Attached files
| file | filename |
|---|---|
| 8-K - 8-K - COVANCE INC | a12-26152_18k.htm |
Exhibit 99.1
PRESS RELEASE
|
|
|
Contact: |
Paul Surdez |
COVANCE REPORTS THIRD QUARTER PRO FORMA NET REVENUE OF $542 MILLION, PRO FORMA EPS OF $0.72 AND ADJUSTED NET ORDERS OF $701 MILLION
— FY2012 Pro Forma EPS Target now $2.65 to $2.70 versus previous range of $2.50 to $2.70 —
Princeton, New Jersey, November 5, 2012 — Covance Inc. (NYSE: CVD) today reported results for its third quarter ended September 30, 2012. On a GAAP basis, net revenue was $545 million. Excluding revenue from facilities in wind-down, pro forma net revenue was $542 million. On a GAAP basis, the company reported earnings of $0.69 per diluted share in the third quarter. Excluding losses from facilities in wind-down, restructuring costs and other charges and favorable income tax developments during the quarter, the company reported earnings per diluted share of $0.72.
“Third quarter pro forma earnings were better than expected, increasing $0.07 sequentially, due to significantly improved profitability in toxicology coupled with continued strong performances in clinical development and central laboratories. Our performance this quarter demonstrates the leverage in our scalable business model when commercial success is combined with our lower cost infrastructure,” said Joe Herring, Chairman and Chief Executive Officer. “On the sales front, clinical development and central laboratories continued to deliver strong new orders, driving adjusted net orders of $701 million and an adjusted book-to-bill of 1.29 to 1. We continue to have significant pending proposals. In addition, our strategic information technology projects continue to progress on-time and on-budget.
“Late-Stage Development revenues grew 6.9% year-on-year, or 13.1% on a constant currency basis. Revenue growth was led by 18% growth in clinical development and continued year-on-year and sequential growth in central laboratories, which more than offset a decline in our market access services. Pro forma operating margins increased 70 basis points year-on-year to 20.0%, but declined as expected from the second quarter level on increased spending on strategic IT projects, continued hiring in clinical development, and lower profitability in market access services, all of which offset sequential operating margin expansion in central laboratories.
“In Early Development, pro forma revenue and earnings improved sequentially for the second consecutive quarter. Pro forma net revenues increased $2.4 million sequentially to $217.8 million, and pro forma operating margin increased 370 basis points sequentially to 12.4% as stronger performance in toxicology coupled with a faster than expected ramp in savings from our cost reduction actions more than offset weaker performance in clinical pharmacology.
“On a consolidated basis, we expect pro forma revenue in the fourth quarter to be up slightly from the third quarter level and pro forma EPS to be approximately $0.70, reflecting the impact of increased IT spending on Late-Stage Development tools as well as the corporate data center initiative. When combining our fourth quarter projection with our third quarter results, we are narrowing our full-year pro forma EPS target to the high-end of our previous range, or $2.65 to $2.70 (excluding impairment charges, restructuring and other costs, losses from facilities in wind-down, favorable income tax developments and using September 30 foreign exchange rates).”
Consolidated Results
|
($ in millions except EPS) |
|
3Q12 |
|
3Q11 |
|
Change |
|
YTD12 |
|
YTD11 |
|
Change | ||||
|
Total Revenues |
|
$ |
597.6 |
|
$ |
578.9 |
|
|
|
$ |
1,756.6 |
|
$ |
1,654.1 |
|
|
|
Less: Reimbursable Out-of-Pockets |
|
$ |
52.8 |
|
$ |
35.6 |
|
|
|
$ |
138.2 |
|
$ |
90.6 |
|
|
|
Net Revenues |
|
$ |
544.8 |
|
$ |
543.3 |
|
0.3% |
|
$ |
1,618.4 |
|
$ |
1,563.5 |
|
3.5% |
|
Operating Income |
|
$ |
30.6 |
|
$ |
51.0 |
|
(40.0%) |
|
$ |
72.8 |
|
$ |
141.7 |
|
(48.6%) |
|
Operating Margin |
|
5.6 |
% |
9.4 |
% |
|
|
4.5 |
% |
9.1 |
% |
| ||||
|
