Covance Reports Third Quarter Net Revenue Of $607 Million, Pro Forma EPS Of $0.83 And Adjusted Net Orders Of $732 Million
-- Raises FY2013 Pro Forma EPS Target to approximately $3.20 --
PRINCETON, N.J., Oct. 29, 2013 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its third quarter ended September 30, 2013. Net revenue was $606.7 million, representing 11.4% growth from the third quarter of 2012's GAAP result of $544.8 million, and 12.0% growth from the third quarter of 2012's pro forma result of $541.9 million. On a GAAP basis, the company reported earnings of $0.78 per diluted share in the third quarter of 2013 as compared to GAAP earnings of $0.69 in the third quarter of 2012. Excluding charges associated with restructuring and other cost reduction actions totaling $4.9 million, the company reported earnings per diluted share of $0.83, up 15.8% over the pro forma earnings of $0.72 for the third quarter of 2012.
"Financial highlights in the third quarter included consolidated pro forma revenue growth of 12%, operating margin of 11.1%, EPS of $0.83, and record quarterly free cash flow of $180 million. Our better-than-expected results in the third quarter were driven by exceptional performance in our central laboratory and continued strong results in clinical development," said Joe Herring, Chairman and Chief Executive Officer. "Strong commercial execution continued in the third quarter, as we delivered adjusted net orders of $732 million and an adjusted net book-to-bill of 1.21 to 1.
"Late-Stage Development revenue grew 19% year-on-year to $386 million and pro forma operating margins were 22.6%, up 260 basis points from a year ago and 120 basis points from last quarter. Better-than-expected kit volumes and a richer mix in central laboratories drove year-over-year revenue growth of 26%, while clinical development grew revenue 14% year-on-year. Both service lines expanded margins year-over-year and sequentially.
"In Early Development, revenue grew $6 million sequentially to $220 million, an increase of 1% from last year's pro forma result. Performance was led by clinical pharmacology, which delivered strong year-over-year and sequential revenue growth and margin expansion, more than offsetting year-over-year declines in discovery support services and pharmaceutical chemistry services. Pro forma operating margin increased 70 basis points year-on-year, and 180 basis points sequentially. Toxicology, where revenue declined slightly both year-on-year and sequentially, delivered better-than-forecasted orders in the third quarter, setting up expected sequential and year-on-year growth in the fourth quarter.
"Looking ahead to the fourth quarter of 2013, we expect sequential growth in revenue and operating income in both our Early and Late-Stage development segments, despite increased spending on our strategic IT programs. Accordingly, we are increasing our full-year pro forma diluted earnings per share target to approximately $3.20 (excluding gains on sale, costs associated with our ongoing restructuring activities, and assuming foreign exchange rates remain at September 30, 2013 levels), versus our previous expectation of $3.10 to $3.20. We also now expect full-year revenue growth of approximately 10%."
Consolidated Results
|
($ in millions except EPS) |
3Q13 |
3Q12 |
Change |
YTD13 |
YTD12 |
Change |
|
Total Revenues |
$647.0 |
$597.6 |
$1,925.3 |
$1,756.6 |
||
|
Less: Reimbursable Out-of-Pockets |
$40.3 |
$52.8 |
$146.1 |
$138.2 |
||
|
Net Revenues |
$606.7 |
$544.8 |
11.4% |
$1,779.2 |
$1,618.4 |
9.9% |
|
Operating Income |
$62.6 |
$30.6 |
104.7% |
$162.4 |
$72.8 |
123.1% |
|
Operating Margin |
10.3% |
5.6% |
9.1% |
4.5% |
||
|
Net Income |
$44.2 |
$37.8 |
16.9% |
$133.4 |
$60.8 |
119.2% |
|
Earnings per Share |
$0.78 |
$0.69 |
13.3% |
