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 27, 201431, 2016
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
01887
(Address of Principal Executive Offices) 
01887
(Zip Code)

(Registrant'sRegistrant’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 DateData 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'sRegistrant’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“large accelerated filer," "accelerated filer"” “accelerated filer” and "smaller“smaller reporting company"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 28, 2014,25, 2016, the aggregate market value of the Registrant'sRegistrant’s voting common stock held by non-affiliates of the Registrant was $2,472,525,191.approximately $3,735,593,230. As of January 30, 2015,27, 2017, there were 47,326,25747,372,995 shares of the Registrant'sRegistrant’s common stock outstanding, $0.01 par value per share.







DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant'sRegistrant’s definitive Proxy Statement for its 20152017 Annual Meeting of Shareholders scheduled to be held on May 5, 2015,9, 2017, which will be filed with the Securities and Exchange Commission (SEC) not later than 120 days after December 27, 2014,31, 2016, are incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of the portions of the 20132017 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.





CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR 2016

TABLE OF CONTENTS

Item Page Page
PART I PART I 
1
1A
1B
2
3
4Mine Safety DisclosuresMine 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 
5Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
6
7
7A
8
9
9A
9B
PART III PART III 
10
11
12
13
14
PART IV PART IV 
15
16Form 10-K Summary
  
SignaturesSignaturesSignatures
Exhibit IndexExhibit IndexExhibit Index





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: goodwill and asset impairments still under review; future demand for drug discovery and development products and services, including the outsourcing of these services; our expectations regarding stock repurchases, including the number of shares to be repurchased, expected timing and duration, the amount of capital that may be expended and the treatment of repurchased shares; present spending trends and other cost reduction activities by our clients; future actions by our management; the outcome of contingencies; changes in our business strategy, business practices and methods of generating revenue; the development and performance of our services and products; market and industry conditions, including competitive and pricing trends; our strategic relationships with leading pharmaceutical companies and venture capital limited partnerships, and leading pharmaceutical companies and opportunities for future similar arrangements; our cost structure; the impact of completed and in-process acquisitions (including Argenta, and BioFocus, VivoPath, ChanTest, Sunrise, Celsis, Oncotest, WIL Research, Blue Stream, and ChanTest);Agilux) and the timing of closing of in-process acquisitions; our expectations with respect to revenue growth and operating synergies (including the impact of specific actions intended to cause related improvements); the impact of specific actions intended to improve overall operating efficiencies and profitability (and our ability to accommodate future demand with our infrastructure), including gains and losses attributable to businesses we plan to close, consolidate or divest; changes in our expectations regarding future stock option, restricted stock, performance share units and other equity grants to employees and directors; expectations with respect to foreign currency exchange; assessing (or changing our assessment of) our tax positions for financial statement purposes; and our liquidity. In addition, these statements include the impact of economic and market conditions on us and our clients; the effects of our cost-saving actions and the steps to optimize returns to shareholders on an effective and timely basis and our ability to withstand the current market conditions. basis.
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 sections entitled “Our Strategy,” “Risks Related to Our Business and Industry,“Risk Factors,” "Management's Discussion and Analysis of Financial Condition and Results of Operations” andOperations,” in our press releases and other financial filings with the Securities and Exchange Commission.SEC. 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 USU.S. 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.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” “the Company” or “our” refer to Charles River Laboratories International, Inc. and its subsidiaries.
This Form 10-K, as well as all other reports filed with the Securities and Exchange Commission, areSEC, is 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:(http://www.sec.gov)www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Overview
Overview
We are a full service, early-stage contract research organization.organization (CRO). We have built upon our core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, that arewhich is able to support our clients from target identification through preclinicalnon-clinical development. We also provide a suite of products and 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.
Discovery represents the earliest stages of research in the life sciences, directed at the identification, screening, and selection of a lead molecule for future drug development. Discovery activities typically extend anywhere from 4-64 to 6 years in conventional pharmaceutical research and development timelines.
Development activities, which follow, and which can take up to 7-107 to10 years, are directed at demonstrating the safety, tolerability, and clinical efficacy of the selected drug candidates. During the preclinicalnon-clinical stage of the development process, a drug candidate is tested in vitro (typically(non-animal, 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 clinical trials.
The development of new drugs requires the steadily increasing investment of time and money. Various studies and reports estimate that it takes between 10-1510 to 15 years, up to $2.0 billion excluding time costs, and exploration of more thanbetween 10,000 and 15,000 drug compoundsmolecules to produce a single FDA-approvedFood and Drug Administration (FDA)-approved drug. We are positioned to leverage our leading portfolio in early-stage drug researchin an efficient and cost-effective way to aid our clients in bringing their drugs to market faster. Our 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.
For 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. Over this time, we have built upon our core competency of in vivo biology to develop a diverse and expanding portfolio of products and services, which now encompasses the broader early-stage drug research process. Our client base includes global pharmaceutical companies, biotechnology companies, government agencies, and leading hospitals and academic institutions around the world. We currently operate approximately 6075 facilities in 1723 countries 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 meetovercome many of the challenges of early-stage life sciences research. In 2014,2016, our total revenue from continuing operations was $1.3$1.7 billion and our operating income from continuing operations, before income taxes, was $177.7$222.9 million.
We have three reporting segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing).
In April 2016, we acquired WRH, Inc. (WIL Research). WIL Research’s safety assessment business is reported in our DSA reportable segment and its contract development and manufacturing (CDMO) services business created a new operating segment, Contract Manufacturing, which is reported as part of our Manufacturing reportable segment. We divested the CDMO business on February 10, 2017.
The revised reportable segments are as follows:
Research Models and ServicesDiscovery and Safety AssessmentManufacturing Support
Research ModelsDiscovery ServicesMicrobial Solutions
Research Model ServicesSafety AssessmentAvian
Biologics
Contract 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. WithWe maintain multiple facilities located on three continents (North America, Europe and Asia), we maintain production centers, including barrier rooms and/or isolator facilities.facilities, on three


continents (North America, Europe, and Asia). In 2014,2016, RMS accounted for 39.1%29.4% of our total revenue from continuing operations and approximately 3,1003,200 of our employees, including approximately 70110 science professionals with advanced degrees.
Our DSA business segment provides services that enable our clients to outsource their innovative drug discovery research, their critical,related drug development activities, and regulatory-required safety assessment testingof potential new drugs, industrial chemicals, and related drug discovery and development activitiesagrochemicals to us. The demand for these services has historically been driven by the needs of large global pharmaceutical companies that have exceeded their internal capacity and by the needs of biotechnology companies and non-governmental organizations (NGOs) who traditionally outsourced allmost of their discovery, development and developmentsafety testing programs. Global pharmaceutical, biotechnology, and biotechnologychemical companies choose to outsource their discovery, development, and developmentsafety activities because outsourcing reduces or eliminates the significant investment in personnel and facilities and other capital resources necessary to efficiently and effectively conduct required scientific studies. Additionally, outsourcing to Charles River provides companies access to scientific expertise that they may not have internally or available to them.
We are one of the two largest providersprovider of drug discovery, non-clinical development, and preclinical developmentsafety testing services worldwide and offer targeta comprehensive portfolio of services required for regulatory submission of pharmaceuticals, chemicals, and agrochemicals. We have extensive expertise in the discovery to Investigational New Drug submission drug discovery with particular expertiseof small molecule clinical candidates and in the design, execution, and reporting of safety assessment studies.studies for both small and large molecules and argochemicals. We currently provide discovery and safety assessment services at multiple facilities located in the United States (U.S.), Canada, Europe and Japan.Europe. Our DSA segment represented 41.5%49.8% of our total revenue from

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continuing operations in 20142016 and employed approximately 3,4005,900 of our employees including approximately 590960 science professionals with advanced degrees.
Through our Manufacturing segment, we help ensure the safe production and release of products manufactured by our clients. Our Endotoxin and Microbial DetectionSolutions business provides non-animal, or in vitro methods for lot releaseconventional and rapid quality control testing of medical devicessterile and injectable drugs for endotoxin contamination. Our Avian Vaccine Services business provides specific pathogen free (SPF) fertile chicken eggsnon-sterile pharmaceuticals and chickens for the manufacture of live viruses.consumer products. Our Biologics Testing ServicesSolutions business provides specialized testing of biologics and devices frequently outsourced by global pharmaceutical and biotechnology companies. Our Avian Vaccine Services business provides specific-pathogen-free (SPF) fertile chicken eggs and chickens used in the manufacture of live viruses.
In 2014,2016, Manufacturing accounted for 19.4%20.9% of our total revenue from continuing operations and approximately 1,1001,400 of our employees, including approximately 50140 science professionals with advanced degrees.
In recent years, we have focused our efforts on unifying our businesses and improving the efficiency of our global operations to enhance our ability to support our key clients. Our key pharmaceutical and biotechnology clients are increasingly seeking full service, “one-stop” global partners to whom they can outsource more of their drug discovery and development efforts. It is estimated that the market for regulated safety assessment services is approximately 45% toat least 50% outsourced, while emerging growth areas such as early and in vivo discovery and certain research model services are currently believed to be less outsourced.
Research Models and Services (RMS).. Our RMS segment is comprised of (1) Research Models and (2) Research Model Services.
Research Models.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, leading hospitals, and academic institutions. We have a global footprint with production facilities strategically located in 8 countries, in close proximity to our clients. Our research models include 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)FDA and foreign regulatory bodiesagencies 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 geographic footprint and continuous commitment to innovation and quality. Our research models are bred and maintained in a variety of 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 research results. With our barrier room production capabilities, we are able to deliver consistently high-quality research models worldwide.

Our research models include:
outbred, which are purposefully bred for heterogeneity;


inbred, which are bred to be genetically identical;homogeneous;
spontaneous mutant, which containwhose genotype results in 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, includingsuch as knock-out models with one or more disabled genes and transgenic models.

Certain of our research models are proprietary, disease-specific mouse and ratrodent models used to find newresearch 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.
We are also a premier provider of high quality, purpose bred, specific-pathogen-free (SPF)SPF large research models to the biomedical research community.
Research Model Services. RMS also offers a variety of services designed to support our clients' use of research models in basic research and screening non-clinical 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. TheseOur 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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currently have three service offerings in research models services: services: Genetically Engineered Models and Services, Insourcing Solutions, and Research Animal Diagnostic Services.
Genetically Engineered Models and Services (GEMS).. We breed and maintain research models purchased or purposefully created by our clients for biomedical research activities. The creation of a genetically engineered model (GEM) is 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 basic and early discovery research. We also provide breeding expertise and colony development, quarantine, health and genetic testing and monitoring, germplasm cryopreservation, and rederivation including assisted reproduction.reproduction and model creation. Our team of project managers is supported by a technologically advanced internet based colony managementInternet Colony Management (ICM™) system that allows for real timereal-time data exchange. We provide these services to clients around the world, fromincluding pharmaceutical and biotechnology companies, to hospitals, universities, and universities.government agencies.
Insourcing Solutions (IS).. We manage research operations (including recruitment, training, staffing, and management services) for government entities, academic organizations, and commercial clients. ResearchSome research institutions prefer to outsource staffing and management while retainingretain certain elements of their research in-house, while outsourcing staffing and management, thus driving demand for our services. We believe that our expertise in 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 programs.
Research Animal Diagnostic Services (RADS).. We monitor and analyze the health profiles of the research models and cell lines ofused by our clients. We developed this capability internally by building upon the scientific foundation created byin order to address the diagnostic needs of our own research model business. We are able to serve as our clients'their sole-source testing laboratory, or as an alternative source supporting our clients’ internal laboratory capabilities. We believe we are the reference laboratory of choice for health testing of laboratory research models and an industry leader in the field of animal diagnostics. We also offer non-GLP biomarker assay platforms and services 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 vivovitro and in vitrovivo studies, supporting laboratory services, and strategic preclinicalnon-clinical consulting and program management to support product development.
Discovery Services.  ServicesWe offer a full spectrum of discovery services from identification of a novel druggable target, within a cellfollowed by high-throughput screening and medical chemistry, through delivery of clinicalnon-clinical drug candidates. In 2014, we integrated ourand therapeutic candidates ready for safety assessment. Our Early Discovery and In VivoDiscovery businesses are integrated into a single business line - Discovery Services - as partevidence 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 their complex scientific needs. We support a variety of therapeutic areas including oncology, CNS,central nervous system, bone and musculoskeletal, inflammation, metabolic diseases, respiratory and fibrotic diseases, cardiovascular, gastrointestinal, genito-urinary, anti-infectives, and ophthalmology. As we look forward, weWe also provide expertise in the growing area of rare and orphan diseases, which are typically diseases of high unmet medical need in smaller patient populations, such as myotonic dystrophy, cystic fibrosis, and Huntington’s Disease. 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.Discovery. We are a global leader in integrated drug discovery services, with a predominant focus on in vitro capabilities. We provide abiology capabilities and medicinal chemistry. Our knowledge and expertise allow us to support our clients as they drive their molecules forward through design and implementation of clear program plans. Our 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. Thisservice offerings 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, ourOur Early Discovery service capabilities include: target discovery and validation, hit identification, medicinal chemistry, and ADME. Furthermore, our October 2014 acquisition of ChanTest,testing how a leading provider ofdrug is absorbed, distributed in the body, metabolized, and excreted (ADME). We also offer ion channel testing and in vitro cardiac safety assessment services, has further enhanced our abilityfor both discovery and non-clinical purposes. In addition, we offer custom in vivo and in vitro genome editing. With this technology, we are able to support our clients’develop more translational research models designed to improve the efficiency and effectiveness of the drug discovery efforts.process. These services extend from the early discovery screening process through to in vitro GLP safety assessment testing.
In Vivo Discovery Services. Services. In Vivo Discovery Services represents the earliest are essential in vivo stages of research in the life sciences,early stage, non-clinical discovery, directed at the identification, screening, and selection of a lead compound for future drug development. In vivoactivities typically extend anywhere from 4-64 to 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, completingcomplete in vivostudies in support of clinical efforts or post-marketing work. We complement and extend 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 andin vivoassays to assess mechanism, bioavailability, metabolism, efficacy, and safety pharmacology.

4In September 2016, we acquired Agilux Laboratories, Inc. (Agilux), a CRO that provides a suite of integrated discovery small and large molecule bioanalytical services, drug metabolism and pharmacokinetic services, and pharmacology services. This acquisition supports our strategy to offer clients a broader, integrated portfolio that provides services continuously from the earliest stages of drug research through the non-clinical development process.



Safety Assessment. Assessment. We offer a full range of discovery and safety assessment studies required for regulatory submission on a global basis.
Bioanalysis, Pharmacokinetics,Drug Metabolism and Drug Metabolism. Pharmacokinetics. In support of preclinicalnon-clinical drug safety testing, our clients are required to demonstrate appropriate exposure, stability in the collected sample, kineticspharmacokinetics 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 preclinicalnon-clinical studies, we have the opportunity to capture the benefits of bridging the preclinicalnon-clinical 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 distributionbiologic disposition of the drug orand its potential 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 preclinicalnon-clinical assessment of the disposition of the drug and the results are used in the final preclinicalnon-clinical safety evaluation of the compound.compound to support the start of clinical trials.
Safety Pharmacology. In support of non-clinical drug safety testing, our clients are required to demonstrate that the test article as formulated does not have the potential to prolong the cardiac QT interval. We have the assays (both in vitro and in vivo) and can perform the screening for this demonstration that is required for an investigational new drug submission.
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:
a broad offering of in vitro and in vivo capabilities and study types designed to identify possible safety risks for potential therapeutics, industrial chemicals, and agrochemicals as they transition from discovery into regulated drug development, toxicology, and human clinical testing, or as they are submitted for regulatory registration;


all the standard in vitro and in vivo studies in support of general toxicology(acute,toxicology (acute, sub-acute, and chronic studies), genetic toxicology, safety pharmacology, and carcinogenicity bioassays that are required for either regulatory submissions supporting “first-in-human” to “first-to-the-market” strategies;strategies, or for national chemical registration;
all the standard in vitro and in vivo studies in support of general toxicology (acute, sub-acute, and chronic studies), genetic toxicology, reproductive and developmental toxicology, environmental toxicology, and carcinogenicity bioassays that are required for regulatory submissions supporting the registration of industrial chemicals, food additives, agrochemicals, and biocides;
expertise in standard and specialty routes of administration (e.g., infusion, intravitreal, intrathecal, and inhalation) that are important not only for the testing of potential pharmaceuticals and biopharmaceuticals, but also for the safety testing of medical devices, industrial chemicals, food additives, agrochemicals, biocides, nutraceuticals, animal health products, and other materials;
expertise in the conduct and assessment of reproductive, developmental, and developmentaljuvenile toxicology studies (in support of larger scalelarger-scale and later-stage human clinical trials)trials or chemical registration);
expertise in environmental toxicology (aquatic and terrestrial) and regulatory submissions required for chemical registration;
services in important specialty areas such as ocular, bone, juvenile/neonatal, immune-toxicology, photobiology, inhalation, 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;development and chemical registration; and
a strong history of assisting our clients in achieving their regulatory and/or internal milestones for the safety testing of numerous therapy types including stem cells, vaccines, proteins, antibodies, drug conjugates, oligonucleotide biotherapeutics, small molecules, medical devices, chemicals, and medical devices.

agrochemicals.
Our discovery and safety assessment facilities comply with Good Laboratory Practices (GLPs)GLP to the extent required by the FDA, Environmental Protection Agency, USDA, European Medicines Agency, European Chemicals Agency, Organization for Economic Co-operation and Development (OECD), as well as other international regulatory bodies.agencies. 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 9100.9100 or similarly constructed internally developed quality systems. 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.therapeutics and agrochemicals. 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-relatedcompound-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 blood hybridization and electron microscopy, tissue morphometry, and stereology services.
Manufacturing Support (Manufacturing)
Endotoxin and Microbial Detection(EMD)Solutions. Our EMDMicrobial Solutions business provides non-animal, or in vitro methods for conventional and rapid quality control testing of sterile and non-sterile biopharmaceutical and consumer products. Our legacy business provided lot release testing of medical devices and injectable drugs for endotoxin contamination. Our Celsis business provides rapid microbial detection systems for quality control testing in the pharmaceutical and consumer products industries. Our Accugenix subsidiarybusiness 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 is an in vitro process which uses a processed extract from the bloodraw materials of the horseshoe crab, known as limulus amebocyte lysate (LAL). The LAL test is the first and most successful FDA-validated alternative to an animal modelin vivo test to date. The extraction of bloodthe raw materials for LAL does not harm the crabs, which are subsequently returned to their natural ocean environment. Our EMDMicrobial Solutions business produces and distributes a comprehensive portfolio of endotoxin testing, microbial detection and identification kits, reagents, software, accessories, instruments, and associated microbial quality control


laboratory services to a broad range of companies manufacturing and releasing products from the pharmaceutical, biotechnology, consumer products, and biotechnology companiesdairy industries 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.
The growth in our EMDMicrobial Solutions business is driven by our FDA approvedFDA-approved line of next-generation endotoxin testing products, which areproducts. This line is based on the Endosafe Portable Testing System (Endosafe®-PTS™) technology, thatwhich allows rapid endotoxin testing in the central laboratory or manufacturing environment. In recent years, we expanded the PTS product portfolio to include a multiple sample testing system known as the Endosafe®-MCS™ (multi cartridge(multi-cartridge system) to satisfy the demand of our clients who require higher sample throughput. We anticipate our clients' demand for rapid testing methods of testing will continue to increase as they respond to the FDA's Process Analytical Technology (PAT) Initiative, as well as move to faster, simpler testing methods for their technicians. In 2013, we launched the first fully automated robotic system developed specifically for high-volume endotoxin testing,testing: Endosafe®-Nexus™ and in 2014 we introduced a rapid bacterial contamination (bioburden) product.. We 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.
Celsis’ systems are principally used for product-release testing to help ensure the safe manufacture of pharmaceutical, pharmaceutical, and consumer products. The Advance II™, Accel™ and Innovate™ systems for non-sterile applications complement our PTS-Micro™, a rapid bacterial (bioburden) detection system for sterile biopharmaceutical applications. We expect our comprehensive portfolio to drive increased adoption of our quality control testing solutions across both sterile and non-sterile applications.
Our Accugenix subsidiary is the premier global provider of cGMP- compliantcurrent ISO 17025 and Good Manufacturing Practice (cGMP)-compliant contract microbial identification and genetic sequencing testing. Accugenix is an acknowledged industry leader in species-level identification and strain typing of bacteria and fungi that are recovered from manufacturing facilities. Utilizing state-of-the-art and proprietary in vitro technologies, 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 government regulations.
Biologics Testing Solutions.Solutions. We perform specialized testing of biologics and devices frequently outsourced by global pharmaceutical and biotechnology companies. Our laboratories in the United States,U.S., Germany, Scotland, Ireland, and IrelandFrance provide timely and compliantregulatory-compliant molecular biology, virology, bioanalysis, immunochemistry, microbiology, and related services. We confirm that biological processes and the drug candidates and drugs produced are consistent, correctly defined, stable, and essentially contaminant free. This testing is required by the FDA and other international 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 USU.S. facilities.
In June 2016, we acquired Blue Stream Laboratories, Inc. (Blue Stream), an analytical CRO supporting the development of complex biologics and biosimilars.
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,U.S., and contracted production capabilities in Hungary, and franchise operations in India.Hungary. We also operate a specialized avian laboratory in the United States,U.S., 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.
Contract Manufacturing. Through our acquisition of WIL Research in April 2016, we acquired its QS Pharma subsidiary. This business specializes in contract formulation development and manufacturing (including analytical services and stability testing) with a focus on high potency compounds, oral solid and liquid dose formulations, and manufacturing. On February 10, 2017, we divested this business. For additional information, see Note 17, “Subsequent Events” included in Item 8, “Financial Statements and Other Supplementary Data” in this Annual Report on Form 10-K.


Our Strategy
Our objective is to be the preferred strategic global partner for our clients. We drive 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. Our strategy is to deliver a comprehensive and integrated portfolio of drug discovery and early-stagenon-clinical development products, services, and solutions to support our clients' goal to maintain the flexible infrastructure that they requirediscovery and early-stage drug research, process development, scale up, and manufacturing efforts, and enable them 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 early-stage development effectiveness by coordinating the dialog between large pharmaceutical, biotechnology, academic and non-governmental organizations, and venture capitalists. Separately, through our various Manufacturing segment businesses, we aim to be the premier provider of products and services that ensure our clients produce and release their products safely. As these groups increasingly rely on 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.Portfolio. We are the only large, global contract research organization (CRO)CRO with a portfolio of products, services, and solutions that focuses almost exclusively on drug discovery and early-stage development. We provide research models and associated services, discovery research studies and services, and comprehensive safety assessment and toxicology studies in both regulated and non-regulated environments. As such, we are able to collaborate with clients from target discovery through candidate selection. When critical decisions are made regarding which therapiestherapeutics will progress from discovery to development, we continue to work alongside themour clients as the drug candidates move downstream. Our recognized expertise in early-stage drug research and pharmacology provides us with a competitive advantage. We understand our clients' therapies and the challenges they face during the discovery and development process, including mechanism of action, efficacy, drug metabolism, safety assessment, and toxicological testing critical for making “go/no-go” decisions.
Pharmaceutical Manufacturing Support Portfolio. We also offer a portfolio of products, services, and solutions that supports the process development, scale up, and quality control efforts of the biopharmaceutical industry. We provide products and services that support the development and release of commercialized biologics products. In particular, we are an industry leader in the areas of microbial detection and microbial identification to support process development and ongoing commercial production. Our portfolio spans a broad range of traditional and rapid methods, which provide the highest testing quality, enhance productivity, and reduce cycle time.
Deep Scientific Expertise.Expertise. We provide a breadth and depth of scientific expertise across a broad range of therapeutic areas which may be too costly for our clients to build and/or maintain in-house. We provide essential capabilities, that our clients demand but are not perceived as strategic differentiators for their businesses. These includeincluding biomarkers, biologics, medicinal chemistry, in vitro screening, in vivo pharmacology, immunology, pathology, biologics process development testing, microbial detection and identification, and other specialty service areas that have high infrastructure costs or are cost-prohibitive for clients to maintain in-house. We continue to increaseexpand our portfolio in key therapeutic and pharmacology areas to align with our clients' internal drug discovery and development areas of focus. These areas of disease focus and expertise include oncology, metabolism and obesity, immunology, respiratory, bone and musculoskeletal, diabetes, cardiovascular, infectious disease, and central nervous system,system. In the areas of functional expertise, it includes synthetic and medicinal chemistry, library design, cell line development, in vitro and in vivo assay development screening, non-clinical imaging, structural biology, process chemistry, toxicology, veterinary pathology, bioanalysis, scale up, and formulation development. We also continue to enhance our small molecule and biologics manufacturing portfolio in areas of greatest industry need, where outsourcing provides major benefits for our clients and where we could provide significant benefits given our unique early development portfolio and global footprint.
Commitment to Animal Welfare. Welfare. We are committed to being the worldwide leader in the humane care of laboratory animals.animals and implementation of the “3Rs” (Replacement, Reduction, and Refinement). 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. Support. We maintain scientific rigor and high quality standards through management of key performance indicators and an intense focus on biosecurity. These standards allow clients to access our global portfolio of products and services 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. Solutions. Each of our clients is different, with unique needs and specific requirements. We understand the importance of flexibility, and we can deliver customized solutions based upon the breadth and depth of our capabilities, expertise and services. We help clients improve their workload and staffing requirements by drawing upon the higher utilization and streamlined efficiencies of our facilities. This allows our clients to reduce internal capacity and/or staff. We leverage the expertise embedded in our integrated early-stage portfolio to provide customized solutions tailored to fit the specific need or therapeutic area for a particular client. By utilizing our streamlined and efficient facilities, we help clients create a flexible infrastructure in order to improve their workload and staffing requirements. This allows our clients to reduce internal capacity and/or staff. We provide enhanced value to clients who use us as a full-service integrated partner over a longer period of time.
Large, Global Partner.Partner. We believe there is a particular advantage in being a full service, high-quality provider of research models and associated services, discovery and preclinicalnon-clinical in vivo and in vitro services, and manufacturing support on a global scale. Many of our clients, especially large biopharmaceutical companies, have decided to limit the number of suppliers with which they work. Their preference is to partner with large Tier 1 CROs like Charles River, who can offer clients access to greater value through economics of scale and scopesupport across the early-stage drug research process 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 the premier preferred provider, by building and expandingthereby enabling us to build broader and deeper long-term strategic relationships with our clients.
Global biopharmaceutical companies are continuing to make the decision to outsource more significant tranches of their drug discovery, development, and developmentmanufacturing processes. For example, overOver the past few years we have entered into strategic relationships with

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leading global pharmaceuticalbiopharmaceutical companies and we have expanded existing preferred provider agreements with other leading global pharmaceuticalbiopharmaceutical companies. For example, in 2016, we extended the term of our longstanding integrated drug discovery alliance with Genentech, a member of the Roche Group. Through this alliance, we provide Genentech early discovery services, including medicinal chemistry, in vitro and in vivo biology, structural biology, and computer-aided drug design to help identify promising candidates for non-clinical development. And, in 2015, we extended the term of our collaboration with AstraZeneca for outsourced regulated safety assessment, and development drug metabolism and pharmacokinetics until 2020. For some of theseour 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 /orand/or research models. Utilizing our capabilitiesOffering flexibility enables our clients to create a flexible research platformutilize our products and services to deliver innovative health solutions.
We believe it is critical to participatesolutions 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 in recognition of our clients'a manner which best suits their individual needs. Biopharmaceutical companies continue to face increasing pressure to innovate and to better manage their pipelines. Accordingly, our clients have reduced their infrastructure while simultaneously they search for improved ways to identify and develop innovative new therapies. Clients are reducing historical fixed costs in favor of a more flexible business model, with an aim to accelerate their discovery and development activities. As a consequence, our pharmaceutical and biotechnology clients have been looking to outsource these 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 partnering and outsourcing. Client spending is not just influenced by the levels of research and development at these pharmaceutical and biotechnology companies, but also by spending of all the sponsors including federal and state 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 areas that provide true differentiation and advance their pipelines. This creates opportunities for us to help optimize our clients' pipelines and be a true partner in accelerating their drug discovery and development 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” therapies;
intensified actions designed to reduce costs and improve research and development innovation and 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
the uncertain and volatile global economy.

As a result, thereThere have been fundamental changes in our clients' research and development needs, particularly with regard to the large pharmaceutical industry. First, these clients are increasingly emphasizing studies that have greater translation to the 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 fewer molecules undergoing regulated safety assessment. The result is a greater focus on discovery services, including in vivo pharmacology studies consisting of efficacy and non-GLP DMPK (drug metabolism and pharmacokinetics) studies. Second, these clients are choosing to outsource additional discovery and safety assessment services in order to increase the efficiency and effectiveness of their drug selection processes.

We believe that this changing environment will provide enhanced outsourcing opportunities for us in the future. We remain optimistic that our clients are increasingly receptive to partnering with CROs as a means of meeting their discovery and safety assessmentnon-clinical support needs. With the stabilization of factors addressed above, as well asWe believe that the successful launchdevelopment of new therapies and the need to advance early-stage pipelines, we believe outsourcing by the pharmaceutical industry will continue to be a positive driver.drivers of demand for our products and services.
We also believe that larger biopharmaceutical companies will increasingly focus on efficiencies and execution. They will continue to reassess what are core differentiators from research and development to commercialization. We expect they will also continue to be conservative in re-building infrastructure and expertise. This should lead to more opportunities for strategic outsourcing as clients choose to utilize external resources rather than invest in internal infrastructure. In the aggregate, we believe that the evolving large biopharmaceutical research and development business model will make our essential products

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and services even more relevant to our clients, and allow them to leverage our integrated offerings and expertise to drive their research, non-clinical development, and developmentmanufacturing efficiency and cost effectiveness.
To addressWe believe it is critical to participate in the challenging market conditions that have persisted, overstrategic partnering process because these relationships are likely to extend for lengthy periods of time - three to five years. Furthermore, both the last few years we have taken significant stepsclient and the CRO invest heavily in the initial phases of the relationship to better support oursuccessfully transfer work streams and establish governance processes. Given this investment, clients identify new strategiesare less likely to enhance client satisfaction, improve operational efficiency and productivity, drive cost savings and generally strengthen our business model:change CROs at the conclusion of the initial relationship. Our goal is to prevail in the majority of these opportunities.
We integratedalso believe that our businesses by unifying them globallyportfolio provides flexible solutions that meet the customized needs for virtual and streamlined our worldwide facilitysmall biotechnology companies, which have limited or no infrastructure. We did this to strengthen the linkage between the businesses, which enables us to offerThese clients more seamless access to our broad portfolio and scientific expertise.
We aligned our sales force to enhancealso value our ability to supportprovide a broad range


of services and integrated services where we work hand in hand with our customers to design, plan, and manage integrated projects and programs. This includes classically outsourced services, “insourced” services, and hybrid offerings blending resources from both our clients and to focus on three particular client segments: global biopharmaceutical companies, mid-tier biopharmaceutical companies,our staff. Our clients have utilized this capability, which blends resources both inside and academic/government institutions.
We aligned our DSA business along functional lines to continue the process of standardizing and harmonizing our procedures. 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.
We announced a number of organizational changes in 2013 designed to continue to improve our operating efficiency across our global portfolio and to enhance our ability to meet the needs of our clients, which resulted in operational enhancements and efficiencies for 2014 and beyond.
We created a project management office (PMO) to help identify and manage initiatives that contribute to our organization’s productivity, efficiency and 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 are consolidating our procurement function through increased centralization and regionalization, reductions in the number of suppliers and increased use of automated procurement processes.

outside their walls.
We maintain an intense focus on initiatives designed to allow us to drive profitable growth and maximize value for shareholders, and better positionedposition ourselves to operate successfully in the current and future business environment. As a result, we believe that we are well positioned to exploit both existing and new outsourcing opportunities. As clients, particularly larger pharmaceutical companies, increase their outsourcing, we believe that our broad portfolio and global footprint allows us to provide a more flexible, efficient and cost-effective alternative for them. We are able to build and maintain expertise and achieve economies of scale that are difficult for our clients to match within their internal 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 development continuum primarily through internal development, and, as needed, through focused acquisitions and alliances. Acquisitions are an integral part of our growth strategy, but weboth to expand our portfolio and broaden our geographic footprint. 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 onfor return on invested capital above our weighted average cost of capital. For example, in 2014each of 2015 and 2016, we made twocompleted significant strategic acquisitions. First, in March 2014,In 2015, we acquired ArgentaCelsis Group Limited., a leading provider of rapid bacterial detection systems for sterile and BioFocus, global leaders in integrated drug discovery services locatednon-sterile quality control testing in the United Kingdombiopharmaceutical and the Netherlands, with a predominant focus on in vitro capabilities. Second, in October 2014,consumer products industries. In 2016, we made three acquisitions. In April, we acquired ChanTest,WIL Research, a premier provider in ion channel testing.of safety assessment and contract development and manufacturing services to biopharmaceutical and agricultural and industrial chemical companies worldwide. In June, we acquired Blue Stream, an analytical CRO supporting the development of complex biologics and biosimilars. In September, we acquired Agilux, a CRO that provides a suite of integrated discovery small and large molecule bioanalytical services, drug metabolism and pharmacokinetic services, and pharmacology services.
Our acquisition strategy also takes into account geographic as well as strategic expansion of existing core services. For example, in 2013,2015, we acquired 75% ownershipOncotest, a Germany-based CRO providing discovery services for oncology, which complements our existing In Vivo Discovery businesses in the U.S. and Finland, and Sunrise, a producer of Vital River,SPF fertile chicken eggs and chickens used in the premier commercial providermanufacture 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 capabilities and services in a related or adjacent business, such as the VivoPath and BRASS acquisitions in 2013 and the Accugenix acquisition in 2012.live viruses.
We are also partnering with a number of venture capital firms primarily investing in life sciences, health carehealthcare, and technology companies with an emphasis on early-stage emerging growth companies. Through these partnerships and leveraging our core competencies, we are able to promote contract research services for discovery and safety assessment to these companies. For example, in 2016, we committed to invest $10 million in BioMotiv, LLC, the therapeutic accelerator company associated with The Harrington Project for Discovery and Development. Through this agreement, we will be the preferred drug discovery and non-clinical development partner for BioMotiv’s portfolio of technologies and companies. This offers us the 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, biotechnology, agrochemical, industrial chemical, and veterinary medicine companies, and biotechnology companies;as well as contract research organizations; and
academic and government institutions.

