There are no unresolved comments to be reported in response to Item 1B.

Our common stock began trading on the New York Stock Exchange on June 23, 2000 under the symbol "CRL." The following table sets forth for the periods indicated below the high and low sales prices for our common stock.

There were no equity securities that were not registered under the Securities Act of 1933, as amended, sold by the Company during the fiscal year ended December 31, 2011.

As of January 31, 2012, there were approximately 448 registered shareholders of the outstanding shares of common stock.

We have not declared or paid any cash dividends on shares of our common stock in the past two years and we do not intend to pay cash dividends in the foreseeable future. We currently intend to retain any earnings to finance future operations and expansion. Some of the restrictive covenants contained in our revolving credit agreement and term loan agreements limit our ability to pay dividends.

The following table provides information relating to the our purchases of shares of our common stock during the quarter ended December 31, 2011.

On July 29, 2010, our Board of Directors authorized a $500.0 million stock repurchase program. Our Board of Directors increased the stock repurchase authorization by $250.0 million to $750.0 million on October 20, 2010.

During the fourth quarter of 2011, we repurchased 844,294 shares of common stock for $25.0 million under our Rule 10b5-1 Purchase Plan and in open market trading.

Additionally, the Company's Incentive Plans permit the netting of common stock upon vesting of restricted stock awards in order to satisfy individual tax withholding requirements. Accordingly, during the quarter ended December 25, 2010, the Company acquired 41 shares for a nominal amount as a result of such withholdings.

The following table summarizes, as of December 31, 2011, the number of options issued under the Company's stock option plans and the number of options available for future issuance under these plans.

The following table provides additional information regarding the aggregate issuances under our existing equity compensation plans as of December 31, 2011:



Category	Number of securities outstanding	Weighted average exercise price		Weighted average term
	(a)	(b)		(c)
Total number of restricted shares outstanding(1)	703,011	$	—	—
Total number of options outstanding	6,081.263	$	38.25	3.67

The following selected financial data are derived from our Consolidated Financial Statements and notes thereto and should be read in conjunction with Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and notes thereto contained in Item 8., "Financial Statements and Supplementary Data" of this report.

The following Management's Discussion and Analysis will help you understand the financial condition and results of operations. The Management's Discussion and Analysis is a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.

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

The following tables show the net sales and the percentage contribution of each of our reportable segments for the past three years. They also show cost of products sold and services provided, selling, general and administrative expenses, amortization of goodwill and intangibles and operating income by segment and as percentages of their respective segment net sales.

In our consolidated statements of income, we provide a breakdown of net sales and cost of sales between net products and services. Such information is reported irrespective of the business segment from which the sales were generated.

Net Sales. Net sales in 2010 were $1,133.4 million, a decrease of $38.2 million, or 3.3%, from $1,171.6 million in 2009.

Research Models and Services. In 2010, net sales for our RMS segment were $667.0 million, an increase of $7.1 million, or 1.1%, from $659.9 million in 2009. Sales growth was driven by the additions of Piedmont Research Center and Cerebricon, both of which were acquired in 2009, partially offset by lower sales of research models.

Preclinical Services. In 2010, net sales for our PCS segment were $466.4 million, a decrease of $45.3 million, or 8.8%, compared to $511.7 million in 2009. The decrease in PCS sales was primarily due to reduced biopharmaceutical spending which resulted in lower sales volume and pricing pressure. Favorable foreign currency translation increased sales growth by 0.9%.

Cost of Products Sold and Services Provided. Cost of products sold and services provided in 2010 was $748.6 million, essentially flat with 2009. Cost of products sold and services provided in 2010 was 66.1% of net sales, compared to 63.9% in 2009 due mainly to lower sales.

Research Models and Services. Cost of products sold and services provided for RMS in 2010 was $388.6 million, an increase of $7.4 million, or 1.9%, compared to $381.2 million in 2009. Cost of products sold and services provided as a percentage of net sales in 2010 was 58.3%, compared to 57.8% in 2009. The increase in cost as a percentage of sales was due mainly to the impact of increased fixed costs with a small sales increase partially offset by cost savings.

Preclinical Services. Cost of services provided for the PCS segment in 2010 was $360.0 million, a decrease of $7.4 million, or 2.0%, compared to $367.4 million in 2009. Cost of services provided as a percentage of net sales was 77.2% in 2010, compared to 71.8% in 2009. The increase in cost of services provided as a percentage of net sales was primarily due to lower capacity utilization due to the lower sales volume and increased pricing pressure.

Selling, General and Administrative Expenses. Selling, general and administrative expenses in 2010 were $232.5 million, an increase of $4.8 million, or 2.1%, from $227.7 million in 2009. Selling, general and administrative expenses in 2010 were 20.5% of net sales, compared to 19.4% of net sales in 2009. The increase in selling, general and administrative expenses as a percentage of sales was primarily due to lower sales.

Research Models and Services. Selling, general and administrative expenses for RMS in 2010 were $85.8 million, an increase of $6.7 million, or 8.5%, compared to $79.1 in 2009. Selling, general and administrative expenses increased as a percentage of sales to 12.9% in 2010 from 12.0% in 2009, due mainly to the reinstatement of limited merit-based wage increases coupled with increased allocations of Corporate Marketing and IT costs.

Preclinical Services. Selling, general and administrative expenses for the PCS segment in 2010 were $73.4 million, a decrease of $11.7 million, or 13.6%, compared to $85.1 million in 2009 due mainly to reduced allocations of Corporate Marketing and IT costs and tight expense control over discretionary costs. Selling, general and administrative expenses in 2010 decreased to 15.8% of net sales, compared to 16.6% in 2009.

Unallocated Corporate Overhead. Unallocated corporate overhead, which consists of various costs primarily related to activities centered at our corporate headquarters, such as compensation (including stock-based compensation), information systems, compliance and facilities expenses associated with our corporate, administration and professional services functions was $73.3 million in 2010, compared to $63.5 million in 2009. The increase in unallocated corporate overhead during 2010 was due primarily to increased global IT costs and costs related to the implementation of our ERP system in 2010 and increased costs associated with the evaluation of acquisition candidates.

Goodwill Impairment. Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our assessment for 2010, the fair value of our PCS business was less than its carrying value. The second step of the goodwill impairment test involved us calculating the implied goodwill for the PCS business. The carrying value of the goodwill assigned to the PCS business exceeded the implied fair value of goodwill resulting in a goodwill impairment of $305.0 million.

Asset Impairment. During the fourth quarter of 2010, based on our most recent market outlook, we assessed our long-lived assets for impairment. The assessment included an evaluation of the ongoing cash flows of the long-lived assets. We determined, based upon our evaluation, that the long-lived assets associated with PCS-Massachusetts and PCS-China were no longer fully recoverable from the future cash flows. Based upon the assets no longer being fully recoverable, we determined the fair value of the long-lived assets based upon a valuation completed by an independent third party valuation firm. The valuation was based upon the estimated market value of the long-lived assets and the future cash flow expected to be generated from the long-lived assets. Accordingly, we recorded impairment charges of $64.6 million for PCS-Massachusetts, $17.2 million for PCS-China and $7.2 million for in-process research and development costs representing the excess of the carrying value of the SPC assets over their respective fair market values.

Termination Fee. On July 29, 2010, in connection with a proposed acquisition, we signed a termination agreement and subsequently paid a $30.0 million termination fee for full satisfaction of the parties' obligations under the acquisition agreement.

Amortization of Other Intangibles. Amortization of other intangibles in 2010 was $24.4 million, a decrease of $1.3 million, from $25.7 million in 2009.

Research Models and Services. In 2010, amortization of other intangibles for our RMS segment was $7.3 million, an increase of $1.0 million from $6.3 million in 2009 due to acquisitions.

Preclinical Services. In 2010, amortization of other intangibles for our PCS segment was $17.1 million, a decrease of

Operating Loss. The operating loss in 2010 was $298.5 million, compared to operating income of $169.6 million in 2009.

Research Models and Services. In 2010, operating income for our RMS segment was $184.5 million, a decrease of $8.8 million, or 4.6%, from $193.3 million in 2009. Operating income as a percentage of net sales in 2010 was 27.7%, compared to 29.3% in 2009. The decrease in operating income as a percentage of net sales was primarily due to the impact of our fixed costs with flat sales and higher selling, general and administrative expenses.

Preclinical Services. In 2010, operating loss for our PCS segment was $379.7 million compared to operating income of $39.8 million in 2009. The decrease in operating income was primarily due to our $305.0 million goodwill impairment, our $64.6 million PCS-Massachusetts impairment and $17.2 million PCS-China impairment.

Interest Expense. Interest expense in 2010 was $35.3 million, compared to $21.7 million in 2009. The increase was due to increased debt balances.

Interest Income. Interest income in 2010 was $1.2 million, compared to $1.7 million in 2009 primarily due to lower cash balances and lower interest rates on invested funds.

Income Taxes. Income tax expense in 2010 was $23 thousand, compared to $40.4 million in 2009. Our effective tax rate was 0.0 % in 2010, compared to 26.6% in 2009. Changes in the effective tax rate resulted primarily from goodwill and fixed asset impairments and the termination fee for a proposed acquisition that were unbenefitted for tax purposes, amount and mix of earnings, increased tax benefits related to our research and development activities in Canada and the UK and the cost of repatriating foreign earnings that were previously indefinitely reinvested.

Income from discontinued operations. During the fourth quarter of 2010, we initiated actions to divest our Phase I clinical services business. We engaged an investment banker and were actively trying to sell the Phase I clinical services business at year end. On December 25, 2010, taking into account the planned divestiture of the Phase I clinical services business, we performed an impairment test on the long-lived assets of the Phase I clinical services business. Based on this analysis, we determined that the book value of assets assigned to the Phase I clinical services business exceeded its future cash flows, which included the proceeds from the sale of the business, and therefore recorded an impairment of the assets of $6.4 million.

Net Loss Income attributable to common shareowners. The net loss attributable to common shareowners in 2010 was $336.7 million, compared to net income of $114.4 million in 2009.

On August 26, 2010, we entered into an agreement with a third party investment bank to implement an ASR program to repurchase $300 million of common stock. Under this ASR, we paid $300 million on August 27, 2010 from cash on hand and available liquidity, including funds borrowed by us under our new amended and restated $750 million credit facility. The initial delivery of 6,000,000 treasury shares was recorded at $175.1 million, the market value at the date of the transaction. We received an additional 750,000 shares under the ASR on September 23, 2010, which were recorded at $23.5 million, which represented the market value on that date, and we received an additional 1,250,000 shares on December 21, 2010, which were recorded at $43.1,million which also represented the market value on that date. During 2010, in total, we repurchased 8,000,000 shares under the ASR program. The ASR was settled on February 11, 2011 based on a discount to the daily volume weighted average price (VWAP) of our common stock over the course of a calculation period. We received the final 871,829 shares based on the settlement of the ASR, which were recorded at $32.5 million.

On February 24, 2011, we entered into an ASR to repurchase $150 million of common stock. Under the ASR, we paid $150 million from cash on hand, including funds borrowed under our credit facility. Upon signing the ASR on February 24, 2011, we received the initial delivery of 3,759,398 shares, which was recorded at $135.9 million based on the market value at the date of the transaction, and recorded $14.1 million as a forward contract indexed to our common stock. The ASR was settled on May 16, 2011 based on a discount to the daily VWAP of our common stock over the course of a calculation period. We received the final 6,505 shares based on the settlement of the ASR, which were recorded at $0.3 million.

During 2011, 2010 and 2009, we repurchased 3,790,762 shares of common stock for $130.9, million, 9,759,857 shares of common stock for $294.5 million and 1,592,500 shares of common stock for $42.4 million, respectively, under our Rule 10b5-1 purchase plan and in open market trading. The timing and amount of any future repurchases will depend on market conditions and corporate considerations.

The above table does not reflect unrecognized tax benefits. Refer to Note 7 to the Consolidated Financial Statements for

The conversion features of our 2013 Notes are equity-linked derivatives. As such, we recognize these instruments as off-balance sheet arrangements. Because the conversion features associated with these notes are indexed to our common stock and classified in stockholders' equity, these instruments are not accounted for as derivatives.

Certain of our financial instruments are subject to market risks, including interest rate risk and foreign currency exchange rates. We generally do not use financial instruments for trading or other speculative purposes.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2011

The effectiveness of our internal control over financial reporting as of December 31, 2011 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which is included herein.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, equity and cash flows present fairly, in all material respects, the financial position of Charles River Laboratories International, Inc. and its subsidiaries at December 31, 2011 and December 25, 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Charles River Laboratories International, Inc. together with its subsidiaries is a leading global provider of solutions that accelerate the drug discovery and development process including research models and associated services, and outsourced preclinical services. Our fiscal year is the twelve-month period ending the last Saturday in December.

The consolidated financial statements include all majority-owned subsidiaries. Intercompany accounts, transactions and profits are eliminated.

Certain reclassifications have been made to prior year statements to conform to the current year presentation. These reclassifications have no impact on period reported net income or cash flow.

The financial statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on informed estimates and judgments of management with consideration given to materiality. Estimates and assumptions are reviewed in an ongoing basis and the effect of revisions is reflected in the consolidated statements in the period in which they are determined to be necessary. Actual results could differ from those estimates.

Cash equivalents include time deposits and highly liquid investments with original maturities at the purchase date of three months or less.

We record trade receivables net of an allowance for doubtful accounts. We establish an allowance for doubtful accounts which we believe is adequate to cover anticipated losses on the collection of all outstanding trade receivable balances. The adequacy of the doubtful account allowance is based on historical information, a review of major client accounts receivable balances and management's assessment of current economic conditions. We reassess the allowance for doubtful accounts each quarter. If the financial condition of our clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Provisions to the allowance for doubtful accounts amount to $426 in 2011, $1,536 in 2010 and $405 in 2009. Write offs to the allowance for doubtful accounts amounted to $1,228 in 2011, $1,541 in 2010 and $243 in 2009.

The composition of net trade receivables is as follows:

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. We place our cash and cash equivalents in various financial institutions with high credit rating and limit the amount of credit exposure to any one financial institution. Our trade receivables are from clients in the

Investments in marketable securities are reported at fair value and consist of time deposits and auction rate securities.

Realized gains and losses on securities are included in earnings and are determined using the specific identification method. Unrealized holding gains and losses on securities classified as available for sale, are excluded from earnings and are reported in accumulated other comprehensive income, net of related tax effects. Unrealized gains and losses on actively traded securities are included in earnings. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income.

As of December 31, 2011, we held $11,051 in auction rate securities which are variable rate debt instruments, which bear interest rates that reset approximately every 35 days. The auction rate securities owned were rated AAA by a major credit rating agency and are either commercially insured or guaranteed by the Federal Family Education Loan Program (FFELP). The underlying securities have contractual maturities which are generally greater than 10 years. The auction rate securities are classified as available for sale and are recorded at fair value. We have classified these investments as long-term consistent with the term of the underlying security which are structured with short term interest rate reset dates of generally 35 days but with contractual maturities that are long term.

The amortized cost, gross unrealized gains, gross unrealized losses and fair value for marketable securities by major security type were as follows:

Maturities of debt securities were as follows:

Inventories are stated at the lower of cost, determined principally on the average cost method, or market. The determination of market value involves assessment of numerous factors, including costs to dispose of inventory and estimated selling price. Inventory costs for small models are based upon the average cost to produce specific models and strains. Costs for large models are accumulated in inventory by specific model. Inventory costs for both small and large models are charged to

The composition of inventories is as follows:

Other current assets consist of assets we intend to settle within the next twelve months.

Property, plant and equipment, including improvements that significantly add to productive capacity or extend useful life, are recorded at cost, while maintenance and repairs are expensed as incurred. We capitalize interest and period costs on certain capital projects which amounted to $298 and $555 in 2011, $56 and $394 in 2010 and $2,496 and $5,023 in 2009, respectively. We also capitalize internal and external costs incurred during the application development stage of internal use software. Depreciation is calculated for financial reporting purposes using the straight-line method based on the estimated useful lives of the assets as follows: buildings, 20 to 40 years; machinery and equipment, 3 to 20 years; furniture and fixtures, 5 to 10 years; vehicles, 3 to 5 years; and leasehold improvements, the shorter of estimated useful life or the lease periods. We begin to depreciate capital projects in the first full month the asset is placed in service.

The composition of net property, plant and equipment is as follows:

Depreciation expense for 2011, 2010 and 2009 was $63,435, $69,244 and $64,246, respectively.

Valuation of certain long-lived assets including intangible assets and goodwill requires significant judgment. Assumptions and estimates are used in determining the fair value of assets acquired and liabilities assumed in a business acquisition. A significant portion of the purchase price in our acquisitions is assigned to intangible assets and goodwill. Assigning value to intangible assets requires that we use significant judgment in determining (i) the fair value and (ii) whether such intangibles are amortizable or non-amortizable and, if the former, the period and the method by which the intangible assets will be amortized. We utilize commonly accepted valuation techniques, such as the income approach and the cost approach, as appropriate, in establishing the fair value of long-lived assets. Typically, key assumptions include projected revenue and expense levels used in establishing the fair value of business acquisitions as well as discount rates based on an analysis of our weighted average cost of capital, adjusted for specific risks associated with the assets. Changes in the initial assumptions could lead to changes in amortization expense recorded in our future financial statements.

As of December 31, 2011, we had recorded goodwill and other intangibles of $290,998 in the consolidated balance sheet. Goodwill and other indefinite-lived intangibles will not be amortized, but will be reviewed for impairment at least annually. Other intangibles with definite lives are amortized over their estimated lives.

We perform a test for goodwill impairment annually and whenever events or circumstances make it likely the fair value of a reporting unit has fallen below its carrying amount to determine if impairment exists. Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. The goodwill impairment analysis is a two-step process. The first step is used to identify potential impairment and involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. Fair value is determined by using a weighted combination of a market-based approach and an income approach, as this combination is deemed to be the most indicative of our fair value in an orderly transaction between market participants. Under the market-based approach, we utilize information about our Company as well as publicly available industry information to determine earnings multiples and sales multiples that are used to value our reporting units. Under the income approach, we determine fair value based on the estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, profit margin percentages, discount rates, perpetuity growth rates, future capital expenditures and future market conditions, among others. Our projections are based on an internal strategic review. Key assumptions, strategies, opportunities and risks from this strategic review along with a market evaluation are the basis for our assessment. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered to be impaired. However, if the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment.

The second step of the goodwill impairment process, if required, involves the calculation of an implied fair value of

We assess the beginning of the fourth quarter. Based on our initial assessment (step one) for 2008, the fair value of our business units exceeded their carrying value therefore our goodwill was not impaired. As economic conditions worsened late in the fourth quarter and our business performance and outlook was not as strong as anticipated coupled with a decrease in our market capitalization, management determined that circumstances had changed enough to trigger another goodwill impairment test as of December 27, 2008. Our analysis resulted in the determination that the fair value our PCS business was less than its carrying value. The second step of the goodwill impairment test involved us calculating the implied goodwill for the PCS business. The carrying value of ~~the goodwill assigned to the PCS business exceeded the implied fair value of goodwill resulting~~property, plant and equipment whenever events or changes in ~~a goodwill impairment of $700 million.~~

~~Goodwill will not be amortized, but will be reviewed for impairment at least annually. The results of this year's impairment test are as of a point in time. If~~circumstances indicate that the ~~future growth and operating results of our business are not as strong as anticipated and/or our market capitalization declines, this could~~

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~~impact the assumptions used in calculating the fair value in subsequent years. To the extent goodwill is impaired, its~~ carrying value will be written down to its implied fair value and a charge will be made to our earnings. Such an impairment charge could materially and adversely affect our operating results and financial condition. As of December 27, 2008, we had recorded goodwill and other intangibles of $593.7 million in the consolidated balance sheet.

~~Contract research services create a risk of liability.~~

~~As a contract research organization we face a range of potential liabilities which may include:~~

•: errors or omissions in reporting of study detail in preclinical or Phase I clinical studies that may lead to inaccurate reports, which may potentially advance studies absent the necessary support or inhibit studies from proceeding to the next level of testing;
•: litigation risk, including resulting from our errors or omissions, associated with the possibility that the drugs/compounds of our clients that were included in drug development trials we participated in may cause illness, personal injury or have other negative side effects to clinical study participants or other persons (including death);
•: general risks associated with operating a Phase I clinical business, including negative consequences from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers;
•: risks associated with our possible failure to properly care for our customers' property, such as research models and samples, study compounds, records, work in progress, other archived materials, or goods and materials in transit, while in our possession;
•: risks that models in our breeding facilities or in facilities that we run may be infected with diseases that may be harmful and even lethal to themselves or humans despite preventive measures contained in our company policies for the quarantine and handling of imported animals; and
•: ~~errors and omissions during a trial that may undermine the usefulness of a trial or data from the trial.~~

~~We attempt to mitigate these risks through a variety of methods. Nonetheless, it is impossible to completely eradicate such risks.~~

In our RMS business, we mitigate these risks to the best of our abilities through our regimen of animal testing, quarantine, and veterinary staff vigilance, through which we seek to control the exposure of animal related disease or infections.

In our PCS business, we attempt to reduce these risks by contract provisions entitling us to be indemnified or entitling us to a limitation of liability; insurance maintained by our clients, investigators, and by us; and various regulatory requirements we must follow in connection with our business.

In both our RMS and PCS businesses, contractual indemnifications generally do not protect us against liability arising from certain of our own actions, such as negligence or misconduct. We could be materially and adversely affected if we were required to pay damages or bear the costs of defending any claim which is not covered by a contractual indemnification provision or in the event that a party who must indemnify us does not fulfill its indemnification obligations or which is beyond the level of our insurance coverage. Furthermore, there can be no assurance that we will be able to maintain such insurance coverage on terms acceptable to us.

~~We may be unable to build out our facilities as anticipated.~~

To support our customers' demand for drug discovery and development services, including increased strategic focus on outsourcing services and programs, we had engaged in a substantial capacity expansion program over the past two years with $227 million spent on capital expenditures in

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2007 and $197 million in 2008. We estimated $100-$120 million allocated for capital expenditures in 2009, as major expansions complete and capacity comes on-line. Included in our 2009 capital plan are the following: continuing fit-out work at our new PCS facility in Nevada, dedicated space initiatives at our new PCS facility in Massachusetts, expansions at our Canada and Scotland PCS facilities, and the remaining work for completing the construction of our new PCS facility in China. We cannot assure you that any or all of these facilities, or any particular phase of such facilities, will be constructed on the anticipated timetable or on budget. Any material delay in bringing these facilities on-line, or substantial increase in costs to complete these facilities, could materially and adversely affect us. In addition, the costs of these capacity expansion programs may have an adverse impact on our operating margins, particularly within our PCS business.

~~If we are unable to attract suitable participants for our Phase I clinical trials, our business might suffer.~~

The Phase I clinical research studies we run rely upon the ready accessibility and willing participation of subjects. Participants generally include people from the communities in which the studies are conducted, which such communities to date have provided a substantial pool of potential subjects for research studies. Our Phase I clinical research activities could be adversely affected if we were unable to attract suitable and willing participants on a consistent basis.

~~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 communities have attempted to develop models, methods and systems that would replace or supplement the use of living animals as test subjects in biomedical research. Some companies have developed techniques in these areas, including vaccine development, that may have scientific merit. In addition, technological improvements to existing or new processes, such as imaging technology, could result in a refinement in the number of animal research models necessary to conduct the required research. It is our strategy to participate in some fashion with any non-animal test method or other method that reduces the need for animal research models as it becomes validated as a research model alternative or adjunct in our markets. For instance, we acquired imaging capabilities in 2008 through our acquisition of MIR Preclinical. However, we generally may not be ~~successful~~recoverable. Factors we consider important which could trigger an impairment review include but are not limited to the following:

Should we determine that the carrying value of long-lived tangible assets may not be ~~able~~recoverable, we will measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to ~~develop new products effectively or~~be commensurate with the risk inherent in ~~a timely manner to replace any lost sales.~~

~~The drug discovery and development industry has a history of patent and other intellectual property litigation, and we might be involved in costly intellectual property lawsuits.~~

The drug discovery and development industry has a history of patent and other intellectual property litigation and these lawsuits will likely continue. Accordingly, we face potential patent infringement suits by companies that have patents for similar products and methods used inour current business or other suits alleging infringement of their intellectual property rights. Legal proceedings relating to intellectual property could be expensive, take significant time and divert management's attention from other business concerns, whether we win or lose. If we do not prevail in an infringement lawsuit brought against us, we might have to pay substantial damages, including treble damages, and we could be required to stop the infringing activity or obtain a license to use technology on unfavorable terms.

model. We may ~~not be able to successfully develop and market new services.~~

We may seek to develop and market new services that complement or expand our existing business or service offerings. If we are unable to develop new services and/or create demand for those newly developed services, our future business, results of operations, financial condition, and cash flows could be adversely affected.

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~~Our debt level could adversely affect our business and growth prospects.~~

At December 27, 2008, we had approximately $575.8 million of debt. This debt could have significant adverse effects on our business, including making it more difficult for us to obtain additional financing on favorable terms; requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of debt and the interest on this debt; limiting our ability to capitalize on significant business opportunities; and making us more vulnerable to rising interest rates. For additional information regarding our debt, please see Note 4 included in the Notes to Consolidated Financial Statements elsewhere in this Form 10-K.

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

During the past seven years, we have expanded our business through several acquisitions. We plan to continue to acquire businesses and technologies and form strategic alliances. However, businesses and technologies may not be available on terms and conditions we find acceptable. We risk spending time and money investigating and negotiating with potential acquisition or alliance partners, but not completing transactions. For instance, in 2008, we expensed over $1.3 million for costs incurred for potential deals that we decided to abandon prior to signing definitive agreements.

~~Even if completed, acquisitions and alliances involve numerous risks which may include:~~

•: ~~difficulties and expenses incurred in assimilating and integrating operations, services, products or technologies;~~
•: ~~challenges with developing and operating new businesses, including diversion of management's attention from other business concerns;~~
•: ~~potential losses resulting from undiscovered liabilities of acquired companies that are not covered by the indemnification we may obtain from the seller;~~
•: acquisitions could be dilutive to earnings, or in the event of acquisitions made through the issuance of our common stock to the shareholders of the acquired company, dilutive to the percentage of ownership of our existing stockholders;
•: ~~loss of key employees of the acquired companies;~~
•: risks of not being able to overcome differences in foreign business practices, customs and importation regulations, language and other cultural barriers in connection with the acquisition of foreign companies;
•: ~~the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies; and~~
•: ~~difficulties in achieving business and financial success.~~

~~In the event that an acquired business or technology or an alliance does not meet our expectations, our results of operations may be adversely affected.~~

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

We operate large and complex computer systems that contain significant amounts of customer data. As a routine element of our business, we collect, analyze and retain substantial amounts of data pertaining to the preclinical and the clinical studies we conduct for our customers. Unauthorized third parties could attempt to gain entry to such computer systems for the purpose of stealing data or disrupting the systems. We believe that we have taken adequate measures to protect them from intrusion, but in the event that our efforts are unsuccessful we could suffer significant harm. Our contracts with our customers typically contain provisions that require us to keep confidential the

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~~information generated from these studies. In the event the confidentiality of such information was compromised, we could suffer significant harm.~~

~~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 and Chairman since 2000, has held various positions with us for over 30 years. We have no employment agreement with Mr. Foster or other members of our management. 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 attracting and retaining qualified scientific, technical and managerial personnel. While we have an excellent record of employee retention, there is still strong competition for qualified personnel in the veterinary, pharmaceutical and biotechnology fields. Therefore, we may not be able to attract and retain the qualified personnel necessary for the development of our business. The loss of the services of existing personnel, as well as the failure to recruit additional key scientific, technical and managerial personnel in a timely manner, could harm our business.

