Covance Reports Fourth Quarter Net Revenue Of $623 Million, Pro Forma EPS Of $0.87 And Adjusted Net Orders Of $769 Million

-- Issues FY2014 Pro Forma EPS Target of $3.65 to $4.00 --

04 Feb, 2014, 16:02 ET from Covance Inc.

PRINCETON, N.J., Feb. 4, 2014 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its fourth quarter and year ended December 31, 2013. Net revenue in the fourth quarter was $623.1 million, representing 10.8% growth from the fourth quarter of 2012's GAAP result of $562.2 million, and 11.1% growth from the fourth quarter of 2012's pro forma result of $560.7 million. On a GAAP basis, the company reported earnings of $0.80 per diluted share in the fourth quarter of 2013 as compared to GAAP earnings of $0.61 in the fourth quarter of 2012. Excluding charges associated with restructuring, other cost reduction actions and other items in both periods, the company reported pro forma earnings per diluted share of $0.87, up 18.6% over the pro forma earnings of $0.73 for the fourth quarter of 2012.

On a full-year basis, net revenue in 2013 was $2.4 billion, representing 10.2% growth from 2012's GAAP result of $2.18 billion, and 10.6% growth from 2012's pro forma result of $2.17 billion. On a GAAP basis, the company reported earnings per diluted share of $3.15 in 2013 as compared to GAAP earnings of $1.68 in 2012. Excluding charges associated with restructuring, other cost reduction actions and other items in both periods, the company reported pro forma earnings per diluted share of $3.23 in 2013, up 19.6% over the pro forma earnings of $2.70 for 2012.

"In 2013, Covance continued to benefit from market share gains in central laboratories, strong operational delivery in clinical development, improving market conditions in toxicology, and successful execution of our on-going strategic IT projects. This performance enabled us to significantly exceed our 2013 financial targets, with a return to double-digit revenue growth, pro forma EPS of $3.23, and free cash flow in excess of $240 million. In addition, we delivered strong orders throughout the year, resulting in record adjusted net orders of $3 billion, and an adjusted net book-to-bill of 1.25 to 1 for the year," said Joe Herring, Chairman and Chief Executive Officer. "For the fourth quarter, revenue grew to $623 million, up 11.1% from 2012 pro forma revenue, and pro forma earnings per share grew 18.6% to $0.87. Adjusted net orders in the fourth quarter were $769 million, representing an adjusted net book-to-bill of 1.23 to 1.

"Late-Stage Development fourth quarter revenues grew 14.5% year-on-year to $395 million. This increase was led by 17% growth in central laboratories and 13% growth in clinical development. Late-Stage Development pro forma operating margins increased 140 basis points year-on-year and 10 basis points sequentially to 22.7%. In Early Development, revenue grew 5.7% year-on-year on a pro forma basis, led by growth in clinical pharmacology and toxicology. Sequentially, revenues grew $7.9 million from the third quarter, driven primarily by strong sequential growth in toxicology. Early Development fourth quarter pro forma operating margins of 12.1% were flat sequentially after normalizing for the UK R&D credits, as strength in toxicology was offset by normal seasonality in clinical pharmacology.

"Looking ahead to 2014, for the full year, we expect year-on-year revenue growth in the 6% to 10% range and pro forma diluted earnings per share, excluding costs from our ongoing restructuring activities, in the range of $3.65 to $4.00 (assuming foreign exchange rates remain at year-end 2013 levels). In the first quarter of 2014, we expect revenue to be up from the fourth quarter level and pro forma earnings per share to increase sequentially by a couple of cents, as we forecast an increase in Late-Stage Development net revenues and earnings to be partially off-set by seasonally-lower first quarter Early Development results." 

