Covance Reports Fourth Quarter Pro Forma Net Revenue Of $561 Million, Pro Forma EPS Of $0.73 And Adjusted Net Orders Of $769 Million

-- Issues FY2013 Pro Forma EPS Target of $2.85 to $3.15 --

Jan 24, 2013, 16:03 ET from Covance Inc.

PRINCETON, N.J., Jan. 24, 2013 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its fourth quarter and year ended December 31, 2012.  On a GAAP basis, net revenue was $562 million in the fourth quarter and $2,181 million for the full year.  Excluding revenue from facilities that were closed in 2012, pro forma net revenue was $561 million in the fourth quarter and $2,172 million for the full year.  On a GAAP basis, the company reported earnings of $0.61 per diluted share in the fourth quarter.  Excluding losses from facilities that were closed in 2012, restructuring costs and other items during the quarter, the company reported earnings per diluted share of $0.73.  For the full year, diluted earnings per share on a GAAP basis were $1.68.  Excluding losses from facilities closed in 2012, restructuring costs and other charges and favorable income tax developments during the year, the company reported earnings per diluted share of $2.70.

"In 2012, Covance took several important actions which are expected to drive future EPS growth, including reducing our preclinical capacity and overhead cost structure, advancing our strategic IT initiatives, and repurchasing over 10% of our outstanding shares. In addition, our intensified selling efforts led to record adjusted net orders for the year of $2.87 billion, a year-on-year increase of 13.5%, resulting in an adjusted net book-to-bill of 1.32 to 1 for the year," said Joe Herring, Chairman and Chief Executive Officer.  "For the fourth quarter, pro forma revenue of $561 million and pro forma earnings per share of $0.73 were better than expected primarily due to significantly higher kit volumes in central laboratories and continued strength in clinical development. Adjusted net orders in the fourth quarter were a record $769 million, representing an adjusted book-to-bill of 1.37 to 1.

"Late-Stage Development fourth quarter revenues grew 15.7% year-on-year to $345 million. This increase was led by 22% growth in clinical development and 16% growth in central laboratories, which more than offset a decline in our market access services. Late-Stage Development pro forma operating margins increased 130 basis points both year-on-year and sequentially to 21.3%.  In Early Development, pro forma revenue of $216 million and pro forma operating margin of 12.0% declined modestly from the third quarter level on lower demand for discovery support services.

"Looking ahead to 2013, for the full year, we are forecasting mid- to high-single digit year-on-year revenue growth and pro forma diluted earnings per share, which exclude costs from ongoing restructuring activities, in the range of $2.85 to $3.15 (assuming foreign exchange rates remain at year-end 2012 levels).  In the first quarter of 2013, we expect revenue to be up slightly from the fourth quarter level and pro forma earnings per share to be in the range of $0.71 to $0.73 as we forecast an increase in Late-Stage Development net revenues and earnings to be off-set by seasonally-lower first quarter Early Development results." 

Consolidated Results

($ in millions except EPS)

4Q12

4Q11

Change

FY12

FY11

Change

Total Revenues

$609.1

$582.4

$2,365.7

$2,236.4

Less: Reimbursable Out-of-Pockets 

$46.9

$49.9

$185.1

$140.5

Net Revenues

$562.2

$532.5

5.6%

$2,180.6

$2,095.9

4.0%

Operating Income

$43.1

$39.0

10.6%

$115.9

$180.6

(35.8%)

   Operating Margin

7.7%

7.3%

5.3%

8.6%

Net Income

$33.9

$21.1

60.3%

$94.7

$132.2

(28.3%)

Diluted Earnings per Share

$0.61

$0.35

77.5%

$1.68

$2.16

(22.2%)

Revenue from facilities closed in 2012**

$1.5

-

$8.8

-

Net Revenue, continuing ops*

$560.7

$532.5

5.3%

$2,171.9

$2,236.4

3.6%

Restructuring costs and other items

($6.6)

($19.0)

($73.1)

($34.7)

Loss from facilities closed in 2012**

($2.9)

-

($9.3)

-

Operating Income, excluding items*

$52.5

$57.9

(9.3%)

$198.2

$215.3

(7.9%)

  Operating Margin, excluding items*

9.4%

10.9%

9.1%

10.3%

Impairment of Equity Investment

-

($12.1)

($7.4)

($12.1)

Gain on Sale of Investment

-

-

$1.5

-

Favorable Income Tax Developments

-

$1.8

$11.5

$2.5

Net Income, excluding items*

$40.3

$44.6

(9.5%)

$151.9

$165.0

(7.9%)

Diluted EPS, excluding items*

$0.73

$0.73

0.1%

$2.70

$2.70

(0.1%)

 * See attached pro forma income statement for reconciliation of 2012 & 2011 GAAP to pro forma amounts.

