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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One) 
ýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 201127, 2014
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                                    TO                                   
Commission File No. 001-15943
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
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)

(Registrant's telephone number, including area code): (781) 222-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class 
Name of each exchange
on which registered
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
 
Accelerated filer o
 
Non-accelerated filer o
(Do not check if smaller
reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý
On June 25, 201128, 2014, the aggregate market value of the Registrant's voting common stock held by non-affiliates of the Registrant was approximately $1,994,509,7352,472,525,191. As of February 17, 2012January 30, 2015, there were 48,886,85847,326,257 shares of the Registrant's common stock outstanding, $0.01 par value per share.







DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Definitivedefinitive Proxy Statement for its 20122015 Annual Meeting of Shareholders scheduled to be held on May 8, 2012,5, 2015, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2011,27, 2014, are incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of the portions of the 20122013 Proxy Statement expressly incorporated into this Annual Report on Form 10-K by reference, such document shall not be deemed filed as part of this Form 10-K.


Table of Contents

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

Item Page Page
PART I PART I 
1
1A
1B
2
3
4Not ApplicableMine Safety Disclosures
 Supplementary Item. Executive Officers of the Registrant (pursuant to Instruction 3 to Item 401(b) of Regulation S-K)
PART II PART II 
5
6
7
7A
8
9
9A
9B
PART III PART III 
10
11
12
13
14
PART IV PART IV 
15
 
SignaturesSignatures
Exhibit IndexExhibit Index


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PART I

Item 1.    Business

General
This Annual Report on Form 10-K contains forward-looking statements regarding future events and the future results of Charles River Laboratories International, Inc. that are based on our current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expect,” “anticipate,” “target,” “goal,” “project,” “intend,” “plan,” “believe,” “seek,” “estimate,” “will,” “likely,” “may,” “designed,” “would,” “future,” “can,” “could” and other similar expressions that are predictions of or indicate future events and trends or which do not relate to historical matters are intended to identify such forward-looking statements. These statements are based on our current expectations and beliefs and involve a number of risks, uncertainties, and assumptions that are difficult to predict. For example, we may use forward-looking statements when addressing topics such as: the pursuit of our initiatives to optimize returns for stockholders, including efforts to improve our operating margins, improve free cash flow, invest in growth businesses and return value to shareholders; goodwill and asset impairments still under review; future demand for drug discovery and development products and services, and in particular non-regulated discovery, including the outsourcing of these services and spending trends by our clients;services; our expectations regarding stock repurchases, including the number of shares to be repurchased, expected timing and duration, the amount of capital that may be expended and the treatment of repurchased shares; present spending trends and other cost reduction activities by our clients; future actions by our management; the outcome of contingencies; changes in our business strategy; changes in ourstrategy, business practices and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; changes in the composition or level of our revenues;strategic relationships with venture capital limited partnerships and leading pharmaceutical companies and opportunities for future similar arrangements; our cost structure; the impact of acquisitions (including Argenta and dispositions;BioFocus, VivoPath and ChanTest); our expectations with respect to salesrevenue growth and operating synergies (including the impact of specific actions intended to cause related improvements); the impact of specific actions intended to improve overall operating efficiencies and profitability (and our ability to accommodate future demand with our infrastructure); including gains and losses attributable to businesses we plan to close, consolidate or divest; changes in our expectations regarding future stock option, restricted stock, performance share units and other equity grants to employees and directors; expectations with respect to foreign currency exchange; assessing (or changing our assessment of) our tax positions for financial statement purposes; and our cash flow and liquidity. In addition, these statements include the impact of economic and market conditions on our clients; the effects of our cost-saving actions and the steps to optimize returns to shareholders on an effective and timely basis and theour ability of Charles River to withstand the current market conditions. You should not rely on forward-looking statements because they are predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document or in the case of statements incorporated by reference, on the date of the document incorporated by reference. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-K under the sectionsections entitled “Our Strategy,” the section entitled “Risks Related to Our Business and Industry,” the section entitled “Management's"Management's Discussion and Analysis of Financial Condition and Results of Operations” and in our press releases and other financial filings with the Securities and Exchange Commission. We have no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or risks. New information, future events or risks may cause the forward-looking events we discuss in this report not to occur.
Corporate History
We began operating in 1947 and since then, we have undergone several changes to our business structure. Charles River Laboratories International, Inc. was incorporated in 1994 and in 2000 we completed our initial public offering. Our stock is traded on the New York Stock Exchange under the symbol “CRL” and is included in the Standard & Poor's MidCap 400 and Composite 1500 indices, the Dow Jones US Biotechnology Index, the NYSE Arca Biotechnology Index, the NYSE Composite and Healthcare Sector indices, and many of the Russell indices, among others. We are headquartered in Wilmington, Massachusetts. Our headquarters mailing address is 251 Ballardvale Street, Wilmington, MA, 01887, and the telephone number at that location is (781) 222-6000. Our Internet site is www.criver.com. Material contained on our Internet site is not incorporated by reference into this Form 10-K. Unless the context otherwise requires, references in this Form 10-K to “Charles River,” “we,” “us” or “our” refer to Charles River Laboratories International, Inc. and its subsidiaries.
This Form 10-K, as well as all other reports filed with the Securities and Exchange Commission, are available free of charge through the Investor Relations section of our Internet site as soon as practicable after we electronically file such material with, or furnish it to, the SEC. You may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. In addition, you may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports,

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proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Overview
We are a leading global providerfull service, early-stage contract research organization. We have built upon our core competency of solutions that accelerate the early-stage druglaboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and development process. The focussafety assessment services, both Good Laboratory Practice (GLP) and non-GLP, that are able to support our clients from target identification through preclinical development. We also provide a suite of our business is in vivo biology; our portfolio includes research modelsproducts and services required to enable support our clients’ manufacturing activities.in vivoUtilizing our broad portfolio of products and services enables our clients to create a more flexible drug discoverydevelopment model, which reduces their costs, enhances their productivity and development.effectiveness and increases speed to market.
Discovery represents the earliest stages of research in the life sciences, directed at the identification, screening and selection of a lead compoundmolecule for future drug development. Discovery activities typically extend anywhere from 4-6 years in conventional pharmaceutical research and development timelines.
Development activities, which follow, and which can take up to 7-10 years, are directed at demonstrating the safety, tolerability and clinical efficacy of the selected drug candidates. During the preclinical stage of the development process, a drug candidate is tested in vitro (typically on a cellular or sub-cellular level in a test tube or multi-well petri plate) and in vivo (in research models) to support planned or on-going human trials.
The development of new drugs requires the steadily increasing investment of time and money; variousmoney. Various studies and reports estimate that it takes between 10-1610-15 years, up to $2.0 billion, and exploration of more than 10,000 drug compounds to produce a single FDA-approved drug. We are positioned to leverage our core competencyleading portfolio in early-stage drug researchin vivo biology in an efficient and cost-effective way to aid our clients in bringing their drugs to market faster. UtilizingOur clients reduce their costs, increase their speed and improve their productivity and effectiveness in early-stage discovery and development by using our broad portfolio of products and services enables our clients to reduce costs, increase speed and enhance their productivity and effectiveness in early-stage drug discovery and development.services.
WeFor nearly 70 years, we have been in the business of providing the research models required in research and development of new drugs, devices and therapies for 65 years.therapies. Over this time, we have built upon our core competency of in vivo biology to develop a diverse and growingexpanding portfolio of products and services.services, which now encompasses the broader early-stage drug research process. Our client base includes global pharmaceutical companies, biotechnology companies, government agencies and leading hospitals and academic institutions around the world. We currently operate approximately 6460 facilities in 1517 countries worldwide.worldwide, which numbers exclude our Insourcing Solutions (IS) sites. Our products and services, supported by our global infrastructure and deep scientific expertise, enable our clients to meet many of the challenges of early-stage life sciences research. In 2011,2014, our net salestotal revenue from continuing operations were $1.1was $1.3 billion and our operating income from continuing operations was $174.3$177.7 million.
We have twothree reporting segments: Research Models and Services (RMS), Discovery and Preclinical Services (PCS)Safety Assessment (DSA), and Manufacturing Support (Manufacturing).
Through our RMS segment, we have been supplying research models to the drug development industry since 1947. With over 150 different strains, we continue to maintain our position as the global leader in the production and sale of the most widely used rodent research model strains, principally genetically and microbiologically defined purpose-bred rats and mice. We also provide a variety of related services that are designed to assist our clients in supporting the use of research models in drug discovery and development. With multiple facilities located on three continents (North America, Europe and Asia), we maintain production centers, including barrier rooms and/or isolator facilities, strategically located near our clients.facilities. In 2011,2014, RMS accounted for 61.7%39.1% of our total net salesrevenue from continuing operations and approximately 51%3,100 of our employees, including approximately 10070 science professionals with advanced scientific degrees.
Services provided by our PCSOur DSA business segment enablesprovides services that enable our clients to outsource their drug discovery research, their critical, regulatory-required safety assessment testing and related drug discovery and development activities to us. The demand for these services has historically been driven by preclinical development programsthe needs of large global pharmaceutical companies that exceeded their internal capacity and by the needs of biotechnology companies whichwho traditionally have been outsourced all of their discovery and also by the selective outsourcing strategy of larger global pharmaceutical companies. The basis for globaldevelopment programs. Global pharmaceutical and biotechnology companies choosingchoose to outsource their discovery and development activities is traced tobecause outsourcing reduces or eliminates the significant investmentsinvestment in personnel, facilities and other capital resources required in ordernecessary to efficiently and effectively conduct these activities. Outsourcing allows them to focus on their core competencies of innovation and early drug discovery and, particularly for pharmaceutical companies, promotion and market distribution.required scientific studies.
We are one of the two largest providers of preclinical (including bothdrug discovery and development)preclinical development services worldwide and offer target discovery to Investigational New Drug submission drug discovery with particular expertise in the design, execution and reporting of safety assessment studies, especially those dealing with large molecule (biologics) and other innovative therapies.studies. We currently provide preclinicaldiscovery and safety assessment services at multiple facilities located in the United States, Canada, Europe and Europe.Japan. Our PCSDSA segment represented 38.3%41.5% of our total net salesrevenue from

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continuing operations in 20112014 and employed 45%approximately 3,400 of our employees including approximately 295590 science professionals with advanced scientific degrees.

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TableThrough our Manufacturing segment, we help ensure the safe production and release of Contents

We provide non-regulated (or non-GLP) discovery services products manufactured by our clients. Our Endotoxin and Microbial Detection business provides non-animal, or in bothvitro, methods for lot release testing of medical devices and injectable drugs for endotoxin contamination. Our Avian Vaccine Services business provides specific pathogen free (SPF) fertile chicken eggs and chickens for the RMSmanufacture of live viruses. Our Biologics Testing Services business provides specialized testing of biologics and PCS business segments. As they have continued to reduce infrastructure and search for more efficient and cost effective models of drug discovery and development, largedevices frequently outsourced by global pharmaceutical and biotechnology companies are choosing to outsource more discovery services, which they historically considered core competencies. These services, which are generally non-regulated, are used by sponsors to screen moleculescompanies.
In 2014, Manufacturing accounted for 19.4% of our total revenue from continuing operations and make earlier “go-no go” decisions as to which molecules should be selected for continued investment.approximately 1,100 of our employees, including approximately 50 science professionals with advanced degrees.
Over the past threeIn recent years, we have focused our efforts on unifying our businesses and improving the efficiency of our global operations. These actions were intendedoperations to enhance our ability to support our key clients. Our key pharmaceutical and biotechnology clients who are increasingly seeking full service, “one-stop” global partners to whom they can outsource more of their early-stage drug researchdiscovery and development efforts. By some estimates, the outsourced in vivo discovery and drug development services markets in which we currently participate, ranging from research model production to non-regulated discovery services to regulated safety assessment, has a current size of approximately $6.0 billion and in the aggregate is expected to increase over time as outsourcing trends continue. It is estimated that the market for regulated safety assessment services is approximately 40%45% to 50% outsourced, while emerging growth areas such as in vivo discovery and certain research model services are currently believed to be less outsourced currently.outsourced.
Research Models and Services (RMS). Our RMS segment is comprised of (1) Research Models and (2) Research Model Services and (3) other related products and services.Services.
Research Models. Our Research Models business is comprisedof the production and sale of research models.
Research Models. A significant portion of this business is comprised of the commercial production and sale of research models, principally purpose-bred rats and mice for use by researchers. We provide our rodent models to numerous clients around the world, including most pharmaceutical companies, a broad range of biotechnology companies and many government agencies, and leading hospitals and academic institutions. We have 20a global footprint with production facilities strategically located in 78 countries, worldwide, which are strategically located to be in close proximity to our clients. Our research models include both standard stocks and strains and disease models such as those with compromised immune systems, which are in demand as early-stage research tools. The United States Food and Drug Administration (FDA) and foreign regulatory bodies typically require that the safety and efficacy of new drug candidates be tested on research models like ours prior to testing in humans. As a result, our research models are an essential part of the drug discovery and development process.
Our rodent species have been, and continue to be, some of the most extensively used research models in the world, largely as a result of our continuous commitment to innovation and quality associated with the products.quality. Our research models are bred and maintained in controlled environments which are designed to ensure that the models are free of specific viral and bacterial agents and other contaminants that can disrupt research operations and distort results. With our barrier room production capabilities, we are able to deliver consistently high-quality research models worldwide.

Our small research models include:
outbred, which are genetically heterogeneous;purposefully bred for heterogeneity;
inbred, which are bred to be genetically identical;
hybrid, which are the offspring of two different inbred parents;
spontaneous mutant, which contain a naturally occurring genetic mutation (such as immune deficiency);
hybrid, which are the offspring of two different inbred parents; and
other genetically modified research models, including knock-out models with one or more disabled genes and transgenic models.
We also offer
Certain of our research models are proprietary, disease-specific mouse and rat models used to find new treatments for diseases such as diabetes, obesity, cardiovascular and kidney disease. We are presently focusing our disease model program on five areas of research: oncology, central nervous system, metabolic, cardiovascular and renal diseases.
In addition to our small research models, weWe are also are a premier provider of high quality, purpose bred, specific-pathogen-free (SPF) large research models to the biomedical research community.
Research Model Services. RMS also offers a variety of services designed to support our clientsclients' use of research models in screening drug candidates. These services capitalize on the technologies and relationships developed through our research model business, and address the need among pharmaceutical and biotechnology companies to outsource the non-core aspects of their drug discovery activities. These services include those which are related to the maintenance and monitoring of research models, and managing research operations for government entities, academic organizations and commercial clients. We

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models, as well as services designed to implement efficacy screening protocols to improve the client's drug evaluation process. We currently offer four major categories ofhave three service offerings in research models services-Geneticallyservices: Genetically Engineered Models and Services, Insourcing Solutions (f/k/a Consulting and Staffing Services), Discovery Services and Research Animal Diagnostic Services.
Genetically Engineered Models and Services (GEMS). In this area of our business, we assist our clients in breedingWe breed and maintenance ofmaintain research models purchased or purposefully created by our clients for biomedical research activities. While theThe creation of a genetically engineered model (GEM) can beis a critical scientific event, but it is only the first step in the discovery process. Productive utilization of GEMs requires significant additional technical expertise in order to properly support early discovery research. We also provide breeding expertise and colony development, quarantine, health and genetic monitoring, germplasm cryopreservation, and rederivation including assisted reproduction and genetic monitoring.reproduction. Our team of project managers is supported by a technologically advanced internet based colony management system that allows for real time data exchange. We provide these services to clients around the world from pharmaceutical and biotechnology companies to hospitals and universities.
Insourcing Solutions.Solutions (IS). Building upon our core capability as the leading provider of high-quality research models, weWe manage research model care operations (including recruitment, training, staffing and management services) on behalf offor government andentities, academic organizations as well asand commercial clients. Demand for our services has been driven by the trend for researchResearch institutions to choose to retain certain elements of their research efforts in-house, but prefer to outsource staffing and management while retaining certain elements of those elements. In addition, wetheir research in-house thus driving demand for our services. We believe that our expertise in in vivo biology,early-stage drug research, and in particular research model care, scientific and technical support, facility operations, and discovery and development services, enhances the productivity and quality of our clients' research model programs.
Discovery Services. Augmenting our traditional model production and GEMS, we believe there are emerging opportunities to assist our clients in a variety of discovery, research, development and imaging areas. Expediting the development process of investigational agents by providing products and services to clients extends their internal capabilities, complements their internal expertise and helps reduce product development timelines. In addition, our in vivo biology expertise positions us to provide complementary disease model services, which include surgical procedures, pre-conditioning and aging. Our discovery and research and development capabilities include facilities in North Carolina (focusing on therapeutic efficacy studies in oncology, inflammation and metabolic disease) and Finland (focusing on therapeutic efficacy studies for the evaluation of investigational agents for the treatment of diseases of the central nervous system). In addition, we offer therapeutic efficacy expertise in inflammation, metabolic, cardiovascular and oncologic pharmacology.
Research Animal Diagnostic Services.Services (RADS). We assist our clients in monitoringmonitor and analyzinganalyze the health profiles of the research models and cell lines used in their research protocols.of our clients. We developed this capability internally by building upon the scientific foundation created by the diagnostic laboratory needs of our research model business. Depending upon a client's needs, we mayWe are able to serve as itsour clients' sole-source testing laboratory, or as an alternative source supporting itsour clients’ internal laboratory capabilities. We believe that the continued use, characterization and utilization of specific disease models and GEMs allows us to be well positioned to bewe are the reference laboratory of choice for health testing of laboratory research models and an industry leader in the field of animal diagnostics.
Other Related Research Model Products and Services. We also offer two other categories of productsnon-GLP biomarker assay platforms and services within RMS:to support early-stage discovery studies. Across these platforms, we can provide both standard as well as customized biomarker testing, including serum and urine chemistries.
Discovery and Safety Assessment (DSA)
We currently offer discovery and safety assessment services, both regulated and non-regulated, in which we include both in vivo and in vitro productsstudies, supporting laboratory services, and avian vaccine services.strategic preclinical consulting and program management to support product development.
Discovery Services.  We offer a full spectrum of discovery services from identification of a druggable target within a cell through delivery of clinical drug candidates. In 2014, we integrated our Early Discovery and In Vivo Discovery businesses into a single business line - Discovery Services - as part of our continued efforts to streamline and enhance the support we can provide for clients’ integrated drug discovery programs. One seamless discovery organization allows us to better engage with clients at the earliest stages of drug discovery and support complex scientific needs. We support a variety of therapeutic areas including oncology, CNS, bone and musculoskeletal, inflammation, metabolic diseases, respiratory, cardiovascular, gastrointestinal, genito-urinary and ophthalmology. As we look forward, we believe there are emerging opportunities to assist our clients in a variety of drug discovery applications and platforms from target discovery to candidate selection.
Early Discovery. We are a global leader in integrated drug discovery services, with a predominant focus on in vitro capabilities. We provide a full suite of drug discovery services from target discovery through the delivery of clinical candidates to a broad range of pharmaceutical and biotechnology companies and non-profit organizations. This allows us to support our clients at the earliest stages of their research, and to stay with them through the entire early-stage process. Primarily through our acquisition of Argenta and BioFocus in April 2014, our Early Discovery service capabilities include: target discovery and validation, hit identification, medicinal chemistry and ADME. Furthermore, our October 2014 acquisition of ChanTest, a leading provider of ion channel testing services, has further enhanced our ability to support our clients’ drug discovery efforts.
In Vitro.Vivo Discovery Services. In Vivo OurDiscovery Services represents the earliest in vivo stages of research in the life sciences, directed at the identification, screening and selection of a lead compound for future drug development. In Vitrovivo activities typically extend anywhere from 4-6 years in conventional pharmaceutical research and development timelines. We offer research and development expertise, capabilities, and services globally to accelerate our clients' drug discovery pipelines from lead generation to candidate selection and on occasion, completing in vivo studies in support of clinical efforts or post-marketing work.  We complement clients' capabilities and expertise to improve their decision-making, increase their flexibility, and reduce their internal costs and product development timelines. In addition, we provide in vitro and in vivo assays in support of lead optimization to candidate selection activities.  Examples of this include early pharmacokinetic and pharmacodynamic studies and in vitro and in vivo assays to assess mechanism, bioavailability, metabolism, efficacy, and safety pharmacology. 

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Safety Assessment. We offer a full range of discovery and safety assessment studies required for regulatory submission on a global basis.
Bioanalysis, Pharmacokinetics, and Drug Metabolism. In support of preclinical drug safety testing, our clients are required to demonstrate appropriate exposure, stability in the collected sample, kinetics of their drug or compound in circulation, the presence of metabolites, and, with biologics, the presence or absence of anti-drug antibodies. We have scientific depth in the sophisticated bioanalytical techniques required to satisfy these requirements for a number of drug classes. After performing sample analysis in support of preclinical studies, we have the opportunity to capture the benefits of bridging the preclinical bioanalysis with subsequent clinical development. Once the analysis is complete, our scientists evaluate the data to provide information on the pharmacokinetics and/or toxicokinetics of the drug, and complete an evaluation of the distribution of the drug or metabolites. Pharmacokinetics refers to understanding what the body does to a drug or compound once administered, including the process by which the drug is absorbed, distributed in the body, metabolized, and excreted (ADME); toxicokinetics refers to the same understanding as applied at higher doses that may result in adverse effects. These studies are required for the full preclinical assessment of the disposition of the drug and the results are used in the final preclinical safety evaluation of the compound.
Toxicology. Toxicology is one of our nonclinical competencies and a competitive strength. We have expertise in the design and execution of development programs in support of both chemically-derived (small molecule) and biotechnology-derived (large molecule) pharmaceuticals. Once a lead molecule is selected, toxicology studies are required to support clinical trials in humans and new drug registrations. These toxicology studies focus on assessing the safety of the molecule to determine if administration of the molecules to humans might cause any unintended harmful effects. These studies are typically performed in research models to identify any potential adverse effects that a compound has on an organism over a variety of doses and over various time periods. Our toxicology services feature:
all the standard studies in support of general toxicology(acute, sub-acute and chronic studies), genetic toxicology, safety pharmacology and carcinogenicity bioassays that are required for regulatory submissions supporting “first-in-human” to “first-to-the-market” strategies;
expertise in standard and specialty routes of administration (e.g., infusion, intravitreal, intrathecal, and inhalation) that are important not only for the testing of potential pharmaceuticals and biopharmaceuticals, but also for the safety testing of medical devices, industrial chemicals, food additives, agrochemicals, biocides, nutraceuticals, animal health products and other materials;
expertise in the conduct and assessment of reproductive and developmental toxicology studies (in support of larger scale and later-stage human clinical trials);
services in important specialty areas such as ocular, bone, juvenile/neonatal, immune-toxicology, photobiology and dermal testing;
expertise in all major therapeutic areas;
study design and strategic advice to our clients based on our wealth of experience and scientific expertise in support of drug development; and
a strong history of assisting our clients in achieving their regulatory and/or internal milestones for the safety testing of numerous therapy types including stem cells, vaccines, proteins, antibodies, drug conjugates, oligonucleotide biotherapeutics, small molecules and medical devices.

Our discovery and safety assessment facilities comply with Good Laboratory Practices (GLPs) to the extent required by the FDA as well as other international regulatory bodies. Furthermore, our early-stage discovery work, which is not subject to GLP standards, is typically carried out under a quality management system such as ISO 9100. Our facilities are regularly inspected by U.S. and other regulatory compliance monitoring authorities, our clients' quality assurance departments and our own internal quality assessment program.

Pathology Services. The ability to identify and characterize clinical and anatomic pathologic changes is critical in determining the safety and efficacy of potential new therapeutics. Key “go/no-go” decisions regarding continued product development are typically dependent on the identification, characterization and evaluation of fluid, tissue and cellular changes that our experts identify and interpret for our clients. We employ a large number of highly trained veterinary anatomic and clinical pathologists and other scientists who use state-of-the-art techniques to identify potential test article-related changes within tissues, fluids and cells. In addition to all standard anatomic and clinical pathology techniques, we provide specialized evaluations such as cytology, platelet function, assay development, immunohistochemistry in situ hybridization and electron microscopy services.
Manufacturing Support (Manufacturing)
Endotoxin and Microbial Detection(EMD). Our EMD business provides non-animal, or in vitro, methods for lot release testing of medical devices and injectable drugs for endotoxin contamination. Our Accugenix subsidiary provides state-of-the-art

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microbial identification and genetic sequencing services for manufacturing in the biopharmaceutical, medical device, nutraceutical and consumer care industries.
Endotoxin testing uses a processed extract from the blood of the horseshoe crab, known as limulus amebocyte lysate (LAL). The LAL test is the first and most successful FDA-validated in vitroalternative to an animal model test to date. The extraction of blood does not harm the crabs, which are subsequently returned to their natural ocean environment. Our EMDIn Vitrobusiness produces and distributes endotoxin testing kits, reagents, software, accessories, instruments and associated services to pharmaceutical and biotechnology companies worldwide. We are a market leader in endotoxin testing products and services, which are used for FDA-required quality control testing of injectable drugs and medical devices, their components and the processes by which they are manufactured.
OurThe growth in the our EMDIn Vitrobusiness is driven by our FDA approved line of next generationnext-generation endotoxin testing products, which are based on the Endosafe Portable Testing System (Endosafe®-PTS™) technology that allows rapid endotoxin testing in the central laboratory or manufacturing environment. In recent years, we have expanded the PTS product portfolio to include a multiple sample testing system known as the Endosafe-MCSEndosafe®-MCS™ (multi cartridge system) in response to satisfy the demand of our clients who require higher testing volume clients.sample throughput. We anticipate continued adoption ofour clients' demand for rapid methods of testing will increase as our clientsthey respond to the FDA's Process Analytical Technology (PAT) Initiative.Initiative as well as move to faster, simpler testing methods for their technicians. In addition,2013, we are planning to introduce alaunched the first fully automated MCSrobotic system developed specifically for high-volume endotoxin testing, Endosafe®-Nexus™ and in 2012, which will assist in penetrating our client's high-volume central testing laboratories.2014 we introduced a rapid bacterial contamination (bioburden) product. We also expect to see expanded use of this rapid endotoxin testing technology in non-traditional areas such as renal dialysis, nuclear and compounding pharmacies, and cellular therapy. We are currently exploring obtaining 510(k) medical device approval of this technology for clinical diagnostic

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applications.
Avian Vaccine Services. We are the global leaderfor the supply of specific-pathogen-free, or SPF, fertile chicken eggs and chickens. SPF chicken embryos are used by animal health companies as self-contained “bioreactors” for the manufacture of live viruses. These viruses are used as a raw material primarily in poultry, as well as human, vaccine applications. The production of SPF eggs is performed under biosecure conditions, similar in many ways to our research model production. We have a worldwide presence, with several SPF egg production facilities in the United States, contracted production capabilities in Hungary, and franchise operations in China and India. We also operate a specialized avian laboratory in the United States, which provides in-house quality control testing of the SPF flocks, offers testing services to vaccine companies and commercial poultry operations, and manufactures poultry diagnostics and bulk antigens for poultry vaccines.
Preclinical Services (PCS).
We currently offerOur Accugenix subsidiary is the following preclinical services,premier global provider of cGMP- compliant contract microbial identification and genetic sequencing testing. Accugenix is an acknowledged industry leader in which we include both in vivospecies-level identification and strain typing of bacteria and fungi that are recovered from manufacturing facilities. Utilizing state-of-the-art and proprietary in vitro studies, supportive laboratorytechnologies, coupled with scientific expertise and analysis, Accugenix excels in providing accurate, timely and cost-effective microbial identification services required to meet internal quality standards and strategic preclinical consulting and program management to support product development:government regulations.
Discovery Support. At the earliest stages of lead compound identification, our scientists are engaged in evaluating the pharmacology of drug candidates in several important therapeutic areas, including:
bone disease (using our state-of-the-art imaging and pathology capabilities);
ophthalmology (using our models of neovascularization);
general cardiovascular and device testing (using our surgical models); and
oncology.
We also offer lead optimization strategies including early pharmacokinetic, metabolism, and toxicology support to help in early integrative drug selection criteria. The Discovery Support services that we offer through our PCS business are complementary to the Discovery Services that we offer through our RMS business.
Safety Assessment. We offer a full range of preclinical studies required for regulatory submission on a global basis.
Bioanalysis, Pharmacokinetics, and Drug Metabolism. In support of preclinical drug safety testing, our clients are required to demonstrate ample drug exposure, stability in the collected sample, kinetics of their drug or compound in circulation, the presence of metabolites, and with recombinant proteins and peptides, the presence or absence of anti-drug antibodies. We have scientific depth in the sophisticated bioanalytical techniques required to satisfy these requirements for a number of drug classes. After performing sample analysis for preclinical study support, we have the opportunity to capture the benefits of bridging the preclinical bioanalysis with subsequent clinical development. Once the analysis is complete, our scientists evaluate the data to provide information on the pharmacokinetics and/or toxicokinetics of the drug, as well as complete evaluation of the distribution of the drug or metabolites. Pharmacokinetics refers to understanding what the body does to a drug or compound once administered, including the process by which the drug is absorbed, distributed in the body, metabolized, and excreted (ADME); toxicokinetics refers to the same understanding as applied to higher doses that may result in adverse effects. Our clients require these studies for the full preclinical assessment of the disposition of the drug, the results of which are used in the final preclinical safety evaluation of the compound.
Toxicology. Toxicology is one of our core preclinical competencies and a competitive strength. Once a lead molecule is selected, appropriate toxicology studies are conducted in support of clinical trials in humans. These toxicology studies are typically performed in laboratory models to elucidate the potential adverse effects that a compound has on an organism over a variety of doses and over various time periods, and focus on safety and assessment of harmful effects. Our toxicology services feature:
all the standard protocols for general toxicity testing (genotoxicity, safety pharmacology, acute, sub-acute, chronic toxicity and carcinogenicity bioassays) required for regulatory submissions supporting “first-in-human” to “first-to-the-market” strategies;
expertise in specialty routes of administration and modes of administration (e.g., infusion, intravitreal, intrathecal, and inhalation), which are important not only for the testing of potential pharmaceuticals, but also for the safety testing of medical devices, industrial chemicals, food additives, agrochemicals, biocides, nutraceuticals, animal

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health products and other materials;
expertise in the conduct and assessment of reproductive and developmental toxicology studies (in support of larger scale and later-stage human clinical trials);
services in important specialty areas such as ocular, bone, juvenile/neonatal, immuno-toxicity, photobiology and dermal testing;
work in all major therapeutic areas;
study design and strategic advice to our clients based on our wealth of experience and scientific expertise in support of drug development; and
a strong history of assisting our clients in achieving their regulatory or internal milestones for safety testing, including studies addressing stem cell therapies, DNA vaccines, protein biotherapeutics, small molecules and medical devices.
Our preclinical facilities operate in compliance with Good Laboratory Practices (GLPs) to the extent required by the FDA as well as other international regulatory bodies. Our facilities are regularly inspected by U.S. and other regulatory compliance monitoring authorities, our clients' Quality Assurance departments and our own internal quality assessment program.
Pathology Services. In the drug development process, the ability to identify and characterize clinical and anatomic pathologic changes is critical in determining the safety of potential new therapeutics. We employ a large number of highly trained veterinary pathologists and other scientists who use state-of-the-art techniques to identify potential test article-related changes within tissues, fluids and cells, as well as at the molecular level. Pathology support is critical not only for regulatory safety assessment studies, but also for specialized investigative studies, discovery support, and stand-alone immunohistochemistry evaluations for monoclonal antibodies. Key “go/no-go” decisions regarding continued product development are typically dependent on the identification, characterization and evaluation of gross and microscopic pathology findings we perform for our clients.
Biopharmaceutical Services.Biologics Testing Solutions. We provideperform specialized testing of biologics and devices frequently outsourced by global pharmaceutical and biotechnology companies. Our laboratories in the United States, Germany, Scotland and Ireland provide timely and compliant molecular biology, virology, bioanalytical,bioanalysis, immunochemistry, microbiology and related services. We confirm that biological processes and the drug candidates produced are consistent, correctly defined, stable and essentially contaminant free. This testing is required by the FDA and other globalinternational regulatory authorities for our clients to obtain new drug approvals, to maintain government licensed manufacturing facilities and to release approved therapeutic products for patient treatment.
Our manufacturing services group grows and stores well-characterized early-stage client cell lines for later development or manufacture of therapeutic proteins and vaccines for clinical trials. We further design and provide viral clearance projects for Phase I, II and III studies in our German and US facilities.
Avian Vaccine Services. We are the global leaderfor the supply of SPF fertile chicken eggs and chickens. SPF chicken embryos are used by animal health companies as self-contained “bioreactors” for the manufacture of live viruses. These viruses are used as a raw material primarily in poultry as well as human and veterinary vaccine applications. The production of SPF eggs is performed under biosecure conditions, similar in many ways to our research model production. We have a worldwide presence, with several SPF egg production facilities in the United States, contracted production capabilities in Hungary, and franchise operations in India. We also collaborate with clients on process development, validation,operate a specialized avian laboratory in the United States, which provides in-house quality control testing of the SPF flocks, offers testing services to vaccine companies and manufacturing scale-up.commercial poultry operations, and manufactures poultry diagnostics and bulk antigens for poultry vaccines.
Our Strategy
Our objective is to be the preferred strategic global partner for our clients. We aim to providedrive our growth by providing our clients superior, flexible and tailored solutions to help them accelerate and enhance the efficiency of their drug research and development efforts, and thereby drive our growth.efforts. Our strategy is to deliver a comprehensive and integrated portfolio of drug discovery and early-stage development products, services, and services which supportssolutions to support our clients' goal to maintain the flexible infrastructure that they need in orderrequire to bring new and improved therapies to market faster and more cost effectively. In addition, we believe we can improve and augment drug discovery and development effectiveness by coordinating the dialog between large pharmaceutical, biotechnology, academic and non-governmental organizations and venture capitalists. As these groups increasingly rely and

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interact with one another in this field, we assist them in working together by developing deeper strategic relationships with each of these constituencies.
We believe we have certain competitive advantages in executing this strategy, as a result of our continuing focus on the following:
Integrated Early-Stage Portfolio. We are the only large, global contract research organization (CRO) with a portfolio of products, services, and servicessolutions that focuses almost exclusively on thedrug discovery and early-stage drug development platform (fromdevelopment. We provide research models and associated services, todiscovery research studies and services, and comprehensive safety assessment and toxicology studies in both regulated and non-regulated discovery services, to regulated safety assessment).environments. As such, we are able to collaborate with clients at the earliest stages, whenfrom target discovery through candidate selection. When critical decisions are made regarding which moleculestherapies will remain inprogress from discovery to development, andwe continue to work alongside them as the drug candidates move downstream through the nonclinical development process. In particular, ourdownstream. Our recognized expertise in in vivo biologyearly-stage drug research and pharmacology provides us with a competitive advantage in understandingadvantage. We understand our client's molecules,clients' therapies, and the challenges facedthey face during the discovery and development process, including non-GLPmechanism of action, efficacy, anddrug metabolism, safety assessment and toxicological testing critical for making “go/no-go” decisions.

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Deep Scientific Expertise. We are able to provide extensivea breadth and depth of scientific expertise which may be too costly for our clients to build and/or maintain in-house. OurWe provide essential capabilities allow us to addressthat our clients' demandsclients demand but are not perceived as strategic differentiators for “non-core” but strategically important in vivo biology activitiestheir businesses. These include biomarkers, biologics, pharmacology, immunology, pathology and other specialty services, such as certain specialty toxicology offeringsareas that have high infrastructure costs or are prohibitivecost-prohibitive for clients to maintain in-house. We have also increasingly alignedcontinue to increase our services portfolio alongin key therapeutic linesand pharmacology areas to simulate many ofalign with our clients' internal drug discovery and development organizations, particularly in therapeutic areas subject to major research funding orof focus. These areas of focus such asand expertise include oncology, metabolism and obesity, autoimmune/inflammation,immunology, respiratory, bone and musculoskeletal, diabetes, cardiovascular, infectious disease, and central nervous system.system, synthetic and medicinal chemistry, library design, cell line development, in vitro and in vivo screening, structural biology, process chemistry, scale up and formulation development.
Commitment to Animal Welfare. We are committed to being the worldwide leader in the humane care of laboratory animals. As animal caregivers and researchers, we are responsible to our clients and the public for the health and well-being of the animals in our care. We work hand-in-hand with the scientific community to understand how living conditions, handling procedures and reduction of stress play an important role in the quality and efficiency of research.

Superior Quality and Client Support. We maintain scientific rigor and high quality standards through rigorous management of key performance indicators and an intense focus on biosecurity. These standards allow clients to access our global portfolio of products and services throughout our global network, with the confidence that they will obtain consistent results no matter where they choose to obtain their products or conduct their research.

Flexible and Customized Environment to Provide the Right Solutions. We recognize thatEach of our clients have individualis different with unique needs and specific requirements, which increasesrequirements. We understand the importance of flexibility when working with them.and we can deliver customized solutions based upon the breadth and depth of our capabilities, expertise and services. We deliver that flexibility through relationships that may take various and customized forms, and which tap into the broad array of physical and/or service resources that we provide. We can help clients better balanceimprove their workload/staffworkload and staffing requirements by drawing upon the higher utilization and streamlined efficiencies of our facilities, often allowing themfacilities. This allows our clients to reduce their internal capacity and/or staff. We can leverage the expertise embedded in our integrated early-stage portfolio to provide customized arrangementssolutions tailored to fit the specific need or therapeutic area focus offor a particular client. We are also able to provide additionalenhanced value to those clients who choose broad based, multi-year partnerships across the breadthuse us as a full-service integrated partner over a longer period of our early-stage portfolio.time.

Large, Global Partner. We believe there is a particular advantage in being a full service, high-quality provider of non-clinicalresearch models and associated services, discovery and preclinical in vivo products and in vitroservices and manufacturing support on a global scale. Many of our clients, especially large pharmaceuticalbiopharmaceutical companies, have limiteddecided to limit the number of suppliers with which they work, preferringwork. Their preference is to partner with large Tier 1 CROs with a full breadth of capabilities. Large CROs like Charles River, who can presentoffer clients with access to greater value through the benefits of economieseconomics of scale and scope as a result of broader portfolios and experience in project management. This includes extensive scientific, technical and therapeutic area expertise, real-time access to data through secure portals, a global footprint, and streamlined and simplified processes and communications including professional project and relationship management. We are focused on leveraging our competitive advantages to ensure we are recognized as athe premier preferred provider by building and buildingexpanding broader and deeper long-term strategic partnershipsrelationships with our clients.
Global biopharmaceutical companies are continuing to make the decision to outsource more significant tranches of their drug discovery and development processes. For example, over the past few years we have entered into strategic relationships with

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Thisleading global pharmaceutical companies and we have expanded existing preferred provider agreements with other leading global pharmaceutical companies. For some of these partners, we provide a broad suite of our research models and discovery and safety assessment services and for others we provide a customized and select array of discovery and safety assessment services and /or research models. Utilizing our capabilities enables our clients to create a flexible research platform to deliver innovative health solutions.
We believe it is critical to participate in that process now, because these relationships are likely to extend for lengthy periods of time, from three to five years. Furthermore, both the client and the CRO invest heavily in the initial phases of the relationship to successfully transfer work streams and establish governance processes. Given this investment, clients are less likely to change CROs at the conclusion of the initial relationship. Our goal is to prevail in the majority of these opportunities. To do this, we are positioning ourselves as the preferred partner for outsourced drug discovery and early-stage development products and services.
We developed this strategy and focus has been developed in recognition of the needs ofour clients' needs. Biopharmaceutical companies continue to face increasing pressure to innovate and to better manage their pipelines. Accordingly, our clients whohave reduced their infrastructure while simultaneously they search for improved ways to identify and develop innovative new therapies. Clients are increasingly facing pressurereducing historical fixed costs in favor of a more flexible business model, with an aim to manageaccelerate their researchdiscovery and development costs, while at the same time maintain or developactivities. As a strong pipeline of innovative new drugs, conduct research and development in multiple countries simultaneously, and identify, hire and retain a breadth of scientific and technical experts. In order to convert what has historically been largely fixed costs into variable expenses and to facilitate and speed their research,consequence, our pharmaceutical and biotechnology clients are making strategic decisionshave been looking to outsource a portfolio ofthese services to high quality, full-service providers like us. Our business prospects are driven primarily by this trend towards the virtualization and externalization of our clients through outsourcing, as well aspartnering and outsourcing. Client spending is not just influenced by the levellevels of research and development spending byat these pharmaceutical and biotechnology companies, but also by spending of all the sponsors including federal government and academic institutions. Outsourcing allows ourstate governments and non-profit organizations. By providing clients with an outsourced suite of robust services from drug discovery to post-IND, we allow them to concentrate their internal expertise and resources on early drug discovery in areas such as lead identificationthat provide true differentiation and optimization (and for more mature companies, post-approval marketing), while continuing to advance their most promising products through the development pipeline.pipelines. This creates opportunities for companies such as ours who canus to help optimize our clients' programspipelines and assistbe a true partner in accelerating their drug discovery and development process.efforts.
In recent years, the pharmaceutical and biotechnology industries have faced a collection of challenges. This involves scientific, public-perception, economic and regulatory challenges that all have negatively affected demand (and pricing) for outsourced discovery and preclinical development services. These challenges included:
patent expirations of blockbuster drugs;

“blockbuster” therapies;
intensified cost-saving and efficiency actions designed to reduce costs and improve research and development productivity;

a stronger emphasis on later-stage programs to accelerate drugs in clinical trials to market;

increased pharmaceutical merger activityinnovation and the associated integration issues;

productivity, including cost-cutting, workforce reductions, rationalization of capacity and other efficiency initiatives;
rationalization of drug pipelines to focus on a smaller number of programs and high-potential therapeutic areas;

changes to government healthcare policies and funding;
a stronger emphasis on delivering later-stage programs to accelerate drugs in clinical trials to market;
increased pharmaceutical merger activity and the associated integration issues;
fluctuations in the biotech funding environment; and

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anthe uncertain and volatile global economy.

TheAs a result, hasthere have been a fundamental changechanges in our clients' research and development models,needs, particularly with regard to the large pharmaceutical industry. First, these clients are increasingly emphasizing shorter term, non-regulated efficacy studies designedthat have greater translation to eliminate non-viable moleculesthe clinic so that they can make appropriate decisions regarding the progression of potential therapeutic entities earlier in the development process. This has reduced the number of molecules moving into preclinical and clinical development and results in a more limited number offewer molecules undergoing regulated safety assessment, andassessment. The result is a greater focus on discovery services, including non-regulated testing such asin vivo pharmacology studies consisting of efficacy and non-GLP DMPK (drug metabolism and pharmacokinetics) and in vivo pharmacology.studies. Second, these clients are choosing to outsource moreadditional discovery and safety assessment services in order to increase the efficiency and effectiveness of their drug researchselection processes.

