Covance Reports Pro Forma Earnings Of $0.10/Share For 1Q 2001

Continued Sequential Earnings Growth, Significant Debt Reduction, and

Substantial Completion of Divestiture Plan Lead First Quarter Accomplishments



Apr 25, 2001, 01:00 ET from Covance Inc.

    PRINCETON, N.J., April 25 /PRNewswire/ -- Covance Inc. (NYSE:   CVD) today
 reported earnings for its first quarter ended March 31, 2001 of $0.54/diluted
 share, including both a $24.3M after-tax gain on the sale of the company's
 packaging business and the results of packaging through the sale close on
 February 14, 2001.  On a pro forma basis, excluding packaging, first quarter
 2001 earnings were $0.10/diluted share.
     "We achieved several important milestones this quarter in our effort to
 strategically reposition Covance and drive improved earnings. In addition to
 delivering solid sequential growth in our core businesses, we improved
 profitability in Phase III clinical development and experienced enhanced order
 flow in that business.  We also reduced our debt by approximately $115 million
 with proceeds from the sale of our packaging business in February," said Chris
 Kuebler, Chairman and CEO.  "With yesterday's announcement of an agreement to
 sell our biomanufacturing business to Akzo Nobel, our divestiture plan is now
 substantially complete.  The planned sale of biomanufacturing will provide an
 excellent opportunity for the future growth of that business and enable
 Covance to further reduce debt and interest expense in 2001.  In light of the
 substantial progress we made in the first quarter, we are confident about our
 ability to achieve both sequential earnings improvement from $0.10/share
 throughout 2001 and current full-year consensus estimates of $0.49/share."
 
     Consolidated Results
     Results for all periods included in this press release are shown on a pro
 forma basis, excluding packaging and 2000 special charges.
 
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues       $217.2       $210.2       $197.0       $197.1      $195.9
     Operating
      Income         $12.4         $9.5        $ 2.7         $8.3       $17.4
     Net Income      $ 5.7         $2.7         ($1.0)       $3.5        $9.2
     Diluted EPS     $0.10        $0.05        ($0.02)      $0.06       $0.16
 
     Net revenues for the first quarter of 2001 increased to $217.2 million,
 compared to $210.2 million last quarter and $195.9 million in the first
 quarter of 2000, a year-over-year increase of 10.9%. Operating income for the
 first quarter was $12.4 million resulting in an operating margin of 5.7%,
 compared to $9.5 million and 4.5% last quarter and $17.4 million and 8.9% for
 the prior year.  Net income for the first quarter was $5.7 million or
 $0.10/diluted share, compared to $2.7 million or $0.05/diluted share last
 quarter and $9.2 million or $0.16/diluted share for the first quarter of 2000.
 
     Segment Results
                           Early Development Segment
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues        $74.0        $72.4        $71.4        $71.2       $72.2
     Operating
      Income         $ 9.5        $ 8.0        $ 9.0        $10.1       $11.0
     OM%             12.8%        11.0%        12.7%        14.1%       15.3%
 
     The Company's Early Development segment includes preclinical and Phase
 I clinical trial services.  Early Development revenues were $74.0 million for
 the first quarter of 2001, compared to $72.4 million last quarter and
 $72.2 million in the first quarter of 2000, a year-over-year increase of
 2.6% (5.7% excluding the impact of foreign exchange).
     Operating income for the 2001 first quarter of $9.5 million, resulting in
 an operating margin of 12.8%, increased 18% sequentially reflecting strong
 performance in toxicology services.  Compared to the first quarter of 2000,
 operating income declined due to the impact of start-up expenses for
 BioLink(TM) totaling $1.6 million in the first quarter of 2001.  BioLink is
 Covance's new bioanalytical service offering launched in November 2000.
 Excluding BioLink, operating margins for the first quarter of 2001 were
 15.0%, in line with operating margins of 15.3% in the prior year.
 
