PRINCETON, N.J., Oct. 29, 2013 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its third quarter ended September 30, 2013. Net revenue was $606.7 million, representing 11.4% growth from the third quarter of 2012's GAAP result of $544.8 million, and 12.0% growth from the third quarter of 2012's pro forma result of $541.9 million. On a GAAP basis, the company reported earnings of $0.78 per diluted share in the third quarter of 2013 as compared to GAAP earnings of $0.69 in the third quarter of 2012. Excluding charges associated with restructuring and other cost reduction actions totaling $4.9 million, the company reported earnings per diluted share of $0.83, up 15.8% over the pro forma earnings of $0.72 for the third quarter of 2012.
"Financial highlights in the third quarter included consolidated pro forma revenue growth of 12%, operating margin of 11.1%, EPS of $0.83, and record quarterly free cash flow of $180 million. Our better-than-expected results in the third quarter were driven by exceptional performance in our central laboratory and continued strong results in clinical development," said Joe Herring, Chairman and Chief Executive Officer. "Strong commercial execution continued in the third quarter, as we delivered adjusted net orders of $732 million and an adjusted net book-to-bill of 1.21 to 1.
"Late-Stage Development revenue grew 19% year-on-year to $386 million and pro forma operating margins were 22.6%, up 260 basis points from a year ago and 120 basis points from last quarter. Better-than-expected kit volumes and a richer mix in central laboratories drove year-over-year revenue growth of 26%, while clinical development grew revenue 14% year-on-year. Both service lines expanded margins year-over-year and sequentially.
"In Early Development, revenue grew $6 million sequentially to $220 million, an increase of 1% from last year's pro forma result. Performance was led by clinical pharmacology, which delivered strong year-over-year and sequential revenue growth and margin expansion, more than offsetting year-over-year declines in discovery support services and pharmaceutical chemistry services. Pro forma operating margin increased 70 basis points year-on-year, and 180 basis points sequentially. Toxicology, where revenue declined slightly both year-on-year and sequentially, delivered better-than-forecasted orders in the third quarter, setting up expected sequential and year-on-year growth in the fourth quarter.
"Looking ahead to the fourth quarter of 2013, we expect sequential growth in revenue and operating income in both our Early and Late-Stage development segments, despite increased spending on our strategic IT programs. Accordingly, we are increasing our full-year pro forma diluted earnings per share target to approximately $3.20 (excluding gains on sale, costs associated with our ongoing restructuring activities, and assuming foreign exchange rates remain at September 30, 2013 levels), versus our previous expectation of $3.10 to $3.20. We also now expect full-year revenue growth of approximately 10%."
Consolidated Results
($ in millions except EPS) 3Q13 3Q12 Change YTD13 YTD12 Change -------------- ---- ---- ------ ----- ----- ------ Total Revenues $647.0 $597.6 $1,925.3 $1,756.6 Less: Reimbursable Out-of-Pockets $40.3 $52.8 $146.1 $138.2 Net Revenues $606.7 $544.8 11.4% $1,779.2 $1,618.4 9.9% Operating Income $62.6 $30.6 104.7% $162.4 $72.8 123.1% Operating Margin 10.3% 5.6% 9.1% 4.5% Net Income $44.2 $37.8 16.9% $133.4 $60.8 119.2% Earnings per Share $0.78 $0.69 13.3% $2.35 $1.07 119.0% ------------------ ----- ----- ---- ----- ----- ----- Revenue from facilities closed in 2012** - $2.9 - $7.3 Net Revenue, continuing ops* $606.7 $541.9 12.0% $1,779.2 $1,611.2 10.4% Restructuring Costs and other items ($4.9) ($18.1) ($17.1) ($66.5) Loss from facilities closed in 2012** - ($2.6) - ($6.4) Operating Income, excluding items* $67.5 $51.3 31.7% $179.5 $145.7 23.2% Operating Margin, excluding items* 11.1% 9.5% 10.1% 9.0% Gain on Sale of Investments - $1.5 $16.4 $1.5 Impairment of Equity Investment - - - ($7.4) Favorable Income Tax Developments - $11.5 - $11.5 Net Income, excluding items* $47.3 $39.6 19.4% $134.1 $111.6 20.1% Diluted EPS, excluding items* $0.83 $0.72 15.8% $2.36 $1.97 20.0% ----------------- ----- ----- ---- ----- ----- ----
* See attached pro forma income statements for reconciliation of 2013 and 2012 GAAP to pro forma amounts. ** Facilities closed in 2012 include Chandler, Honolulu, and Basel.