$2.35 |
$1.07 |
119.0% |
|
Revenue from facilities closed in 2012** |
- |
$2.9 |
- |
$7.3 |
||
|
Net Revenue, continuing ops* |
$606.7 |
$541.9 |
12.0% |
$1,779.2 |
$1,611.2 |
10.4% |
|
Restructuring Costs and other items |
($4.9) |
($18.1) |
($17.1) |
($66.5) |
||
|
Loss from facilities closed in 2012** |
- |
($2.6) |
- |
($6.4) |
||
|
Operating Income, excluding items* |
$67.5 |
$51.3 |
31.7% |
$ 179.5 |
$145.7 |
23.2% |
|
Operating Margin, excluding items* |
11.1% |
9.5% |
10.1% |
9.0% |
||
|
Gain on Sale of Investments |
- |
$1.5 |
$16.4 |
$1.5 |
||
|
Impairment of Equity Investment |
- |
- |
- |
($7.4) |
||
|
Favorable Income Tax Developments |
- |
$11.5 |
- |
$11.5 |
||
|
Net Income, excluding items* |
$47.3 |
$39.6 |
19.4% |
$134.1 |
$111.6 |
20.1% |
|
Diluted EPS, excluding items* |
$0.83 |
$0.72 |
15.8% |
$2.36 |
$1.97 |
20.0% |
|
* See attached pro forma income statements for reconciliation of 2013 and 2012 GAAP to pro forma amounts. |
Operating Segment Results
Early Development
|
($ in millions) |
3Q13 |
3Q12 |
Change |
YTD13 |
YTD12 |
Change |
|
Net Revenues |
$220.4 |
$220.7 |
(0.2%) |
$642.2 |
$652.1 |
(1.5%) |
|
Operating Income (Loss) |
$27.2 |
$7.1 |
283.3% |
$65.6 |
($14.7) |
|
|
Operating Margin |
12.3% |
3.2% |
10.2% |
(2.3%) |
||
|
Revenue from facilities closed in 2012** |
- |
$2.9 |
- |
$7.3 |
||
|
Net Revenue, continuing ops |
$220.4 |
$217.8 |
1.2% |
$642.2 |
$644.8 |
(0.4%) |
|
Restructuring Costs and other items |
($1.6) |
($17.2) |
($7.5) |
($65.1) |
||
|
Loss from facilities closed in 2012** |
- |
($2.6) |
- |
($6.4) |
||
|
Operating Income, excluding items |
$28.8 |
$26.9 |
7.0% |
$73.1 |
$56.9 |
28.6% |
|
Operating Margin, excluding items |
13.1% |
12.4% |
11.4% |
8.8% |
|
** 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 third quarter of 2013 were $220.4 million, compared to $220.7 million on a GAAP basis and $217.8 million on a pro forma basis in the third quarter of last year. Last year's pro forma revenue excluded $2.9 million in revenue from the three sites closed by the end of 2012. On a pro forma basis, net revenue increased 1.2%, including a 10 basis point foreign exchange tailwind, as strong growth in clinical pharmacology and research products were largely offset by declines in discovery support and pharmaceutical chemistry. Sequential growth of $5.8 million was primarily driven by growth in clinical pharmacology and research products.
GAAP operating income in the third quarter of 2013 was $27.2 million, and included $1.6 million in costs associated with our previously-announced restructuring actions versus operating income of $7.1 million in the third quarter of 2012, which included losses at facilities closed in 2012 of $2.6 million and restructuring costs of $17.2 million. Pro forma operating income, excluding these costs, was $28.8 million in the third quarter of this year, a 7.0% increase from the $26.9 million reported in the third quarter of 2012. Pro forma operating margins were 13.1% in the third quarter of 2013, versus 12.4% in the third quarter of 2012 and 11.3% last quarter.
On a sequential basis, operating margin was positively impacted by the shift to above margin treatment of the UK R&D tax credit which added 200 basis points. In addition, annual salary merit increases went into effect on July 1 and this negatively impacted operating margins on a sequential basis by 100 basis points in the quarter. The UK R&D tax credit recorded in the third quarter represents a six month impact (as the law was signed in July 2013, but applied retroactive to April 1, 2013). The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, operating margins in the fourth quarter of 2013 will face a sequential headwind of approximately 100 basis points from a normalization of the UK R&D tax credit.