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

Operating Segment Results

Early Development

($ in millions)

4Q12

4Q11

Change

FY12

FY11

Change

Net Revenues

$217.4

$234.5

(7.3%)

$869.5

$930.6

(6.6%)

Operating Income

$18.7

$17.7

5.8%

$4.0

$105.3

(96.2%)

Operating Margin

8.6%

7.5%

0.5%

11.3%

Revenue from facilities closed in 2012**

$1.5

-

$8.8

-

Net Revenue, continuing ops

$215.9

$234.5

(7.9%)

$860.8

$930.6

(7.5%)

Restructuring costs and other items

($4.3)

($15.0)

($69.5)

($21.7)

Loss from facilities closed in 2012**

($2.9)

-

($9.3)

-

Operating Income, excluding items

$25.9

$32.6

(20.7%)

$82.7

$127.0

(34.9%)

Operating Margin, excluding items

12.0%

13.9%

9.6%

13.7%

** 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 2012 declined 7.3% year-on-year on a GAAP basis to $217.4 million and 7.9% on a pro forma basis to $215.9 million, due to the following: declines in toxicology, discovery support, and clinical pharmacology; the impact of the sale of environmental services (which had contributed approximately $2.0 million in quarterly revenue); and the closure of sites in 2012. In the quarter, foreign exchange had a 20 basis point year-on-year favorable impact. Sequentially, pro forma revenues decreased $1.9 million on a decline in discovery support. Toxicology revenues were flat sequentially.

GAAP operating income in the fourth quarter of 2012 was $18.7 million, and included $4.3 million in costs associated with our on-going restructuring actions and $2.9 million in losses at closed facilities. GAAP operating income for the fourth quarter of 2011 was $17.7 million, and included $15.0 million in restructuring costs.  Pro forma operating income, excluding these items, was $25.9 million in the fourth quarter of this year, versus $26.9 million last quarter and $32.6 million in the fourth quarter of 2011. Pro forma operating margins were 12.0% for the fourth quarter of this year, versus 12.4% last quarter and compared to 13.9% in the fourth quarter of 2011. Sequentially, pro forma operating income decreased primarily due to a decline in profitability in discovery support.  

Late-Stage Development

($ in millions)

4Q12

4Q11

Change

FY12

FY11

Change

Net Revenues

$344.8

$298.0

15.7%

$1,311.1

$1,165.4

12.5%

Operating Income

$72.7

$58.2

24.8%

$277.6

$226.3

22.7%

Operating Margin

21.1%

19.5%

21.2%

19.4%

Restructuring Costs

($0.7)

($1.3)

($1.3)

($5.0)

Operating Income, excluding items

$73.4

$59.5

23.3%

$278.8

$231.3

20.6%

Operating Margin, excluding items

21.3%

20.0%

21.3%

19.8%

The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services.  Net revenues for the fourth quarter of 2012 grew 15.7% year-on-year to $344.8 million, a sequential increase of $20.7 million from the third quarter level. In the quarter, foreign exchange negatively impacted year-on-year revenue growth by 130 basis points. Year-over-year growth was driven by both the continued strong performance in clinical development, where net revenue was up 22%, and a strong increase in central labs, where net revenue was up 16%, which more than offset a year-over-year decline in market access services net revenue. Sequentially, the increase in net revenue was led by central laboratory followed by clinical development and then by market access services.  Central laboratory had an increase in kit volumes for the fifth consecutive quarter.

Operating income for the fourth quarter was $72.7 million on a GAAP basis and $73.4 million on a pro forma basis.  This represents growth of 24.8% and 23.3%, respectively, compared to the fourth quarter of the prior year and a significant increase from the $64.4 million on a GAAP basis and $64.8 million on a pro forma basis last quarter. Pro forma operating margins expanded to 21.3% for the fourth quarter of 2012, up from pro forma operating margins of 20.0% both last quarter and in the fourth quarter of 2011. The year-on-year and sequential increases in profitability were driven by operating leverage in both clinical development and central laboratories, which more than offset increased spending on strategic IT projects.

