Covance Reports Third Quarter Pro Forma Net Revenue Of $542 Million, Pro Forma EPS Of $0.72 And Adjusted Net Orders Of $701 Million

-- FY2012 Pro Forma EPS Target now $2.65 to $2.70 versus previous range of $2.50 to $2.70 --

05 Nov, 2012, 16:03 ET from Covance Inc.

PRINCETON, N.J., Nov. 5, 2012 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its third quarter ended September 30, 2012.  On a GAAP basis, net revenue was $545 million.  Excluding revenue from facilities in wind-down, pro forma net revenue was $542 million.  On a GAAP basis, the company reported earnings of $0.69 per diluted share in the third quarter.  Excluding losses from facilities in wind-down, restructuring costs and other charges and favorable income tax developments during the quarter, the company reported earnings per diluted share of $0.72.

"Third quarter pro forma earnings were better than expected, increasing $0.07 sequentially, due to significantly improved profitability in toxicology coupled with continued strong performances in clinical development and central laboratories. Our performance this quarter demonstrates the leverage in our scalable business model when commercial success is combined with our lower cost infrastructure," said Joe Herring, Chairman and Chief Executive Officer.  "On the sales front, clinical development and central laboratories continued to deliver strong new orders, driving adjusted net orders of $701 million and an adjusted book-to-bill of 1.29 to 1.  We continue to have significant pending proposals. In addition, our strategic information technology projects continue to progress on-time and on-budget.

"Late-Stage Development revenues grew 6.9% year-on-year, or 13.1% on a constant currency basis. Revenue growth was led by 18% growth in clinical development and continued year-on-year and sequential growth in central laboratories, which more than offset a decline in our market access services. Pro forma operating margins increased 70 basis points year-on-year to 20.0%, but declined as expected from the second quarter level on increased spending on strategic IT projects, continued hiring in clinical development, and lower profitability in market access services, all of which offset sequential operating margin expansion in central laboratories.

"In Early Development, pro forma revenue and earnings improved sequentially for the second consecutive quarter. Pro forma net revenues increased $2.4 million sequentially to $217.8 million, and pro forma operating margin increased 370 basis points sequentially to 12.4% as stronger performance in toxicology coupled with a faster than expected ramp in savings from our cost reduction actions more than offset weaker performance in clinical pharmacology.  

"On a consolidated basis, we expect pro forma revenue in the fourth quarter to be up slightly from the third quarter level and pro forma EPS to be approximately $0.70, reflecting the impact of increased IT spending on Late-Stage Development tools as well as the corporate data center initiative. When combining our fourth quarter projection with our third quarter results, we are narrowing our full-year pro forma EPS target to the high-end of our previous range, or $2.65 to $2.70 (excluding impairment charges, restructuring and other costs, losses from facilities in wind-down, favorable income tax developments and using September 30 foreign exchange rates)."

Consolidated Results

($ in millions except EPS)

3Q12

3Q11

Change

YTD12

YTD11

Change

Total Revenues

$597.6

$578.9

$1,756.6

$1,654.1

Less: Reimbursable Out-of-Pockets 

$52.8

$35.6

$138.2

$90.6

Net Revenues

$544.8

$543.3

0.3%

$1,618.4

$1,563.5

3.5%

Operating Income

$30.6

$51.0

(40.0%)

$72.8

$141.7

(48.6%)

   Operating Margin

5.6%

9.4%

4.5%

9.1%

Net Income

$37.8

$40.7

(7.0%)

$60.8

$111.0

(45.2%)

Earnings per Share

$0.69

$0.67

2.5%

$1.07

$1.82

(41.0%)

Revenue from facilities in wind-down**

$2.9

-

$7.3

-

Net Revenue, continuing ops*

$541.9

$543.3

(0.3%)

$1,611.2

$1,563.5

3.1%

Restructuring Costs and other charges

($18.1)

($5.3)

($66.5)

($15.7)

Loss from facilities in wind-down**

($2.6)

-

($6.4)

-

Operating Income, excluding items*

$51.3

$56.3

(8.9%)

$145.7

$157.4

(7.4%)

