000 * 31,901.21 *
Delta Pilots D&S Trust (c/o Oaktree
Capital Management, LLC) 610,000 * 15,693.34 *
Deutsche Banc Alex
Brown Inc. 7,000,000 3.78% 180,087.47 *
Fidelity Financial Trust: Fidelity
Convertible Securities Fund 4,000,000 2.16% 102,907.13 *
First Union Securities Inc. 7,350,000 3.97% 189,091.84 *
Franklin and Marshall College 330,000 * 8,489.84 *
Grace Brothers Management L.L.C. 2,000,000 1.08% 51,453.56 *
33
Number of
Principal Amount of Percentage of Underlying Shares Percentage of
Debentures Owned and Debentures of Common Stock that Common Stock
Name that May be Sold Outstanding May be Sold Outstanding(1)
- ------------------------------------------- -------------------- ------------- -------------------- --------------
Granville Capital Corporation $ 2,500,000 1.35% 64,316.95 *
Highbridge International LLC 16,350,000 8.84% 420,632.88 *
Hotel Union and Hotel Industry of
Hawaii Pension Plan 405,000 * 10,419.35 *
Income Portfolio, a series of IDS Life
Series Fund, Inc. 70,000 * 1,800.87 *
ISBC Financial Products USA Inc. 2,500,000 1.35% 64,316.95 *
Jefferies & Co. 3,500,000 1.89% 90,043.74 *
Jefferies & Company, Inc. 9,000 * 231.54 *
KBC Financial Products U.S.A. Inc. 3,500,000 1.89% 90,043.74 *
Lehman Brothers Inc. 7,000,000 3.78% 180,087.47 *
Lincoln National Global Asset
Allocation Fund, Inc. 160,000 * 4,116.29 *
Microsoft Corporation 1,575,000 * 40,519.68 *
Morgan Stanley & Co. 2,000,000 1.08% 51,453.56 *
Motion Picture Industry Health Plan -
Active Member Fund 280,000 * 7,203.50 *
Motion Picture Industry Health Plan -
Retiree Member Fund 175,000 * 4,502.19 *
National Benefit Life Insurance
Company 8,000 * 205.81 *
OCM Convertible Trust 2,610,000 1.41% 67,146.90 *
Partner Reinsurance Company Ltd. 720,000 * 18,523.28 *
Primerica Life Insurance Company 329,000 * 8,464.11 *
Putnam Asset Allocation Funds-
Balanced Portfolio 1,310,000 * 33,702.08 *
Putnam Asset Allocation Funds-
Conservative Portfolio 1,020,000 * 26,241.32 *
Putnam Convertible Income-Growth
Trust 8,890,000 4.81% 228,711.09 *
Putnam Convertible Opportunities and
Income Trust 340,000 * 8,747.11 *
Putnam Variable Trust-Putnam VT
Global Asset Allocation Fund 320,000 * 8,232.57 *
Qwest Occupational Health Trust 155,000 * 3,987.65 *
34
Number of
Principal Amount of Percentage of Underlying Shares Percentage of
Debentures Owned and Debentures of Common Stock that Common Stock
Name that May be Sold Outstanding May be Sold Outstanding(1)
- ------------------------------------------- -------------------- ------------- -------------------- --------------
RAM Trading Ltd. $ 1,300,000 * 33,444.82 *
SG Cowen Securities Corp. 5,300,000 2.86% 136,351.94 *
Salomon Brothers Asset
Management, Inc. 12,350,000 6.68% 317,725.75 *
Spear, Leeds & Kellogg L.P. 500,000 * 12,863.39 *
State Employees' Retirement Fund of
the State of Delaware 1,785,000 * 45,922.31 *
State of Connecticut Combined
Investment Funds 3,725,000 2.01% 95,832.26 *
State Street Bank Custodian for GE
Pension Trust 2,675,000 1.45% 68,819.14 *
Sturgeon Limited 90,000 * 2,315.41 *
The Estate of James Campbell 240,000 * 6,174.43 *
The Travelers Indemnity Company 785,000 * 20,195.52 *
The Travelers Insurance Company -
Life 594,000 * 15,281.71 *
The Travelers Insurance Company -
Separate Account TLAC 30,000 * 771.80 *
The Travelers Life and Annuity
Company 40,000 * 1,029.07 *
Total Return Portfolio, a series of
Growth and Income Trust 780,000 * 20,066.89 *
Travelers Series Trust Convertible
Bond Portfolio 200,000 * 5,145.36 *
Variable Insurance Products Fund III:
Mid Cap Portfolio 3,800,000 2.05% 97,761.77 *
Viacom Inc. Pension Master Trust 40,000 * 1,029.07 *
Zurich Institutional Benchmarks
Master Fund Ltd. 1,947,000 1.05% 50,090.04 *
- ---------------------------------------------------------------------------------------------------------------------------
Subtotal $ 167,525,000 90.55% 4,309,879.08 9.69%