We also maintain several sales specialists which either have specific technical expertise (often degreed scientists) or cover unique markets.
Our clients continue to consist primarily of all of the major pharmaceutical companies,biopharmaceutical companies; many biotechnology, companies, contract research organizations, agricultural and chemical, companies, life science, companies, veterinary medicine, companies,medical device, diagnostic, and consumer product companies; contract research and contract manufacturing organizations, medical device companies, diagnosticorganizations; 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 2014,2016, no single commercial client accounted for more than 5%3% of our total revenue.

revenue and no single customer accounted for more than 10% of the revenue of any of our three business segments.
We continue to pursue a goal of expanding our relationships with our large biopharmaceutical clients, and with many of our larger mid-tiermid-market clients. These relationships take different forms, from preferred provider arrangements to strategic partnerships. These structuredThe structure of these relationships incentivizeincentivizes 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 becauseearly-


stage portfolio. Because of the strength of these relationships, we have better insight into our clients' planning processes.processes, and therefore, better visibility than in the past. For information regarding revenue and long-lived assets attributable to each of our business segments for the last three fiscal years, please see Note 1315, “Segment and Geographic Information” included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K. For information regarding revenue 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 1315, “Segment and Geographic Information” included in the Notes to 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 (i.e. global(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 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 who work in North America, 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, hosting webinars and making presentations at, and participating in, 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 areas, our direct sales force is supplemented by international distributors and 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 our 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, preclinicalnon-clinical 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 services portfolio. We believe that our ability to provide solutions that address all aspects of early-stage drug researchare 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 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 forWe encounter a broad range of competitors of different sizes and capabilities in each of our three businessbusinesses segments, varies.although the largest competitors within any segment vary.  We also face competition from the internal discovery and development resources of our clients.

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For RMS, ourwe have five 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 thirdwhich one is a government funded, not-for-profit institution.entity; one is part of a large public company; two are privately held in Europe and one is privately held in the U.S. We believe that none of these competitors compares to us in global reach, financial strength, breadth of product and services offerings, technical expertise, or pharmaceutical and biotechnology industry relationships.
For DSA, we believe we areboth our Discovery Services and Safety Assessment businesses have numerous competitors. Discovery has hundreds of competitors, as it is a highly competitive and fragmented market. Safety Assessment has seven main competitors; one is part of the two largest providers of preclinical services (inclusive of discovery and safety assessment services)a large public company in the world, based on net service revenue.Our commercial competitors for discoveryU.S.; one is a privately held company in the U.K.; one is a public company in China; two are privately held companies in the U.S.; one is privately held in Canada; and safety assessment consist of both publiclyone is privately held and privately owned companies, and it is estimated that the top ten participants (including us) account for a significant portion of the global outsourced discovery and safety assessment market, with the rest of the market remaining highly fragmented.in France. Our DSA 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 mainIn addition to many smaller 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). EMDBiologics has five main competitors, of which fourtwo are public companies in Europe, one is a private company in the U.S., one is a public company in China, and one is a public company in the U.S. Avian has one main competitor to its SPF eggs business, which is privately held in Europe, and numerous competitors for services provided through our specialized avian laboratory. Microbial Solutions has five main competitors, of which three are public companies in Europe and two are privately held in the U.S. Contract Manufacturing has five main competitors, of which two are public companies in the EUU.S. and one isthree are 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.Europe.
Industry Support and Animal Welfare
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 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 a 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-being of the animals in our care.
We are firmly committed to the 3Rs and help to reducereducing 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 also maintain a quarterly award recognizing our employees’ efforts to continually implement the 3Rs at our sites globally.
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 and the supporters of 3Rs.
Employees
As of December 27, 2014,31, 2016, we had approximately 7,90011,000 employees (including approximately 7001,200 science professionals with advanced 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 represented by unions or works councilsU.S. Employees at some of our European facilities are represented by works councils and/or unions, which is consistent with local customs for our industry. We believe we have good relationships with our employees, based on a number of factors including employee retention and feedback.survey results.
Backlog
Our backlog for our RMS, DSA and Manufacturing reportable segments was $115.7$88.0 million, $310.5$551.8 million and $27.5$39.5 million, respectively, atas of December 27, 2014,31, 2016, as compared to $138.7$106.6 million, $203.1$327.8 million and $28.1$36.2 million, respectively, atas of December 28, 2013.26, 2015. 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. Canceled studies or projects are removed from backlog.

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 2014December 31, 2016 backlog may be completed in 2015,2017, 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

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 in the United StatesU.S. other than laboratory rats, mice and 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 the 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 in the U.S., our DSA facilities in the U.S., and Canada, and most of our DSA and RMS sites in the European UnionEurope are accredited by the Association for Assessment and Accreditation of Laboratory Animal Care International, a private, nonprofit, international organization that promotes the humane treatment of animals in science through voluntary accreditation and assessment programs.
Our import and export of animals and 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 transport of animals by dealers and research facilities.
We conduct nonclinicalnon-clinical safety assessment studies to support the submissions for approval or licensing of our clients' products throughout the world. Many of these studies must comply with national statutory or regulatory requirements for Good Laboratory Practice (GLP). GLP regulations describe a quality system for the organizational process and the conditions under which nonclinicalnon-clinical studies are planned, performed, monitored, recorded, reported and archived. GLP compliance is required by such regulatory agencies as the FDA, United States Environmental Protection Agency, European Medicines Agency, Medicines and Healthcare Products Regulatory Agency in the United Kingdom (U.K.), Health Products Regulatory Authority in Ireland, Health Canada and other similar agenciesmonitoring authorities in the countries where we operate. GLP requirements are significantly harmonized throughout the world and our laboratories are capable of conducting studies in compliance with all necessary requirements.
Our Manufacturing Support businesses produce endotoxin test kits, reagents, cell banks used in research and biopharmaceutical production, clinical trial vaccines, and vaccine support products and provided GMP contract manufacturing of clinical and marketed products. Additionally, several of our laboratories conduct analytical testing such as identity, stability, sterility and potency testing in support of our clients' manufacturing programs.programs working with our clients to fulfill their validation requirements as applicable. These activities are subject to regulation and consequently require these businesses to be inspected by the FDA and other national regulatory agencies under their respective current Good Manufacturing Practice (cGMP) 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. In addition, the specific activities of some of our businesses require us to hold specialized licenses for the manufacture, distribution and/or marketing of particular productsproducts.
All of our sites are subject to licensing and regulation under international treaties and conventions, including national, regional and local laws relating toto:

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the surface and air transportation of chemicals, biological reagents and laboratory specimens;
the handling, use, storage, and disposal of chemicals (including narcotics and psychotropic drugs). Biological, biological reagents, laboratory specimens, hazardous waste, and radioactive materials;
the procurement, handling, use, storage, and disposal of human cells, tissues, and cellular and tissue based products for research purposes;
the safety and health of employees and visitors to our facilities; and
protection of the environment and general public.

ToGlobal compliance programs are centralized under a single group responsible for global quality programs and systems to ensure that all business sectors comply with applicable statutory and regulatory requirements and satisfy our clientclients’ expectations for


quality and regulatory compliance, we established a corporate regulatory affairs and compliance organization that oversees our corporate quality system and conducts regular audits of our quality assurance functions for all of our GLP, Good Clinical Practices and cGMP facilities.compliance. To assure these compliance obligations, we established quality assurance units (QAU)(QAUs) in each of our nonclinical laboratories.regulated businesses that require independent oversight. The QAUs operate independently from those individuals that direct and conduct studies, manufacturing or manufacturing studies.analytical testing that studies that supports manufacturing.
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 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 enhance our offerings, particularly as we focus on therapeutic area expertise. With the exception of technology related to our EMDMicrobial Solutions testing business, including Accugenix and the Endosafe-PTS, we have no patents, trademarks, licenses, franchises, or concessions which are material and upon which any of our products or services 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,SEC, and the Federal government as implemented by the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Eight of the nine members of our Board of Directors are independent and have no significant financial, business, or personal ties to us or management and all of our board 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 underwww.ir.criver.com.
Executive Officers of the “Investor Relations-Corporate Governance” caption.Registrant (pursuant to Instruction 3 to Item 401(b) of Regulation S-K)
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.
James C. Foster, age 66, joined us in 1976 as General Counsel. 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.
William D. Barbo, age 56, joined us in 1982 as a laboratory technician. Between 1982 and 2005, Mr. Barbo served in a variety of positions of increasing responsibilities. He was named Corporate Vice President of Research Models and Services in 2005, Corporate Senior Vice President of Global Sales and Marketing in 2010, and Corporate Executive Vice President and Chief Commercial Officer in October 2016.
David P. Johst, age 55, joined us in 1991 as Corporate Counsel and was named Vice President, Human Resources in 1995. He became Vice President, Human Resources and Administration in 1996, a Senior Vice President in 1999, and a Corporate Executive Vice President in 2005. He currently serves as our General Counsel and Chief Administrative Officer and is responsible for overseeing our corporate legal function, Human Resources department, and several other corporate staff departments. Prior to joining us, Mr. Johst was in private practice at the law firm of Hale and Dorr (now WilmerHale). Mr. Johst currently serves as a trustee of Mt. Ida College.
Davide Molho, age 47, joined our Italian operations in 1999 and was promoted to Director of Operations for 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. In 2011, Dr. Molho was 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.
David R. Smith, age 51, has served as our Corporate Executive Vice President and Chief Financial Officer since August 2015. He joined us as Corporate Vice President, Discovery Services through our acquisition of Argenta and BioFocus from Galapagos NV in March 2014 and was promoted to Corporate Senior Vice President, Global Discovery Services, in October 2014. At Galapagos, he served in various capacities, including as Chief Executive Officer of its Galapagos Services division and as Chief Financial Officer. Mr. Smith served as Chief Financial Officer for Cambridge University Hospitals from 2007 to 2013. Mr. Smith spent eight years at PricewaterhouseCoopers prior to joining AstraZeneca in 1997, where he spent the next nine years in various finance and business roles of increasingly greater responsibility.
Item 1A.    Risk Factors
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 preclinicalnon-clinical (discovery and safety assessment) stages of drug discovery and development may decrease, which could impair our growth.

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Over the past decade, pharmaceutical and biotechnology companies have generally increased their outsourcing of preclinicalnon-clinical research support 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 such outsourcing 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. 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 this Form 10-K.
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 preclinicalnon-clinical phases of research and development (and in particular discovery and safety assessment) and to outsource the products and services we provide. Fluctuations in the expenditure amounts in each phase of the 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. Available funding for biotechnology clients in particular may be affected by the capital markets, investment objectives of venture capital investors, and priorities of biopharmaceutical industry sponsors.
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 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 spending by our global pharmaceutical clients has been directed towards their therapies in late-stage clinical rather than early-stage preclinical development as they work to replenish drug pipelines to offset the effect of patent expirations on 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 this Form 10-K.
A reduction or delay in government funding of research and development may adversely affect our business.
A portion of revenue 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 salesrevenue 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. 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 carehealthcare 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 streamlined 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 Department of State, the office of Laboratory Animal Welfare of NIH, the Drug Enforcement Agency, as well as numerous other Canadian, Europeanoversight agencies in Canada, Europe, and Asian oversight agencies)Asia), 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 carehealthcare reform legislation intended over time to expand health insurance coverage and impose health industry cost containment measures. In June 2012, the U.S. Supreme Court upheld the constitutionality of this legislation. 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 (4) imposition of an excise tax on the sale of medical devices. Since the law and its implementation continue to face challenges in Congress and federal courts, and from certain state governments, opposition advocacy groups, and some small business organizations, as well as from the incoming president and his administration, we are uncertain as to the ultimate effects of this legislation on our business and are unable to predict what legislative proposals will be adopted in the future.
Implementation of health carehealthcare reform legislation may have certain benefits, but also may contain costs that could limit 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.
The FDA isIn addition, the recent presidential and congressional elections in the processU.S. may result in significant changes in, and uncertainty with respect to, legislation, regulation and government policy. While it is not possible to predict whether and when any such changes will occur, changes at the local, state or federal level may significantly impact our domestic and foreign businesses and/or those of reviewingour clients. Specific legislative and modernizingregulatory proposals discussed during and after the GLP regulationselection that may have a material impact on us or our clients include, but are not limited to, reflect current industry standards. As this may change someappeal or reform of the GLPHealth Care Reform Act; and modifications to international trade policy, public company reporting requirements, the regulatory impact will not be known until the final regulations are issued.environmental regulation and antitrust enforcement.
We are at risk that changes in U.S. Government practices may negatively 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 government researchers. In an effort to mitigate the effect of the cancellation, we launched an outreach program to inform researchers that they could continue to obtain the NCI models from us, with no change in initial pricing or logistics. 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 that amount from direct sales to 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.
ContaminationsIf they occur, 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 potentially credits for prior shipments. In addition to microbiological contaminations, the potential for genetic mix-ups or mis-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.them for which we could be liable for damages. 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. A contamination may require extended CDC quarantine with subsequent reduced sales as a result of lost client orders as well as the potential for complete inventory loss and disinfection of the affected quarantine rooms. Furthermore, while we often negotiate for contractual risk indemnification, 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 PracticeGLP or current Good Manufacturing PracticecGMP 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 continuescontinue 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.


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 non-clinical 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.
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 underunder‑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 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 securitySeveral of our computer systems.product and service offerings are dependent on a limited source of supply, which if interrupted could adversely affect our business.
We operatedepend on a limited international source of supply for certain products, such as large and complex computer systems that contain significant amountsresearch 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 among suppliers for models, disruptions to the air travel system, activist campaigns, commercial disputes, supplier insolvency, or other normal-course or unanticipated events. Any disruption of client data. As a routine element ofsupply could harm our business if we collect, analyzecannot remove the disruption or are unable to secure an alternative or secondary supply source on comparable commercial terms.


If we are not successful in selecting and retain substantial amounts of data pertaining tointegrating the preclinical studiesbusinesses and technologies we conduct foracquire, or in managing our clients. Unauthorized third parties could attempt to gain entry to such computer systems forcurrent and future divestitures, our business may suffer.
During the purpose of stealing data or disrupting the systems. We believe thatpast fifteen years, we have taken appropriate measuressteadily expanded our business through numerous acquisitions. We plan to protect them from intrusion, and we continue to improveacquire businesses and enhancetechnologies 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.
In April 2016, we acquired WIL Research, a premier provider of safety assessment and contract development manufacturing services to biopharmaceutical, agricultural, and industrial chemical companies worldwide. This transaction was our largest acquisition in over ten years.
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 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;
potential losses resulting from undiscovered liabilities of acquired companies that are not covered by the indemnification we may obtain from the seller or the insurance we acquire in connection with the transaction;
loss of key employees;
the presence or absence of adequate internal controls and/or significant fraud in the financial systems in this regard, butof acquired companies;
diversion of management's attention from other business concerns;
becoming subject to a more expansive regulatory environment;
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 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 diversion of 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. management's attention.
In the event that an acquired business, technology, or an alliance does not meet our expectations, our results of operations may be adversely affected.
Some of the confidentialitysame 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 such information was compromised,operations, services, products, and personnel;
diversion of management's attention from other business concerns; and
the need to agree to retain or assume certain current or future liabilities in order to complete the divestiture.
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 could suffermay 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 harm.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.


Impairment of goodwill or other intangible assets may adversely impact future results of operations.
We have intangible assets, including goodwill, and other indefinite-lived 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, reviewsprojections of projected future income cash flows that arise from identifiable intangible assets of acquired businesses and statutory regulations. The use of alternative estimates and assumptions might have increased or decreased the estimated fair valuediscount rates based on an analysis of our goodwillweighted average cost of capital, adjusted for specific risks associated with the assets. Disruptions in global financial markets and deterioration of economic conditions could, among other things, impact the discount rate and other assumptions used in the valuations and actual cash flows arising from a particular intangible assets thatasset could potentiallyvary from projected cash flows, which could imply different carrying values from those established at the dates of acquisition and which could result in a different impact to our resultsimpairment of operations.such assets.
If the future growth and operating results of our business are not as strong as anticipated, overall macroeconomic or industry conditions deteriorate and/or our market capitalization declines, this could impact the assumptions used in calculatingestablishing the faircarrying value of goodwill or other indefinite-lived intangibles.intangible assets. To the extent goodwill or other indefinite-lived intangiblesintangible assets are impaired, their carrying value will be written down to itstheir implied fair valuevalues and a charge will be made to our income from continuing operations. Such an impairment charge could materially and adversely affect our operating results. As of December 27, 2014,31, 2016, the carrying amount of goodwill and other intangibles was $500.0 million on our consolidated balance sheet.sheet was $1,182.0 million.
Our business is subject to risks relating to operating internationally.
A significant part of our revenue is derived from operations outside the U.S. Our international revenues, which include revenues from our non-U.S. subsidiaries, haverevenue represented approximately one-half of our total revenue in recent years.We expect that international revenuesrevenue will continue to account for a significant percentage of our revenuestotal revenue 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;

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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 Organization for Economic Co-operation and Development (OECD)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 USU.S. 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.vice-versa and possibly replace or supplement the use of traditional living animals as test platforms in biomedical research. Some companies have developed techniques in these areas that may have scientific merit.merit to improve translation between species. 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 preclinicalnon-clinical to humanclinical studies. There is an increasing push to focus on in vitro technologies such asthat employ human materials, stem cell technology, and other 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 mimickingdisease-mimicking models we can produce.
It is our strategy to explore non-animal approachesthese in vitro technologies to refine and potentially reduce the need forutilization of animal models as these new methods become validated. For example, ChanTest Corporation 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 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 and attempts to disrupt air carriers from transporting research models, impacting the industry. This has included periodic demonstrations near facilities operated by us and at our annual meetings, as well as shareholder proposals we received for some of our past Annual 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 such as our airline carriers in the future could impair our ability to operate our business efficiently.

Our debt level could adversely affect our business and growth prospects.
18As of December 31, 2016, we had $1.2 billion of debt. Our 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 7, “Long-Term Debt and Capital Lease Obligations”, included in the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.



The drug discovery, and development services industry isand manufacturing support industries are highly competitive.
The drug discovery, non-clinical development, and developmentmanufacturing support services industry isindustries are highly competitive. We often compete for business not only with other 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 outsourced 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;
scope and breadth of service and product offerings across the manufacturing support spectrum;
ability to provide flexible and customized solutions to support our clients' drug discovery, non-clinical development, and developmentmanufacturing support needs;
broad geographic availability (with consistent quality);
price/value;
technological expertise and efficient drug development processes;
quality of facilities;
financial stability;
size;
ability to acquire, process, analyze, and report data in an accurate 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 mightcould 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. 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 industryindustries 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. 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 the U.S., there are several proposals to 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 credits, implementing a territorial regime of taxation, limiting the ability of U.S. corporations to deduct interest expense, associated with offshore earnings, modifying the foreign tax credit rules, and reducing the ability to defer U.S. tax on offshore earnings. These or other changes in the U.S. tax laws could increase our effective tax rate which would affect our profitability.

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 the United Kingdom.U.K. Any reduction in the availability or amount of these tax credits due to tax law changes or outcomes of tax controversies could 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.U.K. Future changes to tax laws or interpretation of tax laws resulting from the BEPS project could increase our effective tax rate, which would affect our profitability.
Contract research services create a risk of liability.
As a CRO, we face a range of potential liabilities which may include:

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errors or omissions in reporting of study detail in preclinicalnon-clinical 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, 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 themselvesthem 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, food, beverages, and home and beauty products (primarily through our EMDMicrobial Solutions business), or in the testing of biologics and other services performed by our Biologics business, which could result in us or our clients failing to identify unsafe or contaminated materials.

While we attempt to mitigate these risks through a variety of 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 DSA and Manufacturing businesses, we attempt to reduce these risks by contractual risk transfer provisions entitling us to be indemnified subject to a limitation of liability, by insurance maintained by our clients and/or by us, and by various regulatory requirements we must follow in connection with our business.
Contractual 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 are required to pay damages or bear the costs of defending any claim that is outside any contractual indemnification provision, or if a party does not fulfill its indemnification obligations, or the 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 neither we nor a party required to indemnify us will be able to maintain such insurance coverage (either at all or on terms acceptable to us).
Upgrading and integrating our business systems could result in implementation issues and business disruptions.
In recent years we implemented a project to replace many of our numerous legacy business systems at certain different sites worldwide with an enterprise wide, integrated enterprise resource planning (ERP) system. The expansion of the ERP 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.
The drug discovery and development industry has a history of patent and other intellectual property litigation and these lawsuits will likely continue. Accordingly,
In July 2015, IDEXX Laboratories, Inc. and IDEXX Distribution, Inc. (collectively, IDEXX) filed a complaint in the United States District Court for the District of Delaware alleging we face potential patent infringement suits by companies that have infringed three (3) recently issued patents for similar products and methodsrelated to a blood spot sample collection method used in businessdetermining the presence or other suits alleging infringementabsence of an infectious disease in a population of rodents.  We filed our answer to the complaint on July 21, 2016. In addition, on July 29, 2016, we initiated an inter partes review (IPR) procedure with the United States Patent and Trademark Office challenging the validity of the IDEXX patents. On February 6, 2017, we entered into a settlement agreement with IDEXX, which involved the withdrawal by IDEXX of their intellectual property rights. complaint and withdrawal by us of the IPR.
Legal proceedings relating to intellectual property could beare 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-partiesthird 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 27, 2014, we had $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 7 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 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 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;
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 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.

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 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 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;
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 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; andventure capital investments;
the occasional extra week (“53rd week”) that we recognize in a fiscal year (and fourth 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.
Referendum on the United Kingdom’s membership in the European Union (“Brexit”) may adversely affect our business.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (E.U.), referred to as “Brexit.” As a result of the referendum, it is expected that the British government will begin negotiating the terms of the U.K.’s future relationship with the E.U. The decision by referendum to withdraw the U.K. from the E.U. has caused significant


volatility in global stock markets and currency exchange rate fluctuations, including the strengthening of the U.S. dollar against foreign currencies. The execution of Brexit also may create global economic uncertainty, which may cause our customers and potential customers to monitor their costs and reduce their budgets for our products and services. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. Given that we conduct a substantial portion of our business in the E.U. and the U.K., these effects of Brexit, among others, could adversely affect our business, business opportunities, results of operations, financial condition, and cash flows.
Our industry has a history of patent and other intellectual property litigation, which can be costly.
Our industry has a history of intellectual property litigation. On July 31, 2015, IDEXX Laboratories, Inc. and IDEXX Distribution, Inc. filed a complaint in the United States District Court for the District of Delaware alleging we infringed three recently issued patents related to a dried blood spot sample collection method used in determining the presence or absence of an infectious disease in a population of rodents. Legal proceedings relating to intellectual property can be expensive, take significant time, and divert management’s attention from other business concerns, regardless of the outcome of the litigation. On February 6, 2017, we entered into a settlement agreement with IDEXX, which involved the withdrawal by IDEXX of their complaint and withdrawal by us of the IPR.
Since we do not expect to pay any cash dividends for the foreseeable future, our shareholders will benefit from an investment in our common stock only if it appreciates in value.
We have not declared or paid any cash dividends on our common stock, and do not anticipate that we will pay any dividends to holders of our common stock for the foreseeable future. Any payment of cash dividends will be at the discretion of our Board of Directors and will depend on our financial condition, capital requirements, legal requirements, earnings and other factors. Consequently, our shareholders should not rely on dividends to receive a return on their investment.
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 DSA businesses in Canada, France, Ireland, Netherlands, Scotland, and the United StatesU.S. and lease large facilities in England and the United States.U.S. We own large RMS facilities in Canada, China, France, Germany, Italy, Japan, England, and the United States.U.S. We own large Manufacturing segment facilities in the United StatesU.S. 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 in each of our reportable segments are adequate for our operations and that suitable additional space will be available when needed. For additional information, see Note 12 to the Consolidated Financial7, “Long-Term Debt and Capital Lease Obligations” and Note 13, “Commitments and Contingencies” included in Item 8, “Financial Statements included elsewhereand Other Supplementary Data” in this Annual Report on 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 track room utilization on an ongoing basis and depending on the needs of our clients at given times, we may need to execute on contingent plans for expansion, which average between six and fifteen months to complete.

We may also expand at specific sites in order to accommodate needs 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, 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.

In early May 2013, with the assistance of the law firm of Davis Polk & Wardwell LLP, the Companywe commenced an investigation ofinto inaccurate billing with respect to certain government contracts. This issue had been reported to the Company’sour senior management by a Charles River employee. The CompanyWe promptly reported these matters to the relevant government contracting officers, the Department of Health and Human Services'Services’ Office of the Inspector General, and the Department of Justice, and iswe are cooperating with these agencies to ensure the proper repayment and resolution of this matter.
The investigation to date has confirmed that the Company’sour 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’sour 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 CompanyWe 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 believeswe believe that this conduct was limited to the Company’sour research model facilities in Raleigh, North Carolina, and Kingston, New York. The Company hasWe previously identified approximately $1.5 million inof excess amounts billed on these contracts, since January 1, 2007 and has reservedrecorded a liability for such amount at December 27, 2014. Given the current status ofamount.  Based on our ongoing discussions with the government, we have recorded an additional charge of $0.3 million during the fiscal year 2016. Our best estimate, which totals $1.8 million, may be subject to change based on the terms of any final settlement with the Department of Justice and the complex natureDepartment of this matter, the Company cannot at this time make a reasonable estimateHealth and Human Services’ Office of the potential range of loss beyond such reserve.
The Company hasInspector General. We have already taken appropriate steps to prevent this conduct from recurring, and will consider additional remedial measures following the conclusion of the investigation.matter.
In July 2015, IDEXX filed a complaint in the United States District Court for the District of Delaware alleging we have infringed three (3) recently issued patents related to a blood spot sample collection method used in determining the presence or absence of an infectious disease in a population of rodents.  On September 21, 2015, we timely filed a motion to dismiss the complaint on the grounds that all of the claims are directed to unpatentable subject matter and therefore are invalid.  On October 7, 2015, IDEXX filed an amended complaint, which substantially asserted the same patents and infringement allegations as asserted in the original complaint, and on October 26, 2015, we timely filed a motion to dismiss this amended complaint.  The hearing on the motion to dismiss was held on January 12, 2016. On July 1, 2016, the Court issued an opinion denying the motion to dismiss. We filed our answer to the complaint on July 21, 2016. In addition, on July 29, 2016, we initiated an inter partes review (IPR) procedure with the United States Patent and Trademark Office, challenging the validity of the IDEXX patents. On February 6, 2017, we entered into a settlement agreement with IDEXX, which involved the withdrawal by IDEXX of their complaint and withdrawal by us of the IPR.
Item 4. Mine Safety Disclosures
Not applicable.

Supplementary Item. Executive Officers of the Registrant (pursuant to Instruction 3 to Item 401(b) of Regulation S-K)
Below are the names, ages and principal occupations of each 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 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 64, joined us in 1976 as General Counsel. 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 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 and in December 2013, he was named Corporate Executive Vice President, Global Productivity and Efficiency. Prior to joining 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 59, joined us in 1999 with the acquisition of Sierra Biomedical. Dr. Gillett has 29 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 DSA 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 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 our 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 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 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. In 2011, Dr. Molho was 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'sRegistrant’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."“CRL.” The following table shows the high and low sales prices for our common stock.stock:
Fiscal 2015High Low
First quarter (through January 30, 2015)$70.73
 $63.22
Fiscal 2014High Low
Fiscal 2017High Low
First quarter (through January 27, 2017)$82.89
 $75.25
Fiscal 2016High Low
First quarter$62.50
 $52.41
$81.61
 $65.70
Second quarter61.92
 49.60
87.95
 73.42
Third quarter61.49
 52.02
89.18
 75.54
Fourth quarter66.11
 55.47
84.53
 67.20
Fiscal 2013High Low
Fiscal 2015High Low
First quarter$46.90
 $36.50
$84.69
 $63.22
Second quarter45.90
 40.28
80.30
 68.59
Third quarter48.73
 41.05
78.50
 63.75
Fourth quarter53.81
 44.12
80.44
 59.99

There were no equity securities that were not registered under the Securities Act of 1933, as amended, sold by the Company during the fiscal year ended December 27, 2014.2016.
Shareholders
As of January 30, 2015,27, 2017, there were approximately 451380 registered shareholders of the outstanding shares of common stock.
Dividends

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 our purchases of shares of our common stock during the fourth quarter ended of 2016:December 27, 2014.

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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
  
 
  

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
For the period      (in thousands)
September 25, 2016 to October 22, 2016482
 $83.34
 
 $69,694
October 23, 2016 to November 19, 2016
 
 
 69,694
November 20, 2016 to December 31, 201620
 71.10
 
 69,694
Total502
   
  
OnIn July 29, 2010, our Board of Directors authorized a $500.0 million stock repurchase program. Our Board of Directorsprogram, and subsequently 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 of $1,150.0 million. During the fourth quarter of the fiscal year 2014,2016, we did not repurchase any shares of common stock under our Rule 10b5-1 Purchase Plan andor 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 Plansour stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, awardsperformance share units, and restricted stock units in order to satisfy individual minimum statutory tax withholding requirements.


25




Comparison of 5-Year Cumulative Total Return
The following stock performance graph below compares the five-yearannual percentage change in the Company’s cumulative total stockholdershareholder return on our common stock,its Common Stock during a period commencing on December 31, 2011 and ending on December 31, 2016 (as measured by dividing (1) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the Company’s share price at the end and the beginning of the measurement period; by (2) the share price at the beginning of the measurement period) with the cumulative total return of the S&P 500 Index and the Nasdaq PharmaceuticalS&P 500 Health Care Index assuming the investment of $100.00 on December 26, 2009 with dividends being reinvested. We haveduring such period. The Company has not paid any dividends on the common stock,Common Stock, and no dividends are included in the representation of ourthe Company’s performance. The stock price performance inon the graph below is not necessarily indicative of future price performance. The graph is not “soliciting material,” is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Information used in the graph was obtained from Standards & Poor’s Institutional Market Services, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information

COMPARISON OF 5 YEAR5-YEAR CUMULATIVE TOTAL RETURN
Among Charles River Laboratories International, Inc., The S&P 500 Index And
The S&P 500 Health CareIndex
And The NASDAQ Pharmaceutical Index
 Fiscal Year
 2011 2012 2013 2014 2015 2016
Charles River Laboratories International, Inc.$100
 $135
 $195
 $235
 $293
 $279
S&P 500100
 116
 154
 175
 177
 198
S&P 500 Health Care100
 118
 167
 209
 223
 217




 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


26




Item 6.    Selected Consolidated Financial Data

The selected financial data presented below is derived from our audited consolidated financial statements and should be read in conjunction with "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” contained in Item 7 and our consolidated financial statements“Financial Statements and notes theretoSupplementary Data” contained in Item 8 of this Annual Report on Form 10-K. Our fiscal year consistsis typically based on 52-weeks, with each quarter composed of 12 months13 weeks ending on the last Saturday on, or priorclosest to, March 31, June 30, September 30, and December 31. A 53rd week was included in fiscal year 2016, which is occasionally necessary to align with a December 31 calendar year-end. The additional week was included in the fourth quarter.
 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
 Fiscal Year
 2016 2015 2014 2013 2012
          
 (in thousands, except per share amounts)
Statement of Income Data         
Total revenue$1,681,432
 $1,363,302
 $1,297,662
 $1,165,528
 $1,129,530
Income from continuing operations, net of income taxes156,086
 152,037
 129,924
 105,416
 102,118
Income (loss) from discontinued operations, net of income taxes280
 (950) (1,726) (1,265) (4,252)
Common Share Data         
Earnings per common share from continuing operations:         
Basic$3.28
 $3.23
 $2.76
 $2.18
 $2.12
Diluted$3.22
 $3.15
 $2.70
 $2.15
 $2.10
Other Data         
Depreciation and amortization$126,658
 $94,881
 $96,445
 $96,636
 $81,275
Capital expenditures55,288
 63,252
 56,925
 39,154
 47,534
Balance Sheet Data (as of period end)         
Cash and cash equivalents$117,626
 $117,947
 $160,023
 $155,927
 $109,685
Total assets(1)
2,711,800
 2,068,497
 1,870,578
 1,623,438
 1,577,111
Long-term debt, net and capital leases(1)
1,207,696
 845,997
 740,557
 635,226
 520,712
Redeemable noncontrolling interest14,659
 28,008
 28,419
 20,581
 
          
(1) During the second quarter of 2015, we elected early adoption of Accounting Standards Update (ASU) 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” and applied the changes retrospectively to all prior periods. During the fourth quarter of 2015, we elected early adoption of ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” and applied the changes retrospectively to all prior periods. Prior years’ amounts have been updated to conform to current presentation.
____________________________Refer to Note 2, “Business Acquisitions” included in Item 8, “Financial Statements and Other Supplementary Data” in this Annual Report on Form 10-K for additional information concerning the impact of our recent acquisitions.