  Operating Margin, excluding items*

9.5%

10.4%

9.0%

10.1%

Impairment of Equity Investment

-

-

($7.4)

-

Gain on Sale of Investment

$1.5

-

$1.5

-

Favorable Income Tax Developments

$11.5

$0.7

$11.5

$0.7

Net Income, excluding items*

$39.6

$43.4

(8.7%)

$111.6

$120.5

(7.3%)

Diluted EPS, excluding items*

$0.72

$0.71

0.7%

$1.97

$1.97

(0.2%)

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

** Facilities in wind-down include Chandler, Honolulu and Basel.

 

Operating Segment Results

Early Development

($ in millions)

3Q12

3Q11

Change

YTD12

YTD11

Change

Net Revenues

$220.7

$240.2

(8.1%)

$652.1

$696.1

(6.3%)

Operating Income (Loss)

$7.1

$33.2

(78.6%)

($14.7)

$87.7

(116.8%)

Operating Margin

3.2%

13.8%

(2.3%)

12.6%

Revenue from facilities in wind-down**

$2.9

-

$7.3

-

Net Revenue, continuing ops

$217.8

$240.2

(9.3%)

$644.8

$696.1

(7.4%)

Restructuring Costs and other charges

($17.2)

($1.9)

($65.1)

($6.7)

Loss from facilities in wind-down**

($2.6)

-

($6.4)

-

Operating Income, excluding items

$26.9

$35.0

(23.2%)

$56.9

$94.4

(39.8%)

Operating Margin, excluding items

12.4%

14.6%

8.8%

13.6%

** Facilities in wind-down 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 2012 declined 8.1% year-on-year on a GAAP basis to $220.7 million and 9.3% on a pro forma basis to $217.8 million, due to the following: declines in toxicology services, research products, and clinical pharmacology; the impact of the sale of environmental services (which had contributed approximately $2.0 million in quarterly revenue); and the inclusion of the Chandler, Honolulu and Basel sites in last year's results. In the quarter, foreign exchange was a 90 basis point year-on-year headwind. Sequentially, pro forma revenues increased $2.4 million as an increase in toxicology revenues more than offset a decline in clinical pharmacology.

GAAP operating income in the third quarter of 2012 was $7.1 million, and included $17.2 million in costs associated with our restructuring actions and $2.6 million in losses at locations in wind-down. GAAP operating income for the third quarter of 2011 was $33.2 million, and included $1.9 million in restructuring costs. Pro forma operating income, excluding these items, was $26.9 million in the third quarter of this year, up from $18.7 million last quarter, and compared to $35.0 million in the third quarter of last year. Pro forma operating margins were 12.4% for the third quarter of this year, up from 8.7% last quarter and compared to 14.6% in the third quarter of 2011. Sequentially, pro forma operating income increased primarily due to a significant increase in North American toxicology profitability.  

Late-Stage Development                

($ in millions)

3Q12

3Q11

Change

YTD12

YTD11

Change

Net Revenues

$324.1

$303.0

6.9%

$966.3

$867.4

11.4%

Operating Income

$64.4

$56.3

14.5%

$204.9

$168.1

21.9%

Operating Margin

19.9%

18.6%

21.2%

19.4%

Restructuring Costs

($0.4)

($2.1)

($0.6)

($3.7)

Operating Income, excluding items

$64.8

$58.4

11.1%

$205.5

$171.8

19.6%

Operating Margin, excluding items

20.0%

19.3%

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 third quarter of 2012 grew 6.9% year-on-year to $324.1 million. In the quarter, foreign exchange negatively impacted year-on-year revenue growth by 620 basis points.  Growth was driven by the continued strong performance in clinical development, which offset a decline in market access revenue. Central laboratory, which grew revenue 2.3% year-on-year on a reported basis and 10.7% on a constant currency basis, had an increase in kit volumes for the fourth consecutive quarter.