We believe that these changesthis changing environment will provide enhanced outsourcing opportunities for us going forward. In fact, wein the future. We remain optimistic that our clients are increasingly receptive to partnering with CROs as a means of meeting their receptiveness towards increased discovery services outsourcing and safety assessment needs. With the stabilization of other factors addressed above, includingas well as the successful launch of new therapies currently in late-stage development and the subsequent need to replenishadvance early-stage pipelines, will eventually drivewe believe outsourcing by the pharmaceutical industry will continue to re-focus on their early-stage development efforts. Also, webe a positive driver.
We also believe that as larger pharmaceuticalbiopharmaceutical companies become leanerwill increasingly focus on efficiencies and more efficient, generally focusing on theirexecution. They will continue to reassess what are core competencies of fundamentaldifferentiators from research and development and commercialization,to commercialization. We expect they will also continue to be conservative in their staffingre-building infrastructure and further reduce their in-house expertise. This should lead to a reinvigoration ofmore opportunities for strategic outsourcing as theyclients choose to utilize external resources rather than invest in internal infrastructure. In the aggregate, we believe that the evolving large pharmaceuticalbiopharmaceutical research and development business model will make our essential products

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and services even more relevant to our clients, and allowsallow them to leverage our integrated offerings and expertise to drive their R&Dresearch and development efficiency and cost effectiveness.
To address the challenging market conditions whichthat have persisted, over the last few years we have taken significant steps to better support our clients, identify new strategies to enhance client satisfaction, improve operatingoperational efficiency and productivity, drive cost savings and generally strengthen our business model. In 2009, we realignedmodel:
We integrated our businesses by unifying them globally and streamlined our worldwide facility infrastructure. We did this to strengthen the linkage between the businesses, which enables us to offer clients more seamless access to our broad portfolio and scientific expertise.
We aligned our sales force in order to enhance our ability to support our clients and to focus on three particular client segments: global biopharmaceutical companies;companies, mid-tier biopharmaceutical companies;companies, and academic/government institutions. Also in 2009, we realigned
We aligned our PCSDSA business along functional lines in order to continue the process of standardizing and harmonizing our procedures, whichprocedures. This has enabled clients to place work with us at multiple locations with the knowledge that procedures are consistently performed and data delivered in standard formats. In 2010, we began the implementation
We announced a number of an ERP systemorganizational changes in order2013 designed to continue to improve availabilityour operating efficiency across our global portfolio and to enhance our ability to meet the needs of our clients, which resulted in operational enhancements and accessefficiencies for 2014 and beyond.
We created a project management office (PMO) to data. In October 2011, we took the next step to further integrate our businesses by unifying RMShelp identify and PCS globally. We took this action to strengthen the linkage between the businesses, which enables us to offer clients more seamless accessmanage initiatives that contribute to our broad portfolioorganization’s productivity, efficiency and scientific expertise.risk management. This group participates globally across all businesses to support maximizing revenues, minimizing costs and reducing risks. PMO projects are prioritized through regular updates to both our Executive Committee and Board of Directors.
We also began to take decisive actionsare consolidating our procurement function through increased centralization and regionalization, reductions in 2009 to reduce coststhe number of suppliers and improve operating efficiency through a combinationincreased use of Lean Six Sigma initiatives and cost-savings actions. These actions were intended to right-size our infrastructure and to identify opportunities to operate more efficiently. In 2011, in addition to our Six Sigma initiative, we undertook a project to identify and implement additional operating efficiencies. These actions were designed to streamline our operating infrastructure, reduce process cycle times, and eliminate non-value added steps so that we could support our clients more efficiently and at a lower cost.automated procurement processes.
In December 2010, we announced
We maintain an intensifiedintense focus on four key initiatives designed to allow us to drive profitable growth and maximize value for shareholders, and thus better positionpositioned ourselves to operate successfully in the current and future business environment. We made significant progress in 2011 on these key initiatives:

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Initiative2011 Progress
Improve our consolidated operating marginImproved 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 businessesCapital 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.

In light of our actions and intensified focus,As a result, we believe that we are well positioned to exploit both existing and new outsourcing opportunities. As strategicclients, particularly larger pharmaceutical companies, increase their outsourcing, by our clients increases, and in particular by larger biopharmaceutical clients, we believe that our expertise in areas previously addressed by our clients' in-house capabilitiesbroad portfolio and global footprint allows us to provide a more flexible, efficient and cost-effective alternative for them. In short, because these products and services are the core of our business, weWe are able to build and maintain expertise and achieve economies of scale that are difficult for our clients to match within their internal infrastructures.infrastructures because these products and services are the core of our business.

We intend to continue to broaden the scope of the products and services we provide across the drug discovery and early-stage drug development continuum primarily through internal development, which will be augmented,and, as needed, through focused acquisitions and alliances. Acquisitions are an integral part of our growth strategy, but we are committed to a disciplined approach that seeks to target businesses that are a sound strategic fit and that offer the prospect of enhancing shareholder value, typically including the achievement of a hurdle rate on return on invested capital above our weighted cost of capital. ThisFor example, in 2014 we made two significant strategic acquisitions. First, in March 2014, we acquired Argenta and BioFocus, global leaders in integrated drug discovery services located in the United Kingdom and the Netherlands, with a predominant focus on in vitro capabilities. Second, in October 2014, we acquired ChanTest, a premier provider in ion channel testing.
Our acquisition strategy may includealso takes into account geographic as well as strategic expansion of existing core services. For example, in 2013, we acquired 75% ownership of Vital River, the premier commercial provider of research models and related services in China. As a result of this acquisition, we now provide more of our high-quality research models and associated services to emerging Asian markets for drug discovery and development. Our strategy also includes strengthening the depth and expanding the breadth of our core services or technical capabilities or the addition of a new product or serviceand services in a related or adjacent business. In 2011, we identifiedbusiness, such as the VivoPath and evaluatedBRASS acquisitions in 2013 and the Accugenix acquisition in 2012.
We are also partnering with a number of acquisition opportunities, but none that metventure capital firms investing in life sciences, health care and technology companies with an emphasis on early-stage emerging growth companies.  Through these partnerships and leveraging our criteria closed duringcore competencies, we are able to promote contract research services for discovery and safety assessment to these companies.  This offers us the year.opportunity to establish ourselves as a provider of choice for a unique client group which has emerged as biopharmaceutical companies rationalize and prioritize their development pipelines.
Customers
We maintain a three-pronged sales organization with a focus on:
global biopharmaceutical companies;

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small and mid-sized pharmaceutical companies and biotechnology companies; and
academic and government clients.institutions.

Our clients continue to consist primarily of all of the major pharmaceutical companies, many biotechnology companies, contract research organizations, (CROs), agricultural and chemical companies, life science companies, veterinary medicine companies, contract manufacturing organizations, (CMOs), medical device companies, diagnostic and other commercial entities, as well as leading hospitals, academic institutions, and government agencies. We have stable, long-term relationships with many of our clients. During 2011,2014, no single commercial client accounted for more than 5% of our total net sales.revenue.

We continue to pursue a goal of expanding our relationships with our large biopharmaceutical clients, and with many of our larger mid-tier clients. These relationships take different forms, from preferred provider arrangements to strategic partnerships. These structured relationships incentivize clients to purchase more products and services across our early-stage portfolio, and in total, the strategic relationships in which we are now engaged represent more than 25% of our total revenues. This provides us with better visibility than in the past, and because of the strength of these relationships, better insight into our clients' planning processes. For information regarding net salesrevenue and long-lived assets attributable to botheach of our business segments for the last three fiscal years, please see Note 1213 included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. For information regarding net salesrevenue and long-lived assets attributable to operations in the United States, Europe, Canada, Japan and other countries for each of the last three fiscal years, please review Note 1213 included in the Notes to

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Consolidated Financial Statements included elsewhere in this Form 10-K.
Sales, Marketing and Customer Support
We have designated dedicated sales people for each of our three client segments enhancing(i.e. global biopharmaceutical, small and mid-sized pharmaceutical and biotechnology companies, and academic and government institutions). This enhances our ability to meet client needs by offering customized, tailored solutions across our entire portfolio. In addition, our mid-market pharmaceutical and biotechnology clients will benefit by additional support from a combination of account managers with broad portfolio knowledge and specialists with specific scientific expertise. This allows us to provide comprehensive coverage of all of the market segments among our diverse client population. We also apply the use of dedicated sales specialists for certain technical product lines, such as in our Manufacturing Support business.
We sell our products and services principally through our direct sales force and account management teams the majority of whomwho work in North America, with the balance in Europe and the Asia-Pacific countries. In addition to interactions with our direct sales force, our primary promotional activities include organizing scientific symposia, publishing scientific papers and newsletters, webinars and making presentations at, and participating atin, scientific conferences and trade shows in North America, Europe and Asia. We supplement these scientifically based marketing activities with internet-based marketing, advertising and direct mail. In certain locales,areas, our direct sales force is supplemented by international distributors and agents for our products and services, particularly with respect to our In Vitro and Biopharmaceutical Services businesses.agents.
Our internal marketing/product management teams support the field sales staff and account management teams while developing and implementing programs to create close working relationships with clients in the biomedical research industry. We maintain customer service, technical assistance and consulting service departments (in addition to project managers for our service businesses), which address both our clients' routine and more specialized needs and generally serve as a scientific resource for them. We frequently assist our clients in solving problems related to animal husbandry, health and genetics, biosecurity, preclinical study design, regulatory consulting, protocol development and other areas in which our expertise is widely recognized as a valuable resource by our clients.
Our marketing efforts are focused on stimulating demand for further outsourcing across our entire portfolio. We believe that our ability to provide solutions that address all aspects of early-stage drug researchin vivo biology are increasingly attractive to our clients, and we continue to design and market our commercial activities to deliver flexible, customized programs designed by segment to meet our clients' global and site-specific needs.
Competition
Our goal is to be a leader in each of the markets in which we participate. We compete in the marketplace on the basis of our therapeutic and scientific expertise in in vivo biology,early-stage drug research, quality, reputation, flexibility, responsiveness, pricing, innovation and global capabilities. We are able to offer a unique portfolio of early-stage products and services to support drug discovery and development.
The competitive landscape for our twothree business segments varies.

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For RMS, our main competitors include three smaller companies in North America (each of whom has a global scope), and several smaller competitors in Europe and in Japan. Of our main U.S. competitors, two are privately held businesses and the third is a government funded, not-for-profit institution. We believe that none of our mainthese competitors compares to us in RMS has our comparable global reach, financial strength, breadth of product and services offerings, technical expertise or pharmaceutical and biotechnology industry relationships.
For PCS,DSA, we believe we are one of the two largest providers of preclinical services (inclusive of discovery and safety assessment services) in the world, based on net service revenue.Our commercial competitors for preclinical servicesdiscovery and safety assessment consist of both publicly held and privately owned companies, and it is estimated that the top ten participants (including Charles River)us) account for a significant portion of the global outsourced preclinicaldiscovery and safety assessment market, with the rest of the market remaining highly fragmented. Our PCSDSA segment also competes with in-house departments of pharmaceutical and biotechnology companies, universities and teaching hospitals.
For Manufacturing, each of our underlying businesses has several competitors. Biologics has three main competitors all of which are public companies - one in the U.S., one in China and one in the EU. Avian has two main competitors both of which are privately held (one in the U.S. and one in the EU). EMD has five main competitors of which four are public companies in the EU and one is privately held in the U.S.

We believe that the barriers to entry in a majority of our business units are generally high and present a significant impediment for new market participants, particularly in those areas which require substantial capital expenditures, trained and specialized personnel, and mandate GLP-compliant practices.
Industry Support and Animal Welfare

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One of our core values is a concern for, and commitment to, animal welfare. We have been in the forefront of animal welfare improvements in our industry, and continue to show our commitment with special recognition programs for employees who demonstrate an extraordinary commitment in this critical aspect of our business. We created our own Humane Care Initiative, which is directed by our Animal Welfare and Training Group. The goal of the initiative is to assure that we continue as a worldwide leader in the humane care of laboratory animals.animals and implementation of the 3Rs (Replacement, Reduction and Refinement). Laboratory animals are an important resource that further our knowledge of living systems and contribute to the discovery of life-saving drugs and procedures. We work hand-in-hand with the scientific community to understand how living conditions, handling procedures and stress play an importanta role in the quality and efficiency of research. As animal caregivers and researchers, we are responsible to our clients and the public for the health and well beingwell-being of the animals in our care.
We are firmly committed to the 3Rs and help to reduce the number of animals used by emphasizing health and genetic integrity to decrease study data variability. Whenever possible, we use technological advances such as new diagnostic tests for screening pathogens in laboratory rodents, microsampling and in vitro assays. We also partner with customers to develop study designs decreasing the number of animals needed and suggesting pilot studies where appropriate.
We support a wide variety of organizations and individuals working to further animal welfare as well as the interests of the biomedical research community. We fund scholarships to laboratory animal training programs, provide financial support to non-profit institutions that educate the public about the benefits of animal research and provide awards and prizes to outstanding leaders in the laboratory animal medicine field.field and the supporters of 3Rs.
Employees
As of December 31, 2011,27, 2014, we had approximately 7,1007,900 employees (including approximately 400700 science professionals with advanced scientific degrees, including Ph.D.s, D.V.M.s, and M.D.s). Our employees are not unionized in the United States, although employees are unionizedrepresented by unions or works councils at some of our European facilities consistent with local customs for our industry. Our past employee surveys have indicated thatWe believe we have excellentgood relationships with our employees.employees, based on a number of factors including employee retention and feedback.
Backlog
Our backlog for our PCS business segment from continuing operationsRMS, DSA and Manufacturing reportable segments was $202.5$115.7 million, $310.5 million and $27.5 million, respectively, at December 31, 2011,27, 2014, as compared to $219.9$138.7 million, $203.1 million and $28.1 million, respectively, at December 25, 2010. Our preclinical28, 2013. Related services are performed over varying durations, from short to extended periods of time, which may be as long as several years. We maintain an order backlog to track anticipated revenue from studies and projects that either have not started, but are anticipated to begin in the near future, or are in process and have not been completed. We only recognize a

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study or project in backlog after we have received written evidence of a client's intention to proceed. We do not recognize verbal orders as backlog. CancelledCanceled studies or projects are removed from backlog. We do not report backlog for our RMS business segment because turnaround time from order placement to fulfillment, both for products and services, is rapid.

We believe our aggregate backlog as of any date is not necessarily a meaningful indicator of our future results for a variety of reasons. First, studies vary in duration (i.e., some studies or projects that are included in 20112014 backlog may be completed in 2012,2015, while others may be completed in later years). Second, the scope of studies or projects may change, which may either increase or decrease their value. Third, studies or projects included in backlog may be subject to bonus or penalty payments. Fourth, studies or projects may be terminated or delayed at any time by the client or regulatory authorities for a number of reasons, including the failure of a drug to satisfy safety and efficacy requirements or a sponsor making a strategic decision that a study or service is no longer necessary. Delayed contracts remain in our backlog until a determination of whether to continue, modify or cancel the study has been made. We cannot provide any assurance that we will be able to realize all or most of the net revenues included in backlog or estimate the portion to be filled in the current year.

Regulatory Matters
As our business operates in a number of distinct operating environments and in a variety of locations worldwide, we are subject to numerous, and sometimes overlapping, regulatory environments.
The Animal Welfare Act (AWA) governs the care and use of certain species of animals used for research. Theresearch in the United States Congress has passed legislation which excludesother than laboratory rats, mice and chickens used for research from regulation under the AWA.chickens. As a result, most of our U.S. small animal research models activities and our avian vaccine services operations are not subject to regulation under the AWA. For regulated species, the AWA and attendantthe associated Animal Care regulations require producers and users of regulated species to provide veterinary care and to utilize specific husbandry practices such as cage size, shipping conditions, sanitation and, for certain species, environmental enrichment to assure the welfare of these animals. Separately, facilities using live vertebrate animals in research funded by the U.S. Public Health Service (PHS) must also adhere to the PHS Policy on Humane Care and Use of Laboratory Animals and follow the Guide for the Care and Use of Laboratory Animals produced by the Institute for Laboratory Animal Research.
We comply with licensing and registration requirement standards set by the United States Department of Agriculture (USDA) and similar agencies in other countries such as the European Union, China, Japan and Canada for the care and use of regulated species. Our animal production facilities and preclinicalin the U.S., our DSA facilities in the U.S., Canada, and most of our DSA sites in the European Union are accredited by the Association for Assessment and Accreditation of Laboratory Animal Care International, (AAALAC), a private, nonprofit, international organization that promotes the humane treatment of animals in science through voluntary accreditation and assessment programs. AAALAC covers all species of laboratory animals, including rats, mice and birds. Our preclinical

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business is also generally regulated by the USDA.
Our import and export of animals in support of several of our business units as well asand our operations in foreign countries are subject to international agreements and conventions, as well as a variety of national, regional, and local laws and regulations, which establish the standards for the humane treatment, care, handling and handlingtransport of animals by dealers and research facilities.
We maintain the necessary certificates, licenses, detailed standard operating procedures and other documentation required to comply with applicable regulations for the humane treatment of the animals in our custody at our locations.
Our PCS business conductsconduct nonclinical safety assessment studies intended to support the registrationsubmissions for approval or licensing of our clients' products throughout the world. A minor part of our RMS business also conducts similar studies for our clients. The conduct of manyMany of these studies must comply with national statutory or regulatory requirements for Good Laboratory Practice (GLP). GLP regulations describe a quality system concerned withfor the organizational process and the conditions under which nonclinical studies are planned, performed, monitored, recorded, archivedreported and reported.archived. GLP compliance is required by such regulatory agencies as the FDA, United States Environmental Protection Agency, European Medicines Agency, (EMA), Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom, Health Canada and other similar agencies in the Japanese Ministry of Health and Welfare, among others.countries we operate. GLP requirements are significantly harmonized throughout the world and our laboratories are capable of conducting studies in compliance with all appropriatenecessary requirements. To assure our compliance obligations, we have established quality assurance units (QAU) in each of our nonclinical laboratories. The QAUs operate independently from those individuals that direct and conduct studies, and monitor each study to assure management that the facilities, equipment, personnel, methods, practices, records, and controls are in compliance with GLP.
Our laboratory managers use the results of QAU monitoring as part of a continuous process improvement program to assure our nonclinical studies meet client and regulatory expectations for quality and integrity.
Our manufacturingManufacturing Support businesses produce endotoxin test kits, reagents, cell banks used in research and biopharmaceutical production, clinical trial vaccines and vaccine support products. Additionally, several of our laboratories conduct identity, stability, sterility and potency testing in support of our clients' manufacturing programs. These activities are subject to regulation by the FDA and other national regulatory agencies under their respective current Good Manufacturing Practice (cGMP) regulations. We are subject to inspection on a routine basis for compliance with these regulations. These regulations require that we manufacture our products or perform testing in a prescribed manner with respect to cGMP compliance, and maintain records of our manufacturing, testing and control activities. We also maintain a Biological License Agreement (BLA) withIn addition, the FDA's Centerspecific activities of some of our businesses require us to hold specialized licenses for Biologics Evaluation and Research (CBER) that covers the manufacture, and distribution and/or marketing of in vitro diagnostic reagents in detecting endotoxins. We also maintain an Establishment License with USDA's Center for Veterinary Biologics (CVB) that covers certain of our sites which manufacture USDA licensed antigens, antibodies, and viruses that are sold to clients for use in the manufacturing of their own USDA licensed products. Our vaccine support business also manufactures and markets three USDA licensedparticular products that are considered final use products (Mycoplasma Gallisepticum Antigen, Mycoplasma Melegridis Antigen and Mycoplasma Synoviae Antigen), and sites involved in the manufacture of these articles are subject to regular inspection by USDA/CVB.
All of our sites are also subject to licensing and regulation under international treaties and conventions, including national, regional and local laws relating to

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the surface and air transportation of chemicals, biological reagents and laboratory specimens, specimens;
the handling, use, storage and disposal of chemicals (including narcotics and psychotropic drugs). Biological reagents, laboratory specimens, hazardous waste and radioactive materials, and materials;
the safety and health of laboratory employees. Although we believe we are currently in compliance in all material respects with such national, regionalemployees and local laws (which include the USDA, the standards set by the International Air Transport Association, the Convention on International Trade in Endangered Species of Wild Faunavisitors to our facilities; and Flora (CITES), and European oversight agencies), failure to comply could subject us to denial
protection of the right to conduct business, fines, criminal penaltiesenvironment and other enforcement actions.general public.

To ensure that all business sectors comply with applicable statutory and regulatory requirements and satisfy our client expectations for quality and regulatory compliance, we have established a corporate regulatory affairs and compliance organization that oversees our corporate quality system and allconducts regular audits of our quality assurance functions.functions for all of our GLP, Good Clinical Practices and cGMP facilities. To assure these compliance obligations, we established quality assurance units (QAU) in each of our nonclinical laboratories. The QAUs operate independently from those individuals that direct and conduct studies or manufacturing studies.
Intellectual Property
We develop and implement computer software and technically derived procedures and products intended to maximize the quality and effectiveness of our services. Although our intellectual property rights are valuable to our success, we believe that such factors as the technical expertise, proprietary know-how, ability and experience of our professionals are more important, and that, overall, these technological capabilities provide significant benefits to our clients. Where we consider it appropriate, steps are taken to protect our know-how through confidentiality agreements and through registrations. In addition, we in-license technology and products from other companies when it enhances both our product and services businesses. In the future, in-licensing may become a larger initiative to enhancingenhance our offerings, particularly as we focus on therapeutic area

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expertise. With the exception of technology related to our EMDIn Vitrotesting business, including Accugenix and the Endosafe-PTS, we have no patents, trademarks, licenses, franchises or concessions which are material and upon which any of theour products or services we offer are dependent.
Corporate Governance
We are committed to operating our business with integrity and accountability. We strive to meet or exceed all of the corporate governance standards established by the New York Stock Exchange, the Securities and Exchange Commission, and the Federal government as implemented by the Sarbanes-Oxley Act of 2002. Nine2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Eight of the tennine members of our Board of Directors are independent and have no significant financial, business or personal ties to the Companyus or management and all of our Boardboard committees (with the exception of our Executive Committee and our Strategic Planning and Capital Allocation Committee) are composed entirely of independent directors. The Board adheres to our Corporate Governance Guidelines and a Code of Business Conduct and Ethics which has been communicated to employees and posted on our website. We are diligent in complying with established accounting principles and are committed to providing financial information that is transparent, timely and accurate. We have a Related Person Transactions Policy designed to promote the timely identification of such transactions and to ensure we give appropriate consideration to any real or perceived conflicts in our commercial arrangements. We have a global process through which employees, either directly or anonymously, can notify management (and the Audit Committee of the Board of Directors) of alleged accounting and auditing concerns or violations including fraud. Our internal Disclosure Committee meets regularly and operates pursuant to formal disclosure procedures and guidelines which help to ensure that our public disclosures are accurate and timely. Copies of our Corporate Governance Guidelines, Code of Business Conduct and Ethics and Related Person Transactions Policy are available on our website at www.criver.com under the “Investor Relations-Corporate Governance” caption.

Item 1A.    Risk Factors

Risks Related to Our Business and Industry
Set forth below, elsewhere in this Form 10-K and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements contained in this Form 10-K. We note that factors set forth below, individually or in the aggregate, may cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties.

The outsourcing trend in the preclinical (discovery and safety assessment) stages of drug discovery and development may decrease, which could slowimpair our growth.

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Over the past decade, our businesses have grown as a result of the increase in pharmaceutical and biotechnology companies have generally increased their outsourcing theirof preclinical research support activities.activities, such as discovery and safety assessment. While many industry analysts expect the outsourcing trend to continue to increase for the next several years (although with different growth rates for different phases of drug discovery and development),decreases in preclinicalsuch outsourcing activity may result in a diminished growth rate in the sales of any one or more of our service lines and may adversely affect our financial condition and results of operations. In fact, in 2011 our revenues for our PCS segment declined 6.3% from 2010, our 2010 PCS revenues declined 8.8% from 2009, and 2009 revenues declined 19.5% from 2008. For additional discussion of the factors that we believe have recently been influencing outsourcing demand from our clients, please see the section entitled “Our Strategy” included elsewhere in thethis Form 10-K. Furthermore, our client contracts are generally terminable on little or no notice. Termination of a large contract or multiple contracts could adversely affect our sales and profitability. Our operations and financial results could be significantly affected by these risks.
A reduction in research and development budgets at pharmaceutical and biotechnology companies may adversely affect our business.
Our clients include researchers at pharmaceutical and biotechnology companies. Our ability to continue to grow and win new business is dependent in large part upon the ability and willingness of the pharmaceutical and biotechnology industries to continue to spend on molecules in the preclinical phasephases of research and development (and in particular discovery and safety assessment) and to outsource the products and

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services we provide. Fluctuations in the expenditure amounts in each phase of the research and development budgets of these researchers and their organizations could have a significant effect on the demand for our products and services. Research and development budgets fluctuate due to changes in available resources, mergers of pharmaceutical and biotechnology companies, spending priorities (including available resources of our biotechnology clients, particularly those that are cash-negative, who may be highly focused on rationing their liquid assets in a challenging funding environment), general economic conditions and institutional budgetary policies. Our business could be adversely affected by any significant decrease in drug research and development expenditures by pharmaceutical and biotechnology companies, as well as by academic institutions, government laboratories or private foundations. In particular, studies in recent years have indicated that a majority of academic researchers are anticipating reductions in their budgets. Similarly, economic factors and industry trends that affect our clients in these industries, including funding for biotechnology companies, which have suffered during the recent economic downturn, also affect their research and development budgets and, consequentially, our business as well. The economic downturn has also negatively affected us to the extent that the research and development spending by our global pharmaceutical clients has been directed towards their later-stage productstherapies in late-stage clinical rather than early-stage studiespreclinical development as they reprioritizework to replenish drug pipelines (focusingto offset the effect of patent expirations on the back-end of their pipelines in the near-term) and moderate their spending per drug candidate.sales. Furthermore, our clients (particularly larger biopharmaceutical companies) continue to search for ways to maximize the return on their investments with a focus on leaner research and development costs per drug candidate. For additional discussion of the factors that we believe have recently been influencing research and development budgets at our clients, please see the sections entitled “Our Strategy” and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in thethis Form 10-K.
A reduction or delay in government funding of research and development may adversely affect our business.
A portion of net salesrevenue in our RMS segment is derived from clients at academic institutions and research laboratories whose funding is partially dependent on both the level and timing of funding from government sources such as the U.S. National Institutes of Health (NIH) and similar domestic and international agencies, which can be difficult to forecast. Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable. Our sales may be adversely affected if our clients delay purchases as a result of uncertainties surrounding the approval of government budget proposals. Also, government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund research and development activities. Other programs, such as homeland security or defense, or general efforts to reduce the federal budget deficit could be viewed by the U.S. government as a higher priority. These budgetary pressures may result in reduced allocations in the future to government agencies that fund research and development activities. Although the Obama administration's stimulus packages in 2009 and 2010 included increases in NIH funding, NIH funding had otherwise remained fairly flat in recent years (including into 2012).years. A reduction in government funding for the NIH or other government research agencies could adversely affect our business and our financial results. Also, there is no guarantee that NIH funding will be directed towards projects and studies that require use of our products and services.
Several of our product and service offerings are dependent on a limited source of supply, which if interrupted could adversely affect our business.
We depend on a limited international source of supply for certain products, such as large research models. Disruptions to their continued supply may arise from health problems, export or import laws/restrictions or embargoes, international trade regulations, foreign government or economic instability, severe weather conditions, increased competition amongst suppliers for models, disruptions to the air travel system, commercial disputes, supplier insolvency, or other normal-course or unanticipated events. Any disruption of supply could harm our business if we cannot remove the disruption or are unable to secure an alternative or secondary supply source on comparable commercial terms.

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Changes in government regulation or in practices relating to the pharmaceutical or biotechnology industries, including potential health care reform, could decrease the need for the services we provide.
Governmental agencies throughout the world, but particularly in the U.S., strictly regulate the drug development process. Our business involves helping pharmaceutical and biotechnology companies, among others, navigate the regulatory drug approval process. Accordingly, many regulations, and often new regulations, are expected to result in higher regulatory standards and often additional revenues for companies that service these industries. However, some changes in regulations, such as a relaxation in regulatory requirements or the introduction of simplifiedstreamlined or expedited drug approval procedures, or an increase in regulatory requirements that we have difficulty satisfying or that make our services less competitive, could eliminate or substantially reduce the demand for our services.
Although we believe we are currently in compliance in all material respects with national, regional and local laws as well as other accepted guidance used by oversight bodies (which include the USDA, the standards set by the International Air Transport Association, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, U.S. Fish and Wildlife Service, The Centers for Disease Control, the Department of Transportation, the office of Laboratory Animal Welfare of NIH as well as numerous other Canadian, European and Asian oversight agencies), failure to comply could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions. In addition, if regulatory authorities were to mandate a significant reduction in safety assessment procedures which utilize laboratory animals (as has been advocated by certain groups), certain segments of our business could be materially adversely affected.
In March 2010, the U.S. Congress enacted health care reform legislation intended over time to expand health insurance coverage and impose health industry cost containment measures. In November 2011,June 2012, the U.S. Supreme Court decided to reviewupheld the constitutionality of this legislationlegislation. The Court’s decision allows implementation of key provisions impacting drug manufacturers going forward including, but not limited to, (1) expansion of access to health insurance coverage, (2) expansion of the Medicaid program, (3) enactment of an industry fee on pharmaceutical companies, and agreed(4) imposition of an excise tax on the sale of medical devices. Since the law and its implementation continue to hear oral argumentsface challenges in March 2012. If this legislation, or parts of it, is found to be constitutional, the legislation as enactedCongress and implemented may significantly impact the pharmaceuticalfederal courts, and biotechnology industries. In addition, the U.S. Congress, variousfrom certain state legislaturesgovernments, opposition advocacy groups, and European and Asian governments may consider various types of health care reform in order to control growing health care costs. Wesome small business organizations, we are presently uncertain as to the effects of the recently enactedthis legislation on our business and are unable to predict what legislative proposals will be adopted in the future, if any.future.
Implementation of health care reform legislation may have certain benefits but also may contain costs that could limit

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the profits that can be made from the development of new drugs. This could adversely affect research and development expenditures by pharmaceutical and biotechnology companies, which could in turn decrease the business opportunities available to us both in the U.S. and abroad. In addition, new laws or regulations may create a risk of liability, increase our costs or limit our service offerings. Furthermore, if health insurers were to change their practices with respect to reimbursements for pharmaceutical products, our clients may spend less, or reduce their growth in spending on research and development.
Any failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.
Any failure on our part to comply with applicable regulations could resultThe FDA is in the terminationprocess of ongoing research orreviewing and modernizing the disqualification of data for submissionGLP regulations to regulatory authorities. This could harm our reputation, our prospects for future work and our operating results. For example, the issuance of a notice of observations or a warning from the FDA based on a finding of a material violation by us of good laboratory practice orreflect current good manufacturing practice requirements could materially and adversely affect us. In recent years, the FDA has significantly increased the number of warning letters regarding drug products. Typically, such letters (and the underlying accountability) are directed to the drug sponsor, but in recent years the FDA has provided such letters to a small number of other contract research organizations (CRO). If our operations are found to violate any applicable law or other governmental regulations, we might be subject to civil and criminal penalties, damages and fines. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation.
In addition, regulations and guidance worldwide concerning the production and use of laboratory animals for research purposes continues to be updated. Notably, there has been a recent updating and adoption of new guidance in Europe that will be implemented over a period of several years on a country-by-country basis.Becauseindustry standards. As this may change some of the complexities ofGLP requirements, the formal adoption process,regulatory impact will not be known until the finalization and implementation of this guidance will likely take three or more years, but is likely to be fully implemented by 2016. Some of the new guidance will require additional operating and capital expensesfinal regulations are issued.
We are at risk that will impact not only us and our industry competitors but clients in the biomedical research community, who not only will bear the costs of these changes in the pricing of goods and services, but will also need to make similar changes in their own operations.
Similarly, guidance has been and continues to be developed for other areas that impact the biomedical research community on both a national and international basis, including transportation, euthanasia guidance, and import and export requirements of biological materials, health monitoring requirements and the use of disinfectants. In the U.S., guidance used by the NIH and by certain oversight agencies for the care and use of laboratory animals was revised in 2010 and will be implemented over a three year period which began in 2011. Furthermore, we have had to begin implementation of some components of this new guidance in 2011 in order to avoid additional costs in certain long-term contracts initiated or bid upon in 2011. Conforming to these new guidelines will likely cause us increased costs attributable to upgrading of existing or addition of new facilities, the need to add personnel to address new processes, as well as increased administrative burden.
Our standard client agreements contain customer‑determined termination and service reduction provisions, which Government practices may result in less contract revenue than we anticipate.
Generally, our agreements with our clients provide that the clients can terminate the agreements or reduce the scope of services under the agreements with little or no notice. Clients may elect to terminate their agreements with us for various reasons, including:
the products being tested fail to satisfy safety requirements;
unexpected or undesired study results;
production problems resulting in shortages of the drug being tested;
the client's decision to forego or terminate a particular study;
the loss of funding for the particular research study; or
general convenience/client preference.
If a client terminates a contract with us, we are entitled under the terms of the contract to receive revenue earned to date as well as certain other costs and, in some cases, penalties. Cancellation of a large contract or proximate cancellation of multiple

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contracts could materially adverselynegatively affect our business since it is a significant customer of ours. For example, in 2014, the National Cancer Institute (NCI) canceled a 10-year, $112 million contract that was originally initiated in 2006, which had two years remaining. Under the contract, we produced NCI research models for academic and therefore, may adversely affect our operating results.
Many of our contracts are fixed price and may be delayed or terminated or reduced in scope for reasons beyond our control, or we may under‑price or overrun cost estimates with these contracts, potentially resulting in financial losses.
Many of our contracts provide for services on a fixed price or fee-for-service with a cap basis and, accordingly, we beargovernment researchers. In an effort to mitigate the financial risk if we initially under-price our contracts or otherwise overrun our cost estimates. In addition, these contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may occur for a variety of reasons, and often at the discretioneffect of the client. The loss, reductioncancellation, we launched an outreach program to inform researchers that they could continue to obtain the NCI models from us, with no change in scopeinitial pricing or delaylogistics. From a revenue standpoint, we received between $10 and $11 million annually to produce the models, and expect that we will retain approximately half of a large contract or the loss or delay of multiple contracts could materially adversely affect our business, although our contracts frequently entitle usthat amount from direct sales to receive the costs of winding down the terminated projects, as well as all fees earned by us up to the time of termination. Some contracts also entitle us to a predetermined termination fee and irrevocably committed costs/expenses.researchers.
Contaminations in our animal populations can damage our inventory, harm our reputation for contaminant-free production, result in decreased sales and cause us to incur additional costs.
Our research models and fertile chicken eggs must be free of certain infectious agents such as certain viruses and bacteria because the presence of these contaminants can distort or compromise the quality of research results and could adversely impact human or animal health. The presence of these infectious agents in our animal production facilities and certain service operations could disrupt our contaminant-free research model and fertile egg production as well as our animal services businesses including GEMS, harm our reputation for contaminant-free production and result in decreased sales.
Contaminations typically require cleaning up, renovating, disinfecting, retesting and restarting production or services. Such clean-ups result in inventory loss, clean-up and start-up costs, and reduced sales as a result of lost client orders and credits for prior shipments. In addition to microbiological contaminations, the potential for genetic mix-ups or mismatingsmis-matings also exists and

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may require the restarting of the applicable colonies. While this does not require the complete clean-up, renovation and disinfection of the barrier room, it would likely result in inventory loss, additional start-up costs and possibly reduced sales. Contaminations also expose us to risks that clients will request compensation for damages in excess of our contractual indemnification requirements. There also exists a risk that contaminations from models that we produce may affect our client's facilities, with similar impact to them. In some cases, we may produce or import animals carrying infectious agents capable of causing disease in humans; and in the case of such a contamination or undiagnosed infection, there could be a possible risk of human exposure and infection.
We are also subject to similar contamination risks with respect to our large research models. While often we own these models, they may be maintained on our behalf at a site operated by the original provider. Accordingly, risk of contamination may be outside of our control, and we depend on the practices and protocols of third parties to ensure a contamination-free environment. Furthermore, while we often negotiate for contractual risk indemnification, we may be exposed in the event of such contaminations if the third party does not fulfill its indemnification obligation or is unable to as a result of insolvency or other impediments.
All such contaminations described above are unanticipated and difficult to predict and could adversely impact our financial results. Many of our operations are comprised of complex mechanical systems which are subject to periodic failure, including aging fatigue. Such failures are unpredictable, and while we have made significant capital expenditures designed to create redundancy within these mechanical systems, strengthen our biosecurity, improve our operating procedures to protect against such contaminations, and replace impaired systems and equipment in advance of such events, failures and/or contaminations may still occur.
Any failure by us to comply with applicable regulations and related guidance could harm our reputation and operating results, and compliance with new regulations and guidance may result in additional costs.
Any failure on our part to comply with applicable regulations could result in the termination of ongoing research or the disqualification of data for submission to regulatory authorities. This could harm our reputation, our prospects for future work and our operating results. For example, the issuance of a notice of objectionable observations or a warning from the FDA based on a finding of a material violation by us for Good Laboratory Practice or current Good Manufacturing Practice requirements could materially and adversely affect us. If our operations are found to violate any applicable law or other governmental regulations, we might be subject to civil and criminal penalties, damages and fines. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and damage our reputation.
In addition, regulations and guidance worldwide concerning the production and use of laboratory animals for research purposes continues to be updated. Notably, the European Directive 2010/63/EU requires new standards for animal housing and accommodations that require implementation by 2017. Some of these new standards require additional operating and capital expenses that will impact not only us and our industry competitors, but clients in the biomedical research community through both changes in the pricing of goods and services and changes in their own operations.
Similarly, guidance has been and continues to be developed for other areas that impact the biomedical research community on both a national and international basis including transportation, mandated contingency planning, euthanasia guidance, import and export requirements of biological materials, health monitoring requirements and the use of disinfectants.
Our revenue generating agreements contain termination and service reduction provisions or may otherwise terminate according to their term, which may result in less contract revenue than we anticipate.
Many of our agreements with both large and small clients, including those which underlie our strategic relationships with some of our more significant customers, provide for termination or reduction in scope with little or no notice. In addition, we sell our products and services to our competitors, and similarly they sell products and services to us. For instance, we have historically entered into, and currently are party to, contracts with certain of our competitors to distribute specialty research models in locations where our competitors may not have distribution capabilities.
Clients and/or competitors may elect to terminate their agreements with us for various reasons including:
the products being tested fail to satisfy safety requirements;
unexpected or undesired study results;
production problems resulting in shortages of the drug being tested;
a client's decision to forego or terminate a particular study;
establishment of alternative distribution channels by our competitors;

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the loss of funding for the particular research study; or
general convenience/counterparty preference.

If a client or competitor terminates a contract with us, we are typically entitled under the terms of the contract to receive revenue earned to date as well as certain other costs and, in some cases, termination fees. Cancellation of a large contract or proximate delay, cancellation or conclusion of multiple contracts could materially adversely affect our business and, therefore, may adversely affect our operating results.

Many of our contracts are fixed price and may be delayed or terminated or reduced in scope for reasons beyond our control, or we may underprice or overrun cost estimates with these contracts, potentially resulting in financial losses.
Many of our contracts provide for services on a fixed price or fee-for-service with a cap basis and, accordingly, we bear the financial risk if we initially under-price our contracts or otherwise overrun our cost estimates. In addition, these contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may occur for a variety of reasons, and often at the discretion of the client. The loss, reduction in scope or delay of a large contract or the loss or delay of multiple contracts could materially adversely affect our business, although our contracts frequently entitle us to receive the costs of winding down the terminated projects, as well as all fees earned by us up to the time of termination. Some contracts also entitle us to a predetermined termination fee and irrevocably committed costs/expenses.
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 client data. As a routine element of our business, we collect, analyze and retain substantial amounts of data pertaining to the preclinical studies we conduct for our clients. 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 appropriate measures to protect them from intrusion, and we continue to improve and enhance our systems in this regard, but in the event that our efforts are unsuccessful we could suffer significant harm. Our contracts with our clients typically contain provisions that require us to keep confidential the information generated from these studies. In the event the confidentiality of such information was compromised, we could suffer significant harm.
Impairment of goodwill or other intangible assets may adversely impact future results of operations.
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 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. The goodwill impairment analysis is a two-step process. The first step is used to identify potential impairment and involves comparing each reporting

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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 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 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 client relationships.
Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our assessment (step one) for 2011, the fair value of our business units exceed their carrying value and therefore our goodwill was not impaired.
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.of goodwill or other indefinite-lived intangibles. To the extent goodwill isor other indefinite-lived intangibles are impaired, itstheir carrying value will be written down to its implied fair value and a charge will be made to our earnings.income from continuing operations. Such an impairment charge could materially and adversely affect our operating results and financial condition.results. As of December 31, 2011, we had recorded27, 2014, the carrying amount of goodwill and other intangibles of $291.0was $500.0 million in theon our consolidated balance sheet.
Our business is subject to risks relating to operating internationally.
A significant part of our net salesrevenue is derived from operations outside the U.S. Our international revenues, which include revenues from our non-U.S. subsidiaries, have represented approximately one-half of our total net salesrevenue in recent years.We expect that international revenues will continue to account for a significant percentage of our revenues for the foreseeable future. There are a number of risks associated with our international business including:
foreign currencies we receive for sales and in which we record expenses outside the U.S. could be subject to unfavorable exchange rates with the U.S. dollar and reduce the amount of revenue and cash flow (and increase the amount of expenses) that we recognize and cause fluctuations in reported financial results;
certain contracts, particularly in Canada, are frequently denominated in currencies other than the currency in which we incur expenses related to those contracts and where expenses are incurred in currencies other than those in which contracts are priced, fluctuations in the relative value of those currencies could have a material adverse effect on our results of operations;

17



general economic and political conditions in the markets in which we operate;
potential international conflicts, including terrorist acts;
potential trade restrictions, exchange controls, adverse tax consequences, and legal restrictions on the repatriation of funds into the U.S.;
difficulties and costs associated with staffing and managing foreign operations, including risks of work stoppages and/or strikes, as well as violations of local laws or anti-bribery laws such as the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, and the OECD

17


Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;
unexpected changes in regulatory requirements;
the difficulties of compliance with a wide variety of foreign laws and regulations;
unfavorable labor regulations in foreign jurisdictions;
potentially negative consequences from changes in or interpretations of US and foreign tax laws;
exposure to business disruption or property damage due to geographically unique natural disasters;
longer accounts receivable cycles in certain foreign countries; and
import and export licensing requirements.

These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition. For example, as mentioned above, we are subject to compliance with the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws, which generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. While our employees, distributors and agents are required to comply with these laws, we cannot be sure that our internal policies and procedures will always protect us from violations of these laws despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these types of risks may adversely affect our business, performance, prospects, value, financial condition, and results of operations.
New technologies may be developed, validated and increasingly used in biomedical research that could reduce demand for some of our products and services.
The scientific and research communities continue to explore methods to develop improved models and systems that would replace or supplement the use of living animals as test platforms in biomedical research as well as improve the translation of cellular and animal models to human studies and vice-versa. Some companies have developed techniques in these areas that may have scientific merit. In addition, technological improvements to existing or new processes, such as imaging and other translational biomarker technologies, could result in the refinement and utility for the number of animal research models necessary to improve the translation from preclinical to human studies. There is an increasing push to focus on in vitro technologies such as human materials, stem cell technology and model creation technology. However, the increasing availability and utility of these in vitro models is partially offset by these technologies facilitating the creation of humanized, highly specialized and specific disease mimicking models we can produce.
It is our strategy to explore non-animal approaches to reduce the need for animal models as these new methods become validated. For example, ChanTest has a well-developed program to evaluate the cardiac properties of induced pluripotent stem cell-derived cardiomyocytes. We may not be successful in commercializing these methods, and, furthermore, revenues from these new models and approaches if successfully developed may not offset reduced sales or profits from research models. In addition, alternative research methods could decrease the need for future research models, and we may not be able to develop new products effectively or in a timely manner to replace any lost sales. Lastly, other companies or entities may develop research models with characteristics different than the ones that we produce, and which may be viewed as more desirable by some of our clients.
Negative attention from special interest groups may impair our business.
The products and services which we provide our clients are essential to the drug discovery, development and development process,manufacturing processes, and are almost universally mandated by law. Notwithstanding, certain special interest groups categorically object to the use of animals for valid research purposes. Historically, our core research model activities with rats, mice and other rodents have not been the subject of significant animal rights media attention. However, research activities with animals have been the subject of adverse attention, including shareholder proposals, impacting the industry. This has included demonstrations near facilities operated by us and at our annual meetings, as well as a shareholder proposalproposals we received for some of our 2012past Annual Meeting.Meetings of Shareholders. In some instances, periodic demonstrations at our operating sites occur. Any negative attention, threats or acts of vandalism directed against either our animal research activities or our third party service providers in the future could impair our ability to operate our business efficiently.

Several of our product and service offerings are dependent on a limited source of supply, which if interrupted could adversely affect our business.
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We depend on a limited international source of supply of large research models required in our product and service offerings. Disruptions to their continued supply may arise from health problems, export or import laws/restrictions or embargoes, international trade regulations, foreign government or economic instability, severe weather conditions, increased competition amongst suppliers for models, disruptions to the air travel system or other normal-course or unanticipated events. Any disruption of supply could harm our business if we cannot remove the disruption or are unable to secure an alternative or secondary supply source on comparable commercial terms.