Corporate Information

The company reported fourth quarter adjusted net orders of $769 million. Backlog at December 31, 2012 was $6.64 billion compared to $6.37 billion at September 30, 2012 and $6.14 billion at December 31, 2011. Foreign exchange favorably impacted backlog sequentially by $44 million.  In addition, contributing $110 million to fourth quarter backlog growth (but excluded from adjusted net orders) was the extension of a contractual minimum volume commitment and the addition of a small new minimum volume commitment.

Corporate expenses totaled $48.3 million in the fourth quarter of 2012 (including $1.5 million in restructuring costs) compared to $40.9 million last quarter (including $0.5 million in restructuring costs) and $37.0 million in the fourth quarter of 2011 (including $2.7 million in restructuring costs). The largest driver of the sequential increase in corporate expenses was spending on our corporate data center consolidation, one of our strategic IT initiatives, coupled with increased incentive compensation accruals related to stronger business performance toward year end.

Cash and cash equivalents at December 31, 2012 were $493 million compared to $441 million at September 30, 2012 and $389 million at December 31, 2011.  Debt outstanding is now $320 million, originating from borrowings related to our share repurchase program.

Free cash flow (defined as operating cash flow less capital expenditures) for the fourth quarter of 2012 was $61 million, consisting of operating cash flow of $107 million less capital expenditures of $46 million.  Free cash flow for full-year 2012 was $108 million, consisting of operating cash flow of $260 million less capital expenditures of $152 million.  

Net Days Sales Outstanding (DSO) were 36 days at December 31, 2012 compared to 38 days at both September 30, 2012 and December 31, 2011.

The Company's investor conference call will be webcast on January 25 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 of approximately $2.2 billion, global operations in more than 30 countries, and more than 11,750 employees worldwide.  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, 2012 AND 2011

(Dollars in thousands, except per share data)

Three Months Ended December 31

Years Ended December 31

2012

2011

2012

2011

(UNAUDITED)

Net revenues

$       562,180

$         532,478

$   2,180,621

$   2,095,938

Reimbursable out-of-pocket expenses

46,964

49,907

185,138

140,508

     Total revenues

609,144

582,385

2,365,759

2,236,446

Costs and expenses:

  Cost of revenue

395,841

371,852

1,570,223

1,467,051

  Reimbursable out-of-pocket expenses

46,964

49,907

185,138

140,508

  Selling, general and administrative

92,823

95,752

358,854

343,044

  Depreciation and amortization

30,423

25,923

117,708

105,214

  Goodwill impairment charge

-

-

17,959

-

        Total costs and expenses

566,051

(a)

543,434

(c)

2,249,882

(b)

2,055,817

(d)

Income from operations

43,093

(a)

38,951

(c)

115,877

(b)

180,629

(d)

Other expense, net:

  Interest expense, net

1,153

339

3,506

1,979

  Foreign exchange transaction loss, net

173

356

1,474

1,248

  Impairment of equity investment

-

12,119

7,373

12,119

  Gain on sale of investment

-

-

(1,459)

-

  Loss on sale of business

-

-

169

-

        Other expense, net

1,326

12,814

(c)

11,063

15,346

(d)

Income before taxes and equity investee earnings

41,767

(a)

26,137

(c)

104,814

(b)

165,283

(d)

Taxes on income

7,870

(a)

5,172

(c)

10,099

(b)

33,574

(d)

Equity investee earnings

-

175

17

480

Net income 

$         33,897

(a)

$           21,140

(c)

$         94,732

(b)

$       132,189

(d)

Basic earnings per share

$             0.63

(a)

$                0.35

(c)

$             1.73

(b)

$             2.22

(d)

Weighted average shares outstanding - basic

53,698,334

59,730,270

54,844,641

59,629,788

Diluted earnings per share

$             0.61

(a)

$                0.35

(c)

$             1.68

(b)

$             2.16

(d)

Weighted average shares outstanding - diluted

55,197,968

61,080,387

56,290,010

61,091,354

(a) Three months ended December 31, 2012 include, 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).

(b) 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 expected 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.

(c) Three months ended December 31, 2011 include, as applicable, $8,667 in restructuring costs ($5,961 net of tax), $10,287 in costs associated with the termination 

       of an inventory supply agreement and related inventory write-down ($7,130 net of tax), $12,119 impairment of equity investment ($12,119 net of tax) and 

      favorable income tax items totaling $1,769.