Operating income for the third quarter was $64.4 million on a GAAP basis or $64.8 million on a pro forma basis.  This compares to $56.3 million on a GAAP basis and $58.4 million on a pro forma basis in the third quarter of the prior year and to $68.2 million on a pro forma basis last quarter. Pro forma operating margins were 20.0% for the third quarter of 2012 compared to pro forma operating margins of 21.1% last quarter and 19.3% in the third quarter of last year. The year-on-year increase in profitability was driven by both clinical development and central laboratories, while the sequential decrease primarily resulted from increased spending on strategic IT projects, lower profitability in market access services, and increased hiring and staff costs in clinical development.

Corporate Information

The company reported third quarter adjusted net orders of $701 million. Backlog at September 30, 2012 was $6.37 billion compared to $6.23 billion at June 30, 2012 and $6.08 billion at September 30, 2011. Foreign exchange favorably impacted backlog sequentially by $69 million

Corporate expenses totaled $40.9 million in the third quarter of 2012 (including $0.5 million in restructuring costs) compared to $38.9 million last quarter (including $0.3 million in restructuring costs) and $38.4 million in the third quarter of last year (including $1.4 million in restructuring costs).  We expect corporate expenses, excluding restructuring costs, to increase in the fourth quarter as spending ramps on the corporate data center consolidation component of our strategic IT spending. However, in order to support longer-term earnings growth, we expanded our cost reduction actions in the third quarter to include corporate and functional support spending.

Cash and cash equivalents at September 30, 2012 were $441 million compared to $398 million at June 30, 2012 and $400 million at September 30, 2011.  Debt outstanding is now $340 million, originating from borrowings related to our share repurchase program. Covance repurchased $20 million of shares outstanding within the third quarter.

Free cash flow (defined as operating cash flow less capital expenditures) for the third quarter of 2012 was $35 million, consisting of operating cash flow of $71 million less capital expenditures of $36 million.  Free cash flow year-to-date was $48 million, consisting of operating cash flow of $153 million less capital expenditures of $105 million.  

Net Days Sales Outstanding (DSO) were 38 days at September 30, 2012 compared to 35 days at June 30, 2012 and 38 days at September 30, 2011.

The Company's investor conference call will be webcast on November 6 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 billion, global operations in more than 30 countries, and 11,500 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 AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Three Months Ended September 30

Nine Months Ended September 30

2012

2011

2012

2011

Net revenues

$       544,818

$         543,254

$   1,618,441

$   1,563,460

Reimbursable out-of-pocket expenses

52,844

35,622

138,174

90,601

     Total revenues

597,662

578,876

1,756,615

1,654,061

Costs and expenses:

  Cost of revenue

389,724

383,347

1,174,382

1,095,199

  Reimbursable out-of-pocket expenses

52,844

35,622

138,174

90,601

  Selling, general and administrative

94,401

81,292

266,031

247,292

  Depreciation and amortization

30,102

27,592

87,285

79,291

  Goodwill impairment charge

-

-

17,959

-

        Total costs and expenses

567,071

(a)

527,853

(c)

1,683,831

(b)

1,512,383

(d)

Income from operations

30,591

(a)

51,023

(c)

72,784

(b)

141,678

(d)

Other (income) expense, net:

  Interest expense, net

920

343

2,353

1,640

  Foreign exchange transaction loss, net

281

777

1,301

892

  Impairment of equity investment

-

-

7,373

-

  Gain on sale of investment

(1,459)

-

(1,459)

-

  Loss on sale of business

-

-

169

-

        Other (income) expense, net

(258)

1,120

9,737

2,532

Income before taxes and equity investee results

30,849

(a)

49,903

(c)

63,047

(b)

139,146

(d)

Taxes on income

(6,971)

(a)

9,781

(c)

2,229

(b)

28,402

(d)

Equity investee earnings

-

547

17

305

Net income 

$         37,820

(a)

$           40,669

(c)

$         60,835

(b)

$       111,049

(d)

Basic earnings per share

$             0.70

(a)

$                0.68

(c)

$             1.10

(b)

$             1.86

(d)

Weighted average shares outstanding - basic

53,687,748

59,695,336

55,206,190

59,596,294

Diluted earnings per share

$             0.69

(a)

$                0.67

(c)

$             1.07

(b)

$             1.82

(d)

Weighted average shares outstanding - diluted

55,201,552

60,926,604

56,701,280

61,093,960

(a) Three months ended September 30, 2012 include, as applicable, $14,072 in restructuring costs ($9,647 net of tax), $4,000 in costs associated with the  

       expected 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.