                   Late-Stage Development Segment (Pro Forma)
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues       $143.2       $137.7       $125.6       $126.0      $123.7
     Operating
      Income          $3.0         $1.5         $(6.4)      $(1.8)       $6.4
     OM%              2.1%         1.1%          (5.1)%      (1.4)%      5.2%
 
     The Late-Stage Development segment includes central laboratory, clinical
 development, biomanufacturing, commercialization and other support services.
 Revenues were $143.2 million for the first quarter of 2001, compared to
 $137.7 million last quarter and $123.7 million in the first quarter of 2000, a
 year-over-year increase of 15.7% (17.1% excluding the impact of foreign
 exchange).  Sequential revenue growth was attributable to central laboratory,
 clinical development, and commercialization services, while year-over-year
 revenue growth was due to biomanufacturing, central laboratory, and
 commercialization services.
     Operating income for the 2001 first quarter of $3.0 million, resulting in
 an operating margin of 2.1%, was double the operating income for the fourth
 quarter of 2000. Sequential growth in operating income was attributable to
 stronger results in central laboratory, commercialization and clinical
 development services in the 2001 first quarter.  These gains were partially
 offset by the impact of a planned shutdown of biomanufacturing operations in
 February for routine maintenance, and Nexigent spending.  Excluding
 biomanufacturing and Nexigent, Late-Stage operating margins were 7.0% for the
 2001 first quarter.  Biomanufacturing services returned to full production
 levels and profitability in March 2001.
 
     Additional Information
     On February 14, 2001, Covance completed the sale of its pharmaceutical
 packaging business for $137.5 million.  Net proceeds of approximately
 $115 million were used to pay down debt.  At March 31, 2001 the company's
 outstanding debt was $130 million versus $253 million at December 31, 2000.
     On April 24, 2001, Covance announced an agreement to sell its
 biomanufacturing unit to Akzo Nobel in a cash transaction valued at
 approximately $190 million.  Covance anticipates receiving approximately
 $100 million in net proceeds from that transaction which is targeted for
 closing by mid-year 2001.
     The Company recorded backlog at the end of the first quarter of 2001 of
 approximately $1,029 million, versus $996 million at December 31, 2000, and
 $925 million at March 31, 2000.
     Net Days Sales Outstanding for the Company were 48 days at March 31, 2001
 versus 52 days at December 31, 2000 and 60 days at March 31, 2000.
     The Company's quarterly financial briefing will be webcast on April 26,
 2001 at 9:00 am EDT.  Please log onto our website at www.covance.com to
 participate.  A corresponding slideshow is also available on our website.
 
     Covance, with headquarters in Princeton, New Jersey, is one of the world's
 largest and most comprehensive drug development services companies with 2000
 pro forma revenues of $800 million, operations currently in 17 countries, and
 approximately 7,500 employees worldwide.  Information on Covance's products
 and services, recent press releases, and SEC filings can be obtained through
 our website at: www.covance.com.
     Statements contained in this press release, which are not historical
 facts, such as statements about prospective earnings, savings, revenue,
 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, the Company's ability to
 continue to attract and retain qualified personnel, the fixed price nature of
 contracts or the loss of large contracts, the success of the Company's
 restructuring, the closing of the divestiture of the company's
 Biomanufacturing subsidiary and other factors described in the Company's
 filings with the Securities and Exchange Commission. No assurance can be given
 that the Company will be able to realize the net revenues included in backlog.
 Covance believes that its aggregate backlog is not necessarily a meaningful
 indicator of future results.
 
                           Financial Exhibits follow
 
 
                                   COVANCE INC.
 
                                     PROFORMA*
 
                    INCOME STATEMENTS - EXCLUDING SPECIAL ITEMS
 
                FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                   (Dollars in thousands, except per share data)
 
                                    (UNAUDITED)
 
                                                  Three Months Ended March 31
                                                    2001(a)           2000(b)
 
     Net revenues                                  $217,219          $195,916
 
     Costs and expenses:
       Cost of revenue                              160,918           138,055
       Selling, general & administrative             30,943            28,475
       Depreciation and amortization                 12,939            11,950
             Total                                  204,800           178,480
 
     Income from operations                          12,419            17,436
 
     Other expense, net:
       Interest expense, net                          3,006             1,586
       Other income                                     (24)              (72)
             Other expense, net                       2,982             1,514
 
     Income before taxes                              9,437            15,922
 
     Taxes on income                                  3,755             6,686
 
     Net income                                      $5,682            $9,236
 
     Basic earnings per share                         $0.10             $0.16
 
     Weighted average shares outstanding -
      basic                                      58,036,599        57,037,201
 
     Diluted earnings per share                       $0.10             $0.16
 
     Weighted average shares outstanding -
      diluted                                    59,096,725        57,199,742
 
     * Adjusted to exclude results of Packaging operations in both periods and
     the gain on sale of the Packaging business in 2001.
 