The drug discovery and development services industry is highly competitive.
The drug discovery and development services industry is highly competitive. We often compete for business not only with other contract research organizations (CRO),CROs, but also with internal discovery and development departments within our larger clients, who may have greater resources than ours. We also compete with universities and teaching hospitals for ouroutsourced services. We compete on a variety of factors, including:
reputation for on-time quality performance;
reputation for regulatory compliance;
expertise and experience in multiple specialized areas;
scope and breadth of service and product offerings across the drug discovery and development spectrum;
ability to provide flexible and customized solutions to support our clients' drug discovery and development needs;
broad geographic availability (with consistent quality);
price/value;
technological expertise and efficient drug development processes;

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quality of facilities;
financial stability;
size; and
ability to acquire, process, analyze and report data in an accurate manner.manner; and
accessibility of client data through secure portals.

If we do not compete successfully, our business will suffer. Increased competition might lead to price and other concessions that might adversely affect our operating results. The drug discovery and development services industry has continued to see a trend towards consolidation, particularly among the biotechnology companies, who are targets for each other and for larger pharmaceutical companies (although recent trends since 2008 also demonstrated increased merger activity between larger pharmaceutical companies themselves).companies. If this trend continues, it is likely to produce more competition among the larger companies and CROs generally, with respect to both clients and acquisition candidates. In addition, while there are substantial barriers to entry for large, global competitors with broad-based services, small, specialized entities considering entering the CRO industry will continue to find lower barriers to entry, and private equity firms may determine that there are opportunities to acquire and consolidate these companies, thus further increasing possible competition. Furthermore, between 2006 and 2008, both Charles River and our competitors, particularly in the preclinical services area, invested significantly in capital projects to increase capacity. An ongoing challenge for all participants is balancing existing (and sometimes excess) capacity and market demand. Where capacity has been increased too much, pressure to lower prices or to take on lower-margin studies and projects can occur. More generally, our competitors or others might develop technologies, services or products that are more effective or commercially attractive than our current or future technologies, services or products, or that render our technologies, services or products less competitive or obsolete. If competitors introduce superior technologies, services or products and we cannot make enhancements to ours to remain competitive, our competitive position, and in turn our business, revenue and financial condition, would be materially and adversely affected. In the aggregate, these competitive pressures may affect the attractiveness of our technologies, services or products and could adversely affect our financial results.
Potential Changes in U.S. and International Tax Law.
In its budget submissionthe U.S., there are several proposals to Congress in February 2010,reform corporate tax law that are currently under consideration. These proposals include reducing the corporate statutory tax rate, broadening the corporate tax base through the elimination or reduction of deductions, exclusions and reiterated in the administration's 2012 and 2013 budget proposals, the Obama administration proposed changes to the manner in which the U.S. would tax the international incomecredits, implementing a territorial regime of U.S.-based companies. The proposed changes include, among others,taxation, limiting the ability of U.S. corporations to deduct interest expense allocated and apportioned toassociated with offshore earnings, and modifying the foreign tax credit rules. Additionally,rules, and reducing the ability to defer U.S. tax on October 26, 2011, House Ways and Means committee Chairman Camp released a draft tax reform proposal that includes a reduction in the corporate statutory tax rate, a move to a territorial tax system which allows a partial exemption from taxation for dividends received from foreign corporations and gains recognized on the sale of shares in foreign corporations, as well as certain anti-base erosion and thin capitalization rules. While it is uncertain how the U.S. Congress may address the issue of tax reform, it continues to be a topic of discussion and debate. Although the scope of the proposed changes remains unclear and the likelihood of enactment is uncertain, it is possible that theseoffshore earnings. These or other changes in the U.S. tax laws could increase our effective tax rate which would affect our profitability.
We could be adversely affected by tax law changes in Canada and the United Kingdom.
We have substantial operations in Canada and the United Kingdom which currently benefit from favorable corporate tax arrangements.  We receive substantial tax credits in Canada, from both the Canadian federal and Quebec governments, and benefits from enhanced deductions and accelerated tax depreciation allowances in the U.K.United Kingdom.  Any reduction in the availability or amount of these tax credits or deductions due to tax law changes or outcomes of tax controversies would likelycould have a material adverse effect on our profits, cash flow and effective tax rate.

Currently, the OECD has developed an action plan to address concerns regarding base erosion and profit shifting (BEPS). This initiative has resulted in proposed and enacted changes to tax laws in various countries including France, Germany, and the United Kingdom. Future changes to tax laws or interpretation of tax laws resulting from the BEPS project could increase our effective tax rate.rate which would affect our profitability.
Contract research services create a risk of liability.
As a contract research organization,CRO, we face a range of potential liabilities which may include:

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errors or omissions in reporting of study detail in preclinical studies that may lead to inaccurate reports, which may undermine the usefulness of a study or data from the study, or which may potentially advance studies absent the necessary support or inhibit studies from proceeding to the next level of testing;
risks associated with our possible failure to properly care for our clients' property, such as research models and samples, study compounds, records, work in progress, other archived materials, or goods and materials in transit,

19


while in our possession;
risks that models in our breeding facilities or in facilities that we manage may be infected with diseases that may be harmful and even lethal to themselves or humans despite preventive measures contained in our policies for the quarantine and handling of imported animals; and
risks that we may have errors and omissions and/or product liabilities related to our products designed to conduct lot release testing of medical devices and injectable drugs (primarily through our In VitroEMD business) or in the testing of biologics and other services performed by our biopharmaceutical servicesBiologics business, which could result in us or our clients failing to identify unsafe or contaminated materials.
We
While we attempt to mitigate these risks through a variety of methods. Nonetheless,methods, 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 procedures, and veterinary staff vigilance, through which we seek to control the exposure of animal related disease or infections.
In our PCS business,DSA and Manufacturing businesses, we attempt to reduce these risks by contractcontractual risk transfer provisions entitling us to be indemnified or entitling ussubject to a limitation of liability, by insurance maintained by our clients andand/or by us, and by various regulatory requirements we must follow in connection with our business.
In both our RMS and PCS businesses, contractualContractual risk transfer 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 wereare required to pay damages or bear the costs of defending any claim whichthat is not covered by aoutside any contractual indemnification provision, or in the event thatif a party who must indemnify us does not fulfill its indemnification obligations, or whichthe damage is beyond the scope or level of insurance coverage. We also often contractually indemnify our clients (subject to a limitation of liability), similar to the way they indemnify us, and we may be materially adversely affected if we have to fulfill our indemnity obligations. Furthermore, there can be no assurance that we ornor a party required to indemnify us will be able to maintain such insurance coverage (either at all or on terms acceptable to us.
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 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. However, we generally may not be successful in commercializing these methods if developed, and sales or profits from these methods may not offset reduced sales or profits from research models. Alternative research methods could decrease the need for research models, and we may not be able to develop new products effectively or in a timely manner to replace any lost sales. In addition, other companies or entities may develop research models with characteristics different than the ones that we produce, and which may be viewed as more desirable by our clients.us).
Upgrading and integrating our business systems could result in implementation issues and business disruptions.
In 2010recent years we completed the initial implementation ofimplemented a project to replace many of our numerous legacy business systems at ourcertain different sites globallyworldwide with an enterprise wide, integrated enterprise resource planning (ERP) system. The first stages, which included all of our U.S. sites as well as our RMS site in Canada, and our PCS sites in Montreal and Edinburgh, went live in 2010. We are now enhancing the value of the system's reporting capabilities. The expansion of the system to other international locations may occur at a future date based on value to the business. In general, the process of planning and preparing for these types of integrated, wide-scale implementations is extremely complex and we are required to address a number of challenges including data conversion, system cutover and user training. Problems in any of these areas could cause operational problems during implementation including delayed shipments, missed sales, billing and accounting errors and other operational issues. There have been numerous, well-publicized instances of companies experiencing difficulties with the implementation of ERP systems which resulted in negative business consequences.
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.

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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 in 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.
We may not be able to successfully develop and market new services and products.
We may seek to develop and market new services and products that complement or expand our existing business or service offerings. We believe our ability to in-license new technologies from third-parties will be critical to our ability to offer new products and services to our customers. Our ability to gain access to technologies that we need for new products and services depends - in part - on our ability to convince inventors and their agents or assignees that we can successfully commercialize their inventions. We cannot guarantee that we will be able to identify new technologies of interest to our customers. Even if we are able to identify new technologies of interest, we may not be able to negotiate license agreements on acceptable terms, or

20



at all. If we are unable to develop new services and products and/or create demand for those newly developed services and products, our future business, results of operations, financial condition, and cash flows could be adversely affected.
Our debt level could adversely affect our business and growth prospects.
At December 31, 2011,27, 2014, we had approximately $739$753.8 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 57 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, or in managing our current and future divestitures, our business may suffer.
During the past decade,fifteen years, we have steadily expanded our business through numerous 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.
Even if completed, acquisitions and alliances involve numerous risks which may include:
difficulties in achieving business and financial success;
difficulties and expenses incurred in assimilating and integrating operations, services, products technologies or technologies;pre-existing relationships with our customers, distributors and suppliers;
challenges with developing and operating new businesses, including those which are materially different from our existing businesses and which may require the development or acquisition of new internal capabilities and expertise;
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;
loss of key employees;
the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies;
diversion of management's attention from other business concerns;
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;shareholders;
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;
new technologies and products may be developed which cause businesses or assets we acquire to become less valuable; and
risks that disagreements or disputes with prior owners of an acquired business, technology, service or product may result in litigation expenses and distribution of our management's attention;attention.
the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies; and

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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.
Some of the same risks exist when we decide to sell a business, site, or product line. In addition, divestitures could involve additional risks, including the following:
difficulties in the separation of operations, services, products and personnel; and
the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture.

We continually evaluate the performance and strategic fit of our businesses. These and any divestitures may result in significant write-offs, including those related to goodwill and other intangible assets, which could have an adverse effect on our results of operations and financial condition. In addition, we may encounter difficulty in finding buyers or alternative exit strategies at acceptable prices and terms and in a timely manner. We may not be successful in managing these or any other significant risks that we encounter in divesting a business, site or product line, and as a result, we may not achieve some or all of the expected benefits of the divestiture.
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 client data. As a routine element of our business, we collect, analyze and retain substantial amounts of data pertaining to the preclinical studies we conduct for our clients. 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, and we continue to improve and enhance our systems in this regard, but in the event that our efforts are unsuccessful we could suffer significant harm. Our contracts with our clients typically contain provisions that require us to keep confidential the 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.

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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 35 years.almost four decades. We have no employment agreement with Mr. Foster or other members of our non-European based senior management. If Mr. Foster or other members of senior 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 a strong record of employee retention, there is still significant 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:
changes in the general global economy;
the number and scope of ongoing client engagements;
the commencement, postponement, delay, progress, completion or cancellation of client contracts in the quarter;
changes in the mix of our products and services;
competitive pricing pressures;
the extent of cost overruns;

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holiday buying patterns of our clients;
budget cycles of our clients;
changes in tax laws, rules, regulations and tax rates in the locations in which we operate;
the timing and charges associated with completed acquisitions and other events;
the occasional extra “53rd week” that we recognize in a fiscal year (and 4th
the financial performance of the limited partnerships in which we invest;
the occasional extra “53rd week” that we recognize in a fiscal year (and 4th fiscal quarter thereof) due to our fiscal year ending on the last Saturday in December; 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 PCSDSA businesses in Canada, Ireland, Scotland and the United States Canada, Scotland and Ireland, and lease large facilities in England and the United States. We own large RMS facilities in the United Kingdom,Canada, China, France, Germany, Japan, CanadaEngland and the United States. We own large Manufacturing segment facilities in the United States and China. None of our leases is individually material to our business operations. Many of our leases have an option to renew, and 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 needed.For additional information see Note 1012 to the Consolidated Financial Statements included elsewhere in this Form 10-K.
Capacity at our Safety Assessment businesses within our DSA segment is primarily based on physical room infrastructure designed towards meeting specific scientific and regulatory requirements. We continually evaluate capacity in lighttrack room utilization on an ongoing basis and depending on the needs of our client needsclients at given times, we may need to execute on contingent plans for expansion, which average between six and demands. Accordingly, in 2011 we disposed of our PCS operation in Shanghai, China and consolidated our Discovery Services site in Michigan with our operations in North Carolina. Currently, we do not anticipate significant expansion requirements in our PCS business for the next few years duefifteen months to available capacity at existing and suspended sites. However, wecomplete.

We may also expand at specific sites should we determine that it is not feasiblein order to utilize available capacity at existing or suspended sites. We have adequate capacity to meet the currentaccommodate needs of our RMS clients and do not currently envision the need for significant expansion of our RMS capacity.
resulting from any consolidation strategy. We continue to employ a master site planning strategy to proactively evaluate our real estate needs. In certain circumstances, we dispose of or consolidate operations, which could result in impairment charges. In situations where the associated real estate is leased. Dependingleased, and depending on the resolution of these situations, we may be encumbered with the remaining real estate lease obligations.

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Item 3.    Legal Proceedings

We are not 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.  On January 31, 2012,

In early May 2013, with the assistance of the law firm of Davis Polk & Wardwell LLP, the Company commenced an investigation of inaccurate billing with respect to certain government contracts. This issue had been reported to the Company’s senior management by 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 asemployee. The Company promptly reported these matters to the outcomerelevant government contracting officers, the Department of litigation, we intendHealth and Human Services' Office of the Inspector General, and the Department of Justice, and is cooperating with these agencies to defend againstensure the proper repayment and resolution of this proceeding vigorously. matter.

The investigation to date has confirmed that the Company’s RMS business segment billed the Department of Health and Human Services for certain work that had not been performed with respect to a small subset of the Company’s government contracts. It has been determined that when employees regularly assigned to work in research model barrier rooms associated with these contracts were absent, other employees' names would be substituted on time-keeping records associated with the relevant contracts. The Company billed the government for the hours associated with these substitute employees, despite the fact that, in many cases, these employees did not perform any services in connection with the relevant government contracts. Based on the findings of the investigation to date, the Company believes that this conduct was limited to the Company’s research model facilities in Raleigh, North Carolina, and Kingston, New York.  The Company has identified approximately $1.5 million in excess amounts billed on these contracts since January 1, 2007 and has reserved such amount at December 27, 2014. Given the current status of discussions with the government and the complex nature of this matter, the Company cannot at this time make a reasonable estimate of the potential range of loss beyond such reserve.
The Company has already taken appropriate steps to prevent this conduct from recurring, and will consider additional remedial measures following the conclusion of the investigation.
Item 4.    Mine Safety Disclosures
Not Applicableapplicable.

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

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Below are the names, ages and principal occupations of each of 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 57,60, 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.
James C. Foster, age 61,64, joined us in 1976 as General Counsel. Over the past 35 years,During his tenure, 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.
Jörg M. Geller, age 57,60, joined our German operation in 1986 as production manager. In 1994, he was promoted to Vice President and in 2007, he was named a Senior Vice President. In 2011, Dr. Geller was promoted to Corporate Executive Vice President, European & Asian Operations.Operations and in December 2013, he was named Corporate Executive Vice President, Global Productivity and Efficiency. Prior to joining the Company,us, Dr. Geller was employed in private practice as a veterinarian. Dr. Geller has announced his intention to retire in March 2015.

Nancy A. Gillett, age 56,59, joined us in 1999 with the acquisition of Sierra Biomedical. Dr. Gillett has 2729 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 PCSDSA 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. Currently, Dr. Gillett serves as our

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Corporate Executive Vice President, Chief Scientific Officer.
David P. Johst, age 50,53, 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'sour General Counsel and Chief Administrative Officer and is responsible for overseeing our Corporate legal function, Human Resources department and several other corporate staff departments. Prior to joining the Company,us, Mr. Johst was in private practice at the law firm of Hale and Dorr (now WilmerHale). Mr. Johst currently serves as a trustee of Mt. Ida College.
Davide Molho, age 42,45, joined our Italian operations in 1999 and was promoted to Director of Operations for Research Models and Services (RMS) Italy in 2002. In 2005, his role was expanded to include French RMS operations and in 2007, he became Corporate Vice President, European Research Models and Services with responsibility for all European RMS operations. In July 2009, Dr. Molho was promoted to Corporate Senior Vice President, North American &and European Research Models and Services. He was subsequently promoted to Corporate Executive Vice President and President, Global Research Models and Services in December 2010. SinceIn 2011, Dr. Molho has served as ourwas named Corporate Executive Vice President, North America Operations and in December 2013, he was named Corporate Executive Vice President and President, Global RMS and DSA Operations.

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 belowshows the high and low sales prices for our common stock.

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2012High Low
First quarter (through February 17, 2012)$36.25
 $27.39
2011High Low
Fiscal 2015High Low
First quarter (through January 30, 2015)$70.73
 $63.22
Fiscal 2014High Low
First quarter$39.39
 $35.54
$62.50
 $52.41
Second quarter42.47
 37.38
61.92
 49.60
Third quarter42.05
 28.54
61.49
 52.02
Fourth quarter33.57
 25.95
66.11
 55.47
2010High Low
Fiscal 2013High Low
First quarter$39.75
 $32.74
$46.90
 $36.50
Second quarter41.65
 28.00
45.90
 40.28
Third quarter35.87
 28.20
48.73
 41.05
Fourth quarter36.10
 30.70
53.81
 44.12

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, 2011.27, 2014.
Shareholders
As of January 31, 2012,30, 2015, there were approximately 448451 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.

Issuer Purchases of Equity Securities
The following table provides information relating to the our purchases of shares of our common stock during the quarter ended December 31, 2011.27, 2014.

24



 
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, 2011450,240
 $28.95
 450,199
 $128,224
October 23, 2011 to November 19, 2011394,095
 $30.36
 394,095
 $116,258
November 20, 2011 to December 31, 2011
 $
 
 $116,258
Total:844,335
  
 844,294
  

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 28, 2014 to October 25, 2014286
 $59.74
 
 $178,455
October 26, 2014 to November 22, 2014252
 63.16
 
 178,455
November 23, 2014 to December 27, 2014
 
 
 178,455
Total:538
  
 
  
On July 29, 2010,, our Board of Directors authorized a $500.0$500.0 million stock repurchase program. Our Board of Directors increasedsubsequently approved increases to the stock repurchase program of $250.0 million in the fiscal year 2010, $250.0 million in the fiscal year 2013 and $150.0 million in the fiscal year 2014 for an aggregate authorization by $250.0 million to $750.0 million on October 20, 2010.
of $1,150.0 million. During the fourth quarter of 2011,the fiscal year 2014, we repurchased 844,294did not repurchase any shares of common stock for $25.0 million under our Rule 10b5-1 Purchase Plan and in open market trading. At December 27, 2014, we had $178.5 million remaining on the authorized stock repurchase program.
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.
Securities Authorized for Issuance Under Equity Compensation Plans
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.

25



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 Plan2,322,927
 $41.20
 1,083,653
 
Charles River 1999 Management Incentive Plan1,000
 $31.12
 6,000
 
Inveresk 2002 Stock Option Plan72,041
 $26.20
 
 
2007 Incentive Plan3,685,295
 $36.63
 4,709,080
 
Equity compensation plans not approved by security holders
 
 
 
Total6,081,263
(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).
(2)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 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 outstanding6,081.263
 $38.25
 3.67
____________________________
(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.
Comparison of 5-Year Cumulative Total Return
Among Charles River Laboratories International, Inc.,The graph below compares the five-year cumulative total stockholder return on our common stock, the S&P 500 Index, and the NASDAQNasdaq Pharmaceutical Index.
The following stock performance graph comparesIndex assuming the annual percentage change in our cumulative total shareholder return on our Common Stock during a period commencinginvestment of $100.00 on December 30, 2006 and ending on December 31, 2011 (as measured by dividing (1) the sum of (A) the cumulative amount of26, 2009 with dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between our 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.being reinvested. We have not paid any dividends on the Common Stock,common stock, and no dividends are included in the representation of the Company'sour performance. The stock price performance onin 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 of our filingsfiling 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 we are not responsible for any errors or omissions in such information.

26



COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Charles River Laboratories International, Inc., The S&P 500 Index
And The NASDAQ Pharmaceutical Index




 
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 Index100
 105.49
 66.46
 84.05
 96.71
 98.75
NASDAQ Pharmaceutical Index100
 90.99
 84.71
 95.64
 100.1
 110.44
 December 26, 2009 December 25, 2010 December 31, 2011 December 29, 2012 December 28, 2013 December 27, 2014
Charles River Laboratories International, Inc.100.00
 108.31
 82.92
 111.89
 161.80
 195.05
S&P 500100.00
 115.06
 117.49
 136.30
 180.44
 205.14
NASDAQ Pharmaceutical100.00
 104.24
 117.69
 161.80
 271.53
 349.75


2726



Item 6.    Selected Consolidated Financial Data

The following selected financial data arepresented below is derived from our Consolidated Financial Statements and notes theretoaudited consolidated financial statements and should be read in conjunction with Item 7., "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7 and our Consolidated Financial Statementsconsolidated financial statements and notes thereto contained in Item 8., "Financial Statements and Supplementary Data"8 of this report.Annual Report on Form 10-K. Our fiscal year consists of 12 months ending on the last Saturday on, or prior to, December 31.
 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 provided740,405
 748,656
 748,650
 796,478
 720,254
Selling, general and administrative expenses198,648
 232,489
 227,663
 223,935
 212,471
Goodwill impairment
 305,000
 
 700,000
 
Asset impairment7,492
 91,378
 
 
 
Termination fee
 30,000
 
 
 
Amortization of intangibles21,796
 24,405
 25,716
 26,725
 30,020
Operating income (loss)174,306
 (298,512) 169,613
 (451,839) 222,394
Interest income1,353
 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 taxes132,662
 (334,082) 151,557
 (471,446) 205,669
Provision for income taxes17,140
 23
 40,354
 57,029
 56,023
Income (loss) from continuing operations net of income taxes115,522
 (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 expenditures49,143
 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 capital209,046
 293,114
 345,828
 317,141
 299,587
Goodwill, net197,561
 198,438
 508,235
 457,578
 1,120,540
Total assets1,558,320
 1,733,373
 2,204,093
 2,141,413
 2,778,313
Total debt and capital lease obligations717,945
 700,852
 492,832
 515,332
 437,902
Total shareowners' equity525,583
 687,423
 1,375,243
 1,241,286
 1,905,390
 Fiscal Year Ended
 12/27/2014 12/28/2013 12/29/2012 12/31/2011 12/25/2010
 (in thousands)
Statement of Income Data:         
Total revenue$1,297,662
 $1,165,528
 $1,129,530
 $1,142,647
 $1,133,416
Goodwill impairment (1)

 
 
 
 305,000
Asset impairment (1)
312
 4,202
 3,548
 7,492
 91,378
Termination fee (2)

 
 
 
 30,000
Income (loss) from continuing operations, net of income taxes129,924
 105,416
 102,118
 115,522
 (334,105)
Loss from discontinued operations, net of income taxes(1,726) (1,265) (4,252) (5,545) (8,012)
Common Share Data:         
Earnings (loss) per common share from continuing operations:         
Basic$2.76
 $2.18
 $2.12
 $2.26
 $(5.25)
Diluted$2.70
 $2.15
 $2.10
 $2.24
 $(5.25)
Other Data:         
Depreciation and amortization$96,445
 $96,636
 $81,275
 $85,230
 $93,649
Capital expenditures56,925
 39,154
 47,534
 49,143
 42,860
Balance Sheet Data (at end of period):         
Cash and cash equivalents$160,023
 $155,927
 $109,685
 $68,905
 $179,160
Working capital310,728
 305,516
 143,005
 209,046
 293,114
Goodwill321,077
 230,701
 208,609
 197,561
 198,438
Total assets1,885,192
 1,632,756
 1,586,344
 1,558,320
 1,733,373
Total debt and capital lease obligations777,862
 663,789
 666,520
 717,945
 700,852
Total equity attributable to common shareholders672,203
 640,984
 600,805
 525,583
 687,423

____________________________

(1)Our fiscal year consistsThe 2010 impairment charges were primarily related to our then Preclinical Services business segment, which is now included in our DSA business segment.
(2)The fee was the result of 12 months ending on the last Saturday on, or prior to, December 31.termination of the proposed WuXi Pharmatech (Cayman) Inc. acquisition.

2827




Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
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, anddiscussion should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements. Actual results may differ significantly from those projected in the accompanying notesforward-looking statements. Factors that might cause future results to differ materially from those projected in the consolidated financial statements.forward-looking statements include, but are not limited to, those discussed in "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Certain percentage changes from period over period may not recalculate due to rounding.
Overview
We are a leading global providerfull service, early-stage contract research organization (CRO). For nearly 70 years, we have been in the business of solutions that advanceproviding the drug discoveryresearch models required in research and development process, including research modelsof new drugs, devices, and associated services and outsourced preclinical services. We provide our products and services to global pharmaceutical companies and biotechnology companies, as well as government agencies, leading hospitals and academic institutions throughout the world in order to bring drugs to market faster and more efficiently. Wetherapies. Over this time, we have built upon our original core competency of in vivo biology, including laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of preclinicaldiscovery and safety assessment services, - both GLP (GoodGood Laboratory Practice)Practice (GLP) and non-GLP, - which address drug discoverythat are able to support our clients from target identification through preclinical development. We also provide a suite of products and development.services to support our clients’ manufacturing activities. Utilizing our broad portfolio of products and services enables our clients to create a more flexible drug development model, which reduces their costs, enhances their productivity and effectiveness, and increases speed to market.

Our client base includes primarily of all of the major global pharmaceutical companies, many biotechnology companies, contract research organizations, agricultural and chemical companies, life science companies, veterinary medicine companies, contract manufacturing organizations, medical device companies, diagnostic and other commercial entities, as well as leading hospitals, academic institutions and government agencies around the world. We have been in business for 65 years and currently operate approximately 6460 facilities in 1517 countries worldwide.worldwide, which numbers exclude our Insourcing Solutions (IS) sites.
Large
Business Trends
The demand for our outsourced services increased in the fiscal year 2014, as did demand for products and services to support our clients’ manufacturing activities. Our pharmaceutical and biotechnology clients continued to intensify their use of strategic outsourcing to improve their operating efficiency and access capabilities that they do not maintain internally. Many of our large biopharmaceutical clients are beginning to refocus on their drug discovery and early-stage development efforts after, a period of stronger emphasis on delivering late-stage programs to bring new drugs to market. In addition, mid-tier biopharmaceutical clients benefited from a resurgence in the biotechnology funding environment in the fiscal year 2014, from both capital markets and partnering with large biopharmaceutical companies. Academia has also benefited from partnering activities, as large biopharmaceutical companies have been undergoing significant changes overincreasingly utilized academic research capabilities to broaden the last few years as they endeavor to improve the productivityscope of their drug development pipelines,research activities.

The primary result of these trends was improved demand for our discovery and atsafety assessment services in the same time, streamline their infrastructuresfiscal year 2014, particularly from mid-tier clients. This improvement led to capacity continuing to fill in our safety assessment business, in which utilization is beginning to approach optimal levels. Our targeted sales efforts also generated continued market shares gains. Price remained competitive, but trends are stable to slightly improving. We believe our scientific expertise, quality, and responsiveness remain key criteria when our clients make the decision to outsource to us. In order to improve efficiencyaccommodate this increased demand and reduce operating costs. Our clients' efforts have had an unfavorable impact on our operations as a result of: measured research and development spending by major pharmaceutical and biotechnology companies; delays in client decisions and commitments; tight cost constraints and the resultant pricing pressure, particularly in viewmaintain responsiveness to clients’ needs, we opened small amounts of excessnew capacity in the contract research industry; afiscal year 2014 at existing facilities and continue to strategically evaluate further capacity additions.

Our clients’ intensified focus on late-stage clinical testing as clients acceleratethe earliest stages of their efforts to bring drugs to market in the face of expiration of patents on branded drugs; decreased funding for biopharmaceutical companies and the impact of healthcare reform initiatives. In addition, consolidation in the pharmaceutical and biotechnology industrypipelines has also affected demand for our products and services. All of these ongoing factors continue to contribute to demand uncertainty.
The market for our goods and services appears to be stabilizing but we remain uncertain as to when the unfavorable market factors will abate. As part of clients efforts to improve pipeline productivity, pharmaceutical and biotechnology companies are emphasizing efficacy testing in order to eliminate therapies from the pipeline earlier in the drug development process. This trend isbeen visible in increasing demand for our non-GLP in vivo pharmacologydiscovery services, and drug metabolismthe willingness to outsource new areas of their research programs. To address these emerging needs and pharmacokinetics (DMPK) services. We continue to anticipate that our clients will reduce their internal capacity through closure of underutilized facilities and increase their use of these outsourced servicesmove further upstream in the future, because utilizing outsourced services enables them to create a flexible drug research and development model which improves operating efficiencycontinuum, we acquired the Early Discovery businesses of Argenta, BioFocus, ChanTest, and reduces costs. We believe that increased focus on strategic outsourcing by our clients should resultVivoPath in the expansionfiscal year 2014, which has enabled us to work with clients at the earliest stage of the discovery process. Our full service, early-stage portfolio has led to additional client discussions regarding strategic relationships with a reduced and limited numberin the fiscal year 2014, where clients seek to outsource larger portions of partners, which will drivetheir early-stage drug research programs to us.

While demand for our services. We believeresearch models and certain services remained constrained in the fiscal year 2014 as clients’ continued to consolidate infrastructure and seek greater pipeline productivity, we remain confident that the long-term drivers forof our business as a whole will primarily emerge from our clients' continued demand for discovery and safety assessment services and research models and services, which remain essential to the early-stage drug research process, as well as our products and both GLPservices that support our clients’ manufacturing activities, including endotoxin and non-GLPmicrobial detection.


28



Acquisitions
During the fiscal year 2014, we continued to make a number of strategic acquisitions designed to expand our portfolio of services to support the drug discovery and early-stage development continuum and position us as a market leader in the outsourced discovery services market. The 2014 acquisitions include:
In April 2014, we acquired 100% of the shares of the United Kingdom (U.K.)-based entities Argenta and BioFocus, and certain related Dutch assets, to form the core of our Early Discovery business. Through this transaction, we enhanced our position as a full service, early-stage CRO, with integrated in vitro and in vivo biologycapabilities from target discovery through preclinical development. The preliminary purchase price of the acquisition was $183.1 million, net of cash acquired, and included contingent consideration.
In June 2014, we acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery service company. The preliminary purchase price was $2.3 million, including contingent consideration that could become payable over the next three years based on the achievement of revenue growth targets.
In October 2014, we acquired ChanTest Corporation (ChanTest), a leading provider of ion channel testing services which are essential to the drug development process. However, presently it is challenging to predict the timing associated with these drivers.pharmaceutical and biotech industry. The preliminary purchase price was $52.1 million, net of cash acquired, and included contingent consideration.
We continue to focus on our four key initiatives designed to allow us to drive profitable growth and to maximize value for shareholders, and thus better position ourselves to operate successfully in the current and future business environment. These four initiatives are:
Segment Reporting
Improving the consolidated operating margin. We continue to aggressively manage our cost structure and drive operating efficiencies which are expected to generate improving operating margins. We have already implemented significant actions to reduce costs during the last two years to manage challenging industry-wide preclinical market conditions. These actions have favorably impacted our margins in 2011. In the fourthsecond quarter of 2011,2014, following our acquisition of Argenta and BioFocus, we implemented a headcount reductionrevised our reportable segments to ensure alignment with our view of approximately 2%, primarily in the Preclinical Services (PCS) business. This action is expected to generate annual savings of approximately $7.5 million beginning in 2012.
Improving free cash flow generation. We believe we have adequate capacity to support revenue growth in bothreviewed the new and existing markets addressed by the business, segments without significant additional investment for expansion. Improvedthe recently revised go-to-market strategy, long-term operating margins, elimination of operating losses with the sale of our Phase I clinical business in 2011 and the closure ofdiscrete financial information available to our PCS China facility in 2011,Chief Operating Decision Maker, and minimal requirements for capital expansion, should contribute to strong cash flow generation. We expect capital expenditures to be approximately $50 million in 2012.

29

Table of Contents

Disciplined investment in growth businesses. We continue to maintain a disciplined focusconsidered how our businesses aggregated based on deployment of capital, investing in those areas of our existing business which will generate the greatest sales growththese qualitative and profitability, such as Genetically Engineered Models and Services (GEMS), Discovery Services (DS), In Vitro products and Biopharmaceutical Services.
Returning value to shareholders. We are repurchasing our stock with the intent to drive immediate shareholder value and earnings per share accretion. During 2011,quantitative factors. Based on this review, we repurchased 8.4 million shares. Our weighted average shares outstanding for 2011 has decreased to 51.3 million shares from 62.6 million shares for 2010. As of December 31, 2011, we had $116.3 million remaining on our $750.0 million stock repurchase authorization.
Total net sales in 2011 were $1,142.6 million, an increase of 0.8% from $1,133.4 million in 2010. The sales increase was due primarily to increased sales for RMS partially offset by lower PCS sales. The effect of foreign currency translation had a positive impact on sales of 2.2%. Due to the timing of our fiscal year end, we periodically recognize a "53rd week" in a fiscal year. The 53rd week in 2011 contributed approximately 1.0% to reported 2011 sales.
Our gross margin increased to 35.2% of net sales in 2011 compared to 33.9% of net sales in 2010, due primarily to cost savings actions and the impact of increased RMS sales.
Our operating income was $174.3 million for 2011 compared to an operating loss of $298.5 million for 2010. Income from continuing operations, net of tax, was $115.5 million for 2011 compared to an operating loss of $334.1 million for 2010. The increase in operating income was primarily due to prior year items which include a goodwill impairment, asset impairments and the $30.0 million acquisition termination fee. For 2011, diluted earnings per share attributable to common shareowners was $2.14 compared to a diluted loss per share of $5.38 in 2010. Our capital expenditures totaled $49.1 million for 2011, compared to $42.9 million for 2010. Our planned capital expenditures in 2012 are approximately $50.0 million. Net income attributable to common shareowners was $109.6 million in 2011, compared to a net loss of $336.7 million in 2010.
We report twoidentified three reportable segments: Research Models and Services (RMS), Discovery and Preclinical Services (PCS)Safety Assessment (DSA), which reflectsand Manufacturing Support (Manufacturing). We reported segment results on this basis for the manner in which our operating unitscurrent period and retrospectively for all comparable prior periods.

The revised reportable segments are managed.as follows:
Research Models and ServicesDiscovery and Safety AssessmentManufacturing Support
Research Models
Discovery Services (2)
Endotoxin and Microbial Detection
Research Model Services (1)
Safety AssessmentAvian Vaccine Services
Biologics Testing Solutions
Our RMS segment, which represented 61.7% of net sales in 2011, includes three categories: production of research models,(1) Research Model Services and Other Products. Research Model Services include four business units:includes Genetically Engineered Models and Services (GEMS), Research Animal DiagnosticsDiagnostic Services (RADS), and IS.
(2)Discovery Services (DS),includes both the Early Discovery and Insourcing Solutions (IS). Other Products includes our In VitroVivo businessDiscovery businesses. Early Discovery includes Argenta, BioFocus, and avian vaccine services. Net sales for theChanTest.

Our RMS segment increased 5.8% compared to 2010, primarily driven by higher sales of Other Productsincludes the Research Models and Research Model Services. The effectServices businesses. Research Models includes the commercial production and sale of foreign currency translation has a positive impact on salessmall research models, as well as the supply of 2.7%large research models. Research Model Services includes three business units: GEMS, which performs contract breeding and other services associated with genetically engineered research models; RADS, which provides health monitoring and diagnostics services related to research models; and IS, which provides management of our clients’ research operations (including recruitment, training, staffing and management services). We experienced increases in both the RMS gross margin, to 42.1% from 41.7%, and operating margin to 29.2% from 27.7% last year, due mainly to the impact of cost savings and our fixed cost leverage with increased sales.
Our PCSDSA segment which represented 38.3% of net sales in 2011, includes services required to take a drug through the early development process including discovery support,services, which are non-regulated services to assist clients with the identification, screening, and selection of a lead compound for drug development, and regulated and non-regulated safety assessment services. Our Manufacturing segment includes Endotoxin and biopharmaceutical services. Sales for thisMicrobial Detection (EMD), which includes in vitro (non-animal) lot-release testing products and microbial detection and species identification services; Biologics Testing Services (Biologics), which performs specialized testing of biologics and devices; and Avian Vaccine Services (Avian), which supplies specific-pathogen-free fertile chicken eggs and chickens.

Prior to recasting the reportable segments, the businesses were reported in two segments as follows:
Research Models and ServicesPreclinical Services
Research Models (3)
Discovery Services
Research Model Services (4)
Safety Assessment
Endotoxin and Microbial DetectionBiologics Testing Solutions

29



(3) Research Models included Avian Vaccine Services.
(4) Research Model Services included GEMS, RADS, IS and Discovery Research Services. As part of the segment decreased 6.3% from 2010, driven by slower demand for preclinical services partially offset by favorable foreign currency, which increased sales growth by 1.5%. We experienced an increase inrevisions, the PCS gross margin to 24.0% from 22.8% in 2010, due mainly to impairments in 2010 and cost savings in 2011 partially offset byformer Discovery Research Services was been folded into our Discovery Services business, previously located under the impact of sales mix and continued pricing pressure. The 2011 operating margin was 5.7% compared to (81.4%) in 2010, mainly due to the goodwill impairment and asset impairments in 2010.Preclinical Services segment.

Critical Accounting Policies and Estimates
PreparationOur discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (U.S.). The preparation of these financial statements requires managementus to use judgment when makingmake certain estimates and assumptions that are involved in preparing estimates thatmay affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimatesreported periods 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 itsrelated disclosures. These estimates and assumptions are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on our historical experience, trends in the industry, and on various other factors that are believed to be reasonable under the circumstances,circumstances. Actual results may differ from our estimates under different assumptions or conditions.

We believe that our application of the resultsfollowing accounting policies, each of which require significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results. Our significant accounting policies are more fully described in Note 1, “Description of Business and Summary of Significant Accounting Policies”, to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

We believe the following represent our critical accounting policies and estimates used in the preparation of our financial statements:

Revenue Recognition
We recognize revenue when all of the following conditions are satisfied: persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, our price to the customer is fixed or determinable, and collectibility is reasonably assured.

Service revenue is generally evidenced by client contracts, which range in duration from a few weeks to a few years and typically take the form of an agreed upon rate per unit or fixed fee arrangements. Such contracts typically do not contain acceptance provisions based upon the basisachievement of certain study or laboratory testing results. Revenue of agreed upon rate per unit contracts is recognized as services are performed, based upon rates specified in the contract. In cases where performance spans reporting periods, revenue of fixed fee contracts is recognized as services are performed, measured on the ratio of outputs or performance obligations completed to the total contractual outputs or performance obligations to be provided. Changes in estimated effort to complete the fixed fee contract are reflected in the period in which the change becomes known. Changes in scope of work are common, especially under long-term contracts, and generally result in a change in contract value. Once the parties have agreed to the changes in scope and renegotiated pricing terms, the contract value is amended and revenue is typically recognized as described above.

Most contracts are terminable by the client, either immediately or upon notice. These contracts often require payment to us of expenses to wind down the project, fees earned to date or, in some cases, a termination fee. Such payments are included in revenues when earned.

We recognize product revenue, net of allowances for making judgments aboutestimated returns, rebates and discounts, when title and risk of loss pass to customers. When we sell equipment with specified acceptance criteria, we assess our ability to meet the carrying valuesacceptance criteria in order to determine the timing of revenue recognition. We would defer revenue until completion of customer acceptance testing if we are not able to demonstrate the ability to meet such acceptance criteria.

Income Taxes
We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations. In preparing our consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial accounting standards, we 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.
Weallowed to consider the following accountingscheduled reversal of deferred tax liabilities, projected future taxable income, and the effects of tax planning strategies. Our estimates important in understanding our operating results and financial condition. For additional accounting policies see Notes to Consolidated Financial Statements-Note 1. Significant Accountingof future taxable income include,

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Policies.among other items, our estimates of future income tax deductions related to the exercise of stock options. In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our financial position and results of operations.
Valuation
We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and Impairmentresolving uncertain tax positions. We evaluate uncertain tax positions on a quarterly basis and consider various factors, that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Our liabilities for uncertain tax positions can be relieved only if the contingency becomes legally extinguished through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associated with the position meet the “more-likely-than-not” threshold or the liability becomes effectively settled through the examination process. We consider matters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews; we have no plans to appeal or litigate any aspect of the tax position; and we believe that it is highly unlikely that the taxing authority would re-examine the related tax position. We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.

As of December 27, 2014, our non-U.S. subsidiaries’ undistributed foreign earnings included in consolidated retained earnings aggregated $271.0 million. All undistributed foreign earnings of non-U.S. subsidiaries, exclusive of earnings that would result in little or no net income tax expense or which were previously taxed under current U.S. tax law, are reinvested indefinitely in operations outside the U.S. This determination is made on a jurisdiction by jurisdiction basis and takes into account the liquidity requirements in both the U.S. and within our foreign subsidiaries. If we decide to repatriate funds in the future to execute our growth initiatives or to fund any other liquidity needs, the resulting tax consequences would negatively impact our results of operations through a higher effective tax rate and dilution of our earnings.

Goodwill Otherand Intangible Assets
We use assumptions and Other Long-Lived Assets
Valuation of certain long-lived assets including property, plant and equipment, 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. Acombination. The determination of the fair value of intangible assets, which represent a significant portion of the purchase price in many of our acquisitions, is assigned to intangible assets and goodwill. Assigning value to intangible assets requires that wethe use of significant judgment in determiningwith regard to (i) the fair valuevalue; and (ii) whether such intangibles are amortizable or non-amortizable and, if the former, the period and the method by which the intangible assetsasset 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-livedintangible assets. Typically, key assumptions include projected revenue and expense levels used in establishing the fair valueprojections of business acquisitionscash flows that arise from identifiable intangible assets of acquired businesses 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.

We performreview definite-lived intangible assets for impairment when indication of potential impairment exists, such as a testsignificant reduction in cash flows associated with the assets. Actual cash flows arising from a particular intangible asset could vary from projected cash flows which could imply different carrying values from those established at the dates of acquisition and which could result in impairment of such asset.

We evaluate goodwill and indefinite-lived intangible assets for goodwill impairment annually, during the fourth quarter, and wheneverwhen events occur or circumstances make it likelychange that may reduce the fair value of a reporting unit has fallenthe asset below its carrying amountamount. Events or circumstances that might require an interim evaluation include unexpected adverse business conditions, economic factors, unanticipated technological changes or competitive activities, loss of key personnel and acts by governments and courts. Estimates of future cash flows require assumptions related to revenue and operating income growth, asset-related expenditures, working capital levels and other factors. Different assumptions from those made in our analysis could materially affect projected cash flows and our evaluation of goodwill and indefinite-lived intangible assets for impairment.

We have the option to first assess qualitative factors to determine if impairment exists. Thewhether it is necessary to perform the two-step goodwill impairment analysistest. If we elect this option and believe, as a result of the qualitative assessment, that it is amore-likely-than-not that the carrying value of goodwill is not recoverable, the quantitative two-step process. Theimpairment test is required; otherwise, no further testing is required. Alternatively, we may elect to not first assess qualitative factors and immediately perform the quantitative two-step impairment test. In the first step, is used to identify potential impairment and involves comparing each reporting unit's estimatedwe compare the fair value of our reporting units to itstheir carrying values. If the carrying values of the net assets assigned to the reporting units exceed the fair values of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of our goodwill. If the carrying value including goodwill.of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.


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In the fiscal years 2014, 2013 and 2012, we performed the first step of the two-step goodwill impairment test for our reporting units. Fair value iswas determined by using a weighted combination of a market-based approach and an income approach, as this combination iswas deemed to be the most indicative of our fair value in an orderly transaction between market participants. Under the market-based approach, we utilizeutilized 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 determinedetermined 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

Our 2014, 2013 and 2012 impairment test indicated that goodwill and other intangible assets were not impaired.

In 2014, we revised our reportable segments to align with our new view of the business following the Argenta and BioFocus acquisition. As a result of this reorganization, goodwill was allocated from our prior reportable segments to our new reportable segments based on the fair value of aeach business group within its original 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 our internal plans. 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 consideredrelative 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 is to determine the impairment which 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 the manner in which 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,that reporting unit. In addition, we utilize appraisals for the fair valuecompleted an assessment of property and equipment and valuations of certain intangible assets, including client relationships.
Our annualany potential goodwill impairment assessment has historically been completed atfor all reporting units immediately prior to the beginningreallocation and determined that no impairment existed.

