Charles River Laboratories Meeting with Management

Transcription

1 Charles River Laboratories Meeting with Management August 12, Charles River Laboratories International, Inc.

2 Safe Harbor Statement Caution Concerning Forward-Looking Statements. This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may be identified by the use of words such as anticipate, believe, expect, will, may, estimate, plan, outlook, and project and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These statements also include statements regarding our projected 2014 and future financial performance including sales, earnings per share, free cash flow, operating margin, specified costs (including capital expenditures and unallocated corporate expenses), net interest expense, effective tax rate, global efficiency initiative, cost increases, pricing, the expected impact of foreign exchange rates, leverage ratios, return on invested capital, days sales outstanding, and the operating results of our businesses; the future demand for drug discovery and development products and services and our intentions to expand those businesses (including opening new facilities); our expectations regarding stock repurchases, debt repayment and debt refinancings; the development and performance of our services and products; market and industry conditions including the outsourcing of these services and spending trends by our customers; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings; our success in consummating and integrating, and the impact of, our acquisitions (including Argenta and BioFocus) including the attainment of sales synergies; the expected impact of the cancelation of our contract with the NCI; our strategic agreements with leading pharmaceutical companies and opportunities for future similar arrangements; our ability to achieve market share gains in targeted market segments; and Charles River s future performance as otherwise delineated in our forward-looking guidance. Forward-looking statements are based on Charles River s current expectations and beliefs, and involve a number of risks and uncertainties that are difficult to predict and that could cause actual results to differ materially from those stated or implied by the forward-looking statements. Those risks and uncertainties include, but are not limited to: the ability to successfully integrate businesses we acquire; the ability to execute our cost-savings actions and the steps to optimize returns to shareholders on an effective and timely basis (including divestitures and site closures); the timing and magnitude of our share repurchases; negative trends in research and development spending, negative trends in the level of outsourced services, or other cost reduction actions by our customers; the ability to convert backlog to sales; special interest groups; contaminations; industry trends; new displacement technologies; USDA and FDA regulations; changes in law; continued availability of products and supplies; loss of key personnel; interest rate and foreign currency exchange rate fluctuations; changes in tax regulation and laws; changes in generally accepted accounting principles; and any changes in business, political, or economic conditions due to the threat of future terrorist activity in the U.S. and other parts of the world, and related U.S. military action overseas. A further description of these risks, uncertainties, and other matters can be found in the Risk Factors detailed in Charles River's Annual Report on Form 10-K as filed on February 25, 2014, as well as other filings we make with the Securities and Exchange Commission. Because forward-looking statements involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by Charles River, and Charles River assumes no obligation and expressly disclaims any duty to update information contained in this news release except as required by law. Regulation G This presentation includes discussion of non-gaap financial measures. We believe that the inclusion of these non-gaap financial measures provides useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company s performance. The non-gaap financial measures included in this presentation are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. The company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules and regulations. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations to those GAAP measures on our website at ir.criver.com. 2

3 Strategic Overview James C. Foster Chairman, President & Chief Executive Officer 2014 Charles River Laboratories International, Inc.

4 Charles River Snapshot A leading drug discovery and early-stage development company $1.17B in net sales (1) Only CRO with an integrated portfolio that spans the discovery and early-stage development process from target discovery through preclinical development A multinational company with ~8,000 employees worldwide ~70 facilities in 17 countries Client Base (1) Global Key Accounts 36% Mid-Tier Biopharma 39% North America 61% Europe 30% Geographic Sales (1) Academic/ Government 25% ROW 9% 1) Based on Charles River s FY 2013 net sales. Does not include the acquisition of Argenta and BioFocus. 4

5 Long-Term Targets RMS DSA Manufacturing TOTAL Revenue Low to midsingle digits Mid to highsingle digits 10%+ Organic: Mid to high-single digits With acquisitions: High-single to lowdouble digits Non-GAAP Operating Margin High 20% range ~20% Low 30% range ~20% EPS growth rate higher than sales growth rate Continued robust cash flow generation Maintain and enhance #1 share position in all of our businesses 5

6 Growth Drivers Scientific expertise Portfolio and geographic expansion Strategic relationships Targeted sales strategies Efficiency initiatives (T. Ackerman) 6

7 Scientific Expertise New Board-level Science & Technology Committee to evaluate technologies for acquisition or licensing Craig B. Thompson M.D. added to Board President and Chief Executive Officer, Memorial Sloan-Kettering Cancer Center Extensive experience with both global pharmaceutical companies and leading academic institutions in the fields of cancer biology and immunology Chairs S&T Committee Increasing utilization of strategic relationships to identify opportunities to enhance CRL expertise Venture capitalists Scientific experts 7

8 Portfolio Expansion Acquisitions to expand capabilities and/or geography Discovery capabilities, particularly Early Discovery Therapeutic area capabilities Endotoxin & Microbial Detection (EMD) Products, software, services Safety Assessment Alternative models Research Models & Services China Licensing technologies and partnering with other companies or academic institutions Lower-risk alternative to acquiring multiple technologies 8

9 Portfolio Expansion, cont. Internal development of products and services EMD PTS, MCS, Nexus, etc. Patent protected Biologics Assay development Cell banking Discovery Finland Electrophysiology GEMS Internet Colony Management (ICM ) Avian Vaccine Services Assay development Geographic expansion Incubation 9

10 M&A Example: Argenta & BioFocus Builds a broader portfolio to support the drug discovery and earlystage development continuum, and increased virtualization of biopharma Adds expert capabilities in integrated drug discovery from target discovery to delivery of clinic-ready candidates Focus on earliest stages of drug discovery, with extensive capabilities in medicinal chemistry, target discovery, and complex in vitro biology Exceptional fit for CRL s in vivo expertise Advances CRL s position as a market leader in discovery services Enhances revenue growth rate Profitable business, with margin expansion opportunity Successful completion of 90-day integration plan Template for future acquisitions 10

11 Argenta & BioFocus Go-to-Market Strategy Early Discovery capabilities enable us to work with clients on their integrated early-stage research programs Ability to provide early discovery services and continue to support research programs as they move downstream through in vivo discovery and safety assessment Meeting with heads of R&D and other decision makers at leading biopharma and larger mid-tier clients Clients are evaluating placing additional work streams with CRL Believe our value proposition is resonating with many clients 11

12 Strategic Relationships We have strategic relationships with the majority of our large biopharma clients Strategic partnerships, enterprise agreements, and preferred provider relationships, all with various durations These structured relationships incentivize large clients to purchase more across our entire early-stage portfolio Addition of Early Discovery capabilities enables clients to engage with us earlier Importance of a single provider to minimize delays due to start-up and hand-offs with multiple providers Most strategic relationships have governance committees, strengthening the interaction between CRL and clients Expanding strategic relationships to include larger mid-tier clients 12

13 Multi-Faceted Strategic Relationships CRL is expanding the scope of strategic relationships Global biopharmaceutical companies Mid-tier biotechnology companies Academic research centers Non-Governmental research organizations (NGOs) Venture capital firms Forming strategic relationships with multiple constituencies enhances the value CRL brings to every relationship Example: Global pharma increasingly relies on biotech for pipeline support More than half of late-stage molecules are originated externally* (product licensing, program partnerships, or company acquisitions) CRL works with many biotech companies, enhancing our understanding of their molecules Strong partnerships with multiple constituencies are essential to our long-term success * Source: McKinsey & Company, New frontiers in pharma R&D investment, Feb

14 Targeted Sales Strategies Global Key Accounts Mid-Tier Biopharma Academic/ Government Partnering with a reliable CRO like CRL enables more efficient and cost-effective drug development, without investment in in-house infrastructure Utilizing CRL s unique, early-stage portfolio, scientific expertise, quality, and flexibility Broad, flexible client arrangements allow us to become more embedded with clients on the same side of the table Opportunities to identify additional services which can be outsourced to CRL are enhanced Strategic relationships represented slightly more than 25% of total sales in 2013 Discussions on additional strategic relationships and expansion of existing ones are ongoing Addition of Argenta and BioFocus enables us to engage with these clients earlier and provide greater value 14

15 Targeted Sales Strategies Global Key Accounts Mid-Tier Biopharma Academic/ Government Most of the mid-tier biopharma companies maintain limited in-house capabilities and many outsource to a single provider Expanded discovery capabilities enable clients to stay with CRL for a more significant portion of the drug discovery and development process Turnover in the mid-tier is considerable due to smaller pipelines, but clients often return to CRL with each new molecule Mid-Tier presents a significant opportunity to drive sales growth Robust funding available from global biopharma and capital markets In 2013, sales to mid-tier exceeded sales to global key accounts for the first time Consolidated mid-tier sales increased ~13% in 1H14 15

16 Targeted Sales Strategies Global Key Accounts Mid-Tier Biopharma Academic/ Government Leading academic institutions globally are increasingly viewed as discovery engines by large biopharma Accessing more funding from multiple sources including large biopharma Helps to offset softer government funding These institutions require support as they navigate the drug discovery and development process CRL has gained market share and believe we will capitalize on opportunity to continue to penetrate academic market Offering the highest-quality products and services at a marginal price premium Scientific expertise to help academic institutions develop molecules Academic/Government clients represented 25% of total revenue in

17 Strategic Imperatives Focus on strategic, disciplined top-line growth Acquisitions to continue portfolio expansion Internal development of products and services Targeting organic revenue growth in mid to high-single digits; highsingle to low-double digits with acquisitions Targeting non-gaap operating margin ~20% Add to scientific and management bench strength Require the best and brightest to support our growing business Rich talent pool Drive productivity and efficiency gains Leverage from higher sales Continue to optimize capacity utilization Alignment of model production operations 17

18 Strategic Imperatives, cont. Expand existing and sign new strategic relationships Enhance our position as the leading full service, early-stage CRO with integrated drug discovery and early development capabilities Believe the portfolio is the strongest it has ever been, enabling new opportunities to support clients 18

19 Financial Review Thomas F. Ackerman Executive Vice President & Chief Financial Officer 2014 Charles River Laboratories International, Inc.