(b) Nine months ended September 30, 2012 include, as applicable, $23,739 in restructuring costs ($16,177 net of tax), $24,781 in inventory impairment charges 

      and costs associated with the expected 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.

(c) Three months ended September 30, 2011 include, as applicable, $5,270 in restructuring costs ($3,392 net of tax) and favorable income tax items totaling $700.

(d) Nine months ended September 30, 2011 include, as applicable,  $15,702 in restructuring costs ($10,106 net of tax) and favorable income tax items totaling $700.

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

agreement, losses at sites in wind-down, gain on sale of investment and favorable tax items:

Income from operations

$         51,272

$           56,293

$       145,687

$       157,380

Taxes on income

$         10,473

$           12,359

$         30,269

$         34,698

Net income 

$         39,598

$           43,361

$       111,612

$       120,455

Basic earnings per share

$             0.74

$                0.73

$             2.02

$             2.02

Diluted earnings per share

$             0.72

$                0.71

$             1.97

$             1.97

 

COVANCE INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2012 and DECEMBER 31, 2011

(Dollars in thousands)

September 30

December 31

2012

2011

(UNAUDITED)

ASSETS

Current Assets:

Cash & cash equivalents

$       441,372

$       389,103

Accounts receivable, net

321,421

312,127

Unbilled services

141,020

114,095

Inventory

48,199

74,698

Deferred income taxes

54,635

52,078

Prepaid expenses and other current assets

173,917

144,809

    Total Current Assets

1,180,564

1,086,910

Property and equipment, net

872,261

849,551

Goodwill

109,820

127,779

Other assets

48,637

43,768

    Total Assets

$   2,211,282

$   2,108,008

LIABILITIES and STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$         38,958

$         36,393

Accrued payroll and benefits

118,928

142,229

Accrued expenses and other current liabilities

141,344

119,308

Unearned revenue

234,152

202,210

Short-term debt 

340,000

30,000

Income taxes payable

6,875

6,889

    Total Current Liabilities

880,257

537,029

Deferred income taxes

21,299

42,295

Other liabilities

67,016

70,889

    Total Liabilities

968,572

650,213

Stockholders' Equity:

Common stock

788

781

Paid-in capital

725,727

689,584

Retained earnings

1,566,729

1,505,894

Accumulated other comprehensive income

15,004

4,622

Treasury stock

(1,065,538)

(743,086)

    Total Stockholders' Equity

1,242,710

1,457,795

    Total Liabilities and Stockholders'  Equity

$   2,211,282

$   2,108,008

 

COVANCE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(Dollars in thousands)

(UNAUDITED)

Nine Months Ended September 30

2012

2011

Cash flows from operating activities:

  Net income

$           60,835

$         111,049

  Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization

87,285

79,291

    Non-cash impairment charges

44,610

-

    Non-cash compensation expense associated with employee benefit

       and stock compensation plans

29,774

29,305

    Deferred income tax benefit

(23,648)

(9,680)

    Gain on sale of investment

(1,459)

-

    Loss on sale of business

169

-

    Loss on disposal of property and equipment

674

431

    Equity investee earnings

(17)

(305)

    Changes in operating assets and liabilities, net of businesses sold

       and acquired:

       Accounts receivable

(10,404)

(23,396)

       Unbilled services

(27,561)

(31,601)

       Inventory

9,115

839

       Accounts payable

2,565

6,184

       Accrued liabilities

(1,396)

31,505

       Unearned revenue

33,374

(4,688)

       Income taxes payable

568

(13,988)

       Other assets and liabilities, net

(51,581)

(33,992)

Net cash provided by operating activities

152,903

140,954

Cash flows from investing activities:

  Capital expenditures

(105,199)

(86,289)

  Proceeds from sale of investment

4,682

-

  Other, net

1,006

(210)

Net cash used in investing activities

(99,511)

