Covance Reports Second Quarter Pro Forma Net Revenue Of $538 Million, Pro Forma EPS Of $0.65 And Adjusted Net Orders Of $701 Million

Jul 25, 2012, 16:08 ET from Covance Inc.

PRINCETON, N.J., July 25, 2012 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its second quarter ended June 30, 2012.  On a GAAP basis, net revenue was $543 million.  Excluding revenue from facilities where closure activities have commenced (as described below), pro forma net revenue was $538 million.  On a GAAP basis, the company reported a loss of $0.23 per share in the second quarter.  Excluding losses from facilities where closure activities have commenced, restructuring costs, and asset impairments, the company reported earnings per diluted share of $0.65.

"In the second quarter pro forma net revenues grew sequentially in both of our business segments, pro forma operating margin expanded 30 basis points sequentially to 9.0%, and pro forma EPS increased to $0.65," said Joe Herring, Chairman and Chief Executive Officer.  "Continued strong commercial performance, led by another record order performance in clinical development, drove a third consecutive quarter of adjusted net orders of at least $700 million, representing a 14% year-on-year increase and an adjusted book-to-bill of 1.30 to 1. In addition, our strategic information technology projects continue to progress on time and on budget.

"In terms of segment performance in the quarter, Late-Stage Development revenues grew 12.8% year-on-year, led again by revenue growth in excess of 25% 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. Operating margins increased 110 basis points year-on-year to 21.1%, but declined as expected from the exceptional first quarter level on increased staffing in clinical development, lower profitability in market access services and increased spending on strategic IT projects. Late-Stage margins are expected to decline in the back half of 2012 due to increased IT spending, continued hiring in clinical, normal seasonality, and the impact of the stronger US dollar.

"In Early Development, we continued to drive our cost reduction and capacity rationalization actions in order to better align supply with demand and improve margins. In addition to the $20 million of annualized profit improvement announced in May, today we are announcing an incremental $15 million, bringing the total annualized impact of these actions to approximately $35 million from the cost reductions and capacity rationalizations, with approximately one-third expected to be realized in 2012. The 2012 savings are largely expected to offset a slower ramp in Early Development earnings this year. New actions include the further streamlining of operations, closure activities at our Phase I clinics in Honolulu and Basel, and a one-third reduction in our Muenster toxicology capacity (the actions in Muenster and Basel are pending the completion of customary employee consultations). In addition, we are pursuing further cost actions, including a reduction of our corporate spending.  

"In terms of Early Development's second quarter results, pro forma revenue and earnings (which exclude restructuring costs; losses incurred in Chandler, Honolulu, and Basel; and asset impairments) improved sequentially from first quarter levels. Pro forma net revenues increased $3.7 million sequentially to $215.4 million while pro forma operating margin increased 340 basis points sequentially to 8.7%. We expect a sequential increase in revenue and operating margins for the segment in the third quarter as somewhat higher volumes in toxicology and discovery support are expected to more than offset a decline in clinical pharmacology results. 

"Looking forward to the third quarter of 2012, we expect pro forma revenue and EPS to be slightly higher than the second quarter level. For the full year, we are revising our revenue growth forecast to the low- to mid-single-digit range primarily due to foreign exchange headwinds and more modest sequential growth in Early Development.  We now expect pro forma diluted earnings per share to be in the range of $2.50 to $2.70 (excluding impairment charges, restructuring costs and losses from facilities in wind-down, and using June 30 foreign exchange rates)."

Consolidated Results

($ in millions except EPS)

2Q12

2Q11

Change

YTD12

YTD11

Change

Total Revenues

$585.0

$547.7

$1,158.9

$1,075.2

Less: Reimbursable Out-of-Pockets 

$42.2

$29.5

$85.3

$55.0

Net Revenues

$542.8

$518.2

4.7%

$1,073.6

$1,020.2

5.2%

Operating Income (Loss)

($3.9)

$48.8

(108.1%)

$42.2

$90.7

(53.5%)

   Operating Margin

(0.7%)

9.4%

3.9%

8.9%

Net Income (Loss)

($12.7)

$37.6

(133.7%)

$23.0

$70.4

(67.3%)

Earnings (Loss) per Share

($0.23)