20 New Business Segment Alignment Reviewed financial reporting segments to ensure alignment with our view of the Company, following the April 1 st acquisition of Argenta/BioFocus Determined that we should report three business segments: Research Models and Services (RMS) Discovery and Safety Assessment (DSA) Manufacturing Support (Manufacturing) Believe business and financial profiles, end customers, and go-tomarket strategies, in aggregate, are now more closely aligned for the businesses within each segment 20

21 Old Segment Structure Research Models & Services (RMS) Research Models Research Models Avian Vaccine Services * Research Model Services Genetically Engineered Models & Services (GEMS) Research Animal Diagnostic Services (RADS) Insourcing Solutions (IS) Discovery Research Services * (NC & Finland sites) Endotoxin & Microbial Detection (EMD) * Preclinical Services (PCS) Discovery Services Safety Assessment Biologics Testing Solutions * (formerly BPS) * Indicates a business unit now reported in a different segment. 21

22 New Segment Structure Research Models & Services (RMS) Research Models Research Model Services Genetically Engineered Models & Services (GEMS) Research Animal Diagnostic Services (RADS) Insourcing Solutions (IS) Discovery & Safety Assessment (DSA) Discovery Services* Early Discovery (Argenta/BioFocus) In Vivo Discovery (NC, Finland & MA sites) Safety Assessment Manufacturing Support Endotoxin & Microbial Detection (EMD)* Avian Vaccine Services* Biologics Testing Solutions* (formerly BPS) * Indicates a business unit previously reported in a different segment. 22

23 New Segment Composition 2Q14 Revenue Mfg. Support 19%* of Revenue 26%* of OI Other Mfg. 9% EMD 10% Discovery and Safety Assessment 42% Research Models 26% RM Services 13% RMS 39%* of Revenue 45%* of OI DSA 42%* of Revenue 29%* of OI * Revenue and Operating Income (OI) percentages are based on 2Q14 amounts. OI is non-gaap operating income before unallocated corporate costs. See website for reconciliations of Non-GAAP to GAAP results. 23

24 New Segment Outlook ($ in millions) YOY Δ RMS Sales $521.6 $512.8 (1.7%) RMS OM% 27.6% 22.8% RMS Non-GAAP OM% 28.7% 26.8% DSA Sales $408.9 $ % DSA OM% 8.7% 11.0% DSA Non-GAAP OM% 13.0% 15.6% Mfg. Support Sales $199.0 $ % Mfg. Support OM% 28.9% 27.6% MS Non-GAAP OM % 31.3% 31.0% 2014 Revenue Outlook RMS Approx. flat sales DSA >20% revenue growth (>15% contribution from Argenta/BioFocus) Mfg. Support >10% sales growth See website for reconciliations of Non-GAAP to GAAP results. 24

25 Operating Margin Outlook Expect non-gaap operating margin in each segment to improve in 2014 Combination of productivity and efficiency initiatives and higher sales volume 2014 consolidated non-gaap operating margin expected to be similar to or slightly higher than last year s level of 17.3% Segment margin improvement will be offset by higher corporate costs Argenta/BioFocus is slightly dilutive to the consolidated non-gaap operating margin Currently has a low to mid-teens non-gaap operating margin, which we expect to improve over time See website for reconciliations of Non-GAAP to GAAP results. 25

26 2Q14 Year-over-Year Performance From Continuing Operations ($ in Millions) 2Q14 2Q13 %Δ FX %Δ ex. FX Revenue (Non-GAAP) $341.2 $ % 1.4% 14.5% GAAP OM% 15.0% 14.7% 30 bps Non-GAAP OM% 19.0% 17.3% 170 bps GAAP EPS $0.75 $ % Non-GAAP EPS $0.97 $ % Free cash flow $47.7 $ % Acquisition of Argenta and BioFocus contributed 8.0% to 2Q14 revenue Slightly ahead of acquisition plan Mid-tier clients generated a double-digit sales increase Margins increased in all three business segments, due primarily to a combination of leverage from higher sales and benefits from efficiency initiatives See website for reconciliations of Non-GAAP to GAAP results. 26

27 2Q14 Performance by New Business Segment ($ in millions) 2Q14* 2Q13* %Δ FX %Δ ex. FX Research Models (Non-GAAP) $87.8 $ % 1.1% (0.7%) RM Services $45.3 $ % 1.3% 2.1% Total RMS Segment $133.1 $ % 1.1% 0.3% Total DSA Segment $142.6 $ % 1.3% 31.4% EMD $33.6 $ % 2.3% 19.1% Other Mfg. Support* $31.9 $ % 2.5% 11.3% Total Mfg. Support $65.4 $ % 2.3% 15.2% Total Revenue (Non-GAAP) $341.2 $ % 1.4% 14.5% Robust Q2 performance across most business units * May not add due to rounding. ** Other Mfg. Support includes the Biologics Testing Solutions and Avian Vaccine business units. See website for reconciliations of Non-GAAP to GAAP results. 27

28 2Q14 Former RMS/PCS Segment Revenue Performance From Continuing Operations ($ in millions) 2Q14 2Q13 %Δ FX %Δ ex. FX Former RMS (Non-GAAP) $189.2 $ % 1.3% 3.5% PCS $128.5 $ % 1.6% 11.2% Argenta/BioFocus $ Total Revenue (Non-GAAP) $341.2 $ % 1.4% 14.5% Strong quarter for safety assessment business Going forward, we will not provide results for our former segments See website for reconciliations of Non-GAAP to GAAP results. 28

29 Capital Priorities Top priority for capital deployment is disciplined M&A activity Continue to strengthen our early-stage portfolio and drive profitable growth Major uses of capital in 2014 have been the completion of Argenta/BioFocus acquisition on April 1 st and stock repurchases Repurchased ~1.7 shares in 1H14 for $90.3M Accelerated a meaningful portion of our planned 2014 stock repurchase activity into 2Q14 Believed that there was an attractive entry point for our stock Anticipate a more modest level of repurchases for the remainder of the year $48.8M remaining under our stock repurchase authorization as of 6/28/14 Total debt was $803M as of 6/28/14 Borrowed $116M to finance the Argenta/BioFocus acquisition Pro forma leverage ratio (total debt-to-ebitda) was within our near-term targeted range of 2.50x-2.75x at end of 2Q14 29

30 2H14/3Q14 Outlook Following an extremely robust 2Q14 performance, 2H14 outlook assumes more normalized results due to a combination of factors: Normal seasonality affects the RMS segment in 2H14 Anticipate modest sequential decline in safety assessment revenue in 3Q14 Have not forecast any limited partnership investment gains in 2H14 Recorded $0.12 of investment gains in 1H14 Expect 3Q14 revenue growth to be in the low-double digits on a YOY basis, including the acquisition of Argenta and BioFocus Expect 3Q14 non-gaap EPS to be similar to the 3Q13 level of $0.79 Equates to YOY EPS growth of ~10% when excluding $0.07 of investment gains and tax-related items in 3Q13 See website for reconciliations of Non-GAAP to GAAP results. 30

31 2014 Guidance From Continuing Operations Revenue growth, reported 9%-11% Impact of foreign exchange NM Revenue growth, constant currency 9%-11% GAAP EPS $2.60-$2.70 Non-GAAP EPS $3.25-$3.35 Raised 2014 non-gaap EPS guidance to reflect strong 2Q14 financial performance See website for reconciliations of Non-GAAP to GAAP results. 31