(1)The 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 the termination of the proposed WuXi Pharmatech (Cayman) Inc. acquisition.

27





Item 7.    Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and related notes appearing elsewherein Item 8, “Financial Statements and Supplementary Data” 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 forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in "Risk Factors"Item 1A, “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 full service, early-stage contract research organization (CRO). For 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. Over this time, we have built upon our original core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, thatwhich are able to support our clients from target identification through preclinicalnon-clinical development. We also provide a suite of products and 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 pharmaceuticalbiopharmaceutical companies, many biotechnology companies, contract research organizations,CROs, agricultural and industrial chemical companies, life science companies, veterinary medicine companies, contract manufacturing organizations, medical device companies, and diagnostic and other commercial entities, as well as leading hospitals, academic institutions, and government agencies around the world. We currently operate approximately 6075 facilities in 1723 countries worldwide, which numbers exclude our Insourcing Solutions (IS) sites.

Business Trends
The demand for our outsourcedproducts and services increased in the fiscal year 2014, as did demand for products and services to support our clients’ manufacturing activities.2016. Our pharmaceutical and biotechnology clients continued to intensify their use of strategic outsourcing to improve their operating efficiency and to access capabilities that they do not maintain internally. Many of our large biopharmaceutical clients are beginning to refocushave refocused on their drug discovery and early-stage development efforts, after a period of strongergreater emphasis on delivering late-stage programs to bring new drugs to market. In addition, mid-tiersmall and mid-size biopharmaceutical clients benefited from a resurgencethe continued strength in the biotechnology funding environment in the fiscal year 2014,2016, from both capital markets, and partnering with large biopharmaceutical companies.companies, and investment by venture capital. Academia has also benefited from partnering activities, as large biopharmaceutical companies have increasingly utilized academic research capabilities to broaden the scope of their research activities.

Our full service, early-stage portfolio continued to lead to additional client discussions in fiscal year 2016 regarding strategic relationships, where clients seek to outsource larger portions of their early-stage drug research programs to us.
The primary result of these trends was improved demand for our discovery and safety assessment services in the fiscal year 2014,2016, particularly from mid-tierbiotechnology clients. This improvement led to increased capacity continuing to fillutilization in our safety assessment business, in whichfacilities, with utilization is beginning to approachapproaching optimal levels. Our targeted sales effortsPrice also generatedimproved moderately in fiscal year 2016, as industry capacity utilization continued market shares gains. Price remained competitive, but trends are stable to slightly improving.increase. In view of client demand, we expanded our global footprint and reinforced our scientific leadership in safety assessment services by acquiring WRH, Inc. (WIL Research) in April 2016. We also opened small amounts of new capacity in fiscal year 2016, including the re-opening of our Charles River Massachusetts facility. We believe our scientific expertise, quality, and responsiveness remain key criteria when our clients make the decision to outsource to us. In order to accommodate this increased demand and maintain responsiveness to clients’ needs, we opened small amounts of new capacity in the fiscal year 2014 at existing facilities and continue to strategically evaluate further capacity additions.

Our clients’ intensified focus on the earliest stages of their pipelines has been visible in increasing demandDemand for discovery services, and the willingness to outsource new areas of their research programs. To address these emerging needs and move further upstream in the drug research and development continuum, we acquired the Early Discovery businesses of Argenta, BioFocus, ChanTest, and VivoPath in the fiscal 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 in the fiscal year 2014, where clients seek to outsource larger portions of their early-stage drug research programs to us.

While demand for research 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 of our business as a whole will primarily emerge from our clients' 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 services that support our clients’ manufacturing activities including endotoxinwas also robust in fiscal year 2016. Demand for our Microbial Solutions business remained strong as manufacturers continued to increase their use of our rapid microbial testing solutions. Our Biologics Testing Solutions (Biologics) business continued to benefit from increased demand for services associated with the growing proportion of biologic drugs in the pipeline and microbial detection.on the market. To enhance our ability to support biologic and biosimilar development, we acquired Blue Stream Laboratories, Inc. (Blue Stream) in June 2016.
As our clients continue to pursue their goal of more efficient and effective drug research, they are evaluating outsourcing new areas of their research programs, such as discovery services. We have enhanced our Discovery Services capabilities over the past three years to enable us to work with clients at the earliest stages of the discovery process. In fiscal year 2016, demand from biotechnology clients was strong for discovery services, but demand from larger biopharmaceutical clients fluctuated, particularly for our early discovery capabilities. We believe this is due to the fact that large biopharmaceutical companies have significant internal discovery capabilities, on which they can choose to rely. In order for large biopharmaceutical clients to


28


increasingly outsource more work to us, we must continue to demonstrate that our services can augment and accelerate our clients’ drug discovery process. We implemented business changes, including a small site consolidation and realignment of sales strategies, in fiscal year 2016 in our early discovery business to expedite this process. Demand for our in vivodiscovery services continued to increase in fiscal year 2016, and we acquired Agilux Laboratories, Inc. (Agilux) in September 2016 to strengthen our bioanalytical services offering, and reinforce the linkage between our discovery and safety assessment capabilities.

Demand for research models and services improved modestly in fiscal year 2016. We remain confident in the long-term drivers of this business because research models and services remain essential tools for our clients’ drug discovery and early-stage development efforts.
Acquisitions
During the fiscal year 2014, weWe 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 2014Fiscal year 2016 acquisitions include:included:
InOn April 2014,4, 2016, we acquired 100%WIL Research, a provider of the shares of the United Kingdom (U.K.)-based entities Argentasafety assessment and BioFocus,contract development and certain related Dutch assets,manufacturing (CDMO) services to form the core of our Early Discovery business. Through this transaction, webiopharmaceutical and agricultural and industrial chemical companies worldwide. The acquisition enhanced our position as a full service,leading global early-stage CRO by strengthening our ability to partner with integrated in vitroclients across the drug discovery and in vivo capabilities from target discovery through preclinical development.development continuum. The preliminary purchase price for WIL Research was $604.8 million, including assumed liabilities of the acquisition$0.4 million, and was $183.1 million, net offunded by cash acquired,on hand and included contingent consideration.
borrowings on our amended credit facility.
InOn June 2014,27, 2016, we acquired substantially allBlue Stream, an analytical CRO supporting the development of the assets of VivoPath LLC (VivoPath), acomplex biologics and biosimilars. Combining Blue Stream with our existing 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),safety assessment, and biologics capabilities creates a leading provider of ion channelwith the ability to support biologic and biosimilar development from characterization through clinical testing services to the pharmaceutical and biotech industry.commercialization. The preliminary purchase price for Blue Stream was $52.1$11.7 million, netincluding $3.0 million in contingent consideration, and was subject to certain customary adjustments. The acquisition was funded by borrowings on our revolving credit facility.
On September 28, 2016, we acquired Agilux, a CRO that provides a suite of integrated discovery small and large molecule bioanalytical services, drug metabolism and pharmacokinetic (DMPK) services, and pharmacology services. The acquisition supports our strategy to offer clients a broader, integrated portfolio that provides services continuously from the earliest stages of drug research through the nonclinical development process. The purchase price for Agilux was $64.9 million in cash acquired, and included contingent consideration.

was funded by borrowings on our revolving credit facility.
Segment Reporting
In the second quarter of 2014, followingWe report our acquisition of Argenta and BioFocus, we revised our reportable segments to ensure alignment with our view of the business. We 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 our Chief Operating Decision Maker, and considered how our businesses aggregated based on these qualitative and quantitative factors. Based on this review, we identifiedperformance in three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing). We aggregate our operating segments into a reportable segment if (a) they have similar economic characteristics; (b) they are similar in the in the nature of the products or services, nature of the production process, type or class of customer for their products and services, methods used to distribute their products and services and nature of the regulatory environment; and (c) the aggregation helps users better understand our performance.
In the second quarter of 2016, we acquired WIL Research. WIL Research’s safety assessment business is reported in our DSA reportable segment and its CDMO business created a new operating segment, Contract Manufacturing, that is reported as part of our Manufacturing reportable segment. On February 10, 2017, we divested the CDMO business. In addition, amounts due to changes in our market strategy for certain services and resulting information provided to the Chief Operating Decision Maker were reclassified from our RMS reportable segment to our Manufacturing reportable segment, including revenue of $2.8 million and $3.7 million for fiscal years 2015 and 2014, respectively, and operating income of $0.5 million and $0.6 million for fiscal years 2015 and 2014, respectively.
We reported segment results on this basis for the current period and retrospectively for all comparable prior periods.periods presented in this Annual Report on Form 10-K.


The revised reportable segments are as follows:
Research Models and ServicesDiscovery and Safety AssessmentManufacturing Support
Research Models
Discovery Services(2)
Endotoxin and Microbial DetectionSolutions
Research Model Services(1)
Safety AssessmentAvian Vaccine Services
  Biologics Testing Solutions
Contract Manufacturing
(1) Research Model Services includes Genetically Engineered Models and Services (GEMS), Research Animal Diagnostic Services (RADS), and IS.
(2) Discovery Services includes both the Early Discovery and In Vivo Discovery businesses. Early Discovery includes Argenta, BioFocus, and ChanTest.

Our RMS segment includes the Research Models and Research Model Services businesses. Research Models includes the commercial production and sale of small research models, as well as the supply of large research models. Research Model Services includes three business units: GEMS,Genetically Engineered Models and Services (GEMS), which performs contract breeding and other services associated with genetically engineered research models; RADS,Research Animal Diagnostic Services (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). Our DSA segment includes services required to take a drug through the early development process including discovery 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 Microbial Detection (EMD),Solutions, which includesin vitro (non-animal) lot-release testing products and microbial detection, conventional and rapid quality control testing of sterile and non-sterile biopharmaceutical and consumer products, and species identification services; Biologics, Testing Services (Biologics), which performs specialized testing of biologics and devices; andbiologics; Avian Vaccine Services (Avian), which supplies specific-pathogen-free fertile chicken eggs and chickens.chickens; and Contract Manufacturing, which, until we divested this business on February 10, 2017, specialized in formulation design and development, manufacturing, and analytical and stability testing for small molecules.

Fiscal Quarters
PriorOur fiscal year is typically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, recasting the reportable segments, the businesses were reported in two segments as follows:
Research Models and ServicesPreclinical Services
Research Models March 31, June 30, September 30, and December 31. A 53(3)
Discovery Services
Research Model Services (4)
Safety Assessment
Endotoxin and Microbial DetectionBiologics Testing Solutions

29



(3)rd Research Modelsweek was included Avian Vaccine Services.in fiscal year 2016, which is occasionally necessary to align with a December 31 calendar year-end. The additional week was included in the fourth quarter.
(4) Research Model Services included GEMS, RADS, IS and Discovery Research Services. As part of the segment revisions, the former Discovery Research Services was been folded into our Discovery Services business, previously located under the Preclinical Services segment.

Critical Accounting Policies and Estimates
Our 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 us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses during the reported periods and related 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 various other factors that are believed to be reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions.

We believe that our application of the following 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 elsewherecontained in Item 8, “Financial Statements and Other Supplementary Data” 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 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 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 estimated 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 acceptance 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.

A portion of our revenue is from multiple-element arrangements that include multiple products and/or services as deliverables in a single arrangement, with each deliverable, or a combination of the deliverables, representing a separate unit of accounting. We allocate revenues to each element in a multiple-element arrangement based upon the relative selling price of each deliverable. Revenue allocated to each deliverable is then recognized when all revenue recognition criteria are met. Judgments as to the identification of deliverables, units of accounting, the allocation of consideration to the deliverable, and the appropriate timing of revenue recognition are critical with respect to these arrangements.
At the inception of each arrangement that includes milestone payments, we evaluate whether each milestone is substantive. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) our performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. We evaluate factors such as the scientific, clinical, regulatory, and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required, and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the arrangement in making this assessment. If a substantive milestone is achieved and collection of the related receivable is reasonably assured, we recognize revenue related to the milestone in its entirety in the period in which the milestone is achieved. If we were to achieve milestones that we consider substantive under any of our revenue arrangements, we may experience significant fluctuations in our revenue from quarter to quarter and year to year depending on the timing of achieving such substantive milestones. In those circumstances where a milestone is not substantive, we recognize as revenue, on the date the milestone is achieved, an amount equal to the applicable percentage of the performance period that had elapsed as of the date the milestone was achieved, with the balance being deferred and recognized over the remaining period of performance. As of December 31, 2016, we had no significant milestones that were deemed substantive.
The Company records shipping charges billed to customers in total revenue and records shipping costs in cost of revenue (excluding amortization of intangible assets) for all periods presented.
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 allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and the effects of tax planning strategies. Our estimates of future taxable income include,

30



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.

We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving 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 examinationcontroversy 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, 2014,31, 2016, our non-U.S. subsidiaries’ undistributed foreign earnings included in consolidated retained earnings aggregated $271.0were $704.6 million. AllAs of the end of fiscal year 2016, our policy with respect to the undistributed foreign earnings of our non-U.S. subsidiaries exclusiveis to maintain an indefinite reinvestment assertion as they are required to fund needs outside 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. and cannot be repatriated in a manner that is substantially tax-free. This determinationassertion 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 to the U.S. in the future to execute our growth initiatives or to fund any other liquidity needs, the resulting tax consequences wouldcould negatively impact our results of operations through a higher effective tax rate and dilution of our earnings.

On December 18, 2015, the U.S. enacted the Consolidated Appropriations Act, which reinstated and extended the controlled foreign corporation look-through rules through the fiscal year 2019. This rule allows us to access Chinese and Canadian cash in a more tax-efficient manner and utilize the cash outside of the U.S. without triggering residual U.S. tax. As such, we are accruing foreign withholding taxes to reflect this change for the years in which the rules are reinstated.
Goodwill and Intangible Assets
We use assumptions and estimates in determining the fair value of assets acquired and liabilities assumed in a business combination. The determination of the fair value of intangible assets, which represent a significant portion of the purchase price in many of our acquisitions, requires the use of significant judgment with regard to (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 asset 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 intangible assets. Typically, key assumptions include projections of cash 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.

We review definite-lived intangible assets for impairment when indication of potential impairment exists, such as a significant 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.

During fiscal year 2016, we determined that the carrying values of certain DSA intangible assets were not recoverable and recorded an impairment charge of $1.9 million, which was included in costs of services provided (excluding amortization of intangible assets).
We evaluate goodwill and indefinite-lived intangible assets for impairment annually, during the fourth quarter, and when events occur or circumstances change that may reduce the fair value of the asset below its carrying amount. 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 whether it is necessary to perform the two-step goodwill impairment test. If we elect this option and believe, 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, we may elect to not first assess qualitative factors and immediately perform the quantitative two-step impairment test. In the first step, we compare the fair value of our 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 our goodwill. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.


31



In the fiscal years 2014, 20132016, 2015 and 2012,2014, we performed the first step of the two-step goodwill impairment test for our reporting units. Fair value was determined by using a weighted combination of a market-based approach and an income approach, as this combination was deemed to be the most indicative of our fair value in an orderly transaction between market participants. Under the market-based approach, we utilized 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 determined 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.

Our 2016, 2015 and 2014 2013 and 2012 impairment testtests indicated that goodwill and other intangible assets werewas not impaired.

In 2014,the second quarter of 2016, we revised the composition of our reportable segments to align with our newthe view of the business following the Argentaour acquisition of WIL Research. See Note 1, "Description of Business and BioFocus acquisition.Summary of Significant Accounting Policies." As a result, of this reorganization, goodwill was allocated from our priorRMS reportable segmentssegment to our newManufacturing reportable segmentssegment based on the fair value of each business group within its original reporting unit relative to the fair value of that reporting unit. In addition, we completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed.

Valuation and Impairment of Long-Lived Assets
Long-lived assets to be held and used, including property, plant, and equipment, 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. 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.

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 amount of the assets, the 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. 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.

Pension and Other RetireePost-Retirement Benefit Plans
Several of our U.S. and non-U.S. subsidiaries sponsor defined benefit pension and other retireepost-retirement benefit plans. We recognize the funded status of our 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. We measure plan assets and benefit obligations as of the date of our fiscal year end.

The cost and obligations of these arrangements are calculated using many assumptions to estimate the benefits that the employee earns while working, the amount of which cannot be completely determined until the benefit payments cease. Major assumptions used in the accounting for these employee benefit plans include the expected return on plan assets, withdrawal and mortality rates, discount rate, and rate of increase in employee compensation levels. Assumptions are determined based on our data and appropriate market indicators, and are evaluated each year as of the plans’ measurement date. Should any of these assumptions change, they would have an effect on net periodic pension costs and the unfunded benefit obligation.

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, we consider 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.


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

32



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 possible with the previously used yield curve model. We believe such a refinement results in an estimate of the 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 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 rate of compensation increase reflects the expected annual 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 a2016, new mortality improvement scale (MP-2014),scales were issued in the U.S. reflecting a decline in longevity projection from the 2015 releases that we adopted, which increaseddecreased our benefit obligations by $6.0$1.3 million as of December 27, 2014. We previously used31, 2016. In fiscal year 2015, new mortality improvement scales were issued in the RP-2000 mortality tables with mortality improvements projected using Scale AA to 2021 for annuitantsU.S. and to 2029 for non-annuitants. In addition, for our U.K. plans, the mortality table was updated to S2 Series (SAPS) usingUnited Kingdom (U.K.) reflecting a decline in longevity projection from the CMI 2013 core projection with a 1.25% per annum long-term mortality improvement. This update increased2014 releases that we adopted, which decreased our benefit obligations by $1.9$3.3 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.26, 2015.

Stock-basedStock-Based Compensation
We grant stock options, restricted stock, restricted stock units, and performance share units (PSUs) to employees, and stock options, restricted stock, and restricted stock units to non-employee directors under stock-based compensation plans. We make certain assumptions in order to value and record expense associated with awards made under our stock-based compensation arrangements. Changes in these assumptions may lead to variability with respect to the timing and amount 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 model and the fair value of PSUs is calculated 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.
Determining the appropriate amount to expense based on the anticipated 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 estimates is reflected in the period of change.
We also estimate forfeitures over the requisite service period when recognizing share-based compensation expense based on historical rates and forward looking factors; these estimates are adjusted to the extent that actual forfeitures differ, or are expected to materially differ, from our estimates.
New Accounting Pronouncements
For a discussion of new accounting pronouncements, refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” to our consolidated financial statements includedcontained in Item 8, “Financial Statements and Other Supplementary Data,” in this Annual Report on Form 10-K.


33



Results of Operations
Fiscal Year 20142016 Compared to Fiscal Year 20132015
Revenue
The following table presents consolidated revenue by reportable segment:
 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)%
 Fiscal Year      
 2016 2015 $ change % change Impact of FX
          
 (in millions, except percentages)
RMS$494.0
 $470.4
 $23.6
 5.0% (0.2)%
DSA836.6
 612.2
 224.4
 36.7% (2.7)%
Manufacturing350.8
 280.7
 70.1
 25.0% (0.8)%
Total revenue$1,681.4
 $1,363.3
 $318.1
 23.3% (1.5)%
Revenue for the fiscal year 20142016 increased $132.2$318.1 million, or 11.3%23.3%, compared with the fiscal year 2013. Reported revenue decreased due to2015. The negative effect of changes in foreign currency translationexchange rates decreased revenue by $1.7$20.0 million, or 0.1%1.5%, when compared to the prior period.year.
RMS revenue decreased $3.9increased $23.6 million due to lowerhigher research modelsmodel services and research models revenue primarily in North America, Europe, and Japan and Europe. Additionally,higher research model revenue in North America, Europe, and Asia; partially offset by 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."negative effect of changes in foreign currency exchange rates.
DSA revenue increased $105.8$224.4 million due to an increase in the Discovery Services business, which includes the Argenta and BioFocus acquisition that contributed $71.4 million to revenue growth, as well as higher revenue in the Safety Assessment business.business, primarily as a result of the WIL Research acquisition that contributed $163.5 million to revenue growth, and increased study volume, mix of services, and pricing in our legacy business; and higher revenue in Discovery Services’ In Vivo business, which includes the acquisitions of Oncotest and Agilux that contributed $14.6 million to revenue growth; partially offset by lower Early Discovery revenue due primarily to softer demand from global clients; and the negative effect of changes in foreign currency exchange rates.
Manufacturing revenue increased $30.3$70.1 million drivendue to higher revenue in the Microbial Solutions business, which includes the acquisition of the Celsis business that contributed $17.9 million to revenue growth; higher revenue in the Biologics business, which includes the Blue Stream acquisition that contributed $4.1 million to revenue growth; higher revenue in the Avian business, primarily due to the acquisition of the Sunrise business that contributed $4.9 million to revenue growth; and Contract Manufacturing revenue related to the CDMO services of WIL Research acquired in April 2016 that contributed $12.6 million to revenue growth; partially offset by broad-basedthe negative effect of changes in foreign currency exchange rates.
The following table presents consolidated revenue by type:
 Fiscal Year    
 2016 2015 $ change % change
        
 (in millions, except percentages)
Service revenue$1,130.7
 $858.2
 $272.5
 31.7%
Product revenue550.7
 505.1
 45.6
 9.0%
Total revenue$1,681.4
 $1,363.3
 $318.1
 23.3%
Service revenue increased $272.5 million due to higher revenue in the Safety Assessment business, primarily as a result of the WIL Research acquisition that contributed $163.5 million to service revenue growth, across all threeand increased study volume, mix of services, and pricing in our legacy business; and higher revenue in Discovery Services’ In Vivo business, which includes the acquisitions of Oncotest and Agilux that contributed $14.6 million to revenue growth; Contract Manufacturing revenue related to the CDMO services of WIL Research acquired in April 2016 that contributed $12.6 million to revenue growth; higher revenue in the Biologics business, which includes the Blue Stream acquisition that contributed $4.1 million to revenue growth; and higher research model services revenue in North America, Europe, and Japan; partially offset by lower Early Discovery revenue due primarily to softer demand from global clients; and the negative effect of changes in foreign currency exchange rates.
Product revenue increased $45.6 million due to higher revenue in Microbial Solutions and Avian, which included the acquisitions of the Celsis and Sunrise businesses, particularlyrespectively, and in total contributed $22.1 million to product revenue growth; and higher research model revenue in North America, Europe, and Asia; partially offset by the EMD business.negative effect of changes in foreign currency exchange rates.


Cost of Services Provided and Products Sold (Excluding Amortization of Intangible Assets)
The following table presents consolidated cost of services provided and Services Providedproducts sold (excluding amortization of intangible assets) by reportable segment:
 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 %
 Fiscal Year    
 2016 2015 $ change % change
        
 (in millions, except percentages)
RMS$292.8
 $284.2
 $8.6
 3.0%
DSA572.4
 407.0
 165.4
 40.6%
Manufacturing169.5
 141.0
 28.5
 20.3%
Total cost of services provided and products sold (excluding amortization of intangible assets)$1,034.7
 $832.2
 $202.5
 24.3%
Cost of services provided and products sold and services provided (costs)(excluding amortization of intangible assets) (Costs) for the fiscal year 20142016 increased $54.4$202.5 million, or 7.1%24.3%, compared with the fiscal year 2013.2015. Costs as a percentage of revenue for the fiscal year 20142016 were 63.6%61.5%, a decreasean increase of 2.5%0.5%, from 66.1%61.0% for the fiscal year 2013. The costs above include asset impairments, which were previously presented separately in our consolidated statement of income.2015.
RMS costs decreased $14.6Costs increased $8.6 million due primarily to the growth of the business, partially offset by cost savings achieved as a result of lower accelerated depreciation expense associated with globalour efficiency initiatives in our research models business.initiatives. RMS costsCosts as a percentage of revenue for the fiscal year 20142016 were 62.5%59.3%, a decrease of 2.4%1.1%, from 64.9%60.4% for the fiscal year 2013, the result of global efficiency initiatives in our research models business.2015.
DSA costsCosts increased $61.7$165.4 million due primarily to a $49.1 millionan increase in Discovery Services costs,Safety Assessment Costs, which includesincluded a higher cost base due to the Argentaacquisition of WIL Research, the growth of the legacy business; an increase in Discovery Services Costs, which included a higher cost base due to the acquisitions of Oncotest and BioFocus acquisition,Agilux; a charge of $1.9 million related to an impairment of certain intangibles; and a $12.6restructuring charge of $9.4 million increaserelated to the consolidation of small DSA facilities in Safety Assessment costs, as a resultthe U.S., Ireland, and the U.K.; partially offset by the favorable effect of increased revenues.changes in foreign currency exchange rates. DSA costsCosts as a percentage of revenue for the fiscal year 20142016 were 72.0%68.4%, a decreasean increase of 3.3%1.9%, from 75.3%66.5% for the fiscal year 2013 as a result2015, primarily due to the acquisition of leverage of fixed costs from higher revenues.WIL Research.
Manufacturing costsCosts increased $7.3$28.5 million due primarily as a resultto an increase in Biologics Costs resulting from the growth of higher revenue for eachthe business and the acquisition of ourBlue Stream; an increase in Contract Manufacturing businesses.Costs related to the CDMO services of WIL Research acquired in April 2016; an increase in Microbial Solutions Costs resulting from the acquisition of Celsis and the growth of the legacy business; and an increase in Avian Costs, primarily due to the acquisition of the Sunrise business; partially offset by $4.1 million due to lower amortization of inventory fair value adjustments related to the Celsis acquisition. Manufacturing costsCosts as a percentage of revenue for the fiscal year 20142016 were 47.8%48.3%, a decrease of 3.2%1.9%, from 51.0%50.2% for the fiscal year 2013,2015.
The following table presents consolidated cost of services provided and products sold (excluding amortization of intangible assets) by type:
 Fiscal Year    
 2016 2015 $ change % change
        
 (in millions, except percentages)
Cost of services provided$757.7
 $568.2
 $189.5
 33.4%
Cost of products sold277.0
 264.0
 13.0
 4.9%
Total cost of services provided and products sold (excluding amortization of intangible assets)$1,034.7
 $832.2
 $202.5
 24.3%
Cost of services provided increased $189.5 million due to an increase in Safety Assessment Costs, which included a higher cost base due to the acquisition of WIL Research, the growth of the legacy business; an increase in Discovery Services Costs, which included a higher cost base due to the acquisitions of Oncotest and Agilux; a charge of $1.9 million related to an impairment of certain intangibles; a restructuring charge of $9.4 million related to the consolidation of small DSA facilities in the U.S., Ireland, and the U.K.; higher Biologics Costs resulting from the growth of the business and the acquisition of Blue Stream; an increase in Contract Manufacturing Costs related to the CDMO services of WIL Research acquired in April 2016; and increased research model services costs due to growth in the business; partially offset by the favorable effect of changes in foreign currency exchange rates primarily related to the Safety Assessment and Discovery Services businesses.
Cost of products sold increased $13.0 million due primarily to higher Microbial Solutions Costs as a result of leveragethe acquisition of fixedCelsis and the growth of the legacy business; higher Avian Costs, primarily due to the acquisition of the Sunrise business; and


higher research model costs from higher revenue.due to growth in the business; partially offset by $4.1 million due to lower amortization of inventory fair value adjustments related to the Celsis acquisition and savings associated with global efficiency initiatives in the research models business.

34



Selling, General and Administrative 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%
 Fiscal Year    
 2016 2015 $ change % change
        
 (in millions, except percentages)
RMS$62.5
 $62.1
 $0.4
 0.5%
DSA98.3
 69.2
 29.1
 42.0%
Manufacturing65.1
 57.9
 7.2
 12.5%
Unallocated corporate141.6
 111.2
 30.4
 27.4%
Total selling, general and administrative$367.5
 $300.4
 $67.1
 22.3%
Selling, general and administrative expenses (SG&A) for the fiscal year 20142016 increased $43.3$67.1 million, or 19.2%22.3%, compared with the fiscal year 2013.2015. SG&A as a percentage of revenue for the fiscal year 20142016 was 20.7%21.9%, an increasea decrease of 1.3%0.1%, from 19.4%22.0% for the fiscal year 2013.2015.
The increase in RMS SG&A of $6.2$0.4 million was related to an increase of $2.5$1.3 million in compensation, benefitsexternal consulting and other employee relatedservice 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$0.3 million in compensation, benefits, and other employee-related expenses; and an increase of $0.2 million in stock-based compensation primarily related to our new hire grantsexpense; partially offset by a decrease of $0.8 million in severance expense; a decrease of $0.3 million in costs associated with the evaluation and our annual stock-based grants madeintegration of acquisitions; a decrease of $0.2 million in February 2014;bad debt expense; and an increasea decrease of $4.0$0.6 million in other expenses; all of which were primarily due to the Argenta and BioFocus acquisition. DSAexpenses. RMS SG&A as a percentage of revenue for the fiscal year 20142016 was 11.7%12.6%, an increasea decrease of 0.2%0.6%, from 11.5%13.2% for the fiscal year 2013.2015.
The increase in ManufacturingDSA SG&A of $5.6$29.1 million was related to an increase of $3.8$12.5 million in compensation, benefits, and other employee relatedemployee-related expenses; an increase of $1.8$5.9 million in operating expenses, including information technology infrastructure and facility expenses; and an increase of $0.5$5.7 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%, consistentcosts associated with the fiscal year 2013.
The increase in unallocated corporate SG&Aevaluation and integration of $18.1 million was related toacquisitions; an increase of $7.4$2.9 million in compensation, benefits and other employee related expenses;severance expense; 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$1.5 million in external consulting and other service expenses; an increase of $4.5$1.3 million in depreciation expense; an increase of $1.2 million in stock-based compensation expense; and an increase of $0.3 million in other expenses; partially offset by a decrease of $2.2 million in bad debt expense. DSA SG&A as a percentage of revenue for fiscal year 2016 was 11.8%, an increase of 0.5%, from 11.3% for fiscal year 2015.
The increase in Manufacturing SG&A of $7.2 million was related to an increase of $6.7 million in compensation, benefits, and other employee-related expenses; an increase of $1.2 million in external consulting and other service expenses; an increase of $1.0 million in operating expenses, including information technology infrastructure and facility expenses; an increase of $0.7 million in stock-based compensation; and an increase of $0.6 million in other expenses; partially offset by a decrease of $1.8 million in severance expense; a decrease of $1.0 million in costs associated with the evaluation and integration of acquisitions; and a decrease of $0.2 million in depreciation expense. Manufacturing SG&A as a percentage of revenue for fiscal year 2016 was 18.6%, a decrease of 2.0%, from 20.6% for fiscal year 2015.
The increase in unallocated corporate SG&A of $30.4 million was related to an increase of $1.4$8.0 million in external consulting and other service expenses; partially offset by a reductionan increase of $5.1$6.2 million in compensation, benefits, and other employee-related expenses; an increase of $4.8 million in information technology relatedexpenses; an increase of $4.0 million in costs associated with the evaluation and integration of acquisitions; an increase of $1.5 million in stock-based compensation; an increase of $1.0 million in depreciation expense; and an increase of $4.9 million in other expenses.
Amortization of Intangible AssetsAmortization of intangibles for the fiscal year 20142016 was $26.0$41.7 million, an increase of $8.2$17.5 million, or 46.1%72.1%, from $17.8$24.2 million for the fiscal year 2013,2015, due primarily as a result ofto certain intangibles acquired in connection with the ArgentaAgilux, Blue Stream, WIL Research, Oncotest, Celsis, and BioFocus acquisition.Sunrise acquisitions.
Interest IncomeInterest income, which represents earnings on held cash, cash equivalents, and time deposits was $1.2$1.3 million for the fiscal year 2014,2016, an increase of $0.5$0.3 million, or 71.4%26.0%, compared to $0.7$1.0 million for the fiscal year 2013.2015.
Interest ExpenseInterest expense for the fiscal year 20142016 was $12.0$27.7 million, a decreasean increase of $9.0$12.6 million, or 42.9%83.8%, compared to $21.0$15.1 million for the fiscal year 2013.2015. The decreaseincrease was primarily due to the write-off of a portion of debt issuance costs in connection with the modification of our $1.3B Credit Facility, a higher average debt balance outstanding as a result of the retirement late in the second quarterbusiness


acquisitions, a higher average interest rate as a result of the fiscal year 2013 of our senior convertible debentures, which lowered our effectivea higher leverage ratio, and an increased interest rate.expense related to capital leases.
Other Income (Expense), NetOther income (expense), net, was $10.7a net other income of $11.9 million for the fiscal year 2014,2016, an increase of $3.5$8.9 million, or 48.6%295.5%, compared to $7.2a net other income of $3.0 million for the fiscal year 2013.2015. The increase in other income (expense), net was driven by the absence of an expense of $10.4 million due to a reversal of the indemnification asset associated with a previous acquisition in the corresponding period in 2015; an increase of $6.5 million in gains on our venture capital investments in limited partnerships accounted for under the equity method, which increased $3.4method; a higher net gain of $2.1 million on life insurance policy investments; a $0.7 million gain on remeasurement of previously held equity interest in an entity acquired in a step acquisition; and an increase of $0.6 million in other activity; partially offset by the absence of a bargain purchase gain of $9.9 million associated with the acquisition of Sunrise in May 2015; and a non-cash$1.5 million charge recorded in connection with the modification of the option to purchase the remaining 13% equity interest in Vital River.

