Susan Hardy - Corporate VP, Investor Relations Jim Foster - Chairman, President and CEO Tom Ackerman - EVP and CFO

David Windley - Jefferies & Company Douglas Tsao - Lehman Brothers John Kreger - William Blair Hari Sambasivam - Merrill Lynch Randall Stanicky - Goldman Sachs Robert Gilliam - UBS Tycho Peterson - JPMorgan John Sullivan - Leerink Swann Sandy Draper - Raymond James Jon Wood - Banc of America

Well, ladies and gentlemen thank you for standing by, and welcome to the Charles River Laboratories' Fourth Quarter and Full Year 2007 Earnings Call. (Operator Instructions). And starting off today, we have Corporate Vice President of Investor Relations, Susan Hardy. Please go ahead.

Thank you. Good morning and welcome to Charles River Laboratories' fourth quarter and full year 2007 conference call and webcast. This morning Jim Foster, Chairman, President and Chief Executive Officer, and Tom Ackerman, Executive Vice President and Chief Financial Officer, will comment on our fourth quarter results and full year results and review guidance for 2008. Following the presentation, we will respond to questions. There is a slide presentation associated with today's remarks, which is posted on the investor relations section of our website at ir.criver.com. A taped replay of this call will be available beginning at noon today, and can be accessed by calling 800-475-6701. The international access number is 320-365-3844. The access code in either case is 905524. The replay will be available through February 26. You may also access an archived version of the webcast on our investor relations website. I would like to remind you of our Safe Harbor. Any remarks that we may make about future expectations, plans, and prospects for the company, constitute forward-looking statements for the purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by any forward-looking statements as a result of various important factors including, but not limited to, those discussed in our annual report on Form 10-K, which was filed on February 27, 2007, as well as other filings we make with the Securities and Exchange Commission. During this call, we will be primarily discussing non-GAAP financial measures. We believe that these non-GAAP financial measures help investors to gain a meaningful understanding of our core operating results and future prospects, consistent with the manner in which management measures and forecasts the company's performance. The non-GAAP financial measures are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and reconciliations to those GAAP measures on the investor relations section of our website through the financial reconciliations link. Now, I will turn the call over to Jim Foster.