Late-Stage Development
|
($ in millions) |
3Q13 |
3Q12 |
Change |
YTD13 |
YTD12 |
Change |
|
Net Revenues |
$386.4 |
$324.1 |
19.2% |
$1,137.0 |
$966.3 |
17.7% |
|
Operating Income |
$86.8 |
$64.4 |
34.8% |
$249.3 |
$204.9 |
21.7% |
|
Operating Margin |
22.5% |
19.9% |
21.9% |
21.2% |
||
|
Restructuring Costs |
($0.5) |
($0.4) |
($3.8) |
($0.6) |
||
|
Operating Income, excluding items |
$87.4 |
$64.8 |
34.8% |
$253.1 |
$205.5 |
23.2% |
|
Operating Margin, excluding items |
22.6% |
20.0% |
22.3% |
21.3% |
The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the third quarter of 2013 grew 19.2% year-on-year to $386.4 million, and increased $8.6 million sequentially from the second quarter level. In the quarter, foreign exchange favorably impacted revenue growth by 160 basis points. Year-over-year growth was driven by increases of 26% in central laboratories and 14% in clinical development, while sequential revenue growth was driven by growth in central laboratories.
Operating income for the third quarter was $86.8 million on a GAAP basis and included $0.5 million in costs associated with our ongoing restructuring actions. On a pro forma basis, operating income was $87.4 million, up 34.8% year-over-year. Pro Forma operating income also increased $6.5 million sequentially. Pro forma operating margins were 22.6% for the third quarter of 2013, versus 20.0% in the third quarter of 2012 and 21.4% last quarter. The year-on-year increase in profitability was led by operating leverage in central laboratories followed by clinical development, which more than offset increased spending on strategic IT projects.
On a sequential basis, operating margins in the third quarter were positively impacted by the shift to above margin treatment of the UK R&D tax credit which added 90 basis points. In addition, on July 1 annual salary merit increases went into effect and this was a sequential operating margin headwind of 90 basis points. The UK R&D tax credit recorded in the third quarter represents a six month impact. The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, operating margins in the fourth quarter of 2013 will face a sequential headwind of approximately 45 basis points from a normalization of the UK R&D tax credit.
Corporate Information
The company reported third quarter adjusted net orders of $732 million. Backlog at September 30, 2013 was $6.83 billion compared to $6.73 billion at June 30, 2013 and $6.37 billion at September 30, 2012. Foreign exchange contributed $70 million to backlog growth on a sequential basis.
Corporate expenses totaled $51.4 million in the third quarter of 2013 (including $2.8 million in restructuring costs) compared to $49.9 million last quarter (including $2.3 million in restructuring costs) and $40.9 million in the third quarter of 2012 (including $0.5 million in restructuring costs). The largest driver of the year-over-year increase in corporate expenses is 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 September 30, 2013 were $593 million compared to $446 million at June 30, 2013 and $441 million at September 30, 2012. Short-term debt was reduced by $60 million in the third quarter to $265 million as of September 30. As announced on October 8, Covance entered into a note purchase agreement for the private placement of $250 million in senior notes planned to be issued in November.
Net Days Sales Outstanding (DSO) declined 13 days in the third quarter to 35 days at September 30, 2013 compared to 48 days at June 30, 2013 and 38 days at September 30, 2012.
Free cash flow (defined as operating cash flow less capital expenditures) for the third quarter of 2013 was $180 million, consisting of operating cash flow of $215 million less capital expenditures of $35 million. Free cash flow year-to-date was $109 million, consisting of operating cash flow of $213 million less capital expenditures of $104 million. In 2013, we continue to expect free cash flow to be at least $125 million, net of capital expenditures of approximately $160 million. The free cash flow target for 2013 assumes net DSO at 40 days at December 31, 2013.
The pro forma effective tax rate in the third quarter of 28.3% was impacted by the shift to above margin treatment of the UK R&D tax credit. Previously this credit was recorded as a reduction to income tax expense. As a result of UK tax legislation signed in the third quarter of 2013, but effective April 1, 2013, the company now reports the UK R&D credit as an above margin expense reduction. The impact in the third quarter was an increase in the company's effective tax rate of approximately 900 basis points, representing a six month impact. The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, the effective tax rate in the fourth quarter of 2013 will face a sequential tailwind of approximately 450 basis points from the third quarter level from a normalization of the UK R&D tax credit, resulting in an expected tax rate slightly below 24%.