Income Taxes Income tax expense was $66.8 million for fiscal year 2016, an increase of $23.4 million, compared to $43.4 million for fiscal year 2015. Our effective tax rate was 30.0% in the fiscal year 2016, compared to 22.2% in the fiscal year 2015. The increase was primarily driven by non-deductible expenses associated with acquisitions and restructurings. In addition, we recognized a reduction in unrecognized tax benefits and related interest of $10.4 million due to the expiration of the statute of limitations associated with pre-acquisition tax positions on the forgiveness of debt and a non-taxable bargain purchase gain of $9.9 million associated with the acquisition of Sunrise in the fiscal year 2015.
Fiscal Year 2015 Compared to Fiscal Year 2014
Revenue
The following table presents consolidated revenue by reportable segment:
35

 Fiscal Year      
 2015 2014 $ change % change Impact of FX
          
 (in millions, except percentages)
RMS$470.4
 $503.7
 $(33.3) (6.6)% (6.3)%
DSA612.2
 538.2
 74.0
 13.7 % (3.4)%
Manufacturing280.7
 255.8
 24.9
 9.7 % (7.6)%
Total revenue$1,363.3
 $1,297.7
 $65.6
 5.1 % (5.3)%
Revenue for fiscal year 2015 increased $65.6 million, or 5.1%, compared with fiscal year 2014. The negative effect of changes in foreign currency exchange rates decreased revenue by $69.4 million, or 5.3%, when compared to the prior period.
RMS revenue decreased $33.3 million due primarily to the negative effect of changes in foreign currency exchange rates. Excluding the impact of foreign exchange rates, RMS revenue decreased slightly due to lower research model services revenue and lower research models revenue in Japan; partially offset by higher research models revenue in North America, China, and Europe.
DSA revenue increased $74.0 million due to higher revenue in the Safety Assessment business, as a result of increased study volume; higher revenue in the Discovery Services business, primarily as a result of the Argenta, BioFocus, ChanTest, and Oncotest acquisitions that contributed $27.0 million to revenue growth; partially offset by the negative effect of changes in foreign currency exchange rates.
Manufacturing revenue increased $24.9 million, as higher revenue for Microbial Solutions and Avian, which include the Celsis and Sunrise acquisitions, respectively, was partially offset by the negative effect of changes in foreign currency exchange rates.
The following table presents consolidated revenue by type:
 Fiscal Year    
 2015 2014 $ change % change
        
 (in millions, except percentages)
Service revenue$858.2
 $797.8
 $60.4
 7.6%
Product revenue505.1
 499.9
 5.2
 1.0%
Total revenue$1,363.3
 $1,297.7
 $65.6
 5.1%
Service revenue increased $60.4 million due to higher revenue in the Safety Assessment business, as a result of increased study volume; and higher revenue in the Discovery Services business, which included the acquisitions of Argenta, BioFocus,


ChanTest, and Oncotest that contributed $27.0 million to service revenue growth; partially offset by lower revenue in our research model services and the negative effect of changes in foreign currency exchange rates.
Product revenue increased $5.2 million due to higher revenue for Microbial Solutions and Avian, which include the acquisitions of Celsis and Sunrise, respectively, that contributed $16.7 million to product revenue growth; higher research models revenue in North America, China, and Europe; partially offset by lower revenue in our research models and the negative effect of changes in foreign currency exchange rates.
Cost of Services Provided and Products Sold (Excluding Amortization of Intangible Assets)
The following table presents consolidated cost of services provided and products sold (excluding amortization of intangible assets) by reportable segment:
 Fiscal Year    
 2015
2014 $ change % change
        
 (in millions, except percentages)
RMS$284.2
 $314.7
 $(30.5) (9.7)%
DSA407.0
 387.3
 19.7
 5.1 %
Manufacturing141.0
 123.0
 18.0
 14.6 %
Total cost of services provided and products sold (excluding amortization of intangible assets)$832.2
 $825.0
 $7.2
 0.9 %
Costs for fiscal year 2015 increased $7.2 million, or 0.9%, compared with fiscal year 2014. Costs as a percentage of revenue for fiscal year 2015 were 61.0%, a decrease of 2.6%, from 63.6% for fiscal year 2014.
RMS costs decreased $30.5 million due primarily to favorable effect of changes in foreign currency exchange rates, cost savings achieved as a result of our efficiency initiatives, and reduced restructuring costs. RMS costs as a percentage of revenue for fiscal year 2015 were 60.4%, a decrease of 2.1%, from 62.5% for fiscal year 2014.
DSA costs increased $19.7 million due primarily to an increase in Discovery Services costs, which included a higher cost base due to the acquisitions of Argenta, BioFocus, ChanTest, and Oncotest; partially offset by the favorable effect of changes in foreign currency exchange rates. Safety Assessment costs increased due to higher costs resulting from the growth of the business, partially offset by the favorable effect of changes in foreign currency exchanges rates. DSA costs as a percentage of revenue for fiscal year 2015 were 66.5%, a decrease of 5.5%, from 72.0% for fiscal year 2014, primarily due to improved operating leverage as a result of increased study volume in our Safety Assessment business.
Manufacturing costs increased $18.0 million due primarily to the Celsis and Sunrise acquisitions, partially offset by the favorable effect of changes in foreign currency exchange rates. Manufacturing costs as a percentage of revenue for fiscal year 2015 were 50.2%, an increase of 2.1%, from 48.1% for fiscal year 2014.
The following table presents consolidated cost of services provided and products sold (excluding amortization of intangible assets) by type:
 Fiscal Year    
 2015 2014 $ change % change
        
 (in millions, except percentages)
Cost of services provided$568.2
 $558.6
 $9.6
 1.7 %
Cost of products sold264.0
 266.4
 (2.4) (0.9)%
Total cost of services provided and products sold (excluding amortization of intangible assets)$832.2
 $825.0
 $7.2
 0.9 %
Cost of services provided increased $9.6 million due to a higher cost base, as a result of the acquisitions of Argenta, BioFocus, ChanTest, and Oncotest as well as increased Safety Assessment revenues; partially offset by the favorable effect of changes in foreign currency exchange rates and lower costs for our research model services as a result of lower revenue.
Cost of products sold decreased $2.4 million due to savings associated with global efficiency initiatives, reduced restructuring costs and the favorable effect of changes in foreign currency exchange rates; partially offset by increased costs as a result of the acquisitions of Sunrise and Celsis.


Selling, General and Administrative Expenses
 Fiscal Year    
 2015 2014 $ change % change
        
 (in millions, except percentages)
RMS$62.1
 $65.7
 $(3.6) (5.5)%
DSA69.2
 63.1
 6.1
 9.7 %
Manufacturing57.9
 48.1
 9.8
 20.4 %
Unallocated corporate111.2
 92.1
 19.1
 20.7 %
Total selling, general and administrative$300.4
 $269.0
 $31.4
 11.7 %
SG&A for fiscal year 2015 increased $31.4 million, or 11.7%, compared with fiscal year 2014. SG&A as a percentage of revenue for fiscal year 2015 was 22.0%, an increase of 1.3%, from 20.7% for fiscal year 2014.
The decrease in RMS SG&A of $3.6 million was related to a decrease of $1.4 million in external consulting and other service expenses; a decrease of $1.2 million in depreciation expense; a decrease of $1.1 million in compensation, benefits and other employee related expenses; and a decrease of $0.4 million in other expenses; partially offset by an increase of $0.5 million in stock-based compensation, primarily related to our annual stock-based grants made in the first quarter of 2015, which included a new retirement vesting provision. RMS SG&A as a percentage of revenue for fiscal year 2015 was 13.2%, an increase of 0.1%, from 13.1% for fiscal year 2014.
The increase in DSA SG&A of $6.1 million was related to an increase of $5.9 million in compensation, benefits and other employee related expenses; an increase of $1.4 million in external consulting and other service expenses; an increase of $0.4 million in operating expenses, including information technology infrastructure and facility expenses; an increase of $0.4 million in bad debt expense; and an increase of $0.3 million in depreciation expense; partially offset by a decrease of $1.8 million in severance expense and a decrease of $0.5 million in other expenses. DSA SG&A as a percentage of revenue for fiscal year 2015 was 11.3%, a decrease of 0.4%, from 11.7% for fiscal year 2014.
The increase in Manufacturing SG&A of $9.8 million was related to an increase of $4.8 million in compensation, benefits and other employee related expenses; an increase of $1.7 million in external consulting and other service expenses; an increase of $1.6 million in severance expense; an increase of $1.0 million in operating expenses, including information technology infrastructure and facility expenses; an increase of $0.9 million in depreciation expense; and an increase of $0.5 million in stock-based compensation, primarily related to our annual stock-based grants made in the first quarter of 2015, which included a new retirement vesting provision; partially offset by a decrease of $0.7 million in other expenses. Manufacturing SG&A as a percentage of revenue for fiscal year 2015 was 20.6%, an increase of 1.8% from 18.8% for fiscal year 2014.
The increase in unallocated corporate SG&A of $19.1 million was related to an increase of $7.3 million in stock-based compensation, primarily related to our annual stock-based grants made in the first quarter of 2015, which included a new retirement vesting provision and the modification of certain stock-based awards as part of executive retirement transitions; an increase of $7.3 million in costs associated with the evaluation and integration of acquisitions and compensation costs related to business acquisitions; an increase of $2.2 million in compensation, benefits and other employee-related expenses; an increase of $2.0 million in external consulting and other service expenses; an increase of $1.9 million in information technology related expenses; and an increase of $0.4 million in other expenses; partially offset by a decrease of $2.0 million in contingent consideration related to business acquisitions.
Amortization of Intangible Assets Amortization of intangibles for fiscal year 2015 was $24.2 million, a decrease of $1.8 million, or 6.7%, from $26.0 million for fiscal year 2014, due primarily to certain intangibles acquired in connection with several Discovery Services and Safety Assessment businesses becoming fully amortized and the effect of changes in foreign currency exchange rates, partially offset by an increase due to recent acquisitions, primarily Argenta, BioFocus, ChanTest, Sunrise, Celsis and Oncotest.
Interest Income Interest income, which represents earnings on held cash, cash equivalents, and time deposits, was $1.0 million for fiscal year 2015, a decrease of $0.2 million, or 9.4%, compared to $1.2 million for fiscal year 2014.
Interest Expense Interest expense for fiscal year 2015 was $15.1 million, an increase of $3.1 million, or 26.1%, compared to $12.0 million for fiscal year 2014. The increase was due primarily to the write-off of a portion of debt issuance costs in connection with the modification of our $970M Credit Facility in April 2015, interest expense related to new capital leases, and overall higher average debt due to additional borrowings related to business acquisitions.
Other Income (Expense), Net Other income (expense), net was net other income of $3.0 million for fiscal year 2015, a decrease of $7.7 million, or 71.9%, compared to net other income of $10.7 million for fiscal year 2014. The decrease in other


income (expense), net was driven by a decrease of $10.4 million due to a reversal of the indemnification asset associated with a pre-acquisition tax position and corresponding unrecognized tax benefit; a decrease of $5.5 million in income from our venture capital investments accounted for under the equity method; and the absence of a noncash gain of $2.1 million related to assets assumed at our Frederick, Maryland, facility following the termination of a customer contract, which was recorded in fiscal year 2014; partially offset by a bargain purchase gain of $9.8 million associated with the impactacquisition of foreign exchangeSunrise and an increase of $0.5 million from other activity of $2.0 million.activity.
Income TaxesIncome tax expense was $43.4 million in the fiscal year 2014 increased $14.82015, a decrease of $4.3 million compared with theto $47.7 million for fiscal year 2013.2014. Our effective tax rate was 26.8% in the fiscal year 2014, compared to 23.8% in the 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 an ability to offset tax on a capital gain from an investment in a limited partnership. The fiscal year 2013 effective tax rate includes a discrete tax detriment of $2.0 million related to the ongoing transfer pricing controversy with the Canadian Revenue Authority (CRA).
Fiscal Year 2013 Compared to Fiscal Year 2012
Revenue
 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 3.2%, compared with the fiscal year 2012. Reported revenue decreased due to foreign currency translation by $9.0 million, or 0.8%, when compared to the prior period.
RMS revenue decreased by $10.3 million due to lower research models revenue in the U.S., Europe and Japan due primarily to infrastructure reductions by our global biopharmaceutical clients, partially offset by the 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 legacy EMD products globally and the inclusion of a full year of Accugenix services (an EMD service provider acquired in 2012).
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 the fiscal year 2013 increased $33.2 million, or 4.5%, compared with the fiscal year 2012. Costs as a percentage of revenue 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 our 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 the increase and the inclusion of Vital River, acquired in January 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 revenue 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 to an increase in Safety Assessment costs as a result of increased revenues. DSA costs as a percentage of revenue for the fiscal year 2013 were 75.3%, a decrease of 0.8%, from 76.1% for the fiscal year 2012 due to higher 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 revenue for the 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
 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 8.4%, compared with the fiscal year 2012. SG&A as a percentage of revenue for the fiscal year 2013 was 19.4%, an increase of 1.0%, from 18.4% for the fiscal year 2012.
The increase in RMS SG&A of $6.5 million was related to an increase of $2.2 million in compensation, benefits and other 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 revenue for the 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 $2.0 million in compensation, benefits and other employee related expenses and a decrease of $1.1 million in operating costs, including information technology and facilities costs; offset by an increase of $3.0 million in other expenses. DSA SG&A as a percentage of 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 Manufacturing SG&A of $8.3 million was primarily related to an increase of $5.1 million in compensation, benefits and other employee related expenses; an increase of $1.0 million in 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 SG&A of $2.8 million was related to an increase of $3.1 million in compensation, benefits and other 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 acquisitions; a decrease of $1.0 million decrease in information technology related expenses; and a decrease of $0.2 million in other expenses.

Amortization of Intangible Assets Amortization of intangibles for the fiscal year 2013 was $17.8 million, a decrease of $0.3 million, or 1.7%, from $18.1 million for the fiscal year 2012.
Interest Income Interest income, which represents earnings on held cash, cash equivalents, and time deposits, was $0.7 million for the fiscal year 2013, an increase of $0.1 million, or 16.7%, compared to $0.6 million for the fiscal year 2012.

37



Interest Expense Interest expense for the fiscal year 2013 was $21.0 million, a decrease of $12.3 million, or 36.9%, compared to $33.3 million for the fiscal year 2012. The decrease was due to lower interest rates on our debt as a result of our debt refinancing in May 2013 and the associated retirement of our senior convertible debentures22.2% in fiscal year 2013.
Other Income (Expense), Net Other income (expense), net was $7.2 million for the2015, compared to 26.8% in fiscal year 2013, an increase of $10.5 million, or 318.2%, compared to $(3.3) million for the fiscal year 2012.2014. The increase in other income (expense), net was driven by our investments in limited partnerships accounted for under the equity method.
Income Taxes Income tax expense for the fiscal year 2013 increased $5.3 million, compared with the fiscal year 2012. Our effective tax rate was 23.8% in the fiscal year 2013, compared to 21.3% in the fiscal year 2012. The increase of 2.5% in the effective tax rate for the fiscal year 2013decrease was primarily attributable to a discrete$10.4 million reduction in unrecognized tax detriment of $2.0 millionbenefits and related interest due to an adjustment related to the ongoing transfer pricing controversyexpiration of the statute of limitations associated with pre-acquisition tax positions on the CRA, a reduction in research and development tax benefits by $1.8 million arising from the adoptionforgiveness of a new refundable research and development credit provided for in a 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,debt and a discrete tax costnon-taxable bargain purchase gain of $0.5$9.8 million related to nondeductible transaction costs incurred in 2012 forassociated with the acquisition of Vital River, which closedSunrise. These benefits were offset by a tax accrual of $6.6 million of withholding taxes in the first quarterorder to access cash from our Canadian and Chinese operations for use outside of the fiscal year 2013. These costs were partially offset by increased benefits from the domestic production deduction of $0.6 million and reduced unbenefitted tax losses of $0.6 million. The fiscal year 2012 effective tax rate reflects a benefit from the settlement of the tax litigation related to the 2003 and 2004 SR&ED credits claimed by our Safety Assessment services facility in Montreal.U.S.

Liquidity and Capital Resources
We currently require cash to fund our working capital needs, pension obligations, capital expansion, and acquisitions, and to pay our debt obligations. Our principal sources of liquidity have been our cash flows from operations, supplemented by long-term borrowings. Based on our current business plan, we believe that our existing funds, when combined with cash generated from operations and our 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:investments:
 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
 December 31, 2016 December 26, 2015
    
 (in millions)
Cash and cash equivalents:   
Held in the U.S. entities$10.6
 $3.6
Held in non-U.S. entities107.0
 114.3
Total cash and cash equivalents117.6
 117.9
Investments:   
Held in the U.S. entities
 4.5
Held in non-U.S. entities3.8
 16.0
Total cash, cash equivalents and investments$121.4
 $138.4
Borrowings
On May 29, 2013,In April 2015, we amended and restated our previous credit agreement and entered into a $970.0 million agreement (the $970M Credit Facility). The $970M Credit Facility, hascreating a maturity date of May 2018 and$1.3 billion facility ($1.3B Credit Facility) that provides for a $420.0$400.0 million U.S. term loan facility and a $550.0$900.0 million multi-currency revolving credit facility. The interest rates applicable to term loans and revolving loans under the Company’s $1.3B Credit Facility were, at our option, equal to either the alternate base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) the one-month adjusted LIBOR rate plus 1%) or the adjusted LIBOR rate, plus an interest rate margin based upon our leverage ratio.
On March 30, 2016, we amended and restated our $1.3B Credit Facility, creating a $1.65 billion credit facility may be drawn($1.65B Credit Facility) which (1) extends the maturity date for the credit facility and (2) makes certain other amendments in U.S. Dollars, Euros, Pound Sterling, or Japanese Yen, subjectconnection with our acquisition of WIL Research. The $1.65B Credit Facility provides for up to sub-limits by currency.approximately $1.65 billion in financing, including a $650.0 million term loan facility and a $1.0 billion multi-currency revolving facility. The term loan facility matures in 19 quarterly installments, with the last installment due March 30, 2021. The revolving facility matures on March 30, 2021, and requires no scheduled payment before that date. Under specified circumstances, we have the ability to expandincrease the term loanloans and/or revolving line of credit facility by up to $350.0 million. The U.S. term loan matures$500.0 million in 20 quarterly installments through May 2018. The revolving credit facility matures in May 2018 and requires no scheduled payment before this date. The interest rates on the $970M Credit Facility are variable and are based on an applicable published rate plus a spread determined by our leverage ratio.aggregate.


38



Amounts outstanding under the $970M$1.65B Credit Facility were as follows as of December 27, 201431, 2016 and December 28, 2013:

26, 2015:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in millions)(in millions)
Term loans$378.0
 $409.5
$633.8
 $390.0
Revolving credit facility375.5
 253.3
578.8
 446.0
Total$753.5
 $662.8
$1,212.6
 $836.0

The interest rates applicable to term loan and revolving loans under the $1.65B Credit Facility are, at our option, equal to either the base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.50%, or (3) the one-month adjusted LIBOR rate plus 1%) or the adjusted LIBOR rate, plus an interest rate margin based upon our leverage ratio.
Repurchases of Common Stock
In July 2010, our Board of Directors authorized a $500.0 million stock repurchase program, and subsequently approved increases for an aggregate authorization of $1,150.0 million. During the fiscal year 2014,2016, we repurchased approximately 2,093,000did not repurchase any shares at a costunder our authorized stock repurchase program. As of $110.6 million. At December 27, 2014,31, 2016, we had $178.5$69.7 million remaining on the authorized stock repurchase program.

Our stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, PSUs, and restricted stock units in order to satisfy individual minimum statutory tax withholding requirements. During fiscal year 2016, we acquired approximately 0.2 million shares for $12.3 million.
Cash Flows
The following table presents our net cash provided by operating activities:
Fiscal Year
Fiscal Year Ended2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in millions)(in millions)
Income from continuing operations$129.9
 $105.4
 $102.1
$156.1
 $152.0
 $129.9
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities126.0
 129.0
 131.7
174.3
 126.6
 126.0
Changes in assets and liabilities(3.8) (25.4) (25.8)(30.0) 9.6
 (3.8)
Net cash provided by operating activities$252.1
 $209.0
 $208.0
$300.4
 $288.2
 $252.1
Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our income from continuing operations for (1) non-cash operating items such as depreciation and amortization, stock-based compensation, gains on venture capital investments, and gains on bargain purchases, as well as (2) changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations. The increasesincrease in cash provided by operating activities from the fiscal years 2013year 2015 to 20142016 was primarily driven by higher income from continuing operations; and an increase in non-cash adjustments, primarily an increase in depreciation and amortization as well as stock-based compensation; partially offset by a negative change in operating assets and liabilities. The increase in cash provided by operating activities from the fiscal years 2012 to 2013 were due to increases in ouryear 2014 and 2015 was primarily driven by higher income from continuing operations with the net effect of changesand a positive change in operating assets and liabilities and adjustments to net income from continuing operations.liabilities. Our days sales outstanding, which includes deferred revenue as an offset to accounts receivable in the calculation, was 52 days as of December 27, 2014,31, 2016, compared to 56 days as of December 28, 2013 and 51 days as of December 29, 2012.26, 2015, and 52 days as of December 27, 2014.


The following table presents our net cash used in investing activities:
Fiscal Year
Fiscal Year Ended2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in millions)(in millions)
Acquisition of businesses and assets, net of cash acquired$(234.3) $(29.2) $(16.9)$(648.5) $(247.7) $(234.3)
Capital expenditures(56.9) (39.1) (47.5)(55.3) (63.3) (56.9)
Investments, net(5.6) (6.0) 6.6
13.7
 (7.1) (5.6)
Other, net(1.2) 0.3
 2.8
3.7
 (2.2) (1.2)
Net cash used in investing activities$(298.0) $(74.0) $(55.0)$(686.4) $(320.3) $(298.0)
The primaryprincipal use of cash in investing activities in the fiscal year 20142016 was related to our acquisitionacquisitions of WIL Research for $577.4 million, net of cash acquired; Agilux for $62.0 million, net of cash acquired; and Blue Stream for $8.7 million, net of cash acquired; as well as our capital expenditures; partially offset by proceeds from the sale of investments and distributions from venture capital investments, net of purchases. The principal use of cash in fiscal year 2015 was related to our acquisitions of Celsis for $202.0 million, net of cash acquired; Oncotest for $35.2 million, net of cash acquired; and Sunrise for $9.6 million, net of cash acquired; as well as our capital expenditures. The principal use of cash in fiscal year 2014 was primarily related to our acquisitions of Argenta and BioFocus for $182.5 million, cash paid net of cash acquired,acquired; and of ChanTest for $51.1 million, cash paid net of cash acquired. acquired; as well as our capital expenditures.
The primary use offollowing table presents our net cash in theprovided by financing activities:
 Fiscal Year
 2016 2015 2014
      
 (in millions)
Proceeds from long-term debt and revolving credit facility$1,044.7
 $492.5
 $298.9
Proceeds from exercises of stock options23.2
 39.3
 73.7
Payments on long-term debt, revolving credit facility, and capital lease obligations(656.6) (417.3) (194.5)
Purchase of treasury stock(12.3) (117.5) (122.0)
Other, net(8.2) 7.5
 5.3
Net cash provided by financing activities$390.8
 $4.5
 $61.4
For fiscal year 2013 was our acquisition2016, cash provided by financing activities reflected net borrowings of 75%$388.0 million and proceeds from exercises of Vital River for $24.2employee stock options of $23.2 million; partially offset by treasury stock purchases of $12.3 million netdue to the netting of cash acquired,common stock upon vesting of stock-based awards in order to satisfy individual minimum statutory tax withholding requirements and of an EMD products and service provider in Singapore for $4.9 million. During theother activity. For fiscal year 2012, we acquired Accugenix, which is part2015, cash provided by financing activities reflected net borrowings of $75.2 million; proceeds from exercises of employee stock options of $39.3 million, and other activity; partially offset by treasury stock purchases of $117.5 million made pursuant to our EMD business, for $16.9 million, net of cash acquired.


39



 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)
authorized stock repurchase program. For the fiscal year 2014,, cash provided by financing activities reflected net borrowings of $104.4 million andmillion; proceeds from exercises of employee stock options of $73.7 million, and other activity; partially offset by treasury stock purchases of $122.0 million made pursuant to our authorized stock repurchase program. For the fiscal year 2013, cash used in financing activities reflected net debt repayments of $11.5 million and treasury stock purchases of $165.9 million, partially offset by proceeds from exercises of employee stock options of $93.8 million. For the fiscal year 2012, cash used in financing activities reflected net debt repayments of $66.2 million and treasury stock purchases of $64.2 million, partially offset by proceeds from exercises of employee stock options of $18.4 million.


Contractual Commitments and Obligations

Minimum future payments of our contractual obligations atas of December 27, 201431, 2016 are as follows:
 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

 Payments Due by Period
 Total Less than
1 Year
 1 - 3 Years 3 - 5 Years More Than
5 Years
          
 (in millions)
Notes payable (1)
$1,212.7
 $24.6
 $89.4
 $1,098.7
 $
Operating leases (2)
101.3
 23.4
 37.4
 21.4
 19.1
Capital leases43.2
 4.1
 6.5
 4.6
 28.0
Redeemable noncontrolling interest (3)
14.1
 
 14.1
 
 
Venture capital investment commitments (4)
46.6
 29.9
 15.7
 1.0
 
Contingent consideration (5)
3.8
 3.8
 
 
 
Unconditional purchase obligations (6)
86.2
 79.1
 7.1
 
 
Total contractual cash obligations$1,507.9
 $164.9
 $170.2
 $1,125.7
 $47.1
(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

40



expect to make to fund our pension and other postretirement benefit plans. We note that actual payments to the pension 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 valueamount that would be paid if settlement occurred as of the interestbalance sheet date based on the contractually defined redemption value as of December 27, 2014.31, 2016.
(6)
(4)
The timing of the remaining capital commitment payments to limited partnership investmentsventure capital funds is subject to the procedures of the general partnerlimited liability partnerships and is therefore estimated by management.limited liability companies; the above table reflects the earliest possible date the payment can be required under the relevant agreements.
(7)
(5)
In connection with our purchase of Argenta and BioFocus, VivoPath and ChanTest,business acquisitions, we agreed to make additional payments of up to $10.5$3.8 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.
(6)
Unconditional purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable at any time without penalty.

The above table excludes obligations related to our pension and other post-retirement benefit plans. Refer to Item 8, “Financial Statements and Other Supplementary Data,” in this Annual Report on Form 10-K for more details.
Tax Related Obligations
We excluded liabilities pertaining to uncertain tax positions from our summary of contractual 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, 2014,31, 2016, we have $34.6had $24.2 million of liabilities associated with uncertain tax positions.

Off-Balance Sheet Arrangements
We doAs of December 31, 2016, we did 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 facilitatingsignificant off-balance sheet arrangements, including "off-balance sheet arrangements" as describeddefined in Item 303(a)(4)(ii) of SEC Regulation S-K Item 303. As such, we are not exposedpromulgated under the Exchange Act, except as disclosed below.
Venture Capital Investments
We invest in several venture capital funds that invest in start-up companies, primarily in the life sciences industry. Our total commitment to any financing, liquidity, market or credit risk that could arise ifthese entities as of December 31, 2016 was $84.8 million, of which we had engagedfunded $38.2 million. Refer to Note 4, “Venture Capital Investments and Marketable Securities,” to our consolidated financial statements contained in such relationships.Item 8, “Financial Statements and Other Supplementary Data,” in this Annual Report on Form 10-K for further details.
Letters of Credit
Our off-balance sheet commitments related to our outstanding letters of credit as of December 31, 2016 were $4.9 million.
Item 7A.    Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in interest rates and currency exchange rates, which could affect our future results of operations and financial condition. We manage our exposure to these risks through our regular operating and financing activities.


Interest Rate Risk
We are exposed to changes in interest rates while conducting normal business operations as a result of ongoing financing activities. As of December 27, 2014,31, 2016, our debt portfolio was comprised primarily of floating interest rate borrowings. A 100-basis point increase in interest rates would increase our annual pre-tax interest expense by approximately $9.3$12.1 million.

Foreign Currency Exchange Rate Risk
We operate on a global basis and have exposure to some foreign currency exchange rate fluctuations for our financial position, results of operations, and cash flows.

While the financial results of our global activities are reported in U.S. dollars, our foreign subsidiaries typically conduct their operations in their respective local currency. The principal functional currencies of the Company’s foreign subsidiaries are the Euro, British Pound, and Canadian Dollar. During fiscal year 2016, the most significant drivers of foreign currency translation adjustment that the Company recorded as part of other comprehensive income (loss) were the Euro, British Pound, Canadian Dollar, and to a lesser extent, the Chinese Yuan Renminbi and Japanese Yen.
Fluctuations in the foreign currency exchange rates of the countries in which we do business will affect our operatingfinancial position, results often in ways that are difficult to predict. In particular, asof operations, and cash flows. As the U.S. dollar strengthens against other currencies, particularly as a result of Brexit and other recent developments, the value of our non-U.S. revenue, expenses, assets, liabilities, and cash flows will generally decline when reported in U.S. dollars. The impact to net income as a result of a U.S. dollar strengthening will be partially mitigated by the value of non-U.S. expense, which will also decline when reported in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue and expenses, assets, liabilities, and cash flows will generally increase when reported in U.S. dollars.

For fiscal year 2016, our revenue would have decreased by approximately $65.9 million and our operating income would have decreased by approximately $2.8 million, respectively, if the U.S. dollar exchange rate would have strengthened by 10% with all other variables held constant.
We attempt to minimize this exposure by using certain financial instruments in accordance with our overall risk management and our hedge policy. We do not enter into speculative derivative agreements.
During 2014,fiscal year 2016, we utilized foreign exchange contracts, principally to hedge certain balance sheet exposures resulting from currency fluctuations. No foreign currency contracts were open at December 27, 2014.

41





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 27,2016, 2015 and 2014 December 28, 2013 and December 29, 2012
Consolidated Statements of Comprehensive Income for the fiscal years ended December 27,2016, 2015 and 2014 December 28, 2013 and December 29, 2012
Consolidated Balance Sheets as of December 27, 201431, 2016 and December 28, 201326, 2015
Consolidated Statements of Cash Flows for the fiscal years ended December 27,2016, 2015 and 2014 December 28, 2013 and December 29, 2012
Consolidated Statements of Changes in Equity for the fiscal years ended December 27,2016, 2015 and 2014 December 28, 2013 and December 29, 2012

42




Report of Independent Registered Public Accounting Firm

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

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, 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 27, 201431, 2016 and December 28, 2013,26, 2015, and the results of theiroperations and their cash flows for each of the three years in the period endedDecember 27, 201431, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 27, 2014,31, 2016, based on criteria established in Internal 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 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'scompany’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'scompany’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'scompany’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.