Consolidated Results

 

($ in millions except EPS)

4Q13

4Q12

Change

FY13

FY12

Change

Total Revenues

$669.8

$609.1

$2,595.1

$2,365.7

Less: Reimbursable Out-of-Pockets 

$46.7

$46.9

$192.8

$185.1

Net Revenues

$623.1

$562.2

10.8%

$2,402.3

$2,180.6

10.2%

Operating Income

$55.0

$43.1

27.5%

$217.3

$115.9

87.6%

   Operating Margin

8.8%

7.7%

9.0%

5.3%

Net Income

$45.8

$33.9

35.3%

$179.2

$94.7

89.2%

Diluted Earnings per Share

$0.80

$0.61

30.5%

$3.15

$1.68

87.2%

Revenue from Facilities Closed in 2012**

-

$1.5

-

$8.8

Net Revenue, continuing ops*

$623.1

$560.7

11.1%

$2,402.3

$2,171.9

10.6%

Restructuring Costs and Other Items

($9.8)

($6.6)

($26.8)

($73.1)

Loss from Facilities Closed in 2012**

-

($2.9)

-

($9.3)

Operating Income, excluding items*

$64.7

$52.5

23.2%

$244.2

$198.2

23.2%

  Operating Margin, excluding items*

10.4%

9.4%

10.2%

9.1%

Gain on Sale of Investments

-

-

$16.4

$1.5

Impairment of Equity Investment

-

-

-

($7.4)

Favorable Income Tax Developments

$3.0

-

$3.0

$11.5

Net Income, excluding items*

$49.6

$40.3

23.0%

$183.7

$151.9

20.9%

Diluted EPS, excluding items*

$0.87

$0.73

18.6%

$3.23

$2.70

19.6%

* See attached pro forma income statements for reconciliation of 2013 and 2012 GAAP to pro forma amounts.

** Facilities closed in 2012 include Chandler, Honolulu and Basel.

 

Operating Segment Results

Early Development

 

($ in millions)

4Q13

4Q12

Change

FY13

FY12

Change

Net Revenues

$228.3

$217.4

5.0%

$870.5

$869.5

0.1%

Operating Income

$21.9

$18.7

17.3%

$87.5

$4.0

2,087.6%

Operating Margin

9.6%

8.6%

10.1%

0.5%

Revenue from Facilities Closed in 2012**

-

$1.5

-

$8.8

Net Revenue, continuing ops

$228.3

$215.9

5.7%

$870.5

$860.8

1.1%

Restructuring Costs and Other Items

($5.7)

($4.3)

($13.2)

($69.5)

Loss from Facilities Closed in 2012**

-

($2.9)

-

($9.3)

Operating Income, excluding items

$27.6

$25.9

6.7%

$100.7

$82.7

21.7%

Operating Margin, excluding items

12.1%

12.0%

11.6%

9.6%

** Facilities closed in 2012 include Chandler, Honolulu and Basel.

 

The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products. Net revenues in the fourth quarter of 2013 were $228.3 million, compared to $217.4 million on a GAAP basis and $215.9 million on a pro forma basis in the fourth quarter of last year. Last year's pro forma revenue excluded $1.5 million in revenue from the three sites closed by the end of 2012. On a pro forma basis, net revenue increased 5.7%, including a 60 basis point foreign exchange tailwind, as continued strong growth in clinical pharmacology and improved results in toxicology were partially offset by declines in discovery support and certain pharmaceutical chemistry services. Sequential growth of $7.9 million was primarily driven by toxicology.

GAAP operating income in the fourth quarter of 2013 was $21.9 million, and included $0.8 million in costs associated with our previously-announced restructuring actions and $4.9 million in asset impairment charges relating to our Manassas and Basel properties, which are being marketed for sale. This compares to GAAP operating income of $18.7 million in the fourth quarter of 2012, which included restructuring costs of $4.3 million and losses at facilities closed in 2012 of $2.9 million. Pro forma operating income, excluding these costs, was $27.6 million in the fourth quarter of this year, a 6.7% increase from the $25.9 million reported in the fourth quarter of 2012 as growth in clinical pharmacology and toxicology and the shift to above margin treatment for the UK R&D credit more than offset declines in discovery support and certain chemistry services. Pro forma operating margins were 12.1% in the fourth quarter of 2013, versus 12.0% in the fourth quarter of 2012 and 13.1% last quarter. Third quarter 2013 margins included a six month impact of the shift to above margin treatment of the UK R&D credit (as the law was signed in July 2013, but applied retroactive to April 1, 2013) versus only a three month impact in the current quarter. 