~~Our quarterly operating results may vary, which could negatively affect the market price of our common stock.~~

~~Our results of operations in any quarter may vary from quarter to quarter and are influenced by such factors as:~~

•: ~~the number and scope of ongoing customer engagements,~~
•: ~~the commencement, postponement, progress, completion or cancellation of customer contracts in the quarter,~~
•: ~~changes in the mix of our products and services,~~
•: ~~the extent of cost overruns,~~
•: ~~holiday patterns of our customers,~~
•: ~~budget cycles of our customers,~~
•: ~~the timing and charges associated with completed acquisitions and other events, and~~
•: ~~exchange rate fluctuations.~~

We believe that operating results for any particular quarter are not necessarily a meaningful indication of future results. Nonetheless, fluctuations in our quarterly operating results could negatively affect the market price of our common stock

~~Item 1B. Unresolved Staff Comments~~

~~There are no unresolved comments to be reported in response to Item 1B.~~

~~Item 2. Properties~~

We own or lease the land and buildings where we have facilities. We own large facilities (facilities over 50,000 square feet) for our PCS businesses in the United States, Canada, Scotland and Ireland, and lease large facilities in the United States, Canada and China. We own large RMS facilities in the United Kingdom, France, Germany, Japan, Canada and the United States. None of our leases are individually material to our business operations and many have an option to renew. We believe that we will be able to successfully renew expiring leases on terms satisfactory to us. We believe that our facilities are adequate for our operations and that suitable additional space will be available when

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~~needed. For additional information see Note 9 to the Consolidated Financial Statements included elsewhere in this Form 10-K.~~

~~Item 3. Legal Proceedings~~

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

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

~~Not applicable.~~

~~Supplementary Item. Executive Officers of the Registrant~~~~(pursuant to Instruction 3 to Item 401(b) of Regulation S-K).~~

Below are the names, ages and principal occupations of each our current executive officers. All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal.

~~Thomas F. Ackerman,~~ age 54, joined us in 1988 with over eleven years of combined public accounting and international finance experience. He was named Controller, North America in 1992 and became our Vice President and Chief Financial Officer in 1996. In 1999, he was named a Senior Vice President and in 2005 he was named a Corporate Executive Vice President. He is currently responsible for overseeing our Accounting and Finance Department and several other corporate staff departments. Prior to joining us, Mr. Ackerman was an accountant at Arthur Andersen & Co.

~~Christophe Berthoux,~~ age 46, rejoined us in February 2005 as General Manager of our clinical services business. Following the sale of our Phase II-IV clinical services business in August 2006, Dr. Berthoux was named Corporate Senior Vice President, U.S. Research Models and Services and In Vitro Products and Services, and in 2008 he was named our Corporate Executive Vice President, Global Sales and Marketing and Chief Commercial Officer. Previously, from 1990 to early 2004, Dr. Berthoux held a variety of managerial positions with the Company, including Corporate Vice President and head of European Research Models and Services.

~~James C. Foster,~~ age 58, joined us in 1976 as General Counsel. Over the past 30 years, Mr. Foster has held various staff and managerial positions, and was named our President in 1991, Chief Executive Officer in 1992 and our Chairman in 2000.

~~Nancy A. Gillett,~~ age 53, joined us in 1999 with the acquisition of Sierra Biomedical. Dr. Gillett has 22 years of experience as an ACVP board certified pathologist and scientific manager. In 1999, she became Senior Vice President and General Manager of our Sierra Biomedical division, and subsequently held a variety of managerial positions, including President and General Manager of Sierra Biomedical and Corporate Vice President and General Manager of Drug Discovery and Development (the predecessor to our Preclinical Services business segment). In 2004, Dr. Gillett was named Corporate Senior Vice President and President, Global Preclinical Services, and in 2006 she became a Corporate Executive Vice President.

~~David P. Johst,~~ age 47, joined us in 1991 as Corporate Counsel and was named Vice President, Human Resources in 1995. He became Vice President, Human Resources and Administration in 1996, a Senior Vice President in 1999, and a Corporate Executive Vice President in 2005. He currently serves as the Company's Chief Administrative Officer and is responsible for overseeing our Human Resources department, our Consulting and Staffing Services business unit and several other corporate staff departments. Prior to joining the Company, Mr. Johst was an attorney in the Corporate Department at Hale and Dorr.

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~~Real H. Renaud,~~ age 62, joined us in 1964 and has over 40 years of research models production and related management experience. In 1986, Mr. Renaud became Vice President of Production, with responsibility for overseeing the Company's North American small animal operations, and was named Vice President, Worldwide Production in 1990. Mr. Renaud became Vice President and General Manager, European and North American Animal Operations in 1996, following a two-year European assignment during which he provided direct oversight to our European operations. In 1999, he became a Senior Vice President and in 2003, Mr. Renaud became Corporate Executive Vice President and President Global Research Models and Services.

~~PART II~~

~~Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~

Our common stock began trading on the New York Stock Exchange on June 23, 2000 under the symbol "CRL." The following table sets forth for the periods indicated below the high and low sales prices for our common stock.

2009
High Low
First quarter (through February 13, 2009)
$ 29.87 $ 23.14

2008
High Low
First quarter
$ 69.04 $ 53.73
Second quarter
65.95 55.14
Third quarter
69.19 57.84
Fourth quarter
58.00 19.92

2007
High Low
First quarter
$ 47.64 $ 42.71
Second quarter
54.04 45.30
Third quarter
56.64 50.15
Fourth quarter
68.00 55.11

~~There were no equity securities that were not registered under the Securities Act of 1933, as amended, sold by the Company during the fiscal year ended December 27, 2008.~~

~~Shareholders~~

~~As of February 13, 2009 there were approximately 572 registered shareholders of the outstanding shares of common stock.~~

~~Dividends~~

We have not declared or paid any cash dividends on shares of our common stock in the past two years and we do not intend to pay cash dividends in the foreseeable future. We currently intend to retain any earnings to finance future operations and expansion. Some of the restrictive covenants contained in our revolving credit agreement and term loan agreements limit our ability to pay dividends.

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~~Issuer Purchases of Equity Securities~~

~~The following table provides information relating to the Company's purchases of shares of its common stock during the quarter ended December 27, 2008.~~

Total Number
of Shares
Purchased Average Price
Paid per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs Approximate
Dollar Value of
Shares that May
Yet be Purchased
Under the Plans
or Programs
Sep. 28, 2008—Oct. 25, 2008
209,825 $ 46.91 209,308 $ 202,065,830
Oct. 26, 2008—Nov. 22, 2008
220,671 $ 28.49 220,000 $ 195,803,701
Nov. 23, 2008—Dec. 27, 2008
370,000 $ 23.42 370,000 $ 187,139,993

Total
800,496 799,308

The Board of Directors of the Company has authorized a share repurchase program, originally authorized on July 27, 2005 and subsequently amended on October 26, 2005, May 9, 2006, August 1, 2007 and July 24, 2008 to acquire up to a total of $600.0 million of common stock. The program does not have a fixed expiration date.

During the quarter ended December 27, 2008, the Company repurchased 799,308 shares of common stock for approximately $24.7 million. The timing and amount of any future repurchases will depend on market conditions and corporate considerations. Additionally, the Company's Incentive Plans permit the netting of common stock upon vesting of restricted stock awards in order to satisfy individual tax withholding requirements. Accordingly, during the quarter ended December 27, 2008, the Company acquired 1,188 shares as a result of such withholdings.

~~Securities Authorized for Issuance Under Equity Compensation Plans~~

~~The following table summarizes, as of December 27, 2008, the number of options issued under the Company's stock option plans and the number of options available for future issuance under these plans.~~

Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights Weighted-average
exercise price of
outstanding
options, warrants
and rights Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))

(a)
(b)
(c)

Equity compensation plan approved by security holders:

Charles River 2000 Incentive Plan
3,459,396 $ 41.28 174,618

Charles River 1999 Management Incentive Plan
30,754 $ 14.52 15,617

Inveresk 2002 Stock Option Plan
136,305 $ 28.00 —

2007 Incentive Plan
915,765 (1) $ 58.25 4,399,402
Equity compensation plans not approved by security holders
— — —

Total
4,542,220 (2) $ 43.93 4,589,637 (3)

~~(1)~~: Includes shares payable under our performance awards granted in fiscal year 2008 under our 2007 Incentive Plan, utilizing 100% target award level of 61,100 shares; actual awards to be determined in February 2009 may differ from this number. The weighted-average exercise prices in column (b) do not take these performance awards into account.

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~~(2)~~: None of the options outstanding under any equity compensation plan of the Company include rights to any dividend equivalents (i.e., a right to receive from the Company a payment commensurate to dividend payments received by holders of common stock or other equity instruments of the Company).
~~(3)~~: On March 22, 2007, the Board of Directors determined that, upon approval of the 2007 Incentive Plan, no future awards would be granted under the preexisting equity compensation plans, including the Charles River 1999 Management Incentive Plan and the Charles River 2000 Incentive Plan. Shareholder approval was obtained on May 8, 2007. Previously, on February 28, 2005, the Board of Directors terminated the Inveresk 2002 Stock Option Plan to the extent that no further awards would be granted thereunder.

~~The following table provides additional information regarding the aggregate issuances under the Company's existing equity compensation plans as of December 27, 2008:~~

Category
Number of securities
outstanding Weighted average
exercise price Weighted
average term

(a)
(b)
(c)

Total number of restricted shares outstanding(1)
716,394 $ — —
Total number of options outstanding(2)
4,542,220 $ 43.93 5.02

~~(1)~~: For purposes of this table, only unvested restricted stock as of December 27, 2008 is included. Also for purposes of this table only, the total includes 46,465 restricted stock units granted to certain employees of the Company outside of the United States.
~~(2)~~: Includes shares payable under our performance awards granted in fiscal year 2008 under our 2007 Incentive Plan, utilizing target award level of 61,100 shares; actual awards determined in February 2009 differ from this number. The weighted-average exercise prices in column (b) do not take these performance awards into account.

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~~Comparision of 5-Year Cumulative Total Return~~

~~Among Charles River Laboratories International, Inc., The S&P 500 Index and The NASDAQ Pharmaceutical Index.~~

The following stock performance graph compares the annual percentage change in the Company's cumulative total shareholder return on its Common Stock during a period commencing on December 27, 2003 and ending on December 27, 2008 (as measured by dividing (1) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the Company's share price at the end and the beginning of the measurement period; by (2) the share price at the beginning of the measurement period) with the cumulative total return of the S&P 500 Index and the NASDAQ Pharmaceutical Index during such period. The Company has not paid any dividends on the Common Stock, and no dividends are included in the representation of the Company's performance. The stock price performance on the graph below is not necessarily indicative of future price performance. The graph is not "soliciting material," is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Information used in the graph was obtained from Standards & Poor's Institutional Market Services, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.

Dec. 27,
2003 Dec. 25,
2004 Dec. 31,
2005 Dec. 30,
2006 Dec. 29,
2007 Dec. 27,
2008
Charles River Laboratories International, Inc.
100.00 138.50 126.06 128.68 196.73 74.44
S&P 500
100.00 110.88 116.33 134.70 142.10 89.53
NASDAQ Pharmaceutical
100.00 110.22 111.87 114.89 106.37 97.32

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~~Item 6. Selected Consolidated Financial Data~~

The following selected financial data should be read in conjunction with Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained in Item 8., "Financial Statements and Supplementary Data" of this report.

Fiscal Year(1)

2008 2007 2006 2005 2004

(dollars in thousands)

Statement of Income Data:

Net sales
$ 1,343,493 $ 1,230,626 $ 1,058,385 $ 993,328 $ 724,221
Cost of products sold and services provided
832,784 752,435 651,778 603,624 435,499
Selling, general and administrative expenses
230,159 217,491 180,795 157,999 116,879
Goodwill impairment
700,000 — — — —
Amortization of goodwill and intangibles
30,312 33,509 37,639 47,011 13,857

Operating income (loss)
(449,762 ) 227,191 188,173 184,694 157,986
Interest income
8,691 9,683 6,836 3,695 3,262
Interest expense
(14,009 ) (18,004 ) (19,426 ) (24,324 ) (11,718 )
Other, net
(5,930 ) (1,448 ) 981 (177 ) 937

Income (loss) before income taxes, minority interests and earnings from equity investments
(461,010 ) 217,422 176,564 163,888 150,467
Provision for income taxes
61,944 59,400 49,738 16,261 60,159

Income (loss) before minority interests and earnings from equity investments
(522,954 ) 158,022 126,826 147,627 90,308
Minority interests
687 (470 ) (1,605 ) (1,838 ) (1,577 )

Income (loss) from continuing operations
(522,267 ) 157,552 125,221 145,789 88,731
Income (loss) from discontinued businesses, net of tax
424 (3,146 ) (181,004 ) (3,790 ) 1,061

Net income (loss)
$ (521,843 ) $ 154,406 $ (55,783 ) $ 141,999 $ 89,792

Common Share Data:

Earnings (loss) per common share

Basic

Continuing operations
$ (7.76 ) $ 2.35 $ 1.82 $ 2.09 $ 1.79

Discontinued operations
$ 0.01 $ (0.05 ) $ (2.63 ) $ (0.05 ) $ 0.02

Net income (loss)
$ (7.76 ) $ 2.31 $ (0.81 ) $ 2.04 $ 1.81
Diluted

Continuing operations
$ (7.76 ) $ 2.29 $ 1.79 $ 2.02 $ 1.65

Discontinued operations
$ 0.01 $ (0.05 ) $ (2.59 ) $ (0.05 ) $ 0.02

Net income (loss)
$ (7.76 ) $ 2.25 $ (0.80 ) $ 1.96 $ 1.68
Other Data:

Depreciation and amortization
$ 91,183 $ 86,379 $ 82,586 $ 87,935 $ 42,063
Capital expenditures
197,081 227,036 181,747 94,520 44,735
Balance Sheet Data (at end of period):

Cash and cash equivalents
$ 243,592 $ 225,449 $ 175,380 $ 114,821 $ 207,566
Working capital
317,141 305,336 241,762 107,910 161,191
Goodwill, net
457,578 1,120,540 1,119,309 1,097,590 1,102,511
Total assets
2,159,918 2,805,537 2,557,544 2,538,209 2,626,835
Total debt
576,098 510,049 572,054 296,090 686,844
Total shareholders' equity
1,199,025 1,860,467 1,595,211 1,827,013 1,472,505

~~(1)~~: ~~Our fiscal year consists of 12 months ending on the last Saturday on, or prior to, December 31.~~

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

~~Overview~~

~~Continuing Operations~~

We are a leading global provider of solutions that advance the drug discovery and development process, including research models and associated services and outsourced preclinical services. We provide our products and services to global pharmaceutical companies, biotechnology companies, as well as government agencies, and leading hospitals and academic institutions throughout the world in order to bring drugs to market faster and more efficiently. Our broad portfolio of products and services enables our customers to reduce costs, increase speed to market and enhance their productivity and effectiveness in drug discovery and development. We have built upon our core competency of laboratory animal medicine and science (research model technologies) to develop a diverse and growing portfolio of regulatory compliant preclinical services which address drug discovery and development in the preclinical arena. We have been in business for over 60 years and currently operate approximately 70 facilities in 17 countries worldwide.

Our sales growth in 2008 was driven by continued spending by major pharmaceuticals, biotechnology companies and academic institutions on our global products and services, which aid in their development of new drugs and products, partially offset by the impact of the slower economy and world wide credit crisis. We expect the long-term drivers for our business as a whole primarily to emerge from our customers' continued demand for research models and services and regulatory compliant preclinical services, as well as increased strategic focus on outsourcing. During the second half of 2008, demand for our services decelerated at a greater rate than products impacting our growth rate. We believe this was primarily due to emerging factors which include: business restructuring and reprioritization of pipelines by pharmaceutical and biotechnology clients, which led to significant and accelerating study slippage and delays; lack of funding for biotechnology companies; and tight cost controls which resulted in more measured spending and some pricing pressure.

Our 2009 expectations reflect softer market demand, particularly for preclinical services which will continue at least until mid-year. We believe that our clients will continue to outsource drug development services as they strive to improve the efficiency of their drug pipelines. For additional discussion of the factors that we believe are influencing outsourcing demand from our customers, please see the section entitled "Our Strategy" included elsewhere in this Form 10-K.

We are using this period of market uncertainty to streamline our operations, and have implemented additional actions to improve our operating efficiency. These actions include initiating a hiring freeze, a salary freeze for a substantial percentage of our workforce, including all incentive-eligible employees, continued tight control of discretionary spending and implementing a headcount reduction affecting 3% of our total workforce (predominately in our PCS business segment) and the closure of our Arkansas facility. As a result of these cost-saving actions, the Company will take a one-time charge in 2009 of approximately $9.0 million. The Company expects that these actions will reduce costs by approximately $20.0 million in 2009, with an annual run-rate of approximately $25.0 million. We also ~~are pursuing strategic alternatives for our clinical Phase I operation in Scotland, with an intention to divest these operations.~~

Our capital expenditures totaled $197.1 million in 2008 and our planned capital expenditures in 2009 are in the range of $100 million to $120 million. As a result of the factors which are affecting our sales growth, we evaluated our expansion plans and determined that we have sufficient capacity to accommodate our clients' current demand. We expect to open the Sherbrooke (Canada) facility in the first half of 2009, in order to relieve capacity constraints at our Montreal facility. We have delayed the expansion of our Ohio facility until 2010, when we believe the industry will be better positioned to absorb additional capacity.

~~In addition to internally generated organic growth, our business strategy includes strategic "bolt-on" acquisitions that complement our business, increase the rate of our growth or geographically~~

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~~expand our existing services, as evidenced by our acquisitions of NewLab BioQuality AG and MIR Preclinical Services in 2008.~~

Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our initial assessment (step one) for 2008, the fair value of our business units exceeded their carrying value therefore our goodwill was not impaired. As economic conditions worsened late in the fourth quarter and our business performance and outlook were not as strong as anticipated, coupled with a decrease in our market capitalization, management determined that circumstances had changed enough to trigger another goodwill impairment test as of December 27, 2008. Our analysis resulted in the determination that the fair value our PCS business was less than its carrying value. The second step of the goodwill impairment test involved us calculating the implied goodwill for the PCS business. The carrying value of the goodwill assigned to the PCS business exceeded the implied fair value of goodwill, resulting in a goodwill impairment of $700 million.

Total net sales in 2008 were $1.3 billion, an increase of 9.2% over 2007 with demand decelerating during the second half of the year. The sales increase was due primarily to increased customer demand and higher pricing in Research Models and Services (RMS), strong large model safety testing and certain specialty toxicology sales partially offset by slower demand for PCS due to our clients' restructuring and reprioritization efforts, particularly in Europe. The effect of foreign currency translation added 1.3% to sales growth. Our gross margin decreased to 38.0% of net sales compared to 38.9% of net sales in 2007, due primarily to lower sales growth.

~~Our operating loss for 2008 was $449.8 million compared to income of $227.2 million for 2007 primarily due to the goodwill impairment of $700 million in 2008.~~

Net loss from continuing operations was $522.3 million in 2008 compared to income of $157.6 million in 2007. Diluted loss per share from continuing operations for 2008 was $7.76 compared to earnings per share of $2.29 in 2007.

~~We report two segments: RMS and PCS, which reflect the manner in which our operating units are managed.~~

Our RMS segment, which represented 49.1% of net sales in 2008, includes sales of research models, genetically engineered models and services (GEMS), research animal diagnostics, discovery and imaging services, consulting and staffing services, vaccine support and in vitro technology (primarily endotoxin testing). Although demand decelerated during the second half of the year, net sales for this segment increased 14.3% compared to 2007 due to increased small model sales in the United States and Europe, increased consulting and staffing services and strong in vitro sales. Favorable foreign currency translation increased the net sales gain by 3.7%. We experienced decreases in both the RMS gross margin and operating margin compared to last year (to 43.1% from 43.2% and to 30.1% from 30.7%, respectively) due mainly to the impact of the greater proportion of services in the sales mix and the second-quarter increase in operating expenses in Japan.

Our PCS segment, which represented 50.9% of net sales in 2008, includes services required to take a drug through the development process including discovery support, toxicology, pathology, biopharmaceutical, bioanalysis, pharmacokinetics and drug metabolism services, as well as Phase I clinical trials. Sales for this segment increased 4.6% over 2007, however, demand decelerated during the second half of the year. Sales were driven by continuing demand for large model safety testing and certain specialty toxicology studies as well as the acquisition of NewLab BioQuality AG, partially offset by more measured pharmaceutical spending due to our clients' restructuring and reprioritization efforts, particularly in Europe. Unfavorable foreign currency decreased sales growth by 0.9%. We experienced a decrease in the PCS gross margin during 2008 to 33.1% from 35.0% in 2007, due mainly to the lower sales growth and additional costs associated with the transition to the new preclinical facility in Nevada and start-up costs in China. As a result of the goodwill impairment, the 2008 operating margin was a negative 87.3% compared to 15.8% in 2007.

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~~Net Income~~

~~Net loss for 2008 was $521.8 million compared to income of $154.4 million in 2007.~~

~~Critical Accounting Policies and Estimates~~

The preparation of these financial statements requires management to use judgment when making assumptions that are involved in preparing estimates that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions. Some of those estimates can be complex and require management to make estimates about the future and actual results could differ from those estimates. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For any given estimate ~~or assumption made by management, there may also be other estimates or assumptions that are reasonable.~~

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the consolidated financial statements of Charles River Laboratories International, Inc. which have been prepared in accordance with accounting principles generally accepted in the United States. Management believes the following critical accounting policies are most affected by significant judgments and estimates used in the preparation of our consolidated financial statements. The following summary should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Form 10-K. We believe the following critical accounting policies and estimates reflect our more significant judgments and estimates than usual in the preparation of our consolidated financial statement:

•: ~~Goodwill and other intangible assets;~~
•: ~~Revenue recognition;~~
•: ~~Pension plan accounting;~~
•: ~~Stock-based compensation; and~~
•: ~~Income taxes and deferred tax assets.~~

~~Goodwill, Other Intangible Assets~~ We have intangible assets, including goodwill and other identifiable and indefinite-lived acquired intangibles on our balance sheet due to our acquisitions of businesses. The initial identification and valuation of these intangible assets and the determination of the estimated useful lives at the time of acquisition involve use of management judgments and estimates. These estimates are based on, among other factors, input from accredited valuation consultants, reviews of projected future income cash flows and statutory regulations. The use of alternative estimates and assumptions might have increased or decreased the estimated fair value of our goodwill and other intangible assets that could potentially result in a different impact to our results of operations.

We perform an annual impairment analysis of goodwill to determine if impairment exists. The goodwill impairment analysis is a two-step process. The first step is used to identify potential impairment and involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. Fair value is determined by using a weighted combination of a market-based approach and an income approach, as this combination is deemed to be the most indicative of our fair value in an orderly transaction between market participants. Under the market-based approach, we utilize information about our Company as well as publicly available industry information to determine earnings multiples and sales multiples that are used to value our reporting units. Under the income approach, we determine fair value based on the estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn. Determining

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the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, profit margin percentages, discount rates, perpetuity growth rates, future capital expenditures and future market conditions, among others. Our projections are based on an internal strategic review. Key assumptions, strategies, opportunities and risks from this strategic review along with a market evaluation are the basisprices for our assessment. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered to be impaired. However, if the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure the amount of impairment.

The second step of the goodwill impairment process involves the calculation of an implied fair value of goodwill for each reporting unit for which step one indicated impairment. The implied fair value of goodwill is determined similar ~~to how goodwill is calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit~~assets, as calculated in step one, over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. In determining the fair value of assets we utilize appraisals for the fair value of property and equipment and valuations of certain intangible assets, including customer relationships.

Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our initial assessment (step one) for 2008, the fair value of our business units exceeded their carrying value therefore our goodwill was not impaired. As economic conditions worsened late in the fourth quarter and our business performance and outlook was not as strong as anticipated coupled with a decrease in our market capitalization, management determined that circumstances had changed enough to trigger another goodwill impairment test as of December 27, 2008. Our analysis resulted in the determination that the fair value our PCS business was less than its carrying value. The second step of the goodwill impairment test involved us calculating the implied goodwill for the PCS business. The carrying value of the goodwill assigned to the PCS business exceeded the implied fair value of goodwill resulting in a goodwill impairment of $700 million.

Goodwill will not be amortized, but will be reviewed for impairment at least annually. The results of this year's impairment test are as of a point in time. If the future growth and operating results of our business are not as strong as anticipated and/or our market capitalization declines, this could impact the assumptions used in calculating the fair value in subsequent years. To the extent goodwill is impaired, its carrying value will be written down to its implied fair value and a charge will be made to our earnings. Such an impairment charge could materially and adversely affect our operating results and financial condition. As of December 27, 2008, we had recorded goodwill and other intangibles of $593.7 million in the consolidated balance sheet.

~~Revenue Recognition~~ We recognize revenue on product and services sales. We record product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price to the buyer is fixed or determinable and collectability is reasonably assured. Recognition of service revenue is primarily based on the completion of agreed-upon service procedures including rate specified contracts and fixed fee contracts. Revenue of agreed-upon rate contracts is recognized as services are performed, based on rates specified in the contract. Revenue of fixed fee contracts is recognized as services are performed in relation to estimated costs to complete procedures specified by the customers in the form of study protocols. Our fixed fee service contracts, which are utilized mainly in our Preclinical segment, vary in term from a few days to greater than a year, with the majority of such contracts having a term of less than six months. Management reviews the costs incurred and services provided to date on these contracts in relation to the total estimated effort to complete the contract. As a result of the reviews, revisions in estimated effort to complete the contract are reflected in the period in which the change became known. Theseappropriate. Significant judgments and estimates are not expected to result in a change that would materially affect our reported results. In some cases, a portion of the contract fee is paid at the time the study is initiated. These advances are recorded as deferred revenue and recognized as revenue as services are performed. Conversely, in some cases, revenue is recorded based on the level of service

~~Table of Contents~~

performed in advance of billing the customer with the offset to unbilled receivable. As of December 27, 2008, we had recorded unbilled revenue of $51.8 million and deferred revenue of $86.7 million in our consolidated balance sheet based on the difference between the estimated level of services performed and the billing arrangements defined by our service contracts.

~~Pension Plan Accounting~~ As of December 27, 2008, we had a pension liability of $32.2 million. The actuarial computations require the use of assumptions to estimate the total benefits ultimately payable to employees and allocate this cost to the service periods. The key assumptions include the discount rate, the expected return on plan assets and expected future rate of salary increases. In addition, our actuaries determine the expense or liability of the plan using other assumptions for future experiences such as withdrawal and mortality rate. The key assumptions used to calculate pension costs are determined and reviewed annually by management after consulting with outside investment advisors and actuaries. The assumed discount rate, which is intended to be the actual rate at which benefits could effectively be settled, is adjusted based on the change in the long-term bond yield as of the measurement date. As of December 27, 2008, the weighted-average discount rate for our pension plans was 5.74%.

The assumed expected return on plan assets is the average return expected on the funds invested or to be invested to provide future benefits to pension plan participants. This includes considering the assets allocation and expected returns likely to be earned over the life of the plan. If the actual return is different from the assumed expected return in plan assets, the difference would be amortized over a period of approximately 15 to 20 years. The estimated effect of a 1.0% change in the expected rate of return would increase or decrease pension expense by $1.3 million.

During 2008, our Board of Directors voted to freeze the accrual of benefits under our U.S. pension plan effective April 30, 2008. In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," we recorded a curtailment gain of $3.3 million in 2008.

