Attached files
| file | filename |
|---|---|
| 8-K - 8-K - COVANCE INC | a14-23447_18k.htm |
Exhibit 99.1
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PRESS RELEASE | |
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Contact: |
Paul Surdez www.covance.com |
COVANCE REPORTS THIRD QUARTER NET REVENUE GROWTH OF 3.4% TO
$627 MILLION, PRO FORMA EPS GROWTH OF 18.2% to $0.98 AND ADJUSTED NET ORDERS OF $752 MILLION
— FY2014 Pro Forma EPS updated to the range of $3.78 to $3.81 reflecting
significant strengthening of the US Dollar—
Princeton, New Jersey, November 3, 2014 — Covance Inc. (NYSE: CVD) today reported results for its third quarter ended September 30, 2014. Net revenue was $627 million, representing 3.4% growth from the third quarter of 2013. On a GAAP basis, the company reported earnings of $1.16 per diluted share in the third quarter. The company reported pro forma earnings per diluted share of $0.98, up 18.2% over the third quarter of 2013. Pro forma results exclude a gain on sale of the antibody products service line totaling $13.4 million, or $0.21 per share net of tax, and charges associated with restructuring and other cost reduction actions totaling $3.2 million or $0.03 per share. In a separate announcement, Covance also announced today that it has entered into a definitive agreement with Laboratory Corporation of America® Holdings (NYSE: LH), under which LabCorp will acquire Covance. As a result, Covance will not be holding its previously scheduled earnings conference call.
“In the third quarter, our Early Development segment revenue growth was in-line with our expectations. This was partially offset by lower-than-expected growth in our Late-Stage Development segment and the strengthening of the US dollar late in the quarter, resulting in consolidated revenue growth of 3.4%. Operating income and margins in the quarter reflect further leverage in Early Development, continued strong margins in Late-State Development, and lower corporate expense, leading to pro forma operating margins of 12.7% and pro forma EPS growth of 18.2% to $0.98,” said Joe Herring, Chairman and Chief Executive Officer. “Commercial performance in the quarter was solid, with third quarter adjusted net orders of $752 million resulting in an adjusted net book-to-bill of 1.20 to 1.
“In Early Development, revenue of $234.8 million grew 6.6% year-on-year and pro forma operating margin increased 120 basis points year-on-year and 100 basis points sequentially to 14.3%. These results were driven by continued strength in clinical pharmacology services and growth in demand for toxicology.
“Late-Stage Development third quarter revenue grew 1.5% year-on-year to $392.3 million and pro forma operating margins were 22.3%, versus 22.6% in the third quarter of 2013. Central laboratories revenue grew approximately 3% year-on-year versus an exceptional third quarter of 2013 and was offset by an unexpected decline in clinical development revenue due to the combined impact of cancellations and continued slow backlog conversion.
“The significant strengthening of the US Dollar since June 30, 2014 is expected to dampen fourth quarter revenue by approximately $20 million and diluted earnings per share by approximately $0.05 versus our prior expectation. Using September 30 exchange rates, we expect fourth quarter revenue to be in the range of $625 million to $635 million and diluted earnings per share to be in the range of $0.95 to $0.98, which would bring full-year earnings per share to $3.78 to $3.81 (excluding gains on sale, costs associated with our restructuring activities, and asset impairment charges).”
Consolidated Results
|
($ in millions except EPS) |
|
3Q14 |
|
3Q13 |
|
Change |
|
YTD14 |
|
YTD13 |
|
Change |
| ||||
|
Total Revenues |
|
$ |
671.0 |
|
$ |
647.0 |
|
|
|
$ |
2,024.4 |
|
$ |
1,925.3 |
|
|
|
|
Less: Reimbursable Out-of-Pockets |
|
$ |
43.9 |
|
$ |
40.3 |
|
|
|
$ |
137.8 |
|
$ |
146.1 |
|
|
|
|
Net Revenues |
|
$ |
627.1 |
|
$ |
606.7 |
|
3.4% |
|
$ |
1,886.6 |
|
$ |
1,779.2 |
|
6.0% |
|
|
Operating Income |
|
$ |
76.5 |
|
$ |
62.6 |
|
22.2% |
|
$ |
162.7 |
|
$ |
162.4 |
|
0.2% |
|
|
Operating Margin |
|
12.2 |
% |
10.3 |
% |
|
|
8.6 |
% |
9.1 |
% |
|
| ||||
|
Net Income |
|
$ |
66.0 |
|
$ |
44.2 |
|
49.3% |
|
$ |
133.8 |
|
$ |
133.4 |
|
0.3% |
|
|
Diluted Earnings per Share |
|
$ |
1.16 |
|
$ |
0.78 |
|
48.8% |
|
$ |
2.32 |
|
$ |
2.35 |
|
(1.1)% |
|
|
Restructuring Costs |
|
$ |
(3.2 |
) |
$ |
(4.9 |
) |
|
|
$ |
(11.5 |
) |
$ |
(17.1 |
) |
|
|
|
Asset Impairments |
|
— |
|
— |
|
|
|
$ |
(52.6 |
) |
— |
|
|
| |||
|
Operating Income, excluding items* |
|
$ |
79.7 |
|
$ |
67.5 |
|
18.1% |
|
$ |
226.8 |
|
$ |
179.5 |
|
26.4% |
|
|
Operating Margin, excluding items* |
|
12.7 |
% |
11.1 |
% |
|
|
12.0 |
% |
10.1 |
% |
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| ||||
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Gain on Sale of Business/Investment |
|
$ |
13.4 |
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— |
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|
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$ |
15.1 |
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$ |
16.4 |
|
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| |
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Net Income, excluding items* |
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$ |
56.1 |
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$ |
47.3 |
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18.6% |
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$ |
163.1 |
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$ |
134.1 |
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21.7% |
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Diluted EPS, excluding items* |
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$ |
0.98 |
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$ |
0.83 |
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18.2% |
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$ |
2.83 |
|
$ |
2.36 |
|
20.0% |
|
* See attached pro forma income statements for reconciliation of 2014 and 2013 GAAP to pro forma amounts.