32 Strong EPS Growth and Cash Flow Generation Non-GAAP Earnings Per Share Free Cash Flow ($ in millions, except per share amounts) $1.99 $2.56 $2.74 $2.93 $3.25- $3.35 $155 $158 $160 $3.32 $3.08 $2.46 $170 $3.50 $180- $190 $3.80- $ E E GAAP ($5.38) $2.14 $2.01 $2.12 $2.60- EPS $2.70 Free Cash Flow (FCF) FCF per Share Improvement primarily driven by targeted sales strategies, productivity and efficiency initiatives, stock repurchases, and improving market demand See website for reconciliations of Non-GAAP to GAAP results. 32

33 Productivity and Efficiency Initiatives COST SAVINGS PROCESS EFFICIENCY 2015 & Beyond PRODUCTIVITY Facility consolidation Streamlined preclinical infrastructure o Arkansas o Massachusetts o China Consolidation of global research model operations o Germany o California o Michigan Consolidation of global research model operations o Japan o Other smaller facilities Operational efficiency Harmonization of preclinical operations to create seamless, global organization SG&A savings Leverage benefits of ERP Enhanced labor utilization and productivity using KPIs Automation of manual processes o ICM for GEMS RM inventory management Study scheduling optimization Additional automation & productivity initiatives o Production & lab Increase use of shared services Procurement synergies Consolidation of major spending categories and leverage regional or global supplier agreements Supplier consolidation Centralization of certain procurement functions Leverage eauctioning strategies with suppliers Standardize eprocurement processes at major global sites Expand global, low-cost sourcing Further reduce supplier base Increase outsourcing of noncore activities Standardization of supplies Client-facing initiatives Realigned sales organization with a three-pronged focus on global key accounts, mid-tier biotechs, and academic/gov t clients Targeted sales efforts o Strategic relationships o Enhanced focus on mid-tier & academic Real-time data access & rapid client response times o mypreclinical SM Strategic IT investments to enhance client access to data and response times Sales optimization strategies Leveraging the CR brand & pullthrough (every step of the way.) 33

34 Productivity and Efficiency Initiatives Facility consolidation Operational efficiency Procurement synergies Client-facing initiatives Incremental Savings Generated Per Year >$25M ~$20M 2014 Outlook ~$25M- $30M 2015 Outlook Targeting $25-$30M Productivity and efficiency initiatives help drive culture of continuous improvement throughout our business Benefits of these initiatives help offset annual cost increases 34

35 Summary Business segment revisions align well with expanded portfolio of integrated drug discovery and early-stage development capabilities Pleased with our robust 2Q14 financial performance and the successful completion of the Argenta/BioFocus acquisition Confident that our financial performance for the year will show signs of sustained improvement in our business Resulting in 2014 non-gaap EPS growth >10% Focus on productivity and efficiency, disciplined capital deployment, and client-facing efforts is expected to continue to drive revenue and EPS growth and enhance shareholder returns 35

36 Discovery Services David Smith Corporate Vice President, Early Discovery Services 2014 Charles River Laboratories International, Inc.

37 Charles River Discovery Services Synergistic fit between Argenta/BioFocus s target identification to IND services and Charles River s in vivo capabilities Early Discovery Services Target discovery Target validation High-throughput screening Safety-toxicology, PR&D Pharmaceutical sciences Respiratory, Oncology, CNS, Inflammation, Rare Diseases Biology Medicinal Chemistry ADME In Vivo Pharmacology Other In Vivo Discovery Services ADME/PK In Vivo Efficacy & Pharmacology Biomarker services Oncology, CNS, Inflammation, Cardiovascular, Metabolic Note: Pie chart represents breakout of 2014PF est. Discovery Services revenue. 37

38 Fully Integrated Target-to-IND Capabilities 1 Target Discovery & Validation Hit Identification Hit-to-Lead Lead-to- Candidate Non-Clinical Development Compound Design, Synthesis & Development Medicinal Chemistry Process Chemistry Pharmaceutical Sciences Physicochemical & Analytical Development Biology & Efficacy Disease Biology Assay Development & Screening In vivo Pharmacology & Efficacy Drug Disposition In Vitro ADME Discovery Bioanalysis (non-glp) In vivo ADME/pK (non-glp) In Vivo ADME/ PK (GLP) Bioanalysis (GLP & GCP) Safety In Vitro Toxicology Non-GLP In Vivo Toxicology GLP Toxicology Translational Tools Discovery Biomarkers / Imaging Pathology & Immunohistochemistry Biomarkers / Imaging (GLP & GCP) Argenta / BioFocus Charles River Both 38

39 Integrated Drug Discovery Capabilities Integrated drug discovery capabilities from target identification to clinic are a key competitive differentiator for Argenta/BioFocus Our expertise allows us to sit on partner steering committees Clients with integrated drug discovery programs represent ~80%* of revenues Average collaboration with these clients is 4 years* Leverage CRL s extensive in vivo capabilities to enhance integrated offering * Figures for Argenta/BioFocus only. 39

40 Scientific Depth Differentiates CRL ~550 scientists covering all aspects of drug discovery ~30% with Ph.D. degrees Significant early discovery expertise resident in Argenta and BioFocus ~45% with Ph.D. degrees Majority with Big Pharma backgrounds Average of 17 years of industry experience per scientist ~1,800 patents 148 drugs in the clinic 43 drugs on the market ~2,700 publications 40

41 Technical Capabilities Differentiate CRL Target discovery/ target validation SoftFocus compound libraries High-throughput screening PhenoFocus HO HO OH H N R Ion channel pharmacology Scale-up chemistry Pharmaceutical sciences Inhalation Histology with image analysis Functional imaging Microsampling Kinematic gait analysis 41

42 Disease Area Expertise Differentiates CRL Oncology Inflammation CNS Respiratory CardioMetabolic Rare Diseases Ocular Musculoskeletal 42

43 Strong Reputation for Candidate Delivery & Scientific Expertise Over 50 development candidates delivered Disease area No of candidates Most advanced compound PCC Ph I Ph IIa Ph IIb Ph III Inflammation 11 Chemokine, integrin, GPCR, cytokine, kinase Respiratory 20 GPCR, protease, N GPCR, protease, NHR, enzyme CNS 6 GPCR, NHR Metabolic disease 4 Enzyme, kinase, protease Oncology 8 Kinase, enzyme Antibacterial 1 Unknown Anti-viral 1 Protease Cardiovascular 1 Ion channel Secretory diarrhea 1 Ion channel 43

44 Comprehensive Offering Distinguishes CRL from Competition Grant Application Support Target Discovery Target Validation Assay Development Screening HTS Electrophysiology Peptide Chemistry Biologics Natural Products Structural Biology Fragment Screening Compound Libraries Medicinal Chemistry Biomarker ID/Development Separations Science CADD In Vitro ADMET In Vivo DMPK Bioanalytical Services Histology Radiolabelling Process R&D Preformulation & Material Science Formulation Development In Vivo Models (Dermatology) In Vivo Models (Respiratory) In Vivo Models (Oncology) In Vivo Models (CNS/Pain) In Vivo Models (Metabolic) In Vivo Models (Inflammation/Immunology) In Vivo Models (Cardiovascular) In Vivo Models (Infectious Diseases) GLP Bioanalytics IND Support Services Safety Pharmacology Western CRO Eastern CRO Has capability Has capability via partner Does not have capability 44

45 Competing with China Focus on differentiated, highquality offering Expertise in complex biology & medicinal chemistry Broad disease area expertise FTE value vs. price More experienced Western scientists reduce FTEs per project and enhance collaboration Significant cost appreciation in China as labor arbitrage declines Believe large pharma will continue to de-risk exposure to Chinese CROs IP protection Diversification of discovery outsourcing strategy Experience* Mid Tier: US/EU Cost-driven: Asia FTE Price Premier: US/EU * Factors: % PhDs, level of pharma experience, time as established CRO 45

46 Value Proposition for Integrated Programs Hit to Lead Target Hit 9-12 Months Lead Optimization Phase 8-10 FTEs Med chem, CADD, in vitro biosciences, pharmacology, and ADME/PK Lead FTEs Med chem, in vitro biosciences, pharmacology, ADME/PK, scale-up chemistry, physical science & formulation development, and early safety Months Development Candidate Charles River Early Discovery Services reduces discovery costs and the time to market for development candidates by up to 30% 46

47 CRL Growth Opportunities Multi-billion dollar outsourced discovery services market with attractive growth prospects Outsourcing penetration remains low and expected to increase Leverage the strength of CRL and Argenta/BioFocus s existing strategic relationships to expand sales to these clients Significant opportunity with global biopharmaceutical clients to increase the scope of services that we provide Example: Top-10 pharma company with strategic relationship with CRL Already a significant safety assessment client Currently evaluating placing integrated projects with CRL Early Discovery CRL would be able to provide seamless program from hit identification to the clinic New client opportunities Establish new strategic relationships Leverage CRL s extensive mid-tier client base to introduce early discovery capabilities 47

48 Productivity Initiatives Charles River Discovery Services has a dual focus of: Making disciplined investments to support growth Enhancing productivity and efficiency Further optimize capacity utilization Example: increasing the scientists per hood ratio Current laboratory capacity could accommodate double-digit growth in Early Discovery Services for 2-3 years Implement IT and lab automation projects Discovery LIMS, electronic notebooks and related strategies Evaluate cross-departmental synergies by consolidating similar capabilities across the sites Capture acquisition synergies, including procurement and backoffice initiatives 48

49 Summary Synergistic fit between Charles River and Argenta/BioFocus Positive client feedback: already expressing interest in expanding the scope of work with CRL to leverage integrated portfolio Charles River s drug discovery differentiators: Comprehensive target-to-ind offering Scientific depth Technical capabilities Disease area expertise Reputation in candidate delivery Integrated programs with long-term client relationships Reduced time and cost to deliver development candidates High-growth outsourced discovery market with attractive growth opportunities 49

50 Endotoxin and Microbial Detection Foster T. Jordan Senior Vice President, Endotoxin and Microbial Detection Products and Services 2014 Charles River Laboratories International, Inc.

