Charles River Laboratories Announces Second-Quarter 2014 Results from Continuing Operations

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Charles River Laboratories Announces Second-Quarter 2014 Results from Continuing Operations

CRL 2Q14 Earnings Release_08.06.14.pdf 130.8 KB

– Second-Quarter Revenue of $341.2 Million –

– Second-Quarter GAAP Earnings per Share of $0.75 and Non-GAAP Earnings per Share of $0.97 –

– Updates EPS Guidance for 2014 –

– Revises Financial Reporting into Three Segments –

WILMINGTON, Mass.--(BUSINESS WIRE)--Aug. 6, 2014-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the second quarter of 2014. For the quarter, revenue from continuing operations was $341.2 million, an increase of 16.5% from $292.9 million in the second quarter of 2013. On a non-GAAP basis, second-quarter revenue increased 15.9%. The acquisition of Argenta and BioFocus, which was completed on April 1, 2014, contributed 8.0% to second-quarter revenue, and foreign currency translation benefited reported revenue by 1.4%.

On a GAAP basis, net income from continuing operations for the second quarter of 2014 was $36.5 million, or $0.75 per diluted share, compared to $28.6 million, or $0.58 per diluted share, for the second quarter of 2013.

On a non-GAAP basis, net income from continuing operations was $46.3 million for the second quarter of 2014, an increase of 29.7% from $35.7 million for the same period in 2013. Second-quarter diluted earnings per share on a non-GAAP basis were $0.97, an increase of 32.9% compared to $0.73 per share in the second quarter of 2013. Higher revenue and operating margin improvement were the primary drivers behind the earnings per share increase. A gain on the Company’s limited partnership investments contributed $0.04 per share.

James C. Foster, Chairman, President and Chief Executive Officer, said, “We are very pleased with the second-quarter performance, which is one of the strongest we have ever reported. Double-digit sales growth for the EMD, Biologics, and safety assessment businesses, and the acquisition of Argenta and BioFocus, drove mid-teens revenue growth in the quarter. Leverage from higher sales and our efficiency initiatives combined to generate a 33% increase in non-GAAP earnings per share. As a result, we are increasing our 2014 non-GAAP earnings guidance to a range of $3.25 to $3.35.”

“We are continuing our focus on targeted sales efforts, which have been particularly successful with the mid-tier clients. And now that we have broadened our early-stage portfolio with the addition of early discovery capabilities, we are engaging in expanded discussions with existing clients and reaching potential clients who are interested in outsourcing entire drug discovery and development programs to a single provider. We believe these discussions will result in expanded and new strategic relationships across our global, mid-tier, and academic clients,” Mr. Foster concluded.

Business Segment Revision

During the second quarter of 2014, following the acquisition of Argenta and BioFocus on April 1, 2014, Charles River revised its financial reporting segments to ensure alignment with its view of the business. The Company reviewed discrete financial information, the new and existing markets addressed by each business, and its recently revised go-to-market strategy. As a result of this review, the Company has determined that its financial results should be reported in three segments: Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Support (Manufacturing).

Management believes that the new business segments reflect results of operations and facilitate investors’ understanding of the Company’s business. The changes in segment presentation have no effect on consolidated revenue or net income. The business segment details discussed in this press release are based on the new business segments. Comparable prior periods have been recast based on the new business segments since the first quarter of 2012, and this quarterly financial information is provided in the schedules at the end of this press release.

The revised reportable segments are as follows:

(1) The Research Models Services business currently includes Genetically Engineered Models and Services (GEMS), Research Animal Diagnostic Services (RADS), and Insourcing Solutions (IS).
(2) The Discovery Services business includes the legacy Discovery Research Services operations (formerly reported in the RMS segment), discovery services which were formerly reported in Preclinical Services, and Argenta and BioFocus.

Prior to recasting the reportable segments, the businesses were reported in two segments as follows:


Research Models and Services			Preclinical Services
Research Models			Discovery Services
(including Avian Vaccine Services)			Safety Assessment
Research Model Services (1)			Biologics Testing Solutions
Endotoxin and Microbial Detection

(1) The Research Models Services business previously included Genetically Engineered Models and Services (GEMS), Research Animal Diagnostic Services (RADS), Insourcing Solutions (IS), and Discovery Research Services.