Net Income |
|
$ |
37.8 |
|
$ |
40.7 |
|
(7.0%) |
|
$ |
60.8 |
|
$ |
111.0 |
|
(45.2%) |
|
Earnings per Share |
|
$ |
0.69 |
|
$ |
0.67 |
|
2.5% |
|
$ |
1.07 |
|
$ |
1.82 |
|
(41.0%) |
|
Revenue from facilities in wind-down** |
|
$ |
2.9 |
|
— |
|
|
|
$ |
7.3 |
|
— |
|
| ||
|
Net Revenue, continuing ops* |
|
$ |
541.9 |
|
$ |
543.3 |
|
(0.3%) |
|
$ |
1,611.2 |
|
$ |
1,563.5 |
|
3.1% |
|
Restructuring Costs and other charges |
|
$ |
(18.1 |
) |
$ |
(5.3 |
) |
|
|
$ |
(66.5 |
) |
$ |
(15.7 |
) |
|
|
Loss from facilities in wind-down** |
|
$ |
(2.6 |
) |
— |
|
|
|
$ |
(6.4 |
) |
— |
|
| ||
|
Operating Income, excluding items* |
|
$ |
51.3 |
|
$ |
56.3 |
|
(8.9%) |
|
$ |
145.7 |
|
$ |
157.4 |
|
(7.4%) |
|
Operating Margin, excluding items* |
|
9.5 |
% |
10.4 |
% |
|
|
9.0 |
% |
10.1 |
% |
| ||||
|
Impairment of Equity Investment |
|
— |
|
— |
|
|
|
$ |
(7.4 |
) |
— |
|
| |||
|
Gain on Sale of Investment |
|
$ |
1.5 |
|
— |
|
|
|
$ |
1.5 |
|
— |
|
| ||
|
Favorable Income Tax Developments |
|
$ |
11.5 |
|
$ |
0.7 |
|
|
|
$ |
11.5 |
|
$ |
0.7 |
|
|
|
Net Income, excluding items* |
|
$ |
39.6 |
|
$ |
43.4 |
|
(8.7%) |
|
$ |
111.6 |
|
$ |
120.5 |
|
(7.3%) |
|
Diluted EPS, excluding items* |
|
$ |
0.72 |
|
$ |
0.71 |
|
0.7% |
|
$ |
1.97 |
|
$ |
1.97 |
|
(0.2%) |
* See attached pro forma income statement for reconciliation of 2012 & 2011 GAAP to pro forma amounts.
** Facilities in wind-down include Chandler, Honolulu and Basel.
Operating Segment Results
Early Development
|
($ in millions) |
|
3Q12 |
|
3Q11 |
|
Change |
|
YTD12 |
|
YTD11 |
|
Change | ||||
|
Net Revenues |
|
$ |
220.7 |
|
$ |
240.2 |
|
(8.1%) |
|
$ |
652.1 |
|
$ |
696.1 |
|
(6.3%) |
|
Operating Income (Loss) |
|
$ |
7.1 |
|
$ |
33.2 |
|
(78.6%) |
|
$ |
(14.7 |
) |
$ |
87.7 |
|
(116.8%) |
|
Operating Margin |
|
3.2 |
% |
13.8 |
% |
|
|
(2.3 |
)% |
12.6 |
% |
| ||||
|
Revenue from facilities in wind-down** |
|
$ |
2.9 |
|
— |
|
|
|
$ |
7.3 |
|
— |
|
| ||
|
Net Revenue, continuing ops |
|
$ |
217.8 |
|
$ |
240.2 |
|
(9.3%) |
|
$ |
644.8 |
|
$ |
696.1 |
|
(7.4%) |
|
Restructuring Costs and other charges |
|
$ |
(17.2 |
) |
$ |
(1.9 |
) |
|
|
$ |
(65.1 |
) |
$ |
(6.7 |
) |
|
|
Loss from facilities in wind-down** |
|
$ |
(2.6 |
) |
— |
|
|
|
$ |
(6.4 |
) |
— |
|
| ||
|
Operating Income, excluding items |
|
$ |
26.9 |
|
$ |
35.0 |
|
(23.2%) |
|
$ |
56.9 |
|
$ |
94.4 |
|
(39.8%) |
|
Operating Margin, excluding items |
|
12.4 |
% |
14.6 |
% |
|
|
8.8 |
% |
13.6 |
% |
| ||||
** Facilities in wind-down include Chandler, Honolulu and Basel.
The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products. Net revenues in the third quarter of 2012 declined 8.1% year-on-year on a GAAP basis to $220.7 million and 9.3% on a pro forma basis to $217.8 million, due to the following: declines in toxicology services, research products, and clinical pharmacology; the impact of the sale of environmental services (which had contributed approximately $2.0 million in quarterly revenue); and the inclusion of the Chandler, Honolulu and Basel sites in last year’s results. In the quarter, foreign exchange was a 90 basis point year-on-year headwind. Sequentially, pro forma revenues increased $2.4 million as an increase in toxicology revenues more than offset a decline in clinical pharmacology.
GAAP operating income in the third quarter of 2012 was $7.1 million, and included $17.2 million in costs associated with our restructuring actions and $2.6 million in losses at locations in wind-down. GAAP operating income for the third quarter of 2011 was $33.2 million, and included $1.9 million in restructuring costs. Pro forma operating income, excluding these items, was $26.9 million in the third quarter of this year, up from $18.7 million last quarter, and compared to $35.0 million in the third quarter of last year. Pro forma operating margins were 12.4% for the third quarter of this year, up from 8.7% last quarter and compared to 14.6% in the third quarter of 2011. Sequentially, pro forma operating income increased primarily due to a significant increase in North American toxicology profitability.