     (a) Excludes gain on sale of Packaging of $39,233 ($24,325 net of tax),
     the results of Packaging from January 1, 2001 through February 14,
     2001, and reflects reduced interest expense from the application of the
     net sales proceeds to outstanding debt (net revenues, income from
     operations and net income of $11,439, $3,807 and $1,818, respectively).
 
     (b) Excludes results of Packaging and reflects reduced interest expense
     from the application of the net proceeds to outstanding debt for the three
     months ended March 31, 2000 (net revenues, income from operations and net
     income of $13,711, $2,488 and $1,125, respectively).
 
 
                                   COVANCE INC.
 
                            CONSOLIDATED BALANCE SHEETS
 
                       MARCH 31, 2001 AND DECEMBER 31, 2000
 
                              (Dollars in thousands)
 
                                                   March 31         December 31
                                                     2001               2000
                                                  (UNAUDITED)
     ASSETS
     Cash & cash equivalents                        $25,034            $7,191
     Accounts receivable, net                       155,653           168,006
     Unbilled services                               64,367            66,135
     Inventory                                       30,546            30,963
     Deferred income taxes                           33,318            32,696
     Prepaid expenses and other current
      assets                                         42,612            48,021
         Total Current Assets                       351,530           353,012
 
     Property and equipment, net                    280,628           331,689
     Goodwill, net                                   56,933            81,327
     Other assets                                     7,178             5,063
         Total Assets                              $696,269          $771,091
 
     LIABILITIES and STOCKHOLDERS' EQUITY
     Accounts payable                               $26,871           $28,312
     Accrued payroll and benefits                    33,502            44,167
     Accrued expenses and other
      liabilities                                    45,905            45,720
     Unearned revenue                               105,496            96,085
     Current portion of long-term debt                  -               1,499
     Short-term debt                                130,000           234,000
     Income taxes payable                            17,666             1,939
         Total Current Liabilities                  359,440           451,722
 
     Long-term debt                                     -              17,224
     Deferred income taxes                           20,046            20,943
     Other liabilities                               15,691            15,451
         Total Liabilities                          395,177           505,340
 
     Common stock                                       601               598
     Paid-in capital                                 95,663            92,572
     Retained earnings                              239,251           207,426
     Cumulative translation adjustment              (14,430)          (14,938)
     Treasury stock                                 (19,993)          (19,907)
         Total Stockholders' Equity                 301,092           265,751
 
         Total Liabilities and
          Stockholders' Equity                     $696,269          $771,091
 
 
                                    COVANCE INC.
 
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                               (Dollars in thousands)
 
                                    (UNAUDITED)
 
                                                    Three Months Ended March 31
                                                      2001             2000 (a)
 
     Cash flows from operating activities:
       Net income                                    $31,825           $10,361
       Adjustments to reconcile net income
        to net cash provided by operating
        activities:
         Gain on sale of business                    (39,233)              -
         Depreciation and amortization                13,619            13,356
         Stock issued under employee
          benefit and stock compensation
          plans                                        2,295               130
         Deferred income tax provision                (1,731)           (1,052)
         Other                                           872                48
     Changes in operating assets and
      liabilities, net of business sold:
       Accounts receivable                            (3,122)          (15,178)
       Unbilled services                               1,768            (2,849)
       Inventory                                      (1,325)           (2,202)
       Accounts payable                                  164             7,606
       Accrued liabilities                           (12,861)          (11,199)
       Unearned revenue                               10,167            (3,079)
       Income taxes payable                           18,083             1,551
       Other assets and liabilities, net              (3,879)           (2,812)
     Net cash provided by (used in)
      operating activities                            16,642            (5,319)
 
     Cash flows from investing activities:
       Proceeds from sale of business                137,500               -
       Capital expenditures                          (14,296)          (22,141)
       Other, net                                          7                 9
     Net cash provided by (used in)
      investing activities                           123,211           (22,132)
 