51 EMD Overview The market-leading provider of the LAL test Limulus; genus of Horseshoe crab Amebocyte; blood cells of crab Lysate; blood extract LAL is an FDA regulated biological that reacts chemically in the presence of endotoxins, also known as lipopolysacharide (LPS) LPS induces fever reactions in patients and is therefore strictly regulated Full line of industry-leading microbial ID solutions 51

52 Business Snapshot Leading global provider of endotoxin detection products and services in the biopharmaceutical sector Product lines Endotoxin detection products and services Microbial identification products and services Markets served Core market: Sterile pharmaceutical, biotech, and medical device Other endotoxin markets: Dialysis, nuclear and compound pharmacies Other microbial ID markets: Non-sterile pharma, consumer care Our goal is to expand our footprint in biopharmaceutical and adjacent markets to enhance our position as the partner of choice for our clients critical product safety needs 52

53 Global Footprint Direct Sales / Support Distributors EMD Facilities 53

54 Key Differentiators Three decades of experience providing products and services to the biopharma quality control segment Innovative, patent protected, game-changing cartridge technology for endotoxin testing market Most comprehensive microbial identification library and contract testing service in the industrial space Global footprint for sales and support Unrivaled technical expertise 54

55 Continuous Innovation Endosafe PTS Endosafe MCS Endosafe Nexus Endosafe Nexgen-PTS PTS Point of Use Multi Cartridge System Full Automation Wireless Web-Based Solution Our Endosafe -PTS /MCS /Nexus /Nexgen products utilize the only FDA approved, cartridge-based technology for FDA-mandated LAL assays 55

56 PTS: Changing the Game Revolutionary cartridge-based technology Point-of-use or first fully automated LAL system In line with PAT (Process Analytical Technology) initiative from FDA Razor/razor-blade concept ~5,000 handheld units already in use in the field Expect to sell ~1M cartridges in 2014 Platform is scalable from low to high-volume labs LAL, glucan, and gram ID assays Value Proposition: Convert users from conventional LAL testing to premium priced, cartridge-based technology by increasing operating efficiencies and productivity gains 56

57 Pfizer PTS Implementation Pfizer assessed Endosafe rapid test methods, gathering data over time to support comparability to traditional testing methods ~47,000 samples tested by different users demonstrated comparability Aligned with USP<85> and PharmEur standards Reduced operator error, cost per test, training costs, reagent control, and technician test time Decentralized >60% of testing from the laboratory to the manufacturing floor Implemented ~70 PTS units and ~20 MCS units Presented poster at 2014 PDA Annual Meeting

58 Charles River Accugenix Solutions Axcess System Reference Microbial Databases Global Contract Service Labs Commercial System with Cloud-based Database Access Customer Portal with Data Management Tools Full line of microbial ID solutions from contract services to instrumentation; leveraging industry leading, proprietary, validated reference databases and unparalleled data analysis for rapid, accurate results 58

59 Globally Transforming the Industry Decentralization of in-process testing Fleet management software provides data management tools connecting and communicating across the Lab of Tomorrow 59

60 Sustained Double-Digit Revenue Growth 2013: Launch of: Nexus Axcess Digital Signatures $113 $94 EMD Revenue ($ in Millions) $33 $38 $46 $ : MCS Launch $63 $72 $ : Accugenix Acquisition : Global expansion of microbial ID 2006: FDA Approves PTS Global footprint expansion through distributor acquisitions

61 Market Opportunity Believe current addressable global market is ~$600M+ Assumes entire endotoxin detection market converted from conventional LAL testing to cartridge technology <10% global market penetration Enhanced market opportunity for microbial identification through the Accugenix portfolio As the Asia-Pacific market continues to expand, we will leverage our entire portfolio and geographic reach Supports manufacturers strategy to shift to a decentralized testing paradigm for rapid results enabling go/no-go decisions 61

62 Growth Strategy Convert traditional LAL test-kit users to PTS rapid detection products Gain additional market share Intend to acquire or license products, software, or services to support the control of microbial contamination Internal development of new, patented products and product extensions Expand PTS brand to accommodate testing for many different forms of bacterial contamination Global footprint expansion Roll-up of international distributors Open satellite microbial identification laboratories 62

63 Safety Assessment Glenn Washer, D.A.B.T. Senior Vice President, North American Preclinical Services 2014 Charles River Laboratories International, Inc.

64 Business Snapshot GLP regulatory-required and non-glp safety-focused studies conducted in North America and Europe U.S. (Nevada, Ohio, Pennsylvania) Canada (Montreal, Sherbrooke) Scotland (Edinburgh) Safety assessment services include: Lead Candidate Selection General and Specialty Toxicology Safety Pharmacology Pathology IND Program Management Drug Metabolism Laboratory Sciences Regulatory Consulting Agrochemical / Animal Health Growing client base in both global biopharma and mid-tier 64

65 Specialty Toxicology Services Inhalation Toxicology Infusion Toxicology Neurotoxicology Bone Research and Toxicology Ocular Research and Toxicology Developmental and Reproductive Toxicology (DART) Neonatal and Juvenile Toxicology Phototoxicology Genetic Toxicology Carcinogenicity Environmental Sciences Unparalleled depth and breadth of specialty services 65

66 Laboratory Sciences Formulation and Analytical Chemistry Bioanalysis Immunology & Immunochemistry In Vitro Sciences Clinical Support Services Dermal Absorption 66

67 Safety Assessment Market Current outsourced market estimated to be ~$2.5B-$3.0B Outsourcing penetration rate of ~45-50% Underlying market trends are beginning to improve Expected 3-year growth CAGR in mid-single digits Capacity utilization estimated at ~70% industry-wide Believe CRL exceeds industry average Believe CRL has the largest market share at >15% Fragmented market with the top 5 key players representing ~60% of the market CRL, Covance, Huntingdon/Harlan, WIL and MPI Other CROs Charles River MPI Covance WIL Research Huntingdon/ Harlan Source: Wall Street research and CRL management estimates. 67

68 CRL Business Trends Capacity utilization continues to steadily improve Pricing continues to be competitive Some price premium for expertise Large Pharma still expects favorable pricing for higher volume Continued to win RFPs for which we were not the lowest bidder Price is important, but expertise and quality are often considered more critical When those criteria are critical, CRL is the preferred choice Realizing efficiencies and customer gains from IT solutions Re-engineering processes / enhancing quality Sales growth and efficiency initiatives have improved operating margin 68

69 Scientific Differentiation Sponsors rely on CRL for the depth and breadth of our scientific expertise We provide expertise which they have chosen not to maintain in-house, or which they never developed Quick response time and ability to resolve unexpected scientific developments in a study or program Worldwide network of scientific experts supports clients wherever and whenever they require us CRL derives a deep understanding of client molecules by working from early discovery through safety assessment A capability unmatched by other CROs 69

70 Scientific Differentiation, cont. Market-leading scientific capabilities Toxicology: Bone/joint, DART, inhalation, infusion, juvenile, ocular Pathology: anatomical pathology, electron microscopy, immunohistochemistry, clinical pathology Laboratory Sciences: immunology, immunochemistry Continuous investment in leading-edge development of new models, assays and scientific services that enhance information generated by early studies, and improve program planning JET ECG technology, 3T3 Phototox Assay Unparalleled depth and breadth of scientific expertise 70

71 Portfolio Expansion Expansion of services we are evaluating: Antibody Drug Conjugates (ADC), Nucleotide-based test articles (RNAs), nanoparticles, biosimilars, imaging agents Use of the minipig as alternative to other large models Immunology capabilities (big pharma collaboration) Non-clinical program management Across drug development process Discovery to early to late non-clinical development Across test article programs Drug development partnerships 71

72 Evolution of Efficiency and Productivity Initiatives Operational Excellence Bottom-line focus Inward looking o Site closures o Consolidations o Staff reductions o Management of staff resources o Expense optimization Major Business Components Optimized Culture of continuous improvement o Continue cost mgmt o Achievable tactical projects o Measurable financial targets/roi Customer Focused Productivity Top-line focus Outward looking Client strategic drivers o Price o Quality o Speed o Communication o Confidence Increasing focus on productivity and driving growth 72