Late-Stage Development
|
($ in millions) |
|
3Q12 |
|
3Q11 |
|
Change |
|
YTD12 |
|
YTD11 |
|
Change |
| ||||
|
Net Revenues |
|
$ |
324.1 |
|
$ |
303.0 |
|
6.9% |
|
$ |
966.3 |
|
$ |
867.4 |
|
11.4% |
|
|
Operating Income |
|
$ |
64.4 |
|
$ |
56.3 |
|
14.5% |
|
$ |
204.9 |
|
$ |
168.1 |
|
21.9% |
|
|
Operating Margin |
|
19.9 |
% |
18.6 |
% |
|
|
21.2 |
% |
19.4 |
% |
|
| ||||
|
Restructuring Costs |
|
$ |
(0.4 |
) |
$ |
(2.1 |
) |
|
|
$ |
(0.6 |
) |
$ |
(3.7 |
) |
|
|
|
Operating Income, excluding items |
|
$ |
64.8 |
|
$ |
58.4 |
|
11.1% |
|
$ |
205.5 |
|
$ |
171.8 |
|
19.6% |
|
|
Operating Margin, excluding items |
|
20.0 |
% |
19.3 |
% |
|
|
21.3 |
% |
19.8 |
% |
|
| ||||
The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the third quarter of 2012 grew 6.9% year-on-year to $324.1 million. In the quarter, foreign exchange negatively impacted year-on-year revenue growth by 620 basis points. Growth was driven by the continued strong performance in clinical development, which offset a decline in market access revenue. Central laboratory, which grew revenue 2.3% year-on-year on a reported basis and 10.7% on a constant currency basis, had an increase in kit volumes for the fourth consecutive quarter.
Operating income for the third quarter was $64.4 million on a GAAP basis or $64.8 million on a pro forma basis. This compares to $56.3 million on a GAAP basis and $58.4 million on a pro forma basis in the third quarter of the prior year and to $68.2 million on a pro forma basis last quarter. Pro forma operating margins were 20.0% for the third quarter of 2012 compared to pro forma operating margins of 21.1% last quarter and 19.3% in the third quarter of last year. The year-on-year increase in profitability was driven by both clinical development and central laboratories, while the sequential decrease primarily resulted from increased spending on strategic IT projects, lower profitability in market access services, and increased hiring and staff costs in clinical development.
Corporate Information
The company reported third quarter adjusted net orders of $701 million. Backlog at September 30, 2012 was $6.37 billion compared to $6.23 billion at June 30, 2012 and $6.08 billion at September 30, 2011. Foreign exchange favorably impacted backlog sequentially by $69 million.
Corporate expenses totaled $40.9 million in the third quarter of 2012 (including $0.5 million in restructuring costs) compared to $38.9 million last quarter (including $0.3 million in restructuring costs) and $38.4 million in the third quarter of last year (including $1.4 million in restructuring costs). We expect corporate expenses, excluding restructuring costs, to increase in the fourth quarter as spending ramps on the corporate data center
consolidation component of our strategic IT spending. However, in order to support longer-term earnings growth, we expanded our cost reduction actions in the third quarter to include corporate and functional support spending.
Cash and cash equivalents at September 30, 2012 were $441 million compared to $398 million at June 30, 2012 and $400 million at September 30, 2011. Debt outstanding is now $340 million, originating from borrowings related to our share repurchase program. Covance repurchased $20 million of shares outstanding within the third quarter.
Free cash flow (defined as operating cash flow less capital expenditures) for the third quarter of 2012 was $35 million, consisting of operating cash flow of $71 million less capital expenditures of $36 million. Free cash flow year-to-date was $48 million, consisting of operating cash flow of $153 million less capital expenditures of $105 million.
Net Days Sales Outstanding (DSO) were 38 days at September 30, 2012 compared to 35 days at June 30, 2012 and 38 days at September 30, 2011.
The Company’s investor conference call will be webcast on November 6 at 9:00 am ET. Management’s commentary and presentation slides will be available through www.covance.com.
Covance, with headquarters in Princeton, New Jersey, is one of the world’s largest and most comprehensive drug development services companies with annual revenues greater than $2 billion, global operations in more than 30 countries, and 11,500 employees worldwide. Information on Covance’s products and services, recent press releases, and SEC filings can be obtained through its website at www.covance.com.
Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, savings, revenue, operations, revenue and earnings growth and other financial results are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements including the statements contained herein regarding anticipated trends in the Company’s business are based largely on management’s expectations and are subject to and qualified by risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, levels of industry research and development spending, the Company’s ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss or delay of large studies, risks associated with acquisitions and investments, the Company’s ability to increase order volume, the pace of translation of orders into revenue in late-stage development services, testing mix and geographic mix of kit receipts in central laboratories, fluctuations in currency exchange rates, the realization of savings from the Company’s announced restructuring actions, the cost and pace of completion of our information technology projects and the realization of benefits therefrom, and other factors described in the Company’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
Financial Exhibits Follow
COVANCE INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
Three Months Ended September 30 |
|
Nine Months Ended September 30 |
| ||||||||
|
|
|
2012 |
|
2011 |
|
2012 |
|
2011 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
544,818 |
|
$ |
543,254 |
|
$ |
1,618,441 |
|
$ |
1,563,460 |
|
|
Reimbursable out-of-pocket expenses |
|
52,844 |
|
35,622 |
|
138,174 |
|
90,601 |
| ||||
|
Total revenues |
|
597,662 |
|
578,876 |
|
1,756,615 |
|
1,654,061 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
389,724 |
|
383,347 |
|
1,174,382 |
|
1,095,199 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
52,844 |
|
35,622 |
|
138,174 |
|
90,601 |
| ||||
|
Selling, general and administrative |
|
94,401 |
|
81,292 |
|
266,031 |
|
247,292 |
| ||||
|
Depreciation and amortization |
|
30,102 |
|
27,592 |
|
87,285 |
|
79,291 |
| ||||
|
Goodwill impairment charge |
|
— |
|
— |
|
17,959 |
|
— |
| ||||
|
Total costs and expenses |
|
567,071 |
(a) |
527,853 |
(c) |
1,683,831 |
(b) |
1,512,383 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
30,591 |
(a) |
51,023 |
(c) |
72,784 |
(b) |
141,678 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
920 |
|
343 |
|
2,353 |
|
1,640 |
| ||||
|
Foreign exchange transaction loss, net |
|
281 |
|
777 |
|
1,301 |
|
892 |
| ||||
|
Impairment of equity investment |
|
— |
|
— |
|
7,373 |
|
— |
| ||||
|
Gain on sale of investment |
|
(1,459 |
) |
— |
|
(1,459 |
) |
— |
| ||||
|
Loss on sale of business |
|
— |
|
— |
|
169 |
|
— |
| ||||
|
Other (income) expense, net |
|
(258 |
) |
1,120 |
|
9,737 |
|
2,532 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes and equity investee results |
|
30,849 |
(a) |
49,903 |
(c) |
63,047 |
(b) |
139,146 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
(6,971 |
)(a) |
9,781 |
(c) |
2,229 |
(b) |
28,402 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Equity investee earnings |
|
— |
|
547 |
|
17 |
|
305 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
37,820 |
(a) |
$ |
40,669 |
(c) |
$ |
60,835 |
(b) |
$ |
111,049 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
0.70 |
(a) |
$ |
0.68 |
(c) |
$ |
1.10 |
(b) |
$ |
1.86 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
53,687,748 |
|
59,695,336 |
|
55,206,190 |
|
59,596,294 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
0.69 |
(a) |
$ |
0.67 |
(c) |
$ |
1.07 |
(b) |
$ |
1.82 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
55,201,552 |
|
60,926,604 |
|
56,701,280 |
|
61,093,960 |
| ||||
(a) Three months ended September 30, 2012 include, as applicable, $14,072 in restructuring costs ($9,647 net of tax), $4,000 in costs associated with the expected settlement of an inventory supply agreement ($2,756 net of tax), $2,609 in losses at sites in wind-down ($1,821 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501.
(b) Nine months ended September 30, 2012 include, as applicable, $23,739 in restructuring costs ($16,177 net of tax), $24,781 in inventory impairment charges and costs associated with the expected settlement of an inventory supply agreement ($17,147 net of tax), $17,959 of goodwill impairment charges ($17,959 net of tax), $7,373 of impairment of equity investment ($7,373 net of tax), $6,424 in losses at sites in wind-down ($4,567 net of tax), $1,459 gain on sale of investment ($945 net of tax) and favorable income tax items totaling $11,501.
(c) Three months ended September 30, 2011 include, as applicable, $5,270 in restructuring costs ($3,392 net of tax) and favorable income tax items totaling $700.
(d) Nine months ended September 30, 2011 include, as applicable, $15,702 in restructuring costs ($10,106 net of tax) and favorable income tax items totaling $700.