     Cash flows from financing activities:
       Net (repayments) borrowings under
        revolving credit facility                   (104,000)           15,000
       Repayments of long-term debt                  (18,723)             (225)
       Purchase of treasury stock                        (86)             (329)
       Stock issued under employee stock
        purchase and option plans                        799             1,022
     Net cash (used in) provided by
      financing activities                          (122,010)           15,468
     Net change in cash and cash
      equivalents                                     17,843           (11,983)
 
     Cash and cash equivalents, beginning
      of period                                        7,191            25,444
 
     Cash and cash equivalents, end of
      period                                         $25,034           $13,461
 
     (a) Adjusted to reflect reduction in interest income of $455 ($278 after
     tax).
 
 
                                   COVANCE INC.
 
                    INCOME STATEMENTS - INCLUDING SPECIAL ITEMS
 
                FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                   (Dollars in thousands, except per share data)
 
                                    (UNAUDITED)
 
                                                   Three Months Ended March 31
                                                     2001            2000 (a)
 
     Net revenues                                  $228,658          $209,627
 
     Costs and expenses:
       Cost of revenue                              166,516           145,924
       Selling, general and administrative           32,297            30,423
       Depreciation and amortization                 13,619            13,356
             Total                                  212,432           189,703
 
     Income from operations                          16,226            19,924
 
     Other (income) expense, net:
       Interest expense, net                          4,215             3,347
       Other income                                      (6)             (381)
       Gain on sale of business                     (39,233)              -
             Other (income) expense, net            (35,024)            2,966
 
     Income before taxes                             51,250            16,958
 
     Taxes on income                                 19,425             6,597
 
     Net income                                     $31,825           $10,361
 
     Basic earnings per share                         $0.55             $0.18
 
     Weighted average shares outstanding -
      basic                                      58,036,599        57,037,201
 
     Diluted earnings per share                       $0.54             $0.18
 
     Weighted average shares outstanding -
      diluted                                    59,096,725        57,199,742
 
 
     (a) First quarter 2000 results adjusted to reflect reduction to interest
     income of $455 ($278 after tax).
 
                     MAKE YOUR OPINION COUNT -  Click Here
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SOURCE Covance Inc.
    PRINCETON, N.J., April 25 /PRNewswire/ -- Covance Inc. (NYSE:   CVD) today
 reported earnings for its first quarter ended March 31, 2001 of $0.54/diluted
 share, including both a $24.3M after-tax gain on the sale of the company's
 packaging business and the results of packaging through the sale close on
 February 14, 2001.  On a pro forma basis, excluding packaging, first quarter
 2001 earnings were $0.10/diluted share.
     "We achieved several important milestones this quarter in our effort to
 strategically reposition Covance and drive improved earnings. In addition to
 delivering solid sequential growth in our core businesses, we improved
 profitability in Phase III clinical development and experienced enhanced order
 flow in that business.  We also reduced our debt by approximately $115 million
 with proceeds from the sale of our packaging business in February," said Chris
 Kuebler, Chairman and CEO.  "With yesterday's announcement of an agreement to
 sell our biomanufacturing business to Akzo Nobel, our divestiture plan is now
 substantially complete.  The planned sale of biomanufacturing will provide an
 excellent opportunity for the future growth of that business and enable
 Covance to further reduce debt and interest expense in 2001.  In light of the
 substantial progress we made in the first quarter, we are confident about our
 ability to achieve both sequential earnings improvement from $0.10/share
 throughout 2001 and current full-year consensus estimates of $0.49/share."
 
     Consolidated Results
     Results for all periods included in this press release are shown on a pro
 forma basis, excluding packaging and 2000 special charges.
 
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues       $217.2       $210.2       $197.0       $197.1      $195.9
     Operating
      Income         $12.4         $9.5        $ 2.7         $8.3       $17.4
     Net Income      $ 5.7         $2.7         ($1.0)       $3.5        $9.2
     Diluted EPS     $0.10        $0.05        ($0.02)      $0.06       $0.16
 
     Net revenues for the first quarter of 2001 increased to $217.2 million,
 compared to $210.2 million last quarter and $195.9 million in the first
 quarter of 2000, a year-over-year increase of 10.9%. Operating income for the
 first quarter was $12.4 million resulting in an operating margin of 5.7%,
 compared to $9.5 million and 4.5% last quarter and $17.4 million and 8.9% for
 the prior year.  Net income for the first quarter was $5.7 million or
 $0.10/diluted share, compared to $2.7 million or $0.05/diluted share last
 quarter and $9.2 million or $0.16/diluted share for the first quarter of 2000.
 