As described in Management's Report on Internal Control over Financial Reporting, management has excluded WRH, Inc., Blue Stream Laboratories, Inc., and Agilux Laboratories, Inc. from its assessment of internal control over financial reporting as of December 31, 2016 because they were acquired by the Company during 2016. We have also excluded WRH, Inc., Blue Stream Laboratories, Inc., and Agilux Laboratories, Inc. from our audit of internal control over financial reporting. WRH, Inc., Blue Stream Laboratories, Inc., and Agilux Laboratories, Inc. are wholly-owned subsidiaries whose total assets and total revenues represent 7.8 percent and 11.1 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2016.
/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
February 17, 201514, 2017

43



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

Fiscal Year EndedFiscal Year
December 27,
2014
 December 28,
2013
 December 29,
2012
2016 2015 2014
Service revenue$797,765
 $689,166
 $661,586
$1,130,733
 $858,244
 $797,765
Product revenue499,897
 476,362
 467,944
550,699
 505,058
 499,897
Total revenue1,297,662
 1,165,528
 1,129,530
1,681,432
 1,363,302
 1,297,662
Costs and expenses:          
Cost of services provided558,578
 497,876
 479,742
Cost of products sold266,424
 272,750
 257,707
Cost of services provided (excluding amortization of intangible assets)757,732
 568,227
 558,578
Cost of products sold (excluding amortization of intangible assets)277,034
 263,983
 266,424
Selling, general and administrative269,033
 225,695
 208,248
367,548
 300,414
 269,033
Amortization of intangible assets25,957
 17,806
 18,068
41,699
 24,229
 25,957
Operating income177,670
 151,401
 165,765
237,419
 206,449
 177,670
Other income (expense):          
Interest income1,154
 730
 589
1,314
 1,043
 1,154
Interest expense(11,950) (20,969) (33,342)(27,709) (15,072) (11,950)
Other income (expense), net10,721
 7,165
 (3,266)11,897
 3,008
 10,721
Income from continuing operations, before income taxes177,595
 138,327
 129,746
222,921
 195,428
 177,595
Provision for income taxes47,671
 32,911
 27,628
66,835
 43,391
 47,671
Income from continuing operations, net of income taxes129,924
 105,416
 102,118
156,086
 152,037
 129,924
Loss from discontinued operations, net of income taxes(1,726) (1,265) (4,252)
Income (loss) from discontinued operations, net of income taxes280
 (950) (1,726)
Net income128,198
 104,151
 97,866
156,366
 151,087
 128,198
Less: Net income attributable to noncontrolling interests(1,500) (1,323) (571)1,601
 1,774
 1,500
Net income attributable to common shareholders$126,698
 $102,828
 $97,295
$154,765
 $149,313
 $126,698
Earnings (loss) per common share          
Basic:          
Continuing operations attributable to common shareholders$2.76
 $2.18
 $2.12
$3.28
 $3.23
 $2.76
Discontinued operations$(0.04) $(0.03) $(0.09)$0.01
 $(0.02) $(0.04)
Net income attributable to common shareholders$2.72
 $2.15
 $2.03
$3.29
 $3.21
 $2.72
Diluted:          
Continuing operations attributable to common shareholders$2.70
 $2.15
 $2.10
$3.22
 $3.15
 $2.70
Discontinued operations$(0.04) $(0.03) $(0.09)$0.01
 $(0.02) $(0.04)
Net income attributable to common shareholders$2.66
 $2.12
 $2.01
$3.23
 $3.13
 $2.66
     
     
     
     
     
     
     
     
     
     
     
     
     
     
See Notes to Consolidated Financial Statements.See Notes to Consolidated Financial Statements.









See Notes to Consolidated Financial Statements.

44



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
 Fiscal Year
 2016 2015 2014
Net income$156,366
 $151,087
 $128,198
Other comprehensive income (loss):     
Foreign currency translation adjustment and other(73,243) (61,982) (48,955)
Cumulative translation adjustment related to intercompany loan forgiveness
 (2,341) 
Pension and other post-retirement benefit plans (Note 10):     
Prior service cost and gains (losses) arising during the period(60,678) (302) (42,236)
Amortization of net gains (losses) and prior service benefit included in net periodic pension cost1,711
 2,617
 1,234
Comprehensive income, before income taxes24,156
 89,079
 38,241
Income tax expense (benefit) related to items of other comprehensive income
(Note 8)
(12,369) 530
 (9,897)
Comprehensive income, net of income taxes36,525
 88,549
 48,138
Less: Comprehensive income (loss) related to noncontrolling interests, net of income taxes(24) 537
 1,044
Comprehensive income attributable to common shareholders, net of income taxes$36,549
 $88,012
 $47,094
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
See Notes to Consolidated Financial Statements.




















See Notes to Consolidated Financial Statements.

45



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

December 27,
2014
 December 28,
2013
December 31, 2016 December 26, 2015
Assets      
Current assets:      
Cash and cash equivalents$160,023
 $155,927
$117,626
 $117,947
Trade receivables, net257,991
 220,630
364,050
 270,068
Inventories89,043
 89,396
95,833
 93,735
Prepaid assets34,315
 30,198
Other current assets99,841
 86,597
45,008
 47,286
Total current assets606,898
 552,550
656,832
 559,234
Property, plant and equipment, net676,797
 676,182
755,827
 677,959
Goodwill321,077
 230,701
787,517
 438,829
Client relationships, net320,157
 213,374
Other intangible assets, net178,875
 84,537
74,291
 67,430
Deferred tax asset23,193
 26,822
Deferred tax assets28,746
 40,028
Other assets78,352
 61,964
88,430
 71,643
Total assets$1,885,192
 $1,632,756
$2,711,800
 $2,068,497
Liabilities and Equity   
Liabilities, Redeemable Noncontrolling Interest and Equity   
Current liabilities:      
Current portion of long-term debt and capital leases$31,904
 $21,437
$27,313
 $17,033
Accounts payable33,815
 31,770
68,485
 36,675
Accrued compensation71,569
 58,461
93,471
 72,832
Deferred revenue78,124
 54,177
127,731
 81,343
Accrued liabilities67,380
 56,712
84,470
 89,494
Other current liabilities11,079
 22,546
26,500
 12,544
Current liabilities of discontinued operations2,299
 1,931
1,623
 1,840
Total current liabilities296,170
 247,034
429,593
 311,761
Long-term debt and capital leases745,958
 642,352
Long-term debt, net and capital leases1,207,696
 845,997
Deferred tax liabilities55,717
 48,223
Other long-term liabilities130,361
 70,632
159,239
 89,062
Long-term liabilities of discontinued operations8,357
 8,080
5,771
 7,890
Total liabilities1,180,846
 968,098
1,858,016
 1,302,933
Commitments and contingencies (Notes 2, 7, 9 and 12)
 
Commitments and contingencies (Notes 2, 7, 9, 10, 13, and 17)
 
Redeemable noncontrolling interest28,419
 20,581
14,659
 28,008
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
Common stock, $0.01 par value; 120,000 shares authorized; 86,301 shares issued and 47,363 shares outstanding as of December 31, 2016 and 85,464 shares issued and 46,698 shares outstanding as of December 26, 2015863
 855
Additional paid-in capital2,307,640
 2,206,155
2,477,371
 2,397,960
Accumulated deficit(138,775) (265,473)
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
Retained earnings165,303
 10,538
Treasury stock, at cost, 38,938 shares and 38,766 shares as of December 31, 2016 and December 26, 2015, respectively(1,553,005) (1,540,738)
Accumulated other comprehensive loss(253,764) (135,548)
Total equity attributable to common shareholders672,203
 640,984
836,768
 733,067
Noncontrolling interests3,724
 3,093
2,357
 4,489
Total equity and redeemable noncontrolling interest704,346
 664,658
Total liabilities, equity and redeemable noncontrolling interest$1,885,192
 $1,632,756
Total equity839,125
 737,556
Total liabilities, redeemable noncontrolling interest and equity$2,711,800
 $2,068,497
See Notes to Consolidated Financial Statements.See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

46



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

Fiscal Year EndedFiscal Year
December 27,
2014
 December 28,
2013
 December 29,
2012
2016 2015 2014
Cash flows relating to operating activities          
Net income$128,198
 $104,151
 $97,866
$156,366
 $151,087
 $128,198
Less: Loss from discontinued operations(1,726) (1,265) (4,252)
Income from continuing operations129,924
 105,416
 102,118
Less: Income (loss) from discontinued operations, net of income taxes280
 (950) (1,726)
Income from continuing operations, net of income taxes156,086
 152,037
 129,924
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:     Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization96,445
 96,636
 81,275
126,658
 94,881
 96,445
Amortization of debt issuance costs and discounts1,725
 9,561
 17,622
2,831
 2,380
 1,725
Impairment charges582
 4,202
 3,548
Stock-based compensation31,035
 24,542
 21,855
43,642
 40,122
 31,035
Deferred income taxes7,060
 (846) 1,311
1,945
 2,689
 7,060
(Gain) loss on investments in limited partnerships(9,301) (5,864) 618
Gain on venture capital investments(10,284) (3,823) (9,301)
Gain on bargain purchase16
 (9,837) 
Other, net(1,564) 755
 5,519
9,499
 168
 (982)
Changes in assets and liabilities:          
Trade receivables(28,088) (19,492) (16,266)
Trade receivables, net(52,780) (16,963) (28,088)
Inventories(2,956) (1,571) 785
(4,021) 3,364
 (2,956)
Other assets(5,145) 2,421
 (117)(6,215) 850
 (5,145)
Accounts payable4,599
 (7,080) (3,257)22,076
 1,174
 4,599
Accrued compensation13,631
 11,926
 4,612
9,298
 8,414
 13,631
Deferred revenue22,244
 (3,297) (915)14,580
 6,274
 22,244
Accrued liabilities8,284
 759
 (7,050)(11,487) 14,069
 8,284
Taxes payable and prepaid taxes(7,090) (3,054) 2,331
(1,800) (3,906) (7,090)
Other liabilities(9,253) (5,969) (5,983)331
 (3,659) (9,253)
Net cash provided by operating activities252,132
 209,045
 208,006
300,375
 288,234
 252,132
Cash flows relating to investing activities          
Acquisition of businesses and assets, net of cash acquired(234,267) (29,218) (16,861)(648,482) (247,651) (234,267)
Capital expenditures(56,925) (39,154) (47,534)(55,288) (63,252) (56,925)
Purchases of investments(26,648) (17,566) (18,537)(40,248) (34,235) (26,648)
Proceeds from sale of investments and distributions from investments in limited partnerships21,000
 11,584
 25,156
Proceeds from sale of investments and distributions from venture capital investments53,954
 27,072
 21,000
Other, net(1,150) 307
 2,786
3,694
 (2,221) (1,150)
Net cash used in investing activities(297,990) (74,047) (54,990)(686,370) (320,287) (297,990)
Cash flows relating to financing activities          
Proceeds from long-term debt and revolving credit agreement298,920
 511,804
 74,116
Proceeds from long-term debt and revolving credit facility1,044,666
 492,514
 298,920
Proceeds from exercises of stock options73,688
 93,789
 18,359
23,197
 39,367
 73,688
Payments on long-term debt, capital lease obligations and revolving credit agreement(194,536) (523,304) (140,347)
Payments on long-term debt, revolving credit facility, and capital lease obligations(656,636) (417,331) (194,536)
Purchase of treasury stock(122,018) (165,932) (64,189)(12,267) (117,478) (122,018)
Other, net5,360
 (594) 940
(8,234) 7,476
 5,360
Net cash provided by (used in) financing activities61,414
 (84,237) (111,121)
Net cash provided by financing activities390,726
 4,548
 61,414
Discontinued operations          
Net cash used in operating activities from discontinued operations(1,081) (1,906) (106)(2,056) (1,876) (1,081)
Effect of exchange rate changes on cash and cash equivalents(10,379) (2,613) (1,009)(2,996) (12,695) (10,379)
Net change in cash and cash equivalents4,096
 46,242
 40,780
(321) (42,076) 4,096
Cash and cash equivalents, beginning of period155,927
 109,685
 68,905
117,947
 160,023
 155,927
Cash and cash equivalents, end of period$160,023
 $155,927
 $109,685
$117,626
 $117,947
 $160,023
     
     
     
     
See Notes to Consolidated Financial Statements.See Notes to Consolidated Financial Statements.


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



 Fiscal Year
 2016 2015 2014
Supplemental cash flow information:     
Cash paid for income taxes$42,868
 $24,436
 $29,704
Cash paid for interest$22,756
 $11,101
 $10,199
Non-cash investing and financing activities:     
Capitalized interest$4
 $424
 $1,032
Additions to property, plant and equipment, net$5,333
 $6,720
 $4,355
Assets acquired under capital lease$1,335
 $10,281

$18,690
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
See Notes to Consolidated Financial Statements.





































See Notes to Consolidated Financial Statements.

48



CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)


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
Common stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock 
Total Equity
Attributable
to Common
Shareholders
 
Noncontrolling
Interests
 
Total
Equity
 Shares Amount Shares Amount 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
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

 
 
 126,698
 
 
 
 126,698
 645
 127,343
Other comprehensive loss(442)  
 
 
 
 (79,604) 
 
 (79,604) (14) (79,618)
 
 
 
 (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)
 
 (7,425) 
 
 
 
 (7,425) 
 (7,425)
Tax benefit associated with stock issued under employee compensation plans
  
 
 4,301
 
 
 
 
 4,301
 
 4,301

 
 4,301
 
 
 
 
 4,301
 
 4,301
Issuance of stock under employee compensation plans
  1,980
 20
 73,574
 
 
 
 
 73,594
 
 73,594
1,980
 20
 73,574
 
 
 
 
 73,594
 
 73,594
Acquisition of treasury shares
  
 
 
 
 
 2,207
 (117,380) (117,380) 
 (117,380)
 
 
 
 
 2,207
 (117,380) (117,380) 
 (117,380)
Stock-based compensation
  
 
 31,035
 
 
 
 
 31,035
 
 31,035

 
 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
84,503
 845
 2,307,640
 (138,775) (74,247) 37,176
 (1,423,260) 672,203
 3,724
 675,927
Net income
 
 
 149,313
 
 
 
 149,313
 936
 150,249
Other comprehensive loss
 
 
 
 (61,301) 
 
 (61,301) (171) (61,472)
Adjustment of redeemable noncontrolling interest to fair value
 
 183
 
 
 
 
 183
 
 183
Tax benefit associated with stock issued under employee compensation plans
 
 10,608
 
 
 
 
 10,608
 
 10,608
Issuance of stock under employee compensation plans961
 10
 39,407
 
 
 
 
 39,417
 
 39,417
Acquisition of treasury shares
 
 
 
 
 1,590
 (117,478) (117,478) 
 (117,478)
Stock-based compensation
 
 40,122
 
 
 
 
 40,122
 
 40,122
December 26, 201585,464
 855
 2,397,960
 10,538
 (135,548) 38,766
 (1,540,738) 733,067
 4,489
 737,556
Net income
 
 
 154,765
 
 
 
 154,765
 924
 155,689
Other comprehensive loss
 
 
 
 (118,216) 
 
 (118,216) (154) (118,370)
Dividends declared to noncontrolling interests
 
 
 
 
 
 
 
 (2,902) (2,902)
Adjustment of redeemable noncontrolling interest to fair value
 
 1,690
 
 
 
 
 1,690
 
 1,690
Purchase of additional equity in redeemable noncontrolling interest

 
 1,593
 
 
 
 
 1,593
 
 1,593
Tax benefit associated with stock issued under employee compensation plans
 
 9,274
 
 
 
 
 9,274
 
 9,274
Issuance of stock under employee compensation plans837
 8
 23,212
 
 
 
 
 23,220
 
 23,220
Acquisition of treasury shares
 
 
 
 
 172
 (12,267) (12,267) 
 (12,267)
Stock-based compensation
 
 43,642
 
 
 
 
 43,642
 
 43,642
December 31, 201686,301
 $863
 $2,477,371
 $165,303
 $(253,764) 38,938
 $(1,553,005) $836,768
 $2,357
 $839,125
                   
                   
                   
                   
                   
                   
See Notes to Consolidated Financial Statements.See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.

49



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


1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business
Charles River Laboratories International, Inc. (the Company), together with its subsidiaries, is a full service, early-stage contract research organization (CRO). The Company has built upon its core competency of laboratory animal medicine and science (research model technologies) to develop a diverse portfolio of discovery and safety assessment services, both Good Laboratory Practice (GLP) and non-GLP, thatwhich are able to support its clients from target identification through preclinicalnon-clinical development. The Company also provides a suite of products and services to support its clients’ manufacturing activities.

Principles of Consolidation
The Company'sCompany’s consolidated financial statements reflect its financial statements and those of its wholly-owned and majority-owned subsidiaries.subsidiaries in which the Company holds a controlling financial interest. 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'sCompany’s fiscal year is the twelve-month periodtypically based on 52-weeks, with each quarter composed of 13 weeks ending on the last Saturday on, or closest to, March 31, June 30, September 30, and December 31. A 53rd week was included in December.

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

Segment Reporting
During the quarter ended June 28, 2014, following its acquisition of the 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 toreports its Chief Operating Decision Maker, and considered how its businesses aggregate based on these qualitative and quantitative factors. Based on this review, the Company identifiedresults in three reportable segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing). The Company aggregates its operating segments into a reportable segment if (a) they have similar economic characteristics; (b) they are similar in the in the nature of the products or services, nature of the production process, type or class of customer for their products and services, methods used to distribute their products and services and nature of the regulatory environment; and (c) the aggregation helps users better understand the Company’s performance.
During the second quarter of 2016, the Company acquired WRH, Inc. (WIL Research), a provider of safety assessment and contract development and manufacturing (CDMO) services. WIL Research’s safety assessment business is reported in the Company’s DSA reportable segment and its CDMO business created a new operating segment, Contract Manufacturing, that is reported as part of the Company’s Manufacturing reportable segment. On February 10, 2017, the Company divested the CDMO business. In addition, amounts due to changes in the Company’s market strategy for certain services and resulting information provided to the Chief Operating Decision Maker were reclassified from the Company’s RMS reportable segment to its Manufacturing reportable segment, including revenue of $2.8 million and $3.7 million for fiscal years 2015 and 2014, respectively, and operating income of $0.5 million and $0.6 million for fiscal years 2015 and 2014, respectively. The Company reported segment results on this basis for the current period and retrospectively for all comparable prior periods.periods presented.

The revised reportable segments are as follows:
Research Models and ServicesDiscovery and Safety AssessmentManufacturing Support
Research Models
Discovery Services(2)
Endotoxin and Microbial Detection (EMD)Solutions
Research Model Services(1)
Safety AssessmentAvian Vaccine Services
  Biologics Testing Solutions
Contract Manufacturing
(1) Research Model Services includes Genetically Engineered Models and Services (GEMS), Research Animal Diagnostic Services (RADS), and Insourcing Solutions (IS).
(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 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
(3) Research Models included Avian Vaccine Services.

50


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


(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 and other investments with remaining maturities at the purchase date of three months or less.

Investments
Marketable securities are reported at fair value. Realized gains and losses on marketable securities are included in other income (expense), net and are determined using the specific identification method. Unrealized gains and losses on available-for-sale marketable securities are included in accumulated other comprehensive income (loss). Time deposits with original maturities of greater than three months are reported as investments.
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, 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'sCompany’s products and services as well as their dispersion across many geographic areas. No single client accounted for more than 5% of revenue or trade receivables for any period presented.

the periods ended December 31, 2016 and December 26, 2015.
Fair Value Measurements
The accounting standard for fair value measurements defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and requires detailedcertain 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 which have been classified as Level 1, 2 or 3 within the fair value hierarchy:

Level 1 - Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;
Level 2 - Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates;
Level 3 - Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The fair value hierarchy level is determined by asset, or liability and redeemable noncontrolling interest 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. The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter.
Valuation methodologies used for assets and liabilities measured or disclosed at fair value are as follows:
Cash equivalents- Valued at quoted market prices determined through third party pricing services.
Life insurance policies- Valued at cash surrender value based on fair value of underlying investments.

51


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

Cash equivalents - Valued at market prices determined through third-party pricing services;

Mutual funds - Valued at the unadjusted quoted net asset value of shares held by the Company;
Foreign currency forward contracts - Valued using readily observable market inputs, such as forward foreign exchange points and foreign exchanges rates;
Life insurance policies - Valued at cash surrender value based on the fair value of underlying investments;
Contingent consideration - Valued based on a probability weighting of the future cash flows associated with the potential outcomes;
Redeemable noncontrolling interest-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 capital.
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.net realizable value. Cost is determined on the average cost method for the small model business and first-in-first-out for the Company'sCompany’s large model and EMDMicrobial Solutions 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 products are sold to an 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 unmarketable, with a corresponding charge to cost of products sold.

Property, Plant and Equipment, Net
Property, plant and equipment, including improvements that significantly add to productive capacity or extend useful life, are carried at cost and 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 equipment is expensed as incurred. In addition, the Company capitalizes certain internal use computer software development costs.

Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Maintenance and training costs related to software obtained for internal use are expensed as incurred.
Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at 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 over the estimated useful lives of the respective assets as follows:

follow:
 Estimated
useful livesUseful 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
Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term. Capital lease assets are amortized over the lease term, however, if ownership is transferred by the end of the capital lease, or there is a bargain purchase option, such capital lease assets are amortized over the useful life that would be assigned if such assets were owned.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

When the Company disposes of property, plant and equipment, it removes the associated cost and accumulated depreciation from the related accounts on its consolidated balance sheet and includes any resulting gain or loss in its consolidated statement of income.

Business CombinationsAcquisitions
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'smanagement’s best estimates of inputs and assumptions that a market participant would use.


52


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


Contingent Consideration
The consideration 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 ourin the Company’s 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 changedchanges 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.

“Fair Value.”
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.

Definite-lived intangible assets, including client relationships, are amortized over the pattern in which the economic benefits of the intangible assets are utilized and 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, which requires the use of customer attribution rates and other assumptions. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the definite-lived intangible assets, the definite-lived intangible assets are written-down to their fair values.
Valuation and Impairment of Long-Lived Assets
Long-lived assets to be held and used including property, plant and equipment and definite-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 its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their fair values.
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Long-lived assets to be disposed of are carried at fair value less costs to sell.

Limited PartnershipsVenture Capital Investments
The Company invests in several venture capital limited partnershipsfunds that invest in start-up companies primarily in the life sciences industry. OurThe Company’s ownership interest in these limited partnershipsfunds ranges from 3.8%0.7% to 12.0%. As of December 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, theThe Company accounts for such investments in limited liability partnerships (LLP), which are variable interest entities, under the equity or cost method of accounting. The Company is not the primary beneficiary because it has no power to direct the activities that most significantly affect the LLPs’ economic performance. The Company accounts for the investments in limited liability companies, which are not variable interest entities, under the equity method of accounting.
Under the equity method of accounting, whereby itsthe Company’s portion of the investment gains and losses, as reported in the fund'sfund’s financial statements on a quarterly lag each reporting period, is recorded in other income (expense), net. In addition, the Company adjusts the carrying value of these investments to reflect its estimate of changes to fair value since the fund'sfund’s financial statements based on information from the fund'sfund’s management team, market prices of known public holdings of the fund and other information. During
Under the fiscal years 2014, 2013cost method of accounting, the Company’s investment is initially measured at cost, with distributions recognized in other income (expense), net. Distributions received in excess of earnings subsequent to the date of investment are considered a return of investment and 2012,are recorded as reductions of cost of the Company recognized gains (losses) related to these investments of $9.3 million, $5.9 million, $(0.6) million, respectively.investment. The Company received distributionsreviews its cost method investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If the decline in fair value is determined to be other-than-temporary, the cost basis of $7.4 million in 2014. No distributions were madethe investment is written down to the Company in 2013 or 2012.fair value.


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Life Insurance Contracts
Investments in life insurance contracts are recorded at cash surrender value. The initial investment at the transaction price is recognized and remeasured 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 cash flows from investing activities in the consolidated statement of cash flows. At As of December 27, 201431, 2016 and December 28, 2013,26, 2015, the Company held 4043 and 3042 contracts, respectively, with a face value of $68.2$61.4 million and $67.5$60.5 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, restricted stock, and restricted stock units 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. Where awards are made with non-substantive vesting periods, where a portion of the award continues to vests after the employee’s retirement, the Company recognizes expense based on the period from the grant date to the date on which the employee is retirement eligible. 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.probable.
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'sCompany’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
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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.

A portion of the Company’s revenue is from multiple-element arrangements that include multiple products and/or services as deliverables in a single arrangement with each deliverable, or a combination of the deliverables, representing a separate unit of accounting. The Company allocates revenues to each element in a multiple-element arrangement based upon the relative selling price of each deliverable. Revenue allocated to each deliverable is then recognized when all revenue recognition criteria are met. Judgments as to the identification of deliverables, units of accounting, the allocation of consideration to the deliverable, and the appropriate timing of revenue recognition are critical with respect to these arrangements.
At the inception of each arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the Company’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the Company’s performance to achieve the milestone; (b) the consideration relates solely to past performance; and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. If a substantive milestone is achieved and collection of the related receivable is reasonably assured, the Company recognizes revenue related to the milestone in its entirety in the period in which the milestone is achieved. In those circumstances where a milestone is not substantive, the Company recognizes as revenue, on the date the milestone is achieved, an amount equal to the applicable percentage of the performance period that had elapsed as of the date the milestone was achieved, with the balance being deferred and recognized over the remaining period of performance. As of December 31, 2016, the Company had no significant milestones that were deemed substantive.
The Company records shipping charges billed to customers in total revenue and records shipping costs in cost of revenue (excluding amortization of intangible assets) for all periods presented.
Advertising Costs
Advertising costs are expensed as incurred. For the fiscal years 2014, 20132016, 2015 and 2012,2014, advertising costs totaled $1.3$1.4 million, $1.1$1.2 million and $0.9$1.3 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.
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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.

Foreign Currency Contracts
Foreign currency contracts are recorded at fair value in the Company’s consolidated balance sheet and are not designated as hedging instruments. Any gains or losses on such contracts are immediately recognized in other income (expense), net.
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 atas of 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 ourthe Company’s foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income (loss), a separate component of equity.

Pension and Other RetireePost-Retirement Benefit Plans
The Company recognizes the funded status of its defined benefit pension and other postretirementpost-retirement 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.rates, expected rate of increase in employee compensation levels and discount rate. Assumptions are determined based on the Company'sCompany’s data and appropriate market indicators, and evaluated each year as of the plan'splan’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.

55In fiscal year 2016, new mortality improvement scales were issued in the U.S. reflecting a decline in longevity projection from the 2015 releases that the Company adopted, which decreased the Company’s benefit obligations by $1.3 million as of December 31, 2016. In fiscal year 2015, new mortality improvement scales were issued in the U.S. and the United Kingdom (U.K.) reflecting a decline in longevity projection from the 2014 releases that the Company adopted, which decreased the Company’s benefit obligations by $3.3 million as of December 26, 2015.


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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 are calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Except where the result would be antidilutiveanti-dilutive to income from continuing operations, diluted earnings per share is computed using the treasury stock method, assuming the exercise of stock options and the vesting of restricted stock awards, restricted stock units, or PSUs, as well as their related income tax effects.
New
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Newly Adopted Accounting Pronouncements
In July 2013,2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-11, “Presentation2015-11, “Simplifying the Measurement of an Unrecognized Tax Benefit WhenInventory,” that simplifies the subsequent measurement of inventories by replacing the current lower of cost or market test with a Net Operating Losses Carryforward, a Similar Tax Loss,lower of cost or a Tax Credit Carryforward Exists.”net realizable value test. The ASU requires an entity to present an unrecognized tax benefit as a reduction ofis effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. During 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 fiscalfourth quarter of 2014 and2016, 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 millionthis standard, which had no impact on inventories as of December 27, 2014 and December 28, 2013, respectively.

31, 2016.
In AprilAugust 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard requires management to assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year after the issuance date and, Disclosuresas applicable, provide additional disclosures on management’s plan to alleviate the substantial doubt. The ASU is effective for fiscal years ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted. During the fourth quarter of Disposals2016, the Company adopted this standard, which had no impact on the Company’s consolidated financial statements and related disclosures.
Newly Issued Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” The standard simplifies the accounting for goodwill impairment by removing Step 2 of Components of an Entity." ASU 2014-08 changes the criteria for determininggoodwill impairment test, which disposals can be presented as discontinued operations and modifies related disclosure requirements.requires a hypothetical purchase price allocation. The ASU is effective for annual andor interim periodsgoodwill impairment tests in fiscal years beginning after December 15, 2014.2019, and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the impact of the adoption of this standard is not expected to have a material impact on the consolidated financial statements and related disclosures.
In January 2017, the FASB issued ASU 2017-01, “Clarifying the Definition of a Business.” The standard clarifies the definition of a business by adding guidance to assist entities in evaluating whether transactions should be material toaccounted for as acquisitions of assets or businesses. The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted for certain transactions. The Company is still evaluating the impact this standard will have on its consolidated financial statements.statements and related disclosures.
In November 2016, the FASB issued ASU 2016-18, “Restricted Cash.” The standard addresses the classification and presentation of restricted cash and restricted cash equivalents within the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In October 2016, the FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory.” The standard requires the immediate recognition of tax effects for an intra-entity asset transfer other than inventory. The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the consolidated financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” The standard addresses the classification of certain transactions within the statement of cash flows, including cash payments for debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and distributions received from equity method investments. The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The standard reduces complexity in several aspects of the accounting for employee share-based compensation, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating the impact this standard will have on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, “Leases.” The standard established the principles that lessees and lessors will apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating the full impact this standard will have on its
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consolidated financial statements and related disclosures but expects to recognize substantially all of its leases on the balance sheet, by recording a right-to-use asset and a corresponding lease liability.
In May 2014, the FASB issued ASU 2014-09, "Revenue“Revenue from Contracts with Customers." The standard, requiresincluding subsequently issued amendments, will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the full retrospective or modified retrospective transition method. The standard will require 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 isbe effective for annual and interim periods beginning after December 15, 2016.2017. The Company has not yet selected athe modified retrospective transition method and is still evaluating the impact the adoption will have on its consolidated financial statements and related disclosures.


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2. BUSINESS ACQUISITIONS

Agilux
ChanTest
In October 2014,On September 28, 2016, the Company acquired ChanTest,Agilux Laboratories, Inc. (Agilux), a leading providerCRO that provides a suite of ion channel testingintegrated discovery small and large molecule bioanalytical services, to the pharmaceuticaldrug metabolism and biotech industry.pharmacokinetic services, and pharmacology services. The acquisition augmentssupports the Company's early discovery capabilities and enhancesCompany’s strategy to offer clients a broader, integrated portfolio that provides services continuously from the Company's ability to support clients' target discovery and lead optimization efforts. The preliminary purchase priceearliest stages of drug research through 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.non-clinical development process. The purchase price is subject to an adjustment basedfor Agilux was $64.9 million in cash and was funded by borrowings on the final determined net working capital as of the closing date.Company’s revolving credit facility. The business is reported in the Company's DSA reportable segment as part of the Company's Early Discovery business.

