PRINCETON, N.J., July 30, 2013 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its second quarter ended June 30, 2013. Net revenue was $592.3 million, representing 9.1% growth from the second quarter of 2012's GAAP result of $542.8 million, and 10.0% growth from the second quarter of 2012's pro forma result of $538.5 million. On a GAAP basis, the company reported earnings of $0.72 per diluted share in the second quarter. Excluding charges associated with restructuring and other cost reduction actions totaling $6.0 million and a gain on the sale of an equity investment of $0.7 million, the company reported earnings per diluted share of $0.78, up 19.9% over the pro forma earnings of $0.65 for the second quarter of 2012.

"Accelerated revenue growth in central laboratories was the primary driver of better-than-expected consolidated results in the second quarter, including pro forma revenue growth of 10%, operating margin of 9.7%, and EPS growth of 20% to $0.78," said Joe Herring, Chairman and Chief Executive Officer. "Strong commercial performance, led by clinical development, delivered record adjusted net orders of $776 million in the quarter. These orders result in an adjusted net book-to-bill of 1.31 to 1.

"Late-Stage Development second quarter revenue grew 17% year-on-year to $378 million and pro forma operating margins were 21.4%, up 30 basis points from a year ago despite increased spending on strategic IT projects. Better-than-expected kit volumes in central laboratories drove both year-over-year revenue growth of 22% and operating margin expansion. Clinical development grew revenue 13% year-on-year and delivered record adjusted net orders.

"In Early Development, revenue of $215 million was flat from last year's pro forma result as strong revenue growth in nutritional chemistry and clinical pharmacology and a return to growth in toxicology were offset by declines in discovery support services and pharmaceutical chemistry services. Pro forma operating margin increased 260 basis points year-on-year, largely as a result of our 2012 restructuring actions, and 160 basis points from the first quarter primarily from sequential growth in toxicology that carried strong incremental earnings.

"As we look ahead to the remainder of the year, we are increasing our pro forma diluted earnings per share target to the range of $3.10 to $3.20 (excluding gains on sale, costs associated with our ongoing restructuring activities, and assuming foreign exchange rates remain at June 30, 2013 levels), versus our previous expectation of $3.00 to $3.20, and we continue to expect revenue growth in the high-single digit range. We expect sequential increases in earnings per share of approximately two cents in each of the third and fourth quarters."

Consolidated Results



    ($ in
     millions
     except EPS)   2Q13       2Q12       Change       YTD13         YTD12         Change
    ------------   ----       ----       ------       -----         -----         ------

    Total
     Revenues         $644.0     $585.0                   $1,278.3      $1,158.9

    Less:
     Reimbursable
     Out-of-
     Pockets           $51.7      $42.2                     $105.8         $85.3

    Net Revenues      $592.3     $542.8          9.1%     $1,172.5      $1,073.6           9.2%

    Operating
     Income
     (Loss)            $51.5      ($3.9)         n/c         $99.8         $42.2         136.4%

       Operating
        Margin           8.7%     (0.7%)                       8.5%          3.9%

    Net Income
     (Loss)            $41.0     ($12.7)         n/c         $89.2         $23.0         287.4%

    Earnings
     (Loss) per
     Share             $0.72     ($0.23)         n/c         $1.58         $0.40         292.8%
    -----------        -----     ------          ---         -----         -----         -----

    Revenue from
     facilities
     closed in
     2012**                -       $4.3                          -          $4.3

    Net Revenue,
     continuing
     ops*             $592.3     $538.5         10.0%     $1,172.5      $1,069.3           9.6%

     Restructuring
     Costs             ($6.0)     ($9.7)                    ($12.2)        ($9.7)

    Loss from
     facilities
     closed in
     2012**                -      ($3.8)                         -         ($3.8)

    Impairment
     of Goodwill
     & Inventory           -     ($38.7)                         -        ($38.7)

    Operating
     Income,
     excluding
     items*            $57.5      $48.3         19.1%       $111.9         $94.4          18.6%

      Operating
       Margin,
       excluding
       items*            9.7%       9.0%                       9.5%          8.8%

    Gain on Sale
     of
     Investments        $0.7          -                      $16.4             -

    Impairment
     of Equity
     Investment            -      ($7.4)                         -         ($7.4)

    Net Income,
     excluding
     items*            $44.5      $36.3         22.4%        $86.8         $72.0          20.5%

    Diluted EPS,
     excluding
     items*            $0.78      $0.65         19.9%        $1.53         $1.25          22.4%
    ------------       -----      -----         ----         -----         -----          ----


    * See attached pro forma income
     statements for reconciliation
     of 2013 and 2012 GAAP to pro
     forma amounts.
    ** Facilities closed in 2012
     include Chandler, Honolulu, and
     Basel.

