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 --

29 Oct, 2013, 16:01 ET from Covance Inc.

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

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 and Other Cost Reduction Activities (1)

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 Activities (1)

Other Items (2)

Operating Results at Sites in Wind- Down (3)

Income Tax Items (4)

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 and Other Cost Reduction Activities (1)

Other Items (2)

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 Activities (1)

Other Items (2)

Operating Results at Sites in Wind- Down (3)

Income Tax Items (4)

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.



RELATED LINKS

http://www.covance.com