The company's investor conference call will be webcast on October 30 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 $2.2 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, the satisfaction of the conditions of the note purchase agreement and the closing thereof, 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 AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 |
|||||||||
|
(Dollars in thousands, except per share data) |
|||||||||
|
(UNAUDITED) |
|||||||||
|
Three Months Ended September 30 |
Nine Months Ended September 30 |
||||||||
|
2013 |
2012 |
2013 |
2012 |
||||||
|
Net revenues |
$ 606,722 |
$ 544,818 |
$ 1,779,219 |
$ 1,618,441 |
|||||
|
Reimbursable out-of-pocket expenses |
40,328 |
52,844 |
146,142 |
138,174 |
|||||
|
Total revenues |
647,050 |
597,662 |
1,925,361 |
1,756,615 |
|||||
|
Costs and expenses: |
|||||||||
|
Cost of revenue |
424,857 |
389,724 |
1,255,316 |
1,174,382 |
|||||
|
Reimbursable out-of-pocket expenses |
40,328 |
52,844 |
146,142 |
138,174 |
|||||
|
Selling, general and administrative |
87,052 |
94,401 |
266,448 |
266,031 |
|||||
|
Depreciation and amortization |
32,191 |
30,102 |
95,072 |
87,285 |
|||||
|
Goodwill impairment charge |
- |
- |
- |
17,959 |
|||||
|
Total costs and expenses |
584,428 |
(a) |
567,071 |
(c) |
1,762,978 |
(b) |
1,683,831 |
(d) | |
|
Income from operations |
62,622 |
(a) |
30,591 |
(c) |
162,383 |
(b) |
72,784 |
(d) | |
|
Other (income) expense, net: |
|||||||||
|
Interest expense, net |
759 |
920 |
2,634 |
2,353 |
|||||
|
Foreign exchange transaction loss, net |
882 |
281 |
1,911 |
1,301 |
|||||
|
Gain on sale of investments |
- |
(1,459) |
(16,400) |
(1,459) |
|||||
|
Impairment of equity investment |
- |
- |
- |
7,373 |
|||||
|
Loss on sale of business |
- |
- |
- |
169 |
|||||
|
Other (income) expense, net |
1,641 |
(258) |
(c) |
(11,855) |
(b) |
9,737 |
(d) | ||
|
Income before taxes and equity investee earnings |
60,981 |
(a) |
30,849 |
(c) |
174,238 |
(b) |
63,047 |
(d) | |
|
Tax expense (benefit) |
16,780 |
(a) |
(6,971) |
(c) |
40,877 |
(b) |
2,229 |
(d) | |
|
Equity investee earnings |
- |
- |
- |
17 |
|||||
|
Net income |
$ 44,201 |
(a) |
$ 37,820 |
(c) |
$ 133,361 |
(b) |
$ 60,835 |
(d) | |
|
Basic earnings per share |
$ 0.81 |
(a) |
$ 0.70 |
(c) |
$ 2.45 |
(b) |
$ 1.10 |
(d) | |
|
Weighted average shares outstanding - basic |
54,703,763 |
53,687,748 |
54,524,296 |
55,206,190 |
|||||
|
Diluted earnings per share |
$ 0.78 |
(a) |
$ 0.69 |
(c) |
$ 2.35 |
(b) |
$ 1.07 |
(d) | |
|
Weighted average shares outstanding - diluted |
56,939,181 |
55,201,552 |
56,754,527 |
56,701,280 |
|||||
|
(a) Three months ended September 30, 2013 includes, as applicable, $4,893 in charges associated with restructuring and other cost reduction actions ($3,063 net of tax). | |||||||||
|
(b) Nine months ended September 30, 2013 includes, as applicable, $17,076 in charges associated with restructuring and other cost reduction actions ($11,352 net of tax), and $16,400 gain on sale of investments ($10,654 net of tax). | |||||||||
|
(c) Three months ended September 30, 2012 includes, as applicable, $14,072 in restructuring costs ($9,647 net of tax), $4,000 in costs associated with the settlement of an inventory supply agreement ($2,756 net of tax), $2,609 in losses at sites in wind-down ($1,821 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501. | |||||||||