Operating Segment Results

Early Development



     ($
     in
     millions)     2Q13       2Q12        Change        YTD13       YTD12       Change
     ---------     ----       ----        ------        -----       -----       ------

     Net
     Revenues         $214.6      $219.7         (2.3%)     $421.9      $431.4         (2.2%)

     Operating
     Income
     (Loss)            $21.9      ($33.1)          n/c       $38.4      ($21.8)          n/c

     Operating
     Margin             10.2%     (15.1%)                      9.1%      (5.1%)
     ---------          ----     -------                       ---      ------

     Revenue
     from
     facilities
     closed
     in
     2012**                -        $4.3                         -        $4.3

     Net
     Revenue,
     continuing
     ops              $214.6      $215.4         (0.4%)     $421.9      $427.1         (1.2%)

     Restructuring
     Costs             ($2.3)      ($9.2)                    ($5.9)      ($9.2)

     Loss
     from
     facilities
     closed
     in
     2012**                -       ($3.8)                        -       ($3.8)

     Impairment
     of
     Goodwill
     &
     Inventory             -      ($38.7)                        -      ($38.7)

     Operating
     Income,
     excluding
     items             $24.2       $18.7          29.8%      $44.3       $30.0          47.9%

     Operating
     Margin,
     excluding
     items              11.3%        8.7%                     10.5%        7.0%
     ---------          ----         ---                      ----         ---


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

The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products. Net revenues in the second quarter of 2013 were $214.6 million, compared to $219.7 million on a GAAP basis and $215.4 million on a pro forma basis in the second quarter of last year. Last year's pro forma revenue excluded $4.3 million in revenue from the three sites closed by the end of 2012. On a pro forma basis, net revenue declined 0.4%, including a 60 basis point foreign exchange headwind, as growth in nutritional chemistry, clinical pharmacology, and toxicology were offset by declines in discovery support and pharmaceutical chemistry. Sequentially, revenue increased by $7.3 million from the first quarter as growth in toxicology, nutritional chemistry and clinical pharmacology more than offset declines in discovery support services and research products.

GAAP operating income in the second quarter of 2013 was $21.9 million, and included $2.3 million in costs associated with our ongoing restructuring actions versus an operating loss of $33.1 million in the second quarter of 2012, which included losses at facilities closed in 2012 of $3.8 million, restructuring costs of $9.2 million and other charges of $38.7 million. Pro forma operating income, excluding these costs, was $24.2 million in the second quarter of this year, a 29.8% increase from the $18.7 million reported in the second quarter of 2012. Pro forma operating margins expanded 260 basis points year-over-year and 160 basis points sequentially. The year-over-year increase was led primarily by our restructuring actions while the sequential increase was led by growth and increased profitability in toxicology.

Late-Stage Development

     ($
     in
     millions)     2Q13       2Q12       Change       YTD13       YTD12       Change
     ---------     ----       ----       ------       -----       -----       ------

     Net
     Revenues         $377.7     $323.1         16.9%     $750.6      $642.3         16.9%

     Operating
     Income            $79.5      $68.0         16.9%     $162.4      $140.5         15.7%

     Operating
     Margin             21.0%      21.1%                    21.6%       21.9%
     ---------          ----       ----                     ----        ----

     Restructuring
     Costs             ($1.4)     ($0.2)                   ($3.3)      ($0.2)

     Operating
     Income,
     excluding
     items             $80.9      $68.2         18.6%     $165.7      $140.7         17.8%

     Operating
     Margin,
     excluding
     items              21.4%      21.1%                    22.1%       21.9%
     ---------          ----       ----                     ----        ----

The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the second quarter of 2013 grew 16.9% year-on-year to $377.7 million, a sequential increase of $4.8 million from the first quarter level. In the quarter, foreign exchange negatively impacted revenue growth by 20 basis points. Year-over-year growth was driven by increases of 22% in central laboratories and 13% in clinical development.