Company’s DSA reportable segment.
The preliminary purchase price allocation of $52.1$62.0 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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$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$2.9 million of cash acquired, was as follows:
April 1, 2014September 28, 2016
(in thousands)(in thousands)
Current assets (excluding cash)$31,257
Trade receivables (contractual amount of $4,799)$4,799
Other current assets (excluding cash)1,509
Property, plant and equipment21,008
3,907
Other long-term assets11,549
11
Definite-lived intangible assets104,270
21,900
Goodwill66,330
43,899
Current liabilities(14,299)(3,987)
Long-term liabilities(36,973)(10,013)
Total purchase price allocation$183,142
$62,025
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. DuringAny 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:
 Definite-Lived Intangible Assets Weighted Average Amortization Life
 (in thousands) (in years)
Client relationships$16,700
 17
Other intangible assets5,200
 4
Total definite-lived intangible assets$21,900
 14
The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s DSA businesses from customers and technology introduced through Agilux, and the assembled workforce of the acquired business. The goodwill attributable to Agilux is not deductible for tax purposes.
The Company incurred transaction and integration costs of $1.7 million in connection with the acquisition during fiscal year 2014,2016, which were included in selling, general and administrative expenses.
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Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Agilux’s financial results are non-significant when compared with the Company’s consolidated financial results.
Blue Stream
On June 27, 2016, the Company acquired Blue Stream Laboratories, Inc. (Blue Stream), an analytical CRO supporting the development of complex biologics and biosimilars. Combining Blue Stream with the Company’s existing discovery, safety assessment, and biologics capabilities creates a leading CRO that has the ability to support biologic and biosimilar development from characterization through clinical testing and commercialization. The purchase price for Blue Stream was $11.7 million, including $3.0 million in contingent consideration, and was subject to certain customary adjustments. The acquisition was funded by borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment.
The contingent consideration is a one-time payment that could become payable based on the achievement of a revenue target. If achieved, the payment will become due in the third quarter of fiscal year 2017. The aggregate, undiscounted amount of contingent consideration that the Company may pay is $3.0 million. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
The purchase price allocation of $11.7 million, net of a non-significant amount of cash acquired, was as follows:
 June 27, 2016
 (in thousands)
Trade receivables (contractual amount of $1,104)$1,104
Other current assets (excluding cash)15
Property, plant and equipment912
Other long-term assets187
Definite-lived intangible assets1,230
Goodwill10,477
Current liabilities(1,132)
Long-term liabilities(1,044)
Total purchase price allocation$11,749
The purchase price allocations are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. From the date of the acquisition through December 31, 2016, the Company recorded measurement period adjustmentsa measurement-period adjustment 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
Definite-Lived Intangible Assets Weighted Average Amortization Life
(in thousands) (in years)(in thousands) (in years)
Client relationships$94,000
 18$650
 10
Backlog5,700
 1
Trademark and trade names1,170
 3
Leasehold interests1,000
 13
Other intangible assets2,400
 19580
 5
Total definite-lived intangible assets$104,270
 $1,230
 7
The goodwill resulting from the transaction is primarily attributable to the potential growth of the Company’s Manufacturing business from customers and technology introduced through Blue Stream, the assembled workforce of the acquired business, expected synergies, and the development of future proprietary processes. The goodwill attributable to Blue Stream is not deductible for tax purposes.
The Company incurred $0.6 million of transaction and integration costs in connection with the acquisition during fiscal year 2016, which were included in selling, general and administrative expenses.
Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Blue Stream’s financial results are non-significant when compared with the Company’s consolidated financial results.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

WIL Research
On April 4, 2016, the Company acquired WIL Research, a provider of safety assessment and CDMO services to biopharmaceutical and agricultural and industrial chemical companies worldwide. The acquisition enhanced the Company’s position as a leading global early-stage CRO by strengthening its ability to partner with clients across the drug discovery and development continuum. The purchase price for WIL Research was $604.8 million, including assumed liabilities of $0.4 million. The purchase price includes payment for estimated working capital, which was subject to final adjustment based on the actual working capital of the acquired business. The acquisition was funded by cash on hand and borrowings on the Company’s amended credit facility. See Note 7, “Long-Term Debt and Capital Lease Obligations.” WIL Research’s safety assessment and CDMO businesses are reported in the Company’s DSA and Manufacturing reportable segments, respectively.
The purchase price allocation of $577.4 million, net of $27.4 million of cash acquired, was as follows:
 April 4, 2016
 (in thousands)
Trade receivables (contractual amount of $48,625)$48,157
Inventories2,296
Other current assets (excluding cash)3,814
Property, plant and equipment129,066
Other long-term assets1,060
Definite-lived intangible assets164,800
Goodwill330,602
Deferred revenue(39,103)
Other current liabilities(27,386)
Long-term liabilities(35,915)
Total purchase price allocation$577,391
The purchase price allocations are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed. From the date of the acquisition through December 31, 2016, the Company recorded measurement-period adjustments related to the acquisition that resulted in an immaterial change to the purchase price allocation on a consolidated basis. 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:
 Definite-Lived Intangible Assets Weighted Average Amortization Life
 (in thousands) (in years)
Client relationships$137,500
 15
Developed technology20,700
 3
Backlog6,600
 1
Total definite-lived intangible assets$164,800
 13
The goodwill resulting from the transaction, $19.0 million of which is deductible for tax purposes due to a prior asset acquisition, is primarily attributed to the potential growth of the Company’s DSA and Manufacturing businesses from clients introduced through WIL Research, the assembled workforce of the acquired business, and expected cost synergies.
The Company incurred transaction and integration costs in connection with the acquisition of $15.5 million and $3.2 million during fiscal years 2016 and 2015, respectively, which were included in selling, general and administrative expenses.
WIL Research revenue and operating income from April 4, 2016 through December 31, 2016 was $176.1 million and $12.5 million, respectively. Beginning on April 4, 2016, WIL Research has been included in the operating results of the Company.
The following selected unaudited pro forma consolidated results of operations are presented as if the WIL Research acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments. For fiscal year 2016, these adjustments included additional amortization of intangible assets and depreciation of
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

fixed assets of $0.4 million, reversal of interest expense on borrowings of $2.6 million, elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments. For fiscal year 2015, these adjustments included additional amortization of intangible assets and depreciation of fixed assets of $13.6 million, reversal of interest expense on borrowings of $10.5 million, inclusion of acquisition-related transaction costs of $11.5 million, elimination of intercompany activity and other one-time costs, and the tax impacts of these adjustments.
 Fiscal Year
 2016 2015
    
 (in thousands, except per share amounts)
 (unaudited)
Revenue$1,741,964
 $1,578,133
Net income attributable to common shareholders175,779
 153,974
Earnings per common share:   
Basic$3.74
 $3.31
Diluted$3.67
 $3.23
These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative 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. No effect has been given for synergies, if any, that may have been realized through the acquisition.
Oncotest
On November 18, 2015, the Company acquired Oncotest GmbH (Oncotest), a German CRO providing discovery services for oncology, one of the largest therapeutic areas for biopharmaceutical research and development spending. With this acquisition, the Company has expanded its oncology services capabilities, enabling it to provide clients with access to a more comprehensive portfolio of technologies, including patient-derived xenograft (PDX) and syngeneic models.  The purchase price for Oncotest was $36.0 million, including $0.3 million in contingent consideration. The acquisition was funded by borrowings on the Company's revolving credit facility. The business is reported in the Company’s DSA reportable segment.
The contingent consideration earn-out period ended in the fourth quarter of 2016. As a result, the related contingent consideration liability was reversed and a gain of $0.3 million was recorded in selling, general and administrative expenses, as no payments were expected to be made. The contingent consideration was a one-time payment that could have become payable based on the achievement of a revenue target for fiscal year 2016. If achieved, the payment would have become due in the first quarter of fiscal year 2017. The aggregate, undiscounted amount of contingent consideration that the Company could have paid was €2.0 million ($2.1 million as of December 31, 2016). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
The purchase price allocation of $35.4 million, net of $0.6 million of cash acquired, was as follows:
 November 18, 2015
 (in thousands)
Trade receivables (contractual amount of $3,546)$3,520
Inventories129
Other current assets (excluding cash)706
Property, plant and equipment2,528
Definite-lived intangible assets13,330
Goodwill22,894
Other long-term assets250
Current liabilities(3,456)
Long-term liabilities(4,470)
Total purchase price allocation$35,431
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The breakout of definite-lived intangible assets acquired was as follows:
 Definite-Lived Intangible Assets Weighted Average Amortization Life
 (in thousands) (in years)
Client relationships$7,146
 19
Developed technology5,960
 19
Other intangible assets224
 3
Total definite-lived intangible assets$13,330
 19
The goodwill resulting from the transaction is primarily attributed to the potential growth in the Company's DSA businesses from customers and technology introduced through Oncotest, the assembled workforce of the acquired business and expected cost synergies. The goodwill attributable to Oncotest is not deductible for tax purposes.
The Company incurred non-significant transaction and integration costs in connection with the acquisition during fiscal year 2016 and costs of $2.1 million during fiscal year 2015, which were included in selling, general and administrative expenses.
Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Oncotest’s financial results are non-significant when compared with the Company’s consolidated financial results.
Celsis
On July 24, 2015, the Company acquired Celsis Group Limited (Celsis), a leading provider of rapid testing systems for non-sterile bacterial contamination for the biopharmaceutical and consumer products industries. The purpose of this acquisition was to enhance the Company’s portfolio of rapid microbial detection products and services with the addition of a rapid bioburden testing product. The purchase price for Celsis was $214.5 million, including assumed debt and certain liabilities of $10.3 million. The acquisition was funded by cash on hand and borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment.
The purchase price allocation of $212.2 million, net of $2.3 million of cash acquired, was as follows:
 July 24, 2015
 (in thousands)
Trade receivables (contractual amount of $5,410)$5,288
Inventories10,103
Other current assets (excluding cash)13,269
Property, plant and equipment4,639
Definite-lived intangible assets118,140
Goodwill105,550
Other long-term assets537
Current debt(9,766)
Other current liabilities(7,136)
Long-term liabilities(28,388)
Total purchase price allocation$212,236
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The breakout of definite-lived intangible assets acquired was as follows:
 Definite-Lived Intangible Assets Weighted Average Amortization Life
 (in thousands) (in years)
Client relationships$71,000
 16
Developed technology39,140
 14
Trademark and trade names5,200
 14
Non-compete2,800
 5
Total definite-lived intangible assets$118,140
 15
The goodwill resulting from the transaction is primarily attributed to the potential growth of the Company’s Manufacturing business from clients introduced through Celsis, the assembled workforce of the acquired business and expected cost synergies. The goodwill attributable to Celsis is not deductible for tax purposes.
The Company incurred transaction and integration costs in connection with the acquisition of $1.0 million and $8.8 million during fiscal years 2016 and 2015, which were included in selling, general and administrative expenses.
Celsis revenue and operating loss from July 24, 2015 through December 26, 2015 was $11.1 million and $6.1 million, respectively. Beginning on July 24, 2015, Celsis has been included in the operating results of the Company.
The following selected unaudited pro forma consolidated results of operations are presented as if the Celsis acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain nonrecurring costs and other adjustments, resulting in a reversal of $0.6 million and additional expenses of $13.1 million for fiscal years 2015 and 2014, respectively, related to depreciation and amortization of property, plant and equipment, inventory fair value adjustments and intangible assets.
 Fiscal Year
 2015 2014
    
 (in thousands, except per share amounts)
 (unaudited)
Revenue$1,380,493
 $1,329,025
Net income attributable to common shareholders162,672
 110,387
Earnings per common share:   
Basic$3.50
 $2.37
Diluted$3.42
 $2.32
These unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative 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. No effect has been given for synergies, if any, that may have been realized through the acquisition.
Sunrise
On May 5, 2015, the Company acquired Sunrise Farms, Inc. (Sunrise), a producer of specific-pathogen-free fertile chicken eggs and chickens used in the manufacture of live viruses. The purpose of this business acquisition was to expand the capabilities of the Company’s existing Avian Vaccine Services business. The purchase price of the acquisition was $9.6 million and was funded by cash on hand and borrowings on the Company’s revolving credit facility. The business is reported in the Company’s Manufacturing reportable segment.
The Company recorded a bargain purchase gain of $9.8 million, which represents the excess of the estimated fair value of the net assets acquired over the purchase price. The bargain purchase gain was recorded in other income (expense), net in the Company’s consolidated statement of income and was not recognized for tax purposes. The Company believes there were several factors that contributed to this transaction resulting in a bargain purchase gain, including the highly specialized nature of Sunrise’s business falling outside of the seller’s core activities and a limited pool of potential buyers.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Before recognizing the gain from the bargain purchase, the Company reassessed its initial identification and valuation of assets acquired and liabilities assumed to validate that all assets and liabilities that the Company was able to identify at the acquisition date were properly recognized.
The purchase price allocation of $9.6 million, net of less than $0.1 million of cash acquired, was as follows:
 May 5, 2015
 (in thousands)
Trade receivables (contractual amount of $995)$965
Inventories1,518
Other current assets (excluding cash)973
Property, plant and equipment13,698
Definite-lived intangible assets3,400
Current liabilities(925)
Long-term liabilities(250)
Fair value of net assets acquired19,379
Bargain purchase gain(9,821)
Total purchase price allocation$9,558
The identifiable definite-lived intangible assets acquired represent the client relationships intangible, which is being amortized over the weighted average estimated useful life of approximately 15 years.
The Company incurred non-significant transaction and integration costs in connection with the acquisition during fiscal year 2016 and costs of $1.5 million during fiscal year 2015, which were included in selling, general and administrative expenses.
Pro forma financial information as well as actual revenue and operating income (loss) have not been included because Sunrise’s financial results are non-significant when compared with the Company’s consolidated financial results.
ChanTest
On October 29, 2014, the Company acquired ChanTest Corporation (ChanTest), a leading provider of ion channel testing services to the biopharmaceutical 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 purchase price of the acquisition was $59.2 million, including $0.3 million in contingent consideration, and was funded by borrowings on the Company’s revolving credit facility and cash on hand. The business is reported in the Company’s DSA reportable segment.
The contingent consideration earn-out period ended in the fourth quarter of 2015. As a result, the related contingent consideration liability was reversed and a gain of $0.3 million was recorded in selling, general and administrative expenses, as no payments were expected to be made. The aggregate, undiscounted amount of contingent consideration that could have become payable was $2.0 million. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
The purchase price allocation of $52.0 million, net of $7.2 million in cash acquired, is as follows:
 October 29, 2014
 (in thousands)
Current assets (excluding cash)$4,669
Property, plant and equipment1,637
Definite-lived intangible assets23,920
Goodwill34,775
Current liabilities(3,486)
Long-term liabilities(9,486)
Total purchase price allocation$52,029
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The breakout of definite-lived intangible assets acquired is as follows:
 Definite-Lived Intangible Assets 
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
 12
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 non-significant transaction and integration costs in connection with the acquisition during both fiscal years 2016 and 2015, and costs of $1.1 million during fiscal year 2014, which were included in selling, general and administrative expenses.
Pro forma financial information as well as actual revenue and operating income (loss) have not been included because ChanTest’s financial results are non-significant when compared with the Company’s consolidated financial results.
VivoPath
On June 16, 2014, the Company acquired substantially all of the assets of VivoPath LLC (VivoPath), a discovery services company specializing in the rapid, in vivo compound evaluation of molecules in the therapeutic areas of metabolism, inflammation and oncology. The purchase price was $2.3 million, including $1.6 million in contingent consideration, and was allocated primarily to the intangible assets acquired. The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes. The undiscounted total amount of contingent consideration was a maximum of $2.4 million, payable over three years based on the achievement of revenue growth targets and other contractual requirements. During fiscal year 2016, the Company paid the second year tranche of the contingent consideration of $0.2 million. During fiscal year 2015, the Company paid the first year tranche of the contingent consideration of $0.6 million and recorded a gain of $0.8 million, primarily due to a decrease in the expected future contingent consideration payments. As of December 31, 2016, the remaining contingent consideration payable is a maximum of $0.2 million. The business is reported in the Company’s DSA reportable segment.
Argenta and BioFocus
On April 1, 2014, the Company acquired (1) 100% of the shares of the 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 non-clinical development. The purchase price of the acquisition was $191.8 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 businesses are reported in the Company’s DSA reportable segment.
The contingent consideration earn-out period ended on April 1, 2015. As a result, the related contingent consideration liability, as adjusted for subsequent changes in fair value, was reversed and a gain of $0.8 million was recorded in selling, general and administrative expenses during fiscal year 2015, as no payments were expected to be made. The contingent consideration was a one-time payment that could have become payable in the second quarter of 2015 based on the achievement of a certain revenue target for the twelve-month period following the acquisition. The aggregate, undiscounted amount of contingent consideration that the Company could have paid was €5.0 million ($5.3 million as of December 31, 2016). The Company estimated the fair value of this contingent consideration based on a probability-weighted set of outcomes.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The purchase price allocation of $183.6 million, net of $8.2 million of cash acquired, was as follows:
 April 1, 2014
 (in thousands)
Current assets (excluding cash)$31,682
Property, plant and equipment21,008
Other long-term assets11,140
Definite-lived intangible assets104,470
Goodwill65,235
Current liabilities(13,139)
Long-term liabilities(36,802)
Total purchase price allocation$183,594
The breakout of definite-lived intangible assets acquired was as follows:
 Definite-Lived Intangible Assets 
Weighted Average
Amortization Life
 (in thousands) (in years)
Client relationships$94,000
 18
Backlog5,900
 1
Trademark and trade names1,170
 3
Leasehold interests1,000
 13
Other intangible assets2,400
 19
Total definite-lived intangible assets$104,470
 17
The goodwill resulting from the transaction is primarily attributed to the potential growth of the Company’s DSA businesses from clients 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 non-significant transaction and integration costs in connection with the acquisition during both fiscal years 2016 and 2015, and costs of $5.3 million during the fiscal year 2014, , which arewere included in selling, general and administrative expenses.
Argenta and BioFocus revenue and operating income for fiscal year 2014 were $71.4 million and $1.8 million, respectively. Beginning on April 1, 2014, Argenta and BioFocus have been included in the operating results of the Company.
The following selected unaudited pro forma consolidated results of operations are presented as if the Argenta and BioFocus acquisition had occurred as of the beginning of the period immediately preceding the period of acquisition after giving effect to certain adjustments, including amortization of intangible assets and depreciation of fixed assets of $3.7 million and other one-timenonrecurring costs. These pro forma consolidated results of operations are for informational purposes only and do not necessarily reflect the results of operations had the companies operated as one entity during the periods reported. No effect has been given for synergies, if any, that may have been realized through the acquisition.

58

 Fiscal Year
 2014
 (in thousands, except per share amounts)
 (unaudited)
Revenue$1,322,771
Net income attributable to common shareholders128,195
Earnings per common share: 
Basic$2.75
Diluted$2.70

CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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 unaudited pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative 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 incomeNo effect has been given 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 75% ownership interest of Vital River, a commercial provider of research models and related services in China, for $24.2 million, net of $2.7 million of cash acquired. Vital River's financial results are included in the RMS reportable segment.


59


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


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 primarily attributed to the potential growth of the business in China and is not deductible for tax purposes.

Concurrent with the acquisition, the Company entered into a joint venture agreement with the noncontrolling interest holderssynergies, if any, 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 of the noncontrolling 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 Company'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.


60


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
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 businessmay have been realized through the increased competitive advantage and market penetration provided by the services offered by Accugenix. The goodwill is not deductible for tax purposes.acquisition.

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., Japan, and Europe. As a result, the Company recorded $2.2 million of 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 2014 and 2013, the Company recorded asset impairments of $0.3 million and $0.4 million, respectively, to cost of revenue related to the consolidation of the European operations.

61


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


Staff Reductions
The following table rolls forward the Company's severance and retention cost liability:
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Balance, beginning of period$2,782
 $3,636
 $3,374
Expense7,792
 3,223
 2,576
Payments/Utilization(7,908) (4,077) (2,314)
Balance, end of period$2,666
 $2,782
 $3,636

The following table presents severance and retention costs by classification on the income statement:
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Severance charges included in cost of sales$3,342
 $1,477
 $1,203
Severance charges included in selling, general and administrative4,450
 1,746
 1,373
Total expense$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
 December 27, 2014 December 28, 2013 December 29, 2012
 (in thousands)
Research models and services$4,593
 $1,429
 $1,015
Discovery and safety assessment2,912
 1,625
 1,494
Manufacturing support166
 169
 67
Corporate121
 
 
Total expense$7,792
 $3,223
 $2,576

4. SUPPLEMENTAL BALANCE SHEET INFORMATION
The composition of trade receivables, net is as follows:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Client receivables$219,118
 $190,423
$283,997
 $230,010
Unbilled revenue43,780
 35,184
82,203
 45,996
Total262,898
 225,607
366,200
 276,006
Less: Allowance for doubtful accounts(4,907) (4,977)(2,150) (5,938)
Trade receivables, net$257,991
 $220,630
$364,050
 $270,068

Recoveries to the allowance for doubtful accounts in fiscal year 2016 were $0.5 million. Provisions to the allowance for doubtful accounts in the fiscal years 2015 and 2014 2013were $1.8 million and 2012 were $0.5$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.

62


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


The composition of inventories is as follows:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Raw materials and supplies$15,416
 $15,028
$18,893
 $15,998
Work in process11,802
 11,715
13,681
 12,101
Finished products61,825
 62,653
63,259
 65,636
Inventories$89,043
 $89,396
$95,833
 $93,735
The composition of other current assets is as follows:
December 27, 2014 December 28, 2013December 31, 2016 December 26, 2015
(in thousands)   
Prepaid assets$26,900
 $20,058
Deferred tax asset27,644
 29,889
Time deposits16,167
 11,158
(in thousands)
Investments$3,771
 $20,516
Prepaid income tax26,287
 25,247
40,705
 26,350
Restricted cash2,552
 245
532
 271
Other291
 

 149
Other current assets$99,841
 $86,597
$45,008
 $47,286
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The composition of property, plant and equipment, net is as follows:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Land$40,314
 $40,157
$47,392
 $39,846
Buildings682,495
 694,074
Buildings (1)
784,129
 713,841
Machinery and equipment384,713
 367,244
403,123
 362,695
Leasehold improvements37,270
 37,959
47,071
 41,477
Furniture and fixtures22,577
 24,013
24,148
 21,783
Computer hardware and software127,283
 113,466
Vehicles3,967
 3,859
4,118
 3,819
Computer hardware and software119,474
 112,328
Construction in progress (1)
40,970
 42,075
Construction in progress24,703
 25,845
Total1,331,780
 1,321,709
1,461,967
 1,322,772
Less: Accumulated depreciation(654,983) (645,527)(706,140) (644,813)
Property, plant and equipment, net$676,797
 $676,182
$755,827
 $677,959
(1) Includes the leased facility under construction.The balances as of December 31, 2016 and December 26, 2015 include capital lease buildings. See Note 7, "Long-Term“Long-Term Debt and Capital Lease Obligations."
Depreciation expense in the fiscal years 2016, 2015 and 2014 2013was $85.0 million, $70.7 million and 2012 was $70.5 million, $78.8 million and $63.2 million, respectively.

63


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


The composition of other assets 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

 December 31, 2016 December 26, 2015
    
 (in thousands)
Life insurance policies$29,456
 $27,554
Venture capital investments45,331
 32,730
Restricted cash1,736
 1,745
Other11,907
 9,614
Other assets$88,430
 $71,643
The composition of other current liabilities is as follows:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Accrued income taxes$9,362
 $18,773
$25,621
 $12,168
Current deferred tax liability1,484
 1,960
Accrued interest and other233
 1,813
Other879
 376
Other current liabilities$11,079
 $22,546
$26,500
 $12,544
The composition of other long-term liabilities is as follows:
December 27, 2014 December 28, 2013December 31, 2016 December 26, 2015
(in thousands)   
Deferred tax liability$30,816
 $14,988
(in thousands)
Long-term pension liability45,135
 16,219
$89,984
 $34,604
Accrued Executive Supplemental Life Insurance Retirement Plan and Deferred Compensation Plan33,007
 28,708
Accrued executive supplemental life insurance retirement plan and deferred compensation plan32,880
 30,188
Other36,375
 24,270
Other long-term liabilities21,403
 10,717
$159,239
 $89,062
Other long-term liabilities$130,361
 $70,632
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. VENTURE CAPITAL INVESTMENTS AND MARKETABLE SECURITIES
Venture Capital Investments
During fiscal years 2016, 2015, and 2014, the Company recognized gains related to the venture capital investments of $10.3 million, $3.8 million and $9.3 million, respectively. The Company’s total commitment to these entities as of December 31, 2016 was $84.8 million, of which the Company had funded $38.2 million as of December 31, 2016. During fiscal years 2016, 2015, and 2014, the Company received dividends totaling $7.1 million, $7.3 million, and $7.4 million, respectively. As of December 31, 2016 and December 26, 2015, the Company’s consolidated retained earnings (accumulated deficit) included $4.4 million and $2.4 million, respectively, of the undistributed earnings related to these entities.
Marketable Securities
The Company held no marketable securities as of December 31, 2016.
The following is a summary of the Company’s marketable securities, all of which are classified as available-for-sale, as of December 26, 2015:
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
        
 (in thousands)
Mutual fund$4,650
 $
 $(141) $4,509
Total$4,650
 $
 $(141) $4,509
During fiscal year 2016, the Company realized non-significant losses and received proceeds of $4.6 million from the sale of its available-for-sale securities. There were no sales of available-for-sale securities during fiscal year 2015.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. FAIR VALUE
Assets, liabilities, and liabilitiesredeemable noncontrolling interest measured at fair value on a recurring basis are summarized below:
December 31, 2016
December 27, 2014Level 1 Level 2 Level 3 Total
Level 1 
Level 2
 
Level 3
 Total       
(in thousands)(in thousands)
Cash equivalents$
 $1,934
 $
 $1,934
$
 $21
 $
 $21
Other assets:       
Life insurance policies
 20,520
 
 20,520

 22,121
 
 22,121
Total assets measured at fair value
 22,454
 
 22,454
$
 $22,142
 $
 $22,142
              
Redeemable noncontrolling interest
 
 28,419
 28,419
Other current liabilities:       
Contingent consideration
 
 2,828
 2,828
$
 $
 $3,621
 $3,621
Total liabilities measured at fair value$
 $
 $31,247
 $31,247
$
 $
 $3,621
 $3,621

64

 December 26, 2015
 Level 1 Level 2 Level 3 Total
        
 (in thousands)
Cash equivalents$
 $190
 $
 $190
Other current assets:       
Marketable securities4,509
 
 
 4,509
Foreign currency forward contracts
 15
 
 15
Other assets:       
Life insurance policies
 20,364
 
 20,364
Total assets measured at fair value$4,509
 $20,569
 $
 $25,078
        
Other current liabilities:       
Contingent consideration$
 $
 $1,172
 $1,172
Other long-term liabilities:       
Contingent consideration
 
 198
 198
Redeemable noncontrolling interest
 
 28,008
 28,008
Total liabilities and redeemable noncontrolling interest measured at fair value$
 $
 $29,378
 $29,378

During fiscal years 2016 and 2015, there were no transfers between fair value levels.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


 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."
 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
 $20,581
The significant unobservable inputs used in the fair value measurement of the Company’s redeemable noncontrolling interest are the estimated future cash flows based on projected financial data and discount rate of 18.5%. Significant changes in the timing or amounts of the estimated future cash flows would result in a significantly higher or lower fair value measurement. Significant increases or decreases in the discount rate would result in a significantly lower or higher fair value measurement, respectively.
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to the acquisition of Argenta, BioFocus, VivoPath and ChanTest.previous business acquisitions. See Note 2, "Business“Business Acquisitions."
Fiscal Year
2016 2015
December 27, 2014   
(in thousands)(in thousands)
Beginning balance$
$1,370
 $2,828
Additions2,678
3,600
 973
Payments(872) (600)
Total gains or losses (realized/unrealized):    
Change in fair value150
Reversal of previously recorded contingent liability and change in fair value(477) (1,831)
Ending balance$2,828
$3,621
 $1,370
The significant unobservable inputs used in the fair value measurement of the Company'sCompany’s contingent consideration are the probabilities of successful achievement of certain financial targets and a discount rate. Significant increasesIncreases or decreases in any of the probabilities of success would result in a significantly higher or lower fair value measurement, respectively. Significant increasesIncreases or decreases in the discount rate would result in a significantly lower or higher fair value measurement, respectively.

65


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



Debt Instruments
The book value of the Company'sCompany’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 2.2 within the fair value hierarchy.

Redeemable Noncontrolling Interest
The Company’s redeemable noncontrolling interest resulted from the acquisition of an interest in Vital River in January 2013 and July 2016.
The following table provides a rollforward of the fair value of the Company’s redeemable noncontrolling interest for fiscal year 2015:
 Redeemable Noncontrolling Interest
 (in thousands)
December 27, 2014$28,419
Total gains or losses (realized/unrealized): 
Net income attributable to noncontrolling interest838
Foreign currency translation(1,066)
Change in fair value, included in additional paid-in capital(183)
December 26, 201528,008
Total gains or losses (realized/unrealized): 
Net income attributable to noncontrolling interest320
Foreign currency translation(653)
Change in fair value, included in additional paid-in capital(1,690)
July 7, 2016$25,985
Since July 7, 2016, the redeemable noncontrolling interest is no longer reported at fair value. See Note 8, “Equity and Redeemable Noncontrolling Interest.”
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill
The changes infollowing table provides a rollforward of the gross carrying amount and accumulated impairment loss are as follows:Company’s goodwill:
   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
   Adjustments to Goodwill   Adjustments to Goodwill  
 December 27, 2014 Acquisitions Foreign Exchange December 26, 2015 Acquisitions Transfers Foreign Exchange December 31, 2016
                
 (in thousands)
RMS$59,196
 $
 $(1,029) $58,167
 $
 $(342) $(1,428) $56,397
DSA1,234,302
 22,146
 (4,398) 1,252,050
 337,872
 
 (21,446) 1,568,476
Manufacturing32,579
 105,567
 (4,534) 133,612
 46,859
 342
 (13,169) 167,644
Gross carrying amount1,326,077
 

 

 1,443,829
 

 

 

 1,792,517
Accumulated impairment loss - DSA(1,005,000) 
 
 (1,005,000) 
 
 
 (1,005,000)
Goodwill$321,077
 

 

 $438,829
 

   

 $787,517

InDuring the second quarter of 2014,2016, the Company revised the composition of its reportable segments to align with the view of the business following its acquisition of Argenta and BioFocus.WIL Research. 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 priorRMS reportable segmentssegment to newits Manufacturing reportable segments,segment, as shown in the preceding table within "transfers." The allocation was based on the fair value of each business group within its original reporting unit relative to the fair value of that reporting unit. In addition, the Company completed an assessment of any potential goodwill impairment for all reporting units immediately prior to the reallocation and determined that no impairment existed.

Based on the Company'sCompany’s step one goodwill impairment test for the fiscal years 2014, 20132016, 2015 and 2012,2014, the fair value of each reporting unit exceeded the reporting unit'sunit’s book value and, therefore, goodwill was not impaired.

Other Intangible Assets, Net
The following table displays the gross carrying amount and accumulated amortization of definite-lived intangible assets, net by major class:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013Gross Accumulated
Amortization
 Net Gross Accumulated
Amortization
 Net
Gross Accumulated amortization Net Gross Accumulated amortization Net           
(in thousands)(in thousands)
Backlog$8,728
 $(6,636) $2,092
 $2,916
 $(2,507) $409
$8,370
 $(6,390) $1,980
 $50,568
 $(50,554) $14
Technology71,425
 (14,314) 57,111
 60,350
 (5,911) 54,439
Trademarks and trade names8,177
 (4,124) 4,053
 11,495
 (5,944) 5,551
Other16,775
 (5,628) 11,147
 14,711
 (7,285) 7,426
Other intangible assets104,747
 (30,456) 74,291
 137,124
 (69,694) 67,430
Client relationships379,339
 (217,938) 161,401
 311,507
 (238,002) 73,505
519,123
 (198,966) 320,157
 396,537
 (183,163) 213,374
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
Intangible assets$623,870
 $(229,422) $394,448
 $533,661
 $(252,857) $280,804

During fiscal year 2016, the Company determined that the carrying values of certain DSA intangible assets were not recoverable and recorded an impairment charge of $1.9 million, which was included in costs of services provided (excluding amortization of intangible assets).
66


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



Additionally, as of both December 27, 2014 and December 28, 2013, other intangible assets, net included $3.4 million of indefinite-lived intangible assets.
Amortization expense of definite-lived intangible assets, including client relationships, for the fiscal years 2014, 20132016, 2015 and 20122014 was $26.0$41.7 million, $17.8$24.2 million and $18.1$26.0 million, respectively. Estimated amortization expense for intangible assets for each of the next five fiscal years is expected to be as follows:
Fiscal Year Amortization Expense Amortization Expense
 (in thousands) (in thousands)
2015 $21,116
2016 20,355
2017 18,501
 $42,525
2018 17,312
 40,731
2019 14,306
 34,995
2020 34,382
2021 32,994

7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-Term Debt
Long-term debt, net consists of the following:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Term loans$378,000
 $409,500
$633,750
 $390,000
Revolving credit facility375,536
 253,308
578,759
 446,041
Other long-term debt214
 241
185
 193
Total debt753,750
 663,049
1,212,694
 836,234
Less: current portion of long-term debt(31,714) (21,241)
Less: Current portion of long-term debt(24,560) (15,193)
Long-term debt$722,036
 $641,808
1,188,134
 821,041
Debt discount and debt issuance costs(7,633) (6,805)
Long-term debt, net$1,180,501
 $814,236
As of December 31, 2016 and December 26, 2015, the weighted average interest rate on the Company’s debt was 1.89% and 1.33%, respectively.
In 2013,April 2015, the Company amended and restated the $970M Credit Facility, creating a $1.3 billion facility ($1.3B Credit Facility) that provides for a $400.0 million term loan facility and a $900.0 million multi-currency revolving facility. The interest rates applicable to term loans and revolving loans under the Company’s $1.3B Credit Facility were, at the Company’s option, equal to either the alternate base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus 0.5% or (3) the one-month adjusted LIBOR rate plus 1%) or the adjusted LIBOR rate, plus an interest rate margin based upon the Company’s leverage ratio.
On March 30, 2016, the Company amended and restated its $1.3B credit agreementfacility creating a $970 million agreement$1.65 billion credit facility ($970M1.65B Credit Facility) thatwhich (1) extends the maturity date for the credit facility and (2) makes certain other amendments in connection with the Company’s acquisition of WIL Research. The amendment was accounted for as a debt modification with a partial extinguishment of debt. In connection with the transaction, the Company capitalized approximately $3.3 million and expensed approximately $1.4 million of debt issuance costs.
The $1.65B Credit Facility provides for a $420$650.0 million U.S.term loan and a $1.0 billion multi-currency revolving facility. The term loan facility matures in 19 quarterly installments with the last installment due March 30, 2021. The revolving facility matures on March 30, 2021, and a $550 million multi-currency revolving credit facility.requires no scheduled payment before that date. Under specified circumstances, the Company has the ability to expandincrease the term loan and/or revolving line of credit facility by up to $350$500 million in the aggregate.
The $420 million U.S. term loan facility matures in quarterly installments through maturity on May 29, 2018. The $550 million multi-currency revolving credit facility also matures on May 29, 2018 and requires no scheduled payment before this date. The interest rates applicable to term loan and revolving loans under the $970M$1.65B Credit Facility are, variable and are based on an applicableat the Company’s option, equal to either the base rate (which is the higher of (1) the prime rate, (2) the federal funds rate plus a spread determined by0.50%, or (3) the Company's leverage ratio. As of both December 27, 2014 and December 28, 2013,one-month adjusted LIBOR rate plus 1%) or the weighted averageadjusted LIBOR rate, plus an interest rate onmargin based upon the Company's debt was 1.42%.Company’s leverage ratio.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The $970M$1.65B Credit Facility includes certain customary representations and warranties, events of default, notices of material adverse changes to the Company'sCompany’s business and negative and affirmative covenants. As of December 27, 2014, the Company was compliant with all financial covenants. These covenants include (1) maintenance of a ratio of consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) less capital expenditures to consolidated cash interest expense, for any period of four consecutive fiscal quarters, of no less than 3.53.50 to 1.0  as well as (2) maintenance of a ratio of consolidated indebtedness to consolidated EBITDA for any period of four consecutive fiscal quarters, of no more than 3.254.25 to 1.0. 1.0 with step downs to 3.50 to 1.0 by the last day of the fourth quarter of 2017. As of December 31, 2016, the Company was compliant with all covenants.
The Company's obligations of the Company under the credit agreement$1.65B Credit Facility are collateralized by substantially all of the Company's assets.
At December 27, 2014 and December 28, 2013,assets of the Company had $5.0 million and $4.9 million, respectively, outstanding under letters of credit.Company.