On January 31, 2014, Covance sold its high-complexity genomics laboratory, located in Seattle, Washington, to Laboratory Corporation of America Holdings, and entered into a five year services agreement, pursuant to which Covance will collaborate with LabCorp to continue to offer these services to its clients. Covance expects to report a small gain on this sale in its first quarter ending March 31, 2014, which will be excluded from its pro forma earnings per share. Covance will continue to provide other genomics services to its clients through its central laboratories. 

Late-Stage Development

               

($ in millions)

4Q13

4Q12

Change

FY13

FY12

Change

Net Revenues

$394.8

$344.8

14.5%

$1,531.8

$1,311.1

16.8%

Operating Income

$89.2

$72.7

22.8%

$338.5

$277.6

22.0%

Operating Margin

22.6%

21.1%

22.1%

21.2%

Restructuring Costs

($0.3)

($0.7)

($4.1)

($1.3)

Operating Income, excluding items

$89.5

$73.4

22.0%

$342.6

$278.8

22.9%

Operating Margin, excluding items

22.7%

21.3%

22.4%

21.3%

 

The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the fourth quarter of 2013 grew 14.5% year-on-year to $394.8 million, and increased $8.5 million sequentially from the third quarter level. In the quarter, foreign exchange favorably impacted revenue growth by 170 basis points. Year-over-year growth was driven by increases of 17% in central laboratories and 13% in clinical development, while the sequential revenue increase was led by growth in clinical development followed by growth in central laboratories. 

Operating income for the fourth quarter was $89.2 million on a GAAP basis and included $0.3 million in costs associated with our ongoing restructuring actions. On a pro forma basis, operating income was $89.5 million, up 22.0% year-over-year. Pro Forma operating income also increased $2.1 million sequentially. Pro forma operating margins were 22.7% in the fourth quarter of 2013, versus 21.3% in the fourth quarter of 2012 and 22.6% last quarter. The year-on-year increase in profitability was driven by operating leverage in both clinical development and central laboratories, partially offset by increased spending on strategic IT projects. On a sequential basis, operating margins increased 10 basis points overcoming a headwind from the normalization of the UK R&D credit and increased IT spending due primarily to margin expansion in clinical development. 

Corporate Information

The company reported fourth quarter adjusted net orders of $769 million. Backlog at December 31, 2013 grew to $6.92 billion compared to $6.83 billion at September 30, 2013 and $6.64 billion at December 31, 2012. Foreign exchange contributed $36 million to backlog growth on a sequential basis. 

Corporate expenses totaled $56.2 million in the fourth quarter of 2013 (including $3.8 million in restructuring costs) compared to $51.4 million last quarter (including $2.8 million in restructuring costs) and $48.3 million in the fourth quarter of 2012 (including $1.5 million in restructuring costs). The largest driver of the year-over-year and sequential increases in corporate expenses are spending on our strategic IT initiatives followed by higher incentive compensation expenses related to stronger-than-budgeted business performance. 

Cash, cash equivalents and short-term investments at December 31, 2013 were $729 million compared to $593 million at September 30, 2013 and $493 million at December 31, 2012. During the fourth quarter, the company raised $250 million from the issuance of senior notes. Proceeds from these notes and cash from operations were used to fully repay the $265 million outstanding balance on the revolving credit facility. The revolving credit facility will be maintained to provide flexibility to execute our growth strategy over the long-term.                                                      

Net Days Sales Outstanding (DSO) declined one day in the fourth quarter to 34 days at December 31, 2013 compared to 35 days at September 30, 2013 and 36 days at December 31, 2012. 

Free cash flow (defined as operating cash flow less capital expenditures) for the fourth quarter of 2013 was $134 million, consisting of operating cash flow of $193 million less capital expenditures of $58 million. Free cash flow for the year was $243 million, consisting of operating cash flow of $406 million less capital expenditures of $162 million. Free cash flow in both the fourth quarter and full year of 2013 include a client payment of approximately $28 million for Value Added Tax, which had been pending resolution between the client and the tax authorities during the year. Following resolution in the fourth quarter, the client paid this amount to Covance, which will in turn be remitted to the tax authorities in the first quarter of 2014. 