Good morning, I am very pleased to speak with you today about our outstanding fourth quarter and full year results, which demonstrates the effectiveness of our organization and validate the investments we made and continue to make, as we correctly anticipated the paradigm shift that has taken place in the global pharmaceutical industry. Let's begin with a review of the fourth quarter and full year highlights. Strong sales growth of 17% in the fourth quarter, contributed to full year sales growth of 16.3%. Including $318 million for the fourth quarter, our full year sales reached $1.23 billion; the result of robust growth in both the Research Models and Services or RMS in Preclinical Services or PCS segment. The acquisition of Northwest Kinetics contributed 2.4% to the year and foreign exchange added 2.9% to the annual sales growth rate. For the fourth quarter, operating income was $65.8 million and the operating margin was 20.7%, compared to $55.9 million and 20.6% reported in the fourth quarter of '06. For '07, operating income rose 14.3% to $165.9 million and the operating margin was 21.6%. As we expected the operating margin declined year-over-year, due primarily to the costs associated with the transition of our new preclinical facilities in Massachusetts, and because of higher corporate costs, as we invested in information technology, and scientific and operational staff to support our growing business. However, we're very pleased that the operating margin declined just 40 basis points when compared to last year, as a result of higher sales and improved operating efficiency. At $45.9 million net income from continuing operations was 17.6% higher than the $39 million reported in the fourth quarter of '06. Earnings per share increased 12.1% to $0.65. For the full year, net income from continuing operations was $180.2 million, an increase of 16.9% from a $154.2 million in '06 and earnings per share increased 19.1% to $2.62 from $2.20. As a result of strong sales and operating efficiencies, we generated operating cash flow of $285 million, which is above the top of our estimated range and even though capital expenditures of $227 million, slightly exceeded our estimates, we generated free cash flow of $58 million, $8 million above the high end of our range. I'll speak more about our capital investment shortly, but I'm very pleased to say that all projects are moving along on schedule and on budget. As you know from our press release, we are reaffirming our '08 guidance of the sales growth in the range of 10% to 13% and non-GAAP earnings per share in the range of $287 to $297. Given the strength of our organization and the opportunities we see in our marketplace, we believe that these targets are achievable. I'd like to review the highlights of the segment operating results. For '07, PCS represented 53% of total revenues and RMS was 47%. From an operating income standpoint, before unallocated corporate overhead, RMS contributed 56% of operating income and PCS contributed 44%. While the PCS segment is growing at a faster rate than the RMS segment, the RMS operating margin is significantly higher, generating a greater percentage of our earnings and cash flow. As a more matured business, the RMS segment enjoys the higher return on invested capital. We believe that once the replacement space in Massachusetts and Nevada has been completed, the capital intensity of the PCS business will moderate and its returns will improve. Now withstanding my comment that the PCS segments sales growth rate is higher, the RMS segment had an outstanding fourth quarter and one of its best years. Sales rose 13.7% in the quarter to $145.2 million. For the year, sales were $577.2 million, a growth rate of 12.1%. Excluding the impact of foreign exchange the organic growth rate was an impressive 9%. We were extremely pleased with the growth which was the result of robust pharma and biotech spending on our broad portfolio research model products and services, a trend which was consistent throughout the year. Higher sales and improved operating efficiencies generated significant improvements in the operating margins, with the fourth quarter margin increasing 130 basis points, 27.6%, and the full year margin increasing 160 basis points to 31%. The largest contributors to both the fourth quarter and annual sales gains for U.S. research models, worldwide Transgenic sale and In Vitro business. This was a very strong year for research models in the United States, which is the bellweather for the industry. Annual sales grew above 10% as pharmaceutical and biotechnology companies continue to use these critical research tools to drive the discovery of new drugs and push existing compounds through the development pipeline. Sales to U.S. Academic Institutions and Governments agencies also increased due to both higher spending and market share gain. We view the increased sales of research model as an indicator that researchers our focusing on filling their pipelines with new therapies. Sales of most of our strains benefited from our customers' increased spending, particularly immunodeficient mice used extensively for discovery of drugs for oncology and infectious diseases, inbred and outbred mice used for both efficacy and safety testing and outbred rats used for safety testing. Sales of Worldwide transgenic services increased again in the fourth quarter, as expected the growth rate was lower than the first nine months of the year as the fourth quarter of ’06 marked the beginning of the improvement in the U.S. business. On a global basis, researchers continue to focus on the use of generically engineered models as discovery tools and to outsource to Charles River the housing of these models and other value added services to support the use of research. Same goals of faster and more efficient drug development which are driving the use of preclinical outsourcing are leading our clients to outsource discovery services as well. As researchers develop more complicated models, they have an increased need for the scientific expertise in defined breeding and ancillary laboratory services we offer. And given the depth of our expertise in the breadth of our services Charles River is the partner of choice to support the use of these models in research. In the fourth quarter and full year, our In Vitro business delivered exceptional results with sales growth of above 20%. The PTS is the right device at the right time, a portable, easy-to-use endotoxin testing device, which provides timely and accurate results. It is tailor-made to support current FDA initiative to improve quality control of injectable drugs and medical devices. Both the Process Analytical Technologies or PAT initiative and the pending resolution of nuclear pharmacies are aimed at reducing the risk of contamination by increasing the frequency of testing during the manufacturing process and shortening the time between sampling of finished lots and obtaining test results. These are goals which the PTS supports exactly. And as a result we are experiencing robust adoption of the technology. In order to better support our clients and to maintain our first-to-market advantage, we are adding to the PTS product family. Our latest innovation, the multi-cartridge system or MCS is set to debut in the second quarter of '08. It is aimed to supporting central QC laboratories, which perform a higher volume of tests and require higher throughput. We believe that our investment in the PTS technology will continue to drive the in vitro businesses growth for the foreseeable future. The Preclinical Services segment reported very strong sales of $172.9 million in the fourth quarter, a growth rate of 20% over the fourth quarter of '06, a seventh straight quarter of sequential growth. For '07 net sales was $653.4 million, a year-over-year growth rate of 20.2%. Excluding the impact of Northwest Kinetics and foreign exchange, the organic growth rate was a robust 14% for the fourth quarter and nearly 13% for the year. In both the quarter and the year, our toxicology facilities delivered very strong performance, and for the full year each of our facilities delivered sales growth in double digits. We attribute this growth to strong demand from our pharmaceutical and biotechnology clients for the breadth of services we provide and scientific expertise, and the advantage of outsourcing to Charles River rather than investing in facilities and developing in-house expertise. By relying on the expertise for a partner like Charles River, our clients can utilize their assets more effectively by focusing on what they do best, the discovery of normal compound. As you know, we transitioned to our new state-of-the-art preclinical facility in Massachusetts throughout '07. We are now located solely in the new facility and the old facility has been closed. Expenses associated with operating two facilities were significant in the fourth quarter, especially when compared to the fourth quarter of '06, when we had only the operating cost of the old facility. In addition, we began the transition to our new Nevada facility in the fourth quarter of '07, which further increased our operating cost. Partially as a result of these transitions, the PCS operating margin declined 210 basis points to 20.6% from 22.7% in the fourth quarter of ’06. Our Phase I business in the UK also depressed the operating margin, as the facility has continued to be affected by the issues surrounding the regulation of Phase I clinics in the UK. Those issues which arose two years ago following an incident at a clinic in London have caused sponsors to perform their first-in-human trials out of the UK. This resulted in weakness in our UK clinic in ’07. The strength of the Canadian dollar created additional margin pressure in the fourth quarter, as did startup in operating cost in our China facility. However, robust sales and operating efficiencies enabled us to deliver a full year ’07 operating margin of 21.5% only a 110 basis points below the ’06 margins and we expect to maintain the similar the margin in ’08. Our results for ’07 represent the intersection of two very important factors, the first is our business strategy and the second is the inflection point at which pharmaceutical companies find themselves with regard to outsourcing. It’s our business strategy to provide a unique continuum of products and services. From the point at which research is begin to use research models and