Second-Quarter Segment Results

Research Models and Services (RMS)

Revenue for the RMS segment was $133.1 million in the second quarter of 2014, an increase of 2.6% from $129.8 million in the second quarter of 2013. On a non-GAAP basis, second-quarter RMS revenue increased 1.4%. Foreign currency translation benefited reported revenue by 1.1%. The RMS revenue increase was primarily driven by research model services.

In the second quarter of 2014, the RMS segment’s GAAP operating margin was unchanged at 25.7% compared to the second quarter of 2013. On a non-GAAP basis, the operating margin increased to 29.0% from 27.5% in the second quarter of 2013. Benefits from the Company’s global efficiency initiatives drove the operating margin improvement.

Discovery and Safety Assessment (DSA)

Second-quarter 2014 revenue from continuing operations for the DSA segment was $142.6 million, an increase of 32.7% from $107.5 million in the second quarter of 2013. Foreign currency translation benefited reported revenue by 1.3%. DSA revenue growth was driven by the acquisition of Argenta and BioFocus, which contributed 21.9% to DSA revenue in the second quarter. Robust demand for the Company’s safety assessment services from mid-tier clients also contributed to the second-quarter revenue increase.

In the second quarter of 2014, the DSA segment’s GAAP operating margin was 12.5% compared to 10.5% in the second quarter of 2013. On a non-GAAP basis, the operating margin increased to 17.1% from 13.5% in the second quarter of 2013. The non-GAAP operating margin improvement was due primarily to leverage from higher sales of safety assessment services. In addition, a foreign exchange benefit from a weaker Canadian dollar and the U.K. tax law change adopted in the third quarter of 2013, which reclassified research and development tax credits, also contributed to the operating margin improvement.

Manufacturing Support (Manufacturing)

Revenue for the Manufacturing segment was $65.4 million in the second quarter of 2014, an increase of 17.5% from $55.7 million in the second quarter of 2013. Foreign currency translation benefited reported revenue by 2.3%. Manufacturing revenue was driven by broad-based growth across all businesses, including a double-digit growth rate for both the Endotoxin and Microbial Detection, and Biologics Testing Solutions businesses.

In the second quarter of 2014, the Manufacturing segment’s GAAP operating margin was 31.3% compared to 28.7% for the second quarter of 2013. On a non-GAAP basis, the operating margin increased to 33.4% from 31.1% in the second quarter of 2013. The operating margin improvement was primarily driven by improved utilization for the Biologics business.

Stock Repurchase Update

During the second quarter of 2014, the Company repurchased approximately 1.5 million shares of its common stock for $80.5 million. As of June 28, 2014, the Company had $48.8 million remaining on its stock repurchase authorization.

Six-Month Results

For the first six months of 2014, revenue increased by 9.7% to $640.5 million from $584.2 million in the same period in 2013. On a non-GAAP basis, first-half revenue increased 9.4%. The acquisition of Argenta and BioFocus contributed 4.0% to first-half revenue, and foreign currency translation benefited reported revenue by 1.0%.

On a GAAP basis, net income from continuing operations for the first half of 2014 was $69.1 million, or $1.43 per diluted share, compared to $54.6 million, or $1.11 per diluted share, for the same period in 2013.

On a non-GAAP basis, net income from continuing operations for the first half of 2014 was $85.5 million, or $1.79 per diluted share, compared to $68.9 million, or $1.42 per diluted share, for the same period in 2013.

Research Models and Services (RMS)

For the first six months of 2014, RMS revenue was $265.6 million, an increase of 0.4% from $264.6 million in the same period in 2013. On a non-GAAP basis, first-half RMS revenue declined by 0.2%. Foreign currency translation benefited reported revenue by 0.6%. On a GAAP basis, the RMS segment operating margin was 26.2% in the first half of 2014, compared to 27.9% for the prior-year period. On a non-GAAP basis, the operating margin was 29.2% in the first half of 2014, compared to 29.1% for the same period in 2013.

Discovery and Safety Assessment (DSA)

For the first six months of 2014, DSA revenue was $247.8 million, an increase of 18.4% from $209.3 million in the same period in 2013. The acquisition of Argenta and BioFocus contributed 11.2% to first-half revenue, and foreign currency translation benefited reported revenue by 0.9%. On a GAAP basis, the DSA segment operating margin was 11.9% in the first half of 2014, compared to 9.4% for the prior-year period. On a non-GAAP basis, the operating margin was 15.7% in the first half of 2014, compared to 12.7% for the same period in 2013.