The pro forma effective tax rate in the fourth quarter was 21.6%, down 670 basis points sequentially from the pro forma effective tax rate of 28.3% last quarter. The effective tax rate in the third quarter included a six month impact, or approximately 900 basis points, from the shift in accounting of the UK R&D credit. The fourth quarter effective tax rate included a benefit of approximately 220 basis points (contributing approximately $0.02 in earnings per share) attributable to the finalization of our 2013 pre-tax earnings mix, where a greater proportion of our earnings came from operations in tax jurisdictions with lower income tax rates. The 2013 full year pro forma effective tax rate was 22.9% and is expected to be approximately 24.5% in 2014.

The Company's investor conference call will be webcast on February 5 at 9:00 am ET. Management's commentary and presentation slides will be available through www.covance.com.

Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with annual revenues greater than $2.4 billion and more than 12,000 employees located in over 60 countries. Information on Covance's products and services, recent press releases, and SEC filings can be obtained through its website at www.covance.com.

Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, savings, revenue, operations, revenue and earnings growth and other financial results are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements including the statements contained herein regarding anticipated trends in the Company's business are based largely on management's expectations and are subject to and qualified by risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, levels of industry research and development spending, the Company's ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss or delay of large studies, risks associated with acquisitions and investments, the Company's ability to increase order volume, the pace of translation of orders into revenue in late-stage development services, testing mix and geographic mix of kit receipts in central laboratories,  fluctuations in currency exchange rates, the realization of savings from the Company's announced restructuring actions, the cost and pace of completion of our information technology projects and the realization of benefits therefrom and other factors described in the Company's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Financial Exhibits Follow

 

 

COVANCE INC.

CONSOLIDATED INCOME STATEMENTS

FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2013 AND 2012

(Dollars in thousands, except per share data)

Three Months Ended December 31

Years Ended December 31

2013

2012

2013

2012

(UNAUDITED)

Net revenues

$           623,094

$            562,180

$   2,402,313

$   2,180,621

Reimbursable out-of-pocket expenses

46,675

46,964

192,817

185,138

     Total revenues

669,769

609,144

2,595,130

2,365,759

Costs and expenses:

  Cost of revenue

436,857

395,841

1,692,173

1,570,223

  Reimbursable out-of-pocket expenses

46,675

46,964

192,817

185,138

  Selling, general and administrative

93,564

92,823

360,012

358,854

  Depreciation and amortization

32,845

30,423

127,917

117,708

  Impairment charges

4,877

-

4,877

17,959

        Total costs and expenses

614,818

(a)

566,051

(c)

2,377,796

(b)

2,249,882

(d)

Income from operations

54,951

(a)

43,093

(c)

217,334

(b)

115,877

(d)

Other expense (income), net:

  Interest expense, net

1,450

1,153

4,084

3,506

  Foreign exchange transaction loss, net

14

173

1,925

1,474

  Gain on sale of investments

-

-

(16,400)

(1,459)

  Impairment of equity investment

-

-

-

7,373

  Loss on sale of business

-

-

-

169

        Other expense (income), net

1,464

1,326

(10,391)

(b)

11,063

(d)

Income before taxes and equity investee earnings

53,487

(a)

41,767

(c)

227,725

(b)

104,814

(d)

Taxes on income

7,641

(a)

7,870

(c)

48,518

(b)

10,099

(d)

Equity investee earnings

-

-

-

17

Net income

$              45,846

(a)

$              33,897

(c)

$       179,207

(b)

$         94,732

(d)

Basic earnings per share

$                  0.83

(a)

$                   0.63

(c)

$             3.28

(b)

$             1.73

(d)

Weighted average shares outstanding - basic

55,021,244

53,698,334

54,648,533

54,844,641

Diluted earnings per share

$                  0.80

(a)

$                   0.61

(c)

$             3.15

(b)

$             1.68

(d)

Weighted average shares outstanding - diluted

57,205,147

55,197,968

56,899,013

56,290,010

(a) Three months ended December 31, 2013 includes, as applicable, $4,874 in charges associated with restructuring and other cost reduction actions ($3,224 net of tax), $4,877 of asset impairment charges ($3,568 net of tax) and favorable income tax items totaling $3,035.

(b) Year ended December 31, 2013 includes, as applicable, $21,950 in charges associated with restructuring and other cost reduction actions ($14,576 net of tax), $16,400 gain on sale of investments ($10,654 net of tax), $4,877 of asset impairment charges ($3,568 net of tax) and favorable income tax items totaling $3,035.