73 IT Strategies for Productivity & Efficiency Speed Scheduling Lab Automation ELN- Safety Form Reduction Workflow Mgmt Confidence SEND Commercial Report Timelines Electronic CAPA Knowledge Mgmt Virtual Auditing Communication Price Dashboards Visibility Surfaced Data Informatics Mobility Analytics E-Protocols E-Pricing E-Change Mgmt 73

74 Quality is Intrinsic to All Client Relationships Client Relationship Type One team Strategic Collaborative Culture Committed Strategic Agreements, Co-Governance & Performance Monitoring, Client Portfolio Management Preferred Culture of Quality Scientific Excellence, Competent Execution, Flexibility, Animal Welfare & Regulatory Compliance, On-Time Deliverables, Modern Facilities & Equipment, Responsiveness, Report Quality Tactical 74

75 Safety Assessment Customer Satisfaction More than 85% of clients are Very Satisfied or Satisfied with five key quality factors: Communications Scientific expertise Study conduct Study timeliness Report quality Source: CRL Customer survey responses from Apr 2013 through Feb 2014; N =

76 Our Vision To maintain and expand our market leadership position in safety assessment Offer a range of services that meet the needs of our clients Increased demand for outsourcing Expertise to address increasingly complex scientific questions Deliver service and scientific expertise that meet/exceed our clients expectations Sell at a price that provides value to our clients and an appropriate return on our investment Increase productivity, efficiency, and quality by aligning our initiatives with our clients key drivers Continuously improve our operating efficiency to reduce costs while maintaining quality Be the employer of choice for our employees 76

77 Research Models & Biologics Testing Solutions Birgit Girshick Senior Vice President, Research Models, Avian Vaccine Services, and Biologics Testing Solutions 2014 Charles River Laboratories International, Inc.

78 Research Models The global leader in breeding and distribution of research models Largest selection of the most widely used strains in the world ~1 of every 2 models sold anywhere in the world comes from Charles River Expertise in biosecurity ensures animals are free of known contaminants, reducing risk to critical research Global footprint with facilities strategically located in close proximity to clients Scientific expertise and associated services to support our clients use of models in research 78

79 Research Model Market Overview Over many years, research model volumes have declined due to efforts to reduce animal usage (3Rs) Decline has accelerated in the last 5 years, due to: Evolution of drug discovery process to eliminate molecules earlier Consolidation of biopharmaceutical industry Rationalization of excess space Recently, U.S. government has begun to reduce or eliminate the provision of research models Offsetting trends: Transition from standard research models to higher value, genetically modified models of disease Rapidly increasing demand for high-quality research models in China and other emerging markets Opportunity to provide research models directly to former government grantees 79

80 Research Models Market Share Worldwide small research model market is ~$0.7B* Pharma Continued unit decline expected due to further pharma consolidations Mid-Tier Increasingly important market segment with favorable growth prospects Academic & Government Growing segment with significant market share opportunities Strong China representation Worldwide Research Model Market Share (in units) * CRL 48% CVD Janvier 3% 4% HLS/Harlan 21% Taconic 11% Jackson 13% * Services not included. Source: Competitor financial reports and CRL management estimates. 80

81 China Outlook Vital River is continuing to grow at a double-digit rate Providing the highest-quality research models available in China Expanding model production capacity Evaluating geographic and service expansions in China Exploring business collaborations with Chinese research institutions 81

82 Efficiency Initiatives Improved capacity utilization Capacity adjustments to meet changes in customer demand Improvements in room utilization Lean manufacturing initiatives Ongoing efficiency improvement program targeting colony management practices, logistics, and supply management Focus on automation IT-supported colony and inventory management systems ICM (Internet Colony Management): Revolutionary, custom-designed software solution for both project and vivarium management Reduce and eliminate manual record keeping 82

83 Business Strategy Expand portfolio Portfolio expansion with focus on specialized models Leverage internal and external alliances and collaborations to support expansion Operational effectiveness Deploy technology to manage inventory Adopt innovative practices/technologies supporting efficiency Manage capacity and fixed costs Gain market share globally Invest in China Increase penetration of academic clients Leverage alliances and collaborations 83

84 Summary The global leader in research models Portfolio expansion programs Productivity initiatives underway to enhance revenue growth and operating efficiency Drive operating margin expansion in RMS segment Strategies in place to increase market share Geographic, services, and portfolio expansion 84

85 Biologics Testing Solutions A global leader in cell bank manufacture and a premier provider of GMP-compliant quality control testing and manufacturing support services for large molecules ~465 employees in 7 facilities worldwide U.S. (3) Ireland UK Germany (2) Support clients with testing and assay development throughout drug development, clinical and commercial manufacturing and for final commercial drug product release Provide reliable results through utilizing scientific expertise, regulatory compliance and close client communication 85

86 Biologics Portfolio Manufacturing GMP cell banking Virus/vaccine manufacture Polyclonal antisera production Testing Services Cell line characterization services Molecular biology Microbiology and sterility Microbial identification Virology In vivo biosafety testing Transmission electron microscopy Drug substance and drug product release testing Host cell protein assays Protein & analytical chemistry Stability testing Bioassays/potency assays Endotoxin/monocyte activation test Discovery & development Medical device testing Viral clearance ClearancePlus SM Custom method development & transfer Assay validation RightSource SM Insourcing Solutions Insourcing solutions Raw material testing Biosimilars Cellular therapies Vaccines 86

87 Alignment with CRL Portfolio R&D Process Research Lead Process Scale-Up and Pharmaceutical Development POC IND/CTA POB POC NDA/BLA/MMA Post - Market Research Models & Services Discovery Services CRL Safety Assessment Biologics Testing Solutions Biologics Testing Solutions QA/QC Endotoxin & Microbial Detection 87

88 Market Size / Competitive Environment Estimated Testing Cost of Biologics ~$7.4B* <10% Internal Outsourced Currently only a fraction of all biologics testing is being outsourced Trend towards increased outsourcing of large molecule manufacturing and analytical testing will drive need for biologics testing services Internal market Biopharmaceutical companies CMOs Fragmented outsourced market: CRL and BioReliance are the two largest providers ~10 competitors in tier two, with WuXi and Eurofins the largest Many smaller/niche competitors Significant opportunity to take market share * Sources: Evaluate Pharma, Aberdeen Group, Lab Medicine, various company websites, and CRL management estimates. 88

89 Growth Strategy Motivate manufacturers to outsource more services by providing: Comprehensive testing portfolio Reliability Fast turn-around time, regulatory compliance Exceptional service Value Flexible, customized solutions A cost-effective alternative to in-house capabilities Externalize testing using RightSource SM insourcing programs Gain market share Global presence and superior service Leverage the Charles River portfolio and customer relationships 89

90 Summary A global leader in biologics testing Growing market opportunity Strategies in place to encourage outsourcing and increase market share Essential component of Charles River s expanding, large molecule service portfolio 90