Operating Segment Results
Early Development
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($ in millions) |
|
3Q14 |
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3Q13 |
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Change |
|
YTD14 |
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YTD13 |
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Change |
| ||||
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Net Revenues |
|
$ |
234.8 |
|
$ |
220.4 |
|
6.6% |
|
$ |
684.2 |
|
$ |
642.2 |
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6.5% |
|
|
Operating Income |
|
$ |
31.5 |
|
$ |
27.2 |
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15.8% |
|
$ |
28.5 |
|
$ |
65.6 |
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(56.5)%* |
|
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Operating Margin |
|
13.4 |
% |
12.3 |
% |
|
|
4.2 |
% |
10.2 |
% |
|
| ||||
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Restructuring Costs |
|
$ |
(2.1 |
) |
$ |
(1.6 |
) |
|
|
$ |
(4.3 |
) |
$ |
(7.5 |
) |
|
|
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Asset Impairments |
|
— |
|
|
|
|
|
$ |
(52.6 |
) |
|
|
|
| |||
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Operating Income, excluding items |
|
$ |
33.5 |
|
$ |
28.8 |
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16.4% |
|
$ |
85.4 |
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$ |
73.1 |
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16.8% |
|
|
Operating Margin, excluding items |
|
14.3 |
% |
13.1 |
% |
|
|
12.5 |
% |
11.4 |
% |
|
| ||||
* Reflects impact of asset impairment charge in 2014 and restructuring charges in both year-to-date periods.
The Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology, discovery support, and research products. Net revenues in the third quarter of 2014 increased 6.6% year-on-year to $234.8 million, as strong growth in clinical pharmacology and toxicology services more than offset a decline in research products and the impact of the sales of our Seattle genomics laboratory and antibody products service line. In the quarter, foreign exchange favorably impacted year-on-year revenue growth by 190 basis points. Sequentially, revenue increased by $3.6 million from the second quarter, on growth in clinical pharmacology and toxicology and improvement in discovery support services.
GAAP operating income in the third quarter of 2014 was $31.5 million, and included $2.1 million in charges associated with our restructuring and cost reduction actions. This compares to operating income of $27.2 million in the third quarter of 2013, which included charges associated with restructuring and other cost reduction actions of $1.6 million. Pro forma operating income, excluding these items, was $33.5 million in the third quarter of this year, a 16.4% increase from the third quarter of 2013. Pro forma operating margins were 14.3% in the third
quarter of this year, up 100 basis points sequentially and 120 basis points year-on-year (inclusive of 100 basis point headwind from the two quarter UK R&D credit recognized in the third quarter of last year). The sequential increase in pro forma operating income was driven by improving toxicology profitability and continued strength in clinical pharmacology.