(c) Three months ended December 31, 2012 includes, as applicable, $10,191 in restructuring costs ($6,968 net of tax), $3,613 favorable inventory adjustment ($2,502 net of tax) and $2,850 in losses at sites that were closed during the period ($1,966 net of tax).

(d) Year ended December 31, 2012 includes, as applicable, $33,930 in restructuring costs ($23,145 net of tax), $21,168 in inventory impairment charges and costs associated with the settlement of an inventory supply agreement ($14,645 net of tax), $17,959 of goodwill impairment charges ($17,959 net of tax), $7,373 of impairment of equity investment ($7,373 net of tax), $9,274 in losses at sites that were closed during the year ($6,533 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501.

Excluding the impact of charges associated with restructuring and other cost reduction actions, impairment charges, gain on sale of investments, 

costs associated with the settlement of an inventory supply agreement, losses at sites that were closed during the period and favorable

tax items, as applicable:

Income from operations

$              64,702

$              52,521

$       244,161

$       198,208

Taxes on income

$              13,635

$              10,866

$         54,490

$         41,135

Net income 

$              49,603

$              40,329

$       183,662

$       151,941

Basic earnings per share

$                  0.90

$                   0.75

$             3.36

$             2.77

Diluted earnings per share

$                  0.87

$                   0.73

$             3.23

$             2.70

 

COVANCE INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2013 and DECEMBER 31, 2012

(Dollars in thousands)

December 31

December 31

2013

2012

ASSETS

Current Assets:

Cash & cash equivalents

$        617,686

$       492,824

Short-term investments

111,359

-

Accounts receivable, net

331,815

339,558

Unbilled services

141,707

136,878

Inventory

48,257

49,270

Deferred income taxes

51,543

44,903

Income taxes receivable

-

3,642

Prepaid expenses and other current assets

201,621

167,629

    Total Current Assets

1,503,988

1,234,704

Property and equipment, net

913,612

891,319

Goodwill

109,820

109,820

Other assets

29,168

52,499

    Total Assets

$     2,556,588

$   2,288,342

LIABILITIES and STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$          59,713

$         34,430

Accrued payroll and benefits

170,806

144,681

Accrued expenses and other current liabilities

153,808

127,686

Unearned revenue

240,398

255,776

Short-term debt 

-

320,000

Income taxes payable

7,952

-

    Total Current Liabilities

632,677

882,573

Long-term debt

250,000

-

Deferred income taxes

32,035

27,912

Other liabilities

76,630

70,665

    Total Liabilities

991,342

981,150

Stockholders' Equity:

Common stock

809

791

Paid-in capital

859,535

744,114

Retained earnings

1,779,833

1,600,626

Accumulated other comprehensive income

25,746

28,520

Treasury stock

(1,100,677)

(1,066,859)

    Total Stockholders' Equity

1,565,246

1,307,192

    Total Liabilities and Stockholders'  Equity

$     2,556,588

$   2,288,342

 

COVANCE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(Dollars in thousands)

Years Ended December 31

2013

2012

Cash flows from operating activities:

  Net income

$         179,207

$           94,732

  Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization

127,917

117,708

    Non-cash impairment charges

4,877

41,736

    Non-cash compensation expense associated with employee benefit

       and stock compensation plans

41,538

40,759

    Deferred income tax expense (benefit)

5,023

(8,404)

    Gain on sale of investments

(16,400)

(1,459)

    Loss on sale of business

-

169

    Loss on disposal of property and equipment

1,236

1,181

    Equity investee earnings

-

(17)

    Changes in operating assets and liabilities, net of business sold:

       Accounts receivable

7,743

(28,541)

       Unbilled services

(4,829)

(23,419)

       Inventory

(1,300)

10,918

       Accounts payable

25,283

(1,963)

       Accrued liabilities

50,885

8,205

       Unearned revenue

(15,378)

54,998

       Income taxes

14,315

(10,522)

       Other assets and liabilities, net

(14,467)

(35,920)

Net cash provided by operating activities

405,650

260,161

Cash flows from investing activities:

  Capital expenditures

(162,170)

(151,679)

  Purchase of short-term investments

(109,794)

-

  Proceeds from sale of investments

17,781

4,682

  Other, net

648

1,017

Net cash used in investing activities

(253,535)