|
(d) Nine months ended September 30, 2012 includes, as applicable, $23,739 in restructuring costs ($16,177 net of tax), $24,781 in inventory impairment charges and costs associated with the settlement of an inventory supply agreement ($17,147 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), $6,424 in losses at sites in wind-down ($4,567 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, costs associated with the settlement of an inventory supply agreement, losses at sites in wind-down, gain on sale of investments and favorable tax items, as applicable: |
|||||||||
|
Income from operations |
$ 67,515 |
$ 51,272 |
$ 179,459 |
$ 145,687 |
|||||
|
Taxes on income |
$ 18,610 |
$ 10,473 |
$ 40,855 |
$ 30,269 |
|||||
|
Net income |
$ 47,264 |
$ 39,598 |
$ 134,059 |
$ 111,612 |
|||||
|
Basic earnings per share |
$ 0.86 |
$ 0.74 |
$ 2.46 |
$ 2.02 |
|||||
|
Diluted earnings per share |
$ 0.83 |
$ 0.72 |
$ 2.36 |
$ 1.97 |
|||||
|
COVANCE INC. | |||||
|
CONSOLIDATED BALANCE SHEETS | |||||
|
SEPTEMBER 30, 2013 and DECEMBER 31, 2012 | |||||
|
(Dollars in thousands) | |||||
|
September 30 |
December 31 | ||||
|
2013 |
2012 | ||||
|
(UNAUDITED) |
|||||
|
ASSETS |
|||||
|
Current Assets: |
|||||
|
Cash & cash equivalents |
$ 482,800 |
$ 492,824 | |||
|
Short-term investments |
109,794 |
- | |||
|
Accounts receivable, net |
353,940 |
339,558 | |||
|
Unbilled services |
147,355 |
136,878 | |||
|
Inventory |
49,516 |
49,270 | |||
|
Deferred income taxes |
49,363 |
44,903 | |||
|
Income taxes receivable |
- |
3,642 | |||
|
Prepaid expenses and other current assets |
203,200 |
167,629 | |||
|
Total Current Assets |
1,395,968 |
1,234,704 | |||
|
Property and equipment, net |
891,680 |
891,319 | |||
|
Goodwill |
109,820 |
109,820 | |||
|
Other assets |
40,846 |
52,499 | |||
|
Total Assets |
$ 2,438,314 |
$ 2,288,342 | |||
|
LIABILITIES and STOCKHOLDERS' EQUITY |
|||||
|
Current Liabilities: |
|||||
|
Accounts payable |
$ 52,020 |
$ 34,430 | |||
|
Accrued payroll and benefits |
143,599 |
144,681 | |||
|
Accrued expenses and other current liabilities |
104,032 |
127,686 | |||
|
Unearned revenue |
266,522 |
255,776 | |||
|
Short-term debt |
265,000 |
320,000 | |||
|
Income taxes payable |
11,663 |
- | |||
|
Total Current Liabilities |
842,836 |
882,573 | |||
|
Deferred income taxes |
21,186 |
27,912 | |||
|
Other liabilities |
75,840 |
70,665 | |||
|
Total Liabilities |
939,862 |
981,150 | |||
|
Stockholders' Equity: |
|||||
|
Common stock |
807 |
791 | |||
|
Paid-in capital |
836,056 |
744,114 | |||
|
Retained earnings |
1,733,987 |
1,600,626 | |||
|
Accumulated other comprehensive income |
23,966 |
28,520 | |||
|
Treasury stock |
(1,096,364) |
(1,066,859) | |||
|
Total Stockholders' Equity |
1,498,452 |
1,307,192 | |||
|
Total Liabilities and Stockholders' Equity |
$ 2,438,314 |
$ 2,288,342 | |||
|
COVANCE INC. | ||||
|
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
|
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 | ||||
|
(Dollars in thousands) | ||||
|
(UNAUDITED) | ||||
|
Nine Months Ended September 30 | ||||
|
2013 |
2012 | |||
|
Cash flows from operating activities: |
||||
|
Net income |
$ 133,361 |
$ 60,835 | ||
|
Adjustments to reconcile net income to net cash provided by |
||||
|
operating activities: |
||||
|
Depreciation and amortization |
95,072 |
87,285 | ||
|
Non-cash impairment charges |