Operating Segment Results
Early Development
($ in millions) 3Q13 3Q12 Change YTD13 YTD12 Change -------------- ---- ---- ------ ----- ----- ------ Net Revenues $220.4 $220.7 (0.2%) $642.2 $652.1 (1.5%) Operating Income (Loss) $27.2 $7.1 283.3% $65.6 ($14.7) Operating Margin 12.3% 3.2% 10.2% (2.3%) ---------------- ---- --- ---- ----- Revenue from facilities closed in 2012** - $2.9 - $7.3 Net Revenue, continuing ops $220.4 $217.8 1.2% $642.2 $644.8 (0.4%) Restructuring Costs and other items ($1.6) ($17.2) ($7.5) ($65.1) Loss from facilities closed in 2012** - ($2.6) - ($6.4) Operating Income, excluding items $28.8 $26.9 7.0% $73.1 $56.9 28.6% Operating Margin, excluding items 13.1% 12.4% 11.4% 8.8% ----------------- ---- ---- ---- ---
** Facilities closed in 2012 include Chandler, Honolulu, and Basel.
The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products. Net revenues in the third quarter of 2013 were $220.4 million, compared to $220.7 million on a GAAP basis and $217.8 million on a pro forma basis in the third quarter of last year. Last year's pro forma revenue excluded $2.9 million in revenue from the three sites closed by the end of 2012. On a pro forma basis, net revenue increased 1.2%, including a 10 basis point foreign exchange tailwind, as strong growth in clinical pharmacology and research products were largely offset by declines in discovery support and pharmaceutical chemistry. Sequential growth of $5.8 million was primarily driven by growth in clinical pharmacology and research products.
GAAP operating income in the third quarter of 2013 was $27.2 million, and included $1.6 million in costs associated with our previously-announced restructuring actions versus operating income of $7.1 million in the third quarter of 2012, which included losses at facilities closed in 2012 of $2.6 million and restructuring costs of $17.2 million. Pro forma operating income, excluding these costs, was $28.8 million in the third quarter of this year, a 7.0% increase from the $26.9 million reported in the third quarter of 2012. Pro forma operating margins were 13.1% in the third quarter of 2013, versus 12.4% in the third quarter of 2012 and 11.3% last quarter.
On a sequential basis, operating margin was positively impacted by the shift to above margin treatment of the UK R&D tax credit which added 200 basis points. In addition, annual salary merit increases went into effect on July 1 and this negatively impacted operating margins on a sequential basis by 100 basis points in the quarter. The UK R&D tax credit recorded in the third quarter represents a six month impact (as the law was signed in July 2013, but applied retroactive to April 1, 2013). The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, operating margins in the fourth quarter of 2013 will face a sequential headwind of approximately 100 basis points from a normalization of the UK R&D tax credit.
Late-Stage Development
($ in millions) 3Q13 3Q12 Change YTD13 YTD12 Change -------------- ---- ---- ------ ----- ----- ------ Net Revenues $386.4 $324.1 19.2% $1,137.0 $966.3 17.7% Operating Income $86.8 $64.4 34.8% $249.3 $204.9 21.7% Operating Margin 22.5% 19.9% 21.9% 21.2% ---------------- ---- ---- ---- ---- Restructuring Costs ($0.5) ($0.4) ($3.8) ($0.6) Operating Income, excluding items $87.4 $64.8 34.8% $253.1 $205.5 23.2% Operating Margin, excluding items 22.6% 20.0% 22.3% 21.3% ----------------- ---- ---- ---- ----
The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the third quarter of 2013 grew 19.2% year-on-year to $386.4 million, and increased $8.6 million sequentially from the second quarter level. In the quarter, foreign exchange favorably impacted revenue growth by 160 basis points. Year-over-year growth was driven by increases of 26% in central laboratories and 14% in clinical development, while sequential revenue growth was driven by growth in central laboratories.