All other holders of debentures or
future transferees, pledgees, donees,
assignees or successors of these
holders (2) 17,475,000 9.45% 449,575.51 1.01%
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 185,000,000 100% 4,759,454.59 10.70%
- ---------
* Less than 1%.
35
(1) Calculated based on Rule 13d-3(d)(1)(i) of the Exchange Act using
44,470,994 shares of common stock outstanding as of March 22, 2002. In
calculating this amount for each holder, we treated as outstanding the
number of shares of common stock issuable upon conversion of all of that
holder's debentures, but we did not assume conversion of any other
holder's debentures.
(2) Information about other selling securityholders will be set forth in
prospectus supplements from time to time, as required. This information
assumes that any other holders of debentures, or any future pledgees,
donees, assignees, transferees or successors of these holders, do not
beneficially own any shares of common stock other than the shares of
common stock issuable upon conversion of the debentures at the initial
conversion price.
36
PLAN OF DISTRIBUTION
We will not receive any of the proceeds of the sale of the debentures and
the underlying shares of common stock offered by this prospectus. The total
proceeds to the selling securityholders from the sale of debentures or shares
of common stock will be the purchase price of the debentures or the shares of
common stock, less any discounts and commissions. A selling securityholder
reserves the right to accept and, together with its agents, to reject, any
proposed purchase of debentures or shares of common stock to be made directly
or through agents.
The debentures and the underlying shares of common stock may be sold from
time to time to purchasers:
o directly by the selling securityholders and their successors, which
includes their transferees, pledgees, donees, assignees or
successors; or
o through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions
from the selling securityholders or the purchasers of the debentures
and the shares of common stock. These discounts, concessions or
commissions may be in excess of those customary in the types of
transactions involved.
The selling securityholders and any underwriters, broker-dealers or agents
who participate in the distribution of the debentures and the underlying shares
of common stock may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act. Any selling securityholder which is a
broker-dealer or an affiliate of a broker-dealer will be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act, unless
the selling securityholder purchased in the ordinary course of business, and at
the time of its purchase of the debentures to be resold, did not have any
agreements or understandings, directly or indirectly, with any person to
distribute the debentures. As a result, any profits on the sale of the
debentures and the shares of common stock by selling securityholders who are
deemed to be underwriters, and any discounts, commissions or concessions
received by any broker-dealers or agents who are deemed to be underwriters,
will be deemed to be underwriting discounts and commissions under the
Securities Act. Selling securityholders who are deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act will be subject to
prospectus delivery requirements of the Securities Act and to statutory
liabilities including, but not limited to, those relating to Sections 11, 12
and 17 of the Securities Act and Rule 10b-5 under the Exchange Act. To our
knowledge, none of the selling securityholders who are broker-dealers or
affiliates of broker dealers, other than the initial purchasers, purchased the
debentures outside of the ordinary course of business or, at the time of the
purchase of the debentures, had any agreements or understandings, directly or
indirectly, with any person to distribute the debentures.