Manufacturing Support (Manufacturing)

For the first six months of 2014, Manufacturing revenue was $127.2 million, an increase of 15.3% from $110.3 million in the same period in 2013. Foreign currency translation benefited reported revenue by 1.9%. On a GAAP basis, the Manufacturing segment operating margin was 30.6% in the first half of 2014, compared to 27.6% for the prior-year period. On a non-GAAP basis, the operating margin was 32.8% in the first half of 2014, compared to 30.0% for the same period in 2013.

2014 Guidance

The Company is updating its 2014 forward-looking guidance based on continuing operations. Guidance for non-GAAP earnings per share has been increased to primarily reflect the strong second-quarter performance, including the gain from limited partnership investments. Primarily as a result of additional charges associated with the Company’s global efficiency initiatives, GAAP earnings per share guidance has been reduced. The Company is maintaining its 2014 revenue guidance and continues to expect foreign currency translation to provide only a small benefit to reported revenue. The outlook for the remainder of the year assumes normal seasonality in the RMS segment.


2014 GUIDANCE (from continuing operations)	REVISED	PRIOR
Net revenue growth, reported	9.0% – 11.0%	9.0% – 11.0%
Impact of foreign exchange	N/M	N/M
Net revenue growth, constant currency	9.0% - 11.0%	9.0% - 11.0%
GAAP EPS estimate	$2.60 - $2.70	$2.64 - $2.74
Amortization of intangible assets	$0.36	$0.33
Operating losses and other items (1)	$0.06	$0.04
Charges related to global efficiency initiative (2)	$0.16-$0.18	$0.08-$0.10
Costs associated with evaluation and integration of acquisitions	$0.06	$0.05
Non-GAAP EPS estimate	$3.25 - $3.35	$3.15 - $3.25

(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.

Webcast

Charles River Laboratories has scheduled a live webcast on Thursday, August 7, at 9:00 a.m. ET to discuss matters relating to this press release. To participate, please go to ir.criver.com and select the webcast link. You can also find the associated slide presentation and reconciliations of non-GAAP financial measures to comparable GAAP financial measures on the website.

Non-GAAP Reconciliations/Discontinued Operations

The Company reports non-GAAP results in this press release, which exclude certain items that are outside of normal operations. A reconciliation of GAAP to non-GAAP results is provided in the schedules at the end of this press release. In addition, the Company reports results from continuing operations, which exclude results of the Phase I clinical business that was divested in 2011. The Phase I business is reported as a discontinued operation.

Use of Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as non-GAAP earnings per diluted share, which exclude the amortization of intangible assets and other charges related to our acquisitions; expenses associated with evaluating and integrating acquisitions; charges, gains and losses attributable to businesses or properties we plan to close, consolidate or divest; severance costs associated with our efficiency initiatives; accelerated depreciation charges related to the consolidation of research model production operations and Biologics Testing Solutions operations; a charge related to a dispute with a large model supplier; gains related to the sales of former research model facilities; an adjustment to prior-period accrued compensation expenses; and the additional interest recorded as a result of the adoption in 2009 of an accounting standard related to our convertible debt accounting which increased interest and depreciation expense. We exclude these items from the non-GAAP financial measures because they are outside our normal operations. This press release also refers to our revenue in both a GAAP and non-GAAP (constant currency) basis. There are limitations in using non-GAAP financial measures, as they are not prepared in accordance with generally accepted accounting principles, and may be different than non-GAAP financial measures used by other companies. In particular, we believe that the inclusion of supplementary non-GAAP financial measures in this press release helps investors to gain a meaningful understanding of our core operating results and future prospects without the effect of these often-one-time charges, and is consistent with how management measures and forecasts the Company's performance, especially when comparing such results to prior periods or forecasts. We believe that the financial impact of our acquisitions (and in certain cases, the evaluation of such acquisitions, whether or not ultimately consummated) is often large relative to our overall financial performance, which can adversely affect the comparability of our results on a period-to-period basis. In addition, certain activities, such as business acquisitions, happen infrequently and the underlying costs associated with such activities do not recur on a regular basis. Presenting revenue on a constant currency basis allows investors to measure our revenue growth exclusive of foreign currency exchange fluctuations more clearly. Non-GAAP results also allow investors to compare the Company’s operations against the financial results of other companies in the industry who similarly provide non-GAAP results. The non-GAAP financial measures included in this press release 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. Reconciliations of the non-GAAP financial measures used in this press release to the most directly comparable GAAP financial measures are set forth in this press release, and can also be found on the Company’s website at ir.criver.com.