Operating income for the third quarter was $86.8 million on a GAAP basis and included $0.5 million in costs associated with our ongoing restructuring actions. On a pro forma basis, operating income was $87.4 million, up 34.8% year-over-year. Pro Forma operating income also increased $6.5 million sequentially. Pro forma operating margins were 22.6% for the third quarter of 2013, versus 20.0% in the third quarter of 2012 and 21.4% last quarter. The year-on-year increase in profitability was led by operating leverage in central laboratories followed by clinical development, which more than offset increased spending on strategic IT projects.
On a sequential basis, operating margins in the third quarter were positively impacted by the shift to above margin treatment of the UK R&D tax credit which added 90 basis points. In addition, on July 1 annual salary merit increases went into effect and this was a sequential operating margin headwind of 90 basis points. The UK R&D tax credit recorded in the third quarter represents a six month impact. The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, operating margins in the fourth quarter of 2013 will face a sequential headwind of approximately 45 basis points from a normalization of the UK R&D tax credit.
Corporate Information
The company reported third quarter adjusted net orders of $732 million. Backlog at September 30, 2013 was $6.83 billion compared to $6.73 billion at June 30, 2013 and $6.37 billion at September 30, 2012. Foreign exchange contributed $70 million to backlog growth on a sequential basis.
Corporate expenses totaled $51.4 million in the third quarter of 2013 (including $2.8 million in restructuring costs) compared to $49.9 million last quarter (including $2.3 million in restructuring costs) and $40.9 million in the third quarter of 2012 (including $0.5 million in restructuring costs). The largest driver of the year-over-year increase in corporate expenses is spending on our strategic IT initiatives followed by higher incentive compensation expenses related to stronger-than-budgeted business performance.
Cash, cash equivalents and short-term investments at September 30, 2013 were $593 million compared to $446 million at June 30, 2013 and $441 million at September 30, 2012. Short-term debt was reduced by $60 million in the third quarter to $265 million as of September 30. As announced on October 8, Covance entered into a note purchase agreement for the private placement of $250 million in senior notes planned to be issued in November.
Net Days Sales Outstanding (DSO) declined 13 days in the third quarter to 35 days at September 30, 2013 compared to 48 days at June 30, 2013 and 38 days at September 30, 2012.
Free cash flow (defined as operating cash flow less capital expenditures) for the third quarter of 2013 was $180 million, consisting of operating cash flow of $215 million less capital expenditures of $35 million. Free cash flow year-to-date was $109 million, consisting of operating cash flow of $213 million less capital expenditures of $104 million. In 2013, we continue to expect free cash flow to be at least $125 million, net of capital expenditures of approximately $160 million. The free cash flow target for 2013 assumes net DSO at 40 days at December 31, 2013.
The pro forma effective tax rate in the third quarter of 28.3% was impacted by the shift to above margin treatment of the UK R&D tax credit. Previously this credit was recorded as a reduction to income tax expense. As a result of UK tax legislation signed in the third quarter of 2013, but effective April 1, 2013, the company now reports the UK R&D credit as an above margin expense reduction. The impact in the third quarter was an increase in the company's effective tax rate of approximately 900 basis points, representing a six month impact. The fourth quarter of 2013 will reflect the UK R&D credit associated with costs incurred during only that quarter. As a result, the effective tax rate in the fourth quarter of 2013 will face a sequential tailwind of approximately 450 basis points from the third quarter level from a normalization of the UK R&D tax credit, resulting in an expected tax rate slightly below 24%.
The company's investor conference call will be webcast on October 30 at 9:00 am ET. Management's commentary and presentation slides will be available through www.covance.com.
Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with annual revenues greater than $2.2 billion and more than 12,000 employees located in over 60 countries. Information on Covance's products and services, recent press releases, and SEC filings can be obtained through its website at www.covance.com.
Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, savings, revenue, operations, revenue and earnings growth and other financial results are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements including the statements contained herein regarding anticipated trends in the company's business are based largely on management's expectations and are subject to and qualified by risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, levels of industry research and development spending, the company's ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss or delay of large studies, risks associated with acquisitions and investments, the company's ability to increase order volume, the pace of translation of orders into revenue in late-stage development services, testing mix and geographic mix of kit receipts in central laboratories, fluctuations in currency exchange rates, the realization of savings from the company's announced restructuring actions, the cost and pace of completion of our information technology projects and the realization of benefits therefrom, the satisfaction of the conditions of the note purchase agreement and the closing thereof, and other factors described in the company's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
Financial Exhibits Follow
COVANCE INC. CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 (Dollars in thousands, except per share data) (UNAUDITED) Three Months Ended September 30 Nine Months Ended September 30 ------------------------------- ------------------------------ 2013 2012 2013 2012 ---- ---- ---- ---- Net revenues $606,722 $544,818 $1,779,219 $1,618,441 Reimbursable out-of-pocket expenses 40,328 52,844 146,142 138,174 Total revenues 647,050 597,662 1,925,361 1,756,615 ------- ------- --------- --------- Costs and expenses: Cost of revenue 424,857 389,724 1,255,316 1,174,382 Reimbursable out-of-pocket expenses 40,328 52,844 146,142 138,174 Selling, general and administrative 87,052 94,401 266,448 266,031 Depreciation and amortization 32,191 30,102 95,072 87,285 Goodwill impairment charge - - - 17,959 Total costs and expenses 584,428 (a) 567,071 (c) 1,762,978 (b) 1,683,831 (d) ------- ------- --------- --------- Income from operations 62,622 (a) 30,591 (c) 162,383 (b) 72,784 (d) Other (income) expense, net: Interest expense, net 759 920 2,634 2,353 Foreign exchange transaction loss, net 882 281 1,911 1,301 Gain on sale of investments - (1,459) (16,400) (1,459) Impairment of equity investment - - - 7,373 Loss on sale of business - - - 169 Other (income) expense, net 1,641 (258) (c) (11,855) (b) 9,737 (d) ----- ---- ------- ----- Income before taxes and equity investee earnings 60,981 (a) 30,849 (c) 174,238 (b) 63,047 (d) Tax expense (benefit) 16,780 (a) (6,971) (c) 40,877 (b) 2,229 (d) Equity investee earnings - - - 17 Net income $44,201 (a) $37,820 (c) $133,361 (b) $60,835 (d) ======= ======= ======== ======= Basic earnings per share $0.81 (a) $0.70 (c) $2.45 (b) $1.10 (d) Weighted average shares outstanding - basic 54,703,763 53,687,748 54,524,296 55,206,190 Diluted earnings per share $0.78 (a) $0.69 (c) $2.35 (b) $1.07 (d) Weighted average shares outstanding - diluted 56,939,181 55,201,552 56,754,527 56,701,280
(a) Three months ended September 30, 2013 includes, as applicable, $4,893 in charges associated with restructuring and other cost reduction actions ($3,063 net of tax). (b) Nine months ended September 30, 2013 includes, as applicable, $17,076 in charges associated with restructuring and other cost reduction actions ($11,352 net of tax), and $16,400 gain on sale of investments ($10,654 net of tax). (c) Three months ended September 30, 2012 includes, as applicable, $14,072 in restructuring costs ($9,647 net of tax), $4,000 in costs associated with the settlement of an inventory supply agreement ($2,756 net of tax), $2,609 in losses at sites in wind- down ($1,821 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501. (d) Nine months ended September 30, 2012 includes, as applicable, $23,739 in restructuring costs ($16,177 net of tax), $24,781 in inventory impairment charges and costs associated with the settlement of an inventory supply agreement ($17,147 net of tax), $17,959 of goodwill impairment charges ($17,959 net of tax), $7,373 of impairment of equity investment ($7,373 net of tax), $6,424 in losses at sites in wind-down ($4,567 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501.