(145,980)

Cash flows from financing activities:

  Net (repayments) borrowings under revolving credit facility

(320,000)

290,000

  Borrowings under long-term debt

250,000

-

  Stock issued under option plans

71,180

13,772

  Purchase of treasury stock

(33,818)

(323,773)

Net cash used in financing activities

(32,638)

(20,001)

Effect of exchange rate changes on cash

5,385

9,541

Net change in cash and cash equivalents

124,862

103,721

Cash and cash equivalents, beginning of period

492,824

389,103

Cash and cash equivalents, end of period

$         617,686

$         492,824

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

Q4 2013

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring and Other Cost Reduction Activities (1)

Other Items (2)

Income Tax Items (3)

Pro Forma

Net revenues

$       623,094

$       623,094

Reimbursable out-of-pocket expenses

46,675

46,675

     Total revenues

669,769

-

-

-

669,769

Costs and expenses:

  Cost of revenue

436,857

436,857

  Reimbursable out-of-pocket expenses

46,675

46,675

  Selling, general and administrative

93,564

(4,456)

89,108

  Depreciation and amortization

32,845

(418)

32,427

  Impairment charges

4,877

(4,877)

-

        Total costs and expenses

614,818

(4,874)

(4,877)

-

605,067

Income from operations

54,951

4,874

4,877

-

64,702

Other expense, net:

  Interest expense, net

1,450

1,450

  Foreign exchange transaction loss, net

14

14

        Other expense, net

1,464

-

-

-

1,464

Income before taxes

53,487

4,874

4,877

-

63,238

Taxes on income

7,641

1,650

1,309

3,035

13,635

Net income 

$         45,846

$              3,224

$              3,568

$            (3,035)

$         49,603

Basic earnings per share

$             0.83

$                0.06

$                0.06

$              (0.06)

$             0.90

Weighted average shares outstanding - basic

55,021,244

55,021,244

55,021,244

55,021,244

55,021,244

Diluted earnings per share

$             0.80

$                0.06

$                0.06

$              (0.05)

$             0.87

Weighted average shares outstanding - diluted

57,205,147

57,205,147

57,205,147

57,205,147

57,205,147

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.

(2) Represents asset impairment charges.

(3) Primarily represents favorable resolutions of income tax matters.

 

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

Q4 2012

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Items (2)

Operating Results at Sites Wound- Down (3)

Pro Forma

Net revenues

$       562,180

$          (1,498)

$       560,682

Reimbursable out-of-pocket expenses

46,964

46,964

     Total revenues

609,144

-

-

(1,498)

607,646

Costs and expenses:

  Cost of revenue

395,841

3,613

(3,697)

395,757

  Reimbursable out-of-pocket expenses

46,964

46,964

  Selling, general and administrative

92,823

(9,013)

(117)

83,693

  Depreciation and amortization

30,423

(1,178)

(534)

28,711

        Total costs and expenses

566,051

(10,191)

3,613

(4,348)

555,125

Income from operations

43,093

10,191

(3,613)

2,850

52,521

Other expense, net:

  Interest expense, net

1,153

1,153

  Foreign exchange transaction loss, net

173

173

        Other expense, net

1,326

-

-

-

1,326

Income before taxes

41,767

10,191

(3,613)

2,850

51,195

Taxes on income

7,870

3,223

(1,111)

884

10,866

Net income 

$         33,897

$            6,968

$          (2,502)

$            1,966

$         40,329

Basic earnings per share

$             0.63

$              0.13

$             (0.05)

$              0.04

$             0.75

Weighted average shares outstanding - basic

53,698,334

53,698,334

53,698,334

53,698,334

53,698,334

Diluted earnings per share

$             0.61

$              0.13

$             (0.05)

$              0.04

$             0.73

Weighted average shares outstanding - diluted

55,197,968

55,197,968

55,197,968

55,197,968

55,197,968

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.

(2) Reduction of inventory impairment based upon determination of actual impaired inventory.

(3) Represents results of operations at sites that were closed during the period.