If the debentures and the underlying shares of common stock are sold
through underwriters or broker-dealers, the selling securityholders will be
responsible for underwriting discounts or commissions or agent's commissions.
The debentures and the underlying shares of common stock may be sold in
one or more transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o prices related to prevailing market prices;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in transactions
o on any national securities exchange or quotation service on which the
debentures and the shares of common stock may be listed or quoted at
the time of the sale, including the NYSE in the case of the common
stock;
o in the over-the-counter market;
37
o in transactions otherwise than on these exchanges or services or in
the over-the-counter market; or
o through the writing of options, whether the options are listed on an
options exchange, or otherwise through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of the debentures and the underlying shares of
common stock, the selling securityholders may enter into hedging transactions
with broker-dealers or other financial institutions. These broker-dealers or
other financial institutions may in turn engage in short sales of the
debentures or the shares of common stock in the course of hedging their
positions. The selling securityholders may also (1) sell debentures and shares
of common stock short, and deliver debentures and shares of common stock to
close out short positions, or (2) loan or pledge debentures or shares of common
stock to broker-dealers that in turn may sell these debentures and shares of
common stock.
A short sale of the debentures or the underlying shares of common stock by
a broker-dealer, financial institution or selling securityholder would involve
the sale of debentures or shares of common stock that are not owned, and as a
result must be borrowed, in order to make delivery of the security in
connection with the sale. In connection with a short sale of the debentures or
the shares of common stock, a broker-dealer, financial institution or selling
securityholder may purchase the debentures or the shares of common stock on the
open market to cover positions created by short sales. In determining the
source of debentures or shares of common stock to close out these short
positions, the broker-dealer, financial institution or selling securityholders
may consider, among other things, the price of the debentures or the shares of
common stock available for purchase in the open market.
At the time a particular offering of the securities is made, if required,
a prospectus supplement will be distributed, which will set forth the names of
the selling securityholders, the total amount and type of securities being
offered and the terms of the offering, including, to the extent required, (1)
the names of any underwriters, broker-dealers or agents, (2) any discounts,
commissions and other terms constituting compensation from the selling
securityholders and (3) any discounts, commissions or concessions allowed or
reallowed to be paid to broker-dealers.
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholder and any underwriter,
broker-dealer or agent regarding the sale of the debentures and the underlying
shares of common stock by the selling securityholders.
Our common stock trades on the NYSE under the symbol "CRL." We do not
intend to apply for listing of the debentures on any securities exchange or for
quotation through Nasdaq. As a result, no assurances may be given as to the
development of liquidity or any trading market for the debentures. See "Risk
Factors--Risks Relating to Our Debt."
We cannot assure you that any selling securityholder will sell any of the
debentures or the underlying shares of common stock with this prospectus.
Further, we cannot assure you that any selling securityholder will not
transfer, devise or gift the debentures and the shares of common stock by other
means not described in this prospectus. In addition, any debentures or shares
of common stock covered by this prospectus that qualify for sale under Rule 144
or Rule 144A of the Securities Act, may be sold under Rule 144 or Rule 144A,
rather than under this prospectus. The debentures and the shares of common
stock may be sold in some states only through registered or licensed
broker-dealers. In addition, in some states the debentures and the shares of
common stock may not be sold unless they have been registered or qualified for
sale under an exemption from registration.
The selling securityholders and any other person participating in the sale
of the debentures or the shares of common stock will be subject to the Exchange
Act. The Exchange Act rules include, without limitation, Regulation M, which
may limit the timing of purchases and sales of any debentures or shares of
common stock by the selling securityholders and any other person. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the debentures and the shares of common stock to engage
in market-making activities with respect to particular debentures and shares of
common stock being distributed for a period of up to five business days before
the distribution. This may affect (1) the marketability of the debentures and
the shares of common stock and (2) the ability of any person or entity to
engage in market-making activities with respect to the debentures and the
shares of common stock.