- |
44,610 | ||
|
Non-cash compensation expense associated with employee benefit |
||||
|
and stock compensation plans |
29,863 |
29,774 | ||
|
Deferred income tax benefit |
(6,787) |
(23,648) | ||
|
Gain on sale of investments |
(16,400) |
(1,459) | ||
|
Loss on sale of business |
- |
169 | ||
|
Loss on disposal of property and equipment |
487 |
674 | ||
|
Equity investee earnings |
- |
(17) | ||
|
Changes in operating assets and liabilities, net of business sold: |
||||
|
Accounts receivable |
(14,382) |
(10,404) | ||
|
Unbilled services |
(10,477) |
(27,561) | ||
|
Inventory |
(246) |
9,115 | ||
|
Accounts payable |
17,590 |
2,565 | ||
|
Accrued liabilities |
(24,736) |
(1,396) | ||
|
Unearned revenue |
10,746 |
33,374 | ||
|
Income taxes |
20,228 |
568 | ||
|
Other assets and liabilities, net |
(21,474) |
(51,581) | ||
|
Net cash provided by operating activities |
212,845 |
152,903 | ||
|
Cash flows from investing activities: |
||||
|
Capital expenditures |
(103,703) |
(105,199) | ||
|
Purchase of short-term investments |
(109,794) |
- | ||
|
Proceeds from sale of investments |
17,781 |
4,682 | ||
|
Other, net |
528 |
1,006 | ||
|
Net cash used in investing activities |
(195,188) |
(99,511) | ||
|
Cash flows from financing activities: |
||||
|
Net (repayments) borrowings under revolving credit facility |
(55,000) |
310,000 | ||
|
Stock issued under option plans |
57,172 |
5,794 | ||
|
Purchase of treasury stock |
(29,505) |
(322,452) | ||
|
Net cash used in financing activities |
(27,333) |
(6,658) | ||
|
Effect of exchange rate changes on cash |
(348) |
5,535 | ||
|
Net change in cash and cash equivalents |
(10,024) |
52,269 | ||
|
Cash and cash equivalents, beginning of period |
492,824 |
389,103 | ||
|
Cash and cash equivalents, end of period |
$ 482,800 |
$ 441,372 | ||
|
COVANCE INC. | |||||
|
GAAP to Pro Forma Reconciliation | |||||
|
Q3 2013 | |||||
|
(Dollars in thousands, except per share data) | |||||
|
(UNAUDITED) | |||||
|
Adjustments |
|||||
|
GAAP |
Restructuring |
Pro Forma | |||
|
Net revenues |
$ 606,722 |
$ 606,722 | |||
|
Reimbursable out-of-pocket expenses |
40,328 |
40,328 | |||
|
Total revenues |
647,050 |
- |
647,050 | ||
|
Costs and expenses: |
|||||
|
Cost of revenue |
424,857 |
424,857 | |||
|
Reimbursable out-of-pocket expenses |
40,328 |
40,328 | |||
|
Selling, general and administrative |
87,052 |
(4,475) |
82,577 | ||
|
Depreciation and amortization |
32,191 |
(418) |
31,773 | ||
|
Total costs and expenses |
584,428 |
(4,893) |
579,535 | ||
|
Income from operations |
62,622 |
4,893 |
67,515 | ||
|
Other (income) expense, net: |
|||||
|
Interest expense, net |
759 |
759 | |||
|
Foreign exchange transaction loss, net |
882 |
882 | |||
|
Other (income) expense, net |
1,641 |
- |
1,641 | ||
|
Income before taxes |
60,981 |
4,893 |
65,874 | ||
|
Taxes on income |
16,780 |
1,830 |
18,610 | ||
|
Net income |
$ 44,201 |
$ 3,063 |
$ 47,264 | ||
|
Basic earnings per share |
$ 0.81 |
$ 0.06 |
$ 0.86 | ||
|
Weighted average shares outstanding - basic |
54,703,763 |
54,703,763 |
54,703,763 | ||
|
Diluted earnings per share |
$ 0.78 |
$ 0.05 |
$ 0.83 | ||
|
Weighted average shares outstanding - diluted |
56,939,181 |
56,939,181 |
56,939,181 | ||
|
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. | |||||
|
COVANCE INC. | |||||||||||
|
GAAP to Pro Forma Reconciliation | |||||||||||
|