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

For the year ended December 31, 2013

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring and Other Cost Reduction Activities (1)

Other Items (2)

Income Tax Items (3)

Pro Forma

Net revenues

$   2,402,313

$   2,402,313

Reimbursable out-of-pocket expenses

192,817

192,817

     Total revenues

2,595,130

-

-

-

2,595,130

Costs and expenses:

  Cost of revenue

1,692,173

1,692,173

  Reimbursable out-of-pocket expenses

192,817

192,817

  Selling, general and administrative

360,012

(19,032)

340,980

  Depreciation and amortization

127,917

(2,918)

124,999

  Impairment charges

4,877

(4,877)

-

        Total costs and expenses

2,377,796

(21,950)

(4,877)

-

2,350,969

Income from operations

217,334

21,950

4,877

-

244,161

Other (income) expense, net:

  Interest expense, net

4,084

4,084

  Foreign exchange transaction loss, net

1,925

1,925

  Gain on sale of investments

(16,400)

16,400

-

        Other (income) expense, net

(10,391)

-

16,400

-

6,009

Income before taxes

227,725

21,950

(11,523)

-

238,152

Taxes on income

48,518

7,374

(4,437)

3,035

54,490

Net income 

$       179,207

$           14,576

$          (7,086)

$          (3,035)

$       183,662

Basic earnings per share

$             3.28

$                0.27

$             (0.13)

$             (0.06)

$             3.36

Weighted average shares outstanding - basic

54,648,533

54,648,533

54,648,533

54,648,533

54,648,533

Diluted earnings per share

$             3.15

$                0.26

$             (0.12)

$             (0.05)

$             3.23

Weighted average shares outstanding - diluted

56,899,013

56,899,013

56,899,013

56,899,013

56,899,013

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.

(2) Consists of gain on sale of investments $16,400 and asset impairment charges ($4,877).

(3) Primarily represents favorable resolutions of income tax matters.

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

For the year ended December 31, 2012

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Items (2)

Operating Results at Sites Wound- Down (3)

Income Tax Items (4)

Pro Forma

Net revenues

$   2,180,621

$          (8,754)

$   2,171,867

Reimbursable out-of-pocket expenses

185,138

185,138

     Total revenues

2,365,759

-

-

(8,754)

-

2,357,005

Costs and expenses:

  Cost of revenue

1,570,223

(21,168)

(15,180)

1,533,875

  Reimbursable out-of-pocket expenses

185,138

185,138

  Selling, general and administrative

358,854

(30,460)

(501)

327,893

  Depreciation and amortization

117,708

(3,470)

(2,347)

111,891

  Goodwill impairment charge

17,959

(17,959)

-

        Total costs and expenses

2,249,882

(33,930)

(39,127)

(18,028)

-

2,158,797

Income from operations

115,877

33,930

39,127

9,274

-

198,208

Other expense, net:

  Interest expense, net

3,506

3,506

  Foreign exchange transaction loss, net

1,474

1,474

  Impairment of equity investment

7,373

(7,373)

-

  Gain on sale of investment

(1,459)

1,459

-

  Loss on sale of business

169

169

        Other expense, net

11,063

-

(5,914)

-

-

5,149

Income before taxes and equity investee earnings

104,814

33,930

45,041

9,274

-

193,059

Taxes on income

10,099

10,785

6,009

2,741

11,501

41,135

Equity investee earnings

17

17

Net income 

$         94,732

$          23,145

$          39,032

$            6,533

$        (11,501)

$       151,941

Basic earnings per share

$             1.73

$              0.42

$              0.71

$              0.12

$             (0.21)

$             2.77

Weighted average shares outstanding - basic

54,844,641

54,844,641

54,844,641

54,844,641

54,844,641

54,844,641

Diluted earnings per share

$             1.68

$              0.41

$              0.69

$              0.12

$             (0.20)

$             2.70

Weighted average shares outstanding - diluted

56,290,010

56,290,010

56,290,010

56,290,010

56,290,010

56,290,010

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.

(2) Consists of inventory impairment and costs associated with the settlement of an inventory supply agreement ($21,168), goodwill impairment ($17,959), impairment of equity investment ($7,373) and a gain on the sale of an investment $1,459.

(3) Represents results of operations at sites that were closed during the period.

(4) Primarily represents favorable resolutions of income tax matters.

 

SOURCE Covance Inc.



RELATED LINKS

http://www.covance.com