discovery through proof of concept and new therapies. We are the only company with the expertise to support such a broad portion of the drug development pipeline, and we can do so because we have focused on, invested in and continue to invest in, our core competencies of laboratory animal medicine and science and regulatory compliant preclinical services. We offer these expensive services in a capacity to provide them at a time when pharmaceutical companies have reached inflection point in their adopting strategic outsourcing. From drugs, coming out patents to pipeline rationalization to spending constraints and facility closures, there are many factors driving the need for improved efficiencies Increasingly these companies are using outsourcing, whether by investing in biotechnology companies to provide discovery of new compounds or utilizing preclinical contract research organizations like Charles River to accelerate business discovery and development process. We see it in the increasing numbers of request for proposal and the outsourcing of compound development programs, rather than just individual studies. And then they request the Charles River Dedicated Resources or CRDR, where we provide staff or space or both, flexible combinations, designed to their specific needs. Our relationships with our clients, already close, are becoming even closer, as we work side-by-side to support their drug development efforts. Understanding the pressure that our pharmaceutical clients were facing and believing that strategic outsourcing would be one of the only ways that could be addressed, in '05, we undertook the most ambitious expansion program in our history. The goal of which was to build capacity to accommodate the growing demand for preclinical drug development services and to support our growth. As you know, we made a strategic decision to establish state-of-the-art, multi-service, multi-species facilities on both the East and West coast of the US, specifically situated to be proximate to the largest concentrations of pharma and biotech companies. And exit our less efficient legacy facilities in Massachusetts and Nevada. Almost three years later, we have made tremendous progress with the transition to our new facility in Shrewsbury, Mass completed, and our old Worcester facility closed. We are now focused on improving the sales mix. As you know, the Worcester facility was better known for its discovery services, which generally involved shorter term studies. PCS, Massachusetts, with its larger, more experienced scientific staff and greater capabilities, is making the transition to a sales mix richer in toxicology studies, which increased more than 50% over the previous year. As we've said previously, the facility's operating margin goals are predicated on an improved mix. We are pleased to say that the great progress is made in '07 and expect continue progress in '08. We are very pleased to announce that the new facility in Reno, Nevada, opened on schedule in January. I am also pleased to say that the clients are very enthusiastic about working with our scientific staff, in such a state-of-the-art environment. Half of our major clients have already qualified the facility and we have additional audits scheduled over the next several weeks. As you know, we will commission and validate progressively more space through the first half of the year, until approximately 80% of the facility is opened by this summer. As we did in Massachusetts in '07, we will be transitioning out of the older facility throughout '08 and expect to be fully located in the new facility by the end of the year. Unlike Massachusetts, we will retain a significant portion of the old Reno facility for quarantine space, rather than utilizing the new more expensive facility for that purpose. While Massachusetts and Nevada are our largest expansion projects, we are also expanding existing facilities and developing new locations, with only one facility in the UK to service European clients, we add capacity in Edinburgh, nearly every year to meet client demands. In the fourth quarter of '07, we completed a uniquely designed specialty toxicology facility and are already working on additional space to be completed in '09. To meet demand for our service in Montreal, we broke ground in the third quarter of '07 for 75,000 square foot facility in Sherbrooke, Quebec. This facility will be open for business in early '09 and could be expanded marginally as demand requires to as much as 300,000 square feet. We are doubling the size of our smaller Ohio facility and expect that expansion project to be completed in '09. We are continuing to make progress on the facility in China and due to robust client demand, are accelerating the schedule in order to provide GLP services in the second half of '08 rather than the first quarter of '09. Some of these facilities such as Sherbrooke and China will provide capacity to CRDRs, as well as the 180,000 square feet of expansion space we have in Massachusetts and the 100,000 square feet in Nevada. We continue to have extensive discussions with clients concerning CRDRs for those facilities. As we said on our guidance call on December, we expect CRDRs to account for approximately 10% of PCS revenue in '08 and we expect that percentage to increase over time. As you know, we signed our first CRDR for research model at the end of '06, a 10-year of $112 million agreement with the National Cancer Institute. We had been managing the NCI colonies under a previous agreement, but the importance of the new agreement is that for the first time we will provide those services in a dedicated space at the Charles River facility. The new facility in Maryland is progressing on schedule and we expect the building to be open in the third quarter of '08. A portion of the new Maryland facility will ultimately be used to support the increasing demand for commercial production and services, as well as the expansion in our California facility, where we've just begun to ship from the first two new production rooms. Demand from our West Coast clients, continues to be robust and we are still on track to open a third production room in the first quarter of this year. It's our belief that the trend towards outsourcing among our clients will continue. The goals of faster and more efficient drug developments have led pharma and biotech companies to outsource as much as an estimated 25% to preclinical development in '07. The expertise of partners by Charles River will have the capacity to support drug recovery and development has enabled this trend and will continue to allow pharma and biotech companies to outsource perhaps to as much as 50% to preclinical development over the next eight to 10 years. We believe we are currently seeing the virtualization of big pharma. Though at Charles River, we are continuing to invest in scientific expertise, capacity and strategic bolt-on acquisitions. We are building our clients' facilities and hiring staff for them in fact we are becoming our clients' infrastructure working with them to accomplish their goals of bringing new therapies to markets faster and more efficiently. Our investments in capacity to support our clients and to promote our future growth are significant as are the investment in additional personnel required to accommodate the demand for our products and services and the information technology system to support our data requirements. In '08, we expect to hire approximately 800 new employees or nearly 10% of our existing employee base. These new employees will work at facilities around the world to provide the high quality products and services for which Charles River is known. And we will continue the IT projects we began in '07, which we believe will position us on the leading edge of information management both internally and to support our clients requirements. Charles River today is a vibrant growing company, with a unique continuum of products and services, that supports and accelerates our clients' drug development efforts as no other provider can. Our strong financial performance in '07 clearly demonstrates the strength of our business model and the value that we provide for our global client base. By adhering to our core competencies of laboratorial medicine and science and the regulatory compliance of pre-clinical services and investing aggressively to expand and strengthen our infrastructure, we have positioned ourselves to partner with our clients at this critical inflexion points, when they are increasingly adopting strategic outsourcing as the means to improve the efficiency and cost effectiveness of the drug development effort. And increasingly they are selecting Charles River to play an integral role in accelerating these efforts. With robust demand for our products and services, we see significant opportunities to continue growth in both RMS and PCS businesses. In order to capitalize on these opportunities, we are turning our attention to our corporate brand and to our sales and marketing functions. These are extremely valuable assets for the company and are intrinsic to effective communication with our clients about the products and services we provide, the support we can offer, and the value we bring to the drug development efforts. To enhance our visibility, we have realigned our sales force, assigned science senior management to key clients accounts, trained every sales person on our core portfolio and establish cross selling initiatives. Given the brand equity we have in the Charles River name, you will now see our name coupled with a new overarching brand message, clearly focused on supporting our customer’s critical needs. Over the course of '08, you'll see the message on our new website marketing materials and programs, all of which are focused on extending our support for and visibility in the research community. You'll see it in our new refresh logo, which builds on a recognized and well regarded brand equity. And although much of this messaging will be new, with still Charles River, a company our clients can continue to rely on to help accelerate the drug development effort, that’s why our new tag is accelerating drug development exactly. It's what we do, who we are and who we'll continue to be exactly. In closing, I would to thank our more than 8500 employees for their exceptional work and commitment and our shareholders for their continuing support. Now, I will turn the call over to Tom Ackerman.