     Segment Results
                           Early Development Segment
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues        $74.0        $72.4        $71.4        $71.2       $72.2
     Operating
      Income         $ 9.5        $ 8.0        $ 9.0        $10.1       $11.0
     OM%             12.8%        11.0%        12.7%        14.1%       15.3%
 
     The Company's Early Development segment includes preclinical and Phase
 I clinical trial services.  Early Development revenues were $74.0 million for
 the first quarter of 2001, compared to $72.4 million last quarter and
 $72.2 million in the first quarter of 2000, a year-over-year increase of
 2.6% (5.7% excluding the impact of foreign exchange).
     Operating income for the 2001 first quarter of $9.5 million, resulting in
 an operating margin of 12.8%, increased 18% sequentially reflecting strong
 performance in toxicology services.  Compared to the first quarter of 2000,
 operating income declined due to the impact of start-up expenses for
 BioLink(TM) totaling $1.6 million in the first quarter of 2001.  BioLink is
 Covance's new bioanalytical service offering launched in November 2000.
 Excluding BioLink, operating margins for the first quarter of 2001 were
 15.0%, in line with operating margins of 15.3% in the prior year.
 
                   Late-Stage Development Segment (Pro Forma)
     ($ in millions) 1Q'01        4Q'00        3Q'00        2Q'00       1Q'00
     Revenues       $143.2       $137.7       $125.6       $126.0      $123.7
     Operating
      Income          $3.0         $1.5         $(6.4)      $(1.8)       $6.4
     OM%              2.1%         1.1%          (5.1)%      (1.4)%      5.2%
 
     The Late-Stage Development segment includes central laboratory, clinical
 development, biomanufacturing, commercialization and other support services.
 Revenues were $143.2 million for the first quarter of 2001, compared to
 $137.7 million last quarter and $123.7 million in the first quarter of 2000, a
 year-over-year increase of 15.7% (17.1% excluding the impact of foreign
 exchange).  Sequential revenue growth was attributable to central laboratory,
 clinical development, and commercialization services, while year-over-year
 revenue growth was due to biomanufacturing, central laboratory, and
 commercialization services.
     Operating income for the 2001 first quarter of $3.0 million, resulting in
 an operating margin of 2.1%, was double the operating income for the fourth
 quarter of 2000. Sequential growth in operating income was attributable to
 stronger results in central laboratory, commercialization and clinical
 development services in the 2001 first quarter.  These gains were partially
 offset by the impact of a planned shutdown of biomanufacturing operations in
 February for routine maintenance, and Nexigent spending.  Excluding
 biomanufacturing and Nexigent, Late-Stage operating margins were 7.0% for the
 2001 first quarter.  Biomanufacturing services returned to full production
 levels and profitability in March 2001.
 
     Additional Information
     On February 14, 2001, Covance completed the sale of its pharmaceutical
 packaging business for $137.5 million.  Net proceeds of approximately
 $115 million were used to pay down debt.  At March 31, 2001 the company's
 outstanding debt was $130 million versus $253 million at December 31, 2000.
     On April 24, 2001, Covance announced an agreement to sell its
 biomanufacturing unit to Akzo Nobel in a cash transaction valued at
 approximately $190 million.  Covance anticipates receiving approximately
 $100 million in net proceeds from that transaction which is targeted for
 closing by mid-year 2001.
     The Company recorded backlog at the end of the first quarter of 2001 of
 approximately $1,029 million, versus $996 million at December 31, 2000, and
 $925 million at March 31, 2000.
     Net Days Sales Outstanding for the Company were 48 days at March 31, 2001
 versus 52 days at December 31, 2000 and 60 days at March 31, 2000.
     The Company's quarterly financial briefing will be webcast on April 26,
 2001 at 9:00 am EDT.  Please log onto our website at www.covance.com to
 participate.  A corresponding slideshow is also available on our website.
 