Caution Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 future financial performance including revenue, operating margins, earnings per share, and the expected impact of foreign exchange rates; the future demand for drug discovery and development products and services, including our expectations for future revenue trends; the integration of Argenta and BioFocus, and our expectations with respect to their impact on the Company, our service offerings, strategic relationships, revenue, revenue growth rates, and earnings; the development and performance of our services and products, including the impact this can have on our clients’ drug development models; market and industry conditions including the outsourcing of these services and spending trends by our clients; the potential outcome of and impact to our business and financial operations due to litigation and legal proceedings, including with respect to our ongoing investigation of inaccurate billing with respect to certain government contracts; and Charles River’s future performance as delineated in our forward-looking guidance, and particularly our expectations with respect to revenue, the impact of foreign exchange, and enhanced efficiency initiatives. 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 efficiency initiatives 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 clients; the ability to convert backlog to revenue; 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.

About Charles River

Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them. To learn more about our unique portfolio and breadth of services, visit www.criver.com.


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(dollars in thousands, except for share and per share data)

	Three Months Ended						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013

Total revenue	$	341,179		$	292,933		$	640,547		$	584,171
Cost of products sold and services provided		215,545			190,363			406,100			377,390
Gross margin		125,634			102,570			234,447			206,781
Selling, general and administrative		67,756			54,919			132,523			112,118
Amortization of intangibles		6,853			4,463			11,193			8,712
Operating income		51,025			43,188			90,731			85,951
Interest income (expense)		(3,151	)		(7,308	)		(5,747	)		(15,491	)
Other income (expense)		2,667			967			8,543			2,035
Income from continuing operations before income taxes		50,541			36,847			93,527			72,495
Provision for income taxes		14,081			8,219			24,439			17,941
Income from continuing operations, net of tax		36,460			28,628			69,088			54,554
Loss from discontinued operations, net of tax		(644	)		(915	)		(914	)		(1,070	)
Net income		35,816			27,713			68,174			53,484
Income from noncontrolling interests		(552	)		(429	)		(678	)		(622	)
Net income attributable to common shareowners	$	35,264		$	27,284		$	67,496		$	52,862

Earnings per common share
Basic:
Continuing operations	$	0.76		$	0.58		$	1.46		$	1.12
Discontinued operations	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.02	)
Net	$	0.75		$	0.57		$	1.44		$	1.10
Diluted:
Continuing operations	$	0.75		$	0.58		$	1.43		$	1.11
Discontinued operations	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.02	)
Net	$	0.74		$	0.56		$	1.41		$	1.09

Weighted average number of common shares outstanding
Basic		46,941,612			48,280,371			47,016,221			47,969,683
Diluted		47,684,096			48,835,453			47,909,233			48,647,942


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands)


	June 28, 2014		December 28, 2013
Assets
Current assets
Cash and cash equivalents	$	117,012	$	155,927
Trade receivables, net		274,504		220,630
Inventories		92,621		89,396
Other current assets		107,709		85,847
Current assets of discontinued businesses		856		750
Total current assets		592,702		552,550
Property, plant and equipment, net		687,664		676,182
Goodwill, net		297,005		230,701
Other intangibles, net		181,269		84,537
Deferred tax asset		19,746		23,671
Other assets		81,815		61,964
Long-term assets of discontinued businesses		3,261		3,151
Total assets	$	1,863,462	$	1,632,756

Liabilities and Equity
Current liabilities
Current portion of long-term debt and capital leases	$	31,932	$	21,437
Accounts payable		35,218		31,770
Accrued compensation		59,224		58,461
Deferred revenue		61,870		54,177
Accrued liabilities		67,462		56,712
Other current liabilities		13,761		22,546
Current liabilities of discontinued businesses		2,181		1,931
Total current liabilities		271,648		247,034
Long-term debt & capital leases		781,617		642,352
Other long-term liabilities		103,305		70,632
Long-term liabilities of discontinued businesses		8,271		8,080
Total liabilities		1,164,841		968,098
Redeemable non-controlling interest		23,483		20,581
Total shareholders' equity		671,815		640,984
Non-controlling interest		3,323		3,093
Total liabilities and equity	$	1,863,462	$	1,632,756


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(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
	Gross margin		52,450			49,020			104,097			104,476
	Gross margin as a % of revenue		39.4	%		37.8	%		39.2	%		39.5	%
	Operating income		34,234			33,296			69,678			73,773
	Operating income as a % of revenue		25.7	%		25.7	%		26.2	%		27.9	%
	Depreciation and amortization		7,165			7,192			14,364			14,094
	Capital expenditures		2,478			3,991			7,711			6,209