67


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


Principal maturities of existing debt for the periods set forth in the table below, are as follows:
Fiscal Year Principal
 (in thousands) Principal
2015 $31,714
2016 47,250
 (in thousands)
2017 68,250
 $24,560
2018 606,536
 36,563
2019 52,813
2020 81,250
2021 1,017,508
Total $753,750
 $1,212,694

Letters of Credit
Build-to-suitAs of both December 31, 2016 and December 26, 2015, the Company had $4.9 million outstanding under letters of credit.
Capital Lease Obligations
The Company acquired a built-to-suitbuild-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 iswas considered the owner, for accounting purposes, of this property during the construction period. Accordingly, the Company recordsrecorded an asset along withand 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 buildingproperty through completion of the construction period. Upon completion of the buildings,construction during the second quarter of fiscal year 2015, the Company will assessdetermined that it was no longer considered the owner of the property because it did not have continuing involvement. Consequently, the Company recorded a successful sale leaseback and determine ifderecognized the assetsproperty and the associated financing obligation from the Company’s consolidated balance sheet and recorded a capital lease asset and a corresponding liabilities should be derecognized. liability of $35.8 million.
As of December 27, 2014, cost incurred in relation to31, 2016, the construction of these buildings totaled $23.1 million. As of December 27, 2014, minimum rental commitmentslease payments under this leasecapital leases for each of the next five fiscal years and total thereafter arewere 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.
  Minimum Lease Payments
  (in thousands)
2017 $4,097
2018 3,503
2019 3,005
2020 2,385
2021 2,250
Thereafter 27,974
Total $43,214


68


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


8. EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

Earnings Per Share
The following table illustratesreconciles the numerator and denominator in the computations of the basic and diluted earnings per share:
Fiscal Year
  Fiscal Year Ended  2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in thousands)(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)
Income from continuing operations, net of income taxes$156,086
 $152,037
 $129,924
Income (loss) from discontinued operations, net of income taxes280
 (950) (1,726)
Less: Net income attributable to noncontrolling interests1,601
 1,774
 1,500
Net income attributable to common shareholders$126,698
 $102,828
 $97,295
$154,765
 $149,313
 $126,698
     
Denominator:          
Weighted-average shares outstanding—Basic46,627
 47,740
 47,912
47,014
 46,496
 46,627
Effect of dilutive securities:          
Stock options and contingently issued restricted stock931
 749
 494
Stock options, restricted stock units, performance share units and restricted stock944
 1,138
 931
Weighted-average shares outstanding—Diluted47,558
 48,489
 48,406
47,958
 47,634
 47,558

Options to purchase approximately 645,0000.8 million shares, 2,289,0000.5 million shares, and 4,591,0000.6 million shares were outstanding at December 27,for fiscal years 2016, 2015 and 2014, respectively, as well as a non-significant number of restricted stock, restricted stock units (RSUs), December 28, 2013and December 29, 2012performance share units (PSUs), respectively, but were not included in computing diluted earnings per share because their inclusion would have been anti-dilutive. Basic weighted average shares outstanding for the fiscal years 2014, 20132016, 2015 and 20122014 excluded the weighted average impact of approximately 1,188,0001.1 million shares, 1,097,0001.1 million shares, and 935,0001.2 million shares, respectively, of non-vested restricted stock, and restricted stock unit awards.

units, and PSUs.
Treasury Shares
In July 2010, the Company'sCompany’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$150.0 million in 2014, for an aggregate authorization of $1,150.0 million. The companyUnder its authorized stock repurchase program, the Company did not repurchase any shares in fiscal year 2016, and repurchased approximately 2,093,0001.5 million shares for $108.8 million and approximately 2.1 million 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 2014, 20132015 and 2012,2014, respectively. As of December 27, 2014,31, 2016, the Company had $178.5$69.7 million remaining on the authorized stock repurchase program. In addition, the Company's 2007 Incentive Plan permitsCompany’s stock-based compensation plans permit the netting of common stock upon vesting of restricted stock, awardsrestricted stock units and performance share units in order to satisfy individual minimum statutory tax withholding requirements. The number ofCompany acquired approximately 0.2 million shares of common stock netted for taxes was insignificant$12.3 million, approximately 0.1 million shares for $8.7 million, and approximately 0.1 million shares for $6.8 million in each of the fiscal years 2014, 20132016, 2015 and 2012.2014, respectively, to satisfy individual minimum statutory tax withholding requirements.


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


Accumulated Other Comprehensive Income (Loss)
Changes to each component of accumulated other comprehensive income (loss), net of income tax,taxes, are as follows:
 

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)
 
Foreign Currency Translation and Other(3)
 Pension and Other Post-Retirement Benefit Plans Total
      
 (in thousands)
December 27, 2014$(19,891) $(54,356) $(74,247)
Other comprehensive loss before reclassifications (1)
(60,745) (302) (61,047)
Amounts reclassified from accumulated other comprehensive income (loss)(2,341) 2,617
 276
Net current period other comprehensive income (loss)(63,086) 2,315
 (60,771)
Income tax expense
 530
 530
December 26, 2015(82,977) (52,571) (135,548)
Other comprehensive loss before reclassifications (2)
(71,618) (60,678) (132,296)
Amounts reclassified from accumulated other comprehensive income (loss)
 1,711
 1,711
Net current period other comprehensive income (loss)(71,618) (58,967) (130,585)
Income tax expense (benefit)
 (12,369) (12,369)
December 31, 2016$(154,595) $(99,169) $(253,764)
(1) The impact of the foreign currency translation adjustment to other comprehensive income (loss) before reclassifications for fiscal year 2015 was primarily due to the effect of changes in foreign currency exchange rates of the Euro and Canadian Dollar and to a lesser extent due to the impact of changes in the British Pound.
(2) The impact of the foreign currency translation adjustment to other comprehensive income (loss) before reclassifications for fiscal year 2016 was primarily due to the effect of changes in foreign currency exchange rates of the Euro, British Pound, and Canadian Dollar and to a lesser extent due to the impact of changes in the Chinese Yuan Renminbi and Japanese Yen.
(3) Foreign currency translation and other includes a non-significant amount of unrealized gains (losses) on available-for-sale marketable securities.

Warrants
Separately and concurrently with the pricing of the senior convertible debentures in June 2006, the Company issued warrants for approximately 7,200,000 shares of its common stock. The warrants give the holders the right to receive, for no additional consideration, cash or shares, at the Company's option, with a value equal to the appreciation in the price of its shares above $59.63 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 RedeemableNonredeemable Noncontrolling Interests
The Company has investments in several entities, whose financial results are consolidated in the Company'sCompany’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 nonredeemable noncontrolling interests.

ReedemableRedeemable Noncontrolling Interest
The Company's redeemable noncontrolling interest resulted fromIn January 2013, the acquisition ofCompany acquired a 75% ownership interest of Vital River, a commercial provider of research models and related services in China, for $24.2 million, net of $2.7 million of cash acquired. Concurrent with the acquisition, the Company entered into an agreement with the noncontrolling interest holders that provided the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining 25% of the entity for cash at its fair value beginning in January 2016.
On July 7, 2016, the Company purchased an additional 12% equity interest in Vital River. See Note 2, "Business Acquisitions."River for $10.8 million, resulting in total ownership of 87%. The Company recorded a $1.6 million gain in equity equal to the excess fair value of the 12% equity interest over the purchase price. Concurrent with the transaction, the original agreement was amended providing the Company with the right to purchase, and the noncontrolling interest holders with the right to sell, the remaining 13% equity interest at a contractually defined redemption value, subject to a redemption floor (embedded derivative). These rights are exercisable beginning in 2019 and are accelerated in certain events. The Company recorded a charge of $1.5 million in other income (expense), net, equal to the excess fair value of the hybrid instrument (equity interest with an embedded derivative) over the fair value of the 13% equity interest. The redeemable noncontrolling interest is measured at the greater of the amount that would be paid if settlement occurred as of the balance sheet date based on the contractually defined redemption value ($14.1 million as of December 31, 2016) and its carrying amount adjusted for net income (loss) attributable to the noncontrolling interest. As the


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

noncontrolling interest holders have the ability to require the Company to purchase the remaining 13% interest, the noncontrolling interest is classified in the mezzanine section of the consolidated balance sheet, which is presented above the equity section and below liabilities. The agreement does not limit the amount that the Company could be required to pay to purchase the remaining 13% equity interest.


The following table provides a rollforward of the Company’s redeemable noncontrolling interest subsequent to the acquisition of the additional 12% equity interest on July 7, 2016:
 Redeemable Noncontrolling Interest
 (in thousands)
July 7, 2016$25,985
Purchase of 12% equity interest(12,360)
Total gains or losses (realized/unrealized): 
Net income attributable to noncontrolling interest357
Foreign currency translation(818)
Modification of 13% purchase option1,495
December 31, 2016$14,659
See Note 5, “Fair Value,” for the activity within the redeemable noncontrolling interest prior to July 7, 2016.
9. INCOME TAXES
The components of income from continuing operations before income taxes and the related provision for income taxes are presented below:
Fiscal Year
Fiscal Year Ended2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in thousands)(in thousands)
Income from continuing operations before income taxes: 
     
    
U.S. $71,002
 $39,900
 $35,504
$59,255
 $76,157
 $71,002
Non-U.S. 106,593
 98,427
 94,242
163,666
 119,271
 106,593
177,595
 138,327
 129,746
$222,921
 $195,428
 $177,595
Income tax provision: 
     
    
Current: 
     
    
Federal13,733
 10,832
 (1,447)$18,592
 $23,687
 $13,733
Foreign20,364
 18,370
 26,411
39,829
 8,572
 20,364
State4,746
 4,240
 1,353
5,263
 6,819
 4,746
Total current38,843
 33,442
 26,317
63,684
 39,078
 38,843
Deferred: 
     
    
Federal12,982
 5,468
 13,132
7,206
 1,790
 12,982
Foreign(4,672) (6,431) (12,683)(4,024) 3,064
 (4,672)
State518
 432
 862
(31) (541) 518
Total deferred8,828
 (531) 1,311
3,151
 4,313
 8,828
$47,671
 $32,911
 $27,628
$66,835
 $43,391
 $47,671

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


The components of deferred tax assets and liabilities are as follows:
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Deferred tax assets:      
Compensation$49,702
 $38,836
$70,863
 $55,259
Accruals and reserves7,061
 2,356
8,103
 8,941
Inventory reserves and valuations1,940
 1,696
3,447
 2,022
Financing related993
 1,594

 902
Net operating loss and credit carryforwards39,927
 47,026
58,081
 35,233
Other4,426
 2,262
2,921
 2,593
Valuation allowance(5,866) (7,071)(10,101) (6,112)
Total deferred tax assets:98,183
 86,699
   
Total deferred tax assets133,314
 98,838
Deferred tax liabilities:      
Goodwill and other intangibles(52,029) (21,826)(121,256) (73,208)
Financing related(854) 
Depreciation related(23,549) (22,389)(32,271) (23,664)
Investments in limited partnerships(4,067) (2,720)
Total deferred tax liabilities:(79,645) (46,935)
Venture capital investments(5,084) (3,570)
Foreign withholding taxes(821) (6,590)
Total deferred tax liabilities(160,286) (107,032)
Net deferred taxes$18,538
 $39,764
$(26,972) $(8,194)
Reconciliations of the statutory U.S. Federal income tax rate to effective tax rates are as follows:
Fiscal Year
December 27, 2014 December 28, 2013 December 29, 20122016 2015 2014
U.S. statutory income tax rate35.0 % 35.0 % 35.0 %35.0 % 35.0 % 35.0 %
Foreign tax rate differences(9.4)% (8.0)% (8.0)%(10.3)% (8.6)% (9.4)%
State income taxes, net of Federal tax benefit1.9 % 1.6 % 1.5 %1.6 % 1.9 % 1.9 %
Unbenefitted losses and changes in valuation allowance0.1 % 0.4 % 0.8 %
Research tax credits and enhanced deductions(4.1)% (6.6)% (8.2)%(3.5)% (2.6)% (4.1)%
Enacted tax rate changes % (0.4)% (0.2)%(0.8)% (1.5)%  %
Impact of tax uncertainties(0.7)% 1.0 % (1.2)%0.2 % (5.2)% (0.7)%
Foreign withholding taxes2.0 % 3.4 %  %
Impact of acquisitions and restructuring1.6 % 0.2 % 0.1 %1.8 % (2.0)% 1.6 %
Other2.4 % 0.6 % 1.5 %4.0 % 1.8 % 2.5 %
26.8 % 23.8 % 21.3 %
Effective income tax rate30.0 % 22.2 % 26.8 %
The tax rate benefit for enacted tax rate changes is primarily associated with a reduction in the U.K.’s statutory tax rates.
As of December 27, 2014,31, 2016, the Company had foreign net operating loss and tax credit carryforwards of $39.8$58.5 million, as compared to $36.9$34.6 million as of December 28, 2013.26, 2015. Of this amount, $24.3$5.2 million will expire beginning after 2015,2016, $40.5 million will begin to expire in 2028 and beyond, and the remainder of $15.5$12.8 million can be carried forward indefinitely. From a tax return basis, the Company has federal tax credit carryforwards of $10.5 million that will begin to expire in 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, the Company claims Scientific Research and Experimental Development (SR&ED) credits on qualified research and development costs incurred in its Safety Assessment facility in Montreal, and currently maintains $24.6$16.8 million in credit carryforwards, which will begin to expire in 2030.2033. Additionally, the Company records a benefit to operating income for research and development credits in both Quebec and the U.K. related to its Safety Assessment and Early Discovery facilities.
The Company has fully recognized its deferred tax assets on the belief that it is more likely than not that they will be realized. The only exceptions relate to deferred tax assets primarily for net operating losses in France, Hong Kong, Luxembourg, and the

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


Netherlands and Germany, capital losses in the U.S. and Canada,, and fixed assets in the U.K. The valuation allowance decreasedincreased by $1.2$4.0 million from $7.1$6.1 million atas of December 28, 201326, 2015 to $5.9$10.1 million atas of December 27, 2014.31, 2016.
A reconciliation of the Company'sCompany’s beginning and ending unrecognized income tax benefits is as follows:
Fiscal Year
2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in thousands)(in thousands)
Beginning balance$18,475
 $30,996
 $27,976
$23,338
 $34,627
 $18,475
Additions to tax positions for current year1,700
 2,009
 1,907
2,194
 2,362
 1,700
Additions to tax positions for prior years18,502
 1,709
 4,196
2,035
 3,028
 18,502
Reductions to tax positions for current year
 
 

 
 
Reductions to tax positions for prior years(3,722) (732) (28)(1,866) (3,991) (3,722)
Settlements(308) (15,246) (3,055)(918) (1,946) (308)
Expiration of statute of limitations(20) (261) 
(597) (10,742) (20)
Ending balance$34,627
 $18,475
 $30,996
$24,186
 $23,338
 $34,627
The $16.2$0.8 million increase in unrecognized income tax benefits during the fiscal year 20142016 is primarily attributable to pre-acquisition tax positions taken by WIL Research, as well as an additional year of Canadian SR&ED credit, offset by a settlement related to the newly acquired Early Discovery businesses.tax year ended 2014 for Canadian SR&ED credits and favorable foreign exchange movement.
The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was $32.3$21.4 million as of December 27, 201431, 2016 and $17.0$20.1 million as of December 28, 2013.26, 2015. The $15.3$1.3 million increase is primarily attributable to pre-acquisition tax positions taken by the newly acquired Early Discovery businesses.WIL Research, as well as an additional year of Canadian SR&ED credit, offset by favorable foreign exchange movement. It is reasonably possible as of December 27, 201431, 2016 that the liability for unrecognized tax benefits for the uncertain tax position associated with forgiveness of debt will decrease by $10.7$4.6 million due toover the expirationnext twelve month period, primarily as a result of statutethe outcome of limitationsa pending tax ruling and by $0.6 million due to the settlement of German and French tax audits.competent authority proceedings. The Company continues to recognize interest and penalties related to unrecognized income tax benefits in income tax expense. The total amount of accrued interest related to unrecognized income tax benefits as of December 27, 201431, 2016 and December 28, 201326, 2015 was $1.4$1.7 million and $0.7$1.0 million, respectively. The total amount of accrued penalties related to unrecognized income tax benefits as of December 31, 2016 was $0.2 million.
The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the U.S., the U.K., China, Japan, France, Japan, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2010.2013.
The Company and certain of its subsidiaries are currently under audit by varioushave ongoing tax authoritiescontroversies in the U.S., Canada, Germany, and France. The Company does not anticipate resolution of these audits will have a material impact on its financial statements.
In the first quarter of 2014,During 2015, the Company settled with the Canadian Revenue Authority (CRA) for tax years 2006 through 2009 related to transfer pricing in our Safety Assessment operations in Montreal. In the fourth quarter of 2014, 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 applyapplied with the Internal Revenue Service (IRS) and CRACanadian Revenue Authority (CRA) for relief pursuant to the competent authority procedure provided in the tax treaty between the U.S. and Canada for transfer pricing tax assessments related to 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 USU.S. receivable. The actual amounts of the liability for Canadian taxes and the asset for the correlative relief in the U.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 enactment and would provide a corresponding increase to the Company’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 an additional corresponding increase to the Company's effective income tax rate in the year of enactment and beyond.
In accordance with the Company'sCompany’s policy, the undistributed earnings of the Company'sCompany’s non-U.S. subsidiaries remain indefinitely reinvested outside of the U.S. as of the end of 20142016 as they are required to fund needs outside the U.S. and cannot be repatriated in a manner that is substantially tax free. As of December 27, 2014,31, 2016, the earnings of non-U.S. subsidiaries considered to be

73


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


indefinitely reinvested totaled $271.0$704.6 million. No provision for U.S. income taxes has been provided herein. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because of the complexities with the hypothetical calculation. Additionally, the amount of liability is dependent on circumstances existing if and when remittance occurs. On December 18, 2015, the U.S. enacted the Consolidated Appropriations Act, which provides for a reinstatement and extension of the controlled foreign corporation look-through rules. This rule allows the Company to access Chinese and Canadian cash in a more tax-efficient manner and utilize the cash outside of the U.S. without triggering residual U.S. tax. As such, in 2016 the Company accrued $4.5 million of foreign withholding taxes.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. EMPLOYEE BENEFIT PLANS

Pension Plans
Charles River Laboratories Employee Savings Plan
The Charles River Laboratories, Employee SavingsInc. Pension Plan (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 and defined benefit pension plan incovering certain U.K. employees. Benefits are based on participants’ final pensionable salary and years of service. Participants’ rights vest immediately. Effective December 31, 2002, the formplan was amended to exclude new participants from joining the defined benefit section of the plan and a qualified 401(k)defined contribution section was established for new entrants. Contributions under the defined contribution plan in which substantially all U.S. employees are eligible to participate upon employment. The plan contains a provision whereby the Company matchesdetermined as a percentage of employee contributions. Duringgross salary. In the fiscal years 2014, 2013fourth quarter of 2015, the Charles River Pension Plan was amended such that the members of the defined benefit section of the plan ceased to accrue additional benefits; however, their benefits continue to be adjusted for changes in their final pensionable salary or a specified inflation index, as applicable.
In addition, the Company has several defined benefit plans in certain other countries in which it maintains an operating presence, including Japan, Canada, France and 2012, the costs associated with this defined contribution plan totaled $4.9 million, $4.7 million and $4.4 million, respectively.

Netherlands.
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 (DCP), which allows a select group of eligible employees to defer a portion of their compensation. At the present time, no contributions are credited to the 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. 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'semployee’s base salary plus the lesser of their target annual bonus or actual annual bonus.

In addition to the DCP, certain officers and key employees also participate, or in the past participated, in the Company'sCompany’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.CRL Pension Plan (CRL Pension Plan) and Social Security. In connection with the establishment of the DCP, certain active ESLIRP participants, who agreed to convert their accrued ESLIRP benefit to a comparable deferred compensation benefit, discontinued their direct participation in the ESLIRP. Instead, the present values of the accrued benefits of ESLIRP participants were credited to their DCP accounts, and future accruals are converted to present values and credited to their DCP accounts annually.  

The costs associated with these plans, including the ESLIRP, for the fiscal years 2014, 20132016, 2015 and 20122014 totaled $2.2 million, $2.6 million and $3.3 million, $3.3 million and $2.9 million, respectively.

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 DCP. Participants have no interest in any such investments. AtAs of December 27, 201431, 2016 and December 28, 2013,26, 2015, the cash surrender value of these life insurance policies were $27.6$29.5 million and $26.5$27.6 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 and defined benefit pension plan covering certain U.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.

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


In addition, the Company has several defined benefit plans in certain other countries in which it maintains an operating presence, including Japan, Canada and France.
The following tables providetable provides a reconciliation of benefit obligations and plan assets of the Company'sCompany’s pension, plansDCP and supplemental post-retirement benefitESLIRP plans:
Pension Benefits 
Supplemental
Retirement Benefits
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Change in projected benefit obligations: 
  
  
  
 
  
Benefit obligation at beginning of year$286,212
 $283,063
 $29,498
 $27,372
$345,220
 $359,130
Service cost3,397
 3,368
 758
 643
2,453
 4,293
Interest cost12,822
 11,273
 1,009
 708
12,046
 12,974
Benefit payments(9,002) (8,300) (722) (726)(13,383) (8,191)
Curtailment(279) 
Settlements(5,499) 
Plan amendments188
 
Transfer in from acquisition5,271
 
Actuarial loss (gain)50,550
 (4,276) 1,703
 1,501
71,006
 (10,362)
Administrative expenses paid(459) (308) 
 
(605) (411)
Effect of foreign exchange(16,636) 1,392
 
 
(36,476) (12,213)
Benefit obligation at end of year326,884
 286,212
 32,246
 29,498
$379,942
 $345,220
Change in fair value of plan assets:          
Fair value of plan assets at beginning of year272,659
 238,672
 
 
$275,480
 $281,290
Actual return on plan assets25,630
 30,820
 
 
23,388
 6,263
Employer contributions6,874
 9,570
 722
 726
10,551
 6,762
Settlements(5,499) 
Transfer in from acquisition508
 
Benefit payments(9,002) (8,300) (722) (726)(13,383) (8,191)
Premiums paid(459) (308) 
 
Administrative expenses paid(605) (411)
Effect of foreign exchange(14,412) 2,205
 
 
(33,537) (10,233)
Fair value of plan assets at end of year$281,290
 $272,659
 $
 $
$256,903
 $275,480
          
Net balance sheet liability$45,594
 $13,553
 $32,246
 $29,498
$123,039
 $69,740
          
Amounts recognized in balance sheet:          
Non-current assets$61
 $2,738
 $
 $
Noncurrent assets$
 $261
Current liabilities169
 72
 744
 789
1,120
 6,133
Non-current liabilities45,486
 16,219
 31,502
 28,709
Noncurrent liabilities121,919
 63,868
Amounts recognized in accumulated other comprehensive income:loss related to the Company’s pension, DCP and ESLIRP plans are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
Fiscal Year
Fiscal Year Ended Fiscal Year Ended2016 2015
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Net actuarial loss$73,433
 $35,481
 $5,761
 $4,307
$123,743
 $73,412
Net prior service cost (credit)(5,388) (6,338) 
 660
(3,300) (4,584)
Net amount recognized$68,045
 $29,143
 $5,761
 $4,967
$120,443
 $68,828

75


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


The accumulated benefit obligation and fair value of plan assets for the CompanyCompany’s pension, DCP and ESLIRP plans with accumulated benefit obligations in excess of plan assets are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Accumulated benefit obligation$299,127
 $81,117
 $29,994
 $27,938
$346,122
 $306,433
Fair value of plan assets267,026
 68,430
 
 
242,172
 253,225
The projected benefit obligation and fair value of plan assets for the CompanyCompany’s pension, DCP and ESLIRP plans with projected benefit obligations in excess of plan assets are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
December 31, 2016 December 26, 2015
December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013   
(in thousands)(in thousands)
Projected benefit obligation$326,731
 $99,671
 $32,246
 $29,498
$379,942
 $336,155
Fair value of plan assets281,075
 83,379
 
 
256,903
 266,154
The amounts in accumulated 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
December 31, 2016
(in thousands)(in thousands)
Amortization of net actuarial loss$3,227
 $269
$3,867
Amortization of net prior service credit(602) 
(475)
Components of net periodic benefit cost:cost for the Company’s pension, DCP and ESLIRP plans are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
Fiscal Year
Fiscal Year Ended Fiscal Year Ended2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012 December 27, 2014 December 28, 2013 December 29, 2012     
(in thousands)(in thousands)
Service cost$3,397
 $3,368
 $3,729
 $758
 $643
 $640
$2,453
 $4,293
 $4,155
Interest cost12,822
 11,273
 11,289
 1,009
 708
 892
12,046
 12,974
 13,831
Expected return on plan assets(17,444) (14,672) (13,799) 
 
 
(14,164) (16,987) (17,444)
Amortization of prior service cost (credit)961
 2,711
 2,461
 250
 249
 260
(292) (581) 1,211
Amortization of net loss (gain)(637) (603) (609) 660
 660
 660
2,003
 3,198
 23
Curtailment(279) 
 
Settlements788
 
 
Net periodic cost (benefit)$(901) $2,077
 $3,071
 $2,677
 $2,260
 $2,452
$2,555
 $2,897
 $1,776

Assumptions

Weighted-average assumptions used to determine projected benefit obligations are as follows:
76

 December 31, 2016 December 26, 2015
Discount rate3.01% 3.89%
Rate of compensation increase3.25% 3.17%

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


Assumptions
Weighted-average assumptions used to determine projected benefit obligations:
 Pension Benefits 
Supplemental
Retirement Benefits
 December 27, 2014 December 28, 2013 December 27, 2014 December 28, 2013
Discount rate3.79% 4.54% 3.34% 3.47%
Rate of compensation increase3.19% 3.39% 3.00% 3.00%
Weighted-average assumptions used to determine net periodic benefit cost:cost are as follows:
Pension Benefits 
Supplemental
Retirement Benefits
December 27, 2014 December 28, 2013 December 29, 2012 December 27, 2014 December 28, 2013 December 29, 2012December 31, 2016 December 26, 2015 December 27, 2014
Discount rate4.54% 4.13% 4.47% 3.47% 2.63% 3.42%3.89% 3.75% 4.44%
Expected long-term return on plan assets6.41% 6.27% 6.55% 
 
 
5.83% 6.24% 6.41%
Rate of compensation increase3.39% 3.04% 3.12% 3.00% 2.50% 2.50%3.17% 3.18% 3.36%
A 0.5% decrease in the expected rate of return would increase annual pension expense by $1.4$1.3 million.
Plan assets
The Company invests its pension assets with the objective of achieving a total long-term rate of return sufficient to fund future pension obligations and to minimize future pension contributions.  The Company is willing to tolerate a commensurate level of risk to achieve this objective.  The Company controls its risk by maintaining a diversified portfolio of assets classes. Plan assets did not include any of the Company'sCompany’s common stock atas of December 27, 201431, 2016 or December 28, 2013.26, 2015. The weighted-average target asset allocations are approximately 49.7%45.0% to equity securities, approximately 31.2%31.5% to fixed income securities and approximately 19.1%23.5% to other securities.
The fair value of the Company'sCompany’s pension plan assets by asset category are as follows:
 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 equity 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.
(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.

 December 31, 2016 December 26, 2015
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
                
 (in thousands)
Cash$108
 $
 $
 $108
 $92
 $
 $
 $92
Equity securities(1)
63,348
 6,252
 
 69,600
 65,890
 5,941
 
 71,831
Debt securities(2) 
59,294
 3,269
 
 62,563
 68,489
 2,822
 
 71,311
Mutual funds(3)
64,698
 56,596
 
 121,294
 63,689
 65,725
 
 129,414
Other1,318
 586
 1,434
 3,338
 1,021
 49
 1,762
 2,832
Total$188,766
 $66,703
 $1,434
 $256,903
 $199,181
 $74,537
 $1,762
 $275,480
(1) This category comprises equity 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.
(2) 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.
(3) 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 insignificantnon-significant during the periods presented.
During the fiscal year ended 2014,2016, the Company contributed $6.4$4.0 million to the pension plans and expects to contribute $6.1$4.0 million to its pension planplans in 2015.fiscal year 2017.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Expected benefit payments are estimated using the same assumptions used in determining the Company’s benefit obligation atas of December 27, 2014.31, 2016. Benefit payments will depend on future employment and compensation levels, among other factors, and

77


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


changes in 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:
Fiscal Year Pension Plans
Pension
Benefits
 
Supplemental
Retirement Benefits
 (in thousands)
(in thousands)
2015$6,811
 $759
20166,832
 13,090
20177,194
 740
 $8,610
20188,384
 727
 8,818
20198,700
 7,147
 9,682
2020-202457,116
 11,286
2020 10,014
2021 30,717
Thereafter 57,705
Post-Retirement Health and Life Insurance Plans
The Company’s Canadian 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 31, 2016 and December 26, 2015, the accumulated benefit obligation related to the plan was $1.2 million and $0.9 million, respectively. The amounts included in other accumulated comprehensive income as well as expenses related to the plan were non-significant for fiscal years 2016, 2015, and 2014.
Charles River Laboratories Employee Savings Plan
The Charles River Laboratories Employee Savings Plan is a defined contribution plan in the form of a qualified 401(k) plan in which substantially all U.S. employees are eligible to participate upon employment. The plan contains a provision whereby the Company matches a percentage of employee contributions. During fiscal years 2016, 2015 and 2014, the costs associated with this defined contribution plan totaled $6.2 million, $5.3 million and $4.9 million, respectively.