91 Appendix Regulation G Financial Reconciliations 2014 Charles River Laboratories International, Inc.

92 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in thousands) Three Months Ended Six Months Ended June 28, 2014 June 29, 2013 June 28, 2014 June 29, 2013 Research Models and Services Revenue $ 133,120 $ 129,759 $ 265,615 $ 264,632 Add back government billing adjustment - 1,495-1,495 Non-GAAP revenue $ 133,120 $ 131,254 $ 265,615 $ 266,127 Operating income 34,234 33,296 69,678 73,773 Operating income as a % of revenue 25.7% 25.7% 26.2% 27.9% Add back: Amortization of intangible assets related to acquisitions ,545 1,245 Severance related to cost-savings actions 2, , Government billing adjustment and related expenses 13 1, ,855 Impairment and other items (2) 1,725-2,705 - Operating losses (3) Operating income, excluding specified charges (Non-GAAP) $ 38,606 $ 36,139 $ 77,630 $ 77,351 Non-GAAP operating income as a % of revenue 29.0% 27.5% 29.2% 29.1% Discovery and Safety Assessment Revenue $ 142,614 $ 107,490 $ 247,752 $ 209,281 Operating income 17,798 11,261 29,511 19,704 Operating income as a % of revenue 12.5% 10.5% 11.9% 9.4% Add back: Amortization of intangible assets related to acquisitions 4,891 2,393 6,863 4,809 Severance related to cost-savings actions , Operating losses (3) ,375 1,735 Costs associated with the evaluation and integration of acquisitions Operating income, excluding specified charges (Non-GAAP) $ 24,450 $ 14,543 $ 39,001 $ 26,561 Non-GAAP operating income as a % of revenue 17.1% 13.5% 15.7% 12.7% Manufacturing Support Revenue $ 65,445 $ 55,684 $ 127,180 $ 110,258 Operating income 20,455 16,008 38,871 30,451 Operating income as a % of revenue 31.3% 28.7% 30.6% 27.6% Add back: Amortization of intangible assets related to acquisitions 1,355 1,317 2,785 2,658 Severance related to cost-savings actions Operating income, excluding specified charges (Non-GAAP) $ 21,834 $ 17,325 $ 41,680 $ 33,109 Non-GAAP operating income as a % of revenue 33.4% 31.1% 32.8% 30.0% Unallocated Corporate Overhead $ (21,462) $ (17,377) $ (47,329) $ (37,977) Add back: Severance related to cost-savings actions Costs associated with the evaluation and integration of acquisitions 1, , Convertible debt accounting Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (20,091) $ (17,129) $ (42,532) $ (37,190) Total Revenue $ 341,179 $ 292,933 $ 640,547 $ 584,171 Add back government billing adjustment - 1,495-1,495 Non-GAAP revenue $ 341,179 $ 294,428 $ 640,547 $ 585,666 Operating income 51,025 43,188 90,731 85,951 Operating income as a % of revenue 15.0% 14.7% 14.2% 14.7% Add back: Amortization of intangible assets related to acquisitions 6,854 4,464 11,193 8,712 Severance related to cost-savings actions 2, , Government billing adjustment and related expenses 13 1, ,855 Impairment and other items (2) 1,725-2,705 - Operating losses (3) ,402 1,944 Costs associated with the evaluation and integration of acquisitions 1, , Convertible debt accounting Operating income, excluding specified charges (Non-GAAP) $ 64,799 $ 50,878 $ 115,779 $ 99,831 Non-GAAP operating income as a % of revenue 19.0% 17.3% 18.1% 17.0% (1) (2) (3) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules, regulations and guidance. For the three and six months ended June 28, 2014, impairment and other items primarily include $1.5 million and $2.5 million of asset impairments and accelerated depreciation related to the consolidation of research model production operations, respectively; a $1.3 million charge related to a dispute with a large model supplier; and a $1.1 million gain related to the sale of a former research model facility in France. This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.

93 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1) (dollars in thousands, except for share and per share data) Three Months Ended June 28, June 29, Six Months Ended June 28, June 29, Net income attributable to common shareholders $ 35,264 $ 27,284 $ 67,496 $ 52,862 Less: Discontinued operations ,070 Net income from continuing operations 35,908 28,199 68,410 53,932 Add back: Amortization of intangible assets related to acquisitions 6,854 4,464 11,193 8,712 Severance related to cost-savings actions 2, , Impairment and other items (2) 1,725-2,705 - Operating losses (3) ,402 1,944 Costs associated with the evaluation and integration of acquisitions 1, , Government billing adjustment and related expenses 13 1, ,855 Write-off of deferred financing costs and fees related to debt refinancing Convertible debt accounting, net (4) - 2,897-6,710 Tax effect of items above (3,426) (3,709) (7,928) (6,166) Net income from continuing operations, excluding specified charges (Non-GAAP) $ 46,256 $ 35,668 $ 85,530 $ 68,894 Weighted average shares outstanding - Basic 46,941,612 48,280,371 47,016,221 47,969,683 Effect of dilutive securities: Stock options and contingently issued restricted stock 742, , , ,259 Weighted average shares outstanding - Diluted 47,684,096 48,835,453 47,909,233 48,647,942 Basic earnings per share from continuing operations $ 0.76 $ 0.58 $ 1.46 $ 1.12 Diluted earnings per share from continuing operations $ 0.75 $ 0.58 $ 1.43 $ 1.11 Basic earnings per share from continuing operations, excluding specified charges (Non-GAAP) $ 0.99 $ 0.74 $ 1.82 $ 1.44 Diluted earnings per share from continuing operations, excluding specified charges (Non-GAAP) $ 0.97 $ 0.73 $ 1.79 $ 1.42 (1) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non- GAAP results consistent with applicable rules, regulations and guidance. (2) For the three and six months ended June 28, 2014, impairment and other items primarily include $1.5 million and $2.5 million of asset impairments and accelerated depreciation related to the consolidation of research model production operations, respectively; a $1.3 million charge related to a dispute with a large model supplier; and a $1.1 million gain related to the sale of a former research model facility in France. (3) This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility. (4) The three and six months ended June 29, 2013 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $2.8 million and $6.6 million and depreciation expense by $0.1 million and $0.1 million, respectively.

94 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP REVENUE GROWTH (YEAR-OVER-YEAR) EXCLUDING THE IMPACT OF FOREIGN EXCHANGE AND A GOVERNMENT BILLING ADJUSTMENT For the Three and Six Months Ended June 28, 2014 For the three months ended June 28, 2014: Total CRL RMS Segment DSA Segment MS Segment Revenue growth, reported 16.5% 2.6% 32.7% 17.5% Impact of foreign exchange 1.4% 1.1% 1.3% 2.3% Impact of government billing adjustment 0.6% 1.2% 0.0% 0.0% Non-GAAP revenue growth, constant currency 14.5% 0.3% 31.4% 15.2% For the six months ended June 28, 2014: Total CRL RMS Segment DSA Segment MS Segment Revenue growth, reported 9.7% 0.4% 18.4% 15.3% Impact of foreign exchange 1.0% 0.6% 0.9% 1.9% Impact of government billing adjustment 0.3% 0.6% 0.0% 0.0% Non-GAAP revenue growth, constant currency 8.4% (0.8%) 17.5% 13.4% Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules and regulations.

95 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SUPPLEMENTAL SCHEDULE: PRIOR PERIODS RECAST FOR BUSINESS SEGMENT REVISION RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in thousands) Three Months Ended Twelve Months Ended Three Months Ended March 30, June 29, September 28, December 28, December 28, March 29, June 28, Research Models and Services Revenue $ 134,873 $ 129,759 $ 124,236 $ 122,482 $ 511,350 $ 132,495 $ 133,120 Add back government billing adjustment - 1, , Non-GAAP revenue $ 134,873 $ 131,254 $ 124,236 $ 122,482 $ 512,845 $ 132,495 $ 133,120 Operating income 40,477 33,296 23,803 19, ,737 35,444 34,234 Operating income as a % of revenue 30.0% 25.4% 19.2% 15.6% 22.8% 26.8% 25.7% Add back: Amortization of intangible assets related to acquisitions ,076 2, Severance related to cost-savings actions ,123 1,424 1,584 2,011 Government billing adjustment and related expenses - 1, , Impairment and other items (2) - - 7,238 6,440 13, ,725 Operating losses (3) Operating income, excluding specified charges (Non-GAAP) $ 41,212 $ 36,139 $ 31,898 $ 28,040 $ 137,289 $ 39,024 $ 38,606 Non-GAAP operating income as a % of revenue 30.6% 27.5% 25.7% 22.9% 26.8% 29.5% 29.0% Discovery and Safety Assessment Revenue $ 101,791 $ 107,490 $ 112,627 $ 110,470 $ 432,378 $ 105,138 $ 142,614 Operating income 8,443 11,261 18,968 8,741 47,413 11,713 17,798 Operating income as a % of revenue 8.3% 10.5% 16.8% 7.9% 11.0% 11.1% 12.5% Add back: Amortization of intangible assets related to acquisitions 2,416 2,393 2,383 2,401 9,593 1,972 4,891 Severance related to cost-savings actions , Impairment and other items (2) ,829 5, Operating losses (3) , Costs associated with the evaluation and integration of acquisitions Operating income, excluding specified charges (Non-GAAP) $ 12,018 $ 14,543 $ 22,485 $ 18,515 $ 67,561 $ 14,551 $ 24,450 Non-GAAP operating income as a % of revenue 11.8% 13.5% 20.0% 16.8% 15.6% 13.8% 17.1% Manufacturing Support Revenue $ 54,574 $ 55,684 $ 55,266 $ 56,276 $ 221,800 $ 61,735 $ 65,445 Operating income 14,443 16,008 16,125 14,651 61,227 18,416 20,455 Operating income as a % of revenue 26.5% 28.7% 29.2% 26.0% 27.6% 29.8% 31.3% Add back: Amortization of intangible assets related to acquisitions 1,341 1,317 1,339 1,438 5,435 1,430 1,355 Severance related to cost-savings actions Impairment and other items (2) ,874 1, Operating income, excluding specified charges (Non-GAAP) $ 15,784 $ 17,325 $ 17,510 $ 18,086 $ 68,705 $ 19,846 $ 21,834 Non-GAAP operating income as a % of revenue 28.9% 31.1% 31.7% 32.1% 31.0% 32.1% 33.4% Unallocated Corporate Overhead $ (20,600) $ (17,377) $ (18,053) $ (17,946) $ (73,976) $ (25,867) $ (21,462) Add back: Severance related to cost-savings actions Costs associated with the evaluation and integration of acquisitions ,752 3,305 1,371 Convertible debt accounting Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (20,061) $ (17,129) $ (17,747) $ (17,180) $ (72,117) $ (22,441) $ (20,091) Total Revenue $ 291,238 $ 292,933 $ 292,129 $ 289,228 $ 1,165,528 $ 299,368 $ 341,179 Add back government billing adjustment - 1, , Non-GAAP revenue $ 291,238 $ 294,428 $ 292,129 $ 289,228 $ 1,167,023 $ 299,368 $ 341,179 Operating income 42,763 43,188 40,843 24, ,401 39,706 51,025 Operating income as a % of revenue 14.7% 14.7% 14.0% 8.5% 13.0% 13.3% 15.0% Add back: Amortization of intangible assets related to acquisitions 4,248 4,464 4,179 4,915 17,806 4,339 6,854 Severance related to cost-savings actions ,161 3,218 1,900 2,889 Government billing adjustment and related expenses - 1, , Impairment and other items (2) - - 7,238 14,143 21, ,725 Operating losses (3) 1, , Costs associated with the evaluation and integration of acquisitions ,752 3,305 1,574 Convertible debt accounting Operating income, excluding specified charges (Non-GAAP) $ 48,953 $ 50,878 $ 54,146 $ 47,461 $ 201,438 $ 50,980 $ 64,799 Non-GAAP operating income as a % of revenue 16.8% 17.3% 18.5% 16.4% 17.3% 17.0% 19.0% (1) (2) (3) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules, regulations and guidance. For the three months ended March 29, 2014, impairment and other items primarily include $1.0 million of asset impairments and accelerated depreciation related to the consolidation of research model production operations. For the year ended December 28, 2013, impairment and other items primarily include: (i) accelerated depreciation of $13.5 million and $1.9 million related to the consolidation of research model production operations and our Biologics Testing Solutions operations, respectively; (ii) an impairment charge of $3.8 million related to our Shrewsbury, Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences of $1.6 million; and (iv) $0.6 million for the impairment of assets at certain European facilities. This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.