Valuation and Impairment of the fourth quarter. Based on our assessment (step one) for 2011, the fair value of our businesses units exceeded their carrying value therefore our goodwill was not impaired.Long-Lived Assets
Additionally, we performed an annual assessment of the fair value of our in-process researchLong-lived assets to be held and development acquired in the acquisition of SPC. The fair value of the in-process research and development was less than the carrying value recorded as the time of the acquisition. Based on the evaluation, we recorded an impairment in 2011 of $6.8 million.
Goodwill and other indefinite-lived assets 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 31, 2011, we had recorded goodwill and other intangibles of $291.0 million in the consolidated balance sheet.
For intangible assets, goodwill andincluding property, plant and equipment, we assess the carrying value of these assetsare reviewed for impairment whenever events or changes in circumstances indicate that the carrying valueamount of the assets or asset group may not be recoverable. Factors we consider

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important which could trigger an impairment review include, but are not limited to, the following:

significant underperformance relative to expected historical or projected future operating results;
significant negative industry or economic trends; or
significant changes or developments in strategy or operations that negatively affect the utilization of our long-lived assets.
Should we determine
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset, net of any sublease income, if applicable, and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying valueamount of long-lived tangiblethe assets, may not be recoverable, we willthe assets are written-down to their fair values. We measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in our current business model. We may also estimate fair value based on market prices for similar assets, as appropriate. Significant judgments are required to estimate future cash flows, including the selection of appropriate discount rates and other assumptions. We may also estimate fair value based on market prices for similar assets, as appropriate. Changes in these estimates and assumptions could materially affect the determination of fair value for these assets. During the fiscal year 2014, we did not record any significant impairment charges to long-lived assets.
Revenue Recognition
Pension and Other Retiree Benefit Plans
Several of our U.S. and non-U.S. subsidiaries sponsor defined benefit pension and other retiree benefit plans. We recognize revenue related tothe funded status of our products, which include research models, in vitro technology and vaccine support products, when persuasive evidence of an arrangement exists, generally in the form of 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 client's site. Product sales are recorded net of returns upon delivery. For large models in some cases 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 , RADS, GEMS, DS and IS and is generally evidenced by client contracts. Safety assessment services provide highly specialized toxicology studies to evaluate the safety and toxicity of new pharmaceutical molecules and materials used in medical devices. It also includes pathology services, which provide the ability to identify and characterize pathologic changes within tissues and cells in determining the safety of a new compound. RADS services monitor and analyze the health and genetics of research models used in research protocols. GEMS services include validating, maintaining, breeding and testing research models for biomedical research activities. DS augments our GEMS services by providing efficacy studiesdefined benefit pension and other services requiredpostretirement benefit plans as drugs progress through the development pipeline. IS provides management of animal care operations on behalf of government, academic, pharmaceutical and biotechnology organizations.
The 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 service arrangements are generally completed within a one-month period and are also of a fixed fee nature. DS services are also short-term in nature, while GEMS and IS are longer-term from six months to five years, and are billed at agreed upon ratesan asset or liability. This amount is defined 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 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 clients in the form of study protocols. In general, such amounts become billable in accordance with predetermined payment schedules, but are recognized as revenue as services are performed. 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.
Deferred and unbilled revenue are 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. Conversely, in some cases, revenue is recorded based on the level of service performed in advance of billing the client and recognized as unbilled receivable. As of December 31, 2011, based on the difference between the estimated levelfair value of services performedplan assets and the billing arrangements defined bybenefit obligation. We measure plan assets and benefit obligations as of the date of our service contracts, we recorded unbilled revenue of $29.4 million and deferred revenue of $56.5 million in our consolidated balance sheet.fiscal year end.



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TableThe cost and obligations of Contents

Pension Plan Accounting
Our defined benefit pension plans' assets, liabilities and expensesthese arrangements are calculated by accredited independent actuaries using certain assumptions which are approved by management. The actuarial computations require the use ofmany assumptions to estimate the total benefits ultimately payable to employees and allocate this cost tothat the service periods. The keyemployee earns while working, the amount of which cannot be completely determined until the benefit payments cease. Major assumptions used to calculate pension costs are determined and reviewed annually by management after consulting with outside investment advisers and actuaries. The key assumptionsin the accounting for these employee benefit plans include the discount rate, the expected return on plan assets, discount rate, 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 assumed discount rate, which is intended to be the actual rate at which benefits could effectively be settled, is adjustedincrease in employee compensation levels. Assumptions are determined based on the change in the long-term bond yieldour data and appropriate market indicators, and are evaluated each year as of the plans’ measurement date. AsShould any of December 31, 2011,these assumptions change, they would have an effect on net periodic pension costs and the weighted‑average discount rate for our pension plans was 4.47%. As of December 31, 2011, we had a pension liability of $49.2 million.unfunded benefit obligation.

The assumed expected long-term rate of return on plan assets isreflects the average returnrate of earnings expected on the funds invested, or to be invested, to provide futurefor the benefits to pensionincluded in the projected benefit obligations. In determining the expected long-term rate of return on plan participants. This includes consideringassets, we consider the asset allocation and expected returns likely to be earned over the liferelative weighting of the plan. If the actual return is different from the assumed expected return in plan assets, the differencehistorical performance of total plan assets and individual asset classes and economic and other indicators of future performance.

The discount rate reflects the rate we would have to pay to purchase high-quality investments that would provide cash sufficient to settle our current pension obligations. In the fiscal year 2014, as part of our annual review of assumptions for our U.S. pension and retiree benefit plans, we selected the discount rate based on a cash-flow matching analysis using Towers Watson’s proprietary Bond:Link tool.  Prior to the fiscal year 2014, we employed a cash-flow matching methodology, which

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used the spot yield curve underlying the Citigroup Index. The refined estimation technique permits us to more closely match cash flows to the expected payments to participants than would be amortized overpossible with the previously used yield curve model. We believe such a periodrefinement results in an estimate of approximately 15the discount rate that more accurately reflects the settlement value for plan obligations than the yield curve methodology used in prior years, as it provides the ability to 20 years. review the quality and diversification of the portfolio to select the bond issues that would settle the obligation in an optimal manner. This refinement reduced our benefit obligations as of December 27, 2014 by $5.5 million.

The estimated effectrate of a 1.0% change incompensation increase reflects the expected rateannual salary increases for the plan participants based on historical experience and the current employee compensation strategy.

In the fiscal year 2014, for our U.S. plans, we adopted new mortality tables (RP-2014) and a new mortality improvement scale (MP-2014), which increased our benefit obligations by $6.0 million as of return would increase or decrease pension expenseDecember 27, 2014. We previously used the RP-2000 mortality tables with mortality improvements projected using Scale AA to 2021 for annuitants and to 2029 for non-annuitants. In addition, for our U.K. plans, the mortality table was updated to S2 Series (SAPS) using the CMI 2013 core projection with a 1.25% per annum long-term mortality improvement. This update increased our benefit obligations by $2.0 million.$1.9 million as of December 27, 2014. Prior to the fiscal year 2014, we used the S1 Series (SAPS) mortality table and the CMI 2009 core projection with a 1.25% per annum long-term improvement. The new mortality information reflects improved life expectancies and an expectation that the trend will continue.

Stock-based Compensation
We recognize compensation expense for all stock-based payment awards madegrant stock options, restricted stock, restricted stock units, and performance share units (PSUs) to employees, and directors including employee stock options and restricted stock awards based on estimated fair values. Accordingly,to non-employee directors under stock-based compensation cost is measured at grant date, based on the estimated fairplans. We make certain assumptions in order to 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 31, 2011, we recognized $21.7 million of stock compensationrecord expense associated with stock options, restricted stockawards made under our stock-based compensation arrangements. Changes in these assumptions may lead to variability with respect to the timing and performance based stock awards. We estimateamount of expense we recognize in connection with share-based payments.
Determining the appropriate valuation model and related assumptions requires judgment. The fair value of stock options granted is calculated using the Black-Scholes option‑pricing model and the fair value of our restricted stock awardsPSUs is calculated using a lattice model with a Monte Carlo simulation, both of which require the use of subjective assumptions including volatility and restricted stock unitsexpected term, among others.
Determining the appropriate amount to expense based on the quoted market priceanticipated achievement of PSU’s performance targets requires judgment, including forecasting the achievement of future financial targets. The estimate of expense is revised periodically based on the probability of achieving the required performance targets. The cumulative impact of any changes to our common stock. estimates is reflected in the period of change.
We recognize the associated compensation expense on a straight-line basisalso estimate forfeitures over the vesting periods of the awards, net of estimated forfeitures. Forfeiture rates are estimatedrequisite service period when recognizing share-based compensation expense based on historical pre-vesting forfeituresrates and forward looking factors; these estimates are updated on a quarterly basisadjusted to reflectthe extent that actual forfeitures of unvested awards.
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 optionsdiffer, or are expected to be outstandingmaterially differ, from our estimates.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, refer to Note 1, “Description of Business and is estimated based on the historical exercise and post-vesting cancellation patternsSummary 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.
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 reducedSignificant Accounting Policies” to zero, then subsequent shortfalls would increase our income tax expense. Our pool of excess tax benefits in computed in accordance with the long form method.
Income Taxes
As part of the process of preparing our consolidated financial statements we estimate our income taxesincluded 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 financial reporting purposes. We recognize deferred tax assets and liabilities for the temporary differences using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We assess the realizability of our deferred tax assets based upon the weight of available evidence both positive and negative. To the extent we believe that recovery is not likely, we establish a valuation allowance. In the event that actual results differ from our estimates or we adjust our estimates in the future, we may need to increase or decrease income tax expense which could impact our financial position and results of operations.this Annual Report on Form 10-K.


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As of December 31, 2011, earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $106.5 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 our policy to indefinitely reinvest the earnings of 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 the current and future periods. Any significant fluctuation in tax rates or changes in tax laws and regulations or changes to interpretation of existing tax laws and regulations could cause our estimate of taxes to change resulting in either increases or decreases in our effective tax rate.
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 based upon 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. Resolutions 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.
Results of Operations
The following table summarizes historical results of operations as a percentage of net sales for the periods shown:Fiscal Year 2014 Compared to Fiscal Year 2013
Revenue
 Fiscal Year Ended
 December 31, 2011 December 25, 2010 December 26, 2009
Net sales100.0 % 100.0 % 100.0%
Cost of products sold and services provided64.8 % 66.1 % 63.9%
Selling, general and administrative expenses17.4 % 20.5 % 19.4%
Goodwill impairment % 26.9 % %
Asset impairments0.7 % 8.1 % %
Termination fee % 2.6 % %
Amortization of other intangibles1.9 % 2.2 % 2.2%
Operating income (loss)15.3 % (26.3)% 14.5%
Interest income0.1 % 0.1 % 0.1%
Interest expense3.7 % 3.1 % 1.9%
Provision for income taxes1.5 %  % 3.4%
Discontinued operations(0.5)% (0.7)% 0.1%
Noncontrolling interests % 0.5 % 0.2%
Net income (loss) attributable to common shareowners9.6 % (29.7)% 9.8%
 Fiscal Year Ended      
 December 27, 2014 December 28, 2013 $ Change % Change Impact of FX
 (in millions, except percentages)
Research models and services$507.4
 $511.3
 $(3.9) (0.8)% (0.7)%
Discovery and safety assessment538.2
 432.4
 105.8
 24.5 % 0.3 %
Manufacturing support252.1
 221.8
 30.3
 13.7 % 0.2 %
Total revenue$1,297.7
 $1,165.5
 $132.2
 11.3 % (0.1)%






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Segment Operations
The following tables show the net sales and the percentage contribution of each of our reportable segmentsRevenue 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 31, 2011 
December 25,
2010
 
December 26,
2009
 (dollars in millions)
Net sales:     
Research models and services$705.4
 $667.0
 $659.9
Preclinical services437.2
 466.4
 511.7
Cost of products sold and services provided:     
Research models and services408.1
 388.6
 381.2
Preclinical services332.3
 360.0
 367.4
Goodwill impairment:     
Preclinical services
 305.0
 
Termination fee
 30.0
 
Asset impairment     
Research models and services0.7
 0.8
 
Preclinical services6.8
 90.6
 
Selling, general and administrative expenses:     
Research models and services83.6
 85.8
 79.1
Preclinical services58.1
 73.4
 85.1
Unallocated corporate overhead56.9
 73.3
 63.5
Amortization of other intangibles:     
Research models and services6.7
 7.3
 6.3
Preclinical services15.0
 17.1
 19.4
Operating income (loss):     
Research models and services206.3
 184.5
 $193.3
Preclinical services24.9
 (379.7) 39.8
Unallocated corporate overhead(56.9) (103.3) (63.5)

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 Fiscal Year Ended
 December 31, 2011 
December 25,
2010
 
December 26,
2009
Net sales:     
Research models and services61.7 % 58.8 % 56.3 %
Preclinical services38.3 % 41.2 % 43.7 %
Cost of products sold and services provided:     
Research models and services57.9 % 58.3 % 57.8 %
Preclinical services76.0 % 77.2 % 71.8 %
Goodwill impairment:     
Preclinical services % 65.4 %  %
Asset impairment:     
Research models and services0.1 % 0.1 %  %
Preclinical services1.6 % 19.4 %  %
Termination fee %  %  %
Selling, general and administrative expenses:     
Research models and services11.8 % 12.9 % 12.0 %
Preclinical services13.3 % 15.8 % 16.6 %
Unallocated corporate overhead %  %  %
Amortization of other intangibles:     
Research models and services1.0 % 1.1 % 1.0 %
Preclinical services3.4 % 3.7 % 3.8 %
Operating income:     
Research models and services29.2 % 27.7 % 29.3 %
Preclinical services5.7 % (81.4)% 7.8 %
Unallocated corporate overhead(5.0)% (9.1)% (5.4)%
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.
Fiscal 2011 Compared to Fiscal 2010
Net Sales. Net sales for thefiscal year ending December 31, 2011 were $1,142.6 million, an increase of $9.22014 increased $132.2 million, or 0.8%11.3%, from $1,133 million forcompared with the fiscal year ending December 25, 2010,2013. Reported revenue decreased due primarily to increased sales for RMS and favorable foreign currency translation of 2.2% partially offset by $1.7 million, or 0.1%, when compared to the prior period.
RMS revenue decreased $3.9 million due to lower PCS sales.research models services and research models revenue, primarily in Japan and Europe. Additionally, the fiscal year 2013 includes a $1.5 million revenue adjustment related to inaccurate billings with respect to certain government contracts. See Note 12, "Commitments and Contingencies."
Research Models and Services. For the year ending December 31, 2011, net sales for our RMS segment were $705.4DSA revenue increased $105.8 million due to an increase of $38.4in the Discovery Services business, which includes the Argenta and BioFocus acquisition that contributed $71.4 million, or 5.8%, from $667.0 million for the year ending December 25, 2010, due primarily to higher Other Product sales, which include our Avian and In Vitro businesses,revenue growth, as well as Research Model Services. The effect of favorable foreign currency translationhigher revenue in the Safety Assessment business.
Manufacturing revenue increased sales by 2.7%.
Preclinical Services. For the year ending December 31, 2011, net sales for our PCS segment were $437.2$30.3 million, a decrease of $29.2 million, or 6.3%, from $466.4 million for the year ending December 25, 2010. The sales decrease was driven by reduced biopharmaceutical spending, which resulted in lower demand for our services and a shift in study mix, offset by favorable foreign currency translation of 1.5%.broad-based growth across all three businesses, particularly the EMD business.
Cost of Products Sold and Services Provided.Provided
 Fiscal Year Ended    
 December 27, 2014 December 28, 2013 $ Change % Change
 (in millions, except percentages)
Research models and services$317.2
 $331.8
 $(14.6) (4.4)%
Discovery and safety assessment387.3
 325.6
 61.7
 18.9 %
Manufacturing support120.5
 113.2
 7.3
 6.4 %
Total cost of products sold and services provided$825.0
 $770.6
 $54.4
 7.1 %
Cost of products sold and services provided during 2011 was $740.4  million, a decrease of $8.3(costs) for the fiscal year 2014 increased $54.4 million, or 1.1%, from $748.7 million during 2010. Cost of products sold and services provided during the year ending December 31, 2011 was 64.8% of net sales, compared to 66.1% during the year ending December 25, 2010.
Research Models and Services. Cost of products sold and services provided for RMS during 2011 was $408.1 million, an increase of $19.5 million, or 5.0%7.1%, compared to $388.6 million in 2010. Cost of products sold and services provided forwith the fiscal year ending December 31, 2011 decreased to 57.9% of net sales compared to 58.3% of net sales for the year ending December 25, 2010. The decrease in cost2013. Costs as a percentage of sales was due primarily to the impact of our cost-savings actions partially

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Table of Contents

offset by the large model inventory write-off.
Preclinical Services. Cost of services providedrevenue for the PCS segment during 2011 was $332.3 million,fiscal year 2014 were 63.6%, a decrease of $27.72.5%, from 66.1% for the fiscal year 2013. The costs above include asset impairments, which were previously presented separately in our consolidated statement of income.
RMS costs decreased $14.6 million, compared to $360.1 millionprimarily the result of lower accelerated depreciation expense associated with global efficiency initiatives in 2010. Cost of services providedour research models business. RMS costs as a percentage of net sales was 76.0% during the year ending December 31, 2011, compared to 77.2%revenue for the fiscal year ending December 25, 2010. The2014 were 62.5%, a decrease of 2.4%, from 64.9% for the fiscal year 2013, the result of global efficiency initiatives in our research models business.
DSA costs increased $61.7 million due to a $49.1 million increase in Discovery Services costs, which includes a higher cost base due to the Argenta and BioFocus acquisition, and a $12.6 million increase in Safety Assessment costs, as a result of services providedincreased revenues. DSA costs as a percentage of net sales wasrevenue for the fiscal year 2014 were 72.0%, a decrease of 3.3%, from 75.3% for the fiscal year 2013 as a result of leverage of fixed costs from higher revenues.
Manufacturing costs increased $7.3 million, primarily due to the impactas a result of higher revenue for each of our cost-savings actions.Manufacturing businesses. Manufacturing costs as a percentage of revenue for the fiscal year 2014 were 47.8%, a decrease of 3.2%, from 51.0% for the fiscal year 2013, as a result of leverage of fixed costs from higher revenue.

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Selling, General and Administrative Expenses.Expenses
 Fiscal Year Ended    
 December 27, 2014 December 28, 2013 $ Change % Change
 (in millions, except percentages)
Research models and services$66.2
 $60.0
 $6.2
 10.3%
Discovery and safety assessment63.1
 49.7
 13.4
 27.0%
Manufacturing support47.6
 42.0
 5.6
 13.3%
Unallocated corporate92.1
 74.0
 18.1
 24.5%
Total selling, general and administrative$269.0
 $225.7
 $43.3
 19.2%
Selling, general and administrative expenses (SG&A) for the fiscal year ending December 31, 20112014 increased $43.3 million, or 19.2%, compared with the fiscal year 2013. SG&A as a percentage of revenue for the fiscal year 2014 was 20.7%, an increase of 1.3%, from 19.4% for the fiscal year 2013.
The increase in RMS SG&A of $6.2 million was related to an increase of $2.5 million in compensation, benefits and other employee related expenses; the recording of $1.6 million in charges related to an arbitration award in favor of a large model supplier; an increase of $0.5 million in severance due to consolidation plans in the U.S. and Japan; and an increase of $2.6 million in other expenses; partially offset by a decrease of $1.0 million due to a gain on the sale of facility impacted by a consolidation plan. RMS SG&A as a percentage of revenue for the fiscal year 2014 was 13.0%, an increase of 1.3%, from 11.7% for the fiscal year 2013.
The increase in DSA SG&A of $13.4 million was related to an increase of $5.5 million in compensation, benefits and other employee related expenses; an increase of $1.9 million in severance; an increase of $1.2 million in operating expenses including information technology infrastructure and facility expenses; an increase of $0.8 million in stock-based compensation, primarily related to our new hire grants and our annual stock-based grants made in February 2014; and an increase of $4.0 million in other expenses; all of which were $198.7primarily due to the Argenta and BioFocus acquisition. DSA SG&A as a percentage of revenue for the fiscal year 2014 was 11.7%, an increase of 0.2%, from 11.5% for the fiscal year 2013.
The increase in Manufacturing SG&A of $5.6 million was related to an increase of $3.8 million in compensation, benefits and other employee related expenses; an increase of $1.8 million in operating expenses including information technology infrastructure and facility expenses; and an increase of $0.5 million in stock-based compensation, primarily related to our new hire grants and our annual stock-based grants made in February 2014; partially offset by a decrease of $0.5 million in other expenses. Manufacturing SG&A as a percentage of revenue for the fiscal year 2014 was 18.9%, consistent with the fiscal year 2013.
The increase in unallocated corporate SG&A of $18.1 million was related to an increase of $7.4 million in compensation, benefits and other employee related expenses; an increase of $5.1 million of stock-based compensation, primarily related to our new hire grants, our annual stock-based grants made in February 2014 and increased expense recognized for performance stock units whose payout is based upon our financial performance; an increase of $4.8 million in external consulting and other service expenses; an increase of $4.5 million of costs associated with the evaluation and integration of acquisitions; and an increase of $1.4 million in other expenses; partially offset by a reduction of $5.1 million in information technology related expenses.
Amortization of Intangible Assets Amortization of intangibles for the fiscal year 2014 was $26.0 million, an increase of $8.2 million, or 46.1%, from $17.8 million for the fiscal year 2013, primarily as a result of the Argenta and BioFocus acquisition.
Interest Income Interest income, which represents earnings on held cash, cash equivalents, and time deposits, was $1.2 million for the fiscal year 2014, an increase of $0.5 million, or 71.4%, compared to $0.7 million for the fiscal year 2013.
Interest Expense Interest expense for the fiscal year 2014 was $12.0 million, a decrease of $33.8$9.0 million, or 14.6%42.9%, from $232.5compared to $21.0 million for the fiscal year ending December 25, 2010. Selling, general and administrative expenses during 2011 were 17.4% of net sales compared to 20.5% for the year ending December 25, 2010. The decrease in selling, general and administrative expenses as a percent of sales was primarily due to the cost saving-actions.
Research Models and Services. Selling, general and administrative expenses for RMS for 2011 were $83.6 million, a decrease of $2.1 million, or 2.5%, compared to $85.7 million in 2010. Selling, general and administrative expenses decreased as a percentage of sales to 11.8% for the year ending December 31, 2011 from 12.9% for the year ending December 25, 2010. The decrease in selling, general and administrative expenses as a percent of sales was primarily due to cost-savings actions.
Preclinical Services. Selling, general and administrative expenses for the PCS segment during 2011 were $58.1 million, a decrease of $15.4 million, or 20.9%, compared to $73.5 million during 2010. Selling, general and administrative expenses for the year ending December 31, 2011 decreased to 13.3% of net sales, compared to 15.8% of net sales for the year ending December 25, 2010, due mainly to the benefit of cost-savings actions.
Unallocated Corporate Overhead. Unallocated corporate overhead, which consists of various costs primarily associated with 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 $56.9 million during the year ending December 31, 2011, compared to $73.3 million during the year ending December 25, 2010.2013. The decrease was primarily due to cost-savings actions and tight expense control, a life insurance gainthe result of $7.7 millionthe retirement late in 2011 and priorthe second quarter of the fiscal year costs related to the evaluation2013 of a proposed acquisition of $6.6 million.our senior convertible debentures, which lowered our effective interest rate.
Goodwill Impairment.Other Income (Expense), Net Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our assessment for 2011, the fair value of our business units exceeded their carrying value: therefore, our goodwillOther income (expense), net was not impaired.
During the fourth quarter of 2010, based on our annual goodwill assessment, the fair value of our PCS business was less than its carrying value. The second step of the goodwill impairment test involved calculation of the implied goodwill$10.7 million for the PCS business. The carrying valuefiscal year 2014, an increase of the goodwill assigned$3.5 million, or 48.6%, compared to the PCS business exceeded the implied fair value of goodwill, resulting in a goodwill impairment of $305.0 million.
Asset Impairment. We recorded an asset impairment of $7.5 million composed of a $6.8 million impairment of our PCS in-process research and development cost and an $0.7 impairment of an RMS facility no longer in use.
During the fourth quarter of 2010, based on our then 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,fiscal year 2013. The increase in connection with a proposed acquisition, we signed a termination agreement and subsequently paid a $30.0 million termination feeother income (expense), net was driven by our investments in limited partnerships accounted for full satisfaction of the parties' obligations under the acquisition agreement.
Amortization of Other Intangibles. Amortization of other intangibles for the year ending December 31, 2011 was $21.8equity method, which increased $3.4 million, and a decrease of $2.6 million, from $24.4 million for the year ending December 25, 2010. Amortization expense decreased as a percentage of sales to 1.9% for the year ending December 31, 2011, from 2.2% for the year ending Decembernon-cash

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25, 2010.
Research Models and Services. In 2011, amortization of other intangibles for our RMS segment was $6.7 million, a decrease of $0.6 million from $7.3 million in 2010.
Preclinical Services. For the year ending December 31, 2011, amortization of other intangibles for our PCS segment was $15.0 million, a decreasegain of $2.1 million from $17.1 million forrelated to assets assumed at our Frederick, Maryland facility following the year ending December 25, 2010.
Operating Income. Operating income for the year ending December 31, 2011was $174.3 million, an increase fromtermination of a loss of $298.5  million for the year ending December 25, 2010. Operating income as a percentage of net sales for the year ending December 31, 2011 was 15.3% compared to (26.3)% for the year ending December 25, 2010, due primarily tocustomer contract, partially offset by the impact of the asset impairment, goodwill impairmentforeign exchange and termination fee in 2010.
Research Models and Services. For 2011, operating income for our RMS segment was $206.3 million, an increaseother activity of $21.9 million, or 11.8%, from $184.5 million in 2010. Operating income as a percentage of net sales for the year ending December 31, 2011 was 29.2%, compared to 27.7% for the year ending December 25, 2010. The increase in operating income as a percentage of net sales was primarily due to cost-savings actions.
Preclinical Services. For the year ending December 31, 2011, operating income for our PCS segment was $24.9 million, an increase from a loss of $379.7 million for the year ending December 25, 2010. Operating income as a percentage of net sales increased to 5.7% in 2011 compared to (81.4)% of net sales in 2010. The increase in operating income as a percentage of net sales was primarily due to the asset impairment, goodwill impairment and termination fee in 2010.
Unallocated Corporate Overhead. Unallocated corporate overhead was $56.9 million during the year ending December 31, 2011, compared to $103.3 million during the year ending December 25, 2010. The decrease was primarily due to the termination fee and costs related to the evaluation of a proposed acquisition of $6.6 million in 2010 as well as cost-savings actions and tight expense control and a life insurance gain of $7.7 million in 2011.
Interest Expense. Interest expense for 2011 was $42.6 million, compared to $35.3 million in 2010. The increase was due to increased debt balances.
Interest Income. Interest income for 2011 was $1.4 million, compared to $1.2 million for 2010.$2.0 million.
Income Taxes.Taxes Income tax expense in 2011 was $17.1the fiscal year 2014 increased $14.8 million, compared to $23 thousand in 2010.with the fiscal year 2013. Our effective tax rate was 12.9 %26.8% in 2011,the fiscal year 2014, compared to 0%23.8% in 2010. Changesthe fiscal year 2013. The increase was primarily attributable to current-year tax law changes, including a statutory 25% decrease in the Canadian Scientific Research and Experimental Development (SR&ED) credit and an increase in the limitation of deductibility of interest expense in France. In addition, the effective tax rate for the fiscal year 2014 reflected a discrete tax cost of $1.6 million related to the nondeductible transaction costs incurred in the fiscal year 2014 for the acquisition of the Early Discovery businesses and a discrete tax cost of $1.2 million related to the write-off of deferred tax assets as a result of the reorganization of the Company's RMS U.K. entities. These increases were partially offset by a $2.1 million release of an uncertain tax position resulting from benefits recognized in 2011 duean ability to releasing a valuation allowanceoffset tax on a tax loss incurred with the disposition of the our Phase I clinical businesscapital gain from an investment in the first quarter of 2011, a non-taxable gain on a settlement of a life insurance policy, a settlement of a German tax audit, and the impact of declines in statutory tax rates in the United Kingdom and Japan. Additionally, in 2010, thelimited partnership. The fiscal year 2013 effective tax rate reflected goodwill and fixed asset impairments andincludes a discrete tax detriment of $2.0 million related to the termination fee for a proposed acquisition, which were unbenefitted for tax purposes andongoing transfer pricing controversy with the cost of repatriating foreign earnings that were previously indefinitely reinvested.Canadian Revenue Authority (CRA).
Net Income Attributable to Common Shareowners. Net income attributable to common shareowners for the year ending December 31, 2011 was $109.6 million compared to a loss of $336.7 million for the year ending December 25, 2010.

Fiscal 2010Year 2013 Compared to Fiscal 2009Year 2012
Net Sales.    Net sales in 2010 were $1,133.4 million, a decrease of $38.2Revenue
 Fiscal Year Ended      
 December 28, 2013 December 29, 2012 $ Change % Change Impact of FX
 (in millions, except percentages)
Research models and services$511.3
 $521.6
 $(10.3) (2.0)% (1.7)%
Discovery and safety assessment432.4
 408.9
 23.5
 5.7 % (0.6)%
Manufacturing support221.8
 199.0
 22.8
 11.5 % 1.1 %
Total revenue$1,165.5
 $1,129.5
 $36.0
 3.2 % (0.8)%
Revenue for the fiscal year 2013 increased $36.0 million, or 3.3%3.2%, 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 $7.1compared with the fiscal year 2012. Reported revenue decreased due to foreign currency translation by $9.0 million, or 1.1%0.8%, from $659.9when compared to the prior period.
RMS revenue decreased by $10.3 million due to lower research models revenue in 2009. Sales growth was driventhe U.S., Europe and Japan due primarily to infrastructure reductions by the additions of Piedmont Research Center and Cerebricon, both of which were acquired in 2009,our global biopharmaceutical clients, partially offset by lowerthe inclusion of Vital River, which was acquired in the fiscal year 2013. Additionally, the fiscal year 2013 included a $1.5 million revenue adjustment related to inaccurate billings with respect to certain government contracts. See Note 12, "Commitments and Contingencies."
DSA revenue increased $23.5 million due to higher demand from global pharmaceutical and mid-tier biotechnology clients as well as a more favorable mix of longer-term services.
Manufacturing revenue increased $22.8 million due to higher sales of research models.legacy EMD products globally and the inclusion of a full year of Accugenix services (an EMD service provider acquired in 2012).
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%.

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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.Provided
Research Models and Services.    Cost of products sold and services provided
 Fiscal Year Ended    
 December 28, 2013 December 29, 2012 $ Change % Change
 (in millions, except percentages)
Research models and services$331.8
 $323.3
 $8.5
 2.6%
Discovery and safety assessment325.6
 311.0
 14.6
 4.7%
Manufacturing support113.2
 103.1
 10.1
 9.8%
Total cost of products sold and services provided$770.6
 $737.4
 $33.2
 4.5%
Costs for RMS in 2010 was $388.6 million, an increase of $7.4the fiscal year 2013 increased $33.2 million, or 1.9%4.5%, compared to $381.2 million in 2009. Cost of products sold and services providedwith the fiscal year 2012. Costs as a percentage of net salesrevenue for the fiscal year 2013 were 66.1%, an increase of 0.8%, from 65.3% for the fiscal year 2012. The costs above include assets impairments which were previously presented separately in 2010 was 58.3%, comparedour consolidated statement of income.
RMS costs increased $8.5 million, primarily the result of accelerated depreciation expense at our California facility, which contributed $13.5 million to 57.8%the increase and the inclusion of Vital River, acquired in 2009. TheJanuary 2013, which contributed $10.5

36



million to the increase, partially offset by declines in cost of products in our research models business due to lower volume. RMS costs as a percentage of sales wasrevenue for the fiscal year 2013 were 64.9%, an increase of 2.9%, from 62.0% for the fiscal year 2012, the result of the lower revenue in our U.S., Europe and Japan research model business along with accelerated depreciation expense at our California facility.
DSA costs increased $14.6 million due mainly to the impactan increase in Safety Assessment costs as a result of increased fixedrevenues. DSA 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, comparedrevenue for the fiscal year 2013 were 75.3%, a decrease of 0.8%, from 76.1% for the fiscal year 2012 due to 71.8% in 2009. The increase in costhigher volume of services provided and the benefit of efficiency initiatives.
Manufacturing costs increased $10.1 million, primarily as a result of higher EMD revenue. Manufacturing costs as a percentage of net sales was primarily due to lower capacity utilization due torevenue for the lower sales volume and increased pricing pressure.fiscal year 2013 were 51.0%, a decrease of 0.8%, from 51.8% in the fiscal year 2012 as a result of leverage of fixed costs from higher revenue.
Selling, General and Administrative Expenses.    Selling, general and administrative expenses in 2010 were $232.5 million, an increase of $4.8Expenses
 Fiscal Year Ended    
 December 28, 2013 December 29, 2012 $ Change % Change
 (in millions, except percentages)
Research models and services$60.0
 $53.5
 $6.5
 12.1 %
Discovery and safety assessment49.7
 49.8
 (0.1) (0.2)%
Manufacturing support42.0
 33.7
 8.3
 24.6 %
Unallocated corporate74.0
 71.2
 2.8
 3.9 %
Total selling, general and administrative$225.7
 $208.2
 $17.5
 8.4 %
SG&A for the fiscal year 2013 increased $17.5 million, or 2.1%8.4%, 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 expenseswith the fiscal year 2012. SG&A as a percentage of salesrevenue for the fiscal year 2013 was primarily due to lower sales.
Research Models and Services.    Selling, general and administrative expenses for RMS in 2010 were $85.8 million,19.4%, an increase of $6.71.0%, from 18.4% for the fiscal year 2012.
The increase in RMS SG&A of $6.5 million or 8.5%, comparedwas related to $79.1an increase of $2.2 million in 2009. Selling, generalcompensation, benefits and administrative expenses increasedother employee related expenses; an increase of $1.8 million in bad debt expense; an increase of $0.8 million in stock-based compensation expense; an increase of $0.8 million in severance charges; and an increase of $1.4 million in other expenses; partially offset by a decrease of $0.5 million in operating costs, including information technology and facility costs. RMS SG&A 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 expensesrevenue for the PCS segment in 2010 were $73.4 million,fiscal year 2013 was 11.7%, an increase of 1.4%, from 10.3% for the fiscal year 2012.
DSA SG&A remained substantially flat year over year due to a decrease of $11.7 million, or 13.6%, compared to $85.1$2.0 million in 2009 due mainly to reduced allocationscompensation, benefits and other employee related expenses and a decrease of Corporate Marketing$1.1 million in operating costs, including information technology and IT costs and tight expense control over discretionary costs. Selling, general and administrative expensesfacilities costs; offset by an increase of $3.0 million in 2010 decreased to 15.8%other expenses. DSA SG&A as a percentage of net sales, compared to 16.6%revenue for the fiscal year 2013 was 11.5%, a decrease of 0.7%, from 12.2% for the fiscal year 2012.
The increase in 2009.
Unallocated Corporate Overhead.    Unallocated corporate overhead, which consistsManufacturing SG&A of various costs$8.3 million was 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 $73.3an increase of $5.1 million in 2010, compared to $63.5compensation, benefits and other employee related expenses; an increase of $1.0 million in 2009. bad debt expense; an increase of $0.9 million in operating costs, including information technology and facility expenses; and an increase of $1.3 million in other expenses. Manufacturing SG&A as a percentage of revenue for the fiscal year 2013 was 18.9%, an increase of 2.0%, from 16.9% for the fiscal year 2012.
The increase in unallocated corporate overhead during 2010SG&A of $2.8 million was due primarily to increased global IT costs and costs related to the implementationan increase of our ERP system$3.1 million in 2010compensation, benefits and increasedother employee related expenses; an increase of $1.7 million in stock-based compensation; and an increase of $1.2 million in external consulting and other service expense; partially offset by a decrease of $2.0 million of costs associated with the evaluation and integration of acquisition candidates.acquisitions; a decrease of $1.0 million decrease in information technology related expenses; and a decrease of $0.2 million in other expenses.
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.Intangible Assets Amortization of other intangibles in 2010for the fiscal year 2013 was $24.4$17.8 million, a decrease of $1.3$0.3 million, or 1.7%, from $25.7$18.1 million in 2009.for the fiscal year 2012.
Research ModelsInterest Income Interest income, which represents earnings on held cash, cash equivalents, and Services.    In 2010, amortization of other intangiblestime deposits, was $0.7 million for our RMS segment was $7.3 million,the fiscal year 2013, an increase of $1.0$0.1 million, from $6.3or 16.7%, compared to $0.6 million in 2009 due to acquisitions.
Preclinical Services.    In 2010, amortization of other intangibles for our PCS segment was $17.1 million, a decrease ofthe fiscal year 2012.

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$2.3 million from $19.4 million in 2009.
Operating Loss.Interest Expense The operating loss in 2010Interest expense for the fiscal year 2013 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$21.0 million, a decrease of $8.8$12.3 million, or 4.6%, from $193.3 million in 2009. Operating income as a percentage of net sales in 2010 was 27.7%36.9%, compared to 29.3% in 2009.$33.3 million for the fiscal year 2012. 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.our debt as a result of our debt refinancing in May 2013 and the associated retirement of our senior convertible debentures in fiscal year 2013.
Other Income (Expense), Net Other income (expense), net was $7.2 million for the fiscal year 2013, an increase of $10.5 million, or 318.2%, compared to $(3.3) million for the fiscal year 2012. The increase in other income (expense), net was driven by our investments in limited partnerships accounted for under the equity method.
Income Taxes.Taxes Income tax expense in 2010 was $23 thousand,for the fiscal year 2013 increased $5.3 million, compared to $40.4 million in 2009.with the fiscal year 2012. Our effective tax rate was 0.0 %23.8% in 2010,the fiscal year 2013, compared to 26.6%21.3% in 2009. Changesthe fiscal year 2012. The increase of 2.5% in the effective tax rate resultedfor the fiscal year 2013 was primarily from goodwill and fixed asset impairments and the termination fee forattributable to a proposed acquisition that were unbenefitted fordiscrete tax purposes, amount and mixdetriment of earnings, increased tax benefits$2.0 million due to an adjustment related to ourthe ongoing transfer pricing controversy with the CRA, a reduction in research and development activitiestax benefits by $1.8 million arising from the adoption of a new refundable research and development credit provided for in Canadaa U.K. tax law change that was enacted in the fiscal year 2013, $1.4 million of costs from a new French tax law enacted in the fiscal year 2013 that applied retroactively to the fiscal year 2012 that limits the deductibility of interest by our French affiliates, and the UK and thea discrete tax cost of repatriating foreign earnings that were previously indefinitely reinvested.
Income from discontinued operations.    During$0.5 million related to nondeductible transaction costs incurred in 2012 for the fourthacquisition of Vital River, which closed in the first quarter of 2010, we initiated actions to divest our Phase I clinical services business. We engaged an investment bankerthe fiscal year 2013. These costs were partially offset by increased benefits from the domestic production deduction of $0.6 million and were actively trying to sellreduced unbenefitted tax losses of $0.6 million. The fiscal year 2012 effective tax rate reflects a benefit from the Phase I clinical services business at year end. On December 25, 2010, taking into account the planned divestituresettlement 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 assignedtax litigation related to the Phase I clinical2003 and 2004 SR&ED credits claimed by our Safety Assessment 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 shareownersfacility in 2010 was $336.7 million, compared to net income of $114.4 million in 2009.Montreal.

Liquidity and Capital Resources

The following discussion analyzes liquidityWe currently require cash to fund our working capital needs, pension obligations, capital expansion, and capital resources by operating, investingacquisitions and financing activities as presented inpay our consolidated statements of cash flows.
debt obligations. Our principal sources of liquidity have been our cash flowflows from operations, supplemented by long-term borrowings. Based on our marketable securitiescurrent business plan, we believe that our existing funds, when combined with cash generated from operations and our revolving line of credit arrangements.access to financing resources, are sufficient to fund our operations for the foreseeable future.

The following table presents our cash and cash equivalents and time deposits held in the U.S. and by foreign subsidiaries:
 December 27, 2014 December 28, 2013
 (in millions)
Cash and cash equivalents   
Held in the U.S.$10.0
 $8.0
Held by non-U.S. subsidiaries150.0
 147.9
Total cash and cash equivalents160.0
 155.9
Time deposits held in the U.S.2.8
 
Time deposits held by non-US subsidiaries13.4
 11.2
Total cash and cash equivalents and time deposits$176.2
 $167.1
Borrowings
On December 25, 2010,May 29, 2013, we had a $750 millionamended and restated our previous credit agreement which hadand entered into a $970.0 million agreement (the $970M Credit Facility). The $970M Credit Facility has a maturity date of August 26, 2015May 2018 and providedprovides for a $230$420.0 million term loan, a €133.8 million EuroU.S. term loan and a $350$550.0 million multi-currency revolving credit facility. On February 24, 2011, we amended the credit agreement, primarily to provide for an incremental $150 million term loan and to modify the leverage ratio used in calculating the interest rate applicable to amounts outstanding. On September 23, 2011, we amended and restated the credit agreement primarily to reduce the interest rate margin applicable to the term loans and the revolving loans based on our leverage ratio and extend the maturity date by approximately one year to September 2016. The current credit agreement provides for a $ 299.8 million term loan, a €69.4 million Euro term loan and a $350 million revolving credit facility.facility may be drawn in U.S. Dollars, Euros, Pound Sterling, or Japanese Yen, subject to sub-limits by currency. Under specified circumstances, we have the ability to increaseexpand the term loansloan and/or revolving line of credit facility by up to $250 million in the aggregate.$350.0 million. The U.S. term loans matureloan matures in 20 quarterly installments with the last installment due September 23, 2016.through May 2018. The $350 million revolving credit facility also matures on September 23, 2016in May 2018 and requires no scheduled payment before thatthis date. The book value ofinterest rates on the $970M Credit Facility are variable and are based on an applicable published rate plus a spread determined by our term and revolving loans approximates fair value. We had $4.5 millionleverage ratio.


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Amounts outstanding under letters of creditthe $970M Credit Facility were as follows as of December 31, 2011.27, 2014 and December 28, 2013:
The interest rates applicable to term loans and revolving loans under the credit agreement are, at our option, equal to either the base rate (which is the higher
 December 27, 2014 December 28, 2013
 (in millions)
Term loans$378.0
 $409.5
Revolving credit facility375.5
 253.3
Total$753.5
 $662.8

Repurchases of (1) the prime rate, (2) the federal funds rate plus 0.50% or (3) the one-month adjusted LIBOR rate plus 1%) plus an applicable interest rate margin based upon the leverage ratio. Based on our leverage ratio, the margin range for base rate loans is 0.0% to 0.75% and the margin range for LIBOR based loans is 1.00% to 1.75%. As

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of December 31, 2011, the interest rate margin for base rate loans was 0.75% and for adjusted LIBOR loans was 1.75%.Common Stock
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 65% of the capital stock of certain first-tier foreign subsidiaries and domestic disregarded entities, and mortgages on owned real property in the U.S. having a book value in excess of $10 million. In addition, the credit agreement includes certain customary representations and warranties, events of default, notices of material adverse changes to our business and negative and affirmative covenants. These covenants 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 of the previous consecutive fiscal quarters, of no more than 4 to 1. In the second and third quarters of 2012, this ratio will step down to 3.5 to 1, and thereafter will step down to 3.25 to 1. As of December 31, 2011, we were compliant with all financial covenants specified in the credit agreement.
In accordance with our policy, the undistributed earnings of our non-U.S. 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.
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 our $750.0 million stock repurchase authorization approved byJuly 2010, our Board of Directors in 2010, we entered into agreements withauthorized a third party investment bank to implement an accelerated$500.0 million stock repurchase (ASR) program. The ASR programs are recorded as two transactions allocated betweenprogram, and subsequently approved increases for an aggregate authorization of $1,150.0 million. During 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.
Onfiscal year 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 20092014, we repurchased 3,790,762approximately 2,093,000 shares at a cost 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.
As of$110.6 million. At December 31, 2011,27, 2014, we had $16.4$178.5 million in marketable securities with $5.3 million in time deposits and $11.1 million in auction rate securities rated AAA by a major credit rating agency. The year-end balance was comprised of $11.1 million held inremaining on the United States and $5.3 million held by non-U.S. subsidiaries. Our auction rate securities are guaranteed by U.S. federal agencies. The current overall credit concerns in the capital markets as well as the failed auction status of these securities have impacted our ability to liquidate our auction rate securities. If 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.