11. STOCK PLANS AND STOCK BASEDSTOCK-BASED COMPENSATION

The Company has stock-based compensation plans under which employees and non-employee directors may be granted stock-based awards such as stock options, restricted stock, restricted stock units and PSUs.
During 2014, 2013fiscal years 2016, 2015 and 2012,2014, 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 common stock on the date of grant; typically vest incrementally, typically over 3 to 4 years; and generallytypically expire 75 to 107 years from date of grant.
Restricted stock units, which entitle the holderrepresent an unsecured promise to receivegrant at no cost a specifiedset number of shares of common stock that vests incrementally,upon the completion of the vesting schedule, and typically vest over 32 to 4 years. With respect to restricted stock units, recipients are not entitled to cash dividends and have no voting rights on the stock during the vesting period.
Restricted stock, which is an award of common stock issued on the grant date and subject to vesting, typically over 2 to 4 years. Recipients cannot sell or transfer the shares until the restriction period has lapsed, but are entitled to forfeitable cash dividends and to vote their respective shares upon grant.
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.maximum and typically vest over 3 years. Payout of this award is contingent upon achievement of certain performance and market conditions.
In May 2007, the Company'sCompany’s shareholders approved the 2007 Incentive Plan, which was amended in 2009, 2011, 2013 and 20132015 (2007 Plan). The 2007 Plan provided no further awards to 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 18.7 million shares to be awarded, of which restricted stock grants, restricted stock units, and
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

performance based stock awards count as 2.3 shares and stock options count as 1.0 share.shares. Any stock options and other share-based awards that were granted under prior plans and were outstanding in May 2007 continue in accordance with the terms of the respective plans.
At In May 2016, the Company’s shareholders approved the 2016 Incentive Plan (2016 Plan). The 2016 Plan provided no further awards to 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 2016 Plan allows a maximum of 6.1 million shares to be awarded, of which restricted stock grants, restricted stock units and performance based stock awards count as 2.3 shares and stock options count as 1.0 shares. Any stock options and other share-based awards that were granted under prior plans and were outstanding in May 2016 continue in accordance with the terms of the respective plans.
As of December 27, 2014,31, 2016, approximately 19.97.3 million shares were authorized for future grants under the Company'sCompany’s share-based compensation plans. The Company settles employee share-based compensation awards with newly issued shares. The following table provides the financial statement line items in which stock-based compensation is reflected:

78


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


Fiscal Year EndedFiscal Year
December 27, 2014
 December 28, 2013
 December 29, 2012
2016 2015 2014
(in thousands)     
Stock-based compensation expense included in:     
Cost of revenue$5,382
 $5,381
 $5,470
(in thousands)
Cost of revenue (excluding amortization of intangible assets)$6,508
 $6,511
 $5,382
Selling, general and administrative25,653
 19,161
 16,385
37,134
 33,611
 25,653
Stock-based compensation expense, before income taxes31,035
 24,542
 21,855
43,642
 40,122
 31,035
Provision for income taxes(11,006) (8,658) (7,793)(15,548) (14,225) (11,006)
After-tax effect of stock-based compensation expense$20,029
 $15,884
 $14,062
Stock-based compensation, net of income taxes$28,094
 $25,897
 $20,029

During fiscal year 2015, the Company modified certain stock-based awards granted in previous years as part of executive retirement transitions. For the stock-based awards granted to employees during and subsequent to fiscal year 2015, the Company introduced a new retirement provision, which allows for continued vesting of such awards after the employee’s retirement if certain eligibility conditions are met. The introduction of the new retirement provision and stock-based award modifications increased the Company’s stock-based compensation expense for 2015 by $4.5 million.
The Company capitalized no stock-based compensation related costs for the fiscal years 2014, 20132016, 2015 and 2012.

2014.
The Company'sCompany’s pool of excess tax benefits, which is computed in accordance with the long form method, was $32.2 million as of December 31, 2016, $22.3 million as of December 26, 2015, and $10.8 million as of December 27, 2014, $7.3 million as of December 28, 2013 and $9.6 million as of December 29, 2012.2014. During the fiscal year 2014,2016, the Company recorded a tax benefit of $4.3$9.3 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$10.6 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.

2015.
Stock Options
The following table summarizes stock option activities under the Company'sCompany’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
 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 26, 20152,066
 $50.62
    
Options granted588
 $74.13
    
Options exercised(601) $38.52
    
Options canceled(83) $62.66
    
Options outstanding as of December 31, 20161,970
 $60.82
 3.4 $30,638
Options exercisable as of December 31, 2016746
 $48.34
 2.6 $20,817
Options expected to vest as of December 31, 20161,202
 $68.40
 3.8 $9,690
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of stock options granted was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Fiscal Year EndedFiscal Year
December 27, 2014 December 28, 2013 December 29, 20122016 2015 2014
Expected life (in years)4.2
 4.2
 4.5
3.6
 3.6
 4.2
Expected volatility30% 33% 35%25% 28% 30%
Risk-free interest rate1.55% 0.80% 0.84%1.2% 1.1% 1.5%
Expected dividend yield
 
 
0% 0% 0%
The weighted-average grant date fair value of stock options granted was $15.12, $17.24 and $15.19 $11.17 and $10.94 for the fiscal years 2014, 20132016, 2015 and 2012,2014, respectively.
As of December 27, 2014,31, 2016, the unrecognized compensation cost related to unvested stock options expected to vest was $11.5 million.$10.8 million. This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.42.2 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 27,2016, 2015 and 2014, December 28, 2013 was $23.0 million, $28.3 million and December 29, 2012 was $30.5 million, $24.7 million and $5.1$30.5 million, respectively, with intrinsic value defined as the difference between the market price on the date of exercise and the grant dateexercise price.
Restricted Stock and Restricted Stock Units
The following table summarizes the restricted stock and restricted stock units activity for the fiscal year 2014:2016:
Restricted Stock Weighted
Average
Grant Date
Fair Value
 Restricted Stock and Restricted Stock Units Weighted
Average
Grant Date
Fair Value
(in thousands)  (in thousands)  
December 28, 20131,096,550
 $36.44
December 26, 2015607
 $55.52
Granted479,104
 58.87
236
 $75.10
Vested(362,770) 38.21
(296) $49.29
Canceled(25,034) 41.51
(32) $63.36
December 27, 20141,187,850
 $46.83
December 31, 2016515
 $67.62
As of December 27, 2014,31, 2016, the unrecognized compensation cost related to shares of unvested restricted stock and restricted stock units expected to vest was $40.0$19.2 million,, which is expected to be recognized over an estimated weighted-average amortization period of 2.2 years.1.2 years. The total fair value of restricted stock and restricted stock unit grants that vested during the fiscal years 2016, 2015 and 2014 2013was $14.6 million, $15.7 million and 2012 was $13.9$13.9 million,, $15.1 million and $10.4 million, respectively.
Performance Based Stock Award Program
In the fiscal years 2014 and 2013, theThe Company issuedissues 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'sCompany’s financial performance. Certain awards are further adjusted based on a market condition, which is calculated based on the Company'sCompany’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:
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
 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%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

 Fiscal Year
 2016 2015 2014
PSUs granted190,628
 148,900
 214,823
Weighted average per share fair value$80.38
 $88.62
 $67.82
Key Assumptions:     
Expected volatility24 % 23% 29%
Risk-free interest rate0.91 % 0.96% 0.63%
Expected dividend yield % % %
20 trading day average stock price on grant date(4.8)% 20.6% 13.1%
The maximum amount of common shares to be issued upon vesting of these PSUs is approximately 763,000.0.3 million. For the fiscal years 20142016, 2015 and 2013,2014, the Company recognized stock-based compensation related to these PSUs of $8.5$19.7 million, $14.7 million and $2.2$8.5 million,, respectively. The total fair value of PSUs that vested during fiscal years 2016 and 2015 was $18.0 million and $6.6 million, respectively.
In fiscal year 2016, the Company also issued approximately 18,000 PSUs using a weighted average fair value per share of $73.70. These PSUs vest upon the achievement of financial targets and other performance measures.

12. FOREIGN CURRENCY CONTRACTS
The Company enters into foreign exchange forward contracts to limit its foreign currency exposure related to intercompany loans that are not of a long-term investment nature. These contracts are recorded at fair value in the Company’s consolidated balance sheet and are not designated as hedging instruments. Any gains or losses on such contracts are immediately recognized in other income (expense), net, and are largely offset by the remeasurement of the underlying intercompany loan balances.
The Company did not have any foreign currency contracts open as of December 31, 2016. The notional amount and fair value of the Company’s foreign currency forward contracts as of December 26, 2015 were as follows:
Notional Amount Fair Value Balance Sheet Location
     
(in thousands)
$88,483
 $15
 Other current assets
The following table summarizes gains (losses) recognized on foreign exchange forward contracts related to intercompany loans denominated in British Pounds and Euros on the Company’s consolidated statement of income:
  Fiscal Year
Location of Gain (Loss) 2016 2015
     
  (in thousands)
Other income (expense), net $3,373
 $(4,917)
The forward contracts outstanding as of December 26, 2015 had durations of approximately 3 months.
13. COMMITMENTS AND CONTINGENCIES

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

80


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


clauses. Rental expense under these leases amounted to $21.8 million, $23.4 million and $14.2 million $16.7 million and $18.2 millionin the fiscal years 2014, 20132016, 2015 and 2012,2014, respectively. In addition to rent, the leases may require the Company to pay additional amounts for taxes, insurance, maintenance and other operating expenses.
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 27, 2014,31, 2016, minimum rental commitments under non-cancelablenon-cancellable leases, net of income from subleases, for each of the next five years and total thereafter were as follows:
Minimum lease payments Minimum Lease Payments
(in thousands) (in thousands)
2015$12,102
20169,854
20177,331
 $23,410
20184,284
 20,273
20193,577
 17,119
2020 13,254
2021 8,104
Thereafter7,769
 19,116
Total$44,917
 $101,276
Insurance
The Company maintains variouscertain insurance policies that maintain large deductibles up to $0.5approximately $5.0 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$5.0 million in the event of a catastrophic event.

Litigation
Various lawsuits, claims and proceedings of a nature considered normal to its business are pending against the 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 July 2015, IDEXX Laboratories, Inc. and IDEXX Distribution, Inc. (collectively, IDEXX) filed a complaint in the United States District Court for the District of Delaware alleging the Company has infringed three recently issued patents related to a blood spot sample collection method used in determining the presence or absence of an infectious disease in a population of rodents.  On September 21, 2015, the Company timely filed a motion to dismiss the complaint on the grounds that all of the claims are directed to unpatentable subject matter and therefore are invalid. On October 7, 2015, IDEXX filed an amended complaint, which substantially asserted the same patents and infringement allegations as asserted in the original complaint, and on October 26, 2015, the Company timely filed a motion to dismiss this amended complaint. The hearing on the motion to dismiss was held on January 12, 2016. On July 1, 2016, the Court issued an opinion denying the motion to dismiss. The Company filed its answer to the complaint on July 21, 2016. In addition, on July 29, 2016, the Company initiated an inter partes review (IPR) procedure with the United States Patent and Trademark Office challenging the validity of the IDEXX patents. On February 6, 2017, we entered into a settlement agreement with IDEXX, which involved the withdrawal by IDEXX of their complaint and withdrawal by us of the IPR.
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'Services’ Office of the Inspector General, and the Department of Justice, and the Company is cooperating with these agencies to ensure the proper repayment and resolution of this matter. The Company previously identified approximately $1.5 million inof excess amounts billed on these contracts since January 1, 2007, and reservedrecorded a liability for such amount.  Because of the early stage ofBased on its ongoing discussions with the government, and complex nature of this matter, the Company believes that it is reasonably possible thathas recorded an additional lossescharge of $0.3 million during the fiscal year 2016. The Company’s best estimate, which totals $1.8 million, may be incurred. However, it cannot at this time estimatesubject to change based on the potential rangeterms of loss beyondany final settlement with the current reserveDepartment of $1.5 million. 
In July 2012, a Mauritius supplier of large animal models submitted an Application for Arbitration with The 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 invoicesJustice and the supplier was therefore permitted to terminate the supply 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 2013Department of Health 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) allHuman Services’ Office 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 arbitration ruling.

Inspector General.
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 of the underlying agreement. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited. However, to date the Company has not incurred
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

material costs to defend lawsuits or settle claims related to these indemnification provisionsprovisions. As a result, the estimated fair value of these obligations is minimal.
Purchase Obligations
The Company enters into unconditional purchase obligations, in the ordinary course of business, that include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable at any time without penalty. The aggregate amount of the Company’s unconditional purchase obligations totaled $86.2 million as of December 31, 2016.
14. RESTRUCTURING AND ASSET IMPAIRMENTS
Workforce Reductions
The Company periodically implements workforce reductions to improve operating efficiency at various sites. The following table provides a rollforward of the Company’s severance and retention costs liability:
 December 31, 2016 December 26, 2015 December 27, 2014
      
 (in thousands)
Balance, beginning of period$2,969
 $2,666
 $2,782
Expense8,454
 6,173
 7,792
Payments / utilization(7,473) (5,820) (7,900)
Foreign currency adjustments(270) (50) (8)
Balance, end of period$3,680
 $2,969
 $2,666
As of December 31, 2016 and December 26, 2015, $3.6 million and $2.6 million of severance and retention costs liability, respectively, was included in accrued compensation and $0.1 million and $0.3 million, respectively, was included in other than guarantieslong-term liabilities on the Company's consolidated balance sheets.
The following table presents severance and retention costs by classification on the consolidated statements of income:
 Fiscal Year
 2016 2015 2014
      
 (in thousands)
Cost of services provided and products sold (excluding amortization of intangible assets)$4,717
 $735
 $3,342
Selling, general and administrative3,737
 5,438
 4,450
Total severance and retention costs$8,454
 $6,173
 $7,792
The following presents severance and retention costs by reportable segment:
 Fiscal Year
 2016 2015 2014
      
 (in thousands)
RMS$759
 $1,338
 $4,593
DSA7,689
 1,068
 2,912
Manufacturing6
 1,639
 166
Unallocated corporate
 2,128
 121
Total severance and retention costs$8,454
 $6,173
 $7,792
Facilities
In fiscal year 2016, the Company commenced a consolidation of small DSA facilities in the U.S., Ireland, and the United Kingdom. As a result, an asset impairment charge of $9.4 million was recorded related to the consolidation plans.

81


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

In fiscal year 2015, the Company commenced a consolidation of certain RMS facilities in the U.S., Europe, and Japan. As a result, an asset impairment charge of $1.8 million was recorded related to the consolidation plans.

Phase I clinical business. See Note 14, “Discontinued Operations.”In fiscal year 2014, the Company committed to plans to consolidate certain research model operations in the U.S., Japan, and Europe. As a result, the estimated fair valueCompany recorded $2.2 million of these obligations,asset impairments and other than liabilitiescharges and $4.3 million of accelerated depreciation related to certain facilities impacted by the Phase I clinical business, is minimal.consolidation plans. Also, in fiscal year 2014, the Company recorded a gain of $1.0 million on the sale of a European facility.


13. BUSINESS15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company revised its reportable segments during 2014fiscal year 2016 to align with its view of the business following its acquisition of Argenta and BioFocus.WIL Research. See Note 1, "Description“Description of Business and Summary of Significant Accounting Policies." The Company reported segment results on this basis retrospectively for all comparable prior periods. Asset information on a reportable segment basis is not disclosed as this information is not separately identified and internally reported to the Company’s Chief Operating Decision Maker.
The following table presents revenue and other financial information by reportable segment.segment:
Fiscal Year EndedFiscal Year
December 27, 2014 December 28, 2013 December 29, 20122016 2015 2014
(in thousands)     
Research Models and Services     
(in thousands)
RMS     
Revenue$507,327
 $511,350
 $521,633
$494,037
 $470,411
 $503,656
Gross margin190,092
 179,493
 198,291
Operating income121,376
 116,737
 143,783
136,365
 120,973
 120,736
Total assets375,415
 460,594
 411,874
Long-lived assets138,021
 161,027
 172,641
Depreciation and amortization27,512
 41,837
 26,725
20,853
 22,526
 27,309
Capital expenditures18,749
 16,717
 27,077
11,642
 17,398
 18,669
Discovery and Safety Assessment   
  
DSA   
  
Revenue$538,218
 $432,378
 $408,908
$836,593
 $612,173
 $538,218
Gross margin150,970
 106,766
 97,908
Operating income69,749
 47,413
 35,688
138,157
 121,981
 69,749
Total assets1,088,171
 766,243
 760,370
Long-lived assets408,280
 394,741
 414,584
Depreciation and amortization47,138
 37,720
 41,001
71,816
 46,812
 47,138
Capital expenditures19,759
 12,561
 10,051
27,493
 30,333
 19,759
Manufacturing Support     
Manufacturing     
Revenue$252,117
 $221,800
 $198,989
$350,802
 $280,718
 $255,788
Gross margin131,598
 108,643
 95,882
Operating income78,620
 61,227
 57,519
104,543
 74,675
 79,260
Total assets274,952
 246,467
 228,804
Long-lived assets71,367
 66,352
 64,254
Depreciation and amortization14,092
 17,079
 13,549
25,566
 18,129
 14,295
Capital expenditures15,541
 9,876
 10,407
12,247
 9,814
 15,621

A reconciliationFor fiscal years ended 2016, 2015 and 2014, reconciliations of segment operating income and capital expenditures to the respective consolidated operating incomeamounts are as follows:
 Operating Income Capital Expenditures
 Fiscal Year Fiscal Year
 2016 2015 2014 2016 2015 2014
            
 (in thousands)
Total reportable segments$379,065
 $317,629
 $269,745
 $51,382
 $57,545
 $54,049
Unallocated corporate(141,646) (111,180) (92,075) 3,906
 5,707
 2,876
Total consolidated$237,419
 $206,449
 $177,670
 $55,288
 $63,252
 $56,925
Revenue for each significant product or service offering is as follows:

82


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


 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
 Fiscal Year
 2016 2015 2014
      
 (in thousands)
RMS$494,037
 $470,411
 $503,656
DSA836,593
 612,173
 538,218
Manufacturing350,802
 280,718
 255,788
Total revenue$1,681,432
 $1,363,302
 $1,297,662

A summary of unallocated corporate overhead consists of the following:following:
Fiscal Year
Fiscal Year Ended2016 2015 2014
December 27, 2014 December 28, 2013 December 29, 2012     
(in thousands)(in thousands)
Stock-based compensation expense$18,474
 $13,411
 $11,724
$27,272
 $25,751
 $18,474
Salary, bonus and fringe30,838
 23,446
 20,312
Consulting, audit and professional services13,431
 8,666
 7,453
Salary, bonus, and fringe39,189
 33,026
 30,838
Consulting, audit, and professional services23,421
 15,418
 13,431
IT related expenses6,528
 11,646
 12,622
13,233
 8,400
 6,528
Depreciation expense7,703
 6,334
 6,260
8,423
 7,414
 7,703
Costs associated with evaluation and integration of acquisitions6,285
 1,752
 3,772
Acquisition related adjustments15,608
 11,644
 6,285
Other general unallocated corporate expenses8,816
 8,721
 9,082
14,500
 9,527
 8,816
Total unallocated corporate overhead costs$92,075
 $73,976
 $71,225
$141,646
 $111,180
 $92,075
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 revenuesRevenue and other financial informationlong-lived assets by geographic locations of our businesses. area are as follows:
 U.S. Europe Canada Japan Other Non-U.S. Consolidated
            
 (in thousands)
2016           
Revenue$850,422
 $520,937
 $194,210
 $46,829
 $69,034
 $1,681,432
Long-lived assets462,330
 177,423
 78,866
 20,941
 16,267
 755,827
2015           
Revenue$659,466
 $435,491
 $172,349
 $40,520
 $55,476
 $1,363,302
Long-lived assets402,238
 159,445
 77,535
 22,348
 16,393
 677,959
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
Included in the other non-U.S. category belowabove are operations located in China, Korea, Australia, Singapore, and India. Revenues represent 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
 (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

14. DISCONTINUED OPERATIONS
In 2011, the Company disposed of its Phase I clinical business, though the Company 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 clinical business filed for Chapter 11 bankruptcy, resulting in an additional charge of $1.3 million. Effective July 2013, the Company assumed control of the leased property and assumed obligations under the lease consistent with the guarantee. As of December 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)

84


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



15.16. SELECTED QUARTERLY FINANCIAL DATA (unaudited)

The following table contains quarterly financial information for fiscal years 20142016 and 2013.2015. The operating results for any quarter are not necessarily indicative of future period results.
 
First
Quarter
 
Second
Quarter
 
Third
Quarter
 
Fourth
Quarter
        
Fiscal Year 2016(in thousands, except per share amounts)
Total revenue$354,868
 $434,055
 $425,720
 $466,789
Gross profit(1)
140,768
 169,747
 156,270
 179,881
Operating income51,472
 58,061
 58,795
 69,091
Net income attributable to common shareholders37,143
 35,207
 37,735
 44,680
Earnings (loss) per common share       
Basic:       
Continuing operations attributable to common shareholders$0.80
 $0.75
 $0.79
 $0.95
Discontinued operations$
 $
 $0.01
 $
Net income attributable to common shareholders$0.80
 $0.75
 $0.80
 $0.95
Diluted:       
Continuing operations attributable to common shareholders$0.78
 $0.73
 $0.78
 $0.93
Discontinued operations$
 $
 $0.01
 $
Net income attributable to common shareholders$0.78
 $0.73
 $0.79
 $0.93
Fiscal Year 2015       
Total revenue$320,414
 $339,573
 $349,465
 $353,850
Gross profit(1)
119,660
 132,783
 138,075
 140,574
Operating income43,005
 55,735
 55,440
 52,269
Net income attributable to common shareholders31,541
 48,509
 37,379
 31,884
Earnings (loss) per common share       
Basic:       
Continuing operations attributable to common shareholders$0.67
 $1.04
 $0.81
 $0.71
Discontinued operations$
 $
 $
 $(0.02)
Net income attributable to common shareholders$0.67
 $1.04
 $0.81
 $0.69
Diluted:       
Continuing operations attributable to common shareholders$0.66
 $1.02
 $0.79
 $0.69
Discontinued operations$
 $
 $
 $(0.02)
Net income attributable to common shareholders$0.66
 $1.02
 $0.79
 $0.67
(1) Gross profit is calculated as total revenues minus cost of revenue (excluding amortization of intangible assets).
Full-year amounts may not sum due to rounding.
17. SUBSEQUENT EVENTS
On February 10, 2017, the Company completed the divestiture of its CDMO business to Quotient Clinical Ltd., based in London, England, for $75.0 million in cash, subject to certain post-closing adjustments.
The CDMO business, which represented approximately 1% of the Company’s 2016 consolidated revenue, was acquired in April 2016 as part of the acquisition of WIL Research. See Note 1, “Description of Business and Summary of Significant Accounting Policies” and Note 2, “Business Acquisitions.” Following a strategic review, the Company determined that the CDMO business was not optimized within the Company’s portfolio at its current scale, and that the capital could be better deployed in other long-term growth opportunities.
The Company is in the process of evaluating the transaction and its impact on the financial statements, including evaluating the resulting gain (loss) that will be recognized. As of December 31, 2016, the carrying amounts of the major classes of assets and liabilities associated with the CDMO business were as follows:
CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 
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
 December 31, 2016
 (in thousands)
Assets 
Current assets$4,270
Property, plant and equipment, net11,313
Goodwill35,857
Long-term assets17,332
Total assets$68,772
Liabilities 
Current liabilities$5,840
Long-term liabilities7,856
Total liabilities$13,696
As of December 31, 2016, the assets and liabilities of the CDMO business were not classified as held-for-sale as management had not committed to a formal plan to sell the business and the sale was not deemed probable.


85





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'sCompany’s principal executive officer and principal financial officer have concluded that the Company'sCompany’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 27, 201431, 2016, 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 the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company'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.
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 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 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 27, 2014.31, 2016.

We have excluded the business acquisitions completed during fiscal year 2016, including WRH, Inc., Blue Stream Laboratories, Inc., and Agilux Laboratories, Inc., from the assessment of the effectiveness of internal control over financial reporting as of December 31, 2016. The acquired businesses are wholly-owned subsidiaries whose total assets and total revenues collectively represent 7.8% and 11.1%, respectively, of the related consolidated financial statement amounts as of and for fiscal year ended December 31, 2016.
The effectiveness of our internal control over financial reporting as of December 27, 201431, 2016, has been audited by PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm, as stated in their report which is included herein.in Item 8, “Financial Statements and Other Supplementary Data” in this Annual Report on Form 10-K.

(b)    Changes in Internal Controls
(b)
Changes in Internal Controls
During the fourth quarter of 2016, the Company continued to execute a plan to centralize certain accounting transaction processing functions to internal shared service centers. This planned effort is expected to continue in subsequent quarters. There were no other changes in the Company'sCompany’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of the Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 27, 2014of 2016 that materially affected, or were reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.

Item 9B.    Other Information
None.


PART III


86



Item 10.    Directors, Executive Officers and Corporate Governance

A.    Directors and Compliance with Section 16(a) of the Exchange Act
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 20152017 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 20152017 Proxy Statement under the section captioned “Corporate Governance” and is incorporated herein by reference thereto.
B.Our Executive Officers
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.”“Item 1. Business”
C.Audit Committee Financial Expert
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 20152017 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
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 and can be accessed by selecting the “Corporate Governance” link at http://ir.criver.com.ir.criver.com. We will provide to any person, without charge, a copy of our Code of Business Conduct and Ethics by requestingEthics. To obtain a copy, fromplease mail a request to 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
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 our Board of Directors.
Item 11.    Executive Compensation

The information required by this Item will be included in the 20152017 Proxy Statement under the sections captioned “2014“2016 Director Compensation,” “Compensation Discussion and Analysis,” “Executive Compensation and Related Information,” “Compensation Committee Interlocks and Insider Participation” and “Report of Compensation Committee”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 20152017 Proxy Statement under the sections captioned “Beneficial Ownership of Securities” and “Equity Compensation Plan Information” and is incorporated herein by reference thereto.

87



Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes, as of December 27, 2014, the number of options issued under the Company's stock option plans and the number of options available for future issuance under these plans.
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
 
Weighted-average
exercise price of
outstanding
options, warrants
and rights
 
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
 
 (a) (b) (c) 
Equity compensation plan approved by security holders:      
Charles River 2000 Incentive 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 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 20152017 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 20152017 Proxy Statement under the section captioned “Statement of Fees Paid to Independent Registered Public Accounting Firm” and is incorporated herein by reference thereto.

PART IV


88



Item 15.    Exhibits and Financial Statement Schedules
Item 15(a)(1) and (2) 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(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 Annual Report on Form 10-K in response to Item 15(c) of Form 10-K.

89Item 16.    Form 10-K Summary
None.




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.
By:/s/ DAVID R. SMITH
David R. Smith
Date:February 17, 2015By:14, 2017
/s/ THOMAS F. ACKERMAN
Thomas F. Ackerman
Corporate Executive Vice President, and
Chief Financial Officer and Chief Accounting 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 17, 201514, 2017
 James C. Foster  
    
By:/s/ THOMAS F. ACKERMANDAVID R. SMITHCorporate Executive Vice President, andChiefFebruary 17, 201514, 2017
 Thomas F. AckermanDavid R. SmithChief Financial Officer
By:/s/ JOHN J. CROWLEYCorporate Senior Vice President, Corporate Controller and Chief Accounting OfficerFebruary 17, 2015
John J. Crowley 
    
By:/s/ ROBERT J. BERTOLINIDirectorFebruary 17, 201514, 2017
 Robert J. Bertolini  
    
By:/s/ STEPHEN D. CHUBBDirectorFebruary 17, 201514, 2017
 Stephen D. Chubb  
    
By:/s/ GEORGE E. MASSARODirectorFebruary 17, 201514, 2017
 George E. Massaro  
    
By:/s/ DEBORAH KOCHEVARDirectorFebruary 17, 201514, 2017
 Deborah Kochevar  
    
By:/s/ GEORGE M. MILNE, JR.DirectorFebruary 17, 201514, 2017
 George M. Milne, Jr.  
    
By:/s/ C. RICHARD REESEDirectorFebruary 17, 201514, 2017
 C. Richard Reese  
    
By:/s/ CRAIG BB. THOMPSONDirectorFebruary 17, 201514, 2017
 Craig B. Thompson  
    
By:/s/ RICHARD F. WALLMANDirectorFebruary 17, 201514, 2017
 Richard F. Wallman  


90



EXHIBIT INDEX
Exhibit No.DescriptionFiled with this Form 10-KIncorporated by ReferenceDescriptionFiled with this Form 10-KIncorporation 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
3.2Third Amended and Restated By-laws of Charles River Laboratories International, Inc. 8-KDecember 2, 20143.2Fifth Amended and Restated By-Laws of Charles River Laboratories International, Inc. 8-KMay 16, 20163.2
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. Form of Performance Share Unit Granted Under 2007 Incentive Plan 10-KFebruary 27, 20134.4Charles River Laboratories International, Inc. Form of Performance Share Unit granted under the 2007 Incentive Plan 10-KFebruary 27, 20134.4
4.3Charles River Laboratories International, Inc. Form of Performance Share Unit granted under the 2016 Incentive PlanX 
10.1*Charles River Corporate Officer Separation Plan dated April 30, 2010 10-QAugust 3, 201010.1Charles River Laboratories International, Inc. 2007 Incentive Plan, as amended 10-KFebruary 17, 201510.13
10.2*Charles River Laboratories International, Inc. 2016 Incentive Plan 10-QAugust 3, 201610.1
10.3*Charles River Laboratories International, Inc. 2000 Incentive Plan amended May 9, 2005 10-KMarch 14, 200610.7Charles River Laboratories International, Inc. Form of Stock Option granted under the 2007 Incentive Plan, as amended 10-KFebruary 20, 200810.17
10.4*Charles River Laboratories International, Inc. Form of Stock Option granted under the 2016 Incentive PlanX 
10.5*Form of change in control agreement 10-KFebruary 23, 200910.7Charles River Laboratories International, Inc. Form of Restricted Stock Award granted under the 2007 Incentive Plan, as amended 10-KFebruary 20, 200810.18
10.6*Executive Incentive Compensation Plan dated January 1, 2009 10-KFebruary 23, 200910.8Charles River Laboratories International, Inc. Form of Restricted Stock Unit granted under the 2007 Incentive PlanX 
10.7*Charles River Laboratories International, Inc. Form of Restricted Stock Unit granted under the 2016 Incentive PlanX 
10.8*Charles River Corporate Officer Separation Plan dated April 30, 2010 10-QAugust 3, 201010.1
10.9*Form of Change in Control Agreement 10-KFebruary 23, 200910.7
10.10*Charles River Laboratories, Inc. Executive Life Insurance/Supplemental Retirement Income Plan 10-KMarch 9, 200510.23Executive Incentive Compensation Plan dated January 1, 2016 10-KFebruary 12, 201610.4
10.11*
Charles River Laboratories amended and restated Deferred Compensation Plan amended December 2, 2008, July 20, 2011 and October 27, 2011
 10-KFebruary 27, 201210.11Charles River Laboratories International, Inc. Non-Employee Directors Deferral Plan dated April 5, 2016 10-QMay 4, 201610.1
10.12Charles River Laboratories International, Inc. Fifth Amended and Restated Credit Agreement dated May 29, 2013 10-QJuly 31, 201310.1
10.12*Charles River Laboratories, Inc. Executive Life Insurance/Supplemental Retirement Income Plan 10-KMarch 9, 200510.23
10.13*Charles River Laboratories International, Inc. 2007 Incentive Plan, as amendedX Charles River Laboratories amended and restated Deferred Compensation Plan, as amended 10-KFebruary 27, 201210.11
10.14*Charles River Laboratories International, Inc. Form of Stock Option granted under 2007 Incentive Plan 10-KFebruary 20, 200810.17Amended and Restated Deferred Compensation Plan Document dated July 17, 2012 10-QAugust 7, 201210.1
10.15*Charles River Laboratories International, Inc. Form of Restricted Stock Award granted under 2007 Incentive Plan 10-KFebruary 20, 200810.18Letter Agreements with Davide Molho dated May 22, 2009 10-KFebruary 23, 201110.17
10.16*Letter Agreements with Dr. Davide Molho dated May 22, 2009 10-KFebruary 23, 201110.17Agreement between Thomas Ackerman and Charles River Laboratories, Inc. dated February 25, 2015 8-KFebruary 27, 201599.10
10.17*Amended and Restated Deferred Compensation Plan Document dated July 17, 2012 10-QAugust 7, 201210.1Agreement between David Smith and Charles River Laboratories, Inc. dated March 3, 2015 10-KFebruary 12, 201610.16
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
10.18Charles River Laboratories International, Inc. Seventh Amended and Restated Credit Agreement dated March 30, 2016 8-KApril 5, 201610.1
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.INSeXtensible Business Reporting Language (XBRL) Instance DocumentX 
101.SCHXBRL Taxonomy Extension SchemaX 
101.CALXBRL Taxonomy Extension Calculation LinkbaseX 

91



10.22*Exhibit No.Addendum to Provision CommittedDescriptionFiled with this Form 10-KIncorporation by Charles River Wiga Deutschland GmbH for Dr. Jorg Geller dated March 25, 199710-QJuly 31, 201310.22Reference
10.23*FormAgreement between Dr. Nancy Gillett and Charles River Laboratories, Inc. effective January 1, 2015Filing DateX
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.INSXBRL Instance DocumentX
101.SCHXBRL Taxonomy Extension SchemaX
101.CALXBRL Taxonomy Extension Calculation LinkbaseXExhibit No.
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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