Thank you, Jim and good morning. First, let me remind you that our discussion today focuses on results from continuing operations. In addition, I'll be speaking primarily to non-GAAP results, which exclude all acquisition-related amortization and other items. Sales and operating income continue to grow at strong double-digit rates in the fourth quarter of 2007, which drove a 12.1% increase year-over-year and EPS to $0.65. The consolidated operating margin improved slightly year-over-year to 20.7%. The RMS operating margin improvement was largely offset by a decline in the PCS margin, result of operating two facilities in Massachusetts in 2007 compared to only one in 2006, incurring some operating cost at the new Nevada facility and the negative impact of foreign exchange in Canada. As I emphasized on our third quarter conference call, we expect the foreign exchange to cross a meaningful drag on the PCS margin in the fourth quarter, just as it did in the third quarter. During the impact of the strengthening Canadian dollar, foreign exchange reduced the PCS operating margin in the fourth quarter by 150 basis points. Throughout 2008, we will working to mitigate the impact of foreign exchange on operating margins by invoicing a larger percentage of our Montreal client in Canadian dollars, reducing Montreal's US dominated sales to slightly more than half of total sales. Foreign exchange did not have a material impact on the RMS operating margin in the fourth quarter, and typically does not. In the fourth quarter, we were please to generate sales growth on a sequential basis for the fifth consecutive quarter. As expected, the consolidated operating margin declined by nearly 200 basis points and EPS also declined sequentially versus the third quarter of 2007, primarily reflecting normal seasonality in the RMS segment and a higher share count related to dilution from the convertible debt. Reduced client orders around the holidays negatively impacts fourth quarter sales volume and operating margins, particularly in the Research Model production business. The seasonal impact is most visible in the RMS operating margin, because the effect of lower sales volume and the high margin, high fixed cost production business dropped straight through to the operating income line. Unallocated corporate overhead declined by $600,000 year-over-year and approximately $2 million sequentially to $9.8 million in the fourth quarter of 2007. For the full year unallocated corporate expense was $53 million or 4.3% of sales. This was below our previous expectations due to lower health fringe and related costs, partially offset by the expected increase in IT costs. Including initiation of multi-year ERP project, we continue to invest in our information infrastructure to support our clients growing requirements and to conduct our operations in a more integrated and efficient manner. Part of the initial investment has required us to hire key staff and consultants to help manage and ensure a successful implementation of our global IT initiatives. Net interest expense decreased by $1 million, both year-over-year and sequentially to $1.3 million in the fourth quarter of 2007, driven by lower interest rates, as well as debt repayment activities. We prepaid the remaining balance on our Canadian term loan at the end of the third quarter have made scheduled payments on our US credit facility. Other income declined by $1.3 million in the fourth quarter, as prior year investment gains related to the deferred compensation plan and foreign exchange transaction gains, did not recur in the fourth quarter of 2007. The tax rate of 29.2% in the fourth quarter was nearly unchanged, year-over-year, and lower than the third quarter level. For the year our tax rate of 29.4% was inline with prior guidance. In the fourth quarter, we excluded a $2.1 million benefit from our non-GAAP results, related to deferred tax revaluation. The revaluation was driven by tax law changes in foreign jurisdictions, primarily Canada and the adjustment was attributable to the impact on acquisition intangibles amortization. As Jim said, we completed the transition into the new Shrewsbury facility on schedule in December. We have also closed the Worcester facility and primarily as a result of the related lease impairment, recorded charges were approximately $4.6 million or $0.04 per share in the fourth quarter. This brings the total charges related to the accelerated exit of Worcester facility to $6.2 million for 2007 or $0.06 per share, which we excluded from our non-GAAP results. We have not yet disposed off the Worcester real estate and when we do, we could incur additional charges. However, we would not expect the amounts of any such charges to be material. Now, I will turn to some balance sheet and cash flow items. At the end of the fourth quarter we had cash and cash equivalents of $225 million, plus $63 million in short and long-term marketable securities for total of $289 million, compared to $287 million at the end of 2006. Accounts receivable improved significantly to $214 million at the end of the fourth quarter, down almost $20 million from the third quarter level. Our finance team's continuing focus on collections paid off in the fourth quarter and we are very pleased to see our DSO meaningfully improve to 35 days at the end of the year compared to 43 days at the end of the third quarter and 39 days at the end of last year. We continue to actively manage our DSOs and monitor our collections and receivables. Free cash flow for 2007 was $58 million exceeding the high end of our expected range by $8 million. We achieved this level as a result of strong operating cash flow generation of $285 million due primarily to high end net income and the improvement in DSO. We generated more than enough cash to fund our 2007 capital expenditures which came in above the high end of our expected range at $227 million. For 2008, we continue to expect free cash flow to be in a range of $50 million to $75 million and capital expenditures to be in a range of $220 million to $240 million. Depreciation in the fourth quarter increased approximately $2 million year-over-year to $14 million, primarily as a result of the new Shrewsbury facility. In the quarter, we also began to book a small amount of depreciation related to our new Reno facility as we open the new building and positioned some management and administrative personnel. For 2007, depreciation grew by nearly $8 million to $53 million due to new space coming on line. Total amortization expense declined $700,000 million to $9 million in the fourth quarter and decreased approximately $4 million to $33.5 million for the year due to a reduction in Inveresk-related amortization expense. A portion of the intangible assets from the Inveresk acquisition were amortized over a shorter three year period which ended in 2007. In the fourth quarter, we repurchased nearly 200,000 shares at a cost of approximately $12 million which brings our total purchases to 724,000 shares for the year at a cost of $39 million. We had approximately $96 million remaining on our current buy back authorization at the end of the year, which we expect to help offset share dilution from option exercises and equity compensation awards. 2007, was a tremendous year for Charles River driven by robust client demand and excellent execution. Nearly all of the businesses in our portfolio metrics exceeded the operating plans that we laid for them over a year ago. We believe that the robust market trends, which supported our growth in 2007, will continue to drive many of our businesses in 2008. As a result, we are reiterating our 2000 guidance of sales growth, in the range of 10% to 13%., GAAP earnings per share in the range of $2.59 to $2.69 and non-GAAP earnings per share in the range of $2.87 to $2.97. We do expect our average diluted share count in 2008 to increase from the guidance that we provided in December, reflecting a higher stock price which drives incremental dilution from our convertible debt. However, this incremental dilution is expected to be offset by lower than expected net interest expense and other operating items. We have seen interest rates drop on our floating rate debt as a result of a Federal reserve January reductions in the Fed fund rate and a correlated impact on LIBOR. As we noted in the December guidance call, we expect the costs for Nevada to step up significantly in the first quarter of 2008 as we commence studies of the new facility. Operating costs at the new Nevada facility are significantly higher than the both the Legacy facility and new Massachusetts facility since we are opening more space in the initial phase in Nevada than we did in Massachusetts. We also expect the PCS margin to continue to be pressured by foreign exchange in Canada. As a result, we expect the first quarter PCS operating margin to be sequentially lower than the fourth quarter of 2007. This is consistent with our December guidance as is our expectation that the full year 2008 operating margin will be comparable to the 2007 levels. We are quite pleased with our 2007 results, but have already put the successful year behind us to focus keenly on delivering another strong year of performance in 2008. That concludes our remarks. We'll now take your questions.