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In 2006, we issued $350.0 million of 2.25% Convertible Senior Notes (the 2013 Notes) due in 2013. At December 31, 2011, the fair value of our outstanding 2013 Notes was approximately $339.5 million based on their quoted market value. During the fourth quarter of 2011, no conversion triggers were met. Upon maturity, we will settle the principal balance of the 2013 Notes in cash and any additional amount due to the conversion feature in cash or shares. We intend to utilize our existing cash and marketable securities, future cash flow from operations, existing capacity of our credit agreement, which includes possible increases to term and/or revolving line of credit, and evaluate other financing alternatives, to meet the cash requirement at maturity in June 2013.authorized stock repurchase program.
We have various life insurance policies which have cash surrender value. The policies provide funding for our deferred compensation plan and in certain cases, funding for life insurance benefits. During the second quarter of 2011, we received life insurance proceeds of $9.5 million related to a former officer. We recognized a tax exempt gain of $7.7 million representing the difference between the life insurance proceeds and the cash surrender value.
Cash andFlows
The following table presents our net cash equivalents totaled $68.9 million at December 31, 2011, compared to $179.2 million at December 25, 2010. provided by operating activities:
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in millions)
Income from continuing operations$129.9
 $105.4
 $102.1
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities126.0
 129.0
 131.7
Changes in assets and liabilities(3.8) (25.4) (25.8)
Net cash provided by operating activities$252.1
 $209.0
 $208.0
The declineincreases in cash and cash equivalents was primarily due to the repurchase of shares, capital expenditures and prepayment of debt. At December 31, 2011, the $68.9 million was comprised of $0.4 million held in the United States and $68.5 million held by non-U.S. subsidiaries. At December 25, 2010, the $179.2 million was comprised of $72.3 million held in the United States and $106.9 million held by non-U.S. subsidiaries. The decline in cash in the U.S. was primarily due to share repurchases and capital expenditures while the decline in cash outside the U.S. was primarily due to capital expenditures and prepayments on the Euro term loan. We are a net borrower and closely managed the cash at year-end to keep balances low. We were able to maintain liquidity by having the ability to borrow on our revolving line of credit.
Net cash provided by operating activities forfrom the fiscal years ending December 31, 20112013 to 2014 and December 25, 2010 was $206.8 millionfrom the fiscal years 2012 to 2013 were due to increases in our income from continuing operations with the net effect of changes in assets and $168.2 million, respectively. The increase in cash provided by operations was primarily dueliabilities and adjustments to net income and trade receivables, partially offset by a decrease in taxes payable. The tax benefit related to the disposition of the Phase I clinical business, which increased net income in 2011, will be realized in cash in the future.from continuing operations. Our days sales outstanding, (DSO) increased to 48 days as of December 31, 2011 compared to 45 days as of December 25, 2010. Our DSOwhich includes deferred revenue as an offset to accounts receivable in the calculation. calculation, was 52 days as of December 27, 2014, compared to 56 days as of December 28, 2013 and 51 days as of December 29, 2012.

The increasefollowing table presents our net cash used in investing activities:
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in millions)
Acquisition of businesses and assets, net of cash acquired$(234.3) $(29.2) $(16.9)
Capital expenditures(56.9) (39.1) (47.5)
Investments, net(5.6) (6.0) 6.6
Other, net(1.2) 0.3
 2.8
Net cash used in investing activities$(298.0) $(74.0) $(55.0)
The primary use of cash in investing activities in the fiscal year 2014 was our DSOacquisition of Argenta and BioFocus for $182.5 million, cash paid net of cash acquired, and of ChanTest for $51.1 million, cash paid net of cash acquired. The primary use of cash in the fiscal year 2013 was primarily driven by slower collectionsour acquisition of 75% of Vital River for $24.2 million, net of cash acquired, and decreased deferred revenue. Ourof an EMD products and service provider in Singapore for $4.9 million. During the fiscal year 2012, we acquired Accugenix, which is part of our EMD business, for $16.9 million, net of cash acquired.


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 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in millions)
Proceeds from long-term debt and revolving credit agreement$298.9
 $511.8
 $74.1
Proceeds from exercises of stock options73.7
 93.8
 18.4
Payments on long-term debt, capital lease obligation and revolving credit agreement(194.5) (523.3) (140.3)
Purchase of treasury stock(122.0) (165.9) (64.2)
Other, net5.3
 (0.6) 0.9
Net cash provided by (used in) financing activities$61.4
 $(84.2) $(111.1)
For the fiscal year 2014, cash provided by operatingfinancing activities will be impacted by future timingreflected net borrowings of client payments for products and services as evidenced in our DSO. A one-day increase or decrease in our DSO represents a change of approximately $3.1 million of cash provided by operating activities. Our allowance for doubtful accounts was $4.0 million as of December 31, 2011 compared to $4.8 million as of December 25, 2010.
Net cash provided by (used in) investing activities for the years ending December 31, 2011 and December 25, 2010 was $(36.6)$104.4 million and $3.0proceeds from exercises of employee stock options of $73.7 million, respectively. Our capital expenditures during 2011 were $49.1partially offset by treasury stock purchases of $122.0 million of which $34.3 million was relatedmade pursuant to RMS and $14.9 million to PCS.our authorized stock repurchase program. For 2012, we project capital expenditures to be approximately $50.0 million. We anticipate that future capital expenditures will be funded by operating activities, marketable securities and existing credit facilities. During 2011 and 2010, we sold $31.6 million and $72.5 million of marketable securities, respectively.
Netthe fiscal year 2013, cash used in financing activities for the years ending December 31, 2011 and December 25, 2010 was $271.8reflected net debt repayments of $11.5 million and $168.0treasury stock purchases of $165.9 million, respectively. Proceedspartially offset by proceeds from long-termexercises of employee stock options of $93.8 million. For the fiscal year 2012, cash used in financing activities reflected net debt were $250.7repayments of $66.2 million and $579.4 million for the years ending December 31, 2011 and December 25, 2010, respectively. Payments on long-term debt and revolving credit agreements were $253.0 million and $381.5 million for the years ending December 31, 2011 and December 25, 2010, respectively. During 2011, we paid $283.8 million for treasury stock purchases of $64.2 million, partially offset by proceeds from exercises of employee stock options of $18.4 million.

Contractual Commitments and shares of common stock acquired through our ASR program and open market purchases, compared to $356.5 million during 2010.Obligations

Minimum future payments of our contractual obligations at December 31, 201127, 2014 are as follows (in millions)follows:
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 payments82.0
 31.5
 36.0
 14.5
 
Operating leases60.2
 14.7
 20.4
 10.9
 14.1
Pension and supplemental retirement benefits107.0
 6.7
 25.1
 21.9
 53.3
Total contractual cash obligations$988.6
 $67.6
 $528.9
 $324.6
 $67.4
 Payments Due by Period
 Total Less than
1 Year
 1 - 3 Years 3 - 5 Years After
5 Years
 (in millions)
Notes payable (1)
$753.8
 $31.7
 $115.5
 $606.6
 $
Operating leases (2)
44.9
 12.1
 17.2
 7.8
 7.8
Build-to-suit leases (3)
68.6
 2.0
 5.4
 5.4
 55.8
Capital leases1.0
 0.2
 0.8
 
 
Pension and supplemental retirement benefits (4)
128.8
 7.5
 27.9
 25.0
 68.4
Redeemable noncontrolling interest (5)
28.4
 
 28.4
 
 
Commitment to limited partnership investments accounted for under the equity method (6)
45.4
 45.4
 
 
 
Contingent consideration (7)
10.5
 6.7
 3.8
 
 
Total contractual cash obligations$1,081.4
 $105.6
 $199.0
 $644.8
 $132.0
The above table does not reflect unrecognized tax benefits. Refer
(1)Notes payable includes the principal payments on our debt.
(2)We lease properties and equipment for use in our operations. In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses. Amounts reflected within the table, detail future minimum rental commitments under non-cancellable operating leases for each of the periods presented.
(3)In the fiscal year 2014, we acquired a build-to-suit lease as part of our acquisition of Argenta and BioFocus. In accordance with accounting guidance applicable to entities involved with the construction of an asset that will be leased when the construction is completed, we are considered the owner of this property during the construction period. Accordingly, we recorded an asset and a corresponding financing obligation on our consolidated balance sheet for the amount of costs incurred related to the construction for this building. The construction is expected to be completed in the first half of the fiscal year 2015. Upon completion of the building, we will assess and determine if the assets and corresponding liability should be derecognized. As of December 27, 2014, the amount recorded within our consolidated balance sheet as property, plant and equipment and financing obligation totaled $23.1 million. The amounts in the above table represent future minimum rental commitments.
(4)We maintain defined benefit pension plans and other postretirement benefit plans as discussed in Note 10, "Employee Benefit Plans" included in this report. In the above table we have included the discounted estimated benefit payments we

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expect to Note 7make to fund our pension and other postretirement benefit plans. We note that actual payments to the Consolidated Financial Statementspension and other postretirement benefit plans are dependent on a number of factors that may change in future years; such as expected retirement age, rate of compensation increases, medical trend rates, mortality assumptions, etc.  Our funding for pension plans is consistent with applicable laws and regulations.
(5)The estimated cash obligation for redeemable noncontrolling interest, which is exercisable by the non-controlling interest holders in 2016 at fair value, is based on the estimated fair value of the interest as of December 27, 2014.
(6)The timing of the remaining capital commitment payments to limited partnership investments is subject to the procedures of the general partner and is therefore estimated by management.
(7)In connection with our purchase of Argenta and BioFocus, VivoPath and ChanTest, we agreed to make additional payments of up to $10.5 million based upon the achievement of certain financial targets. The contingent consideration obligation included in the table above has not been probability adjusted or discounted.

Tax Related Obligations
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additional discussion on unrecognizedcontractual obligations presented above as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of December 27, 2014, we have $34.6 million of liabilities associated with uncertain tax benefits.positions.

Off-Balance Sheet Arrangements
The conversion featuresWe do not have any relationships with entities often referred to as structured finance or special purpose entities which would have been established for the purpose of our 2013 Notes are equity-linked derivatives.facilitating off-balance sheet arrangements, including "off-balance sheet arrangements" as described in SEC Regulation S-K Item 303. 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.
Recent Accounting Pronouncements
In May 2011, the FASB issued an accounting standard updateexposed to provide guidance on wording changes used to describe many of the requirementsany financing, liquidity, market or credit risk that could arise if we had engaged in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Additionally, the update provides clarification about the FASB's intent regarding the application of existing fair value measurement requirements. This amendment will become effective for us on January 1, 2012 and will be applied prospectively.
In June 2011, the FASB issued an accounting standard update to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The update also requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components, followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income and the total of comprehensive income. This amendment will become effective for us on January 1, 2012 and will be applied retrospectively.
In September 2011, the FASB issued an accounting standard update related to the goodwill impairment test. The revised standard is intended to reduce the cost and complexity of the annual goodwill impairment test by providing companies with the option of performing a qualitative assessment to determine whether future impairment testing is necessary. The revised standard is effective for us on January 1, 2012 and will be applied prospectively.such relationships.
Item 7A.    Quantitative and Qualitative Disclosures about Market Risk
Certain of our financial instrumentsWe are subjectexposed to market risks, includingrisk from changes in interest rate riskrates and foreign currency exchange rates.rates, which could affect our future results of operations and financial condition. We generally do not use financial instruments for trading or other speculative purposes.manage our exposure to these risks through our regular operating and financing activities.

Interest Rate Risk
We entered intoare exposed to changes in interest rates while conducting normal business operations as a result of ongoing financing activities. As of December 27, 2014, our amended credit agreement on September 23, 2011. Our primarydebt portfolio was comprised primarily of floating interest rate exposure results from changesborrowings. A 100-basis point increase in LIBOR or the base rates which are used to determine the applicable interest rates underwould increase our term loans and revolving credit facility in the credit agreement.
        Our potential additionalannual pre-tax interest expense over one year that would result from a hypothetical, instantaneous and unfavorable change of 100 basis points in the interest rate would beby approximately $7.1 million on a pre-tax basis. The book value of our debt approximates fair value.$9.3 million.
        We issued $350.0 million of the 2013 Notes in a private placement in the second quarter of 2006. The 2013 Notes bear an interest rate of 2.25%. The fair market value of the outstanding notes was approximately $339.5 million on December 31, 2011 based on their quoted market value.
Foreign Currency Exchange Rate Risk
We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our earningsfinancial position, results of operations and cash flows. This risk is mitigated by

While the fact that variousfinancial results of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations are principally conducted in their respective local currencies. A portioncurrency. Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our operating results, often in ways that are difficult to predict. In particular, as the U.S. dollar strengthens against other currencies the value of our non-U.S. revenue from our foreign operations is denominatedwill decline when reported in U.S. dollars, withdollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the costs accounted forvalue of non-U.S. expense which will also decline when reported in their local currencies. Additionally, we have exposure on certain intercompany loans. U.S. dollars. As the U.S. dollar weakens versus other currencies the value of the non-U.S. revenue and expenses will increase when reported in U.S. dollars.

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 such transactions as hedges.We do not enter into speculative derivative agreements.
During 2011,2014, we utilized foreign exchange contracts, principally to hedge the impact of currency fluctuations on client

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transactions and certain balance sheet items, including intercompany loans. Theexposures resulting from currency fluctuations. No foreign currency contract outstanding as ofcontracts were open at December 31, 2011 is a non-designated hedge, and is marked to market with changes in fair value recorded to earnings.27, 2014.

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Item 8.    Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
   
  
Consolidated Financial Statements: 
 
 
Consolidated Statements of Income for the fiscal years ended December 31, 2011,27, 2014, December 25, 2010,28, 2013 and December 26, 200929, 2012
Consolidated Statements of Comprehensive Income for the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012
Consolidated Balance Sheets as of December 27, 2014 and December 28, 2013
Consolidated Statements of Cash Flows for the fiscal years ended December 27, 2014, December 28, 2013 and December 29, 2012
 
29, 2012
 
Supplementary Data:

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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 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.


45


Report of Independent Registered Public Accounting Firm

To the Board of Directors and ShareownersShareholders of Charles River Laboratories International, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of Charles River Laboratories International, Inc. and its subsidiariesat December 31, 201127, 2014 and December 25, 2010,28, 2013, and the results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2011 27, 2014in 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, 2011,27, 2014, based on criteria established in Internal Control—Control - Integrated Framework (2013) 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 8.9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integratedaudits. 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.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 27, 201217, 2015

4643


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
 Fiscal Year Ended
 December 31,
2011
 December 25,
2010
 December 26,
2009
Net sales related to products$483,309
 $458,623
 $465,268
Net sales related to services659,338
 674,793
 706,374
Net sales1,142,647
 1,133,416
 1,171,642
Costs and expenses     
Cost of products sold267,966
 252,962
 255,682
Cost of services provided472,439
 495,694
 492,968
Selling, general and administrative198,648
 232,489
 227,663
Goodwill impairment
 305,000
 
Asset impairments7,492
 91,378
 
Termination fee
 30,000
 
Amortization of other intangibles21,796
 24,405
 25,716
Operating income (loss)174,306
 (298,512) 169,613
Other income (expense)     
Interest income1,353
 1,186
 1,712
Interest expense(42,586) (35,279) (21,682)
Other, net(411) (1,477) 1,914
Income (loss) from continuing operations, before income taxes132,662
 (334,082) 151,557
Provision for income taxes17,140
 23
 40,354
Income (loss) from continuing operations, net of income taxes115,522
 (334,105) 111,203
Income (loss) from discontinued operations, net of taxes(5,545) (8,012) 1,399
Net income (loss)109,977
 (342,117) 112,602
Less: Net loss (income) attributable to noncontrolling interests(411) 5,448
 1,839
Net income (loss) attributable to common shareowners$109,566
 $(336,669) $114,441
Earnings (loss) per common share     
Basic:     
Continuing operations attributable to common shareowners$2.26
 $(5.25) $1.73
Discontinued operations$(0.11) $(0.13) $0.02
Net income (loss) attributable to common shareowners$2.16
 $(5.38) $1.75
Diluted:     
Continuing operations attributable to common shareowners$2.24
 $(5.25) $1.72
Discontinued operations$(0.11) $(0.13) $0.02
Net income (loss) attributable to common shareowners$2.14
 $(5.38) $1.74
 Fiscal Year Ended
 December 27,
2014
 December 28,
2013
 December 29,
2012
Service revenue$797,765
 $689,166
 $661,586
Product revenue499,897
 476,362
 467,944
Total revenue1,297,662
 1,165,528
 1,129,530
Costs and expenses:     
Cost of services provided558,578
 497,876
 479,742
Cost of products sold266,424
 272,750
 257,707
Selling, general and administrative269,033
 225,695
 208,248
Amortization of intangible assets25,957
 17,806
 18,068
Operating income177,670
 151,401
 165,765
Other income (expense):     
Interest income1,154
 730
 589
Interest expense(11,950) (20,969) (33,342)
Other income (expense), net10,721
 7,165
 (3,266)
Income from continuing operations, before income taxes177,595
 138,327
 129,746
Provision for income taxes47,671
 32,911
 27,628
Income from continuing operations, net of income taxes129,924
 105,416
 102,118
Loss from discontinued operations, net of income taxes(1,726) (1,265) (4,252)
Net income128,198
 104,151
 97,866
Less: Net income attributable to noncontrolling interests(1,500) (1,323) (571)
Net income attributable to common shareholders$126,698
 $102,828
 $97,295
Earnings (loss) per common share     
Basic:     
Continuing operations attributable to common shareholders$2.76
 $2.18
 $2.12
Discontinued operations$(0.04) $(0.03) $(0.09)
Net income attributable to common shareholders$2.72
 $2.15
 $2.03
Diluted:     
Continuing operations attributable to common shareholders$2.70
 $2.15
 $2.10
Discontinued operations$(0.04) $(0.03) $(0.09)
Net income attributable to common shareholders$2.66
 $2.12
 $2.01









See Notes to Consolidated Financial Statements.

4744



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
Net income$128,198
 $104,151
 $97,866
Foreign currency translation adjustment(48,955) (15,322) 5,318
Unrealized gains on marketable securities
 
 921
Defined benefit plan (losses) gains and prior service costs not yet recognized as components of net periodic pension cost (Note 10):     
Prior service cost and (losses) gains for the period(42,236) 19,293
 (8,634)
Amortization of prior service costs and net gains and losses1,234
 3,017
 2,772
Comprehensive income, before income taxes38,241
 111,139
 98,243
Income tax expense (benefit) related to items of other comprehensive income (Note 8)(9,897) 7,805
 (1,677)
Comprehensive income, net of income taxes48,138
 103,334
 99,920
Less: Comprehensive income related to noncontrolling interests1,044
 1,752
 615
Comprehensive income attributable to common shareholders$47,094
 $101,582
 $99,305




















See Notes to Consolidated Financial Statements.

45

Table of Contents


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
December 31,
2011
 December 25,
2010
December 27,
2014
 December 28,
2013
Assets      
Current assets   
Current assets:   
Cash and cash equivalents$68,905
 $179,160
$160,023
 $155,927
Trade receivables, net184,810
 192,972
257,991
 220,630
Inventories92,969
 100,297
89,043
 89,396
Other current assets79,052
 76,603
99,841
 86,597
Current assets of discontinued businesses107
 3,862
Total current assets425,843
 552,894
606,898
 552,550
Property, plant and equipment, net738,030
 752,657
676,797
 676,182
Goodwill, net197,561
 198,438
Other intangibles, net93,437
 121,236
Goodwill321,077
 230,701
Other intangible assets, net178,875
 84,537
Deferred tax asset44,804
 45,003
23,193
 26,822
Other assets57,659
 62,323
78,352
 61,964
Long-term assets of discontinued businesses986
 822
Total assets$1,558,320
 $1,733,373
$1,885,192
 $1,632,756
Liabilities and Equity      
Current liabilities   
Current liabilities:   
Current portion of long-term debt and capital leases$14,758
 $30,582
$31,904
 $21,437
Accounts payable34,332
 30,627
33,815
 31,770
Accrued compensation41,602
 48,918
71,569
 58,461
Deferred revenue56,530
 66,905
78,124
 54,177
Accrued liabilities54,377
 59,369
67,380
 56,712
Other current liabilities14,033
 20,095
11,079
 22,546
Current liabilities of discontinued businesses1,165
 3,284
Current liabilities of discontinued operations2,299
 1,931
Total current liabilities216,797
 259,780
296,170
 247,034
Long-term debt and capital leases703,187
 670,270
745,958
 642,352
Other long-term liabilities108,451
 114,596
130,361
 70,632
Long-term liabilities of discontinued businesses2,522
 
Long-term liabilities of discontinued operations8,357
 8,080
Total liabilities1,030,957
 1,044,646
1,180,846
 968,098
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, 2010785
 775
Capital in excess of par value2,056,921
 1,996,874
Commitments and contingencies (Notes 2, 7, 9 and 12)
 
Redeemable noncontrolling interest28,419
 20,581
Equity:   
Preferred stock, $0.01 par value; 20,000 shares authorized; no shares issued and outstanding
 
Common stock, $0.01 par value; 120,000 shares authorized; 84,503 shares issued and 47,327 shares outstanding at December 27, 2014 and 82,523 shares issued and 47,554 shares outstanding at December 28, 2013845
 825
Additional paid-in capital2,307,640
 2,206,155
Accumulated deficit(465,596) (575,162)(138,775) (265,473)
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 income4,593
 33,635
Total shareowners' equity525,583
 687,423
Treasury stock, at cost, 37,176 shares and 34,969 shares at December 27, 2014 and December 28, 2013, respectively(1,423,260) (1,305,880)
Accumulated other comprehensive income (loss)(74,247) 5,357
Total equity attributable to common shareholders672,203
 640,984
Noncontrolling interests1,780
 1,304
3,724
 3,093
Total equity527,363
 688,727
Total liabilities and equity$1,558,320
 $1,733,373
Total equity and redeemable noncontrolling interest704,346
 664,658
Total liabilities, equity and redeemable noncontrolling interest$1,885,192
 $1,632,756

See Notes to Consolidated Financial Statements.

46



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Fiscal Year EndedFiscal Year Ended
December 31,
2011
 December 25,
2010
 December 26,
2009
December 27,
2014
 December 28,
2013
 December 29,
2012
Cash flows relating to operating activities          
Net income (loss)$109,977
 $(342,117) $112,602
Less: Income (loss) from discontinued operations(5,545) (8,012) 1,399
Income (loss) from continuing operations115,522
 (334,105) 111,203
Net income$128,198
 $104,151
 $97,866
Less: Loss from discontinued operations(1,726) (1,265) (4,252)
Income from continuing operations129,924
 105,416
 102,118
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:          
Depreciation and amortization85,230
 93,649
 89,962
96,445
 96,636
 81,275
Amortization of debt issuance costs and discounts20,010
 19,777
 13,798
1,725
 9,561
 17,622
Goodwill impairment
 305,000
 
Impairment charges7,492
 91,378
 3,460
582
 4,202
 3,548
Pension curtailment
 
 (674)
Non-cash compensation21,706
 25,526
 23,652
Stock-based compensation31,035
 24,542
 21,855
Deferred income taxes(8,668) (42,342) 16,845
7,060
 (846) 1,311
(Gain) loss on investments in limited partnerships(9,301) (5,864) 618
Other, net(7,436) 1,797
 906
(1,564) 755
 5,519
Changes in assets and liabilities:          
Trade receivables7,669
 (5,640) 21,082
(28,088) (19,492) (16,266)
Inventories3,766
 1,989
 (4,376)(2,956) (1,571) 785
Other assets505
 (2,131) 1,461
(5,145) 2,421
 (117)
Accounts payable2,208
 71
 (11,349)4,599
 (7,080) (3,257)
Accrued compensation(7,412) 4,482
 (9,545)13,631
 11,926
 4,612
Deferred revenue(9,515) (4,209) (14,468)22,244
 (3,297) (915)
Accrued liabilities(1,355) 5,501
 (6,671)8,284
 759
 (7,050)
Taxes payable and prepaid taxes(13,782) 13,087
 (15,095)(7,090) (3,054) 2,331
Other liabilities(9,098) (5,594) (4,614)(9,253) (5,969) (5,983)
Net cash provided by operating activities206,842
 168,236
 215,577
252,132
 209,045
 208,006
Cash flows relating to investing activities          
Acquisition of businesses and assets, net of cash acquired
 
 (83,347)(234,267) (29,218) (16,861)
Capital expenditures(49,143) (42,860) (79,853)(56,925) (39,154) (47,534)
Purchases of investments(24,556) (27,600) (98,991)(26,648) (17,566) (18,537)
Proceeds from sale of investments31,607
 72,464
 50,484
Proceeds from sale of investments and distributions from investments in limited partnerships21,000
 11,584
 25,156
Other, net5,447
 950
 2,623
(1,150) 307
 2,786
Net cash provided by (used in) investing activities(36,645) 2,954
 (209,084)
Net cash used in investing activities(297,990) (74,047) (54,990)
Cash flows relating to financing activities          
Proceeds from long-term debt and revolving credit agreement250,708
 579,372
 18,000
298,920
 511,804
 74,116
Proceeds from exercises of stock options and warrants20,625
 4,492
 819
Payments on long-term debt, capital lease obligation and revolving credit agreement(252,965) (381,535) (54,130)
Purchase of treasury stock and Accelerated Stock Repurchase Program(283,795) (356,527) (45,897)
Proceeds from exercises of stock options73,688
 93,789
 18,359
Payments on long-term debt, capital lease obligations and revolving credit agreement(194,536) (523,304) (140,347)
Purchase of treasury stock(122,018) (165,932) (64,189)
Other, net(6,359) (13,697) 231
5,360
 (594) 940
Net cash used in financing activities(271,786) (167,895) (80,977)
Net cash provided by (used in) financing activities61,414
 (84,237) (111,121)
Discontinued operations          
Net cash provided by (used in) operating activities(1,559) 777
 9,467
Net cash provided by investing activities
 2,807
 263
Net cash provided by financing activities
 
 
Net cash provided by (used in) discontinued operations(1,559) 3,584
 9,730
Net cash used in operating activities from discontinued operations(1,081) (1,906) (106)
Effect of exchange rate changes on cash and cash equivalents(7,107) (10,293) 3,736
(10,379) (2,613) (1,009)
Net change in cash and cash equivalents(110,255) (3,414) (61,018)4,096
 46,242
 40,780
Cash and cash equivalents, beginning of period179,160
 182,574
 243,592
155,927
 109,685
 68,905
Cash and cash equivalents, end of period$68,905
 $179,160
 $182,574
$160,023
 $155,927
 $109,685
Supplemental cash flow information     
Cash paid for interest$22,231
 $16,140
 $8,104
Cash paid for taxes$29,124
 $22,068
 $27,180
Capitalized interest$298
 $56
 $2,496


See Notes to Consolidated Financial Statements.

47



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
 Fiscal Year Ended
 December 27,
2014
 December 28,
2013
 December 29,
2012
Supplemental cash flow information:     
Cash paid for income taxes$29,704
 $19,139
 $17,032
Cash paid for interest$10,199
 $12,029
 $15,145
Non-cash investing and financing activities:     
Capitalized interest$1,032
 $243
 $467
Additions to property, plant and equipment, net$4,355
 6,960
 2,778
Assets acquired under capital lease$18,690
 

69








































See Notes to Consolidated Financial Statements.

48



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(dollars in thousands)
 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 income112,602
 114,441
         (1,839)
Foreign currency translation adjustment47,248
   47,250
       (2)
Net decrease in unrecognized pension net gain/loss and prior service costs(6,328)   (6,328)       
Unrealized gain on marketable securities768
   768
       
Total comprehensive income154,290
           (1,841)
Tax detriment associated with stock issued under employee compensation plans(2,203)       (2,203)    
Exercise of warrants22
       22
    
Issuance of stock under employee compensation plans797
     5
 792
    
Acquisition of treasury shares(44,603)     
 
 (44,603)  
Stock-based compensation23,813
       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 securities853
   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 plans4,590
     4
 4,586
    
Acquisition of treasury shares(298,172)       
 (298,172)  
Accelerated Stock Repurchase equity instrument(58,355)       (58,355)    
Stock-based compensation25,737
       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 income109,977
 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 income81,000
           476
Tax detriment associated with stock issued under employee compensation plans(802)       (802)    
Issuance of stock under employee compensation plans20,527
     10
 20,517
    
Acquisition of treasury shares(269,655)       32,766
 (302,421)  
Accelerated Stock Repurchase equity instrument(14,140)       (14,140)    
Stock-based compensation21,706
       21,706
    
Balance at December 31, 2011$527,363
 $(465,596) $4,593
 $785
 $2,056,921
 $(1,071,120) $1,780
 Redeemable
Noncontrolling
Interest
  Common Stock 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 Accumulated
Other
Comprehensive
Income (Loss)
 Treasury Stock 
Total Equity
Attributable
to Common
Shareholders
 
Noncontrolling
Interest
 
Total
Equity
  Shares Amount    Shares Amount   
December 31, 2011$
  78,474
 $785
 $2,056,921
 $(465,596) $4,593
 29,598
 $(1,071,120) $525,583
 $1,780
 $527,363
Components of comprehensive income, net of income taxes:                      
Net income
  
 
 
 97,295
 
 
 
 97,295
 571
 97,866
Other comprehensive income
  
 
 
 
 2,010
 
 
 2,010
 44
 2,054
Total comprehensive income
  

 

 

 

 

 

 
 99,305
 615
 99,920
Tax benefit associated with stock issued under employee compensation plans
  
 
 125
 
 
 
 
 125
 
 125
Issuance of stock under employee compensation plans
  1,134
 11
 18,415
 
 
 
 
 18,426
 
 18,426
Acquisition of treasury shares
  
 
 
 
 
 1,790
 (64,489) (64,489) 
 (64,489)
Stock-based compensation
  
 
 21,855
 
 
 
 
 21,855
 
 21,855
December 29, 2012
  79,608
 796
 2,097,316
 (368,301) 6,603
 31,388
 (1,135,609) 600,805
 2,395
 603,200
Components of comprehensive income, net of income taxes:                      
Net income687
  
 
 
 102,828
 
 
 
 102,828
 636
 103,464
Other comprehensive income (loss)367
  
 
 
 
 (1,246) 
 
 (1,246) 62
 (1,184)
Total comprehensive income1,054
  

 

 

 

 

 

 
 101,582
 698
 102,280
Redeemable noncontrolling interest acquired in business acquisition8,963
  
 
 
 
 
 
 
 
 
 
Adjustment of redeemable noncontrolling interest to fair value10,564
  
 
 (10,564) 
 
 
 
 (10,564) 
 (10,564)
Tax benefit associated with stock issued under employee compensation plans
  
 
 1,069
 
 
 
 
 1,069
 
 1,069
Issuance of stock under employee compensation plans
  2,915
 29
 93,792
 
 
 
 
 93,821
 
 93,821
Acquisition of treasury shares
  
 
 
 
 
 3,581
 (170,271) (170,271) 
 (170,271)
Stock-based compensation
  
 
 24,542
 
 
 
 
 24,542
 
 24,542
December 28, 201320,581
  82,523
 825
 2,206,155
 (265,473) 5,357
 34,969
 (1,305,880) 640,984
 3,093
 644,077
Components of comprehensive income, net of income taxes:                      
Net income855
  
 
 
 126,698
 
 
 
 126,698
 645
 127,343
Other comprehensive loss(442)  
 
 
 
 (79,604) 
 
 (79,604) (14) (79,618)
Total comprehensive income413
  

 

 

 

 

 

 
 47,094
 631
 47,725
Adjustment of redeemable noncontrolling interest to fair value7,425
  
 
 (7,425) 
 
 
 
 (7,425) 
 (7,425)
Tax benefit associated with stock issued under employee compensation plans
  
 
 4,301
 
 
 
 
 4,301
 
 4,301
Issuance of stock under employee compensation plans
  1,980
 20
 73,574
 
 
 
 
 73,594
 
 73,594
Acquisition of treasury shares
  
 
 
 
 
 2,207
 (117,380) (117,380) 
 (117,380)
Stock-based compensation
  
 
 31,035
 
 
 
 
 31,035
 
 31,035
December 27, 2014$28,419
  84,503
 $845
 $2,307,640
 $(138,775) $(74,247) 37,176
 $(1,423,260) $672,203
 $3,724
 $675,927
See Notes to Consolidated Financial Statements.

4849


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 PoliciesDESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business
Charles River Laboratories International, Inc. (the Company), together with its subsidiaries, is a leading global providerfull service, early-stage contract research organization (CRO). The Company has built upon its core competency of solutions that accelerate the druglaboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and development process including research modelssafety assessment services, both Good Laboratory Practice (GLP) and associatednon-GLP, that are able to support its clients from target identification through preclinical development. The Company also provides a suite of products and services to support its clients’ manufacturing activities.

Principles of Consolidation
The Company's consolidated financial statements reflect its financial statements and outsourced preclinical services. Ourthose of its wholly-owned and majority-owned subsidiaries. For consolidated entities in which the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and transactions are eliminated in consolidation.

The Company's 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.
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
Segment Reporting
During the quarter ended June 28, 2014, following its acquisition of Estimatesthe CRO services division of Galapagos N.V. (Argenta and BioFocus), the Company revised its reportable segments to ensure alignment with the Company's view of the business. The Company reviewed the new and existing markets addressed by the business, the recently revised go-to-market strategy, long-term operating margins, and the discrete financial information available to its Chief Operating Decision Maker, and considered how its businesses aggregate based on these qualitative and quantitative factors. Based on this review, the Company identified three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA) and Manufacturing Support (Manufacturing). The Company reported segment results on this basis for the current period and retrospectively for all comparable prior periods.

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 assumptionsrevised reportable segments 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 and Cash Equivalents
Cash equivalents include time deposits and highly liquid investments with original maturities at the purchase date of three months or less.
Trade Receivables
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:
 December 31, 2011 December 25, 2010
Client receivables$159,381
 $170,696
Unbilled revenue29,446
 27,095
Total188,827
 197,791
Less allowance for doubtful accounts(4,017) (4,819)
Net trade receivables$184,810
 $192,972
Research Models and ServicesDiscovery and Safety AssessmentManufacturing Support
Research Models
Discovery Services (2)
Endotoxin and Microbial Detection (EMD)
Research Model Services (1)
Safety AssessmentAvian Vaccine Services
Biologics Testing Solutions
Concentrations of Credit Risk(1) Research Model Services includes Genetically Engineered Models and Services (GEMS), Research Animal Diagnostic Services (RADS), and Insourcing Solutions (IS).
Financial instruments that potentially subject us(2) Discovery Services includes both the In Vivo Discovery business, and the Early Discovery business. Early Discovery includes Argenta and BioFocus, which were acquired in April 2014, and ChanTest Corporation (ChanTest), which was acquired in October 2014.

Prior to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. We place our cash and cash equivalentsrecasting the reportable segments, the businesses were reported 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 thetwo segments as follows:
Research Models and ServicesPreclinical Services
Research Models (3)
Discovery Services
Research Model Services (4)
Safety Assessment
Endotoxin and Microbial DetectionBiologics Testing Solutions
(3) Research Models included Avian Vaccine Services.

4950

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

(4) Research Model Services included GEMS, RADS, IS and Discovery Research Services. As part of the segment revisions, the former Discovery Research Services was folded into the Company’s Discovery Services business, previously located under the Preclinical Services segment.

Use of Estimates
The preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States (U.S. GAAP) requires that the Company makes estimates and judgments that may affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, judgments and methodologies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Changes in estimates are reflected in reported results in the period in which they become known.

Cash and Cash Equivalents
Cash equivalents include money market funds and time deposits with remaining maturities at the purchase date of three months or less.

Trade Receivables, Net
The Company records trade receivables net of an allowance for doubtful accounts. An allowance for doubtful accounts is established based on historical collection information, a review of major client accounts receivable balances and current economic conditions in the geographies in which it operates. Amounts determined to be uncollectible are charged or written off against the allowance.

Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments and trade receivables. The Company places cash and cash equivalents and investments in various financial institutions with high credit rating and limits the amount of credit exposure to any one financial institution. Trade receivables are primarily from clients in the pharmaceutical and biotechnology industries.industries, as well as academic and government institutions. Concentrations of credit risk with respect to trade receivables, which are typically unsecured, are limited due to the wide variety of customers using the Company's products and services as well as their dispersion across many geographic areas. No single client accounted for more than 5% of our net salesrevenue or trade receivables for any period presented.
Marketable Securities
InvestmentsFair Value Measurements
The accounting standard for fair value measurements defines fair value, establishes a framework for measuring fair value in marketable securities are reportedaccordance with U.S. GAAP, and requires detailed disclosures about fair value measurements. Under this standard, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has certain financial assets and liabilities recorded at fair value and consist of time deposits and auction rate securities.which have been classified as Level 1, 2 or 3 within the fair value hierarchy:
Realized gains and losses on securities are included in earnings and
Level 1 - Fair values are determined usingutilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the specific identification method. Unrealized holding gainsCompany has the ability to access;
Level 2 - Fair values are determined by utilizing quoted prices for identical or similar assets and losses on securities classifiedliabilities in active markets or other market observable inputs such 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, yield curves and foreign currency spot rates;
Level 3 - Prices or valuations that reset approximately every 35 days. require inputs that are both significant to the fair value measurement and unobservable.

The auction rate securities owned were rated AAAfair value hierarchy level is determined by a major credit rating agencyasset or liability class based on the lowest level of significant input. The observability of inputs may change for certain assets or liabilities. This condition could cause an asset or liability to be reclassified between levels.
Valuation methodologies used for assets and are either commercially insuredliabilities measured 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 recordeddisclosed at fair value. We have classified these investmentsvalue are 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.follows:
The amortized cost, gross unrealized gains, gross unrealized losses andCash equivalents- Valued at quoted market prices determined through third party pricing services.
Life insurance policies- Valued at cash surrender value based on fair value for marketable securities by major security type were as follows:
 December 31, 2011
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Time deposits$5,359
 $
 $
 $5,359
Auction rate securities11,972
 
 (921) 11,051
 $17,331
 $
 $(921) $16,410
 December 25, 2010
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Time deposits$9,834
 $
 $
 $9,834
Auction rate securities11,974
 
 (597) 11,377
 $21,808
 $
 $(597) $21,211
Maturities of debt securities were as follows:
 December 31, 2011 December 25, 2010
 
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due less than one year$5,359
 $5,359
 $9,834
 $9,834
Due after one year through five years
 
 
 
Due after ten years11,972
 11,051
 11,974
 11,377
 $17,331
 $16,410
 $21,808
 $21,211
Inventories
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 tounderlying investments.

5051

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Redeemable noncontrolling interest- Valued primarily using the income approach based on estimated future cash flows of the underlying business based on the Company's projected financial data discounted by a weighted average cost of salescapital.
Contingent consideration- Valued based on a probability-weighting of the future cash flows associated with the potential outcomes.

Inventories
Inventories are stated at the lower of cost or market. Cost is determined on the average cost method for the small model business and first-in-first-out for the Company's large model and EMD businesses. For the small model business, cost includes direct materials such as feed and bedding, costs of personnel directly involved in the care of the models, and an allocation of facility overhead. For the large model business, cost is primarily the external cost paid to acquire the model. Certain businesses value inventory based on standard costs, which are periodically compared to and adjusted to actual costs. Inventory costs are charged to cost of revenue in the period the modelsproducts are sold. Reserves are recordedsold to reduce the carrying value foran external party. The Company analyzes its inventory levels on a quarterly basis and writes down inventory that is determined to be damaged, obsolete or otherwise unableunmarketable, with a corresponding charge to becost of products sold.
The composition of inventories is as follows:
 December 31, 2011 December 25, 2010
Raw materials and supplies$13,987
 $13,153
Work in process13,533
 13,869
Finished products65,449
 73,275
Inventories$92,969
 $100,297
Other Current Assets
Other current assets consist of assets we intend to settle within the next twelve months.
 December 31, 2011 December 25, 2010
Prepaid assets$22,828
 $21,434
Deferred tax asset30,894
 31,251
Marketable securities5,359
 9,834
Prepaid income tax19,742
 13,856
Restricted cash229
 228
Other current assets$79,052
 $76,603

Property, Plant and Equipment, Net
Property, plant and equipment, including improvements that significantly add to productive capacity or extend useful life, are recordedcarried at cost whileand are subject to review for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The cost of normal, recurring, or periodic repairs and maintenance activities related to property, plant and repairs areequipment is expensed as incurred. We capitalize interest and period costs onIn addition, the Company capitalizes 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 externaluse computer software development costs.

Interest costs incurred during the application development stageconstruction of internalmajor capital projects are capitalized until the underlying asset is ready for its intended use, software. Depreciation is calculated for financial reporting purposesat which point the interest costs are amortized as depreciation expense over the life of the underlying asset.

The Company generally depreciates the cost of its property, plant and equipment using the straight-line method based onover the estimated useful lives of the respective assets as follows: buildings, 20 to 40 years; machinery

Estimated
useful lives
(in years)
LandIndefinite
Buildings20 - 40
Machinery and equipment3 - 20
Furniture and fixtures5 - 10
Computer hardware and software3 - 8
Vehicles3 - 5
Leasehold improvementsLesser of useful life or lease term

When the Company disposes of property, plant and equipment, 3 to 20 years; furnitureit removes the associated cost and fixtures, 5 to 10 years; vehicles, 3 to 5 years;accumulated depreciation from the related accounts on its consolidated balance sheet and leasehold improvements, the shorterincludes any resulting gain or loss in its consolidated statement 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.income.


Business Combinations









The Company accounts for acquisitions as business combinations under the acquisition method of accounting. The Company allocates the amounts that it pays for each acquisition to the assets it acquires and liabilities it assumes based on their fair values at the dates of acquisition, including identifiable intangible assets. The Company bases the fair value of identifiable intangible assets acquired in a business combination on detailed valuations that use information and assumptions determined by management and which consider management's best estimates of inputs and assumptions that a market participant would use.


5152

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Contingent Consideration
The compositionconsideration for the Company’s acquisitions often includes future payments that are contingent upon the occurrence of a particular event. The Company records an obligation for such contingent payments at fair value on the acquisition date. The Company estimates the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and thus likelihood of making related payments. The Company revalues these contingent consideration obligations each reporting period. Changes in the fair value of the contingent consideration obligations are recognized within our consolidated statements of income as a component of selling, general and administrative expenses. Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to the discount rates and changed in the assumed probabilities of successful achievement of certain financial targets.

Discount rates in the Company’s valuation models represent a measure of the credit risk associated with settling the liability. The period over which the Company discounts its contingent obligations is typically based on when the contingent payments would be triggered. These fair value measurements are based on significant inputs not observable in the market. See Note 5, "Fair Value," in the accompanying notes to consolidated financial statements for additional information.

Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but reviewed for impairment on an annual basis, during the fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of the Company's reporting units below their carrying amounts.

The Company has the option to first assess qualitative factors to determine whether it is necessary to perform the two-step impairment test. If the Company elects this option and believes, as a result of the qualitative assessment, that it is more-likely-than-not that the carrying value of goodwill is not recoverable, the quantitative two-step impairment test is required; otherwise, no further testing is required. Alternatively, the Company may elect to not first assess qualitative factors and immediately perform the quantitative two-step impairment test. In the first step, the Company compares the fair value of its reporting units to their carrying values. If the carrying values of the net assets assigned to the reporting units exceed the fair values of the reporting units, then the second step of the impairment test is performed in order to determine the implied fair value of the Company’s goodwill. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then the Company would record an impairment loss equal to the difference.

Long-Lived Assets
Long-lived assets to be held and used, including property, plant and equipment is as follows:
 December 31, 2011 December 25, 2010
Land$40,517
 $40,409
Buildings696,275
 694,342
Machinery and equipment348,795
 327,353
Leasehold improvements29,975
 26,772
Furniture and fixtures10,663
 10,473
Vehicles5,226
 5,456
Computer hardware and software105,563
 106,073
Construction in progress57,661
 45,465
Total1,294,675
 1,256,343
Less accumulated depreciation(556,645) (503,686)
Net property, plant and equipment$738,030
 $752,657
Depreciation expense for 2011, 2010and 2009 was $63,435, $69,244 and $64,246, respectively.
Valuation and Impairment of Goodwill and Other Intangible Assets
Valuation of certain long-lived assets includingdefinite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and goodwill requires significant judgment. Assumptions and estimatesits eventual disposition. In the event that such cash flows are used in determiningnot expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their fair values.