Excluding the impact of restructuring charges, impairment charges, costs associated with the expected settlement of an inventory supply agreement, losses at sites in wind-down, gain on sale of investment and favorable tax items:
|
Income from operations |
|
$ |
51,272 |
|
$ |
56,293 |
|
$ |
145,687 |
|
$ |
157,380 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
$ |
10,473 |
|
$ |
12,359 |
|
$ |
30,269 |
|
$ |
34,698 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
39,598 |
|
$ |
43,361 |
|
$ |
111,612 |
|
$ |
120,455 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
0.74 |
|
$ |
0.73 |
|
$ |
2.02 |
|
$ |
2.02 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
0.72 |
|
$ |
0.71 |
|
$ |
1.97 |
|
$ |
1.97 |
|
COVANCE INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2012 and DECEMBER 31, 2011
(Dollars in thousands)
|
|
|
September 30 |
|
December 31 |
| ||
|
|
|
2012 |
|
2011 |
| ||
|
|
|
(UNAUDITED) |
|
|
| ||
|
ASSETS |
|
|
|
|
| ||
|
Current Assets: |
|
|
|
|
| ||
|
Cash & cash equivalents |
|
$ |
441,372 |
|
$ |
389,103 |
|
|
Accounts receivable, net |
|
321,421 |
|
312,127 |
| ||
|
Unbilled services |
|
141,020 |
|
114,095 |
| ||
|
Inventory |
|
48,199 |
|
74,698 |
| ||
|
Deferred income taxes |
|
54,635 |
|
52,078 |
| ||
|
Prepaid expenses and other current assets |
|
173,917 |
|
144,809 |
| ||
|
Total Current Assets |
|
1,180,564 |
|
1,086,910 |
| ||
|
|
|
|
|
|
| ||
|
Property and equipment, net |
|
872,261 |
|
849,551 |
| ||
|
Goodwill |
|
109,820 |
|
127,779 |
| ||
|
Other assets |
|
48,637 |
|
43,768 |
| ||
|
|
|
|
|
|
| ||
|
Total Assets |
|
$ |
2,211,282 |
|
$ |
2,108,008 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES and STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Current Liabilities: |
|
|
|
|
| ||
|
Accounts payable |
|
$ |
38,958 |
|
$ |
36,393 |
|
|
Accrued payroll and benefits |
|
118,928 |
|
142,229 |
| ||
|
Accrued expenses and other current liabilities |
|
141,344 |
|
119,308 |
| ||
|
Unearned revenue |
|
234,152 |
|
202,210 |
| ||
|
Short-term debt |
|
340,000 |
|
30,000 |
| ||
|
Income taxes payable |
|
6,875 |
|
6,889 |
| ||
|
Total Current Liabilities |
|
880,257 |
|
537,029 |
| ||
|
|
|
|
|
|
| ||
|
Deferred income taxes |
|
21,299 |
|
42,295 |
| ||
|
Other liabilities |
|
67,016 |
|
70,889 |
| ||
|
Total Liabilities |
|
968,572 |
|
650,213 |
| ||
|
|
|
|
|
|
| ||
|
Stockholders’ Equity: |
|
|
|
|
| ||
|
Common stock |
|
788 |
|
781 |
| ||
|
Paid-in capital |
|
725,727 |
|
689,584 |
| ||
|
Retained earnings |
|
1,566,729 |
|
1,505,894 |
| ||
|
Accumulated other comprehensive income |
|
15,004 |
|
4,622 |
| ||
|
Treasury stock |
|
(1,065,538 |
) |
(743,086 |
) | ||
|
Total Stockholders’ Equity |
|
1,242,710 |
|
1,457,795 |
| ||
|
|
|
|
|
|
| ||
|
Total Liabilities and Stockholders’ Equity |
|
$ |
2,211,282 |
|
$ |
2,108,008 |
|
COVANCE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Dollars in thousands)
(UNAUDITED)
|
|
|
Nine Months Ended September 30 |
| ||||
|
|
|
2012 |
|
2011 |
| ||
|
Cash flows from operating activities: |
|
|
|
|
| ||
|
Net income |
|
$ |
60,835 |
|
$ |
111,049 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
87,285 |
|
79,291 |
| ||
|
Non-cash impairment charges |
|
44,610 |
|
— |
| ||
|
Non-cash compensation expense associated with employee benefit and stock compensation plans |
|
29,774 |
|
29,305 |
| ||
|
Deferred income tax benefit |
|
(23,648 |
) |
(9,680 |
) | ||
|
Gain on sale of investment |
|
(1,459 |
) |
— |
| ||
|
Loss on sale of business |
|
169 |
|
— |
| ||
|
Loss on disposal of property and equipment |
|
674 |
|
431 |
| ||
|
Equity investee earnings |
|
(17 |
) |
(305 |
) | ||
|
Changes in operating assets and liabilities, net of businesses sold and acquired: |
|
|
|
|
| ||
|
Accounts receivable |
|
(10,404 |
) |
(23,396 |
) | ||
|
Unbilled services |
|
(27,561 |
) |
(31,601 |
) | ||
|
Inventory |
|
9,115 |
|
839 |
| ||
|
Accounts payable |
|
2,565 |
|
6,184 |
| ||
|
Accrued liabilities |
|
(1,396 |
) |
31,505 |
| ||
|
Unearned revenue |
|
33,374 |
|
(4,688 |
) | ||
|
Income taxes payable |
|
568 |
|
(13,988 |
) | ||
|
Other assets and liabilities, net |
|
(51,581 |
) |
(33,992 |
) | ||
|