Operating income for the second quarter was $79.5 million on a GAAP basis and included $1.4 million in costs associated with our ongoing restructuring actions. On a pro forma basis, operating income was $80.9 million, up 18.6% year-over-year. Pro Forma operating income declined $4.0 million sequentially due to a planned increase in spending on our strategic IT projects as well as mix across the segment's service offerings. Pro forma operating margins were 21.4% for the second quarter of 2013, versus 21.1% in the second quarter of 2012 and 22.8% last quarter. The year-on-year increase in profitability was driven by operating leverage in central laboratories, which more than offset increased spending on strategic IT projects.

Corporate Information

During the quarter ended June 30, 2013 the company received an additional $0.7 million in contingent consideration in connection with the 2012 sale of its investment in Caprion Proteomics Inc., which has been excluded from pro forma earnings.

The company reported second quarter adjusted net orders of $776 million. Backlog at June 30, 2013 was $6.73 billion compared to $6.61 billion at March 31, 2013 and $6.23 billion at June 30, 2012. Foreign exchange contributed $27 million to backlog on a sequential basis.

Corporate expenses totaled $49.9 million in the second quarter of 2013 (including $2.3 million in restructuring costs) compared to $51.3 million last quarter (including $0.7 million in restructuring costs) and $38.9 million in the second quarter of 2012 (including $0.3 million in restructuring costs). The largest driver of the year-over-year increase in corporate expenses is spending on our strategic IT initiatives followed by higher incentive compensation expenses related to stronger-than-budgeted business performance. Sequentially, the decline was driven by lower expenses in a number of areas, which offset increased spending on our strategic IT initiatives.

Cash and cash equivalents at June 30, 2013 were $446 million compared to $430 million at March 31, 2013 and $398 million at June 30, 2012. Debt outstanding remained at $325 million.

Net Days Sales Outstanding (DSO) were 48 days at June 30, 2013 compared to 41 days at March 31, 2013 and 35 days at June 30, 2012.

Free cash flow (defined as operating cash flow less capital expenditures) for the second quarter of 2013 was $13 million, consisting of operating cash flow of $51 million less capital expenditures of $38 million. Free cash flow year-to-date was negative $71 million, consisting of operating cash flow of negative $3 million less capital expenditures of $68 million. In 2013, we continue to expect free cash flow to be at least $125 million, net of capital expenditures of approximately $160 million. The free cash flow target for 2013 assumes net DSO at 40 days at December 31, 2013.

The Company's investor conference call will be webcast on July 31 at 9:00 am ET. Management's commentary and presentation slides will be available through www.covance.com.

Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with annual revenues greater than $2.2 billion, global operations in more than 30 countries, and more than 12,000 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 SIX MONTHS ENDED JUNE 30, 2013 AND 2012


                                                                       (Dollars in thousands, except per share data)


                                                                                    (UNAUDITED)


                                                                                                              Three Months Ended June 30                Six Months Ended June 30
                                                                                                              --------------------------                ------------------------

                                                                                                                     2013                 2012                2013               2012
                                                                                                                     ----                 ----                ----               ----


    Net revenues                                                                                                 $592,298             $542,782          $1,172,497         $1,073,623

    Reimbursable out-of-pocket expenses                                                                            51,678               42,263             105,814             85,330

         Total revenues                                                                                           643,976              585,045           1,278,311          1,158,953
                                                                                                                  -------              -------           ---------          ---------


    Costs and expenses:

      Cost of revenue                                                                                             419,115              408,198             830,459            784,658

      Reimbursable out-of-pocket expenses                                                                          51,678               42,263             105,814             85,330

      Selling, general and administrative                                                                          90,177               90,601             179,396            171,630

      Depreciation and amortization                                                                                31,496               29,953              62,881             57,183

      Goodwill impairment charge                                                                                        -               17,959                   -             17,959

            Total costs and expenses                                                                              592,466  (a)         588,974  (c)      1,178,550  (b)     1,116,760  (c)
                                                                                                                  -------              -------           ---------          ---------


    Income (loss) from operations                                                                                  51,510  (a)          (3,929) (c)         99,761  (b)        42,193  (c)


    Other (income) expense, net:

      Interest expense, net                                                                                         1,004                  940               1,875              1,433

      Foreign exchange transaction loss, net                                                                          694                  792               1,029              1,020

      Gain on sale of investments                                                                                    (707)                   -             (16,400)                 -

      Impairment of equity investment                                                                                   -                7,373                   -              7,373

      Loss on sale of business                                                                                          -                  169                   -                169

            Other (income) expense, net                                                                               991    (a)         9,274  (c)        (13,496)   (b)       9,995  (c)
                                                                                                                      ---                -----             -------              -----