Q3 2012 | |||||||||||
|
(Dollars in thousands, except per share data) | |||||||||||
|
(UNAUDITED) | |||||||||||
|
Adjustments |
|||||||||||
|
GAAP |
Restructuring |
Other |
Operating |
Income Tax |
Pro Forma | ||||||
|
Net revenues |
$ 544,818 |
$ (2,967) |
$ 541,851 | ||||||||
|
Reimbursable out-of-pocket expenses |
52,844 |
52,844 | |||||||||
|
Total revenues |
597,662 |
- |
- |
(2,967) |
- |
594,695 | |||||
|
Costs and expenses: |
|||||||||||
|
Cost of revenue |
389,724 |
(4,000) |
(4,544) |
381,180 | |||||||
|
Reimbursable out-of-pocket expenses |
52,844 |
52,844 | |||||||||
|
Selling, general and administrative |
94,401 |
(12,989) |
(162) |
81,250 | |||||||
|
Depreciation and amortization |
30,102 |
(1,083) |
(870) |
28,149 | |||||||
|
Total costs and expenses |
567,071 |
(14,072) |
(4,000) |
(5,576) |
- |
543,423 | |||||
|
Income from operations |
30,591 |
14,072 |
4,000 |
2,609 |
- |
51,272 | |||||
|
Other (income) expense, net: |
|||||||||||
|
Interest expense, net |
920 |
920 | |||||||||
|
Foreign exchange transaction loss, net |
281 |
281 | |||||||||
|
Gain on sale of investment |
(1,459) |
1,459 |
- | ||||||||
|
Other (income) expense, net |
(258) |
- |
1,459 |
- |
- |
1,201 | |||||
|
Income before taxes |
30,849 |
14,072 |
2,541 |
2,609 |
- |
50,071 | |||||
|
Taxes on income |
(6,971) |
4,425 |
730 |
788 |
11,501 |
10,473 | |||||
|
Net income |
$ 37,820 |
$ 9,647 |
$ 1,811 |
$ 1,821 |
$ (11,501) |
$ 39,598 | |||||
|
Basic earnings per share |
$ 0.70 |
$ 0.18 |
$ 0.03 |
$ 0.03 |
$ (0.21) |
$ 0.74 | |||||
|
Weighted average shares outstanding - basic |
53,687,748 |
53,687,748 |
53,687,748 |
53,687,748 |
53,687,748 |
53,687,748 | |||||
|
Diluted earnings per share |
$ 0.69 |
$ 0.17 |
$ 0.03 |
$ 0.03 |
$ (0.21) |
$ 0.72 | |||||
|
Weighted average shares outstanding - diluted |
55,201,552 |
55,201,552 |
55,201,552 |
55,201,552 |
55,201,552 |
55,201,552 | |||||
|
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure. | |||||||||||
|
(2) Consists of costs associated with the settlement of an inventory supply agreement ($4,000) and a gain on the sale of an investment $1,459. |
|||||||||||
|
(3) Represents results of operations at sites where wind-down activities have commenced. | |||||||||||
|
(4) Primarily represents favorable resolutions of income tax matters. | |||||||||||
|
COVANCE INC. | |||||||
|
GAAP to Pro Forma Reconciliation | |||||||
|
YTD Q3 2013 | |||||||
|
(Dollars in thousands, except per share data) | |||||||
|
(UNAUDITED) | |||||||
|
Adjustments |
|||||||
|
GAAP |
Restructuring |
Other |
Pro Forma | ||||
|
Net revenues |
$ 1,779,219 |
$ 1,779,219 | |||||
|
Reimbursable out-of-pocket expenses |
146,142 |
146,142 | |||||
|
Total revenues |
1,925,361 |
- |
- |
1,925,361 | |||
|
Costs and expenses: |
|||||||
|
Cost of revenue |
1,255,316 |
1,255,316 | |||||
|
Reimbursable out-of-pocket expenses |
146,142 |
146,142 | |||||
|
Selling, general and administrative |
266,448 |
(14,576) |
251,872 | ||||
|
Depreciation and amortization |
95,072 |
(2,500) |
92,572 | ||||
|
Total costs and expenses |
1,762,978 |
(17,076) |
- |
1,745,902 | |||
|
Income from operations |
162,383 |
17,076 |
- |
179,459 | |||
|
Other (income) expense, net: |
|||||||
|
Interest expense, net |
2,634 |
2,634 | |||||
|
Foreign exchange transaction loss, net |
1,911 |
1,911 | |||||
|
Gain on sale of investments |
(16,400) |
16,400 |