~~Stock-based Compensation~~ We recognize compensation expense for all share-based payment awards made to employees and directors including employee stock options and restricted stock awards based on estimated fair values. Accordingly, stock-based compensation cost is measured at grant date, based on the estimated fair value of the award and is recognized as expense on a straight-line basis over the requisite service period which is generally the vesting period. During the year ended December 27, 2008, we recognized $24.3 million of stock compensation expense associated with stock options, restricted stock and performance based stock awards.

We estimate the fair value of stock options using the Black-Scholes option-pricing model and the fair value of our restricted stock awards and restricted stock units based on the quoted market price of our common stock. We recognize the associated compensation expense on a straight-line basis over the vesting periods of the awards, net of estimated forfeitures. Forfeiture rates are estimated based on historical pre-vesting forfeitures and are updated on vesting date to reflect actual forfeitures.

Estimating the fair value for stock options requires judgment, including estimating stock-price volatility, expected term, expected dividends and risk-free interest rates. The expected volatility rates are estimated based on historical volatilities of our common stock over a period of time that approximates the expected term of the options. The expected term represents the average time that options are expected to be outstanding and is estimated based on the historical exercise and post-vesting cancellation patterns of our stock options. Expected dividends are estimated based on our dividend history as well as our current projections. The risk-free interest rate is based on the market yield of U.S. Treasury securities for periods approximating the expected terms of the options in effect at the time of grant. These assumptions are updated on at least an annual basis or when there is a significant change in circumstances that could affect these assumptions.

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~~The fair value of option based stock awards granted during 2008 was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:~~

December 27, 2008
Expected life (in years)
4.5
Expected volatility
24.0 %
Risk-free interest rate
2.76 %
Expected dividend yield
0.0 %
Weighted-average option grant date fair value
$ 14.85

~~Income Taxes~~ ~~As part of the process of preparing our consolidated financial statements, we~~ are required to estimate ~~our income taxes~~future cash flows, including the selection of appropriate discount rates and other assumptions. Changes in each of the jurisdictions in which we operate. This process involves estimating our current tax expense and assessing temporary and permanent differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. In the event that actual results differ from these estimates ~~or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which~~and assumptions could ~~impact our financial position or results of operations.~~

As of December 27, 2008, earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $192.9 million. No provision for U.S. income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. Federal and state taxes and withholding taxes payable to the various foreign countries. It is not practicable to estimate the amount of additional tax that might be payable on this undistributed foreign income.

We are a worldwide business and operate in various tax jurisdictions where tax laws and tax rates are subject to change given the political and economic climate in these countries. We report and pay income taxes based upon operational results and applicable law. Our tax provision is based upon enacted tax rates in effect to determine both the current and deferred tax position. Any significant fluctuation in tax rates or changes in tax laws could cause our estimate of taxes to change resulting in either increases or decreases in our effective tax rate.

Effective December 31, 2006, we adopted the provisions of FIN 48 "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109," which clarifies the accounting for income tax positions by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on the derecognition of previously recognized income tax items, measurement, classification, interest and penalties, accounting in interim periods and financial statement disclosure. Under FIN 48, we recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the tax position. The tax benefits recognized in our financial statements from such positions are measured on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

Due to our size and the number of tax jurisdictions within which we conduct our global business operations, we are subject to income tax audits on a regular basis. As a result, we have tax reserves which are attributable to potential tax obligations around the world. We believe we have sufficiently provided for all audit exposures and assessments. Settlements of these audits or the expiration of the statute of limitations on the assessment of income taxes for any tax year may result in an increase or decrease to our effective tax rate.

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~~Segment Operations~~

The following tables show the net sales and the percentage contribution of each of our reportable segments for the past three years. They also show cost of products sold and services provided, selling, general and administrative expenses, amortization of goodwill and intangibles and operating income by segment and as percentages of their respective segment net sales.

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006

(dollars in millions)

Net sales:

Research models and services
$ 659.9 $ 577.2 $ 515.0

Preclinical services
683.6 653.4 543.4
Cost of products sold and services provided:

Research models and services
$ 375.3 $ 327.9 $ 300.9

Preclinical services
457.5 424.5 350.9
Goodwill impairment

Research models and services
$ — $ — $ —

Preclinical services
700.0 — —
Selling, general and administrative expenses:

Research models and services
$ 83.3 $ 70.3 $ 65.9

Preclinical services
94.8 93.7 73.0

Unallocated corporate overhead
52.1 53.5 41.9
Amortization of other intangibles:

Research models and services
$ 2.6 $ 1.9 $ 0.4

Preclinical services
27.7 31.6 37.2
Operating income (loss):

Research models and services
$ 198.7 $ 177.1 $ 147.8

Preclinical services
(596.4 ) 103.6 82.3

Unallocated corporate overhead
(52.1 ) (53.5 ) (41.9 )

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Net sales:

Research models and services
49.1 % 46.9 % 48.7 %

Preclinical services
50.9 % 53.1 % 51.3 %
Cost of products sold and services provided:

Research models and services
56.9 % 56.8 % 58.4 %

Preclinical services
66.9 % 65.0 % 64.6 %
Goodwill impairment

Research models and services
— — —

Preclinical services
102.4 % — —
Selling, general and administrative expenses:

Research models and services
12.6 % 12.2 % 12.8 %

Preclinical services
13.9 % 14.3 % 13.4 %

Unallocated corporate overhead
— — —
Amortization of other intangibles:

Research models and services
0.4 % 0.3 % 0.1 %

Preclinical services
4.1 % 4.8 % 6.8 %
Operating income:

Research models and services
30.1 % 30.7 % 28.7 %

Preclinical services
(87.3 )% 15.9 % 15.2 %

Unallocated corporate overhead
(3.9 )% (4.3 )% (4.0 )%

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In our consolidated statements of income, we provide a breakdown of net sales and cost of sales between net products and services. Such information is reported irrespective of the business segment from which the sales were generated.

~~Results of Operations~~

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

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Net sales
100.0 % 100.0 % 100.0 %
Cost of products sold and services provided
62.0 % 61.1 % 61.6 %
Selling, general and administrative expenses
17.1 % 17.7 % 17.0 %
Goodwill impairment
52.1 % — —
Amortization of other intangibles
2.3 % 2.7 % 3.6 %
Operating income (loss)
(33.5 )% 18.5 % 17.8 %
Interest income
0.6 % 0.8 % 0.6 %
Interest expense
1.0 % 1.5 % 1.8 %
Provision for income taxes
4.6 % 4.8 % 4.7 %
Minority interests
0.1 % — % 0.2 %
Income (loss) from continuing operations
(38.9 )% 12.8 % 11.8 %


	Fiscal Year Ended
	December 27, 2008		December 29, 2007	December 30, 2006
Net sales		100.0	%	100.0	%	100.0	%
Cost of products sold and services provided		62.0	%	61.1	%	61.6	%
Selling, general and administrative expenses		17.1	%	17.7	%	17.0	%
Goodwill impairment		52.1	%	—		—
Amortization of other intangibles		2.3	%	2.7	%	3.6	%
Operating income (loss)		(33.5	)%	18.5	%	17.8	%
Interest income		0.6	%	0.8	%	0.6	%
Interest expense		1.0	%	1.5	%	1.8	%
Provision for income taxes		4.6	%	4.8	%	4.7	%
Minority interests		0.1	%	—	%	0.2	%
Income (loss) from continuing operations		(38.9	)%	12.8	%	11.8	%

~~Fiscal 2008 Compared to Fiscal 2007~~

~~Net Sales.~~ ~~Net sales in 2008 were $1,343.5 million, an increase of $112.9 million, or 9.2%, from $1,230.6 million in 2007.~~

~~Research Models and Services.~~ In 2008, net sales for our RMS segment were $659.9 million, an increase of $82.7 million, or 14.3%, from $577.2 million in 2007, due to increased small model sales in the United States and Europe, increased consulting and staffing services and strong in vitro sales. Favorable foreign currency translation increased sales growth by approximately 3.7%. RMS sales increased due to pricing and unit volume increases in both models, including large models, and services. The RMS sales growth was driven by increases in basic research and biotechnology spending, which drove greater demand for our products and services.

~~Preclinical Services.~~ In 2008, net sales for our PCS segment were $683.6 million, an increase of $30.2 million, or 4.6%, compared to $653.4 million in 2007. Sales were driven by continuing demand for large model safety testing and certain specialty toxicology studies as well as the acquisition of NewLab BioQuality AG, partially offset by more measured pharmaceutical spending due to our clients' restructuring and reprioritization efforts, particularly in Europe. Unfavorable foreign currency had a negative impact on sales growth by 0.9%.

~~Cost of Products Sold and Services Provided.~~ Cost of products sold and services provided in 2008 was $832.8 million, an increase of $80.4 million, or 10.7%, from $752.4 million in 2007. Cost of products sold and services provided in 2008 was 62.0% of net sales, compared to 61.1% in 2007.

~~Research Models and Services.~~ Cost of products sold and services provided for RMS in 2008 was $375.3 million, an increase of $47.5 million, or 14.5%, compared to $327.8 million in 2007. Cost of products sold and services provided as a percentage of net sales in 2008 was 56.9% compared to 56.8% in 2007. The greater facility utilization was the result of the increased sales during the quarter, partially offset by an unfavorable product mix due to greater growth in the lower margin service area.

~~Preclinical Services.~~ ~~Cost of services provided for the PCS segment in 2008 was $457.5 million, an increase of $32.9 million, or 7.8%, compared to $424.6 million in 2007. Cost of services provided as a~~

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percentage of net sales was 66.9% in 2008, compared to 65.0% in 2007. The increase in cost of services provided as a percentage of net sales was primarily due to the impact of lower sales growth and the start-up and transition costs of PCS Nevada facilities.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses in 2008 were $230.2 million, an increase of $12.7 million, or 5.8%, from $217.5 million in 2007. Selling, general and administrative expenses in 2008 were 17.1% of net sales compared to 17.7% of net sales in 2007.

~~Research Models and Services.~~ Selling, general and administrative expenses for RMS in 2008 were $83.3 million, an increase of $13.0 million, or 18.5%, compared to $70.3 million in 2007. Selling, general and administrative expenses increased as a percentage of sales to 12.6% in 2008 from 12.2% in 2007 due mainly to higher operating costs.

~~Preclinical Services.~~ Selling, general and administrative expenses for the PCS segment in 2008 were $94.8 million, an increase of $1.1 million, or 1.2%, compared to $93.7 million in 2007. Selling, general and administrative expenses in 2008 decreased to 13.9% of net sales compared to 14.3% in 2007.

~~Unallocated Corporate Overhead.~~ Unallocated corporate overhead, which consists of various costs primarily related to activities centered at our corporate headquarters, such as compensation (including stock-based compensation), information systems, compliance and facilities expenses associated with our corporate, administration and professional services functions was $52.1 million in 2008, compared to $53.5 million in 2007. The decrease in unallocated corporate overhead in 2008 was primarily due to the gain associated with the curtailment of the U.S. pension plan and slower growth in health care costs.

~~Amortization of Other Intangibles.~~ ~~Amortization of other intangibles in 2008 was $30.3 million, a decrease of $3.2 million, from $33.5 million in 2007.~~

~~Research Models and Services.~~ ~~In 2008, amortization of other intangibles for our RMS segment was $2.6 million, an increase of $0.7 million from $1.9 million in 2007.~~

~~Preclinical Services.~~ ~~In 2008, amortization of other intangibles for our PCS segment was $27.7 million, a decrease of $3.9 million from $31.6 million in 2007.~~

~~Goodwill Impairment.~~ Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our initial assessment (step one) for 2008, the fair value of our business units exceeded their carrying value therefore our goodwill was not impaired. As economic conditions worsened late in the fourth quarter and our business performance and outlook was not as strong as anticipated coupled with a decrease in our market capitalization, management determined that circumstances had changed enough to trigger another goodwill impairment test as of December 27, 2008. Our analysis resulted inmaterially affect the determination ~~that the fair value our PCS business was less than its carrying value. The second step~~ of the goodwill impairment test involved us calculating the implied goodwill for the PCS business. The carrying value of the goodwill assigned to the PCS business exceeded the implied fair value of goodwill resulting in a goodwill impairment of $700 million.

~~Operating Income.~~ ~~Operating loss in 2008 was $449.8 million, compared to operating income of $227.2 million in 2007.~~

~~Research Models and Services.~~ In 2008, operating income for our RMS segment was $198.7 million, an increase of $21.5 million, or 12.2%, from $177.2 million in 2007. Operating income as a percentage of net sales in 2008 was 30.1%, compared to 30.7% in 2007. The decrease in operating income as a percentage of sales was primarily due to increased operating expenses offset by improved utilization due to the higher sales volume.

~~Preclinical Services.~~ In 2008, operating loss for our PCS segment was $596.4 million, compared to operating income of $103.5 million in 2007. The decrease in operating income as a percentage of net sales was primarily due to goodwill impairment as well as to the start-up and transition costs for our

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~~PCS Nevada facilities partially offset by improved operating efficiency as a result of higher sales and lower amortization costs.~~

~~Interest Expense.~~ ~~Interest expense in 2008 was $14.0 million, compared to $18.0 million in 2007, due primarily to lower outstanding debt and lower interest rates.~~

~~Interest Income.~~ ~~Interest income in 2008 was $8.7 million compared to $9.7 million in 2007.~~

~~Income Taxes.~~ Income tax expense in 2008 was $61.9 million, an increase of $2.5 million compared to $59.4 million in 2007. Our effective tax rate in 2008 was (13.4)% which was adversely impacted by the goodwill impairment by (40.5)%. Our 2007 effective tax rate was 27.3%. The change from 2007 to 2008 effective tax rate was primarily due to the goodwill impairment.

~~Net Income(Loss).~~ ~~Net loss in 2008 was $521.8 million compared to net income of $154.4 million in 2007.~~

~~Fiscal 2007 Compared to Fiscal 2006~~

~~Net Sales.~~ ~~Net sales in 2007 were $1,230.6 million, an increase of $172.2 million, or 16.3%, from $1,058.4 million in 2006.~~

~~Research Models and Services.~~ In 2007, net sales from our RMS segment were $577.2 million, an increase of $62.2 million, or 12.1%, from $515.0 million in 2006. Favorable foreign currency translation increased our net sales gain by 2.9%. RMS sales increased due to pricing and unit volume increases in both models and services. The RMS sales growth was driven by increases in basic research and biotechnology spending, which drove greater demand for our products and services, partially offset by lower sales growth in research models in Japan.

~~Preclinical Services.~~ In 2007, net sales from our Preclinical Services segment were $653.4 million, an increase of $110.0 million, or 20.2%, compared to $543.4 million in 2006. The increase was primarily due to the increased customer demand for toxicology and other specialty preclinical services, reflecting increased customer outsourcing along with the full year impact of the acquisition of Northwest Kinetics. Favorable foreign currency increased sales growth by 2.9%.

~~Cost of Products Sold and Services Provided.~~ Cost of products sold and services provided in 2007 was $752.4 million, an increase of $100.6 million, or 15.4%, from $651.8 million in 2006. Cost of products sold and services provided in 2007 was 61.1% of net sales, compared to 61.6% in 2006.

~~Research Models and Services.~~ Cost of products sold and services provided for RMS in 2007 was $327.9 million, an increase of $27.0 million, or 9.0%, compared to $300.9 million in 2006. Cost of products sold and services provided in 2007 decreased to 56.8% of net sales compared to 58.4% of net sales in 2006. The favorable cost of products sold and services provided as a percentage of sales was due to greater facility utilization as a result of increased sales.

~~Preclinical Services.~~ Cost of services provided for the Preclinical Services segment in 2007 was $424.5 million, an increase of $73.6 million, or 21.0%, compared to $350.9 million in 2006. Cost of services provided as a percentage of net sales was 65.0% in 2007, compared to 64.6% in 2006. The increase in cost of services provided as a percentage of net sales was primarily due to the impact of increased costs related to the transition to our new Massachusetts facility and the foreign exchange impact of the strengthening Canadian dollar, partially offset by improved performance at certain PCS locations.

~~Selling, General and Administrative Expenses.~~ Selling, general and administrative expenses in 2007 were $217.5 million, an increase of $36.7 million, or 20.3%, from $180.8 million in 2006. Selling, general and administrative expenses in 2007 were 17.7% of net sales compared to 17.1% of net sales in 2006. The increase as a percentage of sales was due primarily to increases in unallocated corporate overhead and charges related to the accelerated exit of our Worcester facility.

~~Table of Contents~~

~~Research Models and Services.~~ Selling, general and administrative expenses for RMS in 2007 were $70.3 million, an increase of $4.4 million, or 6.8%, compared to $65.9 million in 2006. Selling, general and administrative expenses decreased as a percentage of sales to 12.2% in 2007 from 12.8% in 2006 due mainly to greater economies of scale.

~~Preclinical Services.~~ Selling, general and administrative expenses for the Preclinical Services segment in 2007 were $93.7 million, an increase of $20.7 million, or 28.3%, compared to $73.0 million in 2006. Selling, general and administrative expenses in 2007 increased to 14.3% of net sales, compared to 13.4% of net sales in 2006 due to charges related to the accelerated exit of our Worcester facility.

~~Unallocated Corporate Overhead.~~ Unallocated corporate overhead, which consists of various corporate expenses including those associated with stock based compensation, pension and departments such as senior executives, corporate accounting, legal, tax, treasury, global informational technology, human resources and investor relations, was $53.5 million in 2007, compared to $41.9 million in 2006. The increase in unallocated corporate overhead in 2007 was due to increased equity based compensation, higher information technology costs and higher bonus accruals.

~~Amortization of Other Intangibles.~~ Amortization of other intangibles in 2007 was $33.5 million, a decrease of $4.1 million, from $37.6 million in 2006. The decreased amortization was primarily due to reduced amortization related to the acquisition of Inveresk.

~~Research Models and Services.~~ In 2007, amortization of other intangibles for our RMS segment was $1.9 million, an increase of $1.5 million from $0.4 million in 2006. The increased amortization was primarily due to the acquisition of the remaining 15% of the equity of Charles River Laboratories Japan, Inc., from the minority interest partner in the first quarter of 2007.

~~Preclinical Services.~~ In 2007, amortization of other intangibles for our Preclinical Services segment was $31.6 million, a decrease of $5.6 million from $37.2 million in 2006. The decrease in amortization of other intangibles was primarily due to reduced amortization related to the Inveresk acquisition.

~~Operating Income.~~ Operating income in 2007 was $227.2 million, an increase of $39.0 million, or 20.7%, from $188.2 million in 2006. Operating income in 2007 was 18.5% of net sales, compared to 17.8% of net sales in 2006. The increase as a percentage of sales was due primarily to increased operating income margins in RMS along with lower amortization costs.

~~Research Models and Services.~~ In 2007, operating income for our RMS segment was $177.2 million, an increase of $29.4 million, or 19.9%, from $147.8 million in 2006. Operating income as a percentage of net sales in 2007 was 30.7%, compared to 28.7% in 2006. The increase in operating income as a percentage of sales was primarily due to improved capacity utilization resulting from the higher sales volume.

~~Preclinical Services.~~ In 2007, operating income for our Preclinical Services segment was $103.5 million, an increase of $21.2 million, or 25.8%, from $82.3 million in 2006. Operating income as a percentage of net sales increased to 15.8%, compared to 15.2% of net sales in 2006. The increase in operating income as a percentage of net sales was primarily due to higher sales which resulted in improved operating efficiency and lower amortization costs, partially offset by the start-up and transition costs for our PCS Massachusetts facilities and the foreign exchange impact of the strengthening Canadian dollar.

~~Interest Income.~~ ~~Interest income in 2007 was $9.7 million, compared to $6.8 million in 2006. The $2.9 million increase was primarily due to increased funds invested.~~

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~~Interest Expense.~~ ~~Interest expense in 2007 was $18.0 million, compared to $19.4 million in 2006. The $1.4 million decrease was primarily due to debt repayment.~~

~~Income Taxes.~~ Income tax expense for 2007 was $59.4 million, an increase of $9.7 million compared to $49.7 million in 2006. Our effective tax rate for 2007 was 27.3% compared to 28.2% for 2006. The decline in effective tax rate in 2007 was primarily due to benefits recorded in 2007 related to tax law changes in the United Kingdom and Germany and benefits generated due to mix of earnings.

~~Income from Continuing Operations.~~ ~~Income from continuing operations in 2007 was $157.6 million, an increase of $32.4 million from $125.2 million in 2006.~~

~~Loss from Discontinued Operations.~~ The loss from discontinued operations in 2007 was $3.1 million. The loss from discontinued operations for 2006 was $181.0 million which included a goodwill impairment of $129.2 million, the tax expense of $37.8 million related to the sale of the Phase II-IV Clinical business, as well as results from our ISS business.

~~Net Income (Loss).~~ ~~Net income in 2007 was $154.4 million compared to a net loss of $55.8 million in 2006.~~

~~Liquidity and Capital Resources~~

~~The following discussion analyzes liquidity and capital resources by operating, investing and financing activities as presented in our condensed consolidated statements of cash flows.~~

~~Our principal sources of liquidity have been our cash flow from operations, the convertible debt offering, our marketable securities and our revolving line of credit arrangements.~~

We had marketable securities of $19.0 million and $63.4 million as of December 27, 2008 and December 29, 2007, respectively. The decline was primarily due to management's decision to move funds into cash equivalent type investments. As of December 27, 2008 and December 29, 2007, we had $19.0 million and $38.2 million invested in auction rate securities rated AAA by a major credit rating agency. Our auction rate securities are guaranteed by U.S. federal agencies. These auction rate securities provide liquidity via an auction process that resets the applicable interest rate at predetermined calendar intervals, usually every 7 or 35 days. The overall credit concerns in the capital markets as well as the failed auctions of these securities have impacted our ability to liquidate these investments. The auctions for the securities we own continue to fail, the investment may not be readily convertible to cash until a future auction of these investments is successful. Based on our ability to access our cash and other short-term investments, our expected operating cash flows, and other sources of cash, we do not anticipate the current lack of liquidity on these investments will affect our ability to operate our business as usual.

In 2006, we issued $350.0 million of 2.25% Convertible Senior Notes (the 2013 notes) due in 2013. At December 27, 2008, the fair value of our outstanding 2013 Notes was approximately $311.1 based on their quoted market value. During the fourth quarter of 2008 no conversion triggers were met.

Concurrently with the sale of the 2013 Notes, we entered into convertible note hedge transactions with respect to our obligation to deliver common stock under the 2013 Notes. The convertible note hedges give us the right to receive, for no additional consideration, the numbers of shares of common stock that we are obligated to deliver upon conversion of the 2013 Notes (subject to antidilution adjustments substantially identical to those in the 2013 Notes), and expire on June 15, 2013. The aggregate cost of these convertible note hedges was $98.3 million.

Separately and concurrently with the pricing of the 2013 Notes, we issued warrants for approximately 7.2 million shares of our common stock. The warrants give the holders the right to receive, for no additional consideration, cash or shares (at our option) with a value equal to the appreciation in the price of our shares above $59.925, and expire between September 13, 2013 and

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~~January 22, 2014 over 90 equal increments. The total proceeds from the issuance of the warrants were $65.4 million.~~

From our economic perspective, the cumulative impact of the purchase of the convertible note hedges and the sale of the warrants increases the effective conversion price of the 2013 Notes from $48.94 to $59.925 per share.

We currently have a $428 million credit agreement and a $50 million credit agreement. At December 27, 2008, we had term loans of $134.9 million and $90.0 million under our revolving credit facility outstanding. As of December 27, 2008, we had $104.4 million available to borrow under our revolving credit agreements. As of December 27, 2008, we were compliant with all financial covenants specified in the credit agreements. For additional information regarding the 2013 Notes, the $428 million credit agreement and the $50 million credit agreement, please see Note 4 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.

During the first quarter of 2009, the Company plans to repatriate approximately $90.0 million of the earnings of its non-U.S. subsidiaries. As such, the Company has changed its permanent reinvestment assertion with regards to these unremitted earnings. As a result of the change in assertion, the Company recorded a tax benefit primarily due to foreign tax credits in the fourth quarter of 2008 of $7.2 million, of which $4.0 million was reflected in the effective tax rate and $3.2 million was reflected in the Cumulative Translation Account. The proceeds from the repatriation will be used for general corporate purposes. The Company continues to maintain its permanent reinvestment assertion with regards to the remaining unremitted earnings of its non-U.S. subsidiaries.

Our Board of Directors has authorized a share repurchase program, originally authorized on July 27, 2005 and subsequently amended on October 26, 2005, May 9, 2006, August 1, 2007 and July 24, 2008 to acquire up to a total of $600.0 million of common stock. The program does not have a fixed expiration date. In order to facilitate these share repurchases, the Company has entered into Rule 10b5-1 Purchase Plans. As of December 27, 2008, approximately $187.1 million remained authorized for share repurchases.

~~Cash and cash equivalents totaled $243.6 million at December 27, 2008 compared to $225.4 million at December 29, 2007.~~

Net cash provided by operating activities in 2008 and 2007 was $279.5 million and $288.4 million, respectively. The decrease in cash provided by operations was primarily due to a decrease in deferred revenue. Our days sales outstanding (DSO) of 40 days as of December 27, 2008 increased from 35 days at December 29, 2007. Our DSO includes deferred revenue as an offset to accounts receivable in the calculation.

Net cash used in investing activities in 2008 and 2007 was $227.2 million and $200.8 million, respectively. Our capital expenditures in 2008 were $197.1 million of which $60.5 million was related to RMS and $136.6 million to PCS. For 2009 we project capital expenditures to be in the range of $100 to $120 million. We anticipate that future capital expenditures will be funded by operating activities and existing credit facilities.

Net cash used in financing activities in 2008 was $17.3 million and $46.4 million in 2007. During 2008, we purchased $115.1 million of treasury stock and repaid debt of $36.5 million partially offset by proceeds from exercises of employee stock options and warrants of $28.5 million and proceeds from debt of $102.0 million. During 2007, we purchased $41.6 million of treasury stock and repaid $64.5 million of debt, partially offset by proceeds from exercises of employee stock options of $54.0 million.

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~~Minimum future payments of our contractual obligations at December 27, 2008 are as follows:~~

Contractual Obligations
Total Less than
1 Year 1—3 Years 3—5 Years After
5 Years
Debt
$ 575.8 $ 35.4 $ 190.4 $ 350.0 $ —
Interest payments
45.6 12.8 28.8 4.0 —
Operating leases
98.3 21.4 24.8 17.4 34.7
Pension
94.5 9.4 9.7 28.7 46.7
Construction commitments
27.4 27.4 — — —

Total contractual cash obligations
$ 841.6 $ 106.4 $ 253.7 $ 400.1 $ 81.4

~~The above table does not reflect unrecognized tax benefits of $28.7 million. Refer to Note 6 to the Consolidated Financial Statements for additional discussion on unrecognized tax benefits.~~

~~Off-Balance Sheet Arrangements~~

The conversion features of our 2013 Notes are equity-linked derivatives. As such, we recognize these instruments as off-balance sheet arrangements. The conversion features associated with these notes would be accounted for as derivative instruments, except that they are indexed to our common stock and classified in stockholders' equity. Therefore, these instruments meet the scope of exception of paragraph 11(a) of SFAS No. 133, "Accounting for Derivatives Instruments and Hedging Activities," and are accordingly not accounted for as derivatives for purposes of SFAS No. 133.