    Income (loss) before taxes and equity investee results                                                         50,519  (a)         (13,203) (c)        113,257  (b)        32,198  (c)


    Tax expense (benefit)                                                                                           9,525  (a)            (607) (c)         24,097  (b)         9,200  (c)


    Equity investee (loss) earnings                                                                                     -                  (81)                  -                 17


    Net income (loss)                                                                                             $40,994  (a)        $(12,677) (c)        $89,160  (b)       $23,015  (c)
                                                                                                                  =======             ========             =======            =======


    Basic earnings (loss) per share                                                                                 $0.75  (a)          $(0.23) (c)          $1.64  (b)         $0.41  (c)


    Weighted average shares outstanding - basic                                                                54,662,093           54,184,966          54,434,563         55,965,410


    Diluted earnings (loss) per share                                                                               $0.72  (a)          $(0.23) (c)          $1.58  (b)         $0.40  (c)


    Weighted average shares outstanding - diluted                                                              56,880,115           54,184,966          56,598,936         57,456,154


     (a)  Three months ended June 30, 2013 includes, as applicable, $6,013 in charges associated with restructuring
           and other cost reduction actions ($3,942 net of tax), and $707 gain on sale of investment ($460 net of tax).

    (b)  Six months ended June 30, 2013 includes, as applicable, $12,183 in charges associated with restructuring

           and other cost reduction actions ($8,289 net of tax), and $16,400 gain on sale of investments ($10,654 net of tax).

    (c)  Three and six months ended June 30, 2012 includes, 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).



    Excluding the impact of charges associated with restructuring and other cost reduction actions, gain on sale of investments, impairment charges and losses at sites in wind-down, as applicable:
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


    Income from operations                                                                                        $57,523              $48,293            $111,944            $94,415


    Taxes on income                                                                                               $11,349               $9,989             $22,245            $19,796


    Net income                                                                                                    $44,476              $36,322             $86,795            $72,014


    Basic earnings per share                                                                                        $0.81                $0.67               $1.59              $1.29


    Diluted earnings per share                                                                                      $0.78                $0.65               $1.53              $1.25



                                                  COVANCE INC.


                                          CONSOLIDATED BALANCE SHEETS


                                      JUNE 30, 2013 and DECEMBER 31, 2012


                                             (Dollars in thousands)



                                                       June 30              December 31

                                                                      2013                 2012
                                                                      ----                 ----

                                                     (UNAUDITED)

    ASSETS

    Current Assets:

      Cash &
       cash
       equivalents                                                $445,600             $492,824

      Accounts
       receivable,
       net                                                         396,653              339,558

      Unbilled
       services                                                    154,345              136,878

      Inventory                                                     47,947               49,270

      Deferred
       income
       taxes                                                        47,953               44,903

      Income
       taxes
       receivable                                                      261                3,642

      Prepaid
       expenses
       and other
       current
       assets                                                      219,481              167,629
                                                                   -------              -------

          Total
           Current
           Assets                                                1,312,240            1,234,704


    Property
     and
     equipment,
     net                                                           880,953              891,319

    Goodwill                                                       109,820              109,820

    Other
     assets                                                         38,261               52,499

          Total
           Assets                                               $2,341,274           $2,288,342
                                                                ==========           ==========


    LIABILITIES and STOCKHOLDERS' EQUITY

    Current Liabilities:

      Accounts
       payable                                                     $52,742              $34,430

      Accrued
       payroll
       and
       benefits                                                    119,889              144,681

      Accrued
       expenses
       and other
       current
       liabilities                                                 107,008              127,686

      Unearned
       revenue                                                     241,681              255,776

      Short-
       term debt                                                   325,000              320,000
                                                                   -------              -------

          Total
           Current
           Liabilities                                             846,320              882,573


    Deferred
     income
     taxes                                                          20,760               27,912

    Other
     liabilities                                                    74,167               70,665

          Total
           Liabilities                                             941,247              981,150
                                                                   -------              -------


    Stockholders' Equity:

      Common
       stock                                                           804                  791

      Paid-in
       capital                                                     806,993              744,114

      Retained
       earnings                                                  1,689,786            1,600,626

       Accumulated
       other
       comprehensive
       (loss)
       income                                                       (3,579)              28,520

      Treasury
       stock                                                    (1,093,977)          (1,066,859)

          Total
           Stockholders'
           Equity                                                1,400,027            1,307,192
                                                                 ---------            ---------

          Total
           Liabilities
           and
           Stockholders'
            Equity                                              $2,341,274           $2,288,342
                                                                ==========           ==========

                          COVANCE INC.