Net cash provided by operating activities |
|
152,903 |
|
140,954 |
| ||
|
|
|
|
|
|
| ||
|
Cash flows from investing activities: |
|
|
|
|
| ||
|
Capital expenditures |
|
(105,199 |
) |
(86,289 |
) | ||
|
Proceeds from sale of investment |
|
4,682 |
|
— |
| ||
|
Other, net |
|
1,006 |
|
(210 |
) | ||
|
Net cash used in investing activities |
|
(99,511 |
) |
(86,499 |
) | ||
|
|
|
|
|
|
| ||
|
Cash flows from financing activities: |
|
|
|
|
| ||
|
Net borrowings under revolving credit facility |
|
310,000 |
|
55,000 |
| ||
|
Repayments under long-term debt |
|
— |
|
(97,500 |
) | ||
|
Stock issued under employee stock purchase and option plans |
|
5,794 |
|
8,465 |
| ||
|
Purchase of treasury stock |
|
(322,452 |
) |
(7,731 |
) | ||
|
Net cash used in financing activities |
|
(6,658 |
) |
(41,766 |
) | ||
|
|
|
|
|
|
| ||
|
Effect of exchange rate changes on cash |
|
5,535 |
|
9,783 |
| ||
|
|
|
|
|
|
| ||
|
Net change in cash and cash equivalents |
|
52,269 |
|
22,472 |
| ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents, beginning of period |
|
389,103 |
|
377,223 |
| ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents, end of period |
|
$ |
441,372 |
|
$ |
399,695 |
|
COVANCE INC.
GAAP to Pro Forma Reconciliation
Q3 2012
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||||||||
|
|
|
GAAP |
|
Restructuring |
|
Other |
|
Operating |
|
Income Tax |
|
Pro Forma |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net revenues |
|
$ |
544,818 |
|
|
|
|
|
$ |
(2,967 |
) |
|
|
$ |
541,851 |
| |||
|
Reimbursable out-of-pocket expenses |
|
52,844 |
|
|
|
|
|
|
|
|
|
52,844 |
| ||||||
|
Total revenues |
|
597,662 |
|
— |
|
— |
|
(2,967 |
) |
— |
|
594,695 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Cost of revenue |
|
389,724 |
|
|
|
(4,000 |
) |
(4,544 |
) |
|
|
381,180 |
| ||||||
|
Reimbursable out-of-pocket expenses |
|
52,844 |
|
|
|
|
|
|
|
|
|
52,844 |
| ||||||
|
Selling, general and administrative |
|
94,401 |
|
(12,989 |
) |
|
|
(162 |
) |
|
|
81,250 |
| ||||||
|
Depreciation and amortization |
|
30,102 |
|
(1,083 |
) |
|
|
(870 |
) |
|
|
28,149 |
| ||||||
|
Goodwill impairment charge |
|
— |
|
|
|
— |
|
|
|
|
|
— |
| ||||||
|
Total costs and expenses |
|
567,071 |
|
(14,072 |
) |
(4,000 |
) |
(5,576 |
) |
— |
|
543,423 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Income from operations |
|
30,591 |
|
14,072 |
|
4,000 |
|
2,609 |
|
— |
|
51,272 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Interest expense, net |
|
920 |
|
|
|
|
|
|
|
|
|
920 |
| ||||||
|
Foreign exchange transaction loss, net |
|
281 |
|
|
|
|
|
|
|
|
|
281 |
| ||||||
|
Impairment of equity investment |
|
— |
|
|
|
|
|
|
|
|
|
— |
| ||||||
|
Gain on sale of investment |
|
(1,459 |
) |
|
|
1,459 |
|
|
|
|
|
— |
| ||||||
|
Loss on sale of business |
|
— |
|
|
|
|
|
|
|
|
|
— |
| ||||||
|
Other (income) expense, net |
|
(258 |
) |
— |
|
1,459 |
|
— |
|
— |
|
1,201 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Income before taxes and equity investee earnings |
|
30,849 |
|
14,072 |
|
2,541 |
|
2,609 |
|
— |
|
50,071 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Taxes on income |
|
(6,971 |
) |
4,425 |
|
730 |
|
788 |
|
11,501 |
|
10,473 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Equity investee earnings |
|
— |
|
|
|
|
|
|
|
|
|
— |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net income |
|
$ |
37,820 |
|
$ |
9,647 |
|
$ |
1,811 |
|
$ |
1,821 |
|
$ |
(11,501 |
) |
$ |
39,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Basic earnings per share |
|
$ |
0.70 |
|
$ |
0.18 |
|
$ |
0.03 |
|
$ |
0.03 |
|
$ |
(0.21 |
) |
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Weighted average shares outstanding - basic |
|
53,687,748 |
|
53,687,748 |
|
53,687,748 |
|
53,687,748 |
|
53,687,748 |
|
53,687,748 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Diluted earnings per share |
|
$ |
0.69 |
|
$ |
0.17 |
|
$ |
0.03 |
|
$ |
0.03 |
|
$ |
(0.21 |
) |
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Weighted average shares outstanding - diluted |
|
55,201,552 |
|
55,201,552 |
|
55,201,552 |
|
55,201,552 |
|
55,201,552 |
|
55,201,552 |
| ||||||
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure.