(Operator Instructions). We have a question at this time from David Windley, Jefferies & Company. Please go ahead. David Windley - Jefferies & Company: Hi. Good morning. Thanks for taking the question. I wanted to focus on the preclinical segment margins. Tom, you've outlined first quarter flat from full year comparison. There were several qualitative items that, Jim, you described the Phase I clinic in the UK, China facility startup, Canadian dollar strength. I guess, it sounds like you're going to take some steps to mitigate the Canadian dollar issue. What about the Phase I clinic and the China facility startup cost, are those addressable? Obviously, you're going to continue to spend in China, but are those addressable in a way that that impact will be mitigated as we move through 2008?

No. We think as we move forward, Dave, both of those issues will be much less of an issue. The China operation that we're going into Dave, they will not have cost increases any higher than the current year, and we intend to build that operation up and open it, so it shouldn't be any more of a significant drag at tall. And Phase I is, we believe that the one of the regulatory issue [differences], the subsequent that they are beginning to soften somewhat. We're also really initiating a more aggressive business development campaign over that drug discovery services and shall be the linkage between our preclinical and (inaudible). So, we'd actually anticipate that there will be much less of an issue going forward. David Windley - Jefferies & Company: Okay. And on the Canadian dollar, Tom, you mentioned that you are going to start billing half of that revenue or so in Canadian dollars from Montreal. But you did say Canadian dollar will pressure the first quarter, is that something that's not going to start until later in the year.

No that, if you just look back to 2007 Dave to put in to perspective David Windley - Jefferies & Company: Yeah.

We've begin the year at about, an exchange rate of 0.85 and in the fourth quarter that Canadian dollar was actually between 1.05 and 1.10. So, that was obviously exacerbated in the fourth quarter. It has improved in the first quarter, I don't know, what it will do for the rest of the quarter, but it has come down somewhat to be almost one for one. So, it will still be a difficult quarter for foreign exchange, but it should be a little bit better than the fourth quarter. We have begun already to build some additional clients in the first quarter, and we'll continue to look at that during the year. So, I think both of those factors will provide a little bit of relief in the first quarter. As you look year-over-year, it's still a lot of pressure in the Canadian dollar versus the first quarter of '07. David Windley - Jefferies & Company: Okay, I'll jump out of the queue then let somebody else ask questions. Thanks. Good luck.