96 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SUPPLEMENTAL SCHEDULE: PRIOR PERIODS RECAST FOR BUSINESS SEGMENT REVISION RECONCILIATION OF GAAP TO NON-GAAP SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in thousands) Twelve Months Three Months Ended Ended March 31, June 30, September 29, December 29, December 29, Research Models and Services Revenue $ 140,875 $ 132,428 $ 124,541 $ 123,789 $ 521,633 Add back government billing adjustment Non-GAAP revenue $ 140,875 $ 132,428 $ 124,541 $ 123,789 $ 521,633 Operating income 44,523 41,131 29,418 28, ,783 Operating income as a % of revenue 31.6% 31.1% 23.6% 23.2% 27.6% Add back: Amortization of intangible assets related to acquisitions Severance related to cost-savings actions ,015 Impairment and other items (2) - - 2, ,810 Operating income, excluding specified charges (Non-GAAP) $ 44,741 $ 41,350 $ 33,449 $ 29,983 $ 149,523 Non-GAAP operating income as a % of revenue 31.8% 31.2% 26.9% 24.2% 28.7% Discovery and Safety Assessment Revenue $ 98,840 $ 103,787 $ 105,080 $ 101,201 $ 408,908 Operating income 6,344 10,314 10,333 8,697 35,688 Operating income as a % of revenue 6.4% 9.9% 9.8% 8.6% 8.7% Add back: Amortization of intangible assets related to acquisitions 3,180 3,141 3,112 2,945 12,378 Severance related to cost-savings actions ,494 Impairment and other items (2) - - (233) 199 (34) Operating losses (3) 1, ,641 Operating income, excluding specified charges (Non-GAAP) $ 11,489 $ 14,264 $ 14,071 $ 13,343 $ 53,167 Non-GAAP operating income as a % of revenue 11.6% 13.7% 13.4% 13.2% 13.0% Manufacturing Support Revenue $ 46,266 $ 48,508 $ 49,065 $ 55,150 $ 198,989 Operating income 12,774 14,906 14,613 15,226 57,519 Operating income as a % of revenue 27.6% 30.7% 29.8% 27.6% 28.9% Add back: Amortization of intangible assets related to acquisitions 1,098 1,050 1,179 1,447 4,774 Severance related to cost-savings actions (11) 71 Operating income, excluding specified charges (Non-GAAP) $ 13,872 $ 15,956 $ 15,874 $ 16,662 $ 62,364 Non-GAAP operating income as a % of revenue 30.0% 32.9% 32.4% 30.2% 31.3% Unallocated Corporate Overhead $ (19,901) $ (17,077) $ (16,682) $ (17,565) $ (71,225) Add back: Costs associated with the evaluation and integration of acquisitions ,140 3,774 Convertible debt accounting Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (19,616) $ (16,279) $ (15,971) $ (15,372) $ (67,238) Total Revenue $ 285,981 $ 284,723 $ 278,686 $ 280,140 $ 1,129,530 Add back government billing adjustment Non-GAAP revenue $ 285,981 $ 284,723 $ 278,686 $ 280,140 $ 1,129,530 Operating income 43,740 49,274 37,682 35, ,765 Operating income as a % of revenue 15.3% 17.3% 13.5% 12.5% 14.7% Add back: Amortization of intangible assets related to acquisitions 4,496 4,410 4,528 4,633 18,067 Severance related to cost-savings actions ,580 Impairment and other items (2) - - 2,694 1,082 3,776 Operating losses (3) 1, ,641 Costs associated with the evaluation and integration of acquisitions ,140 3,774 Convertible debt accounting Operating income, excluding specified charges (Non-GAAP) $ 50,486 $ 55,291 $ 47,423 $ 44,616 $ 197,816 Non-GAAP operating income as a % of revenue 17.7% 19.4% 17.0% 15.9% 17.5% (1) (2) (3) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non- GAAP results consistent with applicable rules, regulations and guidance. For the year ended December 29, 2012, impairment and other items primarily include: (i) an impairment charge of $3.5 million for long-lived assets at certain RMS Europe facilities; (ii) $0.6 million for the gain on the sale of land at an RMS facility; and (iii) $0.9 million for the write-off of large model inventory held at a vendor. This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.

97 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. SUPPLEMENTAL SCHEDULE: PRESENTATION OF FORMER BUSINESS SEGMENT RESULTS RECONCILIATION OF GAAP TO NON-GAAP SELECTED FORMER BUSINESS SEGMENT INFORMATION (UNAUDITED) (1) (dollars in thousands) Three Months Ended June 28, 2014 June 29, 2013 Research Models and Services (former segment) Revenue $ 189,157 $ 178,973 Add back government billing adjustment - 1,495 Non-GAAP revenue $ 189,157 $ 180,468 Operating income 52,547 49,630 Operating income as a % of revenue 27.8% 27.7% Add back: Amortization of intangible assets related to acquisitions 2,035 2,228 Severance related to cost-savings actions 2, Government billing adjustment and related expenses 13 1,855 Impairment and other items (2) 1,725 - Operating losses (3) Operating income, excluding specified charges (Non-GAAP) $ 58,366 $ 54,059 Non-GAAP operating income as a % of revenue 30.9% 30.0% Preclinical Services (former segment) Revenue $ 128,509 $ 113,960 Operating income 19,901 10,935 Operating income as a % of revenue 15.5% 9.6% Add back: Amortization of intangible assets related to acquisitions 1,917 2,236 Severance related to cost-savings actions 858 (10) Operating losses (3) Operating income, excluding specified charges (Non-GAAP) $ 23,380 $ 13,948 Non-GAAP operating income as a % of revenue 18.2% 12.2% Acquisition of Argenta and BioFocus Revenue $ 23,513 $ - Operating income 39 - Operating income as a % of revenue 0.2% - Add back: Amortization of intangible assets related to acquisitions 2,902 - Costs associated with the evaluation and integration of acquisitions Operating income, excluding specified charges (Non-GAAP) $ 3,144 $ - Non-GAAP operating income as a % of revenue 13.4% - Unallocated Corporate Overhead $ (21,462) $ (17,377) Add back: Severance related to cost-savings actions - - Costs associated with the evaluation and integration of acquisitions 1, Convertible debt accounting - 54 Unallocated corporate overhead, excluding specified charges (Non-GAAP) $ (20,091) $ (17,129) Total Revenue $ 341,179 $ 292,933 Add back government billing adjustment - 1,495 Non-GAAP revenue $ 341,179 $ 294,428 Operating income 51,025 43,188 Operating income as a % of revenue 15.0% 14.7% Add back: Amortization of intangible assets related to acquisitions 6,854 4,464 Severance related to cost-savings actions 2, Government billing adjustment and related expenses 13 1,855 Impairment and other items (2) 1,725 - Operating losses (3) Costs associated with the evaluation and integration of acquisitions 1, Convertible debt accounting - 54 Operating income, excluding specified charges (Non-GAAP) $ 64,799 $ 50,878 Non-GAAP operating income as a % of revenue 19.0% 17.3% (1) (2) (3) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of onetime charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules, regulations and guidance. For the three months ended June 28, 2014, impairment and other items primarily include $1.5 million of asset impairments and accelerated depreciation related to the consolidation of research model production operations, a $1.3 million charge related to a dispute with a large model supplier, and a $1.1 million gain related to the sale of a former research model facility in France. This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.