$0.61

(138.0%)

$0.40

$1.15

(65.2%)

Revenue from facilities in wind-down**

$4.3

-

$4.3

-

Net Revenue, continuing ops*

$538.5

$518.2

3.9%

$1,069.3

$1,020.2

4.8%

Restructuring Costs

($9.7)

($4.6)

($9.7)

($10.4)

Loss from facilities in wind-down**

($3.8)

-

($3.8)

-

Impairment of Goodwill & Inventory

($38.7)

-

($38.7)

-

Operating Income, excluding items*

$48.3

$53.3

(9.4%)

$94.4

$101.1

(6.6%)

  Operating Margin, excluding items*

9.0%

10.3%

8.8%

9.9%

Impairment of Equity Investment

($7.4)

-

($7.4)

-

Net Income, excluding items*

$36.3

$40.6

(10.5%)

$72.0

$77.1

(6.6%)

Diluted EPS, excluding items*

$0.65

$0.66

(1.7%)

$1.25

$1.26

(0.7%)

* 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 (pending the completion of customary Swiss employee consultation).

Operating Segment Results

Early Development

($ in millions)

2Q12

2Q11

Change

YTD12

YTD11

Change

Net Revenues

$219.7

$231.8

(5.2%)

$431.4

$455.9

(5.4%)

Operating Income (Loss)

($33.1)

$ 30.9

(207.0%)

($21.8)

$ 54.5

(140.0%)

Operating Margin

(15.1%)

13.3%

(5.1%)

12.0%

Revenue from facilities in wind-down**

$4.3

-

$4.3

-

Net Revenue, continuing ops

$215.4

$231.8

(7.1%)

$427.1

$455.9

(6.3%)

Restructuring Costs

($9.2)

($2.0)

($9.2)

($4.9)

Loss from facilities in wind-down**

($3.8)

-

($3.8)

-

Impairment of Goodwill & Inventory

($38.7)

-

($38.7)

-

Operating Income, excluding items

$18.7

$32.9

(43.3%)

$30.0

$59.4

(49.5%)

Operating Margin, excluding items

8.7%

14.2%

7.0%

13.0%

** Facilities in wind-down include Chandler, Honolulu, and Basel (pending the completion of customary Swiss employee consultation).

The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products.  Net revenues in the second quarter of 2012 declined 5.2% year-on-year on a GAAP basis to $219.7 million and 7.1% on a pro forma basis to $215.4 million, due to a decline in toxicology and research products. In the quarter, foreign exchange was a 100 basis point year-on-year headwind. Sequentially, revenues increased $3.7 million on a rebound in discovery support and clinical pharmacology, which more than offset a decline in research products and toxicology. Revenue from ongoing toxicology operations increased on a sequential basis.  

The GAAP operating loss in the second quarter of 2012 was $33.1 million, and included $9.2 million in costs associated with our restructuring actions, $3.8 million in losses at locations in wind-down and asset impairment charges of $38.7 million relating to the write down of goodwill for the Basel clinic as well as certain preclinical inventory. GAAP operating income for the second quarter of 2011 was $30.9 million, and included $2.0 million in restructuring costs. Pro forma operating income, excluding these items, was $18.7 million in the quarter, compared to $32.9 million in the second quarter of last year, but up from $11.3 million last quarter. Pro forma operating margins, excluding these items, were 8.7% for the second quarter of this year, compared to 14.2% in the second quarter of 2011 and 5.3% last quarter. Sequentially, pro forma operating income increased primarily from a return to profitability in discovery support services (which experienced a loss last quarter), increased profitability in toxicology and the exclusion of losses in Chandler, Honolulu and Basel. Research products, which was profitable in the first quarter, experienced a loss in the second quarter.