Discovery and Safety Assessment
	Revenue	$	142,614		$	107,490		$	247,752		$	209,281
	Gross margin		39,457			25,534			65,116			48,051
	Gross margin as a % of revenue		27.7	%		23.8	%		26.3	%		23.0	%
	Operating income		17,798			11,261			29,511			19,704
	Operating income as a % of revenue		12.5	%		10.5	%		11.9	%		9.4	%
	Depreciation and amortization		13,241			9,369			22,012			18,783
	Capital expenditures		4,340			3,064			8,051			4,856

Manufacturing Support
	Revenue	$	65,445		$	55,684		$	127,180		$	110,258
	Gross margin		33,727			28,016			65,234			54,254
	Gross margin as a % of revenue		51.5	%		50.3	%		51.3	%		49.2	%
	Operating income		20,455			16,008			38,871			30,451
	Operating income as a % of revenue		31.3	%		28.7	%		30.6	%		27.6	%
	Depreciation and amortization		3,894			3,849			7,975			7,543
	Capital expenditures		2,497			2,740			4,743			5,158

Unallocated Corporate Overhead		$	(21,462	)	$	(17,377	)	$	(47,329	)	$	(37,977	)

Total
	Revenue	$	341,179		$	292,933		$	640,547		$	584,171
	Gross margin		125,634			102,570			234,447			206,781
	Gross margin as a % of revenue		36.8	%		35.0	%		36.6	%		35.4	%
	Operating income		51,025			43,188			90,731			85,951
	Operating income as a % of revenue		15.0	%		14.7	%		14.2	%		14.7	%
	Depreciation and amortization		24,300			20,410			44,351			40,420
	Capital expenditures		9,315			9,795			20,505			16,223


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		608			754			1,545			1,245
Severance related to cost-savings actions		2,011			183			3,595			269
Government billing adjustment and related expenses		13			1,855			80			1,855
Impairment and other items ⁽²⁾		1,725			-			2,705			-
Operating losses ⁽³⁾		15			51			27			209
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		854			102			1,049			313
Operating losses ⁽³⁾		704			787			1,375			1,735
Costs associated with the evaluation and integration of acquisitions		203			-			203			-
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		24			-			24			-
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		-			-			121			-
Costs associated with the evaluation and integration of acquisitions		1,371			194			4,676			680
Convertible debt accounting		-			54			-			107
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		2,889			285			4,789			582
Government billing adjustment and related expenses		13			1,855			80			1,855
Impairment and other items ⁽²⁾		1,725			-			2,705			-
Operating losses ⁽³⁾		719			838			1,402			1,944
Costs associated with the evaluation and integration of acquisitions		1,574			194			4,879			680
Convertible debt accounting		-			54			-			107
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) 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.


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						Six Months Ended
	June 28, 2014			June 29, 2013			June 28, 2014			June 29, 2013

Net income attributable to common shareholders	$	35,264		$	27,284		$	67,496		$	52,862
Less: Discontinued operations		644			915			914			1,070
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		2,889			285			4,789			582
Impairment and other items ⁽²⁾		1,725			-			2,705			-
Operating losses ⁽³⁾		719			838			1,402			1,944
Costs associated with the evaluation and integration of acquisitions		1,574			194			4,879			680
Government billing adjustment and related expenses		13			1,855			80			1,855
Write-off of deferred financing costs and fees related to debt refinancing		-			645			-			645
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		742,484			555,082			893,012			678,259
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

(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.


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.


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

	Six Months Ended
	June 28, 2014			June 29, 2013
Cash flows relating to operating activities:
Net income	$	68,174		$	53,484
Less: Loss from discontinued operations		(914	)		(1,070	)
Income from continuing operations		69,088			54,554
Summary of non-cash adjustments		59,081			66,386
Changes in assets and liabilities		(42,731	)		(41,997	)
Net cash provided by operating activities		85,438			78,943

Cash flows relating to investing activities:
Acquisition of businesses, net of cash acquired		(183,151	)		(24,218	)
Capital expenditures		(20,505	)		(16,223	)
Other		1,158			454
Net cash used in investing activities		(202,498	)		(39,987	)

Cash flow relating to financing activities:
Net cash used in financing activities		78,212			(29,417	)