- | ||||
|
Other (income) expense, net |
(11,855) |
- |
16,400 |
4,545 | |||
|
Income before taxes |
174,238 |
17,076 |
(16,400) |
174,914 | |||
|
Taxes on income |
40,877 |
5,724 |
(5,746) |
40,855 | |||
|
Net income |
$ 133,361 |
$ 11,352 |
$ (10,654) |
$ 134,059 | |||
|
Basic earnings per share |
$ 2.45 |
$ 0.21 |
$ (0.20) |
$ 2.46 | |||
|
Weighted average shares outstanding - basic |
54,524,296 |
54,524,296 |
54,524,296 |
54,524,296 | |||
|
Diluted earnings per share |
$ 2.35 |
$ 0.20 |
$ (0.19) |
$ 2.36 | |||
|
Weighted average shares outstanding - diluted |
56,754,527 |
56,754,527 |
56,754,527 |
56,754,527 | |||
|
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. | |||||||
|
(2) Represents gain on sale of investments. | |||||||
|
COVANCE INC. | |||||||||||
|
GAAP to Pro Forma Reconciliation | |||||||||||
|
YTD Q3 2012 | |||||||||||
|
(Dollars in thousands, except per share data) | |||||||||||
|
(UNAUDITED) | |||||||||||
|
Adjustments |
|||||||||||
|
GAAP |
Restructuring |
Other |
Operating |
Income Tax |
Pro Forma | ||||||
|
Net revenues |
$ 1,618,441 |
$ (7,256) |
$ 1,611,185 | ||||||||
|
Reimbursable out-of-pocket expenses |
138,174 |
138,174 | |||||||||
|
Total revenues |
1,756,615 |
- |
- |
(7,256) |
- |
1,749,359 | |||||
|
Costs and expenses: |
|||||||||||
|
Cost of revenue |
1,174,382 |
(24,781) |
(11,483) |
1,138,118 | |||||||
|
Reimbursable out-of-pocket expenses |
138,174 |
138,174 | |||||||||
|
Selling, general and administrative |
266,031 |
(21,446) |
(384) |
244,201 | |||||||
|
Depreciation and amortization |
87,285 |
(2,293) |
(1,813) |
83,179 | |||||||
|
Goodwill impairment charge |
17,959 |
(17,959) |
- | ||||||||
|
Total costs and expenses |
1,683,831 |
(23,739) |
(42,740) |
(13,680) |
- |
1,603,672 | |||||
|
Income from operations |
72,784 |
23,739 |
42,740 |
6,424 |
- |
145,687 | |||||
|
Other (income) expense, net: |
|||||||||||
|
Interest expense, net |
2,353 |
2,353 | |||||||||
|
Foreign exchange transaction loss, net |
1,301 |
1,301 | |||||||||
|
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 (income) expense, net |
9,737 |
- |
(5,914) |
- |
- |
3,823 | |||||
|
Income before taxes and equity investee earnings |
63,047 |
23,739 |
48,654 |
6,424 |
- |
141,864 | |||||
|
Taxes on income |
2,229 |
7,562 |
7,120 |
1,857 |
11,501 |
30,269 | |||||
|
Equity investee earnings |
17 |
17 | |||||||||
|
Net income |
$ 60,835 |
$ 16,177 |
$ 41,534 |
$ 4,567 |
$ (11,501) |
$ 111,612 | |||||
|
Basic earnings per share |
$ 1.10 |
$ 0.29 |
$ 0.75 |
$ 0.08 |
$ (0.21) |
$ 2.02 | |||||
|
Weighted average shares outstanding - basic |
55,206,190 |
55,206,190 |
55,206,190 |
55,206,190 |
55,206,190 |
55,206,190 | |||||
|
Diluted earnings per share |
$ 1.07 |
$ 0.29 |
$ 0.73 |
$ 0.08 |
$ (0.20) |
$ 1.97 | |||||
|
Weighted average shares outstanding - diluted |
56,701,280 |
56,701,280 |
56,701,280 |
56,701,280 |
56,701,280 |
56,701,280 | |||||
|
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure. | |||||||||||
|
(2) Consists of inventory impairment and costs associated with the settlement of an inventory supply agreement ($24,781), 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 where wind-down activities have commenced. | |||||||||||
|
(4) Primarily represents favorable resolutions of income tax matters. | |||||||||||
SOURCE Covance Inc.
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