The next question is from the line of Douglas Tsao, Lehman Brothers. Please go ahead. Douglas Tsao - Lehman Brothers: Hi, good morning. I was just wondering if you could provide a little more color on the sequentially decrease in the operating margin for the RMS segment, certainly there is historically been some seasonality there. I was wondering if there is any other moving parts, since it seems to be little greater than it's been in the past?

Doug, the biggest thing which I mentioned to in my remarks, is that we do see the models themselves decline noticeably from Q3 to Q4, and that's really associated with activity around the holiday period from Thanksgiving, right through the New Years, and it's is a global phenomena. So, when you look at our big geographic areas North America, Europe and Japan, we do see that trend-off, as I mentioned it's very high margin business, and given the high fixed costs, it pretty much dropped straight to the bottom line. When you look sequentially at total RMS sales activity from Q3 to Q4, I think we essentially moved sideways, so we were able to pick up, in sequential growth, in most of our services business. But we just don't have the same margin flow through as on the model business. So, we do see a net overall drop in our margins from Q3 to Q4. Douglas Tsao - Lehman Brothers.: Okay. And then, thinking about -- sticking to RMS, when you think about the models business, is this a function where the volumes of the outbred rats and mice for the toxicology studies is sort of growing at a low-single digit and the immunodeficient and other sort of diseases models are growing at faster rate?

No. Not really, as we said Doug, we've been really pleased that that sector has been growing as quickly as it has. It grew 10% in the fourth quarter, which was pretty much its growth rate for the year. And we've been seeing increased unit growth pretty much across all of the product lines that we delineated in our prepared remarks, driven both by increased research and the oncology infectious disease area, but also significant tick up in toxicology work as well as basic discovery works. So, it's pretty much across the board in all of those models. Douglas Tsao - Lehman Brothers.: So, all the models are growing at comparable rates in terms of volumes?

I can’t say that exactly. But… Douglas Tsao - Lehman Brothers.: Okay.

The ones that we called out, the ones that we reported out are growing at significant increases over the prior year. Douglas Tsao - Lehman Brothers.: Okay. And then one final question on PCS, you referred to a lot of client demand for services in China. I was just wondering if you could provide some comments on the source of that? I mean are these large multinational pharmaceutical companies? And where would this potential work -- would this be coming from the discovery operations based on China or is this the question of taking molecules discovered in the US and bringing them to China for toxicology work?

They are all large international and multinational companies that have discovery efforts, either of their own or in some contract basis in China, and specifically in Shanghai, frankly. So, this is not to support local Chinese companies, it’s to support the clients that we have elsewhere in the world, for whom we do work, both in North America and Europe. And this is for discoveries that are made locally, where they're going to want preclinical task force locally as well. So, it's not for molecules to be shipped from the US or Europe to China.

Thank you. And our next question is from the line John Kreger, William Blair. Please go ahead. John Kreger - William Blair: Alright, great thanks. Jim question, given the economic weakening that we've seen at least in the US and the difficult year that pharma had in '07 are you seeing any change in behavior of your clients both at large company and small?

We really haven't, it's been quite consistent throughout '07, pretty much quarter-to-quarter with significant increases and certainly versus the prior year. We seem to see just the continual virtualization of these companies and because of some of the economic pressures and also some of the pipeline pressures that they have been facing, all with an accelerating interest and desire to outsource and of course we're not just seeing outsourcing of the preclinical sector. But the service components of the RMS business are also sort of the direct legacy of that demand as well. So I think as more as work as these clients can do externally that they got to be done as well as were done internally to allow them to focus their attention else where than more they kind of can do that. That will require continued investment in facilities and staff for us to really show them the quality of our work and of course the same number of the people that we can get into work in our business in particularly at the highest levels, senior scientific levels that coming directly from big pharmas. So to some extent it's kind of the same quality work that's overseen. So we haven’t seen any diminution in demand, we wouldn't expect it to, we would expect that outsourcing would continue like sort of a safety valve to alleviate some of the pressure that these clients are feeling and I think as long as we have the infrastructure in place, it will continue. John Kreger - William Blair: Thanks and just a second question, you talked about the fact that you expect Reno expenses touch around significantly in the first quarter. Can you just expand about what’s really driving that, is that the lack of capitalizing some of those costs or is it really a spike in staffing? And as we look through the rest of the year, should we expect that to continue to around for sort of a plateau at first quarter levels?

Remember that Reno is certainly ramping up the first quarter. We are going to continue to open that about the 80% of the space that we renovated over the next two quarters and then finally have that space finished by this summer. So we will have increased costs during that time and duplicate costs indeed over the prior year. Commensurate with that will be filling up that space as quickly as we can as I reported to you earlier. We've had more than half of our clients already audit the facility and are quite pleased with that. And we have additional clients coming back soon. So, we think the uptake is going to be considerable and consistent by the token the costs are considerably higher than the prior year.