Late-Stage Development            

($ in millions)

2Q12

2Q11

Change

YTD12

YTD11

Change

Net Revenues

$323.1

$286.4

12.8%

$642.3

$564.3

13.8%

Operating Income

$68.0

$56.5

20.3%

$140.5

$111.8

25.7%

Operating Margin

21.1%

19.7%

21.9%

19.8%

Restructuring Costs

($0.2)

($0.7)

($0.2)

($1.7)

Operating Income, excluding items

$68.2

$57.3

19.1%

$140.7

$113.4

24.0%

Operating Margin, excluding items

21.1%

20.0%

21.9%

20.1%

The Late-Stage Development segment includes central laboratory, Phase II-IV clinical development, and market access services.  Net revenues for the second quarter of 2012 grew 12.8% year-on-year to $323.1 million. In the quarter, foreign exchange negatively impacted year-on-year revenue growth by 320 basis points.  Growth was driven by the continued strong performance in clinical development, which offset a decline in market access revenue. Central laboratories grew by over 4% for the second consecutive quarter.   

Operating income for the second quarter was $68.0 million on a GAAP basis or $68.2 million on a pro forma basis.  This compares to $56.5 million on a GAAP basis and $57.3 million on a pro forma basis in the second quarter of the prior year and to $72.4 million last quarter. Pro forma operating margins were 21.1% for the second quarter of 2012 compared to pro forma operating margins of 20.0% in the second quarter of last year and 22.7% last quarter. The year-on-year increase in profitability was driven by both clinical development and central laboratories, while the sequential decrease was primarily driven by hiring and staff costs in clinical development, lower profitability in market access services, and increased spending on strategic IT projects.

Corporate Information

The company reported second quarter adjusted net orders of $701 million. Backlog at June 30, 2012 was $6.23 billion compared to $6.28 billion at March 31, 2012 and $6.25 billion at June 30, 2011. Foreign exchange negatively impacted backlog sequentially by $105 million. 

Corporate expenses totaled $38.9 million in the second quarter of 2012 (including $0.3 million in restructuring costs) compared to $37.6 million last quarter and $38.7 million in the second quarter of last year (including $1.8 million in restructuring costs).  We expect corporate expenses as a percent of revenue, excluding restructuring costs, to trend slightly higher during 2012 and 2013 as we incur costs to execute our strategic IT projects.

During the second quarter, the company recorded an impairment charge of $7.4 million to write-off the remaining carrying value of an equity investment in a supplier of research products.  This charge is reflected as a component of other income (expense) in the consolidated statements of income.

Cash and cash equivalents at June 30, 2012 were $398 million compared to $440 million at March 31, 2012 and $406 million at June 30, 2011.  Covance repaid $10 million in debt during the quarter and now has $330 million in debt outstanding, originating from borrowings related to our share repurchase program. Covance repurchased $18 million of shares outstanding within the second quarter.

Free cash flow (defined as operating cash flow less capital expenditures) for the second quarter of 2012 was negative $3 million, consisting of operating cash flow of $36 million less capital expenditures of $39 million.  Free cash flow year-to-date was $13 million, consisting of operating cash flow of $82 million less capital expenditures of $69 million.  

Net Days Sales Outstanding (DSO) were 35 days at June 30, 2012 compared to a record low 29 days at March 31, 2012 and 38 days at June 30, 2011.

The Company's investor conference call will be webcast on July 26 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 announced restructuring action in the Company's Early Development segment, 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 SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Three Months Ended June 30

Six Months Ended June 30

2012

2011

2012

2011

Net revenues

$   542,782

$   518,220

$1,073,623

$1,020,206

Reimbursable out-of-pocket expenses

42,263

29,507

85,330

54,979

     Total revenues

585,045

547,727

1,158,953

1,075,185

Costs and expenses:

  Cost of revenue

408,198

358,332

784,658

711,852

  Reimbursable out-of-pocket expenses

42,263

29,507

85,330

54,979

  Selling, general and administrative

90,601

85,297

171,630

166,000

  Depreciation and amortization

29,953

25,836

57,183

51,699

  Goodwill impairment charge

17,959

-

17,959

-

        Total costs and expenses

588,974

(a)

498,972

(b)

1,116,760

(a)

984,530

(c)

(Loss) income from operations

(3,929)

(a)

48,755

(b)

42,193

(a)

90,655

(c)

Other expense, net:

  Interest expense, net

940

579

1,433

1,297

  Foreign exchange transaction loss, net

792

307

1,020

115

  Impairment of equity investment

7,373

-

7,373

-

  Loss on sale of business

169

-

169

-

        Other expense, net

9,274

886

9,995

1,412

(Loss) income before taxes and equity investee results

(13,203)