(d) Year ended December 31, 2011 includes, as applicable, $24,369 in restructuring costs ($16,067 net of tax), $10,287 in costs associated with the termination of 

      an inventory supply agreement and related inventory write-down ($7,130 net of tax), $12,119 impairment of equity investment ($12,119 net of tax) and 

      favorable income tax items totaling $2,469.

Excluding the impact of restructuring charges, impairment charges, costs associated with the expected settlement of an inventory supply 

agreement, losses at sites that were closed during the period, gain on sale of investment and favorable tax items, as applicable:

Income from operations

$         52,521

$           57,905

$       198,208

$       215,285

Taxes on income

$         10,866

$           12,804

$         41,135

$         47,502

Net income 

$         40,329

$           44,581

$       151,941

$       165,036

Basic earnings per share

$             0.75

$                0.75

$             2.77

$             2.77

Diluted earnings per share

$             0.73

$                0.73

$             2.70

$             2.70

COVANCE INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2012 and DECEMBER 31, 2011

(Dollars in thousands)

December 31

December 31

2012

2011

ASSETS

Current Assets:

Cash & cash equivalents

$       492,824

$       389,103

Accounts receivable, net

339,558

312,127

Unbilled services

136,878

114,095

Inventory

49,270

74,698

Deferred income taxes

44,903

52,078

Income taxes receivable

3,642

-

Prepaid expenses and other current assets

167,629

144,809

    Total Current Assets

1,234,704

1,086,910

Property and equipment, net

891,319

849,551

Goodwill

109,820

127,779

Other assets

52,499

43,768

    Total Assets

$   2,288,342

$   2,108,008

LIABILITIES and STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$         34,430

$         36,393

Accrued payroll and benefits

144,681

142,229

Accrued expenses and other current liabilities

127,686

119,308

Unearned revenue

255,776

202,210

Short-term debt 

320,000

30,000

Income taxes payable

-

6,889

    Total Current Liabilities

882,573

537,029

Deferred income taxes

27,912

42,295

Other liabilities

70,665

70,889

    Total Liabilities

981,150

650,213

Stockholders' Equity:

Common stock

791

781

Paid-in capital

744,114

689,584

Retained earnings

1,600,626

1,505,894

Accumulated other comprehensive income

28,520

4,622

Treasury stock

(1,066,859)

(743,086)

    Total Stockholders' Equity

1,307,192

1,457,795

    Total Liabilities and Stockholders'  Equity

$   2,288,342

$   2,108,008

 

COVANCE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

(Dollars in thousands)

Years Ended December 31

2012

2011

Cash flows from operating activities:

  Net income

$           94,732

$         132,189

  Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization

117,708

105,214

    Non-cash impairment charges

41,736

12,119

    Non-cash compensation expense associated with employee benefit

       and stock compensation plans

40,759

40,057

    Deferred income tax benefit

(8,404)

(6,128)

    Gain on sale of investment

(1,459)

-

    Loss on sale of business

169

-

    Loss on disposal of property and equipment

1,181

1,618

    Equity investee earnings

(17)

(480)

    Changes in operating assets and liabilities, net of businesses sold

       and acquired:

       Accounts receivable

(28,541)

(50,754)

       Unbilled services

(23,419)

(23,366)

       Inventory

10,918

8,226

       Accounts payable

(1,963)

2,297

       Accrued liabilities

8,205

56,409

       Unearned revenue

54,998

15,909

       Income taxes

(10,522)

(21,070)

       Other assets and liabilities, net

(35,920)

(28,762)

Net cash provided by operating activities

260,161

243,478

Cash flows from investing activities:

  Capital expenditures

(151,679)

(134,633)

  Proceeds from sale of investment

4,682

-

  Other, net

1,017

(219)

Net cash used in investing activities

(145,980)

(134,852)

Cash flows from financing activities:

  Net borrowings (repayments) under revolving credit facility

290,000

(5,000)

  Repayments under long-term debt

-

(97,500)

  Stock issued under employee stock purchase and option plans

13,772

9,325

  Purchase of treasury stock

(323,773)

(8,810)

Net cash used in financing activities

(20,001)

(101,985)

Effect of exchange rate changes on cash

9,541

5,239

Net change in cash and cash equivalents

103,721

11,880

Cash and cash equivalents, beginning of period

389,103

377,223

Cash and cash equivalents, end of period

$         492,824

$         389,103

 