Excluding the impact of charges associated with restructuring and other cost reduction actions, impairment charges, costs associated with the settlement of an inventory supply agreement, losses at sites in wind-down, gain on sale of investments and favorable tax items, as applicable: ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Income from operations $67,515 $51,272 $179,459 $145,687 Taxes on income $18,610 $10,473 $40,855 $30,269 Net income $47,264 $39,598 $134,059 $111,612 Basic earnings per share $0.86 $0.74 $2.46 $2.02 Diluted earnings per share $0.83 $0.72 $2.36 $1.97
COVANCE INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2013 and DECEMBER 31, 2012 (Dollars in thousands) September 30 December 31 2013 2012 ---- ---- (UNAUDITED) ASSETS Current Assets: Cash & cash equivalents $482,800 $492,824 Short-term investments 109,794 - Accounts receivable, net 353,940 339,558 Unbilled services 147,355 136,878 Inventory 49,516 49,270 Deferred income taxes 49,363 44,903 Income taxes receivable - 3,642 Prepaid expenses and other current assets 203,200 167,629 Total Current Assets 1,395,968 1,234,704 Property and equipment, net 891,680 891,319 Goodwill 109,820 109,820 Other assets 40,846 52,499 Total Assets $2,438,314 $2,288,342 LIABILITIES and STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $52,020 $34,430 Accrued payroll and benefits 143,599 144,681 Accrued expenses and other current liabilities 104,032 127,686 Unearned revenue 266,522 255,776 Short-term debt 265,000 320,000 Income taxes payable 11,663 - Total Current Liabilities 842,836 882,573 Deferred income taxes 21,186 27,912 Other liabilities 75,840 70,665 Total Liabilities 939,862 981,150 Stockholders' Equity: Common stock 807 791 Paid-in capital 836,056 744,114 Retained earnings 1,733,987 1,600,626 Accumulated other comprehensive income 23,966 28,520 Treasury stock (1,096,364) (1,066,859) Total Stockholders' Equity 1,498,452 1,307,192 Total Liabilities and Stockholders' Equity $2,438,314 $2,288,342
COVANCE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012 (Dollars in thousands) (UNAUDITED) Nine Months Ended September 30 ------------------------------ 2013 2012 ---- ---- Cash flows from operating activities: Net income $133,361 $60,835 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 95,072 87,285 Non-cash impairment charges - 44,610 Non-cash compensation expense associated with employee benefit and stock compensation plans 29,863 29,774 Deferred income tax benefit (6,787) (23,648) Gain on sale of investments (16,400) (1,459) Loss on sale of business - 169 Loss on disposal of property and equipment 487 674 Equity investee earnings - (17) Changes in operating assets and liabilities, net of business sold: Accounts receivable (14,382) (10,404) Unbilled services (10,477) (27,561) Inventory (246) 9,115 Accounts payable 17,590 2,565 Accrued liabilities (24,736) (1,396) Unearned revenue 10,746 33,374 Income taxes 20,228 568 Other assets and liabilities, net (21,474) (51,581) Net cash provided by operating activities 212,845 152,903 ------- ------- Cash flows from investing activities: Capital expenditures (103,703) (105,199) Purchase of short-term investments (109,794) - Proceeds from sale of investments 17,781 4,682 Other, net 528 1,006 Net cash used in investing activities (195,188) (99,511) -------- ------- Cash flows from financing activities: Net (repayments) borrowings under revolving credit facility (55,000) 310,000 Stock issued under option plans 57,172 5,794 Purchase of treasury stock (29,505) (322,452) Net cash used in financing activities (27,333) (6,658) ------- ------ Effect of exchange rate changes on cash (348) 5,535 ---- ----- Net change in cash and cash equivalents (10,024) 52,269 Cash and cash equivalents, beginning of period 492,824 389,103 ------- ------- Cash and cash equivalents, end of period $482,800 $441,372 ======== ========