~~Recent Accounting Pronouncements~~

In June, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (FSP EITF 03-6-1) which clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities. As participating securities, these instruments should be included in the calculation of basic earnings per share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, as well as interim periods within those years. Once effective, all prior-period earnings per share data presented must be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of the FSP. Early application is not permitted. Upon adoption of FSP EITF 03-6-1, we expect to revise prior period earning per share from continuing operations as follows: decrease 2008 basic and diluted loss per share by $0.08; reduce 2007 basic and diluted earning per share by $0.02 and reduce 2006 basic earning per share by $0.02 and diluted earning per share from continuing operations by $0.01.

In May 2008, the FASB issued FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" (FSP 14-1). This FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and will be applied retrospectively to all periods presented. We estimate that upon adoption of the provisions of FSP 14-1, $261,508 of the total proceeds from our debt will be allocated to the liability component, which represents the estimated fair value of similar debt instruments without the conversion option as of the date of issuance. The remaining $88,492 will be allocated to the equity component. The debt discount of $88,492 will be amortized to interest expense over the seven year period from June 2006 to June 2013, the expected life of the instrument. Additionally, upon adoption, approximately $1,903 of deferred financing costs capitalized at the time of issuance will be reclassified to equity as equity issuance costs and will not be amortized to interest expense.

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In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative Instruments and Hedging Activities" (FAS 161). FAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This statement is not expected to have an impact on our consolidated financial statements.

In February 2008, the FASB issued FSP 157-1 and 157-2 that (1) partially deferred the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities and (2) removed certain leasing transactions from the scope of SFAS 157. SFAS 157 as amended by this FSP is effective for nonfinancial assets and liabilities in fiscal years beginning after November 15, 2008 and will be applied prospectively. The provisions of SFAS 157 will not have a material impact on our consolidated financial statements.

In February 2008, the FASB issued FSP FAS 140-3: "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions" (FSP 140-3). FSP 140-3 provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This FSP presumes that an initial transfer for a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under Statement 140. However, if certain criteria are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be evaluated separately under Statement 140. This FSP is not expected to have an impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (SFAS 141(R)) and No. 160, "Noncontrolling Interests in Consolidated Financial Statements" (SFAS 160). SFAS 141(R) and SFAS 160 introduce significant changes in the accounting for and reporting of business acquisitions and noncontrolling interests in a subsidiary. SFAS 141(R) continues the movement toward the greater use of fair values in financial reporting and increased transparency through expanded disclosures. SFAS 141(R) changes how business acquisitions are accounted for and will impact financial statements at the acquisition date and in subsequent periods. In addition, SFAS 141(R) will impact the annual goodwill impairment test associated with acquisitions that close both before and after its effective date. SFAS 141(R) amends SFAS 109 changing the accounting for adjustments to deferred tax asset valuation allowances and income tax uncertainties related to acquisitions that close both before and after its effective date, generally requiring adjustments to be reflected in income tax expense. SFAS 141(R) applies prospectively to fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. An entity may not apply SFAS 141(R) before that date. The adoption of SFAS 141(R) and SFAS 160 will impact our consolidated financial statements.

~~Item 7A. Quantitative and Qualitative Disclosure about Market Risk~~

Certain of our financial instruments are subject to market risks, including interest rate risk and foreign currency exchange rates. We generally do not use financial instruments for trading or other speculative purposes.

~~Interest Rate Risk~~

The fair value of our marketable securities is subject to interest rate risk and will fall in value if market interest rates increase. If market rates were to increase immediately and uniformly by 100 basis points from levels at December 27, 2008, then the fair value of the portfolio would decline by approximately $0.2 million.

~~We have entered into two credit agreements, the $428 million credit agreement and the $50 million credit agreement. Our primary interest rate exposure results from changes in LIBOR or the~~

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base rates which are used to determine the applicable interest rates under our term loans in the $428 million credit agreement and in the $50 million agreement and our revolving credit facilities. Our potential additional interest expense over one year that would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate would be approximately $3.3 million on a pre-tax basis.

We issued $350 million of the 2013 Notes in a private placement in the second quarter of 2006. The convertible senior debenture notes bear an interest rate of 2.25%. The fair market value of the outstanding notes was $311.1 million on December 27, 2008.

~~Foreign Currency Exchange Rate Risk~~

We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our earnings and cash flows. This risk is mitigated by the fact that various foreign operations are principally conducted in their respective local currencies. However, a portion of our foreign operations' revenue is denominated in U.S. dollars, with the costs accounted for in their local currencies. We attempt to minimize this exposure by using certain financial instruments, for purposes other than trading, in accordance with our overall risk management and our hedge policy. In accordance with our hedge policy, we designate certain transactions as hedges as set forth in SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."

During 2008, we utilized foreign exchange contracts, principally to hedge the impact of currency fluctuations on customer transactions and certain balance sheet items. No foreign exchange contracts were outstanding on December 27, 2008.

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~~Item 8. Financial Statements and Supplementary Data~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~



~~Consolidated Financial Statements:~~
	~~Report of Management~~	50
	~~Report of Independent Registered Public Accounting Firm~~	51
	~~Consolidated Statements of Income for the years ended December 27, 2008, December 29, 2007 and December 30, 2006~~	52
	~~Consolidated Balance Sheets as of December 27, 2008 and December 29, 2007~~	53
	~~Consolidated Statements of Cash Flows for the years ended December 27, 2008, December 29, 2007 and December 30, 2006~~	54
	~~Consolidated Statements of Changes in Shareholders' Equity for the years ended December 27, 2008, December 29, 2007 and December 30, 2006~~	55
	~~Notes to Consolidated Financial Statements~~	56
~~Supplementary Data:~~
	~~Quarterly Information (Unaudited)~~	~~100~~

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~~Management's Annual Report on Internal Control Over Financial Reporting~~

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in~~Internal Control—Integrated Framework~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment our management concluded that, as of December 27, 2008, our internal control over financial reporting was effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 27, 2008 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which is included herein.

~~Table of Contents~~

~~Report of Independent Registered Public Accounting Firm~~

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

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Charles River Laboratories International, Inc and its subsidiaries at December 27, 2008 and December 29, 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 27, 2008 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2008, based on criteria established in~~Internal Control—Integrated Framework~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 8. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

~~As discussed in Note 6 to the consolidated financial statements, the Company changed its method of accounting for uncertain tax positions as of December 31, 2006.~~

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~/s/ PricewaterhouseCoopers LLP~~

~~Boston, Massachusetts~~
~~February 23, 2009~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~CONSOLIDATED STATEMENTS OF INCOME~~

~~(dollars in thousands, except per share amounts)~~

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Net sales related to products
$ 471,741 $ 415,247 $ 374,832
Net sales related to services
871,752 815,379 683,553

Net sales
1,343,493 1,230,626 1,058,385
Costs and expenses

Cost of products sold
252,938 225,088 211,008

Cost of services provided
579,846 527,347 440,770

Selling, general and administrative
230,159 217,491 180,795

Goodwill impairment
700,000 — —

Amortization of other intangibles
30,312 33,509 37,639

Operating income (loss)
(449,762 ) 227,191 188,173
Other income (expense)

Interest income
8,691 9,683 6,836

Interest expense
(14,009 ) (18,004 ) (19,426 )

Other, net
(5,930 ) (1,448 ) 981

Income (loss) before income taxes and minority interests
(461,010 ) 217,422 176,564
Provision for income taxes
61,944 59,400 49,738

Income (loss) before minority interests
(522,954 ) 158,022 126,826
Minority interests
687 (470 ) (1,605 )

Income (loss) from continuing operations
(522,267 ) 157,552 125,221
Loss from discontinued operations, net of tax
424 (3,146 ) (181,004 )

Net income (loss)
$ (521,843 ) $ 154,406 $ (55,783 )

Earnings (loss) per common share

Basic:

Continuing operations
$ (7.76 ) $ 2.35 $ 1.82

Discontinued operations
$ 0.01 $ (0.05 ) $ (2.63 )

Net income (loss)
$ (7.76 ) $ 2.31 $ (0.81 )

Diluted:

Continuing operations
$ (7.76 ) $ 2.29 $ 1.79

Discontinued operations
$ 0.01 $ (0.05 ) $ (2.59 )

Net income (loss)
$ (7.76 ) $ 2.25 $ (0.80 )

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(dollars in thousands, except per share amounts)~~

December 27,
2008 December 29,
2007
Assets

Current assets

Cash and cash equivalents
$ 243,592 $ 225,449

Trade receivables, net
210,214 213,908

Inventories
96,882 88,023

Other current assets
67,218 79,477

Current assets of discontinued operations
233 1,007

Total current assets
618,139 607,864

Property, plant and equipment, net
828,921 748,793

Goodwill, net
457,578 1,120,540

Other intangibles, net
136,100 148,905

Deferred tax asset
62,935 89,255

Other assets
52,058 85,993

Long term assets of discontinued operations
4,187 4,187

Total assets
$ 2,159,918 $ 2,805,537

Liabilities and Shareholders' Equity

Current liabilities

Current portion of long-term debt and capital leases
$ 35,452 $ 25,051

Accounts payable
40,517 36,715

Accrued compensation
54,870 53,359

Deferred revenue
86,707 102,021

Accrued liabilities
60,741 61,366

Other current liabilities
22,676 23,268

Current liabilities of discontinued operations
35 748

Total current liabilities
300,998 302,528

Long-term debt and capital leases
540,646 484,998

Other long-term liabilities
118,827 154,044

Total liabilities
960,471 941,570

Commitments and contingencies

Minority interests
422 3,500

Shareholders' equity

Preferred stock, $0.01 par value; 20,000,000 shares authorized; no shares issued and outstanding
— —

Common stock, $0.01 par value; 120,000,000 shares authorized; 76,609,779 issued and 67,052,884 shares outstanding at December 27, 2008 and 75,427,649 issued and 68,135,324 shares outstanding at December 29, 2007
766 754

Capital in excess of par value
1,965,150 1,906,997

Retained (deficit) earnings
(344,314 ) 177,529

Treasury stock, at cost, 9,556,895 shares and 7,292,325 shares at December 27, 2008 and December 29, 2007, respectively
(425,924 ) (310,372 )

Accumulated other comprehensive income
3,347 85,559

Total shareholders' equity
1,199,025 1,860,467

Total liabilities and shareholders' equity
$ 2,159,918 $ 2,805,537

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(dollars in thousands)~~

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Cash flows relating to operating activities

Net income (loss)
$ (521,843 ) $ 154,406 $ (55,783 )

Less: Income (loss) from discontinued operations
424 (3,146 ) (181,004 )

Income (loss) from continuing operations
(522,267 ) 157,552 125,221
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:

Depreciation and amortization
91,183 86,379 82,586

Goodwill impairment
700,000 — —

Gain on pension curtailment
(3,276 ) — —

Non-cash compensation
24,333 26,017 21,090

Deferred income taxes
12,671 (9,786 ) 4,035

Other, net
9,019 9,056 1,659
Changes in assets and liabilities:

Trade receivables
(8,532 ) (492 ) (18,961 )

Inventories
(9,670 ) (12,988 ) (6,475 )

Other assets
6,421 (9,057 ) (19,139 )

Accounts payable
8,177 2,076 (2,586 )

Accrued compensation
1,248 9,445 (414 )

Deferred revenue
(15,314 ) 8,736 (2,967 )

Accrued liabilities
6,717 3,442 (8,493 )

Other liabilities
(21,245 ) 18,045 417

Net cash provided by operating activities
279,465 288,425 175,973

Cash flows relating to investing activities

Acquisition of businesses, net of cash acquired
(69,151 ) (11,584 ) (30,862 )

Capital expenditures
(197,081 ) (227,036 ) (181,747 )

Purchases of marketable securities
(6,439 ) (299,408 ) (207,900 )

Proceeds from sale of marketable securities
45,444 334,546 122,981

Other, net
51 2,668 130

Net cash used in investing activities
(227,176 ) (200,814 ) (297,398 )

Cash flows relating to financing activities

Proceeds from long-term debt and revolving credit agreement
102,000 — 440,300

Payments on long-term debt, capital lease obligation and revolving credit agreement
(36,540 ) (64,545 ) (170,842 )

Purchase of call options
— — (98,110 )

Proceeds from exercises of stock options and warrants
28,490 53,977 22,900

Proceeds from issuance of warrants
— — 65,423

Excess tax benefit from exercises of employee stock options
3,788 7,150 6,540

Purchase of treasury stock
(115,058 ) (41,617 ) (249,958 )

Other, net
— (1,392 ) (10,685 )

Net cash provided by (used in) financing activities
(17,320 ) (46,427 ) 5,568

Discontinued operations

Net cash provided by (used in) operating activities
484 (4,177 ) (11,603 )

Net cash provided by investing activities
— 30 189,406

Net cash used in financing activities
— — (182 )

Net cash provided by (used in) discontinued operations
484 (4,147 ) 177,621

Effect of exchange rate changes on cash and cash equivalents
(17,310 ) 13,032 (1,205 )

Net change in cash and cash equivalents
18,143 50,069 60,559
Cash and cash equivalents, beginning of period
225,449 175,380 114,821

Cash and cash equivalents, end of period
$ 243,592 $ 225,449 $ 175,380

Supplemental cash flow information

Cash paid for interest
$ 14,186 $ 20,110 $ 22,992

Cash paid for taxes
$ 43,157 $ 38,448 $ 93,109
Supplemental non-cash investing activities information

Capitalized interest
$ 2,486 $ 4,716 $ 4,107

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~

~~(dollars in thousands)~~

Total Accumulated
(Deficit)
Earnings Accumulated
Other
Comprehensive
Income Common
Stock Capital in
Excess
of Par Treasury
Stock Unearned
Compensation
Balance at December 31, 2005
$ 1,827,013 $ 78,906 $ 8,540 $ 724 $ 1,777,625 $ (17,997 ) $ (20,785 )

Components of comprehensive income, net of tax:

Net (loss)
(55,783 ) (55,783 ) — — — — —

Foreign currency translation adjustment
12,335 — 12,335 — — — —

Minimum pension liability adjustment
(195 ) — (195 ) — — — —

Unrealized gain on marketable securities
11 — 11 — — — —

Total comprehensive income
(43,632 ) — — — — — —

Adjustment to initially apply SFAS No. 158, net of tax
480 — 480 — — — —

Tax benefit associated with stock issued under employee compensation plans
5,714 — — — 5,714 — —

Exercise of warrants
79 — — — 79 — —

Issuance of stock under employee compensation plans
22,821 — — 10 22,811 — —

Acquisition of treasury shares
(249,958 ) — — — (249,958 ) —

Stock-based compensation
21,866 — — — 21,866 — —

Purchase of hedge on convertible debt
(98,110 ) — — — (98,110 ) — —

Issuance of warrants
65,423 — — — 65,423 — —

Deferred tax assets
43,515 — — — 43,515 — —

Reversal of unearned compensation upon adoption of SFAS No. 123(R)
— — — (20,785 ) — 20,785

Balance at December 30, 2006
$ 1,595,211 $ 23,123 $ 21,171 $ 734 $ 1,818,138 $ (267,955 ) $ —

Components of comprehensive income, net of tax:

Net income
154,406 154,406 — — — — —

Foreign currency translation adjustment
57,872 — 57,872 — — — —

Net increase in unrecognized pension net gain/loss and prior service costs
6,564 — 6,564 — — — —

Unrealized loss on marketable securities
(48 ) — (48 ) — — — —

Total comprehensive income
218,794 — — — — — —

Tax benefit associated with stock issued under employee compensation plans
8,727 — — — 8,727 — —

Exercise of warrants
14 — — — 14 — —

Issuance of stock under employee compensation plans
54,121 — — 20 54,101 — —

Acquisition of treasury shares
(42,417 ) — — — — (42,417 ) —

Stock-based compensation
26,017 — — — 26,017 — —

Balance at December 29, 2007
$ 1,860,467 $ 177,529 $ 85,559 $ 754 $ 1,906,997 $ (310,372 ) $ —

Components of comprehensive income, net of tax:

Net (loss)
(521,843 ) (521,843 ) — — — — —

Foreign currency translation adjustment
(72,588 ) — (72,588 ) — — — —

Net decrease in unrecognized pension net gain/loss and prior service costs
(7,457 ) — (7,457 ) — — — —

Unrealized loss on marketable securities
(2,167 ) — (2,167 ) — — — —

Total comprehensive income
(604,055 ) — — — — — —

Tax benefit associated with stock issued under employee compensation plans
4,769 — — — 4,769 — —

Exercise of warrants
741 — — — 741 —

Deferred taxes
731 — — — 731 — —

Issuance of stock under employee compensation plans
27,591 — — 12 27,579 — —

Acquisition of treasury shares
(115,552 ) — — — — (115,552 ) —

Stock-based compensation
24,333 — — — 24,333 — —

Balance at December 27, 2008
$ 1,199,025 $ (344,314 ) $ 3,347 $ 766 $ 1,965,150 $ (425,924 ) $ —

~~See Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies~~

~~Description of Business~~

Charles River Laboratories International, Inc. together with its subsidiaries is a leading global provider of solutions that accelerate the drug discovery and development process including research models and associated services, and outsourced preclinical services. Our fiscal year is the twelve-month period ending the last Saturday in December.

~~Principles of Consolidation~~

The consolidated financial statements include all majority-owned subsidiaries. Intercompany accounts, transactions and profits are eliminated. Results for majority-owned subsidiaries are recorded on a one-month lag basis. There were no material transactions or events for these subsidiaries between the reporting date and our fiscal year-end date.

~~Reclassifications~~

~~Certain reclassifications have been made to prior year statements to conform to the current year presentation. These reclassifications have no impact on period reported net income or cash flow.~~

~~Use of Estimates~~

The financial statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on informed estimates and judgments of management with consideration given to materiality. Actual results could differ from those estimates.

~~Cash and Cash Equivalents~~

~~Cash equivalents include time deposits and highly liquid investments with remaining maturities at the purchase date of three months or less.~~

~~Trade Receivables and Concentrations of Credit Risk~~

We record trade receivables net of an allowance for doubtful accounts. We establish an allowance for doubtful accounts which we believe is adequate to cover anticipated losses on the collection of all outstanding trade receivable balances. The adequacy of the doubtful account allowance is based on historical information, a review of major customer accounts receivable balances and management's assessment of current economic conditions. We reassess the allowance for doubtful accounts each quarter. Provisions to the allowance for doubtful accounts amount to $1,179 in 2008 and $494 in 2007. Write offs to the allowance for doubtful accounts amounted to $288 in 2008 and $421 in 2007.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies (Continued)~~

~~The composition of net trade receivables is as follows:~~

December 27,
2008 December 29,
2007
Customer receivables
$ 162,518 $ 165,057
Unbilled revenue
51,798 52,033

Total
214,316 217,090
Less allowance for doubtful accounts
(4,102 ) (3,182 )

Net trade receivables
$ 210,214 $ 213,908

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of trade receivables from customers in the pharmaceutical and biotechnology industries. No single customer accounted for more than 5% of our net sales.

~~Marketable Securities~~

We account for our investment in marketable securities in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Investments in marketable securities are reported at fair value and consist of corporate debt securities and government securities and obligations which are classified as securities available for sale and mutual funds which are classified as actively traded.

Realized gains and losses on securities are included in earnings and are determined using the specific identification method. Unrealized holding gains and losses on securities classified as available for sale, are excluded from earnings and are reported in accumulated other comprehensive income, net of related tax effects. Unrealized gains and losses on actively traded securities are included in earnings. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion is included in interest income.

As of December 27, 2008, we held $18,958 in auction rate securities which are variable rate debt instruments, which bear interest rates that reset approximately every 7 or 35 days. The auction rate securities owned were rated AAA by a major credit rating agency and are either commercially insured or guaranteed by the Federal Family Education Loan Program (FFELP). The underlying securities have contractual maturities which are generally greater than ten years. The auction rate securities are classified as available for sale and are recorded at fair value. Typically, the carrying value of auction rate securities approximates fair value due to the frequent resetting of the interest rates. We have classified these investments as long-term consistent with the term of the underlying security which are structured with short term interest rate reset dates of generally 7 or 35 days but with contractual maturities that are long term.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies (Continued)~~

~~The amortized cost, gross unrealized gains, gross unrealized losses and~~ fair value for ~~marketable securities by major security type were as follows:~~

these assets.

Other assets consist of assets that we do not intend to settle within the next twelve months.

The composition of other assets is as follows:

~~We account for our~~Our investment in life insurance contracts ~~in accordance with FASB Staff Position No. FTB 85-4,~~~~Accounting for Life Settlement Contracts by Third-Party Investors~~ ~~using the~~are recorded at fair ~~value method. Under the fair value method,~~value. Accordingly, we recognize the initial investment at the transaction price and remeasure the investment at fair value each reporting period. Investments in life insurance contracts are reported as part of purchases of ~~marketable securities~~investments in the statement of cash flows. At December ~~27, 2008,~~31, 2011, we held 8469 contracts ~~with a carrying value of $19,652 and a face value of $134,782.~~

We recognize obligations associated with restructuring activities and contract termination costs ~~in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 requires~~by recording a liability at fair value for the costs associated with an exit or disposal activity as well as costs to terminate a contract or an operating lease. The overall purpose of our restructuring actions is to lower ~~overall~~ operating costs and improve profitability by reducing excess capacities. Restructuring charges are typically recorded ~~in selling, general and administrative expenses~~ in the period in which the plan is approved by our senior management and, where material, our Board of Directors, and when the liability is incurred. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity is recognized and measured at its fair value when the entity ceases using the right conveyed by the contract. During ~~2007, the Company ceased using~~2011, 2010 and 2009 we implemented staffing reductions to improve operating efficiency and profitability at various sites. As a ~~leased facility in Worcester, MA and recorded a charge~~result of ~~$2,793~~these actions, for the years ended December 31, 2011, December 25, 2010 and December 26, 2009, we recorded severance and retention charges as shown below. As of December 31, 2011, $1,432 was included in accrued compensation and $1,942 in other long-term liabilities on our consolidated balance sheet. As of December 25, 2010, $5,000 was included in accrued compensation and $5,658 in other long-term liabilities on our consolidated balance sheet.

Other current liabilities consist of liabilities we intend to settle within the next twelve months.

The composition of other current liabilities is as follows:

Other long-term liabilities consist of liabilities we do not intend to settle within the next twelve months.

We adopted on a modified prospective basis, the provisions of SFAS No. 123(R), "Share-Based Payment (Revised 2004)," (SFAS No. 123(R)) and related guidance which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employeegrant stock options and restricted stock ~~awards based on estimated fair values. Accordingly,~~to employees and non-employee directors under our stock-based compensation plans. Stock-based compensation cost is measured at grant date, based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period.

~~Revenue Recognition~~

We ~~recognize revenue related~~estimate the fair value of stock options using the Black-Scholes valuation model. Key inputs and assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the risk-free interest rate over the option's expected term, the expected annual dividend yield and the expected stock price volatility. The expected stock price volatility assumption was determined using the historical volatility of our ~~products~~common stock over the expected life of the option. The risk-free interest rate was based on the market yield for the five year U.S. Treasury security. The expected life of options was determined using historical option exercise activity. Management believes that the valuation technique and ~~services~~the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options granted. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

We record deferred tax assets for stock-based awards based on the amount of stock-based compensation recognized in our Consolidated Statements of Income at the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less than the deferred tax asset, the calculated shortfall reduces our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits in computed in accordance with the ~~SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition."~~

long form method.

We recognize revenue related to our products, which include research models, invitro technology and avian vaccine support products, when persuasive evidence of an arrangement exists, generally in the form of ~~customer~~client purchase orders, title and risk of loss have transferred, which occurs upon delivery of the products, the sales price is fixed and determinable and collectability is reasonably assured. These recognition criteria are met at the time the product is delivered to the ~~customer's~~client's site. Product sales are recorded net of returns upon delivery. For large models, in some cases ~~customers~~clients pay in advance of delivery of the product. These advances are deferred and recognized as revenue upon delivery of the product.

Our service revenue is comprised of discovery support, safety assessment, research animal diagnostic services (RADS),

The ~~toxicology, pathology and clinical Phase I trials~~safety assessment services arrangements typically range from one to six months but can range up to approximately 24 months in length. These agreements are negotiated for a fixed fee. ~~Laboratory~~RADS service arrangements are generally completed within a ~~one-month~~one -month period and are also of a fixed fee nature. ~~Transgenic~~DS services are also short term in nature, while GEMS and ~~contract staffing services~~IS are of a longer-term nature, from ~~six~~6 months to ~~five~~5 years, and are billed at agreed upon rates as specified in the contract.

Our service revenue is recognized upon the completion of the agreed upon performance criteria. These performance criteria are generally in the form of either study protocols or specified activities or procedures which we are engaged to perform. These performance criteria are established by our ~~customers~~clients and do not contain acceptance provisions which are based upon the achievement of certain study or laboratory testing results. Revenue of agreed upon rate contracts is recognized as services are performed, based upon rates specified in the contract. Revenue of fixed fee contracts is recognized as services are performed in relation to estimated costs to complete procedures specified by ~~customers~~clients in the form of study protocols.

Deferred and unbilled revenue isare recognized in our consolidated balance sheets. In some cases, a portion of the contract fee is paid at the time the study is initiated. These advances are recorded as deferred revenue and recognized as revenue as services are performed. Revenue is recognized on unbilled services and relate to amounts that are currently ~~unbillable~~not billable to the ~~customer~~client pursuant to contractual terms. In general, such amounts become billable in accordance with predetermined payment schedules, but are recognized as revenue as services are performed.

We include standard indemnification provisions in ~~customer~~client contracts, which include standard provisions limiting our liability under such contracts, including our indemnification obligations, with certain exceptions.

We ~~follow~~enter into derivatives to hedge the ~~requirements~~foreign currency exchange risk in order to minimize the impact of ~~SFAS No. 133, "Accounting for Derivative Instruments~~market fluctuations of foreign currency rates on our financials. Throughout the year we entered into various contracts to manage this risk. During 2011 and ~~Hedging Activities," which establishes accounting~~2010 , the Company entered into a forward foreign currency contract in order to hedge the foreign exchange impact of an intercompany loan between our entities with different functional currencies. As of December 31, 2011, the outstanding forward contract had a fair value of $5. We recorded a hedge gain (loss) of $(6,287) in 2011, $713 in 2010 and ~~reporting standards for derivative instruments, including~~$1,785 in 2009.

We hold cash equivalents, investments and certain ~~derivative instruments embedded in~~ other ~~contracts and used for hedging activities. All derivatives, whether designed for hedging relationships or not,~~assets that are ~~required to be recorded on the balance sheet~~carried at fair value. ~~If the derivative is designated as a~~We generally determine fair value ~~hedge, all changes~~using a market approach based on quoted prices of identical instruments when available. When market quotes of identical instruments are not readily accessible or available, we determine fair value based on quoted market prices of similar instruments. As of December 31, 2011, we do not have any significant non-recurring measurements of nonfinancial assets and nonfinancial liabilities.

The valuation hierarchy for disclosure of the inputs used to measure fair value prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, including interest rates, yield curves and credit risks, or inputs that are derived principally from or corroborated by observable market data through correlation. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

Descriptions of the ~~derivative~~valuation methodologies used for assets and ~~changes in the~~liabilities measured at fair value ~~of the hedged item attributable to the hedged risk~~ are ~~recognized in earnings. If the derivative is designated~~ as ~~a cash flow hedge, the effective portion of~~

follows:

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies (Continued)~~

The following table ~~below~~ presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the ~~quarter~~years ended December ~~27, 2008.~~31, 2011 and December 25, 2010. Our auction rate securities were valued at fair value by management in part utilizing an independent valuation reviewed by management which used pricing models and discounted cash flow methodologies incorporating assumptions that reflect the assumptions a marketplace participant would use at December ~~27, 2008.~~

31, 2011.