             CONSOLIDATED STATEMENTS OF CASH FLOWS


        FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012


                     (Dollars in thousands)


                          (UNAUDITED)


                                                     Six Months Ended
                                                          June 30
                                                    -----------------


                                                      2013          2012
                                                      ----          ----

    Cash flows from operating activities:

      Net income                                   $89,160       $23,015

      Adjustments to reconcile net income to net
       cash (used in) provided by

        operating activities:

        Depreciation and
         amortization                               62,881        57,183

        Non-cash impairment
         charges                                         -        44,610

        Non-cash compensation expense associated
         with employee benefit

           and stock compensation
            plans                                   19,311        19,422

        Deferred income tax
         benefit                                    (5,712)      (15,507)

        Gain on sale of
         investments                              (16,400)             -

        Loss on sale of
         business                                        -           169

        Loss on disposal of
         property and
         equipment                                     375           432

        Equity investee
         earnings                                        -           (17)

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

           Accounts receivable                    (57,095)        (2,143)

           Unbilled services                      (17,467)       (20,704)

           Inventory                                 1,323         8,948

           Accounts payable                         18,312         6,401

           Accrued liabilities                    (45,470)       (26,023)

           Unearned revenue                       (14,095)        36,442

           Income taxes                              6,736        (5,028)

           Other assets and
            liabilities, net                      (44,441)       (45,124)

    Net cash (used in)
     provided by operating
     activities                                     (2,582)       82,076
                                                    ------        ------


    Cash flows from investing activities:

      Capital expenditures                        (68,433)       (69,343)

      Proceeds from sale of
       investments                                  17,781             -

      Other, net                                       394           990

    Net cash used in
     investing activities                         (50,258)       (68,353)
                                                   -------       -------


    Cash flows from financing activities:

      Net borrowings under
       revolving credit
       facility                                      5,000       300,000

      Stock issued under
       option plans                                 40,226         3,522

      Purchase of treasury
       stock                                      (27,118)     (302,099)

    Net cash provided by
     financing activities                           18,108         1,423
                                                    ------         -----

    Effect of exchange
     rate changes on cash                         (12,492)        (6,421)
                                                   -------        ------

    Net change in cash and
     cash equivalents                             (47,224)         8,725


    Cash and cash
     equivalents,
     beginning of period                           492,824       389,103
                                                   -------       -------


    Cash and cash
     equivalents, end of
     period                                       $445,600      $397,828
                                                  ========      ========

                                                                                    COVANCE INC.


                                                                          GAAP to Pro Forma Reconciliation


                                                                                       Q2 2013


                                                                    (Dollars in thousands, except per share data)


                                                                                  (UNAUDITED)


                                                                                      Adjustments
                                                                                      -----------

                                                    GAAP                              Restructuring                 Other              Pro Forma
                                                                                                                  Items (2)
                                                                                     and Other Cost

                                                                                       Reduction

                                                                                     Activities (1)
                                                                                                                                                      ---


    Net revenues                                           $592,298                                                                              $592,298

    Reimbursable out-
     of-pocket
     expenses                                                51,678                                                                                51,678

         Total revenues                                     643,976                                           -                     -             643,976
                                                            -------                                         ---                   ---             -------


    Costs and expenses:

      Cost of revenue                                       419,115                                                                               419,115

      Reimbursable out-
       of-pocket
       expenses                                              51,678                                                                                51,678

      Selling, general
       and administrative                                    90,177                                      (5,428)                                   84,749

      Depreciation and
       amortization                                          31,496                                        (585)                                   30,911

            Total costs and
             expenses                                       592,466                                      (6,013)                    -             586,453
                                                            -------                                      ------                   ---             -------


    Income from
     operations                                              51,510                                       6,013                     -              57,523


    Other (income) expense, net:

      Interest expense,
       net                                                    1,004                                                                                 1,004

      Foreign exchange
       transaction loss,
       net                                                      694                                                                                   694

      Gain on sale of
       investment                                              (707)                                                              707                   -

            Other (income)
             expense, net                                       991                                           -                   707               1,698
                                                                ---                                         ---                   ---               -----


    Income before taxes                                      50,519                                       6,013                  (707)             55,825


    Taxes on income                                           9,525                                       2,071                  (247)             11,349


    Net income                                              $40,994                                      $3,942                 $(460)            $44,476
                                                            =======                                      ======                 =====             =======


    Basic earnings per
     share                                                    $0.75                                       $0.07                $(0.01)              $0.81


    Weighted average
     shares outstanding
     -basic                                              54,662,093                                  54,662,093            54,662,093          54,662,093


    Diluted earnings
     per share                                                $0.72                                       $0.07                $(0.01)              $0.78


    Weighted average
     shares outstanding
     -diluted                                            56,880,115                                  56,880,115            56,880,115          56,880,115



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

          overall cost structure.