38
Under the registration rights agreement filed as an exhibit to the
registration statement of which this prospectus forms a part, we and the
selling securityholders may be indemnified by the other against liabilities,
including liabilities under the Securities Act, or may be entitled to
contribution in connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the debentures and the underlying shares of
common stock to the public, other than commissions, fees and discounts of
underwriters, brokers, dealers and agents.
39
LEGAL MATTERS
The validity of the debentures and the shares of common stock issuable
upon conversion of the debentures are being passed upon for us by Davis Polk &
Wardwell, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Charles River Laboratories
International, Inc. for the year ended December 29, 2001 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
40
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
Public Reference Room North East Regional Office Midwest Regional Office
450 Fifth Street, N.W. 233 Broadway 500 West Madison Street
Room 1024 New York, NY 10279 Suite 1400
Washington, DC 20549 Chicago, Illinois 60661
You may also obtain copies of this information at prescribed rates by mail
from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for
further information on the operation of its public reference rooms. The SEC
also maintains a website that contains reports, proxy statements and other
information about issuers, like us, who file electronically with the SEC. The
address of that site is www.sec.gov.
You can also inspect reports, proxy statements and other information about
our company at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
We incorporate information into this prospectus by reference, which means
that we disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this prospectus, except for any such
information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that we
have previously filed with the SEC. These documents contain important
information about us and our financial condition.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SEC FILINGS (FILE NO. 001-15943) PERIOD
- ---------------------------------------------- ----------------------------------------------
Annual Report on Form 10-K Fiscal year ended December 29, 2001
Current Reports on Form 8-K Filed on January 17, 2002, January 23, 2002,
January 30, 2002 and February 14, 2002
Annual Proxy Statement on Schedule 14A Filed on April 1, 2002
All documents that we file with the SEC from the date of this prospectus
to the end of the offering of the debentures with this prospectus will also be
incorporated in this prospectus by reference.
You may request a copy of these filings at no cost, by writing or calling
us at the following address or telephone number:
Charles River Laboratories International, Inc.
251 Ballardvale Street
Wilmington, MA 01887
(978) 658-6000
Attn: Office of General Counsel
Exhibits to the filings will not be sent, however, unless those exhibits
have specifically been incorporated by reference in this prospectus.
41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
We are paying all of the selling securityholders' expenses related to this
offering, except that the selling securityholders will pay any applicable
broker's commissions and expenses. The following table sets forth the
approximate amount of fees and expenses payable by us in connection with this
registration statement and the distribution of the debentures and the
underlying shares of common stock registered hereby. Except for the SEC
registration fee, all of these fees and expenses have been estimated.
Amount to
be Paid
--------
SEC registration fee ............... $ 17,233
Legal fees and expenses ............ 100,000
Accounting fees and expenses ....... 15,000
Miscellaneous ...................... 7,767
--------
TOTAL .......................... $140,000
========
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit indemnification for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act.
As permitted by the Delaware General Corporation Law, our certificate of
incorporation includes a provision that eliminates the personal liability of
our directors for monetary damages for breach of fiduciary duty as a director,
except for liability (1) for any breach of the director's duty of loyalty to us
or our stockholders, (2) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (3) under section
174 of the Delaware General Corporation Law (regarding unlawful dividends and
stock purchases) or (4) for any transaction from which the director derived an
improper personal benefit.
As a result of this provision, our ability or that of our stockholders to
successfully prosecute an action against a director for breach of his or her
duty of care is limited. However, this provision does not affect the
availability of equitable remedies such as an injunction or rescission based
upon a director's breach of his or her duty of care. The SEC has taken the
position that this provision will have no effect on claims arising under the
federal securities laws.
In addition, our certificate of incorporation provides for mandatory
indemnification rights, subject to limited exceptions, to any director or
executive officer who (because of the fact that he or she is our director or
officer) is involved in a legal proceeding of any nature. These indemnification
rights include reimbursement for expenses incurred by our director or officer
in advance of the final disposition of a proceeding according to applicable
law.