Long-lived assets to be disposed of are carried at fair value less costs to sell.

Limited Partnerships
The Company invests in several venture capital limited partnerships that invest in start-up companies primarily in the life sciences industry. Our ownership interest in these limited partnerships ranges from 3.8% to 12.0%. As of assets acquired and liabilities assumed in a business acquisition. A significantDecember 27, 2014, the total commitment to these entities was $65.0 million, of which $19.6 million has been funded. Due to the percentage of ownership, the Company accounts for such investments under the equity method of accounting, whereby its portion of the purchase price in our acquisitions is assigned to intangible assetsinvestment gains 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, suchlosses, 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. Changesreported in the initial assumptions could lead to changes in amortization expensefund's financial statements on a quarterly lag each reporting period, is recorded in our future financial statements.
As of December 31, 2011, we had recorded goodwill and other intangibles of $290,998 inincome, net. In addition, 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, ifadjusts the carrying value exceeds estimatedof these investments to reflect its estimate of changes to fair value there is an indicationsince the fund's financial statements based information from the fund's management team, market prices of potential impairment and the second step is performed to measure the amount of impairment.
The second stepknown public holdings of the goodwill impairment process, if required, involvesfund and other information. During the calculationfiscal years 2014, 2013 and 2012, the Company recognized gains (losses) related to these investments of an implied fair value$9.3 million, $5.9 million, $(0.6) million, respectively. The Company received distributions of $7.4 million in 2014. No distributions were made to the Company in 2013 or 2012.


5253

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

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 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 client relationships.
Valuation and Impairment of Long-Lived Assets
We assess the carrying value of property, plant and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider important which could trigger an impairment review include but are not limited to the following:
significant underperformance relative to expected historical or projected future operating results;
significant negative industry or economic trends; or
significant changes or developments in strategy or operations that negatively affect the utilization of our long-lived assets.
Should we determine that the carrying value of long-lived tangible assets may not be recoverable, we will measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in our current business model. We may also estimate fair value based on market prices for similar assets, as appropriate. Significant judgments are required to estimate future cash flows, including the selection of appropriate discount rates and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for these assets.
Other 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:
 December 31, 2011 December 25, 2010
Deferred financing costs$9,239
 $11,167
Cash surrender value of life insurance policies25,057
 31,054
Long term marketable securities11,051
 11,377
Other assets12,312
 8,725
Other assets$57,659
 $62,323

Equity Method Affiliates
In 2009, we entered into a limited partnership which invests in biotechnology and medical device companies. We committed $20,000, or approximately 12%, of the limited partnership's total committed capital. As of December 31, 2011, we have contributed $5,447 of our total committed capital of $20,000. We recognized equity income/(loss) of $869 and $(579)for the years ended December 31, 2011 and December 25, 2010, respectively. This income/(loss) is reported as Other Income (Expense), Net. As of December 31, 2011, Equity Method Affiliates had a carrying value of $5,737, which is reported in Other Assets on the consolidated balance sheets. Subsequent to year end 2011, an investment held by the limited partnership completed its initial public offering, which will result in income in 2012.
Accounting for Investment in Life Insurance Contracts
Our investmentInvestments in life insurance contracts are recorded at faircash surrender value. Accordingly, we recognize theThe initial investment at the transaction price is recognized and remeasure the investment atremeasured based on fair value of underlying investments or contractual value each reporting period. Investments in and redemptions of these life insurance contracts are reported as part of purchases of investmentscash flows from investing activities in the consolidated statement of cash flows. At December 31, 2011, we held 6927, 2014 and December 28, 2013, the Company held 40 and 30 contracts, respectively, with a face value of $68.2 million and $67.5 million, respectively.

Restructuring and Contract Termination Costs
The Company makes estimates and judgments regarding the amount and timing of our restructuring expense and liability, including current and future period termination benefits, lease termination costs, and other exit costs to be incurred when related actions take place. The Company also assesses the recoverability of certain long-lived assets employed in the business and, in certain instances, shortens the expected useful life of the assets based on changes in their expected use. When the Company determines that the useful lives of assets are shorter than we had originally estimated, it records additional depreciation to reflect the assets’ new shorter useful lives. Severance and other related costs and asset-related charges are reflected within the Company’s consolidated statement of income as a component of cost of revenue or selling, general and administrative expenses.

Stock-Based Compensation
The Company grants stock options, restricted stock, restricted stock units and performance share units (PSUs) to employees and stock options and restricted stock to non-employee directors under stock-based compensation plans. Stock-based compensation is recognized as an expense in the consolidated financial statements based on the grant date fair value, adjusted for estimated forfeitures, over the requisite service period.
For stock options, restricted stock and restricted stock units that vest based on service conditions, the Company uses the straight-line method to allocate compensation expense to reporting periods. The Company records the expense for PSU grants subject to performance and/or market conditions using the accelerated attribution method over the remaining service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.
The fair value of stock options granted is calculated using the Black-Scholes option-pricing model and the fair value of PSUs is estimated using a lattice model with a Monte Carlo simulation, both of which require the use of subjective assumptions including volatility and expected term, among others. The expected volatility assumption is typically determined using the historical volatility of the Company's common stock over the expected life of the stock-based award. The expected term is determined using historical option exercise activity. The fair value of restricted stock and restricted stock units is based on the market value of the Company’s common stock on the date of grant.

Revenue Recognition
The Company recognizes revenue when all of the following conditions are satisfied: persuasive evidence of an arrangement exists, delivery has occurred or services have been provided, the price to the customer is fixed or determinable, and collectibility is reasonably assured.
Service revenue is generally evidenced by client contracts, which range in duration from a few weeks to a few years and typically take the form of an agreed upon rate per unit or fixed fee arrangements. Such contracts typically do not contain acceptance provisions based upon the achievement of certain study or laboratory testing results. Revenue of agreed upon rate per unit contracts is recognized as services are performed, based upon rates specified in the contract. In cases where performance spans reporting periods, revenue of fixed fee contracts is recognized as services are performed, measured on the ratio of outputs or performance obligations completed to the total contractual outputs or performance obligations to be provided. Changes in estimated effort to complete the fixed fee contract are reflected in the period in which the change becomes known. Changes in scope of work are common, especially under long-term contracts, and generally result in a change in contract value. Once the client has agreed to the changes in scope and renegotiated pricing terms, the contract value is amended and revenue is typically recognized as described above.
Billing schedules and payment terms are generally negotiated on a contract-by-contract basis. Payments received in excess of revenue recognized are recorded as deferred revenue. As the contracted services are subsequently performed and the associated revenue is recognized, the deferred revenue balance is reduced by the amount of revenue recognized during the period. In other

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(

cases, services may be provided and revenue is recognized before the client is invoiced. In these cases, revenue recognized will exceed amounts billed and the difference, representing amounts which are currently unbillable to the customer pursuant to contractual terms, is recorded as an unbilled receivable. Once the client is invoiced, the unbilled receivable is reduced for the amount billed, and a corresponding trade receivable is recorded.
Most contracts are terminable by the client, either immediately or upon notice. These contracts often require payment to the Company of expenses to wind down the project, fees earned to date or, in some cases, a termination fee. Such payments are included in revenues when earned.
The Company recognizes product revenue net of allowances for estimated returns, rebates and discounts when title and risk of loss pass to customers. When the Company sells equipment with specified acceptance criteria, it assesses its ability to meet the acceptance criteria in order to determine the timing of revenue recognition. The Company would defer revenue until completion of customer acceptance testing if it is not able to demonstrate the ability to meet such acceptance criteria.

Advertising Costs
Advertising costs are expensed as incurred. For the fiscal years 2014, 2013 and 2012, advertising costs totaled $1.3 million, $1.1 million and $0.9 million, respectively.
Income Taxes
The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statements carrying amounts and their respective tax basis. The Company measures deferred tax assets and liabilities using the enacted tax rates expected to be in effect when the temporary differences are expected to be settled. The Company evaluates the realizability of its deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.

The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. The Company evaluates uncertain tax positions on a quarterly basis and considers various factors, including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. The Company also accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense.

Translation of Foreign Currencies
The functional currency for each foreign subsidiary is their local currency. For the Company’s non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign exchange rates for the period. Adjustments resulting from the translation of the financial statements of our foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in thousands, exceptaccumulated other comprehensive income, a separate component of equity.

Pension and Other Retiree Benefit Plans
The Company recognizes the funded status of its defined benefit pension and other postretirement benefit plans as an asset or liability. This amount is defined as the difference between the fair value of plan assets and the benefit obligation. The Company measures plan assets and benefit obligations as of the date of its fiscal year end.
The key assumptions used to calculate benefit obligations and related pension costs include expected long-term rate of return on plan assets, discount rate, and expected future rate of compensation increases. In addition, the Company's actuaries utilize other assumptions such as withdrawal and mortality rates. Assumptions are determined based on the Company's data and appropriate market indicators, and evaluated each year as of the plan's measurement date.
The expected long-term rate of return on plan assets reflects the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In determining the expected long-term rate of return on plan assets, the Company considers the relative weighting of plan assets, the historical performance of total plan assets and individual asset classes and economic and other indicators of future performance.

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The discount rate reflects the rate the Company would have to pay to purchase high-quality investments that would provide cash sufficient to settle its current pension obligations. In the fiscal year 2014, the Company selected the discount rate based on a cash-flow matching analysis using Towers Watson’s proprietary Bond:Link tool.  Prior to the fiscal year 2014, the Company employed a cash-flow matching methodology, which used the spot yield curve underlying the Citigroup Index. The refined estimation technique permits the Company to more closely match cash flows to the expected payments to participants than would be possible with the previously used yield curve model. This refinement reduced the Company's benefit obligations as of December 27, 2014 by $5.5 million.
The rate of compensation increase reflects the expected annual salary increases for the plan participants based on historical experience and the current employee compensation strategy.
The Company is required to recognize as a component of other comprehensive income, net of tax, the actuarial gains or losses and prior service costs or credits that arise but were not previously required to be recognized as components of net periodic benefit cost. Other comprehensive income is adjusted as these amounts are later recognized in income as components of net periodic benefit cost.
In the fiscal year 2014, for the U.S. plans, the Company adopted new mortality tables (RP-2014) and a new mortality improvement scale (MP-2014), which increased the Company’s benefit obligations by $6.0 million as of December 27, 2014. The Company previously used the RP-2000 mortality tables with mortality improvements projected using Scale AA to 2021 for annuitants and to 2029 for non-annuitants. In addition, for the U.K. plans, the mortality table was updated to S2 Series (SAPS) using the CMI 2013 core projection with a 1.25% per annum long-term mortality improvement. This update increased the Company’s benefit obligations by $1.9 million as of December 27, 2014. Prior to the fiscal year 2014, the Company used the S1 Series (SAPS) mortality table and the CMI 2009 core projection with a 1.25% per annum long-term improvement. The new mortality information reflects improved life expectancies and an expectation that the trend will continue.
Earnings Per Share
Basic earnings per share amounts)

with a carrying valueare calculated by dividing net income attributable to common shareholders by the weighted average number of $25,057common shares outstanding during the period. Except where the result would be antidilutive to income from continuing operations, diluted earnings per share is computed using the treasury stock method, assuming the exercise of stock options and a face valuethe vesting of $48,772.
Restructuring and Contract Termination Costs
We recognize obligations associated with restructuring activities and contract termination costs by recording a liability at fair value for the costs associated with an exitrestricted stock awards, restricted stock units, or disposal activityPSUs, as well as coststheir related income tax effects.
New Accounting Pronouncements
In July 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Losses Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” The ASU requires an entity to terminatepresent an unrecognized tax benefit as a contractreduction of the deferred tax asset for a net operating loss, or similar loss or tax credit carryforward, as opposed to a liability, unless certain circumstances exist. The ASU became effective during the Company’s first fiscal quarter of 2014 and the Company adopted its provisions retrospectively. The adoption of the ASU decreased net non-current deferred tax assets and decreased the associated long-term tax liabilities related to unrecognized tax benefits by $16.2 million and $11.9 million as of December 27, 2014 and December 28, 2013, respectively.

In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an operating lease.Entity." ASU 2014-08 changes the criteria for determining which disposals can be presented as discontinued operations and modifies related disclosure requirements. The overall purposeASU is effective for annual and interim periods beginning after December 15, 2014. The Company does not expect the impact of our restructuring actionsthe adoption of this standard to be material to its consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The standard requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. Early adoption is not permitted. The ASU is effective for annual and interim periods beginning after December 15, 2016. The Company has not yet selected a transition method and is evaluating the impact the adoption will have on its consolidated financial statements and related disclosures.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


2. BUSINESS ACQUISITIONS

ChanTest
In October 2014, the Company acquired ChanTest, a leading provider of ion channel testing services to lower operating coststhe pharmaceutical and improve profitability by reducing excess capacities. Restructuring charges are typically recordedbiotech industry. The acquisition augments the Company's early discovery capabilities and enhances the Company's ability to support clients' target discovery and lead optimization efforts. The preliminary purchase price of the acquisition was $59.3 million, including $0.3 million in contingent consideration. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.0 million. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The purchase price is subject to an adjustment based on the final determined net working capital as of the closing date. The business is reported in the Company's DSA reportable segment as part of the Company's Early Discovery business.

The preliminary purchase price allocation of $52.1 million, net of $7.2 million in cash acquired, is as follows:
 October 29, 2014
 (in thousands)
Current assets (excluding cash)4,648
Property, plant and equipment1,579
Definite-lived intangible assets23,920
Goodwill34,927
Current liabilities(3,515)
Long-term liabilities(9,486)
Total purchase price allocation$52,073

The breakout of definite-lived intangible assets acquired is as follows:
 October 29, 2014 Weighted average amortization life
 (in thousands) (in years)
Client relationships$19,000
 13
Other intangible assets4,920
 9
Total definite-lived intangible assets$23,920
  

The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. The goodwill resulting from the transaction is primarily attributed to the potential growth of the business and is not deductible for tax purposes. The Company incurred transaction and integration costs in connection with the acquisition of $1.1 million during the fiscal year 2014, which are included in selling, general and administrative expenses.

VivoPath
In June 2014, the Company acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery service company specializing in the rapid, in vivo compound evaluation of molecules in the therapeutic areas of metabolism, inflammation and oncology. The preliminary purchase price was $2.3 million, including $1.6 million in contingent consideration, and was allocated primarily to the intangible assets acquired. The aggregate, undiscounted amount of contingent consideration that could become payable is a maximum of $2.4 million, payable over the next three years based on the achievement of revenue growth targets. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The business is reported in the Company's DSA reportable segment as part of the Company's In Vivo Discovery business.

Argenta and BioFocus
On April 1, 2014, the Company acquired (1) 100% of the shares of the United Kingdom (U.K.) based entities Argenta and BioFocus, and (2) certain Dutch assets. These businesses have formed the core of the Company's Early Discovery business. With this acquisition, the Company has enhanced its position as a full service, early-stage CRO, with integrated in vitro and in vivo capabilities from target discovery through preclinical development. The preliminary purchase price of the acquisition was

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


$191.3 million, including $0.9 million in contingent consideration. The acquisition was funded by cash on hand and borrowings on the Company's revolving credit facility. The purchase price includes payment for estimated working capital, which is subject to final adjustment based on the actual working capital of the acquired business. The businesses are reported in the Company's DSA reportable segment as part of the Company's Early Discovery business.
The contingent consideration is a one-time payment that could become payable based on the achievement of a revenue target for the twelve-month period following the acquisition. If achieved, the payment would become due in the second quarter of 2015. The aggregate, undiscounted amount of contingent consideration that the Company would pay is €5.0 million ($6.1 million as of December 27, 2014). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
The preliminary purchase price allocation of $183.1 million, net of $8.2 million of cash acquired, was as follows:
 April 1, 2014
 (in thousands)
Current assets (excluding cash)$31,257
Property, plant and equipment21,008
Other long-term assets11,549
Definite-lived intangible assets104,270
Goodwill66,330
Current liabilities(14,299)
Long-term liabilities(36,973)
Total purchase price allocation$183,142
The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. During the fiscal year 2014, the Company recorded measurement period adjustments related to the Argenta and BioFocus acquisition that resulted in an immaterial change to the purchase price allocation. Any additional adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.
The breakout of definite-lived intangible assets acquired was as follows:
 April 1, 2014 Weighted average
amortization life
 (in thousands) (in years)
Client relationships$94,000
 18
Backlog5,700
 1
Trademark and trade names1,170
 3
Leasehold interests1,000
 13
Other intangible assets2,400
 19
Total definite-lived intangible assets$104,270
  
The goodwill resulting from the transaction is primarily attributed to the potential growth in the Company's DSA businesses from customers introduced through Argenta and BioFocus, the assembled workforce of the acquired businesses and expected cost synergies. The goodwill attributable to Argenta and BioFocus is not deductible for tax purposes. The Company incurred transaction and integration costs in connection with the acquisition of $5.3 million during the fiscal year 2014 , which are included in selling, general and administrative expenses.
The following selected pro forma consolidated results of operations are presented as if the plan is approved by our senior managementArgenta and where material, our BoardBioFocus acquisition had occurred as of Directors,the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments, including amortization of intangible assets and whendepreciation of fixed assets of $3.7 million and other one-time costs. These pro forma consolidated results of operations are for informational purposes only and do not necessarily reflect the liability is incurred. A liabilityresults of operations had the companies operated as one entity during the periods reported. No effect has been given for costssynergies, if any, that will continuemay have been realized through the acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands, except per share amounts)
Revenue$1,322,771
 $1,249,649
 $1,215,263
Net income$128,195
 98,508
 85,902
Earnings per common share:     
Basic$2.75
 $2.06
 $1.79
Diluted$2.70
 $2.03
 $1.77
These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be incurred underindicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated or that may result in the future. Argenta and BioFocus revenue and operating income for the fiscal year 2014 are $71.4 million and $1.8 million, respectively.

EMD Singapore
In October 2013, the Company acquired 100% of an EMD products and service provider located in Singapore for $4.9 million in cash. The financial results of the acquired entity are included in the Manufacturing reportable segment as part of the Company's EMD business.

The purchase price allocation is as follows:
 October 4, 2013
 (in thousands)
Current assets (excluding cash)$300
Property, plant and equipment154
Definite-lived intangible assets1,885
Goodwill2,659
Current liabilities(64)
Total purchase price allocation$4,934

The breakout of definite-lived intangible assets acquired is as follows:
 October 4, 2013 
Weighted average
amortization life
 (in thousands) (in years)
Client relationships$1,870
 8
Other intangible assets15
 2
Total definite-lived intangible assets$1,885
  

The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. The goodwill resulting from the transaction is primarily attributed to the potential growth of the business in Southeast Asia and is not deductible for tax purposes.

Vital River
In January 2013, the Company acquired a contract75% ownership interest of Vital River, a commercial provider of research models and related services in China, for its remaining term without economic benefit$24.2 million, net of $2.7 million of cash acquired. Vital River's financial results are included in the RMS reportable segment.


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The purchase price allocation is as follows:
 January 4, 2013
 (in thousands)
Current assets (excluding cash)$3,092
Property, plant and equipment10,468
Other long-term assets2,242
Definite-lived intangible assets16,954
Goodwill16,989
Current liabilities(11,303)
Long-term liabilities(5,260)
Redeemable noncontrolling interest(8,963)
Total purchase price allocation$24,219

The breakout of definite-lived intangible assets acquired is as follows:
 January 4, 2013 
Weighted average
amortization life
 (in thousands) (in years)
Client relationships$14,741
 12
Reacquired rights2,053
 1
Other intangible assets160
 3
Total definite-lived intangible assets$16,954
  

The definite-lived intangibles are largely attributed to the expected cash flows related to client relationships existing at the acquisition closing date. In addition, the Company reacquired a right previously granted to the entity related to a royalty agreement for the distribution of products in China. The goodwill resulting from the transaction is recognizedprimarily attributed to the potential growth of the business in China and measuredis not deductible for tax purposes.

Concurrent with the acquisition, the Company entered into a joint venture agreement with the noncontrolling interest holders that provide the Company with the right to purchase the remaining 25% of the entity for cash at its then appraised value beginning in January 2016. Additionally, the noncontrolling interest holders were granted the right to require the Company to purchase the remaining 25% of the entity at its then appraised value beginning in January 2016 for cash. These rights are accelerated in certain events. As the noncontrolling interest holders can require the Company purchase the remaining 25% interest, the noncontrolling interest is classified in the mezzanine section of the consolidated balance sheet, which is above the equity section and below liabilities. The acquisition-date fair value whenof the entity ceasesnoncontrolling interest was determined based on the fair value of the consideration exchanged for the 75% of Vital River. Subsequent to the acquisition, the noncontrolling interest carrying amount is adjusted to the fair value each quarter using an income approach. The income approach uses estimated future cash flows based on projected financial data discounted by a rate which considers the right conveyedCompany's weighted average cost of capital and the specific risks of achieving these cash flows. Adjustments to fair value are recorded through additional paid-in capital.

Accugenix
In August 2012, the Company acquired 100% of Accugenix Inc. (Accugenix) for $18.4 million in cash. Accugenix is a global provider of cGMP-compliant contract microbial identification testing. The acquisition strengthens the EMD portfolio of products and services by providing state-of-the-art microbial detection services for the biotechnology, pharmaceutical, and medical device manufacturing industries. Accugenix is based in the U.S. and is included in the Manufacturing reportable segment as part of the Company's EMD business.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The purchase price allocation of $16.9 million, net of $1.5 million of cash acquired is as follows:
 August 24, 2012
 (in thousands)
Current assets (excluding cash)$2,162
Property, plant and equipment549
Definite-lived intangible assets8,400
Goodwill10,361
Current liabilities(911)
Long-term liabilities(3,700)
Total purchase price allocation$16,861
The definite-lived intangible assets acquired are as follows:
 August 24, 2012 
Weighted average
amortization life
 (in thousands) (in years)
Client relationships$1,500
 13
Propriety database4,100
 11
Standard operating procedures2,500
 4
Trademarks300
 12
Total definite-lived intangible assets$8,400
  

The definite-lived intangibles are largely attributed to a proprietary database of thousands of species of organisms and the methods and technology to provide accurate, timely and cost-effective microbial identification services. The goodwill resulting from the transaction is primarily attributed to the potential for growth of the Company's global EMD products and services business through the increased competitive advantage and market penetration provided by the contract. During 2011services offered by Accugenix. The goodwill is not deductible for tax purposes.

3. RESTRUCTURING AND ASSET IMPAIRMENTS
Facilities
In the fiscal year 2014, the Company committed to plans to consolidate certain research model operations in the U.S., 2010Japan, and 2009 we implemented staffing reductions to improve operating efficiency and profitability at various sites.Europe. As a result, the Company recorded $2.2 million of these actions,asset impairments and other charges and $4.3 million of accelerated depreciation related to certain facilities impacted by the consolidation plans. Also, in the fiscal year 2014, the Company recorded a gain of $1.0 million on the sale of a European facility.
In the fiscal year 2013, due to changes in real estate values in surrounding properties, the Company performed an impairment test on long-lived assets classified as held-for-use, which resulted in an asset impairment charge of $3.8 million, included in cost of revenue. The Company also implemented a plan to consolidate production in its U.S. research model facilities. As a result, the Company revised the useful lives of a research model building that was abandoned and recorded accelerated deprecation to cost of revenue of $13.5 million. The Company also implemented a plan to consolidate operations within a Biologics leased facility in the U.S. As a result, the Company revised the useful lives of certain leasehold improvements that were abandoned and recorded accelerated deprecation to cost of revenue of $1.9 million.
In the fiscal year 2012, the Company commenced a consolidation of certain research model operations in Europe. As a result, it recorded an impairment charge of $3.5 million to cost of revenue for the disposition of certain facilities. The Company continues to utilize some of the operations in a limited capacity. As a result, during the fiscal years ended December 31, 2011, December 25, 20102014 and December 26, 2009, we2013, the Company recorded severanceasset impairments of $0.3 million and retention charges as shown below. As$0.4 million, respectively, to cost of December 31, 2011, $1,432 was included in accrued compensation and $1,942 in other long-term liabilities on our consolidated balance sheet. Asrevenue related to the consolidation of December 25, 2010, $5,000 was included in accrued compensation and $5,658 in other long-term liabilities on our consolidated balance sheet.the European operations.

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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Staff Reductions
The following table rolls forward ourthe Company's severance and retention cost liability:
Severance and Retention CostsDecember 27, 2014 December 28, 2013 December 29, 2012
2011 2010 2009(in thousands)
Balance, beginning of period$10,658
 $4,332
 $639
$2,782
 $3,636
 $3,374
Expense5,462
 16,504
 16,334
7,792
 3,223
 2,576
Payments/utilization(12,746) (10,178) (12,641)
Payments/Utilization(7,908) (4,077) (2,314)
Balance, end of period$3,374
 $10,658
 $4,332
$2,666
 $2,782
 $3,636

The following table presents severance and retention costs by classification on the income statement:
Fiscal Year EndedDecember 27, 2014 December 28, 2013 December 29, 2012
2011 2010 2009(in thousands)
Severance charges included in cost of sales$1,012
 $10,860
 $5,005
$3,342
 $1,477
 $1,203
Severance charges included in selling, general and administrative expense4,450
 5,644
 11,339
Severance charges included in selling, general and administrative4,450
 1,746
 1,373
Total expense$5,462
 $16,504
 $16,344
$7,792
 $3,223
 $2,576

As of December 27, 2014 and December 28, 2013, $2.2 million and $1.5 million of severance and retention costs liability, respectively, was included in accrued compensation and $0.5 million and $1.3 million, respectively, was included in other long-term liabilities on the Company's consolidated balance sheets.
The following table presents severance and retention cost by reportable segment:
Fiscal Year Ended
Fiscal Year EndedDecember 27, 2014 December 28, 2013 December 29, 2012
2011 2010 2009(in thousands)
Research models and services$1,196
 $4,429
 $3,997
$4,593
 $1,429
 $1,015
Preclinical services4,372
 9,145
 9,722
Discovery and safety assessment2,912
 1,625
 1,494
Manufacturing support166
 169
 67
Corporate(106) 2,930
 2,625
121
 
 
Total expense$5,462
 $16,504
 $16,344
$7,792
 $3,223
 $2,576

Other Current Liabilities
Other current liabilities consist of liabilities we intend to settle within the next twelve months.4. SUPPLEMENTAL BALANCE SHEET INFORMATION
The composition of other current liabilitiestrade receivables, net is as follows:
 December 27, 2014 December 28, 2013
 (in thousands)
Client receivables$219,118
 $190,423
Unbilled revenue43,780
 35,184
Total262,898
 225,607
Less: Allowance for doubtful accounts(4,907) (4,977)
Trade receivables, net$257,991
 $220,630

Provisions to the allowance for doubtful accounts in the fiscal years 2014, 2013 and 2012 were $0.5 million, $1.3 million, and $0.9 million, respectively. Write offs against the allowance for doubtful accounts were insignificant in all periods presented.

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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
Accrued income taxes$10,552
 $18,372
Current deferred tax liability1,379
 963
Accrued interest and other2,102
 760
Other current liabilities$14,033
 $20,095
Other Long-Term Liabilities
Other long-term liabilities consist of liabilities we do not intend to settle within the next twelve months.
The composition of other long-term liabilitiesinventories is as follows:
 December 31, 2011 December 25, 2010
Deferred tax liability$16,074
 $30,050
Long-term pension liability49,223
 36,335
Accrued Executive Supplemental Life Insurance Retirement Plan and Deferred Compensation Plan25,739
 24,659
Other long-term liabilities17,415
 23,552
Other long-term liabilities$108,451
 $114,596
 December 27, 2014 December 28, 2013
 (in thousands)
Raw materials and supplies$15,416
 $15,028
Work in process11,802
 11,715
Finished products61,825
 62,653
Inventories$89,043
 $89,396

Stock-Based Compensation PlansThe composition of other current assets is as follows:
We grant stock options
 December 27, 2014 December 28, 2013
 (in thousands)
Prepaid assets$26,900
 $20,058
Deferred tax asset27,644
 29,889
Time deposits16,167
 11,158
Prepaid income tax26,287
 25,247
Restricted cash2,552
 245
Other291
 
Other current assets$99,841
 $86,597

The composition of property, plant and restricted stock to employeesequipment, net is as follows:
 December 27, 2014 December 28, 2013
 (in thousands)
Land$40,314
 $40,157
Buildings682,495
 694,074
Machinery and equipment384,713
 367,244
Leasehold improvements37,270
 37,959
Furniture and fixtures22,577
 24,013
Vehicles3,967
 3,859
Computer hardware and software119,474
 112,328
Construction in progress (1)
40,970
 42,075
Total1,331,780
 1,321,709
Less: Accumulated depreciation(654,983) (645,527)
Property, plant and equipment, net$676,797
 $676,182
(1) Includes the leased facility under construction. See Note 7, "Long-Term Debt 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 asCapital Lease Obligations."
Depreciation expense on a straight-line basis over the requisite service period. We 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 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 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 assetsfiscal years 2014, 2013 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 long form method.
Revenue Recognition
We recognize revenue related to our products, which include research models, invitro technology2012 was $70.5 million, $78.8 million and avian vaccine support products, when persuasive evidence of an arrangement exists, generally in the form of 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 client's site. Product sales are recorded net of returns upon delivery. For large models, in some cases 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),$63.2 million, respectively.

5563

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

genetically engineered models and services (GEMS), discovery services (DS) and insourcing solutions (IS) and is generally evidenced by client contracts. Safety assessment services provide highly specialized toxicology studies to evaluate the safety and toxicityThe composition of new pharmaceutical molecules and materials used in medical devices. It also includes pathology services, which provide the ability to identify and characterize pathologic changes within tissues and cells in determining the safety of a new compound. RADS services monitor and analyze the health and genetics of research models used in research protocols. GEMS services include validating, maintaining, breeding and testing research models for biomedical research activities. IS provide management of animal care operations on behalf of government, academic, pharmaceutical and biotechnology organizations.
The 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. RADS service arrangements are generally completed within a one -month period and are also of a fixed fee nature. DS services are also short term in nature, while GEMS and IS are of a longer-term nature, from 6 months to 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 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 clients in the form of study protocols.
Deferred and unbilled revenue are 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 not billable to the 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.
Guarantees
We include standard indemnification provisions in client contracts, which include standard provisions limiting our liability under such contracts, including our indemnification obligations, with certain exceptions.
Derivatives and Hedging Activities
We enter into derivatives to hedge the foreign currency exchange risk in order to minimize the impact of market fluctuations of foreign currency rates on our financials. Throughout the year we entered into various contracts to manage this risk. During 2011 and 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 $1,785 in 2009.
Fair Value
We hold cash equivalents, investments and certain other assets that are carried at fair value. We generally determine fair value 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.is as follows:
 December 27, 2014 December 28, 2013
 (in thousands)
Deferred financing costs$5,401
 $7,126
Cash surrender value of life insurance policies27,603
 26,507
Investment in limited partnerships27,047
 17,911
Other assets18,301
 10,420
Other assets$78,352
 $61,964

The valuation hierarchy for disclosurecomposition 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 andother current 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 valuation methodologies used for assets and liabilities measured at fair value are as follows:

56

 December 27, 2014 December 28, 2013
 (in thousands)
Accrued income taxes$9,362
 $18,773
Current deferred tax liability1,484
 1,960
Accrued interest and other233
 1,813
Other current liabilities$11,079
 $22,546
Table
The composition of Contents
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Time deposits—Valued at their ending balancesother long-term liabilities is as reported by the financial institutions that hold our securities, which approximates fair value.follows:
Auction rate securities—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 31, 2011.
Life policies—Valued at cash surrender value.
 December 27, 2014 December 28, 2013
 (in thousands)
Deferred tax liability$30,816
 $14,988
Long-term pension liability45,135
 16,219
Accrued Executive Supplemental Life Insurance Retirement Plan and Deferred Compensation Plan33,007
 28,708
Other long-term liabilities21,403
 10,717
Other long-term liabilities$130,361
 $70,632

Contingent consideration—Consists of future acquisition-related payments based on certain agreed upon revenue and technical milestones valued using the income approach.
Hedge contract—Valued at fair value by management based on our foreign exchange rates and forward points provided by banks.5. FAIR VALUE
Assets and liabilities measured at fair value on a recurring basis are summarized below:
 Fair Value Measurements at December 31, 2011 using
 Quoted Prices in Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Assets and Liabilities at Fair Value
Time deposits$
 $5,359
 $
 $5,359
Auction rate securities
 
 11,051
 11,051
Fair value of life policies
 19,520
 
 19,520
Hedge contract
 5
 
 5
Total assets measured at fair value$
 $24,884
 $11,051
 $35,935
Contingent consideration
 
 
 
Total liabilities measured at fair value$
 $
 $
 $
 Fair Value Measurements at December 25, 2010 using
 Quoted Prices in Active Markets for Identical Assets Level 1 Significant Other Observable Inputs Level 2 Significant Unobservable Inputs Level 3 Assets and Liabilities at Fair Value
Time deposits$
 $9,834
 $
 $9,834
Auction rate securities
 
 11,377
 11,377
Fair value of life policies
 25,609
 
 25,609
Hedge contract
 419
 
 419
Total assets measured at fair value$
 $35,862
 $11,377
 $47,239
Contingent consideration
 
 5,365
 5,365
Total liabilities measured at fair value$
 $
 $5,365
 $5,365

The following table presents a reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 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 31, 2011.

 December 27, 2014
 Level 1 
Level 2
 
Level 3
 Total
 (in thousands)
Cash equivalents$
 $1,934
 $
 $1,934
Life insurance policies
 20,520
 
 20,520
Total assets measured at fair value
 22,454
 
 22,454
        
Redeemable noncontrolling interest
 
 28,419
 28,419
Contingent consideration
 
 2,828
 2,828
Total liabilities measured at fair value$
 $
 $31,247
 $31,247

5764

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

 
Fair Value Measurements
Using Significant
Unobservable Inputs
(Level 3)
 Year ended
Auction rate securitiesDecember 31, 2011
 December 25, 2010
Beginning balance$11,377
 $16,212
Transfers in and/or out of Level 3
 
Total gains or losses (realized/unrealized):   
Included in earnings (other expenses)(1) 14
Included in other comprehensive income(325) 651
Purchases, issuances and settlements
 (5,500)
Ending balance$11,051
 $11,377
 December 28, 2013
 
Level 1
 Level 2 Level 3 Total
 (in thousands)
Cash equivalents$
 $1,851
 $
 $1,851
Life insurance policies
 19,534
 
 19,534
Total assets measured at fair value
 21,385
 
 21,385
        
Redeemable noncontrolling interest
 
 20,581
 20,581
Total liabilities measured at fair value$
 $
 $20,581
 $20,581
During the fiscal years 2014 and 2013, there were no transfers between fair value levels.
Redeemable Noncontrolling Interest
The following table provides a rollforward of the fair value of the Company's redeemable noncontrolling interest related to the acquisition of Vital River in January 2013. See Note 2, "Business Acquisitions."
 
Fair Value Measurements
Using Significant
Unobservable Inputs
(Level 3)
 Year ended
Contingent ConsiderationDecember 31, 2011
 December 25, 2010
Beginning balance$5,365
 $9,300
Transfers in and/or out of Level 3
 
Total gains or losses (realized/unrealized):   
Included in selling, general and administrative expense(5,365) (3,935)
Included in other comprehensive income
 
Purchases, issuances and settlements
 
Ending balance$
 $5,365
 December 27, 2014 December 28, 2013
 (in thousands)
Beginning balance$20,581
 $
Additions
 8,963
Total gains or losses (realized/unrealized):   
Net income attributable to noncontrolling interest855
 687
Foreign currency translation(442) 367
Change in fair value included in additional paid-in capital7,425
 10,564
Ending balance$28,419
 $20,581
Income Taxes
We recognize deferred tax assets and liabilities forThe significant unobservable inputs used in the expected future tax consequences of temporary differences between the carrying amounts and tax basis of our assets and liabilities. 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 we will not realize some or allfair value measurement of the deferred tax assets.
AsCompany’s redeemable noncontrolling interest are the estimated future cash flows based on projected financial data and discount rate of December 31, 2011, earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $106,50418.5%. No provision for U.S. income taxes has been provided thereon. Upon distribution of those earningsSignificant changes in the formtiming or amounts of dividends or otherwise, wethe estimated future cash flows would be subject to both U.S. Federal and state taxes and withholding taxes payable to the various foreign countries. It is our policy to indefinitely reinvest the earnings of our non-U.S. subsidiaries unless they can be repatriatedresult in a manner that generates a tax benefitsignificantly higher or an unforeseen cash need arises in the United States and the earnings can be repatriated in a manner that is substantially free of income taxes. It is not practicable to estimate the amount of additional income taxes payable on the earnings that are indefinitely reinvested in foreign operations.
We are a worldwide business and operate in various tax jurisdictions where tax laws and tax rates are subject to change given the political and economic climate in these countries. We report and pay income taxes based upon operational results and applicable law. Our current and deferred tax provision is based upon enacted tax rates in effect for the current and future periods. Any significant fluctuation in tax rates or changes in tax laws and regulations or changes to interpretation of existing tax laws and regulations could cause our estimate of taxes to change resulting in eitherlower fair value measurement. Significant increases or decreases in our effective taxthe discount rate would result in a significantly lower or higher fair value measurement, respectively.
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to the acquisition of Argenta, BioFocus, VivoPath and ChanTest. See Note 2, "Business Acquisitions."
 December 27, 2014
 (in thousands)
Beginning balance$
Additions2,678
Total gains or losses (realized/unrealized): 
Change in fair value150
Ending balance$2,828

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration are the probabilities of successful achievement of certain financial targets and a discount rate.
We recognize Significant increases or decreases in any of the tax benefit from an uncertain tax position only if it is more likely than not thatprobabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant increases or decreases in the tax position will bediscount rate would result in a significantly lower or higher fair value measurement, respectively.

5865

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

sustained upon examination by
Debt Instruments
The book value of the taxing authorities,Company's term and revolving loans, which are variable rate loans carried at amortized cost, approximates their fair value based on current market pricing of similar debt. As the fair value is based on significant other observable inputs, including current interest and foreign currency exchange rates, it is deemed to be Level 2.


6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill
The changes in the gross carrying amount and accumulated impairment loss are as follows:
   Adjustments to Goodwill   Adjustments to Goodwill  
 December 29, 2012 Acquisitions Foreign Exchange December 28, 2013 Acquisitions Transfers Foreign Exchange December 27, 2014
 (in thousands)
Research Models and Services               
Gross carrying amount$63,139
 $19,647
 $765
 $83,551
 $
 (23,172) (1,183) 59,196
Discovery and Safety Assessment               
Gross carrying amount1,150,470
 
 1,680
 1,152,150
 102,171
 (9,196) (10,823) 1,234,302
Accumulated impairment loss(1,005,000) 
 
 (1,005,000) 
 
 
 (1,005,000)
Manufacturing Support               
Gross carrying amount
 
 
 
 

 32,368
 211
 32,579
Total               
Gross carrying amount1,213,609
     1,235,701
       1,326,077
Accumulated impairment loss(1,005,000)     (1,005,000)       (1,005,000)
Goodwill$208,609
     $230,701
       321,077

In the second quarter of 2014, the Company revised its reportable segments to align with the view of the business following its acquisition of Argenta and BioFocus. See Note 1, "Description of Business and Summary of Significant Accounting Policies." As a result of this reorganization, goodwill was allocated from the Company's prior reportable segments to new reportable segments, as shown in the preceding table within "transfers." The allocation was based on the technical merits of the tax position. The tax benefits recognized in our financial statements from such positions are measured based upon the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
Foreign Currency Translation
The functional currencyfair value of each business group within its original reporting unit relative to the fair value of our operating foreign subsidiaries is local currency. The financial statementsthat reporting unit. In addition, the Company completed an assessment of these subsidiaries are translated into U.S. dollars as follows: assetsany potential goodwill impairment for all reporting units immediately prior to the reallocation and liabilities at year-end exchange rates; income, expenses and cash flows at average exchange rates; and equity at historical exchange rates. The resulting translation adjustment is recorded as a component of accumulated other comprehensive income indetermined that no impairment existed.

Based on 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 $6,237 in 2011, $(1,299) in 2010 and $(861) in 2009.
Comprehensive Income
Our comprehensive income 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 Equity, net of tax.
Pension Plans
Our defined benefit pension plans' assets, liabilities and expenses are calculated using certain assumptions. These assumptions are reviewed annually, or whenever otherwise required, 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 recognize the funded status of our benefit plans on 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 plan assets and obligations as of the date of our fiscal year-end balance sheet. Additional information about certain effects on net periodic benefit costCompany's step one goodwill impairment test for the next fiscal year that arise from delayed recognitionyears 2014, 2013 and 2012, the fair value of each reporting unit exceeded the gains or losses, prior service costs or credits,reporting unit's book value and, transition asset or obligation are disclosed in the notes to our financial statements.therefore, goodwill was not impaired.
Earnings (Loss) Per Share
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.
Discontinued OperationsOther Intangible Assets
The resultsfollowing table displays the gross carrying amount and accumulated amortization of discontinued operations, less applicable income taxes (benefit) anddefinite-lived intangible 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.
2. Business Acquisitionsby major class:
No significant business acquisitions were made in the years ended December 31, 2011 and December 25, 2010. We acquired several businesses during the year ended December 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:
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
 December 27, 2014 December 28, 2013
 Gross Accumulated amortization Net Gross Accumulated amortization Net
 (in thousands)
Backlog$8,728
 $(6,636) $2,092
 $2,916
 $(2,507) $409
Client relationships379,339
 (217,938) 161,401
 311,507
 (238,002) 73,505
Trademarks and trade names6,603
 (5,314) 1,289
 5,399
 (4,997) 402
Standard operating procedures2,309
 (1,642) 667
 2,754
 (1,498) 1,256
Other identifiable intangible assets16,334
 (6,346) 9,988
 10,432
 (4,905) 5,527
Total definite-lived intangible assets$413,313
 $(237,876) $175,437
 $333,008
 $(251,909) $81,099

5966

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)


software. Accordingly, the purchase price was allocated to the estimated fair valueAdditionally, as of In-process research and development. Annually, we perform an analysis of In-process research and development. As a result of our annual analysis, we recorded an impairments charges of $6,800 and $7,200 for the years endedboth December 31, 201127, 2014 and December 25, 201028, 2013, respectively, to adjust the In-process research and development to fair value.
The contingent consideration consists of payments based on certain 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:
Current assets (excluding cash)$49
Property, plant and equipment338
Current liabilities(1,317)
Long term liabilities(1,040)
Goodwill and other intangible asset35,592
Total purchase price allocation$33,622
The breakout of goodwill and other intangibles acquired was as follows:
  
Weighted average
amortization
life (years)
In-process research and development (see Note 4)$14,000
5.1
Goodwill21,592

Total goodwill and other intangibles$35,592
 
In-process research and development is accounted for as an 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 tax purposes.
On July 31, 2009, we acquired Cerebricon Ltd. which is included in our RMS 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 purchase price allocation for Cerebricon, net of $1,200 of acquired cash is as follows:

Current assets (excluding cash)$1,754
Property, plant and equipment816
Other long-term assets41
Current liabilities(1,485)
Long-term debt(1,178)
Long-term deferred tax(1,453)
Goodwill and other intangible asset9,685
Total purchase price allocation$8,180

60

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

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

  
Weighted average
amortization
life (years)
client relationships$5,597
4.2
Goodwill4,088

Total goodwill and other intangibles$9,685
 
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 May 2009, we acquired the assets of Piedmont Research Center (PRC) for $45,558 in cash. PRC, which is based in North Carolina, provides discovery services focused on efficacy studies in oncology and other therapeutic areas for pharmaceutical and biotechnology clients and is included in our RMS segment.
The purchase price allocation for PRC is as follows:
Current assets$1,414
Property, plant and equipment1,315
Current liabilities(1,204)
Goodwill and other intangible asset44,033
Total purchase price allocation$45,558
The breakout of goodwill and other intangibles acquired with the acquisition was as follows:
  Weighted average amortization life (years)
client relationships$18,400
6.3
Backlog900
0.7
Trademarks and trade names500
2.2
Developed technology300
1.5
Goodwill23,933

Total goodwill and other intangibles$44,033
 
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 tax purposes.
3. Goodwill and Other Intangible Assets
The following table displays goodwill and other intangible assets, not subject to amortization and othernet included $3.4 million of indefinite-lived intangible assets that continue to be subject to amortization:

61

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

 December 31, 2011 December 25, 2010
 Gross Carrying Amount Accumulated Amortization & Impairment Loss Gross Carrying Amount Accumulated Amortization & Impairment Loss
Goodwill$1,214,285
 $(1,016,724) $1,216,196
 $(1,017,758)
Other intangible assets not subject to amortization:       
Research models$3,438
 $
 $3,438
 $
PCS in process R&D
 
 6,800
 
Other intangible assets subject to amortization:       
Backlog2,856
 (2,253) 2,839
 (2,109)
Client relationships298,813
 (210,816) 301,175
 (192,345)
Client contracts14,818
 (14,818) 15,259
 (15,259)
Trademarks and trade names5,022
 (4,706) 5,041
 (4,614)
Standard operating procedures650
 (650) 657
 (657)
Other identifiable intangible assets5,415
 (4,332) 5,428
 (4,417)
Total other intangible assets$331,012
 $(237,575) $340,637
 $(219,401)
The changes in the gross carrying amount and accumulated amortization of goodwill are as follows:
   Adjustments to Goodwill   Adjustments to Goodwill  
 Balance at December 26, 2009 Acquisitions Foreign Exchange/ Impairment Balance at December 25, 2010 Acquisitions Foreign Exchange/ Impairment Balance at December 31, 2011
Research Models and Services             
Gross carrying amount$58,734
 $
 $(858) $57,876
 $
 $(1,474) $56,402
Accumulated amortization(4,875) 
 107
 (4,768) 
 1,047
 (3,721)
Preclinical Services             
Gross carrying amount1,162,366
 
 (4,046) 1,158,320
 
 (437) 1,157,883
Accumulated impairment loss(700,000) 
 (305,000) (1,005,000) 
 
 (1,005,000)
Accumulated amortization(7,990) 
 
 (7,990) 
 (13) (8,003)
Total             
Gross carrying amount$1,221,100
 $
 $(4,904) $1,216,196
 $
 $(1,911) $1,214,285
Accumulated impairment loss(700,000) 
 (305,000) (1,005,000) 
 
 (1,005,000)
Accumulated amortization(12,865) 
 107
 (12,758) 
 1,034
 (11,724)
Our annual goodwill impairment assessment has historically been completed at the beginning of the fourth quarter. Based on our assessment (step one) for 2011, the fair value of our business units exceeded their carrying value and, therefore, our goodwill was not impaired. If the future growth and operating results of our businesses are not as strong as anticipated and/or our market capitalization declines, this could impact the assumptions used in calculating the fair value of our goodwill in the future. 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.
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 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

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

impairment of assets.$305,000.
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.
Amortization expense of definite-lived intangible assets for the fiscal years 20112014, 20102013 and 20092012 was $21,796, $24,405$26.0 million, $17.8 million and $25,716,$18.1 million, respectively.
Estimated amortization expense for intangible assets for each of the next five fiscal years is expected to be as follows:
2012$17,670
201314,131
201411,738
20159,291
20167,693
Fiscal Year Amortization Expense
  (in thousands)
2015 $21,116
2016 20,355
2017 18,501
2018 17,312
2019 14,306

4. Impairment of Long Lived Assets

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.