    (2) Represents gain on sale of investment.

                                                                                                                                   COVANCE INC.


                                                                                                                         GAAP to Pro Forma Reconciliation


                                                                                                                                     Q2 2012


                                                                                                                  (Dollars in thousands, except per share data)


                                                                                                                               (UNAUDITED)


                                                                                                                 Adjustments
                                                                                                                 -----------

                                                                                              GAAP              Restructuring                         Other               Operating                Inclusion of                  Pro Forma
                                                                                                               Activities (1)                      Charges (2)
                                                                                                                                                                          Results at               Common Stock

                                                                                                                                                                        Sites in Wind-            Equivalents in

                                                                                                                                                                           Down (3)                Diluted EPS

                                                                                                                                                                                                  Computation(4)
                                                                                                                                                                                                                                                ---


    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


                                                                                                       YTD Q2 2013


                                                                                      (Dollars in thousands, except per share data)


                                                                                                    (UNAUDITED)


                                                                                                                              Adjustments
                                                                                                                              -----------

                                                                                              GAAP                            Restructuring              Other             Pro Forma
                                                                                                                                                       Items (2)
                                                                                                                             and Other Cost

                                                                                                                               Reduction

                                                                                                                             Activities (1)
                                                                                                                                                                                          ---


    Net revenues                                                                                   $1,172,497                                                                      $1,172,497

    Reimbursable out-of-pocket expenses                                                               105,814                                                                         105,814

         Total revenues                                                                             1,278,311                                       -                   -           1,278,311
                                                                                                    ---------                                     ---                 ---           ---------


    Costs and expenses:

      Cost of revenue                                                                                 830,459                                                                         830,459

      Reimbursable out-of-pocket expenses                                                             105,814                                                                         105,814

      Selling, general and administrative                                                             179,396                                 (10,101)                                169,295

      Depreciation and amortization                                                                    62,881                                  (2,082)                                 60,799

            Total costs and expenses                                                                1,178,550                                 (12,183)                  -           1,166,367
                                                                                                    ---------                                 -------                 ---           ---------


    Income from operations                                                                             99,761                                  12,183                   -             111,944


    Other (income) expense, net:

      Interest expense, net                                                                             1,875                                                                           1,875

      Foreign exchange transaction loss, net                                                            1,029                                                                           1,029

      Gain on sale of investments                                                                     (16,400)                                                     16,400                   -

            Other (income) expense, net                                                               (13,496)                                      -              16,400               2,904
                                                                                                      -------                                     ---              ------               -----


    Income before taxes                                                                               113,257                                  12,183             (16,400)            109,040


    Taxes on income                                                                                    24,097                                   3,894              (5,746)             22,245


    Net income                                                                                        $89,160                                  $8,289            $(10,654)            $86,795
                                                                                                      =======                                  ======            ========             =======


    Basic earnings per share                                                                            $1.64                                   $0.15              $(0.20)              $1.59


    Weighted average shares outstanding - basic                                                    54,434,563                              54,434,563          54,434,563          54,434,563


    Diluted earnings per share                                                                          $1.58                                   $0.15              $(0.19)              $1.53


    Weighted average shares outstanding - diluted                                                  56,598,936                              56,598,936          56,598,936          56,598,936



    (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall

          cost structure.

    (2) Represents gain on sale of investments.

                                                                                                                           COVANCE INC.


                                                                                                                 GAAP to Pro Forma Reconciliation


                                                                                                                           YTD Q2 2012


                                                                                                          (Dollars in thousands, except per share data)


                                                                                                                        (UNAUDITED)


                                                                                                                                        Adjustments
                                                                                                                                        -----------

                                                                                                        GAAP                           Restructuring              Other                Operating               Pro Forma
                                                                                                                                                               Charges (2)
                                                                                                                                      Activities (1)                                  Results at

                                                                                                                                                                                    Sites in Wind-

                                                                                                                                                                                       Down (3)



    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.

SOURCE Covance Inc.