The indemnification provisions in our certificate of incorporation,
by-laws and the indemnification agreements entered into between us and each of
our directors and executive officers may be sufficiently broad to permit
indemnification of our directors and executive officers for liabilities arising
under the Securities Act.
We also provide insurance from commercial carriers against some
liabilities incurred by our directors and officers.
II-1
Item 16. Exhibits and Financial Statement Schedules
(a) The following exhibits are filed as part of this registration
statement:
Exhibit No. Document
----------- --------
2.1 Recapitalization Agreement dated as of July 25, 1999 among
Charles River Laboratories, Inc., Charles River
Laboratories International, Inc. (formerly known as
Endosafe, Inc.), Bausch & Lomb Incorporated and the other
parties listed therein. (1)
2.2 Amendment No. 1 to Recapitalization Agreement dated as of
September 29, 1999 between Bausch & Lomb Incorporated and
CRL Acquisition LLC. (1)
2.3 Agreement and Plan of Reorganization dated as of June 6,
2000 among Charles River Laboratories International, Inc.,
CRL Acquisition LLC and B&L CRL, Inc. (2)
2.4 Stock Purchase Agreement dated as of December 21, 2000
among Pathology Associates International Corporation,
Science Applications International Corp. and Charles River
Laboratories, Inc. (3)
2.5 Stock Purchase Agreement among Charles River Laboratories,
Inc., Primedica Corporation, TSI Corporation and Genzyme
Transgenics Corporation. (3)
4.1 Indenture dated as of January 24, 2002 between Charles
River Laboratories International, Inc. and State Street
Bank and Trust Company, as trustee. (4)
4.2 Registration Rights Agreement dated as of January 24, 2002
among Charles River Laboratories International, Inc.,
Credit Suisse First Boston Corporation, Lehman Brothers
Inc., J.P. Morgan Securities Inc., SG Cowen Securities
Corporation, U.S. Bancorp Piper Jaffray Inc., Thomas Weisel
Partners LLC, Investec PMG Capital Corp. and Jeffries &
Company, Inc. (4)
4.3 Form of debentures due February 1, 2022 (included in
exhibit 4.1).
5.1 Opinion of Davis Polk & Wardwell. (5)
8.1 Opinion regarding tax matters (included in exhibit 5.1).
12.1 Statement regarding computation of ratio of earnings to
fixed charges. (5)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith).
23.2 Consent of Davis Polk & Wardwell (included in exhibit 5.1).
24.1 Power of Attorney. (5)
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company under the Trust Indenture Act of 1939, as
amended, relating to exhibit 4.1. (5)
- ---------
(1) Previously filed as an exhibit to our Registration Statement on Form S-1
(File No. 333-92383) filed December 8, 1999.
(2) Previously filed as an exhibit to our Registration Statement on Form S-3
(File No. 333-55670) filed February 15, 2001.
(3) Previously filed as an exhibit to our Registration Statement on Form S-3
(File No. 333-55670) filed February 15, 2001.
(4) Previously filed as an exhibit to our Annual Report on Form 10-K filed
March 27, 2002.
(5) Previously filed as an exhibit to this Registration Statement on Form S-3
(File No. 333-85894) filed April 9, 2002.
II-2
Item 17. Undertakings
A. Undertaking pursuant to Rule 415:
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of securities registered hereby, a post- effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (i) and (ii) above do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
B. Undertaking regarding filings incorporating subsequent Exchange Act
documents by reference:
The undersigned registrant hereby understands that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking in respect of indemnification:
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, State of
Massachusetts, on April 22, 2002.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
By: /s/ Thomas F. Ackerman
-------------------------------------------
Name: Thomas F. Ackerman
Title: Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Act, this Amendment No. 1
to the registration statement has been signed by the following persons in the
capacities indicated on April 22, 2002.