COVANCE INC. GAAP to Pro Forma Reconciliation Q3 2013 (Dollars in thousands, except per share data) (UNAUDITED) Adjustments ----------- GAAP Restructuring Pro Forma and Other Cost Reduction Activities (1) --- Net revenues $606,722 $606,722 Reimbursable out-of- pocket expenses 40,328 40,328 Total revenues 647,050 - 647,050 ------- --- ------- Costs and expenses: Cost of revenue 424,857 424,857 Reimbursable out-of- pocket expenses 40,328 40,328 Selling, general and administrative 87,052 (4,475) 82,577 Depreciation and amortization 32,191 (418) 31,773 Total costs and expenses 584,428 (4,893) 579,535 ------- ------ ------- Income from operations 62,622 4,893 67,515 Other (income) expense, net: Interest expense, net 759 759 Foreign exchange transaction loss, net 882 882 Other (income) expense, net 1,641 - 1,641 ----- --- ----- Income before taxes 60,981 4,893 65,874 Taxes on income 16,780 1,830 18,610 Net income $44,201 $3,063 $47,264 ======= ====== ======= Basic earnings per share $0.81 $0.06 $0.86 Weighted average shares outstanding -basic 54,703,763 54,703,763 54,703,763 Diluted earnings per share $0.78 $0.05 $0.83 Weighted average shares outstanding -diluted 56,939,181 56,939,181 56,939,181 (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.
COVANCE INC. GAAP to Pro Forma Reconciliation Q3 2012 (Dollars in thousands, except per share data) (UNAUDITED) Adjustments ----------- GAAP Restructuring Other Operating Income Tax Pro Forma Activities (1) Items (2) Results at Items (4) Sites in Wind- Down (3) --- Net revenues $544,818 $(2,967) $541,851 Reimbursable out-of-pocket expenses 52,844 52,844 Total revenues 597,662 - - (2,967) - 594,695 ------- --- --- ------ --- ------- Costs and expenses: Cost of revenue 389,724 (4,000) (4,544) 381,180 Reimbursable out-of-pocket expenses 52,844 52,844 Selling, general and administrative 94,401 (12,989) (162) 81,250 Depreciation and amortization 30,102 (1,083) (870) 28,149 Total costs and expenses 567,071 (14,072) (4,000) (5,576) - 543,423 ------- ------- ------ ------ --- ------- Income from operations 30,591 14,072 4,000 2,609 - 51,272 Other (income) expense, net: Interest expense, net 920 920 Foreign exchange transaction loss, net 281 281 Gain on sale of investment (1,459) 1,459 - Other (income) expense, net (258) - 1,459 - - 1,201 ---- --- ----- --- --- ----- Income before taxes 30,849 14,072 2,541 2,609 - 50,071 Taxes on income (6,971) 4,425 730 788 11,501 10,473 Net income $37,820 $9,647 $1,811 $1,821 $(11,501) $39,598 ======= ====== ====== ====== ======== ======= Basic earnings per share $0.70 $0.18 $0.03 $0.03 $(0.21) $0.74 Weighted average shares outstanding - basic 53,687,748 53,687,748 53,687,748 53,687,748 53,687,748 53,687,748 Diluted earnings per share $0.69 $0.17 $0.03 $0.03 $(0.21) $0.72 Weighted average shares outstanding - diluted 55,201,552 55,201,552 55,201,552 55,201,552 55,201,552 55,201,552 (1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure. (2) Consists of costs associated with the settlement of an inventory supply agreement ($4,000) and a gain on the sale of an investment $1,459. (3) Represents results of operations at sites where wind-down activities have commenced. (4) Primarily represents favorable resolutions of income tax matters.