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

  Goodwill impairment charge

-

-

-

        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

  Impairment of equity investment

-

-

  Gain on sale of investment

-

-

  Loss on sale of business

-

-

        Other expense, net

1,326

-

-

-

1,326

Income before taxes and equity investee earnings

41,767

10,191

(3,613)

2,850

51,195

Taxes on income

7,870

3,223

(1,111)

884

10,866

Equity investee earnings

-

-

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

Q4 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Charges (2)

Income Tax Items (3)

Pro Forma

Net revenues

$     532,478

$     532,478

Reimbursable out-of-pocket expenses

49,907

49,907

     Total revenues

582,385

-

-

-

582,385

Costs and expenses:

  Cost of revenue

371,852

371,852

  Reimbursable out-of-pocket expenses

49,907

49,907

  Selling, general and administrative

95,752

(8,754)

(10,287)

76,711

  Depreciation and amortization

25,923

87

26,010

        Total costs and expenses

543,434

(8,667)

(10,287)

-

524,480

Income from operations

38,951

8,667

10,287

-

57,905

Other expense, net:

  Interest expense, net

339

339

  Foreign exchange transaction loss, net

356

356

  Impairment of equity investment

12,119

(12,119)

-

        Other expense, net

12,814

-

(12,119)

-

695

Income before taxes and equity investee earnings

26,137

8,667

22,406

-

57,210

Tax expense

5,172

2,706

3,157

1,769

12,804

Equity investee earnings

175

175

Net income 

$       21,140

$            5,961

$          19,249

$          (1,769)

$       44,581

Basic earnings per share

$            0.35

$              0.10

$              0.32

$             (0.03)

$            0.75

Weighted average shares outstanding - basic

59,730,270

59,730,270

59,730,270

59,730,270

59,730,270

Diluted earnings per share

$            0.35

$              0.10

$              0.32

$             (0.03)

$            0.73

Weighted average shares outstanding - diluted

61,080,387

61,080,387

61,080,387

61,080,387

61,080,387

(1) Represents costs incurred in connection with capacity rationalization, streamlining operations and other cost reduction actions.

(2) Represents costs incurred in connection with termination of an inventory supply agreement and related inventory write-down and 

      an impairment of a related equity investment.

(3) 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 expected 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.

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

For the year ended December 31, 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Charges (2)

Income Tax Items (3)

Pro Forma

Net revenues

$  2,095,938

$  2,095,938

Reimbursable out-of-pocket expenses

140,508

140,508

     Total revenues

2,236,446

-

-

-

2,236,446

Costs and expenses:

  Cost of revenue

1,467,051

1,467,051

  Reimbursable out-of-pocket expenses

140,508

140,508

  Selling, general and administrative

343,044

(22,592)

(10,287)

310,165

  Depreciation and amortization

105,214

(1,777)

103,437

        Total costs and expenses

2,055,817

(24,369)

(10,287)

-

2,021,161

Income from operations

180,629

24,369

10,287

-

215,285

Other expense, net:

  Interest expense, net

1,979

1,979

  Foreign exchange transaction loss, net

1,248

1,248

  Impairment of equity investment

12,119

(12,119)

-

        Other expense, net

15,346

-

(12,119)

-

3,227

Income before taxes and equity investee earnings

165,283

24,369

22,406

-

212,058

Tax expense

33,574

8,302

3,157

2,469

47,502

Equity investee earnings

480

480

Net income 

$     132,189

$          16,067

$          19,249

$          (2,469)

$     165,036

Basic earnings per share

$            2.22

$              0.27

$              0.32

$             (0.04)

$            2.77

Weighted average shares outstanding - basic

59,629,788

59,629,788

59,629,788

59,629,788

59,629,788

Diluted earnings per share

$            2.16

$              0.26

$              0.32

$             (0.04)

$            2.70

Weighted average shares outstanding - diluted

61,091,354

61,091,354

61,091,354

61,091,354

61,091,354

(1) Represents costs incurred in connection with capacity rationalization, streamlining operations and other cost reduction actions.

(2) Represents costs incurred in connection with termination of an inventory supply agreement and related inventory write-down and 

      an impairment of a related equity investment.

(3) Represents favorable resolutions of income tax matters.

 

SOURCE Covance Inc.



RELATED LINKS

http://www.covance.com