Thank you. Our next question is from the line of Hari Sambasivam of Merrill Lynch. Please go ahead. Hari Sambasivam - Merrill Lynch: Yes, thank you very much. Jim just a quick question on the Endosafe PTS, could you give us, maybe give us a quantification of how big this opportunity might be? Just in terms of where you have penetrated your possible or probable accounts and how much actually you can expand on it? And the second question, I’m wondering is on the PCS side you are talking about a mix improvement going forward in Shrewsbury and I’m just wondering what kind of studies you maybe talking about that might be actually contributing to that improvement in mix?

The PCS mix is - historically the Massachusetts operation has done more discovery work or short term work which tends to have a lower margin. They did that very well and the size and scale of the facility and the staff were more commensurate with that type of work. As we cranked up the physical plant and certainly improved the depth and quality of the staff, we are able to do much more sophisticated and long term studies. So we saw that mix actually change nicely during '07 and we anticipate that, that will continue to shift dramatically so that we are relying less and less on discovery work and more on more longer term higher value studies. On the PTS side, we are extremely pleased with this product line. We have a very strong IP situation, we have very good uptake from clients. There is some validation time required, whether they are actually switching from our old technology to the new one or from a competitive technology to a new one, but that's happening consistently throughout the world. Additionally, we are watching the increase in the numbers of cartridges sold along with the machines now seem to increasing nicely as well. So, I think the only metric that would be appropriate to give you as we have given historically is that, by virtue of this device we increased the size of the market four or five folds from it's historical norms, and we think that we are playing in endotoxin testing market with just a couple of hundred million dollars in total revenue, and we anticipate it will have the majority of that going forward. But the conversion time, there's no way to short circuit that or to actually speed it up, we are doing the best we can from a technical service point of view. The response has really been rewarding and positive from clients. So, we anticipate that we will continue to build share and convert that both our own clients, but in particular the competition clients. Hari Sambasivam - Merrill Lynch: Thank you. One additional question on the RMS side. As you sort of see, I guess I am wondering about the condition of the economy, pressures on governments budgets etcetera. How do you sort of mitigate the impact on RMS or do you that business is more vulnerable to government cutbacks, institute cutbacks etcetera. And how do you sort of go about sort of mitigating that risk?

We don’t really think it's more vulnerable. The NIH budget has been beleaguered for I don’t know the last three or four years, and so, we are certainly in for another year of that. We’ve got 15% or less of our revenues dependent on the academic and government marketplace, and a lot of our government contracts are already in place. So it’s a de minimus impact on us, from that point of view. And as I said earlier, while I think the large pharmaceutical and certainly several of large biotech companies have a lot of pressure on them to invigorate the pipeline. The principal and primary way to do that is to invest more in research, not less in research. So we are seeing continued increases on research spending, continued increases in outsource research spending and development spending. And so, that gives us a level of comfortable, particularly off of our strength in '07 that we should see similar trends this year, which you can see in our guidance of 10% to 13% growth for '08.

Thank you, and our next question is from the line of Randall Stanicky, Goldman Sachs. Please go ahead. Randall Stanicky - Goldman Sachs: Good morning. It's Adriana calling on behalf of Randall Stanicky. I actually have two questions. First one is; you guys have been talking about attracting new customers. Do you provide some information on your breakdown of your customers by biotech and pharma? And my second question is regarding your toxicology business, it's being growing very strongly. Do you provide some information, how much of the organic growth in the quarter was attributed to your tox services?

So on the biotech and pharma, we haven't done that recently and the majority of our sales are the big pharma, and I think that's probably the best way to answer that. And it's significant portion -- and a significantly growing portion at biotech. One of the reasons we don't -- so that's the best answer. But one of the reasons we don't think the distinction is all that useful because, fair amount of the funding from biotech comes to us from big pharma and it tends to be some sort of a blurring between the two sectors and it is sort of an area that's grey, and so much of the biotech work is for the big pharmaceutical companies. So we tend to look at them as a collective entity, and we look in terms of the growth of our industrial sector. But we've seen growth in really both large pharma and biotech. And your second question was about how much toxicology was contributing to our organic growth? Randall Stanicky - Goldman Sachs: That's correct. Yes.

Well we don't break that out specifically, but obviously the growth in our toxicology business continues to be consistent as we built and fill up these new facilities. And while, we've some pricing down at that, we're experiencing significant and consistent organic growth in that product lines commensurate with the level -- driven by the levels of outsourcing.

Thank you. And once again, we please ask that you limit your questions to one per queue. Next question and this line is from Robert Gilliam with UBS. Please go ahead. Robert Gilliam - UBS: Sure. I just want to follow-up on I think it was Doug's question from earlier. Just on the RMS margins, the kind of a sequential decline and I kind of understand all the moving parts you laid out there as far as the seasonality that we see. But I guess, I was hoping we could drill a little bit deeper and understand why the magnitude of the sequential decline was more pronounced than it has been in the past? And then also, if it is sequential, should we expect the RMS margins to kind of rebound to the 43%, 44% level in the first quarter year?

Well without being specific on the first quarter, we'd obviously expect them to rebound like they have traditionally moving over from quarter-to-quarter. Last year, we did have a little bit of a positive pickup in Q1, last year being '07, because we've had some quarantine issues in our large animal model facility in the fourth quarter of '06. Those slid over into the first quarter of '07 and we had probably a little bit better than typical quarter. But other than that, I would expect them to come up just as we've always said. The first quarter was typically a good quarter, so I do think that, that trend would continue.