COVANCE INC. GAAP to Pro Forma Reconciliation YTD Q3 2013 (Dollars in thousands, except per share data) (UNAUDITED) Adjustments ----------- GAAP Restructuring Other Pro Forma and Other Cost Items (2) Reduction Activities (1) --- Net revenues $1,779,219 $1,779,219 Reimbursable out-of-pocket expenses 146,142 146,142 Total revenues 1,925,361 - - 1,925,361 --------- --- --- --------- Costs and expenses: Cost of revenue 1,255,316 1,255,316 Reimbursable out-of-pocket expenses 146,142 146,142 Selling, general and administrative 266,448 (14,576) 251,872 Depreciation and amortization 95,072 (2,500) 92,572 Total costs and expenses 1,762,978 (17,076) - 1,745,902 --------- ------- --- --------- Income from operations 162,383 17,076 - 179,459 Other (income) expense, net: Interest expense, net 2,634 2,634 Foreign exchange transaction loss, net 1,911 1,911 Gain on sale of investments (16,400) 16,400 - Other (income) expense, net (11,855) - 16,400 4,545 ------- --- ------ ----- Income before taxes 174,238 17,076 (16,400) 174,914 Taxes on income 40,877 5,724 (5,746) 40,855 Net income $133,361 $11,352 $(10,654) $134,059 ======== ======= ======== ======== Basic earnings per share $2.45 $0.21 $(0.20) $2.46 Weighted average shares outstanding - basic 54,524,296 54,524,296 54,524,296 54,524,296 Diluted earnings per share $2.35 $0.20 $(0.19) $2.36 Weighted average shares outstanding - diluted 56,754,527 56,754,527 56,754,527 56,754,527 (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. (2) Represents gain on sale of investments.
COVANCE INC. GAAP to Pro Forma Reconciliation YTD Q3 2012 (Dollars in thousands, except per share data) (UNAUDITED) Adjustments ----------- GAAP Restructuring Other Operating Income Tax Pro Forma Activities (1) Items (2) Results at Items (4) Sites in Wind- Down (3) --- Net revenues $1,618,441 $(7,256) $1,611,185 Reimbursable out-of-pocket expenses 138,174 138,174 Total revenues 1,756,615 - - (7,256) - 1,749,359 --------- --- --- ------ --- --------- Costs and expenses: Cost of revenue 1,174,382 (24,781) (11,483) 1,138,118 Reimbursable out-of-pocket expenses 138,174 138,174 Selling, general and administrative 266,031 (21,446) (384) 244,201 Depreciation and amortization 87,285 (2,293) (1,813) 83,179 Goodwill impairment charge 17,959 (17,959) - Total costs and expenses 1,683,831 (23,739) (42,740) (13,680) - 1,603,672 --------- ------- ------- ------- --- --------- Income from operations 72,784 23,739 42,740 6,424 - 145,687 Other (income) expense, net: Interest expense, net 2,353 2,353 Foreign exchange transaction loss, net 1,301 1,301 Impairment of equity investment 7,373 (7,373) - Gain on sale of investment (1,459) 1,459 - Loss on sale of business 169 169 Other (income) expense, net 9,737 - (5,914) - - 3,823 ----- --- ------ --- --- ----- Income before taxes and equity investee earnings 63,047 23,739 48,654 6,424 - 141,864 Taxes on income 2,229 7,562 7,120 1,857 11,501 30,269 Equity investee earnings 17 17 Net income $60,835 $16,177 $41,534 $4,567 $(11,501) $111,612 ======= ======= ======= ====== ======== ======== Basic earnings per share $1.10 $0.29 $0.75 $0.08 $(0.21) $2.02 Weighted average shares outstanding - basic 55,206,190 55,206,190 55,206,190 55,206,190 55,206,190 55,206,190 Diluted earnings per share $1.07 $0.29 $0.73 $0.08 $(0.20) $1.97 Weighted average shares outstanding - diluted 56,701,280 56,701,280 56,701,280 56,701,280 56,701,280 56,701,280 (1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure. (2) Consists of inventory impairment and costs associated with the settlement of an inventory supply agreement ($24,781), goodwill impairment ($17,959), impairment of equity investment ($7,373) and a gain on the sale of an investment $1,459. (3) Represents results of operations at sites where wind-down activities have commenced. (4) Primarily represents favorable resolutions of income tax matters.
SOURCE Covance Inc.