Signature Title
* President,
- ---------------------------- Chief Executive Officer and Chairman
James C. Foster
/s/ Thomas F. Ackerman Senior Vice President and Chief Financial Officer
- ---------------------------- (Principal Financial and Accounting Officer)
Thomas F. Ackerman
* Director
- ----------------------------
Robert Cawthorn
* Director
- ----------------------------
Stephen D. Chubb
* Director
- ----------------------------
Samuel O. Thier
* Director
- ----------------------------
William Waltrip
II-4
* The undersigned hereby signs this Amendment No. 1 to the registration
statement on Form S-3 on behalf of each of the indicated persons for whom
he is attorney-in-fact pursuant to a power of attorney previously filed.
By: /s/ Thomas F. Ackerman
----------------------------------------------------
Name: Thomas F. Ackerman
Title: Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
II-5
EXHIBIT INDEX
Exhibit No. Document
----------- --------
2.1 Recapitalization Agreement dated as of July 25, 1999 among
Charles River Laboratories, Inc., Charles River
Laboratories International, Inc. (formerly known as
Endosafe, Inc.), Bausch & Lomb Incorporated and the other
parties listed therein. (1)
2.2 Amendment No. 1 to Recapitalization Agreement dated as of
September 29, 1999 between Bausch & Lomb Incorporated and
CRL Acquisition LLC. (1)
2.3 Agreement and Plan of Reorganization dated as of June 6,
2000 among Charles River Laboratories International, Inc.,
CRL Acquisition LLC and B&L CRL, Inc. (2)
2.4 Stock Purchase Agreement dated as of December 21, 2000
among Pathology Associates International Corporation,
Science Applications International Corp. and Charles River
Laboratories, Inc. (3)
2.5 Stock Purchase Agreement among Charles River Laboratories,
Inc., Primedica Corporation, TSI Corporation and Genzyme
Transgenics Corporation. (3)
4.1 Indenture dated as of January 24, 2002 between Charles
River Laboratories International, Inc. and State Street
Bank and Trust Company, as trustee. (4)
4.2 Registration Rights Agreement dated as of January 17, 2002
among Charles River Laboratories International, Inc.,
Credit Suisse First Boston Corporation, Lehman Brothers
Inc., J.P. Morgan Securities Inc., SG Cowen Securities
Corporation, U.S. Bancorp Piper Jaffray Inc., Thomas Weisel
Partners LLC, Investec PMG Capital Corp. and Jeffries &
Company, Inc. (4)
4.3 Form of debentures due February 1, 2022 (included in
exhibit 4.1).
5.1 Opinion of Davis Polk & Wardwell. (5)
8.1 Opinion regarding tax matters (included in exhibit 5.1).
12.1 Statement regarding computation of ratio of earnings to
fixed charges. (5)
23.1 Consent of PricewaterhouseCoopers LLP (filed herewith).
23.2 Consent of Davis Polk & Wardwell (included in exhibit 5.1).
24.1 Power of Attorney. (5)
25.1 Form T-1 Statement of Eligibility of State Street Bank and
Trust Company under the Trust Indenture Act of 1939, as
amended, relating to exhibit 4.1. (5)
- ---------
(1) Previously filed as an exhibit to our Registration Statement on Form S-1
(File No. 333-92383) filed December 8, 1999.
(2) Previously filed as an exhibit to Amendment No. 2 to our Registration
Statement on Form S-1 (File No. 333-35524) filed June 23, 2000.
(3) Previously filed as an exhibit to our Registration Statement on Form S-3
(File No. 333-55670) filed February 15, 2001.
(4) Previously filed as an exhibit to our Annual Report on Form 10-K filed
March 27, 2002.
(5) Previously filed as an exhibit to this Registration Statement on Form S-3
(File No. 333-85894) filed April 9, 2002.
II-6
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Amendment No.
1 to the Registration Statement on Form S-3 of our report dated February 1,
2002, except as to Note 16 which is as of February 14, 2002, relating to the
consolidated financial statements and financial statement schedules, which
appears in Charles River Laboratories International, Inc.'s Annual Report on
Form 10-K for the year ended December 29, 2001. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
April 22, 2002