(a)

47,869

(b)

32,198

(a)

89,243

(c)

Tax (benefit) expense

(607)

(a)

9,987

(b)

9,200

(a)

18,621

(c)

Equity investee (loss) earnings

(81)

(240)

17

(242)

Net (loss) income 

$   (12,677)

(a)

$      37,642

(b)

$     23,015

(a)

$       70,380

(c)

Basic (loss) earnings per share

$       (0.23)

(a)

$          0.63

(b)

$         0.41

(a)

$          1.18

(c)

Weighted average shares outstanding - basic

54,184,966

59,636,973

55,965,410

59,546,773

Diluted (loss) earnings per share

$       (0.23)

(a)

$          0.61

(b)

$         0.40

(a)

$         1.15

(c)

Weighted average shares outstanding - diluted

54,184,966

61,226,477

57,456,154

61,105,838

(a) Three and six months ended June 30, 2012 include, as applicable, $9,667 in restructuring costs ($6,530 net of tax), $20,781 in inventory impairment charges ($14,391 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) and $3,815 in losses at sites in wind-down ($2,746 net of tax).

(b) Three months ended June 30, 2011 includes, as applicable, $4,564 in restructuring costs ($2,937 net of tax).

(c) Six months ended June 30, 2011 includes, as applicable,  $10,432 in restructuring costs ($6,714 net of tax).

Excluding the impact of restructuring charges, impairment charges and losses at sites in wind-down:

Income from operations

$     48,293

$       53,319

$     94,415

$     101,087

Taxes on income

$       9,989

$       11,614

$     19,796

$       22,339

Net income 

$     36,322

$       40,579

$     72,014

$       77,094

Basic earnings per share

$         0.67

$           0.68

$         1.29

$           1.29

Diluted earnings per share

$         0.65

$          0.66

$         1.25

$          1.26

COVANCE INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2012 and DECEMBER 31, 2011

(Dollars in thousands)

June 30

December 31

2012

2011

(UNAUDITED)

ASSETS

Current Assets:

Cash & cash equivalents

$       397,828

$       389,103

Accounts receivable, net

313,160

312,127

Unbilled services

134,163

114,095

Inventory

48,366

74,698

Deferred income taxes

53,220

52,078

Prepaid expenses and other current assets

175,131

144,809

    Total Current Assets

1,121,868

1,086,910

Property and equipment, net

858,508

849,551

Goodwill

109,820

127,779

Other assets

47,140

43,768

    Total Assets

$   2,137,336

$   2,108,008

LIABILITIES and STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$         42,794

$         36,393

Accrued payroll and benefits

97,583

142,229

Accrued expenses and other current liabilities

138,062

119,308

Unearned revenue

237,220

202,210

Short-term debt 

330,000

30,000

Income taxes payable

1,529

6,889

    Total Current Liabilities

847,188

537,029

Deferred income taxes

28,408

42,295

Other liabilities

72,359

70,889

    Total Liabilities

947,955

650,213

Stockholders' Equity:

Common stock

788

781

Paid-in capital

712,853

689,584

Retained earnings

1,528,909

1,505,894

Accumulated other comprehensive (loss) income

(7,984)

4,622

Treasury stock

(1,045,185)

(743,086)

    Total Stockholders' Equity

1,189,381

1,457,795

    Total Liabilities and Stockholders'  Equity

$   2,137,336

$   2,108,008

 

COVANCE INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(Dollars in thousands)

(UNAUDITED)

Six Months Ended June 30

2012

2011

Cash flows from operating activities:

  Net income

$        23,015

$        70,380

  Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization

57,183

51,699

    Non-cash impairment charges

44,610

-

    Non-cash compensation expense associated with employee benefit

       and stock compensation plans

19,422

18,939

    Deferred income tax benefit

(15,507)

(3,828)

    Loss on sale of business

169

-

    Loss on disposal of property and equipment

432

344

    Equity investee (earnings) loss

(17)

242

    Changes in operating assets and liabilities, net of business sold:

       Accounts receivable

(2,143)

(36,544)

       Unbilled services

(20,704)

(16,948)

       Inventory

8,948

(6,075)

       Accounts payable

6,401

10,611

       Accrued liabilities

(26,023)