Late-Stage Development
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($ in millions) |
|
3Q14 |
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3Q13 |
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Change |
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YTD14 |
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YTD13 |
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Change |
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|
Net Revenues |
|
$ |
392.3 |
|
$ |
386.4 |
|
1.5% |
|
$ |
1,202.4 |
|
$ |
1,137.0 |
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5.7% |
| |
|
Operating Income |
|
$ |
86.4 |
|
$ |
86.8 |
|
(0.5)% |
|
$ |
266.5 |
|
$ |
249.3 |
|
6.9% |
| |
|
Operating Margin |
|
22.0 |
% |
22.5 |
% |
|
|
22.2 |
% |
21.9 |
% |
|
| |||||
|
Restructuring Costs |
|
$ |
(1.1 |
) |
$ |
(0.5 |
) |
|
|
$ |
(4.5 |
) |
$ |
(3.8 |
) |
|
| |
|
Operating Income, excluding items |
|
$ |
87.5 |
|
$ |
87.4 |
|
0.1% |
|
$ |
271.0 |
|
$ |
253.1 |
|
7.1% |
| |
|
Operating Margin, excluding items |
|
22.3 |
% |
22.6 |
% |
|
|
22.5 |
% |
22.3 |
% |
|
| |||||
The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the third quarter of 2014 grew 1.5% year-on-year to $392.3 million. In the quarter, foreign exchange favorably impacted year-over-year revenue growth by 110 basis points. Year-over-year growth reflects a comparison to an exceptionally strong third quarter of 2013 in central labs (where revenue was up over 25% year-over-year) and to slower backlog conversion in clinical development. Sequentially, revenue declined due to slower-than-expected revenue conversion and the impact of cancellations in clinical development, summer seasonality in central lab and clinical development, and the strengthening US dollar, which negatively impacted sequential revenue growth by 100 basis points.
Operating income for the third quarter was $86.4 million on a GAAP basis and included $1.1 million in costs associated with our restructuring and cost reduction actions. On a pro forma basis, operating income was $87.5 million, roughly flat with last year’s result, and down from the $90.2 million delivered last quarter. Pro forma operating margins were 22.3% for the third quarter of 2014, up 20 basis points sequentially and down 30 basis points year-over-year (inclusive of 45 basis point headwind from the two quarter UK R&D credit recognized in the third quarter of last year).
Corporate Information
The company reported third quarter adjusted net orders of $752 million. Backlog at September 30, 2014 was $6.82 billion compared to $6.92 billion at June 30, 2014 and $6.83 billion at September 30, 2013. Backlog was negatively impacted in the quarter by a $134 million foreign exchange headwind.
Corporate expenses totaled $41.4 million in the third quarter of 2014 (including $0.1 million in restructuring and other cost reduction actions) versus $45.4 million last quarter (including $0.4 million in restructuring and other cost reduction actions) and $51.4 million (including $2.8 million in restructuring and other cost reduction actions) in the third quarter of 2013. On a pro forma basis, excluding these costs, corporate spending was $41.3 million or 6.6% of net revenue in the third quarter of 2014 versus $45.0 million or 7.0% of net revenue last quarter and $48.6 million or 8.0% of net revenue in the third quarter of 2013. The lower level of corporate expense in the quarter reflects the continued impact of our cost reduction actions, lower IT operating expense due to project timing, and lower incentive compensation expense.
Cash and cash equivalents at September 30, 2014 were $705 million compared to cash, cash equivalents and short-term investments of $648 million at June 30, 2014 and $593 million at September 30, 2013. Free cash flow (defined as operating cash flow less capital expenditures) for the third quarter of 2014 was $103 million,
consisting of operating cash flow of $135 million less capital expenditures of $32 million. Year-to-date free cash flow was $27 million, consisting of operating cash flow of $133 million less capital expenditures of $105 million. We expect full year free cash flow of approximately $130 million, net of capital expenditures of approximately $155 million. The free cash flow target for 2014 assumes net DSO at 40 days at December 31, 2014. Debt outstanding decreased to $250 million, down $40 million from June 30, 2014.
Net Days Sales Outstanding (DSO) were 39 days at September 30, 2014 compared to 45 days at June 30, 2014 and 35 days at September 30, 2013.
Due to a change in mix of revenue received from outside of the United States, the pro forma effective tax rate in the third quarter was higher than expected at 25.7%. We expect the pro forma effective tax rate to be approximately 24.5% in the fourth quarter of 2014.