We recognize deferred tax assets and liabilities are measured at fair value on a non-recurring basis. As of December 27, 2008, we have not applied the provisions of SFAS 157 to these assets and liabilities in accordance with FASB "Staff Position FAS 157-2: Effective Date of SFAS 157" (FSP 157-2). FSP 157-2 partially defers the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities and removes certain leasing transactions from the scope of SFAS 157. SFAS 157 as amended by this FSP is effective for nonfinancial assets and liabilities in the first quarter of 2009 and will be applied prospectively.

~~Income Taxes~~

~~We account for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." SFAS No. 109 requires the recognition of deferred tax liabilities and assets~~ for the expected future tax consequences of temporary differences between the carrying amounts and tax basis of our assets and liabilities. ~~A valuation allowance is provided for~~We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence both positive and negative, it is more likely than not that ~~these items~~we will ~~expire before we are able to~~not realize ~~their benefits~~some or ~~that their future deductibility is uncertain.~~

~~Effective~~ all of the deferred tax assets.

As of December 31, ~~2006,~~2011, earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $106,504. No provision for U.S. income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we ~~adopted~~would be subject to both U.S. Federal and state taxes and withholding taxes payable to the ~~provisions~~various foreign countries. It is our policy to indefinitely reinvest the earnings of ~~FIN 48 "Accounting~~our non-U.S. subsidiaries unless they can be repatriated in a manner that generates a tax benefit or an unforeseen cash need arises in the United States and the earnings can be repatriated in a manner that is substantially free of income taxes. It is not practicable to estimate the amount of additional income taxes payable on the earnings that are indefinitely reinvested in foreign operations.

We are a worldwide business and operate in various tax jurisdictions where tax laws and tax rates are subject to change given the political and economic climate in these countries. We report and pay income taxes based upon operational results and applicable law. Our current and deferred tax provision is based upon enacted tax rates in effect for ~~Uncertainty~~the current and future periods. Any significant fluctuation in ~~Income Taxes-an~~tax rates or changes in tax laws and regulations or changes to interpretation of ~~FASB Statement No. 109," which clarifies the accounting for income~~existing tax ~~positions by prescribing a minimum recognition threshold that a~~laws and regulations could cause our estimate of taxes to change resulting in either increases or decreases in our effective tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on the derecognition of previously recognized income tax items, measurement, classification, interest and penalties, accounting in interim periods and financial statement disclosure. Under FIN 48, werate.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be

The functional currency of each of our operating foreign subsidiaries is local currency. ~~In accordance with SFAS No. 52, "Foreign Currency Translation," the~~The financial statements of these subsidiaries are translated into U.S. dollars as follows: assets and liabilities at year-end exchange rates; income, expenses and cash flows at average exchange rates; and ~~shareholders'~~ equity at historical exchange rates. The resulting translation adjustment is recorded as a component of accumulated other comprehensive income in the accompanying balance sheet. Exchange gains and losses on foreign currency transactions are recorded as other income or expense. We recorded an exchange gain (loss) of ~~$3,653~~$6,237 in ~~2008, $(3,959)~~2011, $(1,299) in ~~2007~~2010 and ~~$170~~$(861) in ~~2006.~~

2009.

Our comprehensive income ~~in accordance with SFAS No. 130, "Reporting Comprehensive Income." As it relates to us, comprehensive income is defined as~~consists of net income plus the sum of the changes in unrealized gains (losses) on available-for-sale marketable securities, unrealized gains (losses) on hedging activities, foreign currency translation adjustments and change in unrecognized pension gains and losses and prior service costs and credits (collectively, other comprehensive income) and is presented in the Consolidated Statements of Changes in ~~Shareholders'~~ Equity, net of tax.

Our defined benefit pension ~~plans in accordance with SFAS No. 87, "Employers' Accounting for Pensions." Assets,~~plans' assets, liabilities and expenses are calculated ~~by accredited independent actuaries. As required by SFAS No. 87, we are required to make~~using certain ~~assumptions to value the plan assets and liabilities.~~assumptions. These assumptions are reviewed annually, or whenever otherwise required, ~~by SFAS No. 87,~~ based on reviews of current plan information and consultations with independent investment advisors and actuaries. The selection of assumptions requires a high degree of judgment and may materially change from period to period. We do not offer other defined benefits associated with post-retirement benefit plans other than pensions.

We adopted the recognition and disclosure requirements of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)" as of December 30, 2006. This statement requires employers that sponsor defined benefit plans to recognize the funded status of aour benefit ~~plan~~plans on ~~its~~our balance sheet; recognize gains, losses and prior service costs or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of accumulated other comprehensive income, net of tax; and measure ~~defined benefit~~ plan assets and obligations as of the date of ~~the employer's~~our fiscal year-end balance ~~sheet; and disclose in the notes to financial statements additional~~sheet. Additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or ~~obligation.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars~~obligation are disclosed in ~~thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies (Continued)~~

~~During 2008,~~the notes to our Board of Directors voted to freeze the accrual of benefits under our U.S. pension plan effective April 30, 2008. In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," we recorded a curtailment gain of $3,276 in 2008. Based on a remeasurement of the U.S. pension plan's assets and liabilities at April 30, 2008, the benefit accrual freeze reduced the projected benefit obligation by $8,298 and resulted in a corresponding adjustment, net of tax, to accumulated other comprehensive income.

financial statements.

Basic earnings per share are calculated by dividing net income attributable to common shareowners by the weighted average number of common shares outstanding. Diluted earnings per common share are calculated by adjusting the weighted average number of common shares outstanding to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued, to the extent these additional shares are not anti-dilutive.

The results of discontinued operations, less applicable income taxes (benefit) and assets and liabilities, are reported as a separate component in the accompanying statement of income and consolidated balance sheets for the current and prior periods. The statement of cash flows also reflects separate disclosure of cash flows pertaining to discontinued operations consistently for all periods presented.

~~New Accounting Pronouncements~~

In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" (FSP EITF 03-6-1) which clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities. As participating securities, these instruments should be includedNo significant business acquisitions were made in the ~~calculation of basic earnings per share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal~~ years ~~beginning after~~ ended December 15, 2008, as well as interim periods within those years. Once effective, all prior period earnings per share data presented must be adjusted retrospectively (including interim financial statements, summaries of earnings,31, 2011 and selected financial data) to conform with the provisions of the FSP. Early application is not permitted. Upon adoption of FSP EITF 03-6-1, we expect to revise prior period earning per share from continuing operations as follows: decrease 2008 basic and diluted loss per share by $0.08; reduce 2007 basic and diluted earning per share by $0.02 and reduce 2006 basic earning per share by $0.02 and diluted earning per share from continuing operations by $0.01.

In May 2008, the FASB issued FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" (FSP 14-1). This FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and will be applied retrospectively to all periods presented. We estimate that upon adoption of the provisions of FSP 14-1, $261,508 of the total proceeds from our debt will be allocated to the liability component,

25, 2010~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~1. Description of Business and Summary of Significant Accounting Policies (Continued)~~

which represents the estimated fair value of similar debt instruments without the conversion option as of the date of issuance. The remaining $88,492 will be allocated to the equity component. The debt discount of $88,492 will be amortized to interest expense over the seven year period from June 2006 to June 2013, the expected life of the instrument. Additionally, upon adoption, approximately $1,903 of deferred financing costs capitalized at the time of issuance will be reclassified to equity as equity issuance costs and will not be amortized to interest expense.

~~In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative Instruments and Hedging Activities" (FAS 161)~~. FAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. FAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This statement is not expected to have an impact on our consolidated financial statements.

In February 2008, the FASB issued FSP 157-1 and 157-2 that (1) partially deferred the effective date of SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities and (2) removed certain leasing transactions from the scope of SFAS 157. SFAS 157 as amended by this FSP is effective for nonfinancial assets and liabilities in fiscal years beginning after November 15, 2008 and will be applied prospectively. The provisions of SFAS 157 are not expected to have a material impact on our consolidated financial statements.

In February 2008, the FASB issued FSP FAS 140-3: "Accounting for Transfers of Financial Assets and Repurchase Financing Transactions" (FSP 140-3). FSP 140-3 provides guidance on accounting for a transfer of a financial asset and a repurchase financing. This FSP presumes that an initial transfer for a financial asset and a repurchase financing are considered part of the same arrangement (linked transaction) under Statement 140. However, if certain criteria are met, the initial transfer and repurchase financing shall not be evaluated as a linked transaction and shall be evaluated separately under Statement 140. This FSP is not expected to have an impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" (SFAS 141(R)) and No. 160, "Noncontrolling Interests in Consolidated Financial Statements" (SFAS 160). SFAS 141(R) and SFAS 160 introduce significant changes in the accounting for and reporting of business acquisitions and noncontrolling interests, formerly "minority interest," in a subsidiary. SFAS 141(R) continues the movement toward the greater use of fair values in financial reporting and increased transparency through expanded disclosures. SFAS 141(R) changes how business acquisitions are accounted for and will impact financial statements at the acquisition date and in subsequent periods. In addition, SFAS 141(R) will impact the annual goodwill impairment test associated with acquisitions that close both before and after its effective date. SFAS 141(R) amends SFAS 109 changing the accounting for adjustments to deferred tax asset valuation allowances and income tax uncertainties related to acquisitions that close both before and after its effective date, generally requiring adjustments to be reflected in income tax expense. SFAS 141(R) applies prospectively to fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. An entity may not apply SFAS 141(R) before that date. The adoption of SFAS 141(R) and SFAS 160 will impact our consolidated financial statements.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~2. Business Acquisitions~~

We acquired several businesses during the ~~three-year period~~year ended December ~~27, 2008.~~26, 2009. The results of operations of the acquired businesses are included in the accompanying consolidated financial statements from the date of acquisition. Significant acquisitions include the following:

~~On November 19, 2008~~

In August 2009, we acquired Systems Pathology Company, LLC (SPC), a pathology-based software development company, for $24,522 in cash and up to $14,000 (undiscounted) potential contingent consideration. SPC is a development stage company included in our PCS segment and its only activity consists of developing computer-assisted pathology system software. As of the acquisition date, SPC did not have developed technology given the current incomplete nature of the

The contingent consideration consists of payments based on certain ~~assets~~agreed upon revenue and technical milestones. The fair value of the contingent consideration at the date of acquisition was $9,100, which was estimated using the income approach based on significant inputs that are not observable in the market. Key assumptions included a discount rate of 18% and a probability adjustment as we estimated the probability of each milestone payment being made was from 60% to 85%. Due to the delay in the development of the product, we adjusted the contingent consideration to $5,365 during the year ending December 25, 2010 and reversed the remaining balance during the year ending December 31, 2011 with no payments of contingent consideration.

The purchase price allocation for SPC, net of $9 of cash acquired is as follows:

The breakout of goodwill and other intangibles acquired was as follows:

In-process research and development is accounted for as an ~~Indian distributor~~indefinite- lived intangible asset until its completion, after which it becomes an amortizable finite-lived asset (completion costs are expensed as incurred).

The goodwill recognized is largely attributable to anticipated revenue synergies expected to arise after the acquisition including new clients as well as the value of the assembled workforce. Goodwill is deductible for ~~$5,469~~tax purposes.

On July 31, 2009, we acquired Cerebricon Ltd. which ~~are~~is included in our RMS ~~segment.~~ segment for $8,180 in cash. Based in Finland, Cerebricon provides discovery services for therapeutic products for treatment of diseases of the central nervous system supported by in vivo imaging capabilities.

The ~~preliminary~~ purchase price allocation ~~including deal costs~~for Cerebricon, net of ~~$273 incurred by us~~$1,200 of acquired cash is as follows:

The breakout of goodwill and other intangibles acquired with the acquisition was as follows:

The goodwill recognized is largely attributable to anticipated revenue synergies expected to arise after the acquisition including new clients as well as the value of the assembled workforce. Goodwill is not deductible for tax purposes.

The ~~preliminary~~ purchase price allocation ~~including deal costs of $79 incurred by us and net of $368 of cash acquired,~~for PRC is as follows:

The breakout of goodwill and other intangibles acquired with the ~~MIR~~ acquisition was as follows:

The goodwill recognized is largely attributable to anticipated revenue synergies expected to arise after the acquisition including new clients as well as the value of the assembled workforce. Goodwill is ~~not~~ deductible for tax purposes.

In addition, on September 9, 2008, we acquired all of the capital stock of privately held Dusseldorf, Germany-based NewLab BioQuality AG (NewLab) for $48,500 in cash. NewLab, a contract service organization, provides safety and quality control services to biopharmaceutical clients and enhances our existing capabilities in process validation services, in consulting services, and assisting in designing International Conference on Harmonisation (ICH)-compliant stability testing programs and is included in our PCS segment.

~~The preliminary purchase price allocation associated with the NewLab acquisition, including transaction costs of $1,602 incurred by us and net of $3,363 of cash acquired, is as follows:~~

Current assets (excluding cash)
$ 5,242
Property, plant and equipment
3,198
Current liabilities
(3,324 )
Deferred taxes
(6,012 )
Goodwill and other intangibles acquired
47,635

Total purchase price allocation
$ 46,739

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~2. Business Acquisitions (Continued)~~

~~In conjunction with the purchase of NewLab, we utilized $87 of available cash to prepay NewLab's existing debt.~~

~~The breakout of goodwill and other intangibles acquired with the NewLab acquisition was as follows:~~

Weighted average
amortization
life (years)
Customer relationships
$ 17,600 6.2
Backlog
800 0.7
Non-compete covenants
200 1.9
Goodwill
29,035 —

Total goodwill and other intangibles
$ 47,635

~~Goodwill is not deductible for tax purposes.~~

On June 14, 2007, we entered into a joint venture with Shanghai BioExplorer Co., Ltd., a Shanghai, China-based provider of preclinical services, to form Charles River Laboratories Preclinical Services—China. We paid $2,400 in cash for a 75% ownership interest in the joint venture. Additionally, as part of the agreement, the joint venture purchased the net assets of Shanghai BioExplorer for a purchase price of $1,532 including transaction costs of $543. Intangible assets of $935 were recorded by the joint venture based on the preliminary purchase price allocation.

On January 4, 2007, we acquired the remaining 15% of the equity (319,199 common shares) of Charles River Laboratories Japan, Inc., ("Charles River Japan") from Ajinomoto Company Inc., the minority interest partner. As of the effective date of this transaction, we own 100% of Charles River Japan. The purchase price for the equity was 1.3 billion Yen, or approximately $10,899, which was paid in cash. The purchase price allocation is as follows:

Minority interest acquired
$ 5,624
Property, plant and equipment
2,224
Deferred tax liability
(4,187 )
Intangible asset (customer relationships with 15 year estimated amortization life)
$ 7,238

$ 10,899

On October 30, 2006, the Company acquired all of the capital stock of privately held Tacoma, Washington based Northwest Kinetics for $29,357 in cash. Northwest Kinetics runs clinical trials, primarily in Phase I facility, with a focus on high end clinical pharmacology studies.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~2. Business Acquisitions (Continued)~~

~~The final purchase price allocation associated with the Northwest Kinetics acquisition, including transaction costs of $265 incurred by the Company and net of $812 of cash acquired, is as follows:~~

Current assets (excluding cash)
$ 6,741
Property, plant and equipment
2,983
Non-current assets
100
Current liabilities
(6,378 )
Non-current liabilities
(7,493 )
Goodwill and other intangibles acquired
32,857

Total purchase price allocation
$ 28,810

~~In conjunction with the purchase of Northwest Kinetics, the Company utilized $2,076 of available cash to pay off Northwest Kinetics' existing debt.~~

~~The breakout of goodwill and other intangibles acquired with the Northwest Kinetics acquisition was as follows:~~

Weighted average
amortization
life (years)
Customer relationships
$ 13,700 12
Participant list
1,300 12
Non-compete covenants
200 5
Trademarks and trade names
40 1
Goodwill
17,617 —

Total goodwill and other intangibles
$ 32,857

The following selected unaudited pro forma consolidated results of operations are presented as if each of the acquisitions had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments including the amortization of intangibles. The pro forma data is for informational purposes only and does not necessarily reflect the results of operations had the companies operated as one during the periods reported. No effect has been given for synergies, if any, that may have been realized through the acquisitions.

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Net sales
$ 1,363,670 $ 1,253,372 $ 1,073,215
Operating income
(452,512 ) 226,386 186,918
Income from continuing operations
(522,931 ) 156,783 123,325
Earnings per common share

Basic
$ (7.77 ) $ 2.34 $ 1.79

Diluted
$ (7.77 ) $ 2.28 $ 1.76

~~Refer to Note 5 for further discussion of the method of computation of earnings per share.~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

3. Goodwill and Other Intangible Assets

The following table displays goodwill and other intangible assets not subject to amortization and other intangible assets that continue to be subject to amortization:

The changes in the gross carrying amount and accumulated amortization of goodwill are as follows:

Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our ~~initial~~ assessment (step one) for ~~2008,~~2011, the fair value of our business units exceeded their carrying value and, therefore, our goodwill was not impaired. ~~As economic conditions worsened late in~~If the ~~fourth quarter~~future growth and operating results of our ~~business performance was~~businesses are not as strong as anticipated ~~coupled with a decrease in~~and/or our market capitalization ~~management determined that circumstances had changed enough to trigger another goodwill impairment test as of December 27, 2008.~~

~~The goodwill impairment analysis is a two-step process. The first step is~~declines, this could impact the assumptions used to identify potential impairment and involves comparing each reporting unit's estimated fair value to its carrying value, including goodwill. Fair value is determined by using a weighted combination of a market-based approach and an income approach, as this combination is deemed to be the most indicative of our fair

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars~~ in ~~thousands, except per share amounts)~~

~~3. Goodwill and Other Intangible Assets (Continued)~~

value in an orderly transaction between market participants. Under the market-based approach, we utilize information about our Company as well as publicly available industry information to determine earnings multiples and sales multiples that are used to value our reporting units. Under the income approach, we determine fair value based on the estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital which reflects the overall level of inherent risk of the reporting unit and the rate of return an outside investor would expect to earn. Determiningcalculating the fair value of ~~a reporting unit~~our goodwill in the future. To the extent goodwill is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, profit margin percentages, discount rates, perpetuity growth rates, future capital expenditures and future market conditions, among others. Our projections are based on an internal strategic review. Key assumptions, strategies, opportunities and risks from this strategic review along with a market evaluation are the basis for our assessment. If the estimated fair value of a reporting unit exceedsimpaired, its carrying value ~~goodwill is not considered~~will be written down to ~~be impaired. However, if the carrying value exceeds estimated~~its implied fair value ~~there is~~and a charge will be made to our earnings. Such an ~~indication of potential~~ impairment charge could materially and ~~the second step is performed to measure the amount of impairment. Our analysis resulted in the determination that~~adversely affect our operating results and financial condition.

Based on our assessment (step one) for 2010, the fair value of our PCS business was less than its carrying value.

The second step of the goodwill impairment ~~process involves~~test involved us calculating the ~~calculation of an~~ implied ~~fair value of~~ goodwill for the PCS business which step one indicated an impairment. The implied fair value of goodwill is determined similar to how goodwill is calculated in a business combination, by measuring the excess of the estimated fair value of the reporting unit as calculated in step one, over the estimated fair values of the individual assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination. If the carrying value of goodwill assigned to a reporting unit exceeds the implied fair value of the goodwill, an impairment charge is recorded for the excess. In determining the fair value of assets we utilize appraisals for the fair value of property and equipment and valuations of certain intangible assets, including customer relationships.business. The carrying value of the goodwill assigned to the PCS business exceeded the implied fair value of goodwill resulting in a goodwill

Based on our assessment (step one) for 2009, the fair value of our business units exceeded their carrying value therefore our goodwill was not impaired.

Estimated amortization expense for each of the next five fiscal years is expected to be as follows:

For the years ended 2011, 2010 and 2009 based on our most recent market outlook, we assessed our long-lived assets for impairment. The assessment included an evaluation of the ongoing cash flows of the long lived assets. For the year ended 2011, we impaired $692 of long-lived assets in our RMS segment related to facilities no longer in use and not expected to be fully recoverable. For the year ended December 25, 2010, we determined that the long-lived assets associated with our PCS-Massachusetts and PCS-China locations were no longer fully recoverable. We calculated the fair value of the long-lived assets based upon a valuation completed by an independent third party valuation firm., which utilized our estimates of future cash flows discounted using a rate commensurate with the risks inherent in our current business model and the estimated market value of the long lived assets. Accordingly, for the year ended 2010, we recorded an impairment charge of $64,631 for PCS-Massachusetts and $17,186 for PCS-China representing the excess of the carry value of those assets over their respective fair market values. During the fourth quarter of 2011, we transferred our site and the sold the assets of our PCS-China facility for $4,593. We recognized a gain on the sale of $3,776.

Additionally, for the years ended December 31, 2011 and December 25, 2010, we determined that the fair value of our in process research and development acquired in the acquisition of SPC (see Note 2) exceeded its the carrying value. Based on our evaluation, we recorded an impairment charges of $6,800 and $7,200 for the period ended December 31, 2011 and December 25, 2010, respectively.

Long-term debt consists of the following:

Minimum future principal payments of long-term debt at December ~~27, 2008~~31, 2011 are as follows:

On ~~July 31, 2006, the Company~~August 26, 2010, we amended and restated ~~its $660,000~~our $428,000 credit agreement to (1) pay off loans outstanding under the credit agreement, (2) extend the maturity date under the new $750,000 credit facility to August 26, 2015 and (3) terminate and payoff the remaining term loan under our $50,000 credit agreement. The $750,000 credit agreement provided for a $230,000 U.S. term loan, a €133,763 Euro term loan and a $350,000 revolver. On February 24, 2011, we amended the credit agreement primarily to provide for an incremental $150,000 term loan and to modify the leverage ratio used in calculating the interest rate applicable to amounts outstanding. On September 23, 2011, we further amended the credit agreement to reduce the ~~current~~ interest rate ~~modify certain restrictive covenants~~margin applicable to the term loans and the revolving loans based on our leverage ratio and extend the ~~term.~~maturity date by approximately one year to September 2016. The ~~amount of debt outstanding under the original $660,000~~current credit agreement ~~remained the same at the time of amendment. The now $428,000 credit agreement provided~~provides for a ~~$156,000 U.S.~~$299,750 term loan, ~~facility,~~ a ~~$200,000 U.S. revolving facility, a C$57,800~~€69,414 Euro term loan ~~facility~~ and a ~~C$12,000~~$350,000 revolving ~~facility for a Canadian subsidiary, and a GBP 6,000~~credit facility. Under specified circumstances, we have the ability to increase the term loans and/or revolving ~~facility for a U.K. subsidiary.~~line of credit by up to $250,000 in the aggregate. The ~~$156,000~~ term loan facility matures in 20 quarterly installments with the last installment due ~~June 30, 2011. As of December 27, 2008, the Company had $85,800 outstanding on the U.S. term loan.~~September 23, 2016. The ~~$200,000 U.S.~~$350,000 revolving facility also matures on ~~July 31, 2011~~September 23, 2016 and requires no scheduled payment before that date. ~~Under specified circumstances, the $200,000 U.S.~~The book value of our term and revolving ~~facility may be increased by $100,000. The Canadian term loan was repaid during 2007. The Canadian and U.K. revolving facilities were both terminated in the first quarter of 2008.~~ loans approximates fair value.

The interest ~~rate~~rates applicable to ~~U.S.~~our term ~~loan~~loans and revolving ~~loan~~loans under the credit agreement are, at ~~the Company's~~our option, equal to either the base rate (which is the higher of (1) the prime rate, or(2) the federal funds rate plus ~~0.50%~~0.5% or (3) the one-month adjusted LIBOR rate plus 1%) plus an applicable interest rate margin based upon the leverage ratio or the adjusted LIBOR rate plus an

Our obligations under the credit agreement are guaranteed by our material domestic subsidiaries and are secured by substantially all of our assets, including a pledge of 100% of the capital stock of our domestic subsidiaries (other than the capital stock of any domestic subsidiary that is treated as

a disregarded entity for U.S. federal income tax purposes) and ~~Table~~65% of ~~Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~4. Long-Term Debt (Continued)~~

~~of December 27, 2008. The Company has pledged~~ the capital stock of certain first-tier foreign subsidiaries ~~as well as certain~~and domestic disregarded entities, and mortgages on owned real property in the U.S. ~~assets for~~having a book value in excess of $10,000. In addition, the ~~$428,000 credit agreement. The $428,000~~ credit agreement includes certain customary representations and warranties, events of default, ~~notice~~notices of material adverse ~~change~~changes to our business and negative and affirmative covenants. These covenants ~~including~~include (1) the ratio of consolidated earnings before interest, taxes, depreciation and amortization less capital expenditures to consolidated cash interest expense, which for any period of four consecutive fiscal quarters, of no less than 3.5 to 1.0 as well as (2) the ratio of consolidated indebtedness to consolidated earnings before interest, taxes, depreciation and amortization for any period of four consecutive fiscal quarters, of no more than ~~3.0~~4.0 to 1.1.0 , which will step down to 3.5 to 1.0 effective in the second and third fiscal quarters in 2012, and thereafter will step down to 3.25 to 1.0 . As of December ~~27, 2008,~~31, 2011, we were compliant with all financial covenants specified in the credit agreement. ~~The Company~~We had ~~$5,627 and $5,466~~$4,475 outstanding under letters of credit as of December ~~27, 2008 and December 29, 2007, respectively. As of December 27, 2008, $90,000 was outstanding on our U.S. revolving credit facility.~~

~~On July 27, 2005 the Company entered into a $50,000 credit agreement ("$50,000 credit agreement"), which was subsequently amended on December 20, 2005 and again on July~~ 31, 2006 to reflect substantially the same modifications made to the covenants in the $660,000 and $428,000 credit agreements, respectively. On June 15, 2007, the Company executed a third amendment to the $50,000 credit agreement to extend the maturity date and reduce the interest rate. The $50,000 credit agreement provides for a $50,000 term loan facility which matures on June 22, 2010. Prior to the amendment, the interest rate applicable to term loans under the credit agreement was, at the Company's option, equal to either the base rate (which was the higher of the prime rate or the federal funds rate plus 0.50%) or the LIBOR rate plus 0.75%2011. From June 15, 2007 through June 21, 2008, the interest rates applicable to term loans under the credit agreement are, at the Company's option, equal to either the base rate (which is the higher of the prime rate or the federal funds rate plus 0.50%) minus 2.25% or the LIBOR rate plus 0.50%. Commencing June 22, 2008 through June 22, 2010, the applicable interest rates are equal to either the base rate (which is the higher of the prime rate or the federal funds rate plus 0.50%) or the adjusted LIBOR rate plus an interest rate margin based on the Company's leverage ratio. The Company has pledged certain U.S. assets for the $50,000 credit agreement. As of December 27, 2008, we were compliant with all financial covenants specified in the credit agreement. The $50,000 credit agreement includes certain customary representations and warranties, negative and affirmative covenants and events of default. As of December 27, 2008, $49,167 of the $50,000 credit agreement was outstanding.