Cash flows used in discontinued operations		(689	)		(946	)
Effect of exchange rate changes on cash and cash equivalents		622			(4,757	)
Net change in cash and cash equivalents		(38,915	)		3,836
Cash and cash equivalents, beginning of period		155,927			109,685
Cash and cash equivalents, end of period	$	117,012		$	113,521


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SUPPLEMENTAL SCHEDULE: PRIOR PERIODS RECAST FOR BUSINESS SEGMENT REVISION
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)

		Three Months Ended												Twelve Months Ended			Three Months Ended
		March 30, 2013			June 29, 2013			September 28, 2013			December 28, 2013			December 28, 2013			March 29, 2014
Research Models and Services
	Revenue	$	134,873		$	129,759		$	124,236		$	122,482		$	511,350		$	132,495
	Gross margin		55,456			49,020			39,127			35,889			179,492			51,647
	Gross margin as a % of revenue		41.1	%		37.8	%		31.5	%		29.3	%		35.1	%		39.0	%
	Operating income		40,477			33,296			23,803			19,161			116,737			35,444
	Operating income as a % of revenue		30.0	%		25.7	%		19.2	%		15.6	%		22.8	%		26.8	%
	Depreciation and amortization		6,902			7,192			13,548			14,195			41,837			7,199
	Capital expenditures		2,218			3,991			4,208			6,300			16,717			5,233

Discovery and Safety Assessment
	Revenue	$	101,791		$	107,490		$	112,627		$	110,470		$	432,378		$	105,138
	Gross margin		22,517			25,534			33,061			25,654			106,766			25,659
	Gross margin as a % of revenue		22.1	%		23.8	%		29.4	%		23.2	%		24.7	%		24.4	%
	Operating income		8,443			11,261			18,968			8,741			47,413			11,713
	Operating income as a % of revenue		8.3	%		10.5	%		16.8	%		7.9	%		11.0	%		11.1	%
	Depreciation and amortization		9,414			9,369			9,486			9,451			37,720			8,771
	Capital expenditures		1,792			3,064			2,459			5,246			12,561			3,711

Manufacturing Support
	Revenue	$	54,574		$	55,684		$	55,266		$	56,276		$	221,800		$	61,735
	Gross margin		26,238			28,016			27,738			26,651			108,643			31,507
	Gross margin as a % of revenue		48.1	%		50.3	%		50.2	%		47.4	%		49.0	%		51.0	%
	Operating income		14,443			16,008			16,125			14,651			61,227			18,416
	Operating income as a % of revenue		26.5	%		28.7	%		29.2	%		26.0	%		27.6	%		29.8	%
	Depreciation and amortization		3,694			3,849			3,881			5,655			17,079			4,081
	Capital expenditures		2,418			2,740			2,429			2,289			9,876			2,246

Unallocated Corporate Overhead		$	(20,600	)	$	(17,377	)	$	(18,053	)	$	(17,946	)	$	(73,976	)	$	(25,867	)

Total
	Revenue	$	291,238		$	292,933		$	292,129		$	289,228		$	1,165,528		$	299,368
	Gross margin		104,211			102,570			99,926			88,194			394,901			108,813
	Gross margin as a % of revenue		35.8	%		35.0	%		34.2	%		30.5	%		33.9	%		36.3	%
	Operating income		42,763			43,188			40,843			24,607			151,401			39,706
	Operating income as a % of revenue		14.7	%		14.7	%		14.0	%		8.5	%		13.0	%		13.3	%
	Depreciation and amortization		20,010			20,410			26,915			29,301			96,636			20,051
	Capital expenditures		6,428			9,795			9,096			13,835			39,154			11,190


CHARLES RIVER LABORATORIES INTERNATIONAL, INC.
SUPPLEMENTAL SCHEDULE: PRIOR PERIODS RECAST FOR BUSINESS SEGMENT REVISION
SELECTED BUSINESS SEGMENT INFORMATION (UNAUDITED)
(dollars in thousands)

		Three Months Ended												Twelve Months Ended
		March 31, 2012			June 30, 2012			September 29, 2012			December 29, 2012			December 29, 2012
Research Models and Services
	Revenue	$	140,875		$	132,428		$	124,541		$	123,789		$	521,633
	Gross margin		59,154			53,900			44,364			40,873			198,291
	Gross margin as a % of revenue		42.0	%		40.7	%		35.6	%		33.0	%		38.0	%
	Operating income		44,523			41,131			29,418			28,711			143,783
	Operating income as a % of revenue		31.6	%		31.1	%		23.6	%		23.2	%		27.6	%
	Depreciation and amortization		6,597			6,618			6,792			6,718			26,725
	Capital expenditures		8,039			5,378			5,834			7,826			27,077