(86,499)

Cash flows from financing activities:

  Net borrowings under revolving credit facility

310,000

55,000

  Repayments under long-term debt

-

(97,500)

  Stock issued under employee stock purchase and option plans

5,794

8,465

  Purchase of treasury stock

(322,452)

(7,731)

Net cash used in financing activities

(6,658)

(41,766)

Effect of exchange rate changes on cash

5,535

9,783

Net change in cash and cash equivalents

52,269

22,472

Cash and cash equivalents, beginning of period

389,103

377,223

Cash and cash equivalents, end of period

$         441,372

$         399,695

 

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

  Goodwill impairment charge

-

-

-

        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

  Impairment of equity investment

-

-

  Gain on sale of investment

(1,459)

1,459

-

  Loss on sale of business

-

-

        Other (income) expense, net

(258)

-

1,459

-

-

1,201

Income before taxes and equity investee earnings

30,849

14,072

2,541

2,609

-

50,071

Taxes on income

(6,971)

4,425

730

788

11,501

10,473

Equity investee earnings

-

-

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 expected 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

Q3 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

Restructuring Activities (1)

Income Tax Items (2)

Pro Forma

Net revenues

$     543,254

$    543,254

Reimbursable out-of-pocket expenses

35,622

35,622

     Total revenues

578,876

-

-

578,876

Costs and expenses:

  Cost of revenue

383,347

383,347

  Reimbursable out-of-pocket expenses

35,622

35,622

  Selling, general and administrative

81,292

(4,216)

77,076

  Depreciation and amortization

27,592

(1,054)

26,538

        Total costs and expenses

527,853

(5,270)

-

522,583

Income from operations

51,023

5,270

56,293

Other expense, net:

  Interest expense, net

343

343

  Foreign exchange transaction loss, net

777

777

        Other expense, net

1,120

-

-

1,120

Income before taxes and equity investee earnings

49,903

5,270

55,173

Taxes on income

9,781

1,878

700

12,359

Equity investee earnings

547

547

Net income

$       40,669

$            3,392

$              (700)

$       43,361

Basic earnings per share

$           0.68

$              0.06

$             (0.01)

$           0.73

Weighted average shares outstanding - basic

59,695,336

59,695,336

59,695,336

59,695,336

Diluted earnings per share

$           0.67

$              0.06

$             (0.01)

$           0.71

Weighted average shares outstanding - diluted

60,926,604

60,926,604

60,926,604

60,926,604

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

(2) Represents favorable resolutions of income tax matters.

 

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 expected 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.

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

YTD Q3 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

Restructuring Activities (1)

Income Tax Items (2)

Pro Forma

Net revenues

$ 1,563,460

$ 1,563,460

Reimbursable out-of-pocket expenses

90,601

90,601

     Total revenues

1,654,061

-

-

1,654,061

Costs and expenses:

  Cost of revenue

1,095,199

1,095,199

  Reimbursable out-of-pocket expenses

90,601

90,601

  Selling, general and administrative

247,292

(13,838)

233,454

  Depreciation and amortization

79,291

(1,864)

77,427

        Total costs and expenses

1,512,383

(15,702)

-

1,496,681

Income from operations

141,678

15,702

157,380

Other expense, net:

  Interest expense, net

1,640

1,640

  Foreign exchange transaction loss, net

892

892

        Other expense, net

2,532

-

-

2,532

Income before taxes and equity investee earnings

139,146

15,702

154,848

Taxes on income

28,402

5,596

700

34,698

Equity investee earnings

305

305

Net income

$     111,049

$          10,106

$              (700)

$    120,455

Basic earnings per share

$           1.86

$              0.17

$             (0.01)

$           2.02

Weighted average shares outstanding - basic

59,596,294

59,596,294

59,596,294

59,596,294

Diluted earnings per share

$           1.82

$              0.17

$             (0.01)

$           1.97

Weighted average shares outstanding - diluted

61,093,960

61,093,960

61,093,960

61,093,960

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

(2) Represents favorable resolutions of income tax matters.

 

SOURCE Covance Inc.



RELATED LINKS

http://www.covance.com