(2) Consists of costs associated with the expected settlement of an inventory supply agreement ($4,000) and a gain on the sale of an investment $1,459.
(3) Represents results of operations at sites where wind-down activities have commenced.
(4) Primarily represents favorable resolutions of income tax matters.
COVANCE INC.
GAAP to Pro Forma Reconciliation
Q3 2011
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||
|
|
|
GAAP |
|
Restructuring |
|
Income Tax |
|
Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
543,254 |
|
|
|
|
|
$ |
543,254 |
| ||
|
Reimbursable out-of-pocket expenses |
|
35,622 |
|
|
|
|
|
35,622 |
| ||||
|
Total revenues |
|
578,876 |
|
— |
|
— |
|
578,876 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
383,347 |
|
|
|
|
|
383,347 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
35,622 |
|
|
|
|
|
35,622 |
| ||||
|
Selling, general and administrative |
|
81,292 |
|
(4,216 |
) |
|
|
77,076 |
| ||||
|
Depreciation and amortization |
|
27,592 |
|
(1,054 |
) |
|
|
26,538 |
| ||||
|
Total costs and expenses |
|
527,853 |
|
(5,270 |
) |
— |
|
522,583 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
51,023 |
|
5,270 |
|
|
|
56,293 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
343 |
|
|
|
|
|
343 |
| ||||
|
Foreign exchange transaction loss, net |
|
777 |
|
|
|
|
|
777 |
| ||||
|
Other expense, net |
|
1,120 |
|
— |
|
— |
|
1,120 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes and equity investee earnings |
|
49,903 |
|
5,270 |
|
|
|
55,173 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
9,781 |
|
1,878 |
|
700 |
|
12,359 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Equity investee earnings |
|
547 |
|
|
|
|
|
547 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
40,669 |
|
$ |
3,392 |
|
$ |
(700 |
) |
$ |
43,361 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
0.68 |
|
$ |
0.06 |
|
$ |
(0.01 |
) |
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
59,695,336 |
|
59,695,336 |
|
59,695,336 |
|
59,695,336 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
0.67 |
|
$ |
0.06 |
|
$ |
(0.01 |
) |
$ |
0.71 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
60,926,604 |
|
60,926,604 |
|
60,926,604 |
|
60,926,604 |
| ||||
(1) Represents costs incurred in connection with capacity rationalization, streamlining operations and other cost reduction actions.
(2) Represents favorable resolutions of income tax matters.
COVANCE INC.
GAAP to Pro Forma Reconciliation
YTD Q3 2012
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||||||||
|
|
|
GAAP |
|
Restructuring |
|
Other |
|
Operating |
|
Income Tax |
|
Pro Forma |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net revenues |
|
$ |
1,618,441 |
|
|
|
|
|
$ |
(7,256 |
) |
|
|
$ |
1,611,185 |
| |||
|
Reimbursable out-of-pocket expenses |
|
138,174 |
|
|
|
|
|
|
|
|
|
138,174 |
| ||||||
|
Total revenues |
|
1,756,615 |
|
— |
|
— |
|
(7,256 |
) |
— |
|
1,749,359 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Cost of revenue |
|
1,174,382 |
|
|
|
(24,781 |
) |
(11,483 |
) |
|
|
1,138,118 |
| ||||||
|
Reimbursable out-of-pocket expenses |
|
138,174 |
|
|
|
|
|
|
|
|
|
138,174 |
| ||||||
|
Selling, general and administrative |
|
266,031 |
|
(21,446 |
) |
|
|
(384 |
) |
|
|
244,201 |
| ||||||
|
Depreciation and amortization |
|
87,285 |
|
(2,293 |
) |
|
|
(1,813 |
) |
|
|
83,179 |
| ||||||
|
Goodwill impairment charge |
|
17,959 |
|
|
|
(17,959 |
) |
|
|
|
|
— |
| ||||||
|
Total costs and expenses |
|
1,683,831 |
|
(23,739 |
) |
(42,740 |
) |
(13,680 |
) |
— |
|
1,603,672 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Income from operations |
|
72,784 |
|
23,739 |
|
42,740 |
|
6,424 |
|
— |
|
145,687 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Interest expense, net |
|
2,353 |
|
|
|
|
|
|
|
|
|
2,353 |
| ||||||
|
Foreign exchange transaction loss, net |
|
1,301 |
|
|
|
|
|
|
|
|
|
1,301 |
| ||||||
|
Impairment of equity investment |
|
7,373 |
|
|
|
(7,373 |
) |
|
|
|
|
— |
| ||||||
|
Gain on sale of investment |
|
(1,459 |
) |
|
|
1,459 |
|
|