Discovery and Safety Assessment
	Revenue	$	98,840		$	103,787		$	105,080		$	101,201		$	408,908
	Gross margin		23,165			25,384			24,961			24,398			97,908
	Gross margin as a % of revenue		23.4	%		24.5	%		23.8	%		24.1	%		23.9	%
	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	%
	Depreciation and amortization		10,286			10,270			10,375			10,070			41,001
	Capital expenditures		2,984			1,996			2,166			2,905			10,051

Manufacturing Support
	Revenue	$	46,266		$	48,508		$	49,065		$	55,150		$	198,989
	Gross margin		21,893			24,301			23,935			25,753			95,882
	Gross margin as a % of revenue		47.3	%		50.1	%		48.8	%		46.7	%		48.2	%
	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	%
	Depreciation and amortization		3,119			3,177			3,383			3,870			13,549
	Capital expenditures		3,089			2,067			2,242			3,009			10,407

Unallocated Corporate Overhead		$	(19,901	)	$	(17,077	)	$	(16,682	)	$	(17,565	)	$	(71,225	)

Total
	Revenue	$	285,981		$	284,723		$	278,686		$	280,140		$	1,129,530
	Gross margin		104,212			103,585			93,260			91,024			392,081
	Gross margin as a % of revenue		36.4	%		36.4	%		33.5	%		32.5	%		34.7	%
	Operating income		43,740			49,274			37,682			35,069			165,765
	Operating income as a % of revenue		15.3	%		17.3	%		13.5	%		12.5	%		14.7	%
	Depreciation and amortization		20,002			20,065			20,550			20,658			81,275
	Capital expenditures		14,112			9,441			10,242			13,740			47,535


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, 2013			June 29, 2013			September 28, 2013			December 28, 2013			December 28, 2013			March 29, 2014
Research Models and Services
Revenue	$	134,873		$	129,759		$	124,236		$	122,482		$	511,350		$	132,495
Add back government billing adjustment		-			1,495			-			-			1,495			-
Non-GAAP revenue	$	134,873		$	131,254		$	124,236		$	122,482		$	512,845		$	132,495
Operating income		40,477			33,296			23,803			19,161			116,737			35,444
Operating income as a % of revenue		30.0	%		25.4	%		19.2	%		15.6	%		22.8	%		26.8	%
Add back:
Amortization of intangible assets related to acquisitions		491			754			457			1,076			2,778			937
Severance related to cost-savings actions		86			183			32			1,123			1,424			1,584
Government billing adjustment and related expenses		-			1,855			321			226			2,402			67
Impairment and other items ⁽²⁾		-			-			7,238			6,440			13,678			980
Operating losses ⁽³⁾		158			51			47			14			270			12
Operating income, excluding specified charges (Non-GAAP)	$	41,212		$	36,139		$	31,898		$	28,040		$	137,289		$	39,024
Non-GAAP operating income as a % of revenue		30.6	%		27.5	%		25.7	%		22.9	%		26.8	%		29.5	%

Discovery and Safety Assessment
Revenue	$	101,791		$	107,490		$	112,627		$	110,470		$	432,378		$	105,138
Operating income		8,443			11,261			18,968			8,741			47,413			11,713
Operating income as a % of revenue		8.3	%		10.5	%		16.8	%		7.9	%		11.0	%		11.1	%
Add back:
Amortization of intangible assets related to acquisitions		2,416			2,393			2,383			2,401			9,593			1,972
Severance related to cost-savings actions		211			102			397			915			1,625			195
Impairment and other items ⁽²⁾		-			-			-			5,829			5,829			-
Operating losses ⁽³⁾		948			787			737			629			3,101			671
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
Non-GAAP operating income as a % of revenue		11.8	%		13.5	%		20.0	%		16.8	%		15.6	%		13.8	%