Thank you. And our next question is from the line of Tycho Peterson, JPMorgan. Please go ahead. Tycho Peterson - JPMorgan: Hi, good morning. Following up actually on one of the earlier questions just on the Endosafe, I'm just wondering, if you can give us a sense as to what the global demand is like. I mean, you talked about the PAT initiatives here in the U.S., but how you are seeing demand shapeup overseas? And then where you are on the capacity side? I think you are manufacturing most of the systems In South Carolina, so do you need to add new capacities for the new cartridges?

We are seeing a very good up-tick in demand and purchases of this device in Europe. We sold a lot of these devices for R&D purposes in Europe before we had the FDA approval. We continue to do so. And so, we've got very strong purchases across the whole range of clients, overseas as well. So, there is not a huge difference geographically in the response to the product. We are doing final assembly manufacturing in our own facility, we intend to continue to do that. We have continuously ramped up our GMP production capacity to accommodate the anticipated growth rate and we're comfortable, we'll able to continue to do so. Tycho Peterson - JPMorgan: :

That wasn't – you switched subjects. Tycho Peterson - JPMorgan: Yeah

So, pricing on the preclinical side has been continuous to always be a factor, but I would say less significantly than we seen in the prior years. I think there's some acknowledgement that we are bankrolling, both the space and the headcount significantly, and need to pay for that. So, we have what we believe are appropriate pricing increases. And have had very well push back at all from our clients. As I said earlier, we think that the Chinese marketplace for us is going to be a place to support local, to support international clients who have located in China, to use that as another locale for basic discovery. Too early to comment on what the pricing scenarios will be over there, except to say that, we are quite confident that we can fill up as much of the new facility that we are currently building, as we see that pretty much on day on. So, there is really a significant client interest in having a high quality GLT facility and of course we intend to be the first company to open the facility there in the second half of this year.

Thank you. And our next question is from the line of John Sullivan, Leerink Swann. Please go ahead. John Sullivan - Leerink Swann: Hi guys, good morning, thanks for squeezing me in. Just a quick question about the biotech industry as a customer group for you. Funding is probably a little bit harder to come by, especially for some smaller biotechs, any change in the profile of business with the biotech industry specifically and how important is the biotech industry to your overall business? Thank you.

John we really haven't seen much of a change, biotech continues to increase in a meaningful way. As I said earlier, we think a lot of the money doesn’t just come from the capital market, it comes directly form big pharma, as they use biotech as a discovery engine. It’s only a meaningful part of our total sales portfolio, and we expect it will continue to be. I think many people believe that the future success of biomedical research will come directly from the small biotech companies. So, they will continue to find sources of capital to keep them going.

Thank you. And our next question is from Sandy Draper, Raymond James. Please go ahead. Sandy Draper - Raymond James: Thank you. This is a little bit more, just about a higher level question, looking back at '07 and looking into '08, obviously throughout the year, you ended up delivering very results in beating the numbers. Just for sort of a perspective, when I look at it between FX, acquisitions, strong organic growth, and research and RMS and PCS, how would you sort of qualify where the biggest surprises in 2007 were, in terms of beating the results? And then looking out at 2008, where do you think the biggest risks are and where would say the biggest potentials for upside are? Thanks.

Well, we wouldn't characterize '07 as full of surprises, I guess the best way to characterize it is that we have a dozen or more P&L's. It's unusual that virtually all of our businesses perform well at the same time, virtually all of them did and the result of that was that we were able to increase our guidance a couple of times. We always intended to guide as accurately as possible. And so, I wouldn't say we were surprised by the results, but we were pleased with them. We certainly would like to see that trend continue, it's not necessarily a realistic assumption. I don't think there are any particular areas of concerns that we have, we think the demand will be quite consistent and conservative for both of our product lines, RMS and PCS, given the state of our clients. We think that outsourcing will continue significantly both on the PCS side and the RMS Services side. And we're quite confident that we'll continue to see purchases of our core research model products and our in-vitro products would be strong as well. So, we believe that our guidance for '08 is a accurate reflection of what we believe the demand would be, and sales and profit will be on that activity.

Thank you. And our final question will be from the line of Jon Wood, Banc of America. Please go ahead. Jon Wood - Banc of America: Thank you. Jim you touched on this qualitatively, but can you give us the sense of your estimate of the growth of the US Research Models business in 2008 for the whole market from a volume perspectives? And then, typically, what proportion of the targeted price increases in the models business are realized in a given year? Thank you.

So, I am not going to answer that specifically, US Research Models did about 10% last year. It's a very strong year for us. We would like to believe that growth around and in that area could continue. It's always been our strongest market, with the strongest margins. And we've always been the leader in that market place as well. We provide our price increases at the end of a particular fiscal year, and we usually, just kind of a pushback, we see it quite early, we really haven’t, we tried to be responsible and respectful of our clients and their financial situation, as we raise our prices. We've also had some competitive opportunities where we've had competitors raise their prices actually more aggressively than we did and reduced the premium that we disserve frankly. And so, it actually made our price increases seem even more responsible than I think there's. So we've seen virtually no pushback, we believe the demand will continue, we don't have any indications when we are putting our operating plans, I suggest that it would.

Thank you. And speakers you may continue with any closing remarks you may have.

Thank you for joining us this morning. We look forward to speaking with you soon and to seeing you at the Cowen and Lehman Healthcare conferences in March. This concludes the conference call. Thank you.

Ladies and gentlemen, that does conclude your conference. We do thank you for joining, for using the AT&T executive teleconference. You may now disconnect. Have a good day.