     Covance, with headquarters in Princeton, New Jersey, is one of the world's
 largest and most comprehensive drug development services companies with 2000
 pro forma revenues of $800 million, operations currently in 17 countries, and
 approximately 7,500 employees worldwide.  Information on Covance's products
 and services, recent press releases, and SEC filings can be obtained through
 our website at: www.covance.com.
     Statements contained in this press release, which are not historical
 facts, such as statements about prospective earnings, savings, revenue,
 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, the Company's ability to
 continue to attract and retain qualified personnel, the fixed price nature of
 contracts or the loss of large contracts, the success of the Company's
 restructuring, the closing of the divestiture of the company's
 Biomanufacturing subsidiary and other factors described in the Company's
 filings with the Securities and Exchange Commission. No assurance can be given
 that the Company will be able to realize the net revenues included in backlog.
 Covance believes that its aggregate backlog is not necessarily a meaningful
 indicator of future results.
 
                           Financial Exhibits follow
 
 
                                   COVANCE INC.
 
                                     PROFORMA*
 
                    INCOME STATEMENTS - EXCLUDING SPECIAL ITEMS
 
                FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                   (Dollars in thousands, except per share data)
 
                                    (UNAUDITED)
 
                                                  Three Months Ended March 31
                                                    2001(a)           2000(b)
 
     Net revenues                                  $217,219          $195,916
 
     Costs and expenses:
       Cost of revenue                              160,918           138,055
       Selling, general & administrative             30,943            28,475
       Depreciation and amortization                 12,939            11,950
             Total                                  204,800           178,480
 
     Income from operations                          12,419            17,436
 
     Other expense, net:
       Interest expense, net                          3,006             1,586
       Other income                                     (24)              (72)
             Other expense, net                       2,982             1,514
 
     Income before taxes                              9,437            15,922
 
     Taxes on income                                  3,755             6,686
 
     Net income                                      $5,682            $9,236
 
     Basic earnings per share                         $0.10             $0.16
 
     Weighted average shares outstanding -
      basic                                      58,036,599        57,037,201
 
     Diluted earnings per share                       $0.10             $0.16
 
     Weighted average shares outstanding -
      diluted                                    59,096,725        57,199,742
 
     * Adjusted to exclude results of Packaging operations in both periods and
     the gain on sale of the Packaging business in 2001.
 
     (a) Excludes gain on sale of Packaging of $39,233 ($24,325 net of tax),
     the results of Packaging from January 1, 2001 through February 14,
     2001, and reflects reduced interest expense from the application of the
     net sales proceeds to outstanding debt (net revenues, income from
     operations and net income of $11,439, $3,807 and $1,818, respectively).
 
     (b) Excludes results of Packaging and reflects reduced interest expense
     from the application of the net proceeds to outstanding debt for the three
     months ended March 31, 2000 (net revenues, income from operations and net
     income of $13,711, $2,488 and $1,125, respectively).
 
 
                                   COVANCE INC.
 
                            CONSOLIDATED BALANCE SHEETS
 
                       MARCH 31, 2001 AND DECEMBER 31, 2000
 
                              (Dollars in thousands)
 
                                                   March 31         December 31
                                                     2001               2000
                                                  (UNAUDITED)
     ASSETS
     Cash & cash equivalents                        $25,034            $7,191
     Accounts receivable, net                       155,653           168,006
     Unbilled services                               64,367            66,135
     Inventory                                       30,546            30,963
     Deferred income taxes                           33,318            32,696
     Prepaid expenses and other current
      assets                                         42,612            48,021
         Total Current Assets                       351,530           353,012
 
     Property and equipment, net                    280,628           331,689
     Goodwill, net                                   56,933            81,327
     Other assets                                     7,178             5,063
         Total Assets                              $696,269          $771,091
 
     LIABILITIES and STOCKHOLDERS' EQUITY
     Accounts payable                               $26,871           $28,312
     Accrued payroll and benefits                    33,502            44,167
     Accrued expenses and other
      liabilities                                    45,905            45,720
     Unearned revenue                               105,496            96,085
     Current portion of long-term debt                  -               1,499
     Short-term debt                                130,000           234,000
     Income taxes payable                            17,666             1,939
         Total Current Liabilities                  359,440           451,722
 