Manufacturing Support
Revenue	$	54,574		$	55,684		$	55,266		$	56,276		$	221,800		$	61,735
Operating income		14,443			16,008			16,125			14,651			61,227			18,416
Operating income as a % of revenue		26.5	%		28.7	%		29.2	%		26.0	%		27.6	%		29.8	%
Add back:
Amortization of intangible assets related to acquisitions		1,341			1,317			1,339			1,438			5,435			1,430
Severance related to cost-savings actions		-			-			46			123			169			-
Impairment and other items ⁽²⁾		-			-			-			1,874			1,874			-
Operating income, excluding specified charges (Non-GAAP)	$	15,784		$	17,325		$	17,510		$	18,086		$	68,705		$	19,846
Non-GAAP operating income as a % of revenue		28.9	%		31.1	%		31.7	%		32.1	%		31.0	%		32.1	%

Unallocated Corporate Overhead	$	(20,600	)	$	(17,377	)	$	(18,053	)	$	(17,946	)	$	(73,976	)	$	(25,867	)
Add back:
Severance related to cost-savings actions		-			-			-			-			-			121
Costs associated with the evaluation and integration of acquisitions		486			194			306			766			1,752			3,305
Convertible debt accounting		53			54			-			-			107			-
Unallocated corporate overhead, excluding specified charges (Non-GAAP)	$	(20,061	)	$	(17,129	)	$	(17,747	)	$	(17,180	)	$	(72,117	)	$	(22,441	)

Total
Revenue	$	291,238		$	292,933		$	292,129		$	289,228		$	1,165,528		$	299,368
Add back government billing adjustment		-			1,495			-			-			1,495			-
Non-GAAP revenue	$	291,238		$	294,428		$	292,129		$	289,228		$	1,167,023		$	299,368
Operating income		42,763			43,188			40,843			24,607			151,401			39,706
Operating income as a % of revenue		14.7	%		14.7	%		14.0	%		8.5	%		13.0	%		13.3	%
Add back:
Amortization of intangible assets related to acquisitions		4,248			4,464			4,179			4,915			17,806			4,339
Severance related to cost-savings actions		297			285			475			2,161			3,218			1,900
Government billing adjustment and related expenses		-			1,855			321			226			2,402			67
Impairment and other items ⁽²⁾		-			-			7,238			14,143			21,381			980
Operating losses ⁽³⁾		1,106			838			784			643			3,371			683
Costs associated with the evaluation and integration of acquisitions		486			194			306			766			1,752			3,305
Convertible debt accounting		53			54			-			-			107			-
Operating income, excluding specified charges (Non-GAAP)	$	48,953		$	50,878		$	54,146		$	47,461		$	201,438		$	50,980
Non-GAAP operating income as a % of revenue		16.8	%		17.3	%		18.5	%		16.4	%		17.3	%		17.0	%

(2) 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.

(3) This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.


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
	March 31, 2012			June 30, 2012			September 29, 2012			December 29, 2012			December 29, 2012
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			28,711			143,783
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		218			219			237			241			915
Severance related to cost-savings actions		-			-			867			148			1,015
Impairment and other items ⁽²⁾		-			-			2,927			883			3,810
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		911			-			22			561			1,494
Impairment and other items ⁽²⁾		-			-			(233	)		199			(34	)
Operating losses ⁽³⁾		1,054			809			837			941			3,641
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		-			-			82			(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		232			744			658			2,140			3,774
Convertible debt accounting		53			54			53			53			213
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			35,069			165,765
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		911			-			971			698			2,580
Impairment and other items ⁽²⁾		-			-			2,694			1,082			3,776
Operating losses ⁽³⁾		1,054			809			837			941			3,641
Costs associated with the evaluation and integration of acquisitions		232			744			658			2,140			3,774
Convertible debt accounting		53			54			53			53			213
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	%

(2) 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.

(3) This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.


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		2,031			295
Government billing adjustment and related expenses		13			1,855
Impairment and other items ⁽²⁾		1,725			-
Operating losses ⁽³⁾		15			51
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⁾		704			787
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		203			-
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		1,371			194
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		2,889			285
Government billing adjustment and related expenses		13			1,855
Impairment and other items ⁽²⁾		1,725			-
Operating losses ⁽³⁾		719			838
Costs associated with the evaluation and integration of acquisitions		1,574			194
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	%

(2) 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.

(3) This item includes operating losses related primarily to the Company's Shrewsbury, Massachusetts facility.

Source: Charles River Laboratories International, Inc.

Charles River Laboratories International, Inc.
Investor Contact:
Susan E. Hardy, 781-222-6190
Corporate Vice President, Investor Relations
susan.hardy@crl.com
or
Media Contact:
Amy Cianciaruso, 781-222-6168
Executive Director, Public Relations
amy.cianciaruso@crl.com

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