~~In 2006, we issued $350,000~~

Our $350,000 of 2.25% Convertible Senior Notes (the 2013 Notes) due in June 2013 with interest payable ~~semi-annually. The 2013 Notes~~semi-annually are convertible into ~~approximately 7.2 million~~cash for the principal amount and shares of our common stock ~~at an initial~~for the conversion ~~price of $48.94 per share of common stock. The 2013 Notes are convertible into cash and shares of our common stock~~premium (or, at our election, cash in lieu of some or all of such common stock), if any, based on an initial conversion rate, subject to adjustment, of 20.4337 shares of our common stock per ~~$1,000~~$1,000 principal amount of notes (which represents an initial conversion price of ~~$48.94~~$48.94 per share), only in the following circumstances and to the following extent: (1) during any fiscal quarter beginning after July 1, 2006 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is more than 130% of the conversion price on the last day of such preceding fiscal quarter; (2) during the five business-day period after any five consecutive trading-day period, or the measurement period, in which the trading price per note for each day of that measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such day; (3) upon the occurrence of specified corporate transactions, as described in the indenture for the 2013

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~4. Long-Term Debt (Continued)~~

Notes; and (4) at the option of the holder at any time beginning on the date that is two months prior to the stated maturity date and ending on the close of business on the second trading-day immediately preceding the maturity date. Upon conversion, we will pay cash and shares of our common stock (or, at our election, cash in lieu of some or all of such common stock), if any. If we undergo a fundamental change as described in the indenture for the 2013 Notes, holders will have the option to require us to purchase all or any portion of their notes for cash at a price equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest, including any additional interest to, but excluding, the purchase date.

During the second and third quarters of 2008, our stock traded at or above 130% of the conversion price for 20 trading days during the last 30 consecutive trading days of the quarter. Since the conversion trigger was met, the 2013 Notes were convertible at the discretion of the bond holders during the third and fourth quarters of 2008. As of

At December 27, 2008, 5 bonds had been presented for conversion to occur in early February. The conversion trigger tests are repeated each fiscal quarter and no conversion triggers were met in the fourth quarter. At December 27, 2008,31, 2011, the fair value of our outstanding 2013 Notes was approximately ~~$311.1~~$339,530 based on their quoted market ~~value.~~

value and no conversion triggers were met.

~~5. Shareholders'~~As of December 31, 2011, $21,533 of debt discount remained and will be amortized over 6 quarters. As of December 31, 2011 and December 25, 2010, the equity component of our convertible debt was $88,492. Interest expense related to our convertible debt of $14,050 and $13,013 for years ending December 31, 2011 and December 25, 2010 respectively, yielded an effective interest rate of 6.93% on the liability component. In addition, $7,962 and $7,853 of contractual interest expense was recognized on our convertible debt during the years ended December 31, 2011 and December 25, 2010, respectively.

We have capital leases for equipment. These leases are capitalized using interest rates considered appropriate at the inception of each lease. Capital lease obligations amounted to $43 and $101 at December 31, 2011 and December 25, 2010, respectively.

Basic earnings per share for ~~2008, 2007~~2011, 2010 and ~~2006~~2009 was computed by dividing earnings available to common ~~shareholders~~shareowners for these periods by the weighted average number of common shares outstanding in the respective periods adjusted for contingently issuable shares. The weighted average number of common shares outstanding for ~~2007~~2011 and ~~2006~~2009 have been adjusted to include common stock equivalents for the purpose of calculating diluted earnings per share for these periods.

Options to purchase ~~4,481,120~~4,249,564 shares, ~~243,357~~6,594,313 shares and ~~2,972,420~~4,272,647 shares were outstanding at December ~~27, 2008,~~ 31, 2011, December ~~29, 2007~~25, 2010 and December ~~30, 2006,~~26, 2009, respectively, but were not included in computing diluted earnings per share because their inclusion would have been anti-dilutive.

In addition, weighted average shares outstanding for ~~2008, 2007~~2011, 2010 and ~~2006~~2009 excluded the weighted average impact of ~~777,494, 711,896~~703,011, 777,740 and ~~653,780~~896,393 shares, respectively, of non-vested fixed restricted stock awards.

The sum of the earnings (loss) per share from continuing operations attributable to common shareowners and the earnings (loss) per share from discontinued operations attributable to common shareowners does not necessarily equal the earnings (loss) per share from net income attributable to common shareowners in the consolidated statements of operations due to rounding.

On

~~The~~July 29, 2010, our Board of Directors ~~has~~ authorized a ~~share~~$500,000 stock repurchase program. Our Board of Directors increased the stock repurchase authorization by $250,000 to $750,000 on October 20, 2010. In order to enable us to facilitate, on a more timely and cost efficient basis, the repurchase of a substantial number of our shares pursuant to that stock repurchase authorization, we entered into a series of accelerated stock repurchase (ASR) programs. The ASR programs are recorded as two transactions allocated between the initial purchase of treasury stock and a forward contract indexed to our common stock. The treasury shares result in an immediate reduction of shares on our statement of financial position and in our EPS calculation.

On August 26, 2010, we entered into an agreement with a third party investment bank to implement an ASR program ~~originally authorized on July 27, 2005 and subsequently amended on October 26, 2005, May 9, 2006, August 1, 2007 and July 24, 2008~~ to ~~acquire up to a total of $600,000~~repurchase $300,000 of common stock. Under this ASR, we paid $300,000 on August 27, 2010 from cash on hand and available liquidity, including funds borrowed by us under our $750,000 credit facility. The ~~program does not have a fixed expiration date. In order to facilitate these share repurchases, we entered into Rule 10b5-1 Purchase Plans.~~

~~During 2008, 2007 and 2006, we repurchased 2,159,908,~~initial delivery of 6,000,000 treasury shares ~~of common stock for $109,260, 724,200 shares of common stock for $38,911, and 518,800 shares of common stock for $23,322, respectively, under these plans. In addition, concurrent with~~was recorded at $175,066, the ~~sale~~market value at the date of the ~~2013 Notes, we used $148,866 of the net proceeds for the purchase of 3,726,300~~transaction. We received an additional 750,000 shares ~~of its common stock.~~

During 2006 we also entered into an Accelerated Stock Repurchase (ASR) program with a third-party investment bank. In connection with this ASR program, we purchased 1,787,706 shares of stock at a cost of $75,000. In conjunction with the ASR, we also entered into a cashless collar with a forward floor price of $37.9576 per share of our common stock (95% of the initial price of $39.9554, the market price of our common stock on August 23, 2006) and a forward cap price of $41.9532 per share of our common stock (105% of the initial price). The final number of shares repurchased under the ASR ~~program~~on September 23, 2010, which were recorded at $23,511, which represented the market value on that date, and we received an additional 1,250,000 shares on December 21, 2010, which were recorded at $43,069, which also represented the market value on that date. During 2010, in total, we repurchased 8,000,000 shares under the ASR program. The ASR was ~~determined by taking~~settled on February 11, 2011 based on a discount to the ~~average~~daily volume weighted average price (VWAP) of our common ~~stock~~

On February 24, 2011, we entered into an ASR to repurchase $150,000 of common stock. Under the ASR, we paid $150,000 from cash on hand, including funds borrowed under our credit facility. Upon signing the ASR on February 24, 2011, we received the initial delivery of 3,759,398 shares, which was ~~above~~recorded at $135,860 based on the ~~cap price~~market value at the date of ~~$41.9532, there~~the transaction, and recorded $14,140 as a forward contract indexed to our common stock. The ASR was ~~no adjustment~~settled on May 16, 2011 based on a discount to the daily volume weighted average price (VWAP) of our common stock over the course of a calculation period. We received the final ~~number~~6,505 shares based on the settlement of the ASR, which were recorded at $257.

During 2011, 2010 and 2009, we repurchased 3,790,762shares ~~repurchased.~~

As of ~~December 27, 2008, approximately $187,140 remains authorized~~common stock for ~~share repurchases.~~

$130,853, 1,759,857 shares of common stock for $52,888 and 1,592,500 shares of common stock for $42,387, respectively, under our Rule 10b5-1 Purchase Plan and in open market trading. In May 2009, we terminated our Rule 10b5-1 Purchase Plan. The timing and amount of any future repurchases will depend on market conditions and corporate considerations.

Share repurchases during ~~2008, 2007~~2011, 2010 and ~~2006~~2009 were as follows:

Additionally, our 2000 Incentive Plan permits the netting of common stock upon vesting of restricted stock awards in order to satisfy individual tax withholding requirements. During the fiscal year ended December ~~27, 2008,~~ 31, 2011, December ~~29, 2007~~25, 2010 and December ~~30, 2006,~~26, 2009, we acquired ~~104,662~~79,704 shares for ~~$6,291, 71,456~~$2,942, 100,489 shares for ~~$3,506~~$3,638 and ~~57,688~~80,234 shares for ~~$2,755,~~$2,216, respectively, as a result of such withholdings.

~~The timing and amount~~

The composition of accumulated other comprehensive income is as follows:

Foreign
Currency
Translation
Adjustment Pension Gains/(Losses)
and Prior Service
(Cost)/Credit Not Yet
Recognized as
Components of Net
Periodic Benefit Costs Net Unrealized
Gain on
Marketable
Securities Accumulated
Other
Comprehensive
Income
Balance at December 30, 2006
$ 24,103 $ (2,929 ) $ (3 ) $ 21,171

Period change
58,045 10,201 (48 ) 68,198

Tax
(173 ) (3,637 ) (3,810 )

Balance at December 29, 2007
$ 81,975 $ 3,635 $ (51 ) $ 85,559

Period change
(79,278 ) (12,023 ) (2,167 ) (93,468 )

Tax
6,690 4,566 — 11,256

Balance at December 27, 2008
$ 9,387 $ (3,822 ) $ (2,218 ) $ 3,347



	Foreign Currency Translation Adjustment			Pension Gains/(Losses) and Prior Service (Cost)/Credit Not Yet Recognized as Components of Net Periodic Benefit Costs			Net Unrealized Gain on Marketable Securities			Accumulated Other Comprehensive Income
Balance at December 26, 2009	$	56,637		$	(10,150	)	$	(1,450	)	$	45,037
Period change	(10,122		)	(10,776		)	854			(20,044		)
Tax	5,319			3,323			—			8,642
Balance at December 25, 2010	$	51,834		$	(17,603	)	$	(596	)	$	33,635
Period change	(12,329		)	(22,660		)	(325		)	(35,314		)
Tax	(820		)	7,092			—			6,272
Balance at December 31, 2011	$	38,685		$	(33,171	)	$	(921	)	$	4,593

Warrants

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~5. Shareholders' Equity (Continued)~~

~~Warrants~~

Separately and concurrently with the pricing of the 2013 Notes in June 2006, we issued warrants for approximately 7.2 million shares of our common stock. The warrants give the holders the right to receive, for no additional consideration, cash or shares (at our option) with a value equal to the appreciation in the price of our shares above ~~$59.925,~~$59.925 and expire between September 13, 2013 and January 22, 2014 over 90 equal increments. The total proceeds from the issuance of the warrants ~~was $65,423.~~

~~As part~~were

67

Table of Contents

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share amounts)

$65,423.

Noncontrolling Interests

We hold investments in several joint ventures. These joint ventures are separate legal entities whose purpose is consistent with our overall operations and represent geographic and business segment expansions of existing markets. The financial results of all joint ventures were consolidated in our results as we have the ability to exercise control over these entities. The interests of the ~~recapitalization~~outside joint venture partners in ~~1999,~~these joint ventures have been recorded as noncontrolling interest totaling $1,780 and $1,304 at December 31, 2011 and December 25, 2010, respectively.

During the fourth quarter of 2010, we ~~issued 150,000 units, each comprised~~purchased for $4,000 the remaining interest in our Charles River—PCS-China joint venture. The transaction closed on December 24, 2010 with the cash transferred on the following business day. On the date of ~~a $1 senior subordinated note and a warrant to~~the purchase, ~~7.6 shares~~we recorded the purchase price of ~~our common stock for total proceeds of $150,000. We allocated the $150,000 offering proceeds between the senior subordinated notes ($147,872)~~$4,000 and the ~~warrants ($2,128), based upon the estimated fair value. The portion~~balance of the ~~proceeds allocated~~noncontrolling interests of $8,623 to the warrants is reflected as capital in excess of par in the accompanying consolidated financial statements. Each warrant entitles the holder, subject to certain conditions, to purchase 7.6 shares of common stock at an exercise price of $5.19 per share of common stock, subject to adjustment under some circumstances. Upon exercise, the holders of warrants would be entitled to purchase 4,180 and 147,250 shares of our common stock as of December 27, 2008 and December 29, 2007, respectively. The warrants expire on October 1, 2009.

6.equity.

7. Income Taxes

An analysis of the components of income (loss) from continuing operations before income taxes ~~minority interests and earnings from equity investments~~ and the related provision for income taxes is presented below:

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Income before income taxes, minority interests and earnings from equity investments

U.S.
$ 106,392 $ 94,286 $ 90,598

Non-U.S.
(567,402 ) 123,136 85,966

$ (461,010 ) $ 217,422 $ 176,564

Income tax provision

Current:

Federal
$ 21,922 $ 39,907 $ 22,626

Foreign
28,355 21,547 10,895

State and local
1,278 7,732 5,501

Total current
$ 51,555 $ 69,186 $ 39,022

Deferred:

Federal
$ 7,758 $ (3,469 ) $ 10,595

Foreign
(5,136 ) (4,689 ) 121

State and local
7,767 (1,628 ) 0

Total deferred
$ 10,389 $ (9,786 ) $ 10,716

$ 61,944 $ 59,400 $ 49,738

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~6. Income Taxes (Continued)~~



	Fiscal Year Ended
	December 31, 2011			December 25, 2010			December 26, 2009
Income (loss) from continuing operations before income taxes
U.S.	$	47,158		$	(149,275	)	$	38,368
Non-U.S.	85,504			(184,807		)	113,189
	$	132,662		$	(334,082	)	$	151,557
Income tax provision
Current:
Federal	$	3,957		$	11,378		$	(4,607	)
Foreign	20,727			23,782			26,851
State and local	1,124			2,416			1,086
Total current	$	25,808		$	37,576		$	23,330
Deferred:
Federal	$	2,961		$	(24,604	)	$	16,968
Foreign	(11,649		)	(9,696		)	(1,487		)
State and local	20			(3,253		)	1,543
Total deferred	$	(8,668	)	$	(37,553	)	$	17,024
	$	17,140		$	23		$	40,354

Net deferred taxes, detailed below, recognize the impact of temporary differences between the amounts of assets and liabilities recorded for financial statement purposes and such amounts measured in accordance with tax laws.

December 27,
2008 December 29,
2007
Compensation
$ 38,973 $ 31,314
Accruals and reserves
1,502 643
Financing related
25,129 31,301
Goodwill and other intangibles
(5,805 ) (7,851 )
Net operating loss and credit carryforwards
27,446 17,609
Depreciation related
(35,738 ) (28,948 )
Non-indefinitely reinvested earnings
(2,039 ) 0
Other
606 (1,007 )

50,074 43,061
Valuation allowance
(4,197 ) (561 )

Total deferred taxes
$ 45,877 $ 42,500

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share amounts)



	December 31, 2011			December 25, 2010
Compensation	$	49,178		$	47,695
Accruals and reserves	3,712			4,725
Financing related	3,193			3,576
Goodwill and other intangibles	(6,523		)	(5,876		)
Net operating loss and credit carryforwards	57,193			36,359
Depreciation related	(34,389		)	(28,400		)
Non-indefinitely reinvested earnings	(146		)	(250		)
Other	(1,795		)	(547		)
	70,423			57,282
Valuation allowance	(12,178		)	(12,041		)
Total deferred taxes	$	58,245		$	45,241

Reconciliations of the statutory U.S. Federal income tax rate to effective tax rates are as follows:

December 27,
2008 December 29,
2007 December 30,
2006
U.S. statutory income tax rate
(35.0 )% 35.0 % 35.0 %
Foreign tax rate differences
(2.6 )% (3.9 )% (3.4 )%
State income taxes, net of Federal tax benefit
1.5 % 1.7 % 1.9 %
Unbenefitted losses and valuation allowance
0.9 % 0.3 % (0.2 )%
Net impact of change in APB23 assertion
(1.5 )% 0.0 % 0.0 %
Research tax credits and enhanced deductions
(3.2 )% (6.0 )% (6.4 )%
Enacted tax rate changes
0.7 % (1.3 )% (1.0 )%
Impact of tax uncertainties
0.5 % 2.2 % 1.1 %
Impact of goodwill impairment
52.5 % 0.0 % 0.0 %
Other
(0.4 )% (0.7 )% 1.2 %

13.4 % 27.3 % 28.2 %

In the third quarter of 2008, the Company revalued certain of its deferred tax assets and liabilities due to the enactment of a Massachusetts state tax law change resulting in tax expense of $3,396. Additionally, the Company recorded a deferred tax liability of $1,897 in the fourth quarter of 2008 resulting from a newly promulgated Massachusetts regulation.

During 2008, the Company recorded a reduction to income taxes payable for $4,911 from the exercise of stock options and vesting of restricted shares. The benefit of this reduction has been recorded to additional paid in capital for $4,769 and goodwill for $142.



	December 31, 2011		December 25, 2010		December 26, 2009
U.S. statutory income tax rate	35.0	%	(35.0	)%	35.0	%
Foreign tax rate differences	(6.7	)%	(1.3	)%	(5.4	)%
State income taxes, net of Federal tax benefit	2.1	%	(0.7	)%	1.3	%
Unbenefitted losses and valuation allowance	0.6	%	0.6	%	1.4	%
Impact of repatriation of non-U.S.earnings	0.5	%	4.6	%	(0.7	)%
Research tax credits and enhanced deductions	(7.6	)%	(3.6	)%	(6.7	)%
Enacted tax rate changes	(1.0	)%	—	%	(0.1	)%
Impact of tax uncertainties	(1.0	)%	3.1	%	1.2	%
Impact of goodwill and other impairments	—	%	31.3	%	—	%
Releasing valuation allowance on loss from disposition of the Phase 1 Clinical business	(8.4	)%	—	%	—	%
Non taxable gain from settlement of life insurance policy	(2.2	)%	—	%	—	%
Other	1.6	%	1.0	%	0.6	%
	12.9	%	0.0	%	26.6	%

As of December ~~27, 2008, the Company has~~31, 2011, we have non-U.S. net operating loss carryforwards, the tax effect of which is ~~$10,064.~~$18,372. Of this amount, ~~$816~~$1,125 will ~~begin to~~ expire in ~~2013.~~2013, $1,856 will expire in 2014, $915 will expire in 2015, $2,533 will expire in 2016, $150 will expire in 2017 and $390 will expire in 2018. The remainder of $11,403 can be carried forward indefinitely. ~~The Company has~~We have U.S. net operating loss carryforwards at the state level, the tax effect of which is $421, which will expire between 2015 and 2031. We have U.S. foreign tax credit carryforwards of ~~$10,665 which~~$25,481. Of this amount, $16,428 will ~~begin to~~ expire in ~~2019. The Company has state tax credit~~2019, $6,285 will expire in 2020, $2,448 will expire in 2021, and the remaining $320 thereafter. We have Canadian Scientific Research and Experimental Development (SR&ED) Credit carryforwards of ~~$1,843~~$18,402, which begin to expire in ~~2017. The Company has~~2029. In accordance with Canadian ~~Investment Tax Credit carryforwards of $3,885 as a result~~

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~6. Income Taxes (Continued)~~

~~of its~~Federal tax law, we claim SR&ED credits on qualified research and development ~~activity~~costs incurred by our Preclinical service facility in ~~Montreal, which begin to expire in 2026. The Company has capital loss carryforwards~~Canada, in the USperformance of projects for non-Canadian clients. Additionally, in accordance with the tax law of the United Kingdom, we claim enhanced deductions related to qualified research and development costs incurred by our Preclinical service facility in Scotland, in the performance of certain client contracts. We have unrealized capital losses in the U.S. and Canada, the tax effect of which is ~~$825~~$341 and ~~$164,~~$277, respectively.

~~The Company has~~

We record deferred tax assets for stock-based awards based on the amount of stock-based compensation recognized in

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share amounts)

our Consolidated Statements of Income at the statutory tax rate in the jurisdiction in which we will receive a tax deduction. Differences between the deferred tax assets and the actual tax deduction reported on our income tax returns are recorded in additional paid-in capital. If the tax deduction is less that the deferred tax asset, the calculated shortfall reduces our pool of excess tax benefits. If the pool of excess tax benefits is reduced to zero, the subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits, which is computed in accordance with the long form method, was $10,580 as of December 31, 2011 and $12,614 as of December 25, 2010. During 2011, we recorded a tax detriment of $802 to additional paid-in-capital related to the exercise of stock options and vesting of restricted shares.

We have fully recognized ~~its~~our deferred tax assets on the belief that it is more likely than not that they will be realized. The only exceptions at December ~~27, 2008~~31, 2011 relate to deferred tax assets primarily for net operating losses in China, Hong Kong, India, Luxembourg and ~~China and a~~the Netherlands, capital ~~loss~~losses in the U.S., and Canada, and fixed assets in the U.K. which have resulted in an increase of $137 in the valuation allowance ~~increasing~~ from ~~$561~~$12,041 at December ~~29, 2007~~25, 2010 to ~~$4,197~~$12,178 at December ~~27, 2008. The Company established a~~31, 2011. We increased the valuation allowance against these tax attributes due to the determination, after consideration of all evidence, both positive and negative, that it is more likely than not that these ~~carryforwards~~deferred tax assets will not be realized.

~~In July 2006,~~

During the ~~FASB issued FASB Interpretation No. 48, "Accounting~~fourth quarter of 2010, we took actions to divest of our Phase 1 clinical business. We recorded in discontinued operations a deferred tax asset associated with the excess of the tax outside basis over the basis for ~~Uncertainty~~financial reporting purposes of the Phase 1 clinical business. As of the fourth quarter of 2010, we determined that we did not meet the more-likely-than-not realization threshold for this deferred tax asset and we recorded a valuation allowance against it as part of discontinued operations. During the first quarter of 2011, we determined that the tax loss would more-likely-than-not be benefitted as a worthless stock deduction. As such, we released the valuation allowance recorded against the tax loss on the Phase 1 clinical business and recognized a $11,111 benefit in ~~Income Taxes—an interpretation~~continuing operations during the first quarter of ~~FASB Statement No. 109" (FIN 48), which became effective for the Company on~~2011.

At December 31, ~~2006. The cumulative effect of adopting FIN 48 did not result in a change to~~2011, the ~~Company's opening retained earnings.~~amount recorded for unrecognized tax benefits was $27,976. At December ~~27, 2008~~25, 2010 the amount recorded for unrecognized income tax benefits was ~~$28,732. At December 29, 2007, the amount recorded for unrecognized tax benefits was $22,129.~~$33,427. The ~~increase~~$5,451 decrease during ~~2008~~2011 is primarily ~~due~~attributable to the ~~continuing~~settlement reached with the German Tax Office related to an uncertain tax position for the deductibility of interest. This decrease was offset by increases resulting from ongoing evaluation of uncertain tax positions ~~conducted~~ in the current and prior ~~periods.~~periods and foreign exchange movement. The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was ~~$12,500~~$22,477 as of December ~~29, 2007~~31, 2011 and ~~increased to $21,441~~$28,456 as of December ~~27, 2008. This increase~~25, 2010. The $5,979 decrease is primarily attributable to the settlement of the German controversy which is partially offset by increases due to ~~the amendment to SFAS 109 by SFAS 141(R) with regards to accounting for adjustments to income~~ongoing evaluation of uncertain tax ~~uncertainties related to acquisitions, generally requiring that, on a prospective basis, such adjustments be reflected~~positions in the ~~effective tax rate versus impacting goodwill.~~

~~The Company's~~current and prior periods and foreign exchange movement.

A reconciliation of our beginning and ending unrecognized income tax benefits ~~are~~is as follows:

December 27,
2008 December 29,
2007
Beginning balance
$ 22,129 $ 16,896
Additions:

Tax positions for current year
2,071 3,612

Tax positions for prior years
8,041 2,413
Reductions:

Tax positions for current year
(252 ) (65 )

Tax positions for prior years
(3,011 ) (43 )

Settlements
— (177 )

Expiration of statute of limitations
(246 ) (507 )

Ending balance
$ 28,732 $ 22,129

~~The Company continues~~



	December 31, 2011			December 25, 2010			December 26, 2009
Beginning balance	$	33,427		$	21,389		$	28,732
Additions:
Tax positions for current year	1,714			13,142			1,515
Tax positions for prior years	—			693			2,367
Reductions:
Tax positions for current year	—			—			—
Tax positions for prior years	(239		)	(1,797		)	(1,024		)
Settlements	(6,926		)	—			(10,113		)
Expiration of statute of limitations	—			—			(88		)
Ending balance	$	27,976		$	33,427		$	21,389

We continue to recognize interest and penalties related to unrecognized income tax benefits in income tax expense.

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share amounts)

The total amount of accrued interest related to unrecognized income tax benefits as of December ~~29, 2007~~31, 2011 and December ~~27, 2008~~25, 2010 was ~~$1,753~~$1,515 and ~~$2,729,~~$2,313, respectively. The ~~Company has~~$798 decrease is primarily attributable to settlement of the German controversy, which is partially offset by increases due to ongoing evaluation of uncertain tax positions in the current and prior periods and foreign exchange movement. We have not recorded a provision for penalties associated with uncertain tax positions.

~~The Company conducts~~

We conduct business ~~operations~~ in a number of tax jurisdictions. As a result, ~~the Company is~~we are subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the United States, the United Kingdom, Germany and Canada. With few exceptions, we are no longer subject to U.S. and international income tax examinations for years before ~~2002.~~

2005.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~6. Income Taxes (Continued)~~

~~The Company~~We and certain of ~~its~~our subsidiaries are currently under audit by the ~~Canada~~Canadian Revenue ~~Agency,~~Authority (CRA), the ~~Internal~~Minister of Revenue ~~Service in the United States,~~Quebec provincial tax authority (MRQ) and ~~the Commonwealth of Massachusetts. It is reasonably possible that the Company will settle with the IRS Appeals division on proposed adjustments related to the 2004 and 2005~~various state tax ~~filings for the Company and an acquired subsidiary and conclude an examination of the 2006 tax filings for the Company within the next twelve months.~~authorities. We do not ~~anticipate~~believe that ~~the settlement~~resolution of ~~the proposed audit adjustments, which relate primarily to issues associated with an acquisition,~~these audits will have a material impact on our financial position or results of operations. ~~During~~

Additionally, we are challenging the reassessments received by the CRA with respect to the SR&ED credits claimed in 2003 and 2004 by our Canadian Preclinical Services subsidiary in the Tax Court of Canada (TCC). In the fourth quarter of ~~2008, there has been no change~~2009 and the first quarter of 2010, we filed Notices of Appeal with the TCC and received the Crown's response in the ~~status~~second quarter of 2010. In a related development, during the ~~ongoing examinations~~first quarter of 2010 we received Notices of Reassessment from the MRQ with respect to the Quebec Research and Development tax credit. We filed Notices of Objection with the MRQ in the second quarter of 2010. We disagree with the positions taken by the ~~Canada Revenue Agency~~CRA and ~~Massachusetts Department~~MRQ with regard to the credits claimed. We believe that it is reasonably possible that we will conclude the controversies with the TCC and MRQ within the next twelve months. We do not believe that resolution of ~~Revenue. The Company believes~~these controversies will have a material impact on our financial position or results of operations. However, it ~~has~~is possible that the CRA and MRQ will propose similar adjustments for later years.

We believe we have appropriately provided for all ~~unrecognized~~uncertain tax ~~benefits.~~

positions.