98 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1) (dollars in thousands, except for per share data) Three Months Ended September 28, 2013 Net income attributable to common shareholders $ 30,867 Less: Discontinued operations 113 Net income from continuing operations 30,980 Add back: Amortization of intangible assets related to acquisitions 4,179 Severance related to cost-savings actions 475 Impairment and other items (2) 7,238 Operating losses (3) 784 Costs associated with the evaluation of acquisitions 306 Government billing adjustment and related expenses 321 Tax effect of items above (6,041) Net income, excluding specified charges (Non-GAAP) $ 38,242 Weighted average shares outstanding - Basic 47,910,649 Effect of dilutive securities: Stock options and contingently issued restricted stock 530,516 Weighted average shares outstanding - Diluted 48,441,165 Basic earnings per share $ 0.64 Diluted earnings per share $ 0.64 Basic earnings per share, excluding specified charges (Non-GAAP) $ 0.80 Diluted earnings per share, excluding specified charges (Non-GAAP) $ 0.79 (1) (2) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules, regulations and guidance. The three months ended September 28, 2013 primarily includes accelerated depreciation related to the consolidation of research model production operations in California. (3) Includes operating losses related primarily to the Company's PCS-Massachusetts facility.

99 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP TO NON-GAAP EARNINGS PER SHARE (EPS) Guidance for the Twelve Months Ended December 27, 2014E 2014E Guidance GAAP EPS Estimate $ $2.70 Add back: Amortization of intangible assets $0.36 Operating losses and other items (1) $0.06 Charges related to global efficiency initiative (2) $0.16-$0.18 Costs associated with the evaluation and integration of acquisitions $0.06 Non-GAAP EPS Estimate $ $3.35 Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non- GAAP financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules and regulations. (1) These costs relate primarily to the Company s Shrewsbury, Massachusetts, facility and a dispute with a large model supplier. (2) These charges relate primarily to the consolidation of research model production operations and other efficiency initiatives. Other projects in support of the global efficiency initiative are expected, but these charges reflect only the decisions that have already been finalized.

100 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF FREE CASH FLOW (NON-GAAP) (dollars in thousands) Three Months Ended June 28, June 29, Net cash provided by operating activities $ 56,975 $ 48,966 Less: Capital expenditures (9,315) (9,794) Free cash flow $ 47,660 $ 39,172 Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules and regulations.

101 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF FREE CASH FLOW AND FCF/NOA RETURN (NON-GAAP) (dollars in thousands) December 25, December 31, December 29, December 28, December 27, E Free Cash Flow Reconciliation Net cash provided by operating activities $ 168,236 $ 206,998 $ 208,006 $ 209,045 $240,000-$250,00 Add: WuXi PharmaTech termination fee 30, Less: Capital expenditures (42,860) (49,143) (47,534) (39,154) (55,000)-(65,000) Free cash flow $ 155,376 $ 157,855 $ 160,472 $ 169,891 $180,000-$190,000 Free Cash Flow Per Share Calculation Diluted shares outstanding - average (in thousands) 63,119,523 51,318,242 48,406,320 48,489,322 47,500,000+ Free Cash Flow Per Share $ 2.46 $ 3.08 $ 3.32 $ 3.50 $3.80-$4.00 Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules and regulations.

102 CHARLES RIVER LABORATORIES INTERNATIONAL, INC. RECONCILIATION OF GAAP EARNINGS TO NON-GAAP EARNINGS (1) (dollars in thousands, except for per share data) December 28, 2013 Twelve Months Ended December 29, 2012 December 31, 2011 December 25, 2010 Net income (loss) attributable to common shareholders $ 102,828 $ 97,295 $ 109,566 $ (336,669) Less: Discontinued operations 1,265 4,252 5,545 8,012 Net income (loss) from continuing operations 104, , ,111 (328,657) Add back: Amortization of intangible assets related to acquisitions 17,806 18,067 21,795 24,405 Severance related to cost-savings actions 3,218 2,580 5,462 16,504 Impairment and other items (2) 21,381 3, ,896 Adjustment of acquisition-related contingent consideration and related items - - (721) 2,865 Operating losses (3) 3,371 3,738 6,471 13,387 Costs associated with the evaluation of acquisitions 1,752 3, ,319 Government billing adjustment and related expenses 2, Acquisition agreement termination fee ,000 Gain on settlement of life insurance policy - - (7,710) - U.S. pension curtailment Gain on sale of U.K. real estate Write-off of deferred financing costs and fees related to debt refinancing 645-1,450 4,542 Loss on sale of auction rate securities Convertible debt accounting, net (4) 6,710 14,741 13,978 12,948 Deferred tax revaluation Tax benefit from disposition of Phase I clinical business - - (11,111) - Massachusetts tax law change Reduction of tax benefits - PCS Massachusetts Costs and taxes associated with corporate legal entity restructuring and repatriation - - 1,637 15,689 Tax effect of items above (19,126) (16,604) (15,710) (59,274) Net income, excluding specified charges (Non-GAAP) $ 142,252 $ 132,518 $ 131,340 $ 125,624 Weighted average shares outstanding - Basic 47,740,167 47,912,135 50,823,063 62,561,294 Effect of dilutive securities: 2.25% senior convertible debentures Stock options and contingently issued restricted stock 749, , , ,229 Warrants Weighted average shares outstanding - Diluted 48,489,322 48,406,320 51,318,242 63,119,523 Basic earnings (loss) per share $ 2.15 $ 2.03 $ 2.16 $ (5.38) Diluted earnings (loss) per share $ 2.12 $ 2.01 $ 2.14 $ (5.38) Basic earnings per share, excluding specified charges (Non-GAAP) $ 2.98 $ 2.77 $ 2.58 $ 2.01 Diluted earnings per share, excluding specified charges (Non-GAAP) $ 2.93 $ 2.74 $ 2.56 $ 1.99 See next page for footnotes to this reconciliation.

103 Footnotes to reconciliation on previous page. (1) Charles River management believes that supplementary non-gaap financial measures provide useful information to allow investors to gain a meaningful understanding of our core operating results and future prospects, without the effect of one-time charges and other items which are outside our normal operations, consistent with the manner in which management measures and forecasts the Company s performance. The supplementary non-gaap financial measures included are not meant to be considered superior to, or a substitute for results of operations prepared in accordance with GAAP. The Company intends to continue to assess the potential value of reporting non-gaap results consistent with applicable rules, regulations and guidance. (2) Reported results in 2013 include: (i) accelerated depreciation related to the consolidation of research model production operations in California and BPS operations; (ii) an impairment charge related to the Company's PCS Massachusetts facility; (iii) an adjustment to prior-period accrued compensated absences; and (iv) asset impairments at certain European facilities. Reported results in 2012 include: (i) the impairment of long-lived assets for certain RMS Europe facilities; (ii) the gain on the sale of land for an RMS facility; and (iii) a write-off associated with large model inventory held at a vendor. Reported results in 2011 include: (i) asset impairments associated with certain RMS and PCS operations; (ii) gains on the disposition of RMS facilities in Michigan and Europe; (iii) costs associated with exiting a defined benefit plan in RMS Japan; and (iv) costs associated with vacating a corporate leased facility. Reported results in 2010 primarily include to goodwill and asset impairments associated with the Company s PCS business segment. Additionally, these amounts were reduced by $4.3 million to account for the portion of the asset impairment charge associated with the non-controlling interest in the company's former PCS facility in China. Reported results in 2009 primarily include an asset impairment and costs associated with the Company s planned disposition of its PCS facility in Arkansas, as well as additional miscellaneous expenses. Reported results in 2008 primarily include a goodwill impairment related to the Company's PCS business segment, as well as asset impairments and other charged related to the sale of the Company's Vaccine business in Mexico and closure of the Company's facility in Hungary; the disposition of and accelerated exit from the Company's Worcester, MA facility; severance costs related to cost-saving actions and advisory fees incurred in connection with repatriation of accumulated foreign earnings. (3) Operating losses are primarily related to the curtailment of operations and subsequent operating costs at the Company's PCS facilities in China, Massachusetts and Arkansas. (4) Reported results in 2013, 2012, 2011, 2010, 2009, and 2008 include the impact of convertible debt accounting adopted at the beginning of 2009, which increased interest expense by $6.6 million, $14.5 million, $13.8 million, $12.7 million, $11.9 million, and $11.1 million and depreciation expense by $0.1 million, $0.2 million, $0.2 million, $0.2 million, $0.2 million, and $0.1 million, respectively; and capitalized interest by $1.0 million in 2009 and $2.8 million in 2008.

104 2014 Charles River Laboratories International, Inc.