     Long-term debt                                     -              17,224
     Deferred income taxes                           20,046            20,943
     Other liabilities                               15,691            15,451
         Total Liabilities                          395,177           505,340
 
     Common stock                                       601               598
     Paid-in capital                                 95,663            92,572
     Retained earnings                              239,251           207,426
     Cumulative translation adjustment              (14,430)          (14,938)
     Treasury stock                                 (19,993)          (19,907)
         Total Stockholders' Equity                 301,092           265,751
 
         Total Liabilities and
          Stockholders' Equity                     $696,269          $771,091
 
 
                                    COVANCE INC.
 
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                 FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                               (Dollars in thousands)
 
                                    (UNAUDITED)
 
                                                    Three Months Ended March 31
                                                      2001             2000 (a)
 
     Cash flows from operating activities:
       Net income                                    $31,825           $10,361
       Adjustments to reconcile net income
        to net cash provided by operating
        activities:
         Gain on sale of business                    (39,233)              -
         Depreciation and amortization                13,619            13,356
         Stock issued under employee
          benefit and stock compensation
          plans                                        2,295               130
         Deferred income tax provision                (1,731)           (1,052)
         Other                                           872                48
     Changes in operating assets and
      liabilities, net of business sold:
       Accounts receivable                            (3,122)          (15,178)
       Unbilled services                               1,768            (2,849)
       Inventory                                      (1,325)           (2,202)
       Accounts payable                                  164             7,606
       Accrued liabilities                           (12,861)          (11,199)
       Unearned revenue                               10,167            (3,079)
       Income taxes payable                           18,083             1,551
       Other assets and liabilities, net              (3,879)           (2,812)
     Net cash provided by (used in)
      operating activities                            16,642            (5,319)
 
     Cash flows from investing activities:
       Proceeds from sale of business                137,500               -
       Capital expenditures                          (14,296)          (22,141)
       Other, net                                          7                 9
     Net cash provided by (used in)
      investing activities                           123,211           (22,132)
 
     Cash flows from financing activities:
       Net (repayments) borrowings under
        revolving credit facility                   (104,000)           15,000
       Repayments of long-term debt                  (18,723)             (225)
       Purchase of treasury stock                        (86)             (329)
       Stock issued under employee stock
        purchase and option plans                        799             1,022
     Net cash (used in) provided by
      financing activities                          (122,010)           15,468
     Net change in cash and cash
      equivalents                                     17,843           (11,983)
 
     Cash and cash equivalents, beginning
      of period                                        7,191            25,444
 
     Cash and cash equivalents, end of
      period                                         $25,034           $13,461
 
     (a) Adjusted to reflect reduction in interest income of $455 ($278 after
     tax).
 
 
                                   COVANCE INC.
 
                    INCOME STATEMENTS - INCLUDING SPECIAL ITEMS
 
                FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
 
                   (Dollars in thousands, except per share data)
 
                                    (UNAUDITED)
 
                                                   Three Months Ended March 31
                                                     2001            2000 (a)
 
     Net revenues                                  $228,658          $209,627
 
     Costs and expenses:
       Cost of revenue                              166,516           145,924
       Selling, general and administrative           32,297            30,423
       Depreciation and amortization                 13,619            13,356
             Total                                  212,432           189,703
 
     Income from operations                          16,226            19,924
 
     Other (income) expense, net:
       Interest expense, net                          4,215             3,347
       Other income                                      (6)             (381)
       Gain on sale of business                     (39,233)              -
             Other (income) expense, net            (35,024)            2,966
 
     Income before taxes                             51,250            16,958
 
     Taxes on income                                 19,425             6,597
 
     Net income                                     $31,825           $10,361
 
     Basic earnings per share                         $0.55             $0.18
 
     Weighted average shares outstanding -
      basic                                      58,036,599        57,037,201
 
     Diluted earnings per share                       $0.54             $0.18
 
     Weighted average shares outstanding -
      diluted                                    59,096,725        57,199,742
 
 
     (a) First quarter 2000 results adjusted to reflect reduction to interest
     income of $455 ($278 after tax).
 
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 SOURCE  Covance Inc.