During 2010, we executed an agreement to implement an accelerated share repurchase (ASR) program to repurchase $300,000 of common stock. The ASR resulted in a cash need in the ~~first quarter~~United States that was previously unforeseen. In accordance with our policy with respect to the unremitted earnings of ~~2009, the Company plans to repatriate approximately $90,000~~our non-U.S. subsidiaries, we evaluated whether a portion of the foreign earnings could be repatriated in order to fund the ASR. We determined that approximately $229,792of ~~its~~earnings that were previously indefinitely reinvested and approximately $63,640 in basis in our non-U.S. ~~subsidiaries.~~subsidiaries could be repatriated in a substantially tax-free manner. As ~~such, the Company has~~a result, in 2010, we changed ~~its permanent~~our indefinite reinvestment assertion with ~~regards~~respect to these ~~unremitted earnings. As a result of~~earnings and accrued the ~~change in assertion, the Company recorded a tax benefit primarily due~~cost to ~~foreign tax credits in the fourth quarter of 2008 of $7,227,~~repatriate $10,334, of which ~~$4,045 was~~$15,264 is reflected ~~in the effective tax rate and $3,182 was reflected~~as Income Tax Expense, with an offsetting benefit of $4,930, which is recorded in the Cumulative Translation ~~Account. The proceeds from the repatriation will be used for general corporate purposes. The Company continues to maintain its permanent reinvestment assertion with regards~~Adjustment account. During 2010, we repatriated approximately $293,432 to the U.S. to partially fund the ASR and the $30,000 termination fee for a proposed acquisition.

In accordance with our policy, the remaining ~~unremitted~~undistributed earnings of ~~its~~our non-U.S. ~~subsidiaries.~~

subsidiaries remain indefinitely reinvested as of the end of 2011 as they are required to fund needs outside the U.S. and cannot be repatriated in a manner that is substantially tax free. During the third quarter of 2011, we restructured our international operations in a tax-free manner to allow us more flexibility in accessing our offshore cash to fund needs outside the U.S. As of December ~~27, 2008,~~31, 2011, the earnings of ~~the Company's~~our non-U.S. subsidiaries considered to be indefinitely reinvested totaled ~~$192,917.~~ $106,504. No provision for U.S. income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, ~~the Company~~we would be subject to both U.S. Federal and state income taxes and withholding taxes payable to the various foreign countries. It is not practicable to estimate the amount of additional tax that might be payable on this undistributed foreign income.

On June 12, 2006, ~~the Company~~we issued ~~$300,000~~$300,000 aggregate principal amount of convertible senior notes ~~("the 2013 Notes")~~(2013 Notes) in a private placement with net proceeds to ~~the Company~~us of approximately ~~$294,000.~~$294,000. On June 20, 2006, the initial purchasers associated with this convertible debt offering exercised an option to purchase an additional ~~$50,000~~$50,000 of the 2013 Notes for additional net proceeds ~~to the Company~~ of approximately ~~$49,000.~~$49,000. The 2013 Notes bear stated interest at 2.25% per annum, payable semi-annually, and mature on June 15, 2013. In accordance with the applicable accounting rules, a debt discount of $88,492 was recorded upon issuance of the 2013 Notes. Concurrently with the ~~sale~~issuance of the 2013 Notes, ~~the Company~~we entered into convertible note hedge transactions with respect to its obligation to deliver common stock under the ~~notes.~~2013 Notes. Separately and concurrently with the pricing of the 2013 Notes, ~~the Company~~we issued warrants for approximately 7.2 million shares of its common stock. ~~The Company has~~We elected to apply the rules of the Integration Regulations under Treas. Reg. 1.1275-6 to treat the 2013 Notes and the associated hedge as synthetic debt instruments and accordingly ~~is deducting~~we deduct the option premium paid for the hedge as original issue discount (OID) over the 7 year term. ~~The cash tax benefit of this deduction is recorded to additional paid in capital.~~ A deferred tax asset ~~has been~~was recorded at issuance with an offset to ~~reflect~~Additional Paid in Capital for tax savings

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share amounts)

resulting from the ~~future cash tax benefit~~excess of the ~~deductions~~OID over the interest expense to be reported in our Statement of Income during the term of the 2013 Notes. Also, pursuant to Internal Revenue Code Section 1032, ~~the Company~~we will not recognize any gain or loss for tax purpose with respect to the exercise or lapse of the warrants.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

7.

8. Employee Benefits

Charles River Laboratories Employee Savings Plan

Our defined contribution plan, the Charles River Laboratories Employee Savings Plan, qualifies under section 401(k) of the Internal Revenue Code. It covers substantially all U.S. employees and contains a provision whereby we match a percentage of employee contributions. The costs associated with this defined contribution plan totaled ~~$6,377, $4,074~~$4,178, $4,694 and ~~$3,439,~~$6,253, in ~~2008, 2007~~2011, 2010 and ~~2006,~~2009, respectively.

Charles River Laboratories Deferred Compensation Plan and Executive Supplemental Life Insurance Retirement Plan

The Charles River Laboratories Deferred Compensation Plan (Deferred Compensation Plan) is designed for select eligible employees, including our Named Executive Officers. Under the Deferred Compensation Plan, participants may elect to defer bonus and salary amounts, and may select the investment returns to be applied to deferred amounts from among a number of reference mutual funds as well as an interest crediting rate. The plan is not qualified under Section 401(a) of the Internal Revenue Code and is not subject to the Employee Retirement Income Security Act of 1974. At the present time, no contributions will be credited to the plan, except as set forth below. Participants must specify the distribution date for deferred amounts at the time of deferral, in accordance with applicable IRS regulations. Generally, amounts may be paid in lump sum or installments upon retirement or termination of employment, or later if the employee terminates employment after age 55 and before age ~~65.~~65. Amounts may also be distributed during employment, subject to a minimum deferral requirement of three years.

In addition to the Deferred Compensation Plan, certain officers and key employees also participate, or in the past participated, in our amended and restated Executive Supplemental Life Insurance Retirement Plan (ESLIRP) which is a non-funded, non-qualified arrangement. Annual benefits under this plan will equal a percentage of the highest five consecutive years of compensation, offset by amounts payable under the Charles River Laboratories, Inc. Pension Plan and Social Security.

In connection with the establishment of the Deferred Compensation Plan, current active employees who agreed to convert their ESLIRP benefit to a comparable benefit in the deferred compensation plan discontinued their direct participation in the ESLIRP. Instead, the present value of the accrued benefits of ESLIRP participants was credited to their Deferred Compensation Plan accounts, and future ESLIRP accruals will now be converted to present values and credited to their Deferred Compensation Plan accounts annually. Upon the adoption of the Deferred Compensation Plan, the value of their accrued ESLIRP benefits, prior to adjustments for outstanding Medicare taxes, were credited to their Deferred Compensation Plan account. In addition, we provide certain active employees an annual contribution into their Deferred Compensation Plan account of 10% of the employee's base salary plus the lesser of their target annual bonus or actual annual bonus. The costs associated with these defined contribution plans totaled ~~$2,819, $3,462~~$2,048, $3,082 and ~~$4,029~~$3,562 in ~~2008, 2007~~2011, 2010 and ~~2006,~~2009, respectively.

~~The Company has~~

We have invested in several corporate-owned key-person life insurance policies as well as mutual funds and U.S. Treasury Securities with the intention of using these investments to fund the ESLIRP and the Deferred Compensation Plan. Participants have no interest in any such investments. At December ~~27, 2008~~31, 2011 and December ~~29, 2007~~25, 2010 the cash surrender value of these life insurance policies were ~~$19,652~~$25,057 and ~~$22,027,~~$31,054, respectively.

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~7. Employee Benefits (Continued)~~

Pension Plans

The Charles River Pension Plan is a defined contribution plan and a defined benefit pension plan covering certain UK employees. Benefits are based on participants' final pensionable salary and years of service. Participants' rights vest immediately. Effective December 31, 2002, the plan was amended to exclude new participants from joining the defined benefit section of the plan and a defined contribution section was established for new entrants. Contributions under the defined contribution plan are determined as a percentage of gross salary.

~~The Charles River Laboratories, Inc. Pension Plan is a qualified, non-contributory defined benefit~~ During 2009, the UK plan that covers certain U.S. employees. Benefits are based on participants' final average monthly compensation and years of service. Participants' rights vest upon completion of five years of service. Effective January 1, 2002, this plan was amended to exclude new participants from joining. Benefit criteria offered to existing participants as of the amendment date did not change. During 2008, our Board of Directors voted to freeze the accrual of benefits under the Pension Plan effective April 30, 2008. In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," we recorded a curtailment gain of ~~$3,276~~$674 associated with the sale of our Phase I PCS business in ~~2008. Based on a remeasurement of~~ the U.S. pension plan's assets and liabilities at April 30, 2008, the benefit accrual freeze reduced the projected benefit obligation by $8,298 and resulted in a corresponding adjustment, net of tax, to accumulated other comprehensive income.

UK.

The following tables summarize the funded status of our defined benefit plans and amounts reflected in our consolidated balance sheets.

The following table summarizes stock option activities under our plans:

As of December ~~27, 2008,~~31, 2011, the unrecognized compensation cost related to2,464,331 unvested stock options expected to vest was ~~$19,352.~~$16,062. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 3028.13 months.

The total intrinsic value of options exercised during the fiscal years ending December ~~27, 2008,~~ 31, 2011, December ~~29, 2007~~25, 2010 and December ~~30, 2006~~26, 2009 was ~~$17,197, $37,342~~$7,950, $1,767 and ~~$12,557,~~$909, respectively, with intrinsic value defined as the difference between the market price on the date of exercise and the grant date price. The total amount of cash received from the exercise of ~~these~~ options during 2011was ~~$27,589.~~$20,625. The actual tax benefit realized for the tax deductions from option exercises totaled ~~$5,888~~$2,898 for the year ended December ~~27, 2008.~~

31, 2011.

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on a closing stock price of ~~$25.02~~$27.33 as of December ~~27, 2008,~~31, 2011, that would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of December ~~27, 2008~~31, 2011 was ~~118,948.~~

431,077.

The following table summarizes the non-vested stock option activity in the equity incentive plans for the fiscal year ending December ~~27, 2008:~~

31, 2011:

Stock compensation expense associated with restricted common stock is charged for the market value on the date of grant, less estimated forfeitures, and is amortized over the awards' vesting period on a straight-line basis.

As of December ~~27, 2008,~~31, 2011, the unrecognized compensation cost related to shares of unvested restricted stock expected to vest was ~~$24,895.~~$15,253. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of ~~31 months.~~29 months. The total fair value of restricted stock grants that vested during the fiscal years ending December ~~27, 2008,~~ 31, 2011, December ~~29, 2007~~25, 2010 and December ~~30, 2006~~26, 2009 was ~~$16,049, $10,661~~$10,989, $13,072 and ~~$9,231,~~$13,707, respectively. The actual tax benefit realized for the tax deductions from restricted stock grants that vested totaled ~~$7,574~~$3,952 for the year ended December ~~27, 2008.~~

~~During 2008 and 2007, we~~31, 2011.

We made performance-based awards to our ~~executives.~~executives during 2007, 2008 and 2009. Payout of these awards iswas contingent upon achievement of individualized ~~stretch goals as determined by the~~goals. Compensation ~~Committee of the Board of Directors. These grants are accounted for in accordance with FAS 123(R), accordingly, compensation~~ expense associated with these awards of ~~$2,360~~$188, $496 and ~~$1,883~~$412 has been recorded during ~~2008~~2011, 2010 and ~~2007,~~2009, respectively.

9.

We have commitments for various operating leases for machinery and equipment, vehicles, office equipment, land and office space. As a matter of ordinary business course, we occasionally guarantee certain lease commitments to landlords. Rent expense for all operating leases was ~~$23,781, $25,548~~$18,778, $22,635 and ~~$18,134~~$19,952 in ~~2008, 2007~~2011, 2010 and ~~2006,~~2009, respectively. Future minimum payments by year and in the aggregate, under noncancellable operating leases with initial or remaining terms of one year or more, consist of the following at December ~~27, 2008:~~

2009
21,410
2010
13,790
2011
11,051
2012
8,937
2013
8,417
Thereafter
34,676

31, 2011:

~~9. Commitments and Contingencies (Continued)~~

~~Insurance~~

We maintain various ~~insurances~~insurance which maintain large deductibles up to ~~$500,~~$750, some with or without stop-loss limits, depending on market availability. ~~Aggregate loss limits for workers compensation and auto liability are projected at $5,200.~~

~~Construction~~

~~We have certain purchase commitments related to the completion of our ongoing construction projects which amounted to approximately $27,406 as of December 27, 2008.~~

Various lawsuits, claims and proceedings of a nature considered normal to ~~its~~our business are pending against us. In the opinion of management, the outcome of such proceedings and litigation currently pending will not materially affect our consolidated financial statements.

On January 31, 2012, a putative class action, entitled Irma Garcia v. Charles River Laboratories, Inc., was filed against us in the San Diego Superior Court, alleging various causes of action related to failure to make proper and timely payments to employees in California, failure to timely furnish accurate itemized wage statements, unfair business practices, associated penalties pursuant to California law, and declaratory relief. While no prediction may be made as to the outcome of litigation, we intend to defend against this proceeding vigorously and therefore an estimate of the possible loss or range of loss cannot be made.

.

We report two business segments, ~~called~~ Research Models and Services (RMS) and Preclinical Services (PCS).

Our RMS segment includes sales of research models, ~~genetically engineered models~~GEMS, IS, RADS, DS, in vitro products and services, ~~(GEMS), research animal diagnostics, discovery~~ and ~~imaging services, consulting~~avian vaccine products and ~~staffing services, vaccine support and in vitro technology (primarily endotoxin testing).~~services. Our PCS segment includes services required to take a drug through the development process, ~~including~~which include discovery support, ~~toxicology, pathology,~~safety assessment and biopharmaceutical ~~bioanalysis, pharmacokinetics and drug metabolism services as well as Phase I clinical trials.~~

services.

A reconciliation of segment operating income to consolidated operating income is as follows:

Net sales for each significant service area are as follows:

~~10. Business Segment and Geographic Information (Continued)~~

A summary of unallocated corporate overhead consists of the ~~following:~~

following:

Other general unallocated corporate expenses consist of various departmental costs including those associated with departments such as senior executives, corporate accounting, legal, tax, human resources, treasury and investor relations.

The following table presents sales and other financial information by geographic regions. Included in the other non-U.S. category below are operations located in China, Korea, Australia, ~~India~~ and ~~Mexico.~~India. Sales to unaffiliated ~~customers~~clients represent net sales originating in entities physically located in the identified geographic area. Long-lived assets include property, plant and equipment ~~goodwill, other intangibles,~~ and other long-lived assets.

During the ~~first~~fourth quarter of ~~fiscal 2006, the Company~~2010, we initiated actions to ~~sell~~divest our Phase ~~II-IV of the Clinical~~I clinical services business. On May 9, 2006, the Company announced that it entered into a definitive agreement to sell Phase II-IV of the Clinical Services business for $215,000 in cash as part of a portfolio realignment which would allow the Company to capitalize on core competencies. Accordingly, management performed a goodwill impairment test for the Clinical business segment assuming sale of the Phase II-IV business. To determine the fair value of this segment, the Company used a combination of discounted cash flow methodology for the Phase I Clinical business and expected selling price for the

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~11. Discontinued Operations (Continued)~~

Phase II-IV Clinical business. Based on this analysis, it was determined that the book carrying value of goodwill assigned to the Clinical business reporting unit exceeded its implied fair value and therefore a $129,187 charge was recorded in 2006 to write-down the value of this goodwill. No additional goodwill impairment was recorded during 2006.

~~In addition,~~December 25, 2010, taking into account the planned divestiture of the Phase ~~II-IV Clinical~~I clinical services business, ~~the Company~~we performed an impairment test on the long-lived assets of the ~~Clinical~~ Phase ~~II-IV~~I clinical services business. Based on this analysis, ~~the Company~~we determined that the book value of assets assigned to the ~~Clinical~~ Phase ~~II-IV~~I clinical services business exceeded its future cash flows, which included the proceeds from the sale of the business, and therefore recorded an impairment of the assets of ~~$3,900~~$6,402 during ~~2006.~~

~~During 2006, the Company also made~~2010.

On March 28, 2011, we disposed of our Phase I clinical business for a decision to close its Interventional and Surgical Services (ISS) business, which was formerly included in the Preclinical Services segment. The Company performed an impairment test on the long-lived assetsnominal amount. As part of the ~~ISS business and based on that analysis, it was determined that~~disposition we remained the ~~book~~guarantor of the Phase I facility lease. During the second quarter of 2011, we recognized the value of the ~~ISS assets exceeded the future cash flows~~guarantee net of the ~~business. Accordingly,~~buyer's related indemnity as a liability of $2,994, which we are amortizing ratably over the ~~Company recorded an impairment charge of $1,070 during 2006.~~

~~For the year end December 30, 2006, the discontinued businesses recorded a loss from operations of $181,004 which included a $546 loss from the sale~~remaining term of the ~~Phase II-IV Clinical business. As a direct result~~lease. The facility lease runs through January 2021 with remaining lease payments totaling $14,711 as of ~~the sale, the Company realized a significant tax gain resulting~~December 31,

The consolidated financial statements have been reclassified to segregate, as discontinued operations, the assets and liabilities, operating results and cash flows, of the businesses being discontinued for all periods presented. Operating results from discontinued operations are as follows:

Fiscal Year Ended

December 27,
2008 December 29,
2007 December 30,
2006
Net sales
$ — $ 599 $ 73,658
Income (loss) from operations of discontinued businesses, before income taxes
122 267 (145,613 )
Provision for income taxes
(302 ) 3,413 35,391

Income (loss) from operations of discontinued businesses, net of taxes
$ 424 $ (3,146 ) $ (181,004 )



	Fiscal Year Ended
	December 31, 2011			December 25, 2010			December 26, 2009
Net sales	$	2,112		$	17,508		$	30,907
Asset impairment	—			6,402			—
Income (loss) from operations of discontinued businesses, before income taxes	(8,964		)	(13,465		)	3,205
Provision (benefit) for income taxes	(3,419		)	(5,453		)	1,806
Income (loss) from operations of discontinued businesses, net of taxes	$	(5,545	)	$	(8,012	)	$	1,399

~~Table of Contents~~

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share amounts)~~

~~11. Discontinued Operations (Continued)~~

Assets and liabilities of discontinued operations at December ~~27, 2008~~2011 and December ~~29, 2007~~2010 consisted of the following:

December 27, 2008 December 29, 2007
Current assets
$ 233 $ 1,007
Long-term assets
4,187 4,187

Total assets
$ 4,420 $ 5,194

Current liabilities
$ 35 $ 748

Total liabilities
$ 35 $ 748



	December 31, 2011		December 25, 2010
Current assets	$	107	$	3,862
Long-term assets	986		822
Total assets	$	1,093	$	4,684
Current liabilities	$	1,165	$	3,284
Long-term liabilities	2,522		—
Total liabilities	$	3,687	$	3,284

Current assets included accounts receivable and prepaid income taxes. Non-current assets included a long-term deferred tax ~~receivable.~~asset. Current and long-term liabilities consisted of accounts payable, deferred income and accrued expenses.

~~12. Subsequent Event~~

During the first quarter of 2009, we implemented actions to improve our operating efficiency. As a result of these actions, we will record a one time charge, primarily in the first quarter of 2009 of approximately $9.0 million, mainly in the PCS segment, for the closure and severance of our Arkansas facility as well as other headcount reductions.

Quarterly Information (Unaudited)



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Fiscal Year Ended December 31, 2011
Total net sales	$	285,843		$	288,263		$	277,579		$	290,962
Gross profit	102,638			106,320			92,716			100,568
Operating income	42,251			53,314			37,094			41,647
Income from continuing operations, net of tax	35,377			34,156			18,911			27,078
(Loss) income from discontinued businesses, net of tax	(3,945		)	(1,732		)	(18		)	150
Net income attributable to common shareowners	31,335			32,318			18,798			$	27,115
Earnings (loss) per common share
Basic
Continuing operations attributable to common shareowners	$	0.65		$	0.67		$	0.38		$	0.55
Discontinued operations attributable to common shareowners	(0.07		)	(0.03		)	—			—
Net income attributable to common shareowners	$	0.58		$	0.63		$	0.38		$	0.56
Diluted
Continuing operations attributable to common shareowners	$	0.65		$	0.66		$	0.37		$	0.55
Discontinued operations attributable to common shareowners	(0.07		)	(0.03		)	—			—
Net income attributable to common shareowners	$	0.57		$	0.63		$	0.37		$	0.55
Fiscal Year Ended December 25, 2010
Total net sales	$	292,287		$	288,592		$	270,885		$	281,652
Gross profit	100,191			100,764			90,500			93,305
Operating income (loss)	30,194			29,985			6,468			(365,159		)
Income from continuing operations, net of tax	17,338			15,234			(24,248		)	(342,429		)
Income (loss) from discontinued businesses, net of tax	(338		)	(1,139		)	(986		)	(5,549		)
Net income attributable to common shareowners	$	17,382		$	14,454		$	(24,941	)	$	(343,564	)
Earnings (loss) per common share
Basic
Continuing operations attributable to common shareowners	$	0.27		$	0.24		$	(0.38	)	$	(5.94	)
Discontinued operations attributable to common shareowners	(0.01		)	(0.02		)	(0.02		)	(0.1		)
Net income attributable to common shareowners	$	0.27		$	0.22		$	(0.4	)	$	(6.04	)
Diluted
Continuing operations attributable to common shareowners	$	0.27		$	0.24		$	(0.38	)	$	(5.94	)
Discontinued operations attributable to common shareowners	(0.01		)	(0.02		)	(0.02		)	(0.1		)
Net income attributable to common shareowners	$	0.26		$	0.22		$	(0.4	)	$	(6.04	)

Quarterly Segment Information (Unaudited)



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Fiscal Year Ended December 31, 2011
Research Models and Services
Sales	$	173,371		$	178,163		$	171,471		$	182,414
Gross margin	73,839			78,307			70,514			74,667
Operating income	51,742			55,691			48,534			50,352
Depreciation and amortization	9,269			9,318			9,327			9,326
Capital expenditures	4,403			4,010			5,789			20,055
Preclinical Services
Sales	$	112,472		$	110,100		$	106,108		$	108,548
Gross margin	28,799			28,013			22,202			25,902
Operating income	9,306			7,875			3,663			4,082
Depreciation and amortization	11,996			12,498			11,840			11,656
Capital expenditures	2,387			2,650			2,433			7,416
Unallocated corporate overhead	$	(18,797	)	$	(10,252	)	$	(15,103	)	$	(12,786	)
Total
Sales	$	285,843		$	288,263		$	277,579		$	290,962
Gross margin	102,638			106,320			92,716			100,569
Operating income	42,251			53,314			37,094			41,648
Depreciation and amortization	21,265			21,816			21,167			20,982
Capital expenditures	6,790			6,660			8,222			27,471
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Fiscal Year Ended December 25, 2010
Research Models and Services
Sales	$	172,205		$	167,140		$	159,259		$	168,382
Gross margin	74,279			71,346			64,383			68,383
Operating income	49,984			47,258			42,817			44,405
Depreciation and amortization	9,721			8,811			9,422			9,703
Capital expenditures	4,960			6,245			4,622			11,867
Preclinical Services
Sales	$	120,082		$	121,452		$	111,626		$	113,270
Gross margin	25,912			29,418			26,117			24,922
Operating income	429			6,509			5,178			(391,842		)
Depreciation and amortization	13,859			14,114			14,063			13,956
Capital expenditures	4,333			2,187			4,505			4,141
Unallocated corporate overhead	$	(20,219	)	$	(23,782	)	$	(41,527	)	$	(17,722	)
Total
Sales	$	292,287		$	288,592		$	270,885		$	281,652
Gross margin	101,191			100,764			90,500			93,305
Operating income	30,194			29,985			6,468			(365,159		)
Depreciation and amortization	23,580			22,925			23,485			23,659
Capital expenditures	9,293			8,432			9,127			16,008

84

Table of Contents

~~CHARLES RIVER LABORATORIES INTERNATIONAL, INC.~~

~~SUPPLEMENTARY DATA~~

~~Quarterly Information (Unaudited)~~

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter
Fiscal Year Ended December 27, 2008

Total net sales
$ 337,685 $ 352,134 $ 342,227 $ 311,447
Gross profit
130,377 137,987 130,270 112,075
Operating income (loss)
63,500 69,323 68,211 (650,796 )
Income from continuing operations
45,154 50,187 44,700 (662,308 )
Income (loss) from discontinued businesses, net of tax
— — — 424
Net income
$ 45,154 $ 50,187 $ 44,700 $ (661,884 )
Earnings (loss) per common share

Basic

Continuing operations
$ 0.67 $ 0.75 $ 0.67 $ (9.91 )

Discontinued operations
— — — 0.01

Net income
$ 0.67 $ 0.75 $ 0.67 $ (9.91 )

Diluted

Continuing operations
$ 0.64 $ 0.71 $ 0.63 $ (9.91 )

Discontinued operations
— — — 0.01

Net income
$ 0.64 $ 0.71 $ 0.63 $ (9.91 )
Fiscal Year Ended December 29, 2007

Total net sales
$ 291,199 $ 307,435 $ 313.964 $ 318,028
Gross profit
115,573 120,596 123,899 117,763
Operating income (loss)
54,701 56,725 63,631 52,134
Income from continuing operations
37,227 37,841 43,536 38,948
Income (loss) from discontinued businesses, net of tax
(464 ) 115 (759 ) (2,038 )
Net income
$ 36,763 $ 37,956 $ 42,777 $ 36,910
Earnings (loss) per common share

Basic

Continuing operations
$ 0.56 $ 0.57 $ 0.65 $ 0.58

Discontinued operations
(0.01 ) — (0.01 ) (0.03 )

Net income
$ 0.55 $ 0.57 $ 0.64 $ 0.55

Diluted

Continuing operations
$ 0.55 $ 0.55 $ 0.63 $ 0.55

Discontinued operations
(0.01 ) — (0.01 ) (0.03 )

Net income
$ 0.54 $ 0.55 $ 0.62 $ 0.52
Fiscal Year Ended December 30, 2006

Total net sales
$ 254,141 $ 267,859 $ 264,660 $ 271,725
Gross profit
95,505 107,110 102,262 101,730
Operating income (loss)
43,696 47,702 51,621 45,154
Income from continuing operations
28,515 32,781 32,133 31,792
Income (loss) from discontinued businesses, net of tax
(128,630 ) (7,032 ) (48,739 ) 3,397
Net income
$ (100,115 ) $ 25,749 $ (16,606 ) $ 35,189
Earnings (loss) per common share

Basic

Continuing operations
$ 0.40 $ 0.46 $ 0.48 $ 0.48

Discontinued operations
(1.80 ) (0.10 ) (0.73 ) 0.05

Net income
$ (1.40 ) $ 0.36 $ (0.25 ) $ 0.53

Diluted

Continuing operations
$ 0.39 $ 0.46 $ 0.47 $ 0.47

Discontinued operations
(1.76 ) (0.10 ) (0.72 ) 0.05

Net income
$ (1.37 ) $ 0.36 $ (0.24 ) $ 0.52

~~Table of Contents~~

~~Quarterly Segment Information (Unaudited)~~

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter
Fiscal Year Ended December 27, 2008

Research Models and Services

Sales
$ 168,596 $ 172,848 $ 165,656 $ 152,841

Gross margin
76,256 76,429 70,813 61,141

Operating income
55,813 52,199 50,673 40,011

Depreciation and amortization
6,659 7,016 7,043 7,468

Capital expenditures
10,146 23,510 12,572 14,262
Preclinical Services

Sales
$ 169,089 $ 179,286 $ 176,571 $ 158,606

Gross margin
54,121 61,558 59,457 50,934

Operating income
23,268 28,849 30,390 (678,944 )

Depreciation and amortization
15,674 16,004 15,894 15,425

Capital expenditures
29,558 40,667 33,577 32,789
Unallocated corporate overhead

$
(15,581
)
$
(11,725
)
$
(12,852
)
$
(11,863
)
Total

Sales
$ 337,685 $ 352,134 $ 342,227 $ 311,447

Gross margin
130,377 137,987 130,270 112,075

Operating income
63,500 69,323 68,211 (650,796 )

Depreciation and amortization
22,333 23,020 22,937 22,893

Capital expenditures
39,704 64,177 46,149 47,051

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter
Fiscal Year Ended December 29, 2007

Research Models and Services

Sales
$ 143,068 $ 143,803 $ 145,207 $ 145,153

Gross margin
63,654 63,109 63,408 59,177

Operating income
47,021 45,268 45,574 39,288

Depreciation and amortization
5,569 5,663 5,780 6,366

Capital expenditures
7,084 10,688 12,643 20,671
Preclinical Services

Sales
$ 148,131 $ 163,632 $ 168,757 $ 172,875

Gross margin
51,919 57,847 60,491 58,586

Operating income
23,444 27,426 29,993 22,678

Depreciation and amortization
14,344 15,569 16,180 16,908

Capital expenditures
30,840 38,724 37,692 68,694
Unallocated corporate overhead

$
(15,764
)
$
(15,969
)
$
(11,936
)
$
(9,832
)
Total

Sales
$ 291,199 $ 307,435 $ 313,964 $ 318,028

Gross margin
115,573 120,956 123,899 117,763

Operating income
54,701 56,725 63,631 52,134

Depreciation and amortization
19,913 21,232 21,960 23,274

Capital expenditures
37,924 49,412 50,335 89,365

~~Table of Contents~~

First
Quarter Second
Quarter Third
Quarter Fourth
Quarter
Fiscal Year Ended December 30, 2006

Research Models and Services

Sales
$ 128,972 $ 130,816 $ 127,560 $ 127,651

Gross margin
55,866 55,478 52,423 50,358

Operating income
40,476 38,003 36,691 32,619

Depreciation and amortization
5,035 5,237 5,185 5,345

Capital expenditures
3,566 4,783 3,932 14,737
Preclinical Services

Sales
$ 125,169 $ 137,043 $ 137,100 $ 144,074

Gross margin
39,639 51,632 49,839 51,372

Operating income
13,788 22,530 22,971 23,034

Depreciation and amortization
14,625 15,288 15,389 16,482

Capital expenditures
35,821 12,620 39,038 67,249
Unallocated corporate overhead

$
(10,568
)
$
(12,831
)
$
(8,041
)
$
(10,499
)
Total

Sales
$ 254,141 $ 267,859 $ 264,660 $ 271,725

Gross margin
95,505 107,110 102,262 101,730

Operating income
43,696 47,702 51,621 45,154

Depreciation and amortization
19,660 20,525 20,574 21,827

Capital expenditures
39,387 17,403 42,970 81,986

~~Table of Contents~~

Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure

None.



(Mark One)
ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER ~~27, 2008~~31, 2011
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO



Delaware		06-1397316
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
251 Ballardvale Street Wilmington, Massachusetts (Address of Principal Executive Offices)		01887 (Zip Code)



	Title of each class		Name of each exchange on which registered
Common Stock, $0.01 par value		New York Stock Exchange



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o (Do not check if smaller reporting company)	Smaller reporting company o



Initiative	2011 Progress
Improve our consolidated operating margin	Improved consolidated operating margin from continuing operations achieved due to:
	Ÿ increased RMS margin,
	Ÿ stable Corporate costs,
	Ÿ November 2010 cost-savings actions, and
	Ÿ six-sigma and other process improvement initiatives
Improve our free cash flow generation	Ÿ Free cash flow increased in 2011 to a per-share yield we believe was the highest among public CROs.
	Ÿ Divested non-strategic / underperforming PCS assets (U.S. Phase 1 clinical and China preclinical facility)
Disciplined investment in growth businesses	Capital projects invested in growth business:
	Ÿ Diagnostic laboratories opening in 2012,
	Ÿ In Vitro production facility in China, and
	Ÿ Capacity expansion in Finland Discovery Services business.
Return value to shareholders	Ÿ Repurchased 8.4 million shares of common stock for a total purchase price of approximately $300 million.



Item		Page
	PART I
1	Business	1
1A	Risk Factors	13
1B	Unresolved Staff Comments	23
2	Properties	23
3	Legal Proceedings	23
4	Not Applicable	23
	Supplementary Item. Executive Officers of the Registrant pursuant to Instruction 3 to Item 401 (b) of Regulation S-K
	PART II
5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
6	Selected Consolidated Financial Data	28
7	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
7A	Quantitative and Qualitative Disclosures About Market Risk	43
8	Financial Statements and Supplementary Data	44
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	85
9A	Controls and Procedures	85
9B	Other Information	85
	PART III
10	Directors, Executive Officers and Corporate Governance	85
11	Executive Compensation	86
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	86
13	Certain Relationships and Related Transactions, and Director Independence	86
14	Principal Accountant Fees and Services	86
	PART IV
15	Exhibits and Financial Statement Schedules	86


•	the occasional extra “53^rd week” that we recognize in a fiscal year (and 4^th fiscal quarter thereof) due to our fiscal year ending on the last Saturday in December; and



2012	High		Low
First quarter (through February 17, 2012)	$	36.25	$	27.39
2011	High		Low
First quarter	$	39.39	$	35.54
Second quarter	42.47		37.38
Third quarter	42.05		28.54
Fourth quarter	33.57		25.95
2010	High		Low
First quarter	$	39.75	$	32.74
Second quarter	41.65		28.00
Third quarter	35.87		28.20
Fourth quarter	36.10		30.70



	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
September 25, 2011 to October 22, 2011	450,240	$	28.95	450,199	$	128,224
October 23, 2011 to November 19, 2011	394,095	$	30.36	394,095	$	116,258
November 20, 2011 to December 31, 2011	—	$	—	—	$	116,258
Total:	844,335			844,294



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plan approved by security holders:
Charles River 2000 Incentive Plan	2,322,927		$	41.20	1,083,653
Charles River 1999 Management Incentive Plan	1,000		$	31.12	6,000
Inveresk 2002 Stock Option Plan	72,041		$	26.20	—
2007 Incentive Plan	3,685,295		$	36.63	4,709,080
Equity compensation plans not approved by security holders	—		—		—
Total	6,081,263	(1)			5,798,733	(2)


(1)	None of the options outstanding under any of our equity compensation plans include rights to any dividend equivalents (i.e., a right to receive from us a payment commensurate to dividend payments received by holders of our common stock or our other equity instruments).


(1)	For purposes of this table, only unvested restricted stock as of December 31, 2011 is included. Also for purposes of this table only, the total includes 72,668 restricted stock units granted to certain of our employees outside of the United States.



	Dec. 30, 2006	Dec. 29, 2007	Dec. 27, 2008	Dec. 26, 2009	Dec. 25, 2010	Dec. 31, 2011
Charles River Laboratories International, Inc.	100	152.88	57.85	76.21	82.54	63.19
S&P 500 Index	100	105.49	66.46	84.05	96.71	98.75
NASDAQ Pharmaceutical Index	100	90.99	84.71	95.64	100.1	110.44



	Fiscal Year(1)
	2011			2010			2009			2008			2007
	(dollars in thousands)
Statement of Income Data:
Net sales	$	1,142,647		$	1,133,416		$	1,171,642		$	1,295,299		$	1,185,139
Cost of products sold and services provided	740,405			748,656			748,650			796,478			720,254
Selling, general and administrative expenses	198,648			232,489			227,663			223,935			212,471
Goodwill impairment	—			305,000			—			700,000			—
Asset impairment	7,492			91,378			—			—			—
Termination fee	—			30,000			—			—			—
Amortization of intangibles	21,796			24,405			25,716			26,725			30,020
Operating income (loss)	174,306			(298,512		)	169,613			(451,839		)	222,394
Interest income	1,353			1,186			1,712			7,882			9,120
Interest expense	(42,586		)	(35,279		)	(21,682		)	(22,335		)	(24,453		)
Other, net	(411		)	(1,477		)	1,914			(5,154		)	(1,392		)
Income (loss) from continuing operations before income taxes	132,662			(334,082		)	151,557			(471,446		)	205,669
Provision for income taxes	17,140			23			40,354			57,029			56,023
Income (loss) from continuing operations net of income taxes	115,522			(334,105		)	111,203			(528,475		)	149,646
Income (loss) from discontinued businesses, net of tax	(5,545		)	(8,012		)	1,399			3,283			1,472
Net income (loss)	109,977			(342,117		)	112,602			(525,192		)	151,118
Net income (loss) attributable to noncontrolling interests	(411		)	5,448			1,839			687			(470		)
Net income (loss) attributable to common shareowners	$	109,566		$	(336,669	)	$	114,441		$	(524,505	)	$	150,648
Common Share Data:
Earnings (loss) per common share
Basic
Continuing operations attributable to common shareowners	$	2.26		$	(5.25	)	$	1.73		$	(7.85	)	$	2.23
Discontinued operations	$	(0.11	)	$	(0.13	)	$	0.02		$	0.05		$	(0.02	)
Net income (loss) attributable to common shareowners	$	2.16		$	(5.38	)	$	1.75		$	(7.8	)	$	2.25
Diluted
Continuing operations attributable to common shareowners	$	2.24		$	(5.25	)	$	1.72		$	(7.85	)	$	2.17
Discontinued operations	$	(0.11	)	$	(0.13	)	$	0.02		$	0.05		$	(0.02	)
Net income (loss) attributable to common shareowners	$	2.14		$	(5.38	)	$	1.74		$	(7.8	)	$	2.19
Other Data:
Depreciation and amortization	$	85,230		$	93,649		$	89,962		$	86,851		$	81,965
Capital expenditures	49,143			42,860			79,853			198,642			230,754
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	68,905		$	179,160		$	182,574		$	243,592		$	225,449
Working capital	209,046			293,114			345,828			317,141			299,587
Goodwill, net	197,561			198,438			508,235			457,578			1,120,540
Total assets	1,558,320			1,733,373			2,204,093			2,141,413			2,778,313
Total debt and capital lease obligations	717,945			700,852			492,832			515,332			437,902
Total shareowners' equity	525,583			687,423			1,375,243			1,241,286			1,905,390


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



	December 31, 2011		December 25, 2010
Raw materials and supplies	$	13,987	$	13,153
Work in process	13,533		13,869
Finished products	65,449		73,275
Inventories	$	92,969	$	100,297



	December 31, 2011			December 25, 2010
Land	$	40,517		$	40,409
Buildings	696,275			694,342
Machinery and equipment	348,795			327,353
Leasehold improvements	29,975			26,772
Furniture and fixtures	10,663			10,473
Vehicles	5,226			5,456
Computer hardware and software	105,563			106,073
Construction in progress	57,661			45,465
Total	1,294,675			1,256,343
Less accumulated depreciation	(556,645		)	(503,686		)
Net property, plant and equipment	$	738,030		$	752,657



Contractual Obligations (in millions)	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		After 5 Years
Debt	$	739.4	$	14.7	$	447.4	$	277.3	$	—
Interest payments	82.0		31.5		36.0		14.5		—
Operating leases	60.2		14.7		20.4		10.9		14.1
Pension and supplemental retirement benefits	107.0		6.7		25.1		21.9		53.3
Total contractual cash obligations	$	988.6	$	67.6	$	528.9	$	324.6	$	67.4





Consolidated Financial Statements:
	Management's Annual Report on Internal Control Over Financial Reporting	45
	Report of Independent Registered Public Accounting Firm	46
	Consolidated Statements of Income for the years ended December 31, 2011, December 25, 2010, and December 26, 2009	47
	Consolidated Balance Sheets as of December 31, 2011 and December 25, 2010	48
	Consolidated Statements of Cash Flows for the years ended December 31, 2011, December 25, 2010, and December 26, 2009	48
	Consolidated Statements of Changes in Equity for the years ended December 31, 2011, December 25, 2010, and December 26, 2009	48
	Notes to Consolidated Financial Statements	49
Supplementary Data:
	Quarterly Information (Unaudited)	84



	December 31, 2011			December 25, 2010
Assets
Current assets
Cash and cash equivalents	$	68,905		$	179,160
Trade receivables, net	184,810			192,972
Inventories	92,969			100,297
Other current assets	79,052			76,603
Current assets of discontinued businesses	107			3,862
Total current assets	425,843			552,894
Property, plant and equipment, net	738,030			752,657
Goodwill, net	197,561			198,438
Other intangibles, net	93,437			121,236
Deferred tax asset	44,804			45,003
Other assets	57,659			62,323
Long-term assets of discontinued businesses	986			822
Total assets	$	1,558,320		$	1,733,373
Liabilities and Equity
Current liabilities
Current portion of long-term debt and capital leases	$	14,758		$	30,582
Accounts payable	34,332			30,627
Accrued compensation	41,602			48,918
Deferred revenue	56,530			66,905
Accrued liabilities	54,377			59,369
Other current liabilities	14,033			20,095
Current liabilities of discontinued businesses	1,165			3,284
Total current liabilities	216,797			259,780
Long-term debt and capital leases	703,187			670,270
Other long-term liabilities	108,451			114,596
Long-term liabilities of discontinued businesses	2,522			—
Total liabilities	1,030,957			1,044,646
Commitments and contingencies
Shareowners' equity
Preferred stock, $0.01 par value; 20,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.01 par value; 120,000,000 shares authorized; 78,473,888 issued and 48,875,715 shares outstanding at December 31, 2011 and 77,531,056 issued and 56,441,081 shares outstanding at December 25, 2010	785			775
Capital in excess of par value	2,056,921			1,996,874
Accumulated deficit	(465,596		)	(575,162		)
Treasury stock, at cost, 29,598,173 shares and 21,089,975 shares at December 31, 2011 and December 25, 2010, respectively	(1,071,120		)	(768,699		)
Accumulated other comprehensive income	4,593			33,635
Total shareowners' equity	525,583			687,423
Noncontrolling interests	1,780			1,304
Total equity	527,363			688,727
Total liabilities and equity	$	1,558,320		$	1,733,373



	Total			Accumulated (Deficit) Earnings			Accumulated Other Comprehensive Income			Common Stock		Capital in Excess of Par			Treasury Stock			Non-controlling Interest
Balance at December 27, 2008	$	1,241,708		$	(352,934	)	$	3,347		$	766	$	2,016,031		$	(425,924	)	$	422
Components of comprehensive income, net of tax:
Net income	112,602			114,441														(1,839		)
Foreign currency translation adjustment	47,248						47,250											(2		)
Net decrease in unrecognized pension net gain/loss and prior service costs	(6,328		)				(6,328		)									—
Unrealized gain on marketable securities	768						768											—
Total comprehensive income	154,290																	(1,841		)
Tax detriment associated with stock issued under employee compensation plans	(2,203		)									(2,203		)
Exercise of warrants	22											22
Issuance of stock under employee compensation plans	797									5		792
Acquisition of treasury shares	(44,603		)							—		—			(44,603		)
Stock-based compensation	23,813											23,813
Balance at December 26, 2009	$	1,373,824		$	(238,493	)	$	45,037		$	771	$	2,038,455		$	(470,527	)	$	(1,419	)
Components of comprehensive income, net of tax:
Net loss	(342,117		)	(336,669		)												(5,448		)
Foreign currency translation adjustment	(4,985		)				(4,803		)									(182		)
Net decrease in unrecognized pension net gain/loss and prior service costs	(7,452		)				(7,452		)									—
Unrealized gain on marketable securities	853						853											—
Total comprehensive income	(353,701		)															(5,630		)
Dividends paid noncontrolling interest	(270		)															(270		)
Purchase of noncontrolling interest in PCS-China	(4,000		)									(12,623		)				8,623
Tax detriment associated with stock issued under employee compensation plans	(926		)									(926		)
Issuance of stock under employee compensation plans	4,590									4		4,586
Acquisition of treasury shares	(298,172		)									—			(298,172		)
Accelerated Stock Repurchase equity instrument	(58,355		)									(58,355		)
Stock-based compensation	25,737											25,737
Balance at December 25, 2010	$	688,727		$	(575,162	)	$	33,635		$	775	$	1,996,874		$	(768,699	)	$	1,304
Components of comprehensive income, net of tax:
Net income	109,977			109,566														411
Foreign currency translation adjustment	(13,084		)				(13,149		)									65
Net decrease in unrecognized pension net gain/loss and prior service costs	(15,568		)				(15,568		)									—
Unrealized gain on marketable securities	(325		)				(325		)									—
Total comprehensive income	81,000																	476
Tax detriment associated with stock issued under employee compensation plans	(802		)									(802		)
Issuance of stock under employee compensation plans	20,527									10		20,517
Acquisition of treasury shares	(269,655		)									32,766			(302,421		)
Accelerated Stock Repurchase equity instrument	(14,140		)									(14,140		)
Stock-based compensation	21,706											21,706
Balance at December 31, 2011	$	527,363		$	(465,596	)	$	4,593		$	785	$	2,056,921		$	(1,071,120	)	$	1,780



	December 31, 2011			December 25, 2010
Client receivables	$	159,381		$	170,696
Unbilled revenue	29,446			27,095
Total	188,827			197,791
Less allowance for doubtful accounts	(4,017		)	(4,819		)
Net trade receivables	$	184,810		$	192,972



	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Time deposits	$	5,359	$	—	$	—		$	5,359
Auction rate securities	11,972		—		(921		)	11,051
	$	17,331	$	—	$	(921	)	$	16,410



	December 31, 2011		December 25, 2010
Prepaid assets	$	22,828	$	21,434
Deferred tax asset	30,894		31,251
Marketable securities	5,359		9,834
Prepaid income tax	19,742		13,856
Restricted cash	229		228
Other current assets	$	79,052	$	76,603

2008	High		Low

First quarter	$	69.04	$	53.73
Second quarter		65.95		55.14
Third quarter		69.19		57.84
Fourth quarter		58.00		19.92

2007	High		Low

First quarter	$	47.64	$	42.71
Second quarter		54.04		45.30
Third quarter		56.64		50.15
Fourth quarter		68.00		55.11

		Average Price Paid per Share			Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs

Sep. 28, 2008—Oct. 25, 2008	209,825	$	46.91	209,308	$	202,065,830
Oct. 26, 2008—Nov. 22, 2008	220,671	$	28.49	220,000	$	195,803,701
Nov. 23, 2008—Dec. 27, 2008	370,000	$	23.42	370,000	$	187,139,993

Total	800,496			799,308

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

		(a)			(b)		(c)
Equity compensation plan approved by security holders:
	Charles River 2000 Incentive Plan		3,459,396		$	41.28		174,618
	Charles River 1999 Management Incentive Plan		30,754		$	14.52		15,617
	Inveresk 2002 Stock Option Plan		136,305		$	28.00		—
	2007 Incentive Plan		915,765	(1)	$	58.25		4,399,402
Equity compensation plans not approved by security holders			—			—		—

Total			4,542,220	(2)	$	43.93		4,589,637	(3)

Category	Number of securities outstanding		Weighted average exercise price		Weighted average term

	(a)		(b)		(c)
Total number of restricted shares outstanding(1)		716,394	$	—		—
Total number of options outstanding(2)		4,542,220	$	43.93		5.02



Charles River Laboratories International, Inc.	100.00	138.50	126.06	128.68	196.73	74.44
S&P 500	100.00	110.88	116.33	134.70	142.10	89.53
NASDAQ Pharmaceutical	100.00	110.22	111.87	114.89	106.37	97.32

		Fiscal Year(1)

		2008			2007			2006			2005			2004
		(dollars in thousands)
Statement of Income Data:
Net sales		$	1,343,493		$	1,230,626		$	1,058,385		$	993,328		$	724,221
Cost of products sold and services provided			832,784			752,435			651,778			603,624			435,499
Selling, general and administrative expenses			230,159			217,491			180,795			157,999			116,879
Goodwill impairment			700,000			—			—			—			—
Amortization of goodwill and intangibles			30,312			33,509			37,639			47,011			13,857

Operating income (loss)			(449,762	)		227,191			188,173			184,694			157,986
Interest income			8,691			9,683			6,836			3,695			3,262
Interest expense			(14,009	)		(18,004	)		(19,426	)		(24,324	)		(11,718	)
Other, net			(5,930	)		(1,448	)		981			(177	)		937

Income (loss) before income taxes, minority interests and earnings from equity investments			(461,010	)		217,422			176,564			163,888			150,467
Provision for income taxes			61,944			59,400			49,738			16,261			60,159

Income (loss) before minority interests and earnings from equity investments			(522,954	)		158,022			126,826			147,627			90,308
Minority interests			687			(470	)		(1,605	)		(1,838	)		(1,577	)

Income (loss) from continuing operations			(522,267	)		157,552			125,221			145,789			88,731
Income (loss) from discontinued businesses, net of tax			424			(3,146	)		(181,004	)		(3,790	)		1,061

Net income (loss)		$	(521,843	)	$	154,406		$	(55,783	)	$	141,999		$	89,792

Common Share Data:
Earnings (loss) per common share
Basic
	Continuing operations	$	(7.76	)	$	2.35		$	1.82		$	2.09		$	1.79
	Discontinued operations	$	0.01		$	(0.05	)	$	(2.63	)	$	(0.05	)	$	0.02
	Net income (loss)	$	(7.76	)	$	2.31		$	(0.81	)	$	2.04		$	1.81
Diluted
	Continuing operations	$	(7.76	)	$	2.29		$	1.79		$	2.02		$	1.65
	Discontinued operations	$	0.01		$	(0.05	)	$	(2.59	)	$	(0.05	)	$	0.02
	Net income (loss)	$	(7.76	)	$	2.25		$	(0.80	)	$	1.96		$	1.68
Other Data:
Depreciation and amortization		$	91,183		$	86,379		$	82,586		$	87,935		$	42,063
Capital expenditures			197,081			227,036			181,747			94,520			44,735
Balance Sheet Data (at end of period):
Cash and cash equivalents		$	243,592		$	225,449		$	175,380		$	114,821		$	207,566
Working capital			317,141			305,336			241,762			107,910			161,191
Goodwill, net			457,578			1,120,540			1,119,309			1,097,590			1,102,511
Total assets			2,159,918			2,805,537			2,557,544			2,538,209			2,626,835
Total debt			576,098			510,049			572,054			296,090			686,844
Total shareholders' equity			1,199,025			1,860,467			1,595,211			1,827,013			1,472,505

	December 27, 2008

Expected life (in years)		4.5
Expected volatility		24.0	%
Risk-free interest rate		2.76	%
Expected dividend yield		0.0	%
Weighted-average option grant date fair value	$	14.85

Contractual Obligations		Total		Less than 1 Year		1—3 Years		3—5 Years		After 5 Years

Debt		$	575.8	$	35.4	$	190.4	$	350.0	$	—
Interest payments			45.6		12.8		28.8		4.0		—
Operating leases			98.3		21.4		24.8		17.4		34.7
Pension			94.5		9.4		9.7		28.7		46.7
Construction commitments			27.4		27.4		—		—		—

	Total contractual cash obligations	$	841.6	$	106.4	$	253.7	$	400.1	$	81.4

				Total			Accumulated (Deficit) Earnings			Accumulated Other Comprehensive Income			Common Stock		Capital in Excess of Par			Treasury Stock			Unearned Compensation

Balance at December 31, 2005				$	1,827,013		$	78,906		$	8,540		$	724	$	1,777,625		$	(17,997	)	$	(20,785	)
	Components of comprehensive income, net of tax:
		Net (loss)			(55,783	)		(55,783	)		—			—		—			—			—
		Foreign currency translation adjustment			12,335			—			12,335			—		—			—			—
		Minimum pension liability adjustment			(195	)		—			(195	)		—		—			—			—
		Unrealized gain on marketable securities			11			—			11			—		—			—			—

			Total comprehensive income		(43,632	)		—			—			—		—			—			—

		Adjustment to initially apply SFAS No. 158, net of tax			480			—			480			—		—			—			—
	Tax benefit associated with stock issued under employee compensation plans				5,714			—			—			—		5,714			—			—
	Exercise of warrants				79			—			—			—		79			—			—
	Issuance of stock under employee compensation plans				22,821			—			—			10		22,811			—			—
	Acquisition of treasury shares				(249,958	)		—			—			—					(249,958	)		—
	Stock-based compensation				21,866			—			—			—		21,866			—			—
	Purchase of hedge on convertible debt				(98,110	)		—			—			—		(98,110	)		—			—
	Issuance of warrants				65,423			—			—			—		65,423			—			—
	Deferred tax assets				43,515			—			—			—		43,515			—			—
	Reversal of unearned compensation upon adoption of SFAS No. 123(R)							—			—			—		(20,785	)		—			20,785

Balance at December 30, 2006				$	1,595,211		$	23,123		$	21,171		$	734	$	1,818,138		$	(267,955	)	$	—
	Components of comprehensive income, net of tax:
		Net income			154,406			154,406			—			—		—			—			—
		Foreign currency translation adjustment			57,872			—			57,872			—		—			—			—
		Net increase in unrecognized pension net gain/loss and prior service costs			6,564			—			6,564			—		—			—			—
		Unrealized loss on marketable securities			(48	)		—			(48	)		—		—			—			—

			Total comprehensive income		218,794			—			—			—		—			—			—

	Tax benefit associated with stock issued under employee compensation plans				8,727			—			—			—		8,727			—			—
	Exercise of warrants				14			—			—			—		14			—			—
	Issuance of stock under employee compensation plans				54,121			—			—			20		54,101			—			—
	Acquisition of treasury shares				(42,417	)		—			—			—		—			(42,417	)		—
	Stock-based compensation				26,017			—			—			—		26,017			—			—

Balance at December 29, 2007				$	1,860,467		$	177,529		$	85,559		$	754	$	1,906,997		$	(310,372	)	$	—
	Components of comprehensive income, net of tax:
		Net (loss)			(521,843	)		(521,843	)		—			—		—			—			—
		Foreign currency translation adjustment			(72,588	)		—			(72,588	)		—		—			—			—
		Net decrease in unrecognized pension net gain/loss and prior service costs			(7,457	)		—			(7,457	)		—		—			—			—
		Unrealized loss on marketable securities			(2,167	)		—			(2,167	)		—		—			—			—

			Total comprehensive income		(604,055	)		—			—			—		—			—			—

	Tax benefit associated with stock issued under employee compensation plans				4,769			—			—			—		4,769			—			—
	Exercise of warrants				741			—			—			—		741						—
	Deferred taxes				731			—			—			—		731			—			—
	Issuance of stock under employee compensation plans				27,591			—			—			12		27,579			—			—
	Acquisition of treasury shares				(115,552	)		—			—			—		—			(115,552	)		—
	Stock-based compensation				24,333			—			—			—		24,333			—			—

Balance at December 27, 2008				$	1,199,025		$	(344,314	)	$	3,347		$	766	$	1,965,150		$	(425,924	)	$	—

		December 27, 2008			December 29, 2007

Customer receivables		$	162,518		$	165,057
Unbilled revenue			51,798			52,033

Total			214,316			217,090
Less allowance for doubtful accounts			(4,102	)		(3,182	)

	Net trade receivables	$	210,214		$	213,908

		December 27, 2008		December 29, 2007

Raw materials and supplies		$	14,202	$	13,139
Work in process			12,091		9,794
Finished products			70,589		65,090

	Inventories	$	96,882	$	88,023

		December 27, 2008		December 29, 2007

Prepaid assets		$	25,354	$	26,087
Deferred tax asset			31,748		25,506
Marketable securities			—		14,958
Prepaid income tax			7,391		7,214
Restricted cash			2,725		3,493
Other			—		2,219

	Other current assets	$	67,218	$	79,477