Covance, the world’s most comprehensive drug development company and a leader in nutritional analysis, is dedicated to advancing healthcare and delivering Solutions Made RealTM. The company, headquartered in Princeton, New Jersey, has annual revenues greater than $2.5 billion and more than 12,500 employees located in over 60 countries. Information on Covance’s solutions, 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, 2014 AND 2013
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
Three Months Ended September 30 |
|
Nine Months Ended September 30 |
| ||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
627,075 |
|
$ |
606,722 |
|
$ |
1,886,583 |
|
$ |
1,779,219 |
|
|
Reimbursable out-of-pocket expenses |
|
43,922 |
|
40,328 |
|
137,810 |
|
146,142 |
| ||||
|
Total revenues |
|
670,997 |
|
647,050 |
|
2,024,393 |
|
1,925,361 |
| ||||
|
|
|
|
|
|
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|
|
|
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Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
431,006 |
|
424,857 |
|
1,310,218 |
|
1,255,316 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
43,922 |
|
40,328 |
|
137,810 |
|
146,142 |
| ||||
|
Selling, general and administrative |
|
84,373 |
|
87,052 |
|
258,979 |
|
266,448 |
| ||||
|
Depreciation and amortization |
|
35,177 |
|
32,191 |
|
102,151 |
|
95,072 |
| ||||
|
Impairment charges |
|
— |
|
— |
|
52,564 |
|
— |
| ||||
|
Total costs and expenses |
|
594,478 |
(a) |
584,428 |
(c) |
1,861,722 |
(b) |
1,762,978 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
76,519 |
(a) |
62,622 |
(c) |
162,671 |
(b) |
162,383 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
2,622 |
|
759 |
|
7,879 |
|
2,634 |
| ||||
|
Foreign exchange transaction loss, net |
|
1,608 |
|
882 |
|
3,552 |
|
1,911 |
| ||||
|
Gain on sale of businesses |
|
(13,448 |
) |
— |
|
(15,096 |
) |
— |
| ||||
|
Gain on sale of investments |
|
— |
|
— |
|
— |
|
(16,400 |
) | ||||
|
Other (income) expense, net |
|
(9,218 |
)(a) |
1,641 |
(c) |
(3,665 |
)(b) |
(11,855 |
)(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes |
|
85,737 |
(a) |
60,981 |
(c) |
166,336 |
(b) |
174,238 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
19,738 |
(a) |
16,780 |
(c) |
32,584 |
(b) |
40,877 |
(d) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
65,999 |
(a) |
$ |
44,201 |
(c) |
$ |
133,752 |
(b) |
$ |
133,361 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
1.20 |
(a) |
$ |
0.81 |
(c) |
$ |
2.41 |
(b) |
$ |
2.45 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
55,219,766 |
|
54,703,763 |
|
55,485,756 |
|
54,524,296 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
1.16 |
(a) |
$ |
0.78 |
(c) |
$ |
2.32 |
(b) |
$ |
2.35 |
(d) |
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
57,119,595 |
|
56,939,181 |
|
57,553,096 |
|
56,754,527 |
| ||||
(a) Three months ended September 30, 2014 includes, as applicable, $3,203 in charges associated with restructuring and other cost reduction actions ($1,963 net of tax) and $13,448 gain on sale of Antibody Products service line ($11,904 net of tax).
(b) Nine months ended September 30, 2014 includes, as applicable, $52,564 in asset impairment charges ($34,866 net of tax), $11,539 in charges associated with restructuring and other cost reduction actions ($7,414 net of tax) and $15,096 gain on sale of Antibody Products service line and certain assets of Genomics Laboratory ($12,937 net of tax).
(c) 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).
(d) 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).
Excluding the impact of impairment charges, charges associated with restructuring and other cost reduction actions, gain on sale of businesses and gain on sale of investments, as applicable:
|
Income from operations |
|
$ |
79,722 |
|
$ |
67,515 |
|
$ |
226,774 |
|
$ |
179,459 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
$ |
19,434 |
|
$ |
18,610 |
|
$ |
52,248 |
|
$ |
40,855 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
56,058 |
|
$ |
47,264 |
|
$ |
163,095 |
|
$ |
134,059 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
1.02 |
|
$ |
0.86 |
|
$ |
2.94 |
|
$ |
2.46 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
0.98 |
|
$ |
0.83 |
|
$ |
2.83 |
|
$ |
2.36 |
|
COVANCE INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2014 and DECEMBER 31, 2013
(Dollars in thousands)
|
|
|
September 30 |
|
December 31 |
| ||
|
|
|
2014 |
|
2013 |
| ||
|
|
|
(UNAUDITED) |
|
|
| ||
|
ASSETS |
|
|
|
|
| ||
|
Current Assets: |
|
|
|
|
| ||
|
Cash & cash equivalents |
|
$ |
704,822 |
|
$ |
617,686 |
|
|
Short-term investments |
|
— |
|
111,359 |
| ||
|
Accounts receivable |
|
330,751 |
|
331,815 |
| ||
|
Unbilled services |
|
159,191 |
|
141,707 |
| ||
|
Inventory |
|
51,463 |
|
48,257 |
| ||
|
Deferred income taxes |
|
56,027 |
|
51,543 |
| ||
|
Prepaid expenses and other current assets |
|
215,269 |
|
201,621 |
| ||
|
Total Current Assets |
|
1,517,523 |
|
1,503,988 |
| ||
|
|
|
|
|
|
| ||
|
Property and equipment, net |
|
862,173 |
|
913,612 |
| ||
|
Goodwill |
|
118,075 |
|
109,