|
|
|
— |
| ||||||
|
Loss on sale of business |
|
169 |
|
|
|
|
|
|
|
|
|
169 |
| ||||||
|
Other (income) expense, net |
|
9,737 |
|
— |
|
(5,914 |
) |
— |
|
— |
|
3,823 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Income before taxes and equity investee earnings |
|
63,047 |
|
23,739 |
|
48,654 |
|
6,424 |
|
— |
|
141,864 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Taxes on income |
|
2,229 |
|
7,562 |
|
7,120 |
|
1,857 |
|
11,501 |
|
30,269 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Equity investee earnings |
|
17 |
|
|
|
|
|
|
|
|
|
17 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Net income |
|
$ |
60,835 |
|
$ |
16,177 |
|
$ |
41,534 |
|
$ |
4,567 |
|
$ |
(11,501 |
) |
$ |
111,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Basic earnings per share |
|
$ |
1.10 |
|
$ |
0.29 |
|
$ |
0.75 |
|
$ |
0.08 |
|
$ |
(0.21 |
) |
$ |
2.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Weighted average shares outstanding - basic |
|
55,206,190 |
|
55,206,190 |
|
55,206,190 |
|
55,206,190 |
|
55,206,190 |
|
55,206,190 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Diluted earnings per share |
|
$ |
1.07 |
|
$ |
0.29 |
|
$ |
0.73 |
|
$ |
0.08 |
|
$ |
(0.20 |
) |
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Weighted average shares outstanding - diluted |
|
56,701,280 |
|
56,701,280 |
|
56,701,280 |
|
56,701,280 |
|
56,701,280 |
|
56,701,280 |
| ||||||
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce cost structure.
(2) Consists of inventory impairment and costs associated with the expected settlement of an inventory supply agreement ($24,781), goodwill impairment ($17,959), impairment of equity investment ($7,373) and a gain on the sale of an investment $1,459.
(3) Represents results of operations at sites where wind-down activities have commenced.
(4) Primarily represents favorable resolutions of income tax matters.
COVANCE INC.
GAAP to Pro Forma Reconciliation
YTD Q3 2011
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||
|
|
|
GAAP |
|
Restructuring |
|
Income Tax |
|
Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
1,563,460 |
|
|
|
|
|
$ |
1,563,460 |
| ||
|
Reimbursable out-of-pocket expenses |
|
90,601 |
|
|
|
|
|
90,601 |
| ||||
|
Total revenues |
|
1,654,061 |
|
— |
|
— |
|
1,654,061 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
1,095,199 |
|
|
|
|
|
1,095,199 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
90,601 |
|
|
|
|
|
90,601 |
| ||||
|
Selling, general and administrative |
|
247,292 |
|
(13,838 |
) |
|
|
233,454 |
| ||||
|
Depreciation and amortization |
|
79,291 |
|
(1,864 |
) |
|
|
77,427 |
| ||||
|
Total costs and expenses |
|
1,512,383 |
|
(15,702 |
) |
— |
|
1,496,681 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
141,678 |
|
15,702 |
|
|
|
157,380 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
1,640 |
|
|
|
|
|
1,640 |
| ||||
|
Foreign exchange transaction loss, net |
|
892 |
|
|
|
|
|
892 |
| ||||
|
Other expense, net |
|
2,532 |
|
— |
|
— |
|
2,532 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes and equity investee earnings |
|
139,146 |
|
15,702 |
|
|
|
154,848 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
28,402 |
|
5,596 |
|
700 |
|
34,698 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Equity investee earnings |
|
305 |
|
|
|
|
|
305 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
111,049 |
|
$ |
10,106 |
|
$ |
(700 |
) |
$ |
120,455 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
1.86 |
|
$ |
0.17 |
|
$ |
(0.01 |
) |
$ |
2.02 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
59,596,294 |
|
59,596,294 |
|
59,596,294 |
|
59,596,294 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
1.82 |
|
$ |
0.17 |
|
$ |
(0.01 |
) |
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
61,093,960 |
|
61,093,960 |
|
61,093,960 |
|
61,093,960 |
| ||||
(1) Represents costs incurred in connection with capacity rationalization, streamlining operations and other cost reduction actions.
(2) Represents favorable resolutions of income tax matters.