17,838

       Unearned revenue

36,442

2,027

       Income taxes payable

(5,028)

(17,811)

       Other assets and liabilities, net

(45,124)

(2,142)

Net cash provided by operating activities

82,076

88,732

Cash flows from investing activities:

  Capital expenditures

(69,343)

(50,548)

  Proceeds from sale of business

900

-

  Other, net

90

106

Net cash used in investing activities

(68,353)

(50,442)

Cash flows from financing activities:

  Net borrowings (repayments) under revolving credit facility

300,000

(35,000)

  Repayments under long-term debt

-

(5,000)

  Stock issued under employee stock purchase and option plans

3,522

7,622

  Purchase of treasury stock

(302,099)

(7,517)

Net cash provided by (used in) financing activities

1,423

(39,895)

Effect of exchange rate changes on cash

(6,421)

30,589

Net change in cash and cash equivalents

8,725

28,984

Cash and cash equivalents, beginning of period

389,103

377,223

Cash and cash equivalents, end of period

$    397,828

$    406,207

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

Q2 2012

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Charges (2)

Operating Results at Sites in Wind-Down (3)

Inclusion of Common Stock Equivalents in Diluted EPS Computation(4)

Pro Forma

Net revenues

$   542,782

$      (4,289)

$   538,493

Reimbursable out-of-pocket expenses

42,263

42,263

     Total revenues

585,045

-

-

(4,289)

-

580,756

Costs and expenses:

  Cost of revenue

408,198

(20,781)

(6,939)

380,478

  Reimbursable out-of-pocket expenses

42,263

42,263

  Selling, general and administrative

90,601

(8,458)

(222)

81,921

  Depreciation and amortization

29,953

(1,209)

(943)

27,801

  Goodwill impairment charge

17,959

(17,959)

-

        Total costs and expenses

588,974

(9,667)

(38,740)

(8,104)

-

532,463

(Loss) income from operations

(3,929)

9,667

38,740

3,815

-

48,293

Other expense, net:

  Interest expense, net

940

940

  Foreign exchange transaction loss, net

792

792

  Impairment of equity investment

7,373

(7,373)

-

  Loss on sale of business

169

-

169

        Other expense, net

9,274

-

(7,373)

-

-

1,901

(Loss) income before taxes and equity investee earnings

(13,203)

9,667

46,113

3,815

-

46,392

Tax (benefit) expense

(607)

3,137

6,390

1,069

-

9,989

Equity investee (loss) earnings

(81)

(81)

Net (loss) income 

$    (12,677)

$            6,530

$      39,723

$        2 ,746

$                      -

$      36,322

Basic (loss) earnings per share

$       (0.23)

$              0.12

$          0.73

$            0.05

$         0.67

Weighted average shares outstanding - basic

54,184,966

54,184,966

54,184,966

54,184,966

54,184,966

Diluted (loss) earnings per share

$       (0.23)

$              0.12

$          0.73

$          0.05

$                (0.02)

$         0.65

Weighted average shares outstanding - diluted

54,184,966

54,184,966

54,184,966

54,184,966

1,500,115

(4)

55,685,081

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure.

(2) Consists of inventory impairment ($20,781), goodwill impairment ($17,959) and impairment of equity investment ($7,373).

(3) Represents results of operations at sites where wind-down activities have commenced.

(4) Reflects inclusion of impact of common stock equivalents in computation of diluted earnings per share as GAAP loss transitions to Pro Forma income.

COVANCE INC.

GAAP to Pro Forma Reconciliation

Q2 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

Restructuring Activities (1)

Pro Forma

Net revenues

$   518,220

$   518,220

Reimbursable out-of-pocket expenses

29,507

29,507

     Total revenues

547,727

-

547,727

Costs and expenses:

  Cost of revenue

358,332

358,332

  Reimbursable out-of-pocket expenses

29,507

29,507

  Selling, general and administrative

85,297

(4,159)

81,138

  Depreciation and amortization

25,836

(405)

25,431

        Total costs and expenses

498,972

(4,564)

494,408

Income from operations

48,755

4,564

53,319

Other expense, net:

  Interest expense, net

579

579

  Foreign exchange transaction loss, net

307

307

        Other expense, net

886

-

886

Income before taxes and equity investee earnings

47,869

4,564

52,433

Tax (benefit) expense

9,987

1,627

11,614

Equity investee (loss) earnings

(240)

(240)

Net income 

$     37,642

$            2,937

$     40,579

Basic earnings per share

$         0.63

$              0.05

$         0.68

Weighted average shares outstanding - basic

59,636,973

59,636,973

59,636,973

Diluted earnings per share

$         0.61

$              0.05

$          0.66

Weighted average shares outstanding - diluted

61,226,477

61,226,477

61,226,477

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

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

YTD Q2 2012

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

 Restructuring Activities (1)

Other Charges (2)

Operating Results at Sites in Wind-Down (3)

Pro Forma

Net revenues

$  1,073,623

$      (4,289)

$1,069,334

Reimbursable out-of-pocket expenses

85,330

85,330

     Total revenues

1,158,953

-

-

(4,289)

1,154,664

Costs and expenses:

  Cost of revenue

784,658

(20,781)

(6,939)

756,938

  Reimbursable out-of-pocket expenses

85,330

85,330

  Selling, general and administrative

171,630

(8,458)

(222)

162,950

  Depreciation and amortization

57,183

(1,209)

(943)

55,031

  Goodwill impairment charge

17,959

(17,959)

-

        Total costs and expenses

1,116,760

(9,667)

(38,740)

(8,104)

1,060,249

(Loss) income from operations

42,193

9,667

38,740

3,815

94,415

Other expense, net:

  Interest expense, net

1,433

1,433

  Foreign exchange transaction loss, net

1,020

1,020

  Impairment of equity investment

7,373

(7,373)

-

  Loss on sale of business

169

169

        Other expense, net

9,995

-

(7,373)

-

2,622

Income before taxes and equity investee earnings

32,198

9,667

46,113

3,815

91,793

Tax (benefit) expense

9,200

3,137

6,390

1,069

19,796

Equity investee (loss) earnings

17

17

Net income 

$         23,015

$            6,530

$       39,723

$          2,746

$     72,014

Basic earnings per share

$            0.41

$              0.12

$           0.71

$            0.05

$         1.29

Weighted average shares outstanding - basic

55,965,410

55,965,410

55,965,410

55,965,410

55,965,410

Diluted earnings per share

$            0.40

$              0.11

$          0.69

$            0.05

$         1.25

Weighted average shares outstanding - diluted

57,456,154

57,456,154

57,456,154

57,456,154

57,456,154

(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure.

(2) Consists of inventory impairment ($20,781), goodwill impairment ($17,959) and impairment of equity investment ($7,373).

(3) Represents results of operations at sites where wind-down activities have commenced.

 

COVANCE INC.

GAAP to Pro Forma Reconciliation

YTD Q2 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

Adjustments

GAAP

Restructuring Activities (1)

Pro Forma

Net revenues

$1,020,206

$1,020,206

Reimbursable out-of-pocket expenses

54,979

54,979

     Total revenues

1,075,185

-

1,075,185

Costs and expenses:

  Cost of revenue

711,852

711,852

  Reimbursable out-of-pocket expenses

54,979

54,979

  Selling, general and administrative

166,000

(9,622)

156,378

  Depreciation and amortization

51,699

(810)

50,889

        Total costs and expenses

984,530

(10,432)

974,098

Income from operations

90,655

10,432

101,087

Other expense, net:

  Interest expense, net

1,297

1,297

  Foreign exchange transaction loss, net

115

115

        Other expense, net

1,412

-

1,412

Income before taxes and equity investee earnings

89,243

10,432

99,675

Tax (benefit) expense

18,621

3,718

22,339

Equity investee (loss) earnings

(242)

(242)

Net income 

$     70,380

$            6,714

$     77,094

Basic earnings per share

$         1.18

$              0.11

$         1.29

Weighted average shares outstanding - basic

59,546,773

59,546,773

59,546,773

Diluted earnings per share

$         1.15

$              0.11

$         1.26

Weighted average shares outstanding - diluted

61,105,838

61,105,838

61,105,838

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

 

 

SOURCE Covance Inc.



RELATED LINKS

http://www.covance.com