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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

5. Long-Term Debt and Capital Lease Obligations7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-Term Debt
Long-term debt consists of the following:

 December 31, 2011 December 25, 2010
2.25% Senior convertible debentures:   
Principal$349,995
 $349,995
Unamortized debt discount(21,533) (35,583)
Net carrying amount of senior convertible debentures328,462
 314,412
Term loan facilities356,322
 386,213
Revolving credit facility33,000
 
Other long-term debt, represents secured and unsecured promissory notes, interest rates ranging from 0% to 0.5%, 0% to 0.5% and 0% to 0.5% at December 31, 2011, December 25, 2010 and December 26, 2009, respectively, maturing between 2012 and 2013118
 127
Total debt717,902
 700,752
Less: current portion of long-term debt(14,732) (30,535)
Long-term debt$703,170
 $670,217
 December 27, 2014 December 28, 2013
 (in thousands)
Term loans$378,000
 $409,500
Revolving credit facility375,536
 253,308
Other long-term debt214
 241
Total debt753,750
 663,049
Less: current portion of long-term debt(31,714) (21,241)
Long-term debt$722,036
 $641,808
Minimum future principal payments of long-term debt at December 31, 2011 are as follows:
Fiscal Year 
2012$14,732
2013388,965
201458,455
201577,941
2016199,342
Thereafter
Total$739,435
On August 26, 2010, weIn 2013, the Company amended and restated our $428,000its credit agreement to (1) pay off loans outstanding under the creditcreating a $970 million 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($970M Credit Facility) that provides for a $230,000$420 million U.S. term loan a €133,763 Euro term loanfacility 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 interest rate margin applicable to the term loans and the revolving loans based on our leverage ratio and extend the maturity date by approximately one year to September 2016. The current credit agreement provides for a $299,750 term loan, a €69,414 Euro term loan and a $350,000$550 million multi-currency revolving credit facility. Under specified circumstances, we havethe Company has the ability to increaseexpand the term loansloan and/or revolving line of credit facility by up to $250,000$350 million in the aggregate.
The $420 million U.S. term loan facility matures in 20quarterly installments with the last installment due September 23, 2016.through maturity on May 29, 2018. The $350,000$550 million multi-currency revolving credit facility also matures on September 23, 2016May 29, 2018 and requires no scheduled payment before thatthis date. The book value of our term and revolving loans approximates fair value.
The interest rates applicable to our term loansthe $970M Credit Facility are variable and revolving loans under the credit agreement are at our option, equal to either the base rate (which is the higher of (1) the prime rate, (2) the federal fundsbased on an applicable rate plus 0.5% or (3)a spread determined by the one-month adjusted LIBOR rate plus 1%) plus an applicableCompany's leverage ratio. As of both December 27, 2014 and December 28, 2013, the weighted average interest rate margin based uponon the leverage ratio or the adjusted LIBOR rate plus an

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

interest rate margin based upon our leverage ratio. Based on our leverage ratio, the margin range for base rate loans is 0% to 0.75% and the margin range for LIBOR based loans is 1% to 1.75%. As of December 31, 2011, the interest rate margin for base rate loans was 0.75% and for adjusted LIBOR loans was 1.75%.
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 65% of the capital stock of certain first-tier foreign subsidiaries and domestic disregarded entities, and mortgages on owned real property in the U.S. having a book value in excess of $10,000. In addition, the credit agreementThe $970M Credit Facility includes certain customary representations and warranties, events of default, notices of material adverse changes to ourthe Company's business and negative and affirmative covenants. As of December 27, 2014, the Company was compliant with all financial covenants. These covenants include (1) themaintenance of a ratio of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) 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) themaintenance of a ratio of consolidated indebtedness to consolidated earnings before interest, taxes, depreciation and amortizationEBITDA for any period of four consecutive fiscal quarters, of no more than 4.03.25 to 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 31, 2011, we were compliant with all financial covenants specified in1.0. The Company's obligations under the credit agreement. Weagreement are collateralized by substantially all of the Company's assets.
At December 27, 2014 and December 28, 2013, the Company had $4,475$5.0 million and $4.9 million, respectively, outstanding under letters of credit as of December 31, 2011.
Our $350,000 of 2.25% Convertible Senior Notes (the 2013 Notes) due in June 2013 with interest payable semi-annually are convertible into cash for the principal amount and shares of our common stock for the conversion 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 principal amount of notes (which represents an initial conversion price of $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 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.
At December 31, 2011, the fair value of our outstanding 2013 Notes was approximately $339,530 based on their quoted market value and no conversion triggers were met.
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.
6. Equity
Earnings Per Share
Basic earnings per share for 2011, 2010 and 2009 was computed by dividing earnings available to common 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 2011 and 2009 have been adjusted to include common stock equivalents for the purpose of calculating diluted earnings per share for these periods.credit.

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars

Principal maturities of existing debt for the periods set forth in thousands, exceptthe table below, are as follows:
Fiscal Year Principal
  (in thousands)
2015 $31,714
2016 47,250
2017 68,250
2018 606,536
Total $753,750

Build-to-suit Lease
The Company acquired a built-to-suit lease as part of its acquisition of Argenta and BioFocus. In accordance with accounting guidance applicable to entities involved with the construction of an asset that will be leased when the construction is completed, the Company is considered the owner, for accounting purposes, of this property during the construction period. Accordingly, the Company records an asset along with a corresponding financing obligation on its consolidated balance sheet for the amount of total project costs incurred related to the construction in progress for this building through completion of the construction period. Upon completion of the buildings, the Company will assess and determine if the assets and corresponding liabilities should be derecognized. As of December 27, 2014, cost incurred in relation to the construction of these buildings totaled $23.1 million. As of December 27, 2014, minimum rental commitments under this lease for each of the next five fiscal years and total thereafter are as follows:

Fiscal Year Minimum lease payments
  (in thousands)
2015 $2,031
2016 2,707
2017 2,707
2018 2,707
2019 2,707
Thereafter 55,762
Total $68,621

Capital Lease Obligations
Capital lease obligations amounted to $1.0 million and $0.7 million at December 27, 2014 and December 28, 2013, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8. EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

Earnings Per Share
The following table illustrates the numerator and denominator in the computations of the basic and diluted earnings per share amounts)share:
   Fiscal Year Ended  
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Numerator:     
Net income from continuing operations attributable to common shareholders$128,424
 $104,093
 $101,547
Loss from discontinued businesses, net of income taxes(1,726) (1,265) (4,252)
Net income attributable to common shareholders$126,698
 $102,828
 $97,295
Denominator:     
Weighted-average shares outstanding—Basic46,627
 47,740
 47,912
Effect of dilutive securities:     
Stock options and contingently issued restricted stock931
 749
 494
Weighted-average shares outstanding—Diluted47,558
 48,489
 48,406

Options to purchase approximately 4,249,564645,000 shares, 6,594,3132,289,000 shares and 4,272,6474,591,000 shares were outstanding at December 31, 201127, 2014, December 25, 201028, 2013 and December 26, 200929, 2012, respectively, but were not included in computing diluted earnings per share because their inclusion would have been anti-dilutive.
In addition, Basic weighted average shares outstanding for the fiscal years 20112014, 20102013 and 20092012 excluded the weighted average impact of 703,011, 777,740approximately 1,188,000 shares, 1,097,000 shares, and 896,393935,000 shares, respectively, of non-vested fixed restricted stock and restricted stock unit awards.
The following table illustrates the reconciliation of the numerator and denominator in the computations of the basic and diluted earnings per share:
 December 31, 2011 December 25, 2010 December 26, 2009
Numerator:     
Income (loss) from continuing operations for purposes of calculating earnings per share$115,111
 $(328,657) $113,042
Income (loss) from discontinued businesses(5,545) $(8,012) $1,399
Denominator:     
Weighted-average shares outstanding—Basic50,823,063
 62,561,294
 65,366,319
Effect of dilutive securities:     
2.25% senior convertible debentures
 
 
Stock options and contingently issued restricted stock495,179
 
 267,650
Warrants
 
 1,926
Weighted-average shares outstanding—Diluted51,318,242
 62,561,294
 65,635,895
Basic earnings (loss) per share from continuing operations attributable to common shareowners$2.26
 $(5.25) $1.73
Basic earnings (loss) per share from discontinued operations attributable to common shareowners$(0.11) $(0.13) $0.02
Diluted earnings (loss) per share from continuing operations attributable to common shareowners$2.24
 $(5.25) $1.72
Diluted earnings (loss) per share from discontinued operations attributable to common shareowners$(0.11) $(0.13) $0.02
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.
Treasury Shares
On In July 29, 2010,, our the Company's Board of Directors authorized a $500.0 million stock repurchase program, and subsequently approved increases to the stock repurchase program of $250.0 million in 2010, $250.0 million in 2013 and $150 million in 2014 for an aggregate authorization of $1,150.0 million. The company repurchased approximately 2,093,000 shares for $110.6 million, approximately 3,468,000 shares for $165.7 million and approximately 1,706,000 shares for $61.4 million in the fiscal years $500,0002014, 2013 and 2012, respectively. As of December 27, 2014, the Company had $178.5 million remaining on the authorized stock repurchase program. Our Board of Directors increasedIn addition, 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 to 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 initial delivery of 6,000,000 treasury shares was recorded at $175,066, 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 $23,511, 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 settled on February 11, 2011 based on a discount to the daily volume weighted average price (VWAP) of our common

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

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 $32,509.
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 recorded at $135,860 based on the market value at the date of the transaction, and recorded $14,140 as a forward contract indexed to our common stock. The ASR was 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 6,505 shares based on the settlement of the ASR, which were recorded at $257.
During 2011, 2010 and 2009, we repurchased 3,790,762 shares of common stock for $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 2011, 2010 and 2009 were as follows:
 Fiscal Year Ended
 December 31, 2011 December 25, 2010 December 26, 2009
Number of shares of common stock repurchased8,428,494
 9,759,857
 1,592,500
Total cost of repurchase$299,479
 $294,534
 $42,387
Additionally, our 2000Company's 2007 Incentive Plan permits the netting of common stock upon vesting of restricted stock awards in order to satisfy individual tax withholding requirements. DuringThe number of shares of common stock netted for taxes was insignificant in each of the fiscal year endedyears December 31, 20112014, December 25, 20102013 and December 26, 2009, we acquired 79,704 shares for $2,942, 100,489 shares for $3,638 and 80,234 shares for $2,216, respectively, as a result of such withholdings.
Accumulated Deficit
None of our accumulated deficit is restricted due to statutory requirements in the local jurisdiction of a foreign subsidiary as of December 31, 2011 and December 25, 20102012.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Accumulated Other Comprehensive Income (Loss)
The compositionChanges to each component of accumulated other comprehensive income is(loss), net of income tax, are 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 26, 2009$56,637
 $(10,150) $(1,450) $45,037
Period change(10,122) (10,776) 854
 (20,044)
Tax5,319
 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
 

Translation
Adjustment
 
Pension Gains(Losses)
and Prior Service
(Cost) Credit Not Yet
Recognized as
Components of Net
Periodic Benefit Costs
 Total
 (in thousands)
December 29, 2012$44,057
 $(37,454) $6,603
Other comprehensive income (loss) before reclassifications(15,751) 19,293
 3,542
Amounts reclassified from accumulated other comprehensive income (loss)
 3,017
 3,017
Net current period other comprehensive income (loss)(15,751) 22,310
 6,559
Income tax benefit (expense)197
 (8,002) (7,805)
December 28, 201328,503
 (23,146) 5,357
Other comprehensive loss before reclassifications(48,499) (42,236) (90,735)
Amounts reclassified from accumulated other comprehensive income (loss)
 1,234
 1,234
Net current period other comprehensive loss(48,499) (41,002) (89,501)
Income tax benefit105
 9,792
 9,897
December 27, 2014$(19,891) $(54,356) $(74,247)

Warrants
Separately and concurrently with the pricing of the 2013 Notessenior convertible debentures in June 2006, wethe Company issued warrants for approximately 7.27,200,000 million shares of ourits common stock. The warrants give the holders the right to receive, for no additional consideration, cash or shares, (at our option)at the Company's option, with a value equal to the appreciation in the price of ourits shares above $59.92559.63 and expire between September 13, 2013 and January 22, 2014 over 90 equal increments. As of December 28, 2013, warrants for approximately 1,271,000 shares were outstanding and none were subsequently exercised. As of December 27, 2014, no warrants were outstanding.

Non Redeemable Noncontrolling Interests
The total proceedsCompany has investments in several entities, whose financial results are consolidated in the Company's financial statements, as it has the ability to exercise control over these entities. The interests of the respective noncontrolling parties in these entities have been recorded as noncontrolling interests.

Reedemable Noncontrolling Interest
The Company's redeemable noncontrolling interest resulted from the issuanceacquisition of the warrants werea 75% ownership interest in Vital River. See Note 2, "Business Acquisitions."


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

$65,423.

Noncontrolling Interests9. INCOME TAXES
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 outside joint venture partners in 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 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 the purchase, we recorded the purchase price of $4,000 and the balance of the noncontrolling interests of $8,623 to equity.
7. Income Taxes
An analysis of the components of income (loss) from continuing operations before income taxes and the related provision for income taxes isare presented below:
 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)
Foreign20,727
 23,782
 26,851
State and local1,124
 2,416
 1,086
Total current$25,808
 $37,576
 $23,330
Deferred:     
Federal$2,961
 $(24,604) $16,968
Foreign(11,649) (9,696) (1,487)
State and local20
 (3,253) 1,543
Total deferred$(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.
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Income from continuing operations before income taxes: 
    
U.S. $71,002
 $39,900
 $35,504
Non-U.S. 106,593
 98,427
 94,242
 177,595
 138,327
 129,746
Income tax provision: 
    
Current: 
    
Federal13,733
 10,832
 (1,447)
Foreign20,364
 18,370
 26,411
State4,746
 4,240
 1,353
Total current38,843
 33,442
 26,317
Deferred: 
    
Federal12,982
 5,468
 13,132
Foreign(4,672) (6,431) (12,683)
State518
 432
 862
Total deferred8,828
 (531) 1,311
 $47,671
 $32,911
 $27,628

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

The components of deferred tax assets and liabilities are as follows:
December 31, 2011 December 25, 2010December 27, 2014 December 28, 2013
(in thousands)
Deferred tax assets:   
Compensation$49,178
 $47,695
$49,702
 $38,836
Accruals and reserves3,712
 4,725
7,061
 2,356
Inventory reserves and valuations1,940
 1,696
Financing related3,193
 3,576
993
 1,594
Net operating loss and credit carryforwards39,927
 47,026
Other4,426
 2,262
Valuation allowance(5,866) (7,071)
Total deferred tax assets:98,183
 86,699
   
Deferred tax liabilities:   
Goodwill and other intangibles(6,523) (5,876)(52,029) (21,826)
Net operating loss and credit carryforwards57,193
 36,359
Depreciation related(34,389) (28,400)(23,549) (22,389)
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
Investments in limited partnerships(4,067) (2,720)
Total deferred tax liabilities:(79,645) (46,935)
Net deferred taxes$18,538
 $39,764
Reconciliations of the statutory U.S. Federal income tax rate to effective tax rates are as follows:

December 31, 2011 December 25, 2010 December 26, 2009December 27, 2014 December 28, 2013 December 29, 2012
U.S. statutory income tax rate35.0 % (35.0)% 35.0 %35.0 % 35.0 % 35.0 %
Foreign tax rate differences(6.7)% (1.3)% (5.4)%(9.4)% (8.0)% (8.0)%
State income taxes, net of Federal tax benefit2.1 % (0.7)% 1.3 %1.9 % 1.6 % 1.5 %
Unbenefitted losses and valuation allowance0.6 % 0.6 % 1.4 %
Impact of repatriation of non-U.S.earnings0.5 % 4.6 % (0.7)%
Unbenefitted losses and changes in valuation allowance0.1 % 0.4 % 0.8 %
Research tax credits and enhanced deductions(7.6)% (3.6)% (6.7)%(4.1)% (6.6)% (8.2)%
Enacted tax rate changes(1.0)%  % (0.1)% % (0.4)% (0.2)%
Impact of tax uncertainties(1.0)% 3.1 % 1.2 %(0.7)% 1.0 % (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)%  %  %
Impact of acquisitions and restructuring1.6 % 0.2 % 0.1 %
Other1.6 % 1.0 % 0.6 %2.4 % 0.6 % 1.5 %
12.9 % 0.0 % 26.6 %26.8 % 23.8 % 21.3 %

As of December 31, 2011, we have non-U.S.27, 2014, the Company had foreign net operating loss and tax credit carryforwards the tax effect of which is $18,372.$39.8 million, as compared to $36.9 million as of December 28, 2013. Of this amount, $1,125$24.3 million will expire in 2013, $1,856 will expire in 2014, $915 will expire inafter 2015, $2,533 will expire in 2016, $150 will expire in 2017 and $390 will expire in 2018. Thethe remainder of $11,403$15.5 million can be carried forward indefinitely. We have U.S. net operating loss carryforwards atFrom a tax return basis, the state level, the tax effect of which is $421, which will expire between 2015 and 2031. We have U.S. foreignCompany has federal tax credit carryforwards of $25,481. Of this amount, $16,428$10.5 million that will expire in 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 $18,402, which begin to expire in 2029.2019, as compared to $21.7 million as of December 28, 2013. However, from a financial statement perspective, all of its federal tax credit carryforwards are shown net of unrecognized tax benefits. In accordance with Canadian Federal tax law, we claim SR&EDthe Company claims Scientific Research and Experimental Development (SR&ED) credits on qualified research and development costs incurred by our Preclinical servicein its Safety Assessment facility in Canada,Montreal, and currently maintains $24.6 million in credit carryforwards, which will begin to expire in 2030. Additionally, the performance of projectsCompany records a benefit to operating income 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 facilitycredits 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 $341 and $277, respectively.
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 assetsboth Quebec 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-capitalU.K. related to the exercise of stock optionsits Safety Assessment and vesting of restricted shares.Early Discovery facilities.

We haveThe Company has fully recognized ourits deferred tax assets on the belief that it is more likely than not that they will be realized. The only exceptions at December 31, 2011relate to deferred tax assets primarily for net operating losses in China, Hong Kong, India, Luxembourg and the

72


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Netherlands, capital losses in the U.S. and Canada, and fixed assets in the U.K. which have resulted in an increase of $137 in theThe valuation allowance decreased by $1.2 million from $12,041$7.1 million at December 25, 201028, 2013 to $12,178$5.9 million at December 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 deferred tax assets will not be realized.27, 2014.
During the 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 excessA reconciliation of the tax outside basis over the basis for 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 assetCompany's beginning 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 continuing operations during the first quarter of 2011.
At December 31, 2011, the amount recorded for unrecognized tax benefits was $27,976. At December 25, 2010 the amount recorded forending unrecognized income tax benefits was $33,427. is as follows:
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Beginning balance$18,475
 $30,996
 $27,976
Additions to tax positions for current year1,700
 2,009
 1,907
Additions to tax positions for prior years18,502
 1,709
 4,196
Reductions to tax positions for current year
 
 
Reductions to tax positions for prior years(3,722) (732) (28)
Settlements(308) (15,246) (3,055)
Expiration of statute of limitations(20) (261) 
Ending balance$34,627
 $18,475
 $30,996

The $5,451 decrease$16.2 million increase in unrecognized income tax benefits during 2011the fiscal year 2014 is primarily attributable to the 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 uncertainpre-acquisition tax positions intaken by the current and prior periods and foreign exchange movement. newly acquired Early Discovery businesses.
The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was $22,477$32.3 million as of December 31, 201127, 2014 and $28,456$17.0 million as of December 25, 2010.28, 2013. The $5,979 decrease$15.3 million increase is primarily attributable to pre-acquisition tax positions taken by the newly acquired Early Discovery businesses. It is reasonably possible as of December 27, 2014 that the liability for unrecognized tax benefits for the uncertain tax position associated with forgiveness of debt will decrease by $10.7 million due to the expiration of statute of limitations and by $0.6 million due to the settlement of the German controversy which is partially offset by increases due to ongoing evaluation of uncertainand French tax positions in the current and prior periods and foreign exchange movement.
A reconciliation of our beginning and ending unrecognized income tax benefits is as follows:

 December 31, 2011 December 25, 2010 December 26, 2009
Beginning balance$33,427
 $21,389
 $28,732
Additions:     
Tax positions for current year1,714
 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 continueaudits. The Company continues 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 31, 201127, 2014 and December 25, 201028, 2013 was $1,515$1.4 million and $2,313,$0.7 million, respectively.
The $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.
We conductCompany conducts business in a number of tax jurisdictions. As a result, we areit is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the United States,U.S., the United Kingdom,U.K., France, Japan, Germany and Canada. With few exceptions, we arethe Company is no longer subject to U.S. and international income tax examinations for years before 2005.2010.
WeThe Company and certain of ourits subsidiaries are currently under audit by the Canadian Revenue Authority (CRA), the Minister of Revenue Quebec provincialvarious tax authority (MRQ)authorities in Canada, Germany and various state tax authorities. We doFrance. The Company does not believe thatanticipate resolution of these audits will have a material impact on its financial statements.
In the first quarter of 2014, the Company settled with the Canadian Revenue Authority (CRA) for tax years 2006 through 2009 related to transfer pricing in our financial position or results of operations.
Additionally, we are challenging the reassessments received by the CRA with respect to the SR&ED credits claimedSafety Assessment operations in 2003 and 2004 by our Canadian Preclinical Services subsidiary in the Tax Court of Canada (TCC).Montreal. In the fourth quarter of 20092014, the Company received an assessment from the CRA related to transfer pricing in our Safety Assessment operations in Montreal. The CRA has disallowed certain deductions related to headquarter service charges for the years 2010 through 2012. The Company intends to apply with the Internal Revenue Service (IRS) and CRA for relief pursuant to the competent authority procedure provided in the tax treaty between the U.S. and Canada for the tax years 2008 through 2012. The Company believes that the controversy will likely be ultimately settled via the competent authority process and accordingly have recorded both a Canadian liability and a US receivable. The actual amounts of the liability for Canadian taxes and the first quarter of 2010, we filed Notices of Appeal withasset for the TCC and received the Crown's responsecorrelative relief in the second quarterU.S. could be different based upon the agreement reached between the IRS and the CRA.
On December 2, 2014, the Quebec government released Information Bulletin 2014-11, which elaborated on a proposed law change on its SR&ED credit that, if passed, would provide a one-time retroactive benefit to operating income in the year of 2010. Inenactment and would provide a related development, during the first quarter of 2010 we received Notices of Reassessment from the MRQ with respectcorresponding increase to the Quebec ResearchCompany’s effective income tax rate. If passed as proposed, the tax law change would also provide an ongoing reduction in benefit to operating income and Developmentan additional corresponding increase to the Company's effective income tax credit. We filed Notices of Objection with the MRQrate in the second quarteryear of 2010. We disagree with the positions taken by the CRAenactment and 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 these controversies will have a material impact on our financial position or results of operations. However, it is possible that the CRA and MRQ will propose similar adjustments for later years.beyond.
We believe we have appropriately provided for all uncertain tax 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 United States that was previously unforeseen. In accordance with ourthe Company's policy, with respect to the unremitted earnings of 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 $229,792 of earnings that were previously indefinitely reinvested and approximately $63,640 in basis in our non-U.S. subsidiaries could be repatriated in a substantially tax-free manner. As a result, in 2010, we changed our indefinite reinvestment assertion with respect to these earnings and accrued the cost to repatriate $10,334, of which $15,264 is reflected as Income Tax Expense, with an offsetting benefit of $4,930, which is recorded in the Cumulative Translation 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 undistributed earnings of ourthe Company's non-U.S. subsidiaries remain indefinitely reinvested as of the end of 20112014 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 31, 2011,27, 2014, the earnings of our 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 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, we issued $300,000 aggregate principal amount of convertible senior notes (2013 Notes) in a private placement with net proceeds to us of approximately $294,000. On June 20, 2006, the initial purchasers associated with this convertible debt offering exercised an option to purchase an additional $50,000 of the 2013 Notes for additional net proceeds of approximately $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 issuance of the 2013 Notes, we entered into convertible note hedge transactions with respect to its obligation to deliver common stock under the 2013 Notes. Separately and concurrently with the pricing of the 2013 Notes, we issued warrants for approximately 7.2 million shares of its common stock. 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 we deduct the option premium paid for the hedge as original issue discount (OID) over the 7 year term. A deferred tax asset was recorded at issuance with an offset to 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 excessindefinitely reinvested totaled $271.0 million. No provision for U.S. income taxes has been provided herein. Determination of the OID over the interest expense to be reported in our Statementamount of Income during the termunrecognized deferred income tax liabilities on these earnings is not practicable because of the 2013 Notes. Also, pursuant to Internal Revenue Code Section 1032, we will not recognize any gain or loss for tax purposecomplexities with respect to the exercise or lapsehypothetical calculation. Additionally, the amount of the warrants.

liability is dependent on circumstances existing if and when remittance occurs.
8. Employee Benefits
10. EMPLOYEE BENEFIT PLANS

Charles River Laboratories Employee Savings Plan
Our defined contribution plan, theThe Charles River Laboratories Employee Savings Plan qualifies under sectionis a defined contribution plan in the form of a qualified 401(k) of the Internal Revenue Code. It coversplan in which substantially all U.S. employees andare eligible to participate upon employment. The plan contains a provision whereby we matchthe Company matches a percentage of employee contributions. TheDuring the fiscal years 2014, 2013 and 2012, the costs associated with this defined contribution plan totaled $4.9 million, $4,178, $4,6944.7 million and $6,253, in 2011, 2010 and 20094.4 million, respectively.

Charles River Laboratories Deferred Compensation Plan and Executive Supplemental Life Insurance Retirement Plan
The Company maintains a non-qualified deferred compensation plan, known as the Charles River Laboratories Deferred Compensation Plan (Deferred Compensation Plan) is designed for(DCP), which allows a select group of 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 numberportion 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.their compensation. At the present time, no contributions will beare credited to the plan,DCP, 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.

The Company provides certain active employees an annual contribution into their DCP account of 10% of the employee's base salary plus the lesser of their target annual bonus or actual annual bonus.

In addition to the Deferred Compensation Plan,DCP, certain officers and key employees also participate, or in the past participated, in our amended and restatedthe Company's 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 (CRL 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, totaledincluding the ESLIRP, for the fiscal years $2,0482014, $3,0822013 and $3,5622012 in 2011, 2010totaled $3.3 million, $3.3 million and 2009,$2.9 million, respectively.
We have
The Company has 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.DCP. Participants have no interest in any such investments. At December 31, 201127, 2014 and December 25, 201028, 2013, the cash surrender value of these life insurance policies were $25,057$27.6 million and $31,054,$26.5 million, respectively.

Post-Retirement Health and Life Insurance Plans
The Company's Montreal location offers post-retirement life insurance benefits to its employees and post-retirement medical and dental insurance coverage to certain executives. The plan is non-contributory and unfunded. As of December 27, 2014 and December 28, 2013, the accumulated benefit obligation related to the plan was $1.2 million and $1.1 million, respectively. The amounts included in other accumulated comprehensive income as well as expenses related to the plan were insignificant in the fiscal years 2014, 2013, and 2012.

Pension Plans
The CRL Pension Plan is a qualified, non-contributory defined benefit plan covering certain U.S. employees. Effective 2002, the plan was amended to exclude new participants from joining and in 2008 the accrual of benefits was frozen.
The Charles River Pension Plan is a defined contribution plan and a defined benefit pension plan covering certain UKU.K. 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. During 2009, the UK plan recorded a curtailment gain of $674 associated with the sale of our Phase I PCS business in the UK.
The defined benefit pension plans for Japan and our Canadian RMS operation are non-contributory plans that cover substantially all employees of those respective companies. Benefits are based upon length of service and final salary. In addition, our French RMS operation has a defined benefit statutory indemnity plan covering most of its employees.

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars

In addition, the Company has several defined benefit plans in thousands, except per share amounts)certain other countries in which it maintains an operating presence, including Japan, Canada and France.

The following tables summarizeprovide a reconciliation of benefit obligations and plan assets of the funded status of our defined benefitCompany's pension plans and amounts reflected in our consolidated balance sheets.
Obligations and Funded Status

supplemental post-retirement benefit plans:
Pension Benefits 
Supplemental
Retirement Benefits
Pension Benefits 
Supplemental
Retirement Benefits
2011 2010 2011 2010December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Change in benefit obligations       
(in thousands)
Change in projected benefit obligations: 
  
  
  
Benefit obligation at beginning of year$228,810
 $205,913
 $30,572
 $28,297
$286,212
 $283,063
 $29,498
 $27,372
Service cost3,056
 2,617
 636
 597
3,397
 3,368
 758
 643
Interest cost12,107
 11,214
 1,201
 1,341
12,822
 11,273
 1,009
 708
Plan participants' contributions574
 585
 
 
Curtailment
 
 
 
Settlements(158) (579) (5,113) 
Benefit payments(6,664) (5,849) (764) (764)(9,002) (8,300) (722) (726)
Actuarial loss (gain)13,319
 19,011
 (76) 1,101
50,550
 (4,276) 1,703
 1,501
Plan amendments53
 
 
 
Administrative expenses paid(272) (307) 
 
(459) (308) 
 
Effect of foreign exchange1,091
 (3,795) 
 
(16,636) 1,392
 
 
Benefit obligation at end of year$251,916
 $228,810
 $26,456
 $30,572
326,884
 286,212
 32,246
 29,498
Change in plan assets       
Change in fair value of plan assets:       
Fair value of plan assets at beginning of year$192,429
 $174,022
 $
 $
272,659
 238,672
 
 
Plan assets assumed
 
 
 
Actual return on plan assets3,661
 20,512
 
 
25,630
 30,820
 
 
Settlements(158) (578) (5,113) 
Employer contributions12,170
 7,515
 5,877
 764
6,874
 9,570
 722
 726
Plan participants' contributions574
 585
 
 
Benefit payments(6,664) (5,849) (764) (764)(9,002) (8,300) (722) (726)
Premiums paid(272) 
 
 
(459) (308) 
 
Other
 (307) 
 
Effect of foreign exchange912
 (3,471) 
 
(14,412) 2,205
 
 
Fair value of plan assets at end of year$202,652
 $192,429
 $
 $
$281,290
 $272,659
 $
 $
Funded status       
Projected benefit obligation$251,916
 $228,810
 $26,456
 $30,572
Fair value of plan assets202,652
 192,429
 
 
       
Net balance sheet liability$49,264
 $36,381
 $26,456
 $30,572
$45,594
 $13,553
 $32,246
 $29,498
Classification of net balance sheet liability       
       
Amounts recognized in balance sheet:       
Non-current assets$11
 $
 $
 $
$61
 $2,738
 $
 $
Current liabilities52
 46
 717
 5,913
169
 72
 744
 789
Non-current liabilities49,223
 36,335
 25,739
 24,659
45,486
 16,219
 31,502
 28,709

Amounts recognized in accumulated other comprehensive income:
 Pension Benefits 
Supplemental
Retirement Benefits
 Fiscal Year Ended Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
 (in thousands)
Net actuarial loss$73,433
 $35,481
 $5,761
 $4,307
Net prior service cost (credit)(5,388) (6,338) 
 660
Net amount recognized$68,045
 $29,143
 $5,761
 $4,967

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Amounts recognized in statementThe accumulated benefit obligation and fair value of financial position as part of accumulated other comprehensive income ("AOCI")

 Pension Benefits 
Supplemental
Retirement Benefits
 2011 2010 2011 2010
Net actuarial (gain)/loss$52,384
 $30,045
 $3,190
 $2,988
Net prior service cost/(credit)(7,117) (7,734) 1,981
 2,479
Total$45,267
 $22,311
 $5,171
 $5,467
The accumulated benefit obligation for all defined benefit plans$245,705
 $224,127
 $24,663
 $29,073
Informationplan assets for defined benefitthe Company plans with accumulated benefit obligationobligations in excess of plan assets
are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
Pension Benefits 
Supplemental
Retirement Benefits
2011 2010 2011 2010December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Projected benefit obligation$247,232
 $216,088
 $26,457
 $30,572
(in thousands)
Accumulated benefit obligation242,467
 214,802
 24,663
 29,073
$299,127
 $81,117
 $29,994
 $27,938
Fair value of plan assets198,689
 180,587
 
 
267,026
 68,430
 
 
InformationThe projected benefit obligation and fair value of plan assets for defined benefitthe Company plans with projected benefit obligationobligations in excess of plan assets

are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
Pension Benefits 
Supplemental
Retirement Benefits
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
2011 2010 2011 2010(in thousands)
Projected benefit obligation$251,723
 $228,810
 $26,457
 $30,572
$326,731
 $99,671
 $32,246
 $29,498
Accumulated benefit obligation245,574
 224,127
 24,663
 29,073
Fair value of plan assets202,448
 192,429
 
 
281,075
 83,379
 
 
AmountsThe amounts in AOCIaccumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year are as follows:

 
Pension
Benefits
 
Supplemental
Retirement
Benefits
 (in thousands)
Amortization of net actuarial loss$3,227
 $269
Amortization of net prior service credit(602) 
Components of net periodic benefit cost:
 
Pension
Benefits
 
Supplemental
Retirement
Benefits
Amortization of net actuarial (gain)/loss$2,338
 $261
Amortization of net prior service cost/(credit)(596) 660






 Pension Benefits 
Supplemental
Retirement Benefits
 Fiscal Year Ended Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Service cost$3,397
 $3,368
 $3,729
 $758
 $643
 $640
Interest cost12,822
 11,273
 11,289
 1,009
 708
 892
Expected return on plan assets(17,444) (14,672) (13,799) 
 
 
Amortization of prior service cost (credit)961
 2,711
 2,461
 250
 249
 260
Amortization of net loss (gain)(637) (603) (609) 660
 660
 660
Net periodic cost (benefit)$(901) $2,077
 $3,071
 $2,677
 $2,260
 $2,452


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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Components of net periodic benefit cost

 Pension Benefits 
Supplemental
Retirement Benefits
 2011 2010 2009 2011 2010 2009
Service cost$3,056
 $2,617
 $2,283
 $636
 $597
 $623
Interest cost12,107
 11,214
 9,771
 1,201
 1,341
 1,485
Expected return on plan assets(13,677) (12,185) (9,783) 
 
 
Amortization of prior service cost (credit)(617) (598) (618) 498
 498
 498
Amortization of net loss (gain)978
 749
 1,271
 210
 155
 125
Net periodic benefit cost1,847
 1,797
 2,924
 2,545
 2,591
 2,731
Settlement23
 27
 43
 (487) 
 
Curtailment gain
 
 (674) 
 
 
Net pension cost$1,870
 $1,824
 $2,293
 $2,058
 $2,591
 $2,731
Rollforward of accumulated other comprehensive income
 Pension Benefits 
Supplemental
Retirement Benefits
 2011 2010 2011 2010
Beginning balance$22,311
 $12,012
 $5,467
 $5,020
Amortization of prior service cost617
 598
 (497) (498)
Amortization of net gain (loss)(978) (749) (210) (155)
Asset loss/(gain)10,016
 (8,327) 
 
Liability loss/(gain)13,319
 19,011
 (76) 1,100
Recognized prior service (cost) credit due to curtailment53
 
 
 
Recognized (loss)/gain due to settlement(23) (27) 487
 
Currency impact(48) (207) 
 
Ending balance$45,267
 $22,311
 $5,171
 $5,467
Assumptions
Weighted-average assumptions used to determine projected benefit obligations
obligations:
Pension
Benefits
 
Supplemental
Retirement Benefits
Pension Benefits 
Supplemental
Retirement Benefits
2011 2010 2011 2010December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Discount rate4.47% 5.20% 3.42% 4.34%3.79% 4.54% 3.34% 3.47%
Rate of compensation increase3.12% 2.50% 2.50% 2.50%3.19% 3.39% 3.00% 3.00%





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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Weighted-average assumptions used to determine net periodic benefit cost
cost:
Pension Benefits 
Supplemental
Retirement Benefits
Pension Benefits 
Supplemental
Retirement Benefits
2011 2010 2009 2011 2010 2009December 27, 2014 December 28, 2013 December 29, 2012 December 27, 2014 December 28, 2013 December 29, 2012
Discount rate5.20% 5.63% 5.74% 4.34% 5.22% 6.15%4.54% 4.13% 4.47% 3.47% 2.63% 3.42%
Expected long-term return on plan assets6.79% 7.11% 6.84% 
 
 
6.41% 6.27% 6.55% 
 
 
Rate of compensation increase3.48% 2.50% 3.24% 2.50% 2.50% 4.75%3.39% 3.04% 3.12% 3.00% 2.50% 2.50%
A 0.5% decrease in the expected rate of return would increase annual pension expense by $1.4 million.
Plan assets
The expectedCompany invests its pension assets with the objective of achieving a total long-term rate of return on plan assets was made considering thesufficient to fund future pension plan's asset mix, historical returnsobligations and the expected yields on plan assets.to minimize future pension contributions.  The discount rates reflect the rates at which amounts that are invested inCompany is willing to tolerate a commensurate level of risk to achieve this objective.  The Company controls its risk by maintaining a diversified portfolio of high-quality debt instruments would provide the future cash flows necessary to pay benefits when they become due. The rate of compensation increase reflects the expected annual salary increases for the plan participants based on historical experience and our current employee compensation strategy.
Plan assets
Our pension plans' weighted-average asset allocations are as follows:
 
Target
Allocation
 
Pension
Benefits
 2012 2011 2010
Equity securities67% 59% 65%
Fixed income31% 37% 31%
Other2% 4% 4%
Total100% 100% 100%
Our investment objective is to obtain the highest possible return commensurate with the level of assumed risk. Fund performances are compared to benchmarks including the S&P 500 Index, Russell 2000, BC Aggregate Index and MSCI EAFE Index. Our Investment Committee meets on a quarterly basis to review plan assets.
classes. Plan assets did not include any of ourthe Company's common stock at December 31, 201127, 2014 or December 28, 2013. The weighted-average target asset allocations are approximately 49.7% to equity securities, approximately 31.2% to fixed income securities and December 25, 2010, respectively.approximately 19.1% to other securities.
The fair value of ourthe Company's pension plan assets by asset category are as follows.
follows:
 Fair Value Measurements at December 31, 2011
Assets
Quoted Prices in
Active Markets
for Identical
Assets
Level 1
 
Significant Other
Observable
Inputs
Level 2
 
Significant
Unobservable
Inputs
Level 3
 
Assets at
Fair Value
Cash$1,132
 $
 $
 $1,132
Common stock(a)85,288
 
 
 85,288
Debt securities(a)54,067
 
 
 54,067
Mutual funds(b)45,818
 14,559
 
 60,377
Life insurance policies(c)
 284
 1,419
 1,703
Other (d)85
 
 
 85
Total$186,390
 $14,843
 $1,419
 $202,652


 December 27, 2014 December 28, 2013
 
Level 1
 
Level 2
 
Level 3
 Total 
Level 1
 
Level 2
 
Level 3
 Total
 (in thousands)
Cash$1
 $
 $
 $1
 $1,004
 $
 $
 $1,004
Equity securities(a)
80,692
 5,126
 
 85,818
 97,857
 5,059
 
 102,916
Debt securities(b) 
69,716
 3,232
 
 72,948
 62,717
 3,487
 
 66,204
Mutual funds(c)
67,079
 53,330
 
 120,409
 65,152
 35,610
 
 100,762
Other297
 46
 1,771
 2,114
 299
 48
 1,426
 1,773
Total$217,785
 $61,734
 $1,771
 $281,290
 $227,029
 $44,204
 $1,426
 $272,659
(a)This category comprises investmentsequity securities held by non-U.S. pension plans valued at the quoted closing price, reported on the active market on which the individual securities are traded.and translated into U.S. dollars using a foreign currency exchange rate at year end.
(b)This category comprises debt securities held by non-U.S. pension plans valued at the quoted closing price, and translated into U.S. dollars using a foreign currency exchange rate at year end.
(c)This category comprises mutual funds valued at the net asset value of shares held at year end.

The activity within the Level 3 pension plan assets was insignificant during the periods presented.
During the fiscal year ended 2014, the Company contributed $6.4 million to the pension plans and expects to contribute $6.1 million to its pension plan in 2015.
Expected benefit payments are estimated using the same assumptions used in determining the Company’s benefit obligation at December 27, 2014. Benefit payments will depend on future employment and compensation levels, among other factors, and

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars

changes in thousands, except per share amounts)

(c)This category comprises life insurance policies valued at cash surrender value at year end.
(d)This comprises annuity policies held with various insurance companies valued at face value.
 
Fair Value Measurements
Using Significant
Unobservable
Inputs
(Level 3)
Balance at December 25, 2010$1,203
Actual return on plan assets: 
Relating to assets still held at December 31, 2011334
Relating to assets sold during the period 
Purchases, sales and settlements(118)
Transfers in and/or out of Level 3
Balance at December 31, 2011$1,419
Contributions
During 2011, we contributed $18,047 to our pension plans. We expect to contribute $13,868 to our pension plan in 2012.
any of these factors could significantly affect these estimated future benefit payments. Estimated future benefit payments during the next five years and in the aggregate for the fiscal years thereafter, are as follows:
 
Pension
Benefits
 
Supplemental
Retirement Benefits
2012$5,961
 $731
20136,869
 10,760
20146,679
 797
20157,379
 739
20168,357
 5,379
2017-2021$49,874
 $3,432
 
Pension
Benefits
 
Supplemental
Retirement Benefits
 (in thousands)
2015$6,811
 $759
20166,832
 13,090
20177,194
 740
20188,384
 727
20198,700
 7,147
2020-202457,116
 11,286

11. STOCK PLANS AND STOCK BASED COMPENSATION

9. Stock Plans and Stock Based Compensation
We have share-basedThe Company has stock-based compensation plans under which employees and non-employee directors may be granted share based awards. stock-based awards such as stock options, restricted stock and PSUs.
During 20112014, 20102013 and 20092012, the primary share-based awards and their general terms and conditions are as follows:
Stock options, which entitle the holder to purchase a specified number of shares of common stock at an exercise price equal to the closing market price of our common stock on the date of grant; vest incrementally, typically over three3 to four4 years; and generally expire seven7 to ten10 years from date of grant.
Restricted stock, grants, which entitle the holder to receive at no cost, a specified number of shares of common stock that vests incrementally, typically over three3 to four4 years. RecipientsWith respect to restricted stock units, recipients are entitled to cash dividends and to vote their respective shares upon grant.
Performance based stock awards,PSUs, which entitle the holder to receive at no cost, a specified number of shares of common stock within a range of shares from zero to a specified maximum. Payout of this award is contingent upon achievement of individualized stretch goals as determined by our Compensation Committee ofcertain performance and market conditions.
In May 2007, the Board of Directors.
At the Annual Meeting of Shareholders held on May 8, 2007, ourCompany's shareholders approved the 2007 Incentive Plan, which was amended in 2009, 2011 and 2013 (2007 Plan). The 2007 Plan was subsequently amended in 2009 and 2011, and in each case the amendments were approved by our shareholders at the respective annual meeting of shareholders. The 2007 Plan provides that effective upon approval,provided no further awards willto be granted under preexisting stock option and incentive plans; provided, however, that any shares that have been forfeited or canceled in accordance with the terms of the applicable award under a preexisting plan may be subsequently awarded in accordance with the terms of the preexisting plan. The 2007 Plan allows a maximum of 12.218.7 million shares to be awarded, of which restricted stock grants and performance based stock awards count as 2.3 shares and stock options count as

77

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

one 1.0 share. In the past, we had various employeeAny stock and incentive plans under which stock options and other share-based awards were granted. Stock options and other share-based awards that were granted under prior plans and were outstanding onin May 8, 2007, continue in accordance with the terms of the respective plans.
At December 31, 201127, 2014, approximately 5.819.9 million shares were authorized for future grants under ourthe Company's share-based compensation plans. We settleThe Company settles employee share-based compensation awards with newly issued shares.
The estimated fair value of our stock-based awards, less expected forfeitures, is amortized over the awards' vesting period on a straight-line basis. The following table presentsprovides the financial statement line items in which stock-based compensation included in our consolidated statement of income:
 December 31, 2011 December 25, 2010 December 26, 2009
Stock-based compensation expense in:     
Cost of sales$5,983
 $7,186
 $7,006
Selling and administration15,723
 18,340
 16,646
Income from continuing operations, before income taxes21,706
 25,526
 23,652
Provision for income taxes(7,784) (9,179) (8,388)
Net income attributable to common shareowners$13,922
 $16,347
 $15,264
We capitalized is reflected:no stock-based compensation related costs for the years ended 2011, 2010 and 2009.
The fair value of stock-based awards granted during 2011, 2010 and 2009 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 December 31, 2011 December 25, 2010 December 26, 2009
Expected life (in years)4.2
 4.5
 4.5
Expected volatility33% 34% 25%
Risk-free interest rate2.21% 2.35% 1.87%
Expected dividend yield0% 0% 0%
Weighted—average grant date fair value$11.32
 $11.96
 $6.15














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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars

 Fiscal Year Ended
 December 27, 2014
 December 28, 2013
 December 29, 2012
 (in thousands)
Stock-based compensation expense included in:     
Cost of revenue$5,382
 $5,381
 $5,470
Selling, general and administrative25,653
 19,161
 16,385
Stock-based compensation expense, before income taxes31,035
 24,542
 21,855
Provision for income taxes(11,006) (8,658) (7,793)
After-tax effect of stock-based compensation expense$20,029
 $15,884
 $14,062

The Company capitalized no stock-based compensation related costs for the fiscal years 2014, 2013 and 2012.

The Company's pool of excess tax benefits, which is computed in thousands, except per share amounts)accordance with the long form method, was $10.8 million as of December 27, 2014, $7.3 million as of December 28, 2013 and $9.6 million as of December 29, 2012. During the fiscal year 2014, the Company recorded a tax benefit of $4.3 million to additional paid-in capital related to the exercise of stock options and vesting of restricted shares and restricted stock units, compared to a tax benefit of $1.1 million in 2013. Additionally, in the fiscal year 2014, the windfall tax benefit was reduced by $1.6 million due to the utilization of foreign tax credits.


Stock Options
The following table summarizes stock option activities under ourthe Company's stock-based compensation plans:
 Number of shares Weighted Average
Exercise Price
 Weighted Average
Remaining
Contractual Life
(in years)
 Aggregate
Intrinsic
Value
 (in thousands, except per share amounts)
Options outstanding as of December 28, 20133,768,733
 $40.81
    
Options granted568,615
 $57.82
    
Options exercised(1,733,293) $42.46
    
Options canceled(50,820) $45.03
    
Options outstanding as of December 27, 20142,553,235
 $43.39
 3.9 $53,383
Options exercisable as of December 27, 20141,149,763
 $39.92
 2.3 $28,034
Options expected to vest as of December 27, 20141,200,470
 $45.95
 5.1 $22,016
The fair value of stock options granted was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 Shares Weighted Average
Exercise Price
 Weighted Average
Remaining
Contractual Life
(in years)
 Aggregate
Intrinsic
Value
Options outstanding as of December 27, 20084,481,120
 $43.93
    
Options granted2,252,704
 $25.34
    
Options exercised(48,411) $16.46
    
Options canceled(468,470) $40.47
    
Options outstanding as of December 26, 20096,216,943
 $37.67
    
Options granted1,367,780
 $37.32
    
Options exercised(188,585) $24.34
    
Options canceled(801,825) $38.61
    
Options outstanding as of December 25, 20106,594,313
 $37.87
    
Options granted929,980
 $37.27
    
Options exercised(722,355) $28.41
    
Options canceled(720,675) $43.33
    
Options outstanding as of December 31, 20116,081,263
 $38.25
    
Options exercisable as of December 26, 20093,096,990
 $41.69
    
Options exercisable as of December 25, 20103,732,025
 $40.61
    
Options exercisable as of December 31, 20113,593,374
 $40.58
 2.65 years $1,319
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
Expected life (in years)4.2
 4.2
 4.5
Expected volatility30% 33% 35%
Risk-free interest rate1.55% 0.80% 0.84%
Expected dividend yield
 
 

The weighted-average grant date fair value of stock options granted was $15.19, $11.17 and $10.94 for the fiscal years 2014, 2013 and 2012, respectively.
As of December 31, 201127, 2014, the unrecognized compensation cost related to2,464,331 unvested stock options expected to vest was $16,06211.5 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 28.13 months.2.4 years.

79


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The total intrinsic value of options exercised during the fiscal years ending December 31, 201127, 2014, December 25, 201028, 2013 and December 26, 200929, 2012 was $7,95030.5 million, $1,76724.7 million and $909,$5.1 million, 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 options during 2011 was $20,625. The actual tax benefit realized for the tax deductions from option exercises totaled $2,898 for the year ended December 31, 2011.
Restricted Stock and Restricted Stock Units
The following table summarizes significant ranges of outstanding and exercisable options as ofthe restricted stock activity for the fiscal year December 31, 20112014:
 Options Outstanding Options Exercisable
Range of Exercise PricesNumber
Outstanding
 Weighted
Average
Remaining
Contractual
Life
(In years)
 Weighted
Average
Exercise
Price
 Aggregate
Intrinsic
Value
 Options
Exercisable
 Weighted
Average
Remaining
Contractual
Life
(In years)
 Weighted
Average
Exercise
Price
 Aggregate
Intrinsic
Value
$0.00–$10.00657
 0.16
 $0.24
 $18
 657
 0.16
 $0.24
 $18
$10.01–$20.0029,264
 0.55
 13.35
 409
 29,264
 0.55
 13.35
 409
$20.01–$30.001,167,411
 4.11
 25.20
 2,576
 468,256
 4.02
 25.61
 892
$30.01–$40.002,916,283
 4.11
 36.33
 
 1,318,068
 2.24
 35.19
 
$40.01–$50.001,415,972
 2.69
 45.65
 
 1,340,657
 2.49
 45.95
 
$50.01–$60.00503,356
 3.08
 57.96
 
 389,108
 3.05
 57.78
 
$60.01–$70.0048,320
 3.30
 62.56
 
 47,364
 3.29
 62.52
 
Totals6,081,263
 3.67
 $38.25
 $3,003
 3,593,374
 2.65
 $40.58
 $1,319
 Restricted Stock Weighted
Average
Grant Date
Fair Value
 (in thousands)  
December 28, 20131,096,550
 $36.44
Granted479,104
 58.87
Vested(362,770) 38.21
Canceled(25,034) 41.51
December 27, 20141,187,850
 $46.83
As of December 27, 2014, the unrecognized compensation cost related to shares of unvested restricted stock and restricted stock units expected to vest was $40.0 million, which is expected to be recognized over an estimated weighted-average amortization period of 2.2 years. The total fair value of restricted stock and restricted stock unit grants that vested during the fiscal years 2014, 2013 and 2012 was $13.9 million, $15.1 million and $10.4 million, respectively.
Performance Based Stock Award Program
In the fiscal years 2014 and 2013, the Company issued PSUs to certain corporate officers. The number of shares of common stock issued for each PSU is adjusted based on a performance condition linked to the Company's financial performance. Certain awards are further adjusted based on a market condition, which is calculated based on the Company's stock performance relative to a peer group over the three-year vesting period. The fair value of the market condition is reflected in the fair value of the award at grant date.

The Company utilizes a Monte Carlo simulation valuation model to value these awards. Information pertaining to the Company’s PSUs and the related estimated weighted-average assumptions used to calculate their fair value were as follows:
 Fiscal Year Ended
 December 27, 2014
 December 28, 2013
PSUs granted214,823
 163,847
Weighted average per share fair value$67.82 $44.47
Key Assumptions:   
Expected volatility29% 32%
Risk-free interest rate0.63% 0.38%
Expected dividend yield% %
20 trading day average stock price on grant date13.1% 6.9%

In April 2014, the Company also issued 5,800 PSUs using a fair value per share of $61.25. These PSUs vest upon the achievement of certain revenue growth targets.

The maximum amount of common shares to be issued upon vesting of these PSUs is approximately 763,000. For the fiscal years 2014 and 2013, the Company recognized stock-based compensation related to these PSUs of $8.5 million and $2.2 million, respectively.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases
The Company rents laboratory and office space, land, vehicles and certain equipment under non-cancelable operating leases. These lease agreements contain various clauses for renewal at the Company's option and, in certain cases, rent escalation

7980

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

The aggregate intrinsic value in the preceding table represents the total intrinsic value, based on a closing stock price ofclauses. Rental expense under these leases amounted to $14.2 million, $16.7 million and $27.3318.2 million as of December 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 31, 2011 was 431,077.
The following table summarizes the non-vested stock option activity in the equity incentive plans for the fiscal year ending December 31, 2011:
 Non-vested Stock Options Weighted Average
Exercise Price
December 25, 20102,862,288
 $34.30
Granted929,980
 37.27
Forfeited(221,080) 33.52
Vested(1,083,299) 35.65
December 31, 20112,487,889
 $34.89
Restricted Stock
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.
The following table summarizes the restricted stock activity for 2011:
 Restricted Stock Weighted
Average
Grant Date
Fair Value
Outstanding as of December 25, 2010777,740
 $35.97
Granted292,840
 37.04
Vested(295,572) 37.18
Canceled(71,997) 37.88
Outstanding as of December 31, 2011703,011
 $35.70
As of December 31, 2011, the unrecognized compensation cost related to shares of unvested restricted stock expected to vest was $15,253. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 29 months. The total fair value of restricted stock grants that vested during the fiscal years ending December 31, 20112014, December 25, 20102013 and December 26, 2009 was $10,989, $13,072 and $13,7072012, respectively. The actual tax benefit realizedIn addition to rent, the leases may require the Company to pay additional amounts for the tax deductionstaxes, insurance, maintenance and other operating expenses.

As of December 27, 2014, minimum rental commitments under non-cancelable leases, net of income from restricted stock grants that vested totaled $3,952subleases, for the year ended December 31, 2011.
Performance Based Stock Award Program
We made performance-based awards to our executives during 2007, 2008 and 2009. Payout of these awards was contingent upon achievement of individualized goals. Compensation expense associated with these awards of $188, $496 and $412 has been recorded during 2011, 2010 and 2009, respectively.
10. Commitments and Contingencies
Operating Leases
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 $18,778, $22,635 and $19,952 in 2011, 2010 and 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, consisteach of the following at December 31, 2011:next five years and total thereafter were as follows:

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

2012$14,740
201311,483
20148,961
Minimum lease payments
(in thousands)
20155,980
$12,102
20164,959
9,854
20177,331
20184,284
20193,577
Thereafter$14,108
7,769
Total$44,917

Insurance
We maintainThe Company maintains various insurance whichpolicies that maintain large deductibles up to$7500.5 million, some with or without stop-loss limits, depending on market availability. Insurance policies at certain locations are based on a percentage of the insured assets, for which deductibles for certain property may exceed $0.5 million in the event of a catastrophic event.

Litigation
Various lawsuits, claims and proceedings of a nature considered normal to ourits business are pending against us. In the opinion of management,Company. While the outcome of any of these proceedings cannot be accurately predicted, the Company does not believe the ultimate resolution of any of these existing matters would have a material adverse effect on the Company’s business or financial condition.
In May 2013, the Company commenced an investigation into inaccurate billing with respect to certain government contracts. The Company promptly reported these matters to the relevant government contracting officers, the Department of Health and Human Services' Office of the Inspector General, and the Department of Justice, and is cooperating with these agencies to ensure the proper repayment and resolution of this matter. The Company identified approximately $1.5 million in excess amounts billed on these contracts since January 1, 2007 and reserved such proceedingsamount.  Because of the early stage of discussions with the government 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 incomplex nature of this matter, 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 predictionCompany believes that it is reasonably possible that additional losses may be made as toincurred. However, it cannot at this time estimate the outcome of litigation, we intend to defend against this proceeding vigorously and therefore an estimate of the possible loss orpotential range of loss cannot be made.beyond the current reserve of $1.5 million. 
11. Termination Fee—WuXi Pharma Tech
On In July 29, 2010, we signed2012, a termination agreementMauritius supplier of large animal models submitted an Application for Arbitration with WuXiThe Permanent Secretariat, The Permanent Court of Arbitration, The Mauritius Chamber of Commerce and Industry in Port Louis, Mauritius.  The supplier asserted that the Company failed to pay certain invoices and the supplier was therefore permitted to terminate the previously announced acquisitionsupply agreement.  The Company filed a counterclaim asserting that the supplier had failed to meet its contractual obligations under the supply agreement.  The arbitration hearing relating to this contract dispute took place in Mauritius from August 2013 and final arguments were presented in March 2014. In May 2014 and August 2014, the arbitrator issued the final rulings, ordering the Company to pay the supplier (1) the sum of $1.2 million and (2) all of the supplier's arbitration costs, in each case with interest. In September 2014, the Company paid the supplier $1.6 million in accordance with the termsarbitration ruling.

Guarantees
The Company enters into certain agreements with other parties in the ordinary course of business that contain indemnification provisions. These typically include agreements with directors and officers, business partners, contractors, landlords, and customers. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities. These indemnification provisions generally survive termination agreement, on July 29, 2010, we paid WuXi a $30,000termination fee for full satisfaction of the parties' obligations under the acquisitionunderlying agreement. The termination agreement also included mutual releasesmaximum potential amount of any claims and liabilities arising out of or relating tofuture payments the acquisition agreement.
12. Business Segment and Geographic Information
We report two business segments, Research Models and Services (RMS) and Preclinical Services (PCS). Our RMS segment includes sales of research models, GEMS, IS, RADS, DS, in vitro products and services, and avian vaccine products and services. Our PCS segment includes servicesCompany could be required to take a drug throughmake under these indemnification provisions is unlimited. However, to date the development process, which include discovery support, safety assessment and biopharmaceutical services.
The following table presents sales andCompany has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions other financial information by business segment. Net sales represent sales originating in entities primarily engaged in either provision of RMS or PCS. Long-lived assets include property, plant and equipment and other long-lived assets.than guaranties related to the

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

Phase I clinical business. See Note 14, “Discontinued Operations.” As a result, the estimated fair value of these obligations, other than liabilities related to the Phase I clinical business, is minimal.


13. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company revised its reportable segments during 2014 to align with its view of the business following its acquisition of Argenta and BioFocus. See Note 1, "Description of Business and Summary of Significant Accounting Policies." The Company reported segment results on this basis retrospectively for all comparable prior periods.
The following table presents revenue and other financial information by reportable segment.
Fiscal Year Ended
December 27, 2014 December 28, 2013 December 29, 2012
2011 2010 2009(in thousands)
Research Models and Services          
Net sales$705,419
 $666,986
 $659,929
Revenue$507,327
 $511,350
 $521,633
Gross margin297,327
 278,391
 278,670
190,092
 179,493
 198,291
Operating income206,319
 184,464
 193,349
121,376
 116,737
 143,783
Total assets687,346
 711,824
 717,975
375,415
 460,594
 411,874
Long-lived assets282,388
 277,193
 284,809
138,021
 161,027
 172,641
Depreciation and amortization37,240
 37,657
 33,501
27,512
 41,837
 26,725
Capital expenditures34,257
 27,694
 31,859
18,749
 16,717
 27,077
Preclinical Services     
Net sales$437,228
 $466,430
 $511,713
Discovery and Safety Assessment   
  
Revenue$538,218
 $432,378
 $408,908
Gross margin104,915
 106,369
 144,322
150,970
 106,766
 97,908
Operating income24,925
 (379,726) 39,814
69,749
 47,413
 35,688
Total assets869,881
 1,016,864
 1,469,488
1,088,171
 766,243
 760,370
Long-lived assets513,302
 537,786
 632,115
408,280
 394,741
 414,584
Depreciation and amortization47,990
 55,992
 56,461
47,138
 37,720
 41,001
Capital expenditures14,886
 15,166
 47,994
19,759
 12,561
 10,051
Manufacturing Support     
Revenue$252,117
 $221,800
 $198,989
Gross margin131,598
 108,643
 95,882
Operating income78,620
 61,227
 57,519
Total assets274,952
 246,467
 228,804
Long-lived assets71,367
 66,352
 64,254
Depreciation and amortization14,092
 17,079
 13,549
Capital expenditures15,541
 9,876
 10,407

A reconciliation of segment operating income to consolidated operating income is as follows:
 Fiscal Year Ended
 December 31, 2011 December 25, 2010 December 26, 2009
Total segment operating income$231,244
 $(195,262) $233,163
Unallocated corporate overhead(56,938) (73,250) (63,550)
Termination fee (Note 11)
 (30,000) 
Consolidated operating income$174,306
 $(298,512) $169,613
Net sales for each significant service area are as follows:

 Fiscal Year Ended
 December 31, 2011 December 25, 2010 December 26, 2009
Research models$358,027
 $355,218
 $362,669
Research model services222,110
 208,363
 194,663
Other products125,282
 103,405
 102,597
Total research models705,419
 666,986
 659,929
Total preclinical services437,228
 466,430
 511,713
Total sales$1,142,647
 $1,133,416
 $1,171,642





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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012

(in thousands)
Total segment operating income$269,745
 $225,377
 $236,990
Unallocated corporate overhead(92,075) (73,976) (71,225)
Consolidated operating income$177,670
 $151,401
 $165,765


Revenue for each significant product or service offering is as follows:

 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Research Models and Services$507,327
 $511,350
 $521,633
Discovery and Safety Assessment538,218
 432,378
 408,908
   Endotoxin and Microbial Detection132,208
 112,918
 93,622
     Other manufacturing support119,909
 108,882
 105,367
Manufacturing Support252,117
 221,800
 198,989
Total revenue$1,297,662
 $1,165,528
 $1,129,530

A summary of unallocated corporate overhead consists of the following:
 December 31, 2011 December 25, 2010 December 26, 2009
Stock-based compensation expense$11,159
 $11,893
 $10,757
U.S. retirement plans3,802
 3,921
 5,336
Audit, tax and related expense3,069
 2,805
 2,609
Salary and bonus18,486
 19,617
 17,239
Global IT13,253
 13,678
 9,309
Employee health, LDP and fringe benefit expense(2,952) (2,231) 1,622
Consulting and professional services8,432
 7,686
 3,329
Depreciation expense6,312
 5,796
 648
Severance expense(65) 4,153
 2,625
Transaction (acquisition/disposition) costs1,329
 6,669
 3,445
Contingent consideration write-down(5,598) (4,335) 
Other general unallocated corporate expenses(289) 3,598
 6,631
Total unallocated corporate overhead costs$56,938
 $73,250
 $63,550
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Stock-based compensation expense$18,474
 $13,411
 $11,724
Salary, bonus and fringe30,838
 23,446
 20,312
Consulting, audit and professional services13,431
 8,666
 7,453
IT related expenses6,528
 11,646
 12,622
Depreciation expense7,703
 6,334
 6,260
Costs associated with evaluation and integration of acquisitions6,285
 1,752
 3,772
Other general unallocated corporate expenses8,816
 8,721
 9,082
Total unallocated corporate overhead costs$92,075
 $73,976
 $71,225
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.

83


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


The following table presents salesrevenues and other financial information by geographic regions.locations of our businesses. Included in the other non-U.S. category below are operations located in China, Korea, Australia, Singapore and India. Sales to unaffiliated clientsRevenues represent net sales originating in entities physically located in the identified geographic area. Long-lived assets include property, plant and equipment and other long-lived assets.
 U.S Europe Canada Japan Other Non-U.S. Consolidated
2011           
Sales to unaffiliated clients$545,185
 $348,455
 $158,997
 $75,992
 $14,018
 $1,142,647
Long lived assets497,197
 123,634
 127,531
 45,857
 1,470
 795,689
2010           
Sales to unaffiliated clients$535,790
 $327,492
 $181,028
 $73,852
 $15,254
 $1,133,416
Long lived assets507,089
 124,428
 136,846
 44,818
 1,798
 814,979
2009           
Sales to unaffiliated clients$575,574
 $327,244
 $188,206
 $70,848
 $9,770
 $1,171,642
Long lived assets577,808
 135,316
 141,687
 42,084
 20,029
 916,924

 U.S. Europe Canada Japan Other Non-U.S. Consolidated
 (in thousands)
2014           
Revenue$588,531
 $446,263
 $163,490
 $49,921
 $49,457
 $1,297,662
Long lived assets386,624
 153,203
 95,272
 23,896
 17,802
 676,797
2013           
Revenue$551,340
 $353,688
 $162,404
 $59,370
 $38,726
 $1,165,528
Long lived assets447,829
 130,855
 109,811
 30,589
 19,062
 738,146
2012           
Revenue$534,817
 $341,550
 $160,004
 $77,707
 $15,452
 $1,129,530
Long lived assets476,927
 122,351
 124,302
 39,642
 2,457
 765,679
13. Discontinued Operations
14. DISCONTINUED OPERATIONS
DuringIn 2011, the fourth quarter of 2010, we initiated actions to divest our Phase I clinical services business. 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 $6,402 during 2010.
On March 28, 2011, weCompany disposed of ourits Phase I clinical business, for a nominal amount. As part ofthough the disposition weCompany remained the guarantor of a facility lease with a term through January 2021. The Company recorded a liability for the Company's obligation under the lease, net of estimated sublease income, and reflected the liability on the consolidated balance sheet as discontinued operations. In 2012, due to an increased probability that the Company would be required to make future lease payments as guarantor, the Company recorded an additional contingent loss of $7.2 million. In 2013, the buyer of the Company's Phase I facility lease. Duringclinical business filed for Chapter 11 bankruptcy, resulting in an additional charge of $1.3 million. Effective July 2013, the second quarter of 2011, we recognized the valueCompany assumed control of the guarantee net ofleased property and assumed obligations under the buyer's related indemnity as a liability of $2,994, which we are amortizing ratably overlease consistent with the remaining term of the lease. The facility lease runs through January 2021 with remaining lease payments totaling $14,711 asguarantee. As of December 31,27, 2014, the remaining lease payments amounted to $10.0 million.
Operating results from discontinued operations are as follows:
 Fiscal Year Ended
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Loss from operations of discontinued businesses, before income taxes$(2,712) $(2,035) $(6,986)
Benefit for income taxes(986) (770) (2,734)
Loss from operations of discontinued businesses, net of income taxes$(1,726) $(1,265) $(4,252)

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CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share amounts)

2011.
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:15. SELECTED QUARTERLY FINANCIAL DATA (unaudited)
 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

Assets and liabilities of discontinued operations atThe following table contains quarterly financial information for fiscal years December 20112014 and December 20102013 consisted. The operating results for any quarter are not necessarily indicative of the following:future period results.

 December 31,
2011
 December 25,
2010
Current assets$107
 $3,862
Long-term assets986
 822
Total assets$1,093
 $4,684
Current liabilities$1,165
 $3,284
Long-term liabilities2,522
 
Total liabilities$3,687
 $3,284
Current assets included accounts receivable and prepaid income taxes. Non-current assets included a long-term deferred tax asset. Current and long-term liabilities consisted of accounts payable, deferred income and accrued expenses.

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 profit102,638
 106,320
 92,716
 100,568
Operating income42,251
 53,314
 37,094
 41,647
Income from continuing operations, net of tax35,377
 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 shareowners31,335
 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 profit100,191
 100,764
 90,500
 93,305
Operating income (loss)30,194
 29,985
 6,468
 (365,159)
Income from continuing operations, net of tax17,338
 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 margin73,839
 78,307
 70,514
 74,667
Operating income51,742
 55,691
 48,534
 50,352
Depreciation and amortization9,269
 9,318
 9,327
 9,326
Capital expenditures4,403
 4,010
 5,789
 20,055
Preclinical Services       
Sales$112,472
 $110,100
 $106,108
 $108,548
Gross margin28,799
 28,013
 22,202
 25,902
Operating income9,306
 7,875
 3,663
 4,082
Depreciation and amortization11,996
 12,498
 11,840
 11,656
Capital expenditures2,387
 2,650
 2,433
 7,416
Unallocated corporate overhead$(18,797) $(10,252) $(15,103) $(12,786)
Total       
Sales$285,843
 $288,263
 $277,579
 $290,962
Gross margin102,638
 106,320
 92,716
 100,569
Operating income42,251
 53,314
 37,094
 41,648
Depreciation and amortization21,265
 21,816
 21,167
 20,982
Capital expenditures6,790
 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 margin74,279
 71,346
 64,383
 68,383
Operating income49,984
 47,258
 42,817
 44,405
Depreciation and amortization9,721
 8,811
 9,422
 9,703
Capital expenditures4,960
 6,245
 4,622
 11,867
Preclinical Services       
Sales$120,082
 $121,452
 $111,626
 $113,270
Gross margin25,912
 29,418
 26,117
 24,922
Operating income429
 6,509
 5,178
 (391,842)
Depreciation and amortization13,859
 14,114
 14,063
 13,956
Capital expenditures4,333
 2,187
 4,505
 4,141
Unallocated corporate overhead$(20,219) $(23,782) $(41,527) $(17,722)
Total       
Sales$292,287
 $288,592
 $270,885
 $281,652
Gross margin101,191
 100,764
 90,500
 93,305
Operating income30,194
 29,985
 6,468
 (365,159)
Depreciation and amortization23,580
 22,925
 23,485
 23,659
Capital expenditures9,293
 8,432
 9,127
 16,008
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
Fiscal Year Ended December 27, 2014(in thousands)
Total revenue$299,368
 $341,179
 $327,567
 $329,548
Gross profit108,813
 125,634
 118,268
 119,945
Operating income39,706
 51,025
 46,172
 40,767
Income from continuing operations, net of income tax32,628
 36,460
 32,300
 28,536
Income (loss) from discontinued operations, net of income tax(270) (644) 52
 (864)
Net income attributable to common shareholders32,232
 35,264
 32,036
 $27,166
Earnings (loss) per common share:       
Basic:       
Continuing operations attributable to common shareholders$0.69
 $0.76
 $0.70
 $0.60
Discontinued operations(0.01) (0.01) 
 (0.02)
Net income attributable to common shareholders$0.68
 $0.75
 $0.70
 $0.58
Diluted:       
Continuing operations attributable to common shareholders$0.67
 $0.75
 $0.68
 $0.59
Discontinued operations(0.01) (0.01) 
 (0.02)
Net income attributable to common shareholders$0.67
 $0.74
 $0.68
 $0.57
Fiscal Year Ended December 28, 2013       
Total revenue$291,238
 $292,933
 $292,129
 $289,228
Gross profit104,211
 102,570
 99,926
 88,195
Operating income42,763
 43,188
 40,843
 24,607
Income from continuing operations, net of income tax25,926
 28,628
 31,336
 19,526
Loss from discontinued operations, net of income tax(155) (915) (113) (82)
Net income attributable to common shareholders$25,578
 $27,284
 $30,867
 $19,099
Earnings (loss) per common share:       
Basic:       
Continuing operations attributable to common shareholders$0.54
 $0.58
 $0.65
 $0.41
Discontinued operations
 (0.02) 
 
Net income attributable to common shareholders$0.54
 $0.57
 $0.64
 $0.41
Diluted:       
Continuing operations attributable to common shareholders$0.53
 $0.58
 $0.64
 $0.40
Discontinued operations
 (0.02) 
 
Net income attributable to common shareholders$0.53
 $0.56
 $0.64
 $0.40

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Item 9.    Changes in and Disagreement with Accountants on Accounting and Financial Disclosure
None.
Item 9A.    Controls and Procedures

(a)   Evaluation of Disclosure Controls and Procedures
Based on their evaluation, required by paragraph (b) of Rules 13a-15 or 15d-15, promulgated by the Securities Exchange Act of 1934, as amended (Exchange Act), the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act are effective, at a reasonable assurance level, as of December 31, 201127, 2014 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuerthe Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer'sCompany's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurances of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. We continually
Management’s 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, as amended). 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 processdegree of further reviewingcompliance with the policies or procedures may deteriorate.

Under the supervision and documentingwith the participation of our disclosure controlsmanagement, including our CEO and procedures, andCFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment and accordingly may from time to time make changes aimed at enhancingthose criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 27, 2014.

The effectiveness of our internal control over financial reporting as of December 27, 2014 has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their effectiveness and to ensure that our systems evolve with our business.report which is included herein.

(b)
Changes in Internal Controls
There were no changes in the Company's internal controlscontrol over financial reporting identified in connection with the evaluation required by paragraph (d) of the Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended December 31, 201127, 2014 that materially affected, or were reasonably likely to materially affect, the Company's internal control over financial reporting.
Management's report on our internal controls over financial reporting can be found in Item 8 of this report. The Independent Registered Public Accounting Firm's attestation report on the effectiveness of our internal control over financial reporting can also be found in Item 8 of this report.

Item 9B.    Other Information
None.
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Item 10.    Directors, Executive Officers, and Corporate Governance

A.Directors and Compliance with Section 16(a) of the Exchange Act
The information required by this Item regarding our directors and compliance with Section 16(a) of the Exchange Act by our officers and directors will be included in the 20122015 Proxy Statement under the sections captioned “Nominees for Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference thereto. The information required by this Item regarding our corporate governance will be included in the 20122015 Proxy Statement under the section captioned “Corporate Governance” and is incorporated herein by reference thereto.
B.Our Executive Officers
The information required by this Item regarding our executive officers is reported in Part I of this Form 10-K under the heading “Supplementary Item. Executive Officers of the Registrant pursuant to Instruction 3 to Item 401(b) of Regulation S-K.”

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C.Audit Committee Financial Expert
The information required by this Item regarding the audit committee of the Board of Directors and financial experts will be included in the 20122015 Proxy Statement under the section captioned “The Board of Directors and its Committees-Audit Committee and Financial Experts” and is incorporated herein by reference thereto.
D.Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. Our Code of Business Conduct and Ethics is posted on our website by selecting the “Corporate Governance” link at http://ir.criver.com. We will provide to any person, without charge, a copy of our Code of Business Conduct and Ethics by requesting a copy from the Secretary, Charles River Laboratories, Inc., 251 Ballardvale Street, Wilmington, MA 01887. Information on our website is not incorporated by reference in this annual report.
E.Changes to Board Nomination Procedures
Since December 2008, there have been no material changes to the procedures by which security holders may recommend nominees to the our Board of Directors.
Item 11.    Executive Compensation

The information required by this Item will be included in the 20122015 Proxy Statement under the sections captioned “2011“2014 Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation and Related Information,” “Compensation Committee Interlocks and Insider Participation” and “Report of Compensation Committee” and is incorporated herein by reference thereto.
Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be included in the 20122015 Proxy Statement under the sections captioned “Beneficial Ownership of Securities” and is incorporated herein by reference thereto. See also Item 5. “Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities-Securities

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Securities Authorized for Issuance Under Equity Compensation Plans” forPlans
The following table summarizes, as of December 27, 2014, the disclosure required by Item 201(d)number of Regulation S-K promulgatedoptions issued under the Securities Exchange ActCompany's stock option plans and the number of 1934,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 Plan61,779
 $47.56
 1,196,405
 
Charles River 1999 Management Incentive Plan
 $
 6,000
 
2007 Incentive Plan2,491,456
 $43.28
 18,664,000
 
Equity compensation plans not approved by security holders
 
 
 
Total2,553,235
(1) 
 19,866,405
(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).
(2)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 our existing equity compensation plans as amended.of December 27, 2014:
Category
Number of securities
outstanding
 
Weighted average
exercise price
 
Weighted
average term
 (a) (b) (c)
Total number of restricted shares outstanding(1)
803,380
    
Total number of options outstanding2,553,235
 $43.39
 3.9
Total number of performance units outstanding384,470
    
____________________________
(1)
For purposes of this table, only unvested restricted stock as of December 27, 2014 is included. Also for purposes of this table only, the total includes 196,762 restricted stock units granted to certain of our employees outside of the U.S.

Item 13.    Certain Relationships and Related Transactions, and Director Independence

The information required by this Item will be included in the 20122015 Proxy Statement under the sections captioned “Related Person Transaction Policy” and “Corporate Governance-Director Qualification Standards; Director Independence” and is incorporated herein by reference thereto.
Item 14.    Principal Accountant Fees and Services

The information required by this Item will be included in the 20122015 Proxy Statement under the section captioned “Statement of Fees Paid to Independent Registered Public Accounting Firm” and is incorporated herein by reference thereto.
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Item 15.    Exhibits and Financial Statement Schedules
Item 15(a)(1) and (2) and Item 15(d) Financial Statements and Schedules
See "Index to Consolidated Financial Statements and Financial Statements Schedules" at Item 8 to this Annual Report on Form 10-K. Other financial statement schedules have not been included because they are not applicable or the information is included in the financial statements or notes thereto.
Item 15(a)(3) and Item 15(c)15(b) Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding the exhibits. We have identified in the Exhibit Index each management contract and compensation plan filed as an exhibit to this

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Annual Report on Form 10-K in response to Item 15(c) of Form 10-K.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
Date:February 27, 201217, 2015By:
/s/ THOMAS F. ACKERMAN
Thomas F. Ackerman
 Corporate Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated below and on the dates indicated.
SignaturesTitleDate
By:/s/ JAMES C. FOSTERPresident, Chief Executive Officer and ChairmanFebruary 27, 201217, 2015
 James C. Foster  
    
By:/s/ THOMAS F. ACKERMANCorporate Executive Vice President andFebruary 27, 201217, 2015
 Thomas F. AckermanChief Financial Officer
By:/s/ JOHN J. CROWLEYCorporate Senior Vice President, Corporate Controller and PrincipalChief Accounting OfficerFebruary 17, 2015
John J. Crowley 
    
By:/s/ ROBERT J. BERTOLINIDirectorFebruary 27, 201217, 2015
 Robert J. Bertolini  
    
By:/s/ STEPHEN D. CHUBBDirectorFebruary 27, 201217, 2015
 Stephen D. Chubb  
    
By:/s/ GEORGE E. MASSARODirectorFebruary 27, 201217, 2015
 George E. Massaro  
    
By:/s/ DEBORAH KOCHEVARDirectorFebruary 27, 201217, 2015
 Deborah Kochevar  
    
By:/s/ GEORGE M. MILNE, JR.DirectorFebruary 27, 201217, 2015
 George M. Milne, Jr.  
    
By:/s/ C. RICHARD REESEDirectorFebruary 27, 201217, 2015
 C. Richard Reese  
    
By:/s/ SAMUEL O. THIERCRAIG B THOMPSONDirectorFebruary 27, 201217, 2015
 Samuel O. ThierCraig B. Thompson  
    
By:/s/ RICHARD F. WALLMANDirectorFebruary 27, 201217, 2015
 Richard F. Wallman  
By:/s/ WILLIAM H. WALTRIPDirectorFebruary 27, 2012
William H. Waltrip


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EXHIBIT INDEX
Exhibit No.DescriptionFiled with this Form 10-KIncorporated by ReferenceDescriptionFiled with this Form 10-KIncorporated by Reference
FormFiling DateExhibit No.FormFiling DateExhibit No.
3.1Second Amended and Restated Certificate of Incorporation of Charles River Laboratories International, Inc. dated June 5, 2000 S-1/AJune 23, 20003.1Second Amended and Restated Certificate of Incorporation of Charles River Laboratories International, Inc. dated June 5, 2000 S-1/AJune 23, 20003.1
3.2Second Amended and Restated By-laws of Charles River Laboratories International, Inc. 8-KDecember 5, 20083.2Third Amended and Restated By-laws of Charles River Laboratories International, Inc. 8-KDecember 2, 20143.2
4.1Form of common stock certificate, $0.01 par value, of Charles River Laboratories International, Inc. S-1June 23, 20004.1Form of common stock certificate, $0.01 par value, of Charles River Laboratories International, Inc. S-1June 23, 20004.1
4.2Charles River Laboratories International, Inc. as Issuer and U.S. Bank National Association as Trustee Indenture dated June 12, 2006 8-KJune 12, 20064.1Charles River Laboratories International, Inc. Form of Performance Share Unit Granted Under 2007 Incentive Plan 10-KFebruary 27, 20134.4
4.3Charles River Laboratories International, Inc. Form of 2.25% Convertible Senior Note due 2013 8-KJune 12, 20064.1
10.1*Charles River Corporate Officer Separation Plan dated April 30, 2010 10-QAugust 3, 201010.1Charles River Corporate Officer Separation Plan dated April 30, 2010 10-QAugust 3, 201010.1
10.2*Charles River Laboratories Holdings 1999 Management Incentive Plan 10-KMarch 14, 200610.6
10.3*Charles River Laboratories International, Inc. 2000 Incentive Plan amended May 9, 2005 10-KMarch 14, 200610.7Charles River Laboratories International, Inc. 2000 Incentive Plan amended May 9, 2005 10-KMarch 14, 200610.7
10.4*Charles River Laboratories International, Inc. 2000 Incentive Plan Inland Revenue Approved Rules for UK Employees 10-QNovember 5, 200199.1
10.5*Form of change in control agreement 10-KFebruary 23, 200910.7Form of change in control agreement 10-KFebruary 23, 200910.7
10.6*Executive Incentive Compensation Plan dated January 1, 2009 10-KFebruary 23, 200910.8Executive Incentive Compensation Plan dated January 1, 2009 10-KFebruary 23, 200910.8
10.7*Charles River Laboratories International, Inc. Form of Stock Option Award letter granted under 2000 Incentive Plan 10-QNovember 1, 200410.3
10.8*Charles River Laboratories International. Inc. Form of Restricted Stock Award granted under 2000 Incentive Plan 10-QNovember 1, 200410.4
10.9*Inveresk Research Group, Inc. 2002 Stock Option and Incentive Compensation Plan amended and restated as of May 4, 2004 S-8October 20, 200499.1
10.10*Charles River Laboratories, Inc. Executive Life Insurance/Supplemental Retirement Income Plan 10-KMarch 9, 200510.23Charles River Laboratories, Inc. Executive Life Insurance/Supplemental Retirement Income Plan 10-KMarch 9, 200510.23
10.11*
Charles River Laboratories amended and restated Deferred Compensation Plan amended December 2, 2008, July 20, 2011 and October 27, 2011
X 
Charles River Laboratories amended and restated Deferred Compensation Plan amended December 2, 2008, July 20, 2011 and October 27, 2011
 10-KFebruary 27, 201210.11
10.12Charles River Laboratories International, Inc. Fourth Amended and Restated Credit Agreement dated September 23, 2011 8-KSeptember 23, 201110.1Charles River Laboratories International, Inc. Fifth Amended and Restated Credit Agreement dated May 29, 2013 10-QJuly 31, 201310.1
10.13*Charles River Laboratories International, Inc. 2007 Incentive Plan amended March 18, 2009 and March 22, 2011X Charles River Laboratories International, Inc. 2007 Incentive Plan, as amendedX 
10.14*Charles River Laboratories International, Inc. Form of Stock Option granted under 2007 Incentive Plan 10-KFebruary 20, 200810.17Charles River Laboratories International, Inc. Form of Stock Option granted under 2007 Incentive Plan 10-KFebruary 20, 200810.17
10.15*Charles River Laboratories International, Inc. Form of Restricted Stock Award granted under 2007 Incentive Plan 10-KFebruary 20, 200810.18Charles River Laboratories International, Inc. Form of Restricted Stock Award granted under 2007 Incentive Plan 10-KFebruary 20, 200810.18
10.16*Letter Agreements with Dr. Davide Molho dated May 22, 2009 10-KFebruary 23, 201110.17Letter Agreements with Dr. Davide Molho dated May 22, 2009 10-KFebruary 23, 201110.17
10.17*Amended and Restated Deferred Compensation Plan Document dated July 17, 2012 10-QAugust 7, 201210.1
10.18*Employment agreement between Dr. Jorg Geller and Charles River Germany GmbH & Co. 10-KFebruary 27, 201310.18
10.19*Certificate of Life Insurance for Dr. Jorg Geller dated February 8, 1988 10-QJuly 31, 201310.19
10.20*Certificate of Life Insurance for Dr. Jorg Geller dated April 24, 1998 10-QJuly 31, 201310.20
10.21*Provision Committed by Charles River Wiga Deutschland GmbH for Dr. Jorg Geller dated December 13, 1996 10-QJuly 31, 201310.21

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10.22*Addendum to Provision Committed by Charles River Wiga Deutschland GmbH for Dr. Jorg Geller dated March 25, 199710-QJuly 31, 201310.22
10.23*Agreement between Dr. Nancy Gillett and Charles River Laboratories, Inc. effective January 1, 2015X
21.1Subsidiaries of Charles River Laboratories International, Inc.X   
23.1Consent of PricewaterhouseCoopers LLPX   
31.1Rule 13a-14(a)/15d-14(a) Certification of Chief Executive OfficerX   
31.2Rule 13a-14(a)/15d-14(a) Certification of Chief Financial OfficerX   
32.1Section 1350 Certification of the Chief Executive Officer and Chief Financial OfficerX   
101.1101.INSThe following materials from our Annual Report on Form 10-K for the year ended December 31, 2011 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Shareholders' Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements, tagged as blocks of text.Instance DocumentX
101.SCHXBRL Taxonomy Extension SchemaX
101.CALXBRL Taxonomy Extension Calculation LinkbaseX
101.DEFXBRL Taxonomy Extension Definition LinkbaseX
101.LABXBRL Taxonomy Extension Labels LinkbaseX
101.PREXBRL Taxonomy Extension Presentation LinkbaseX   

*    Management contract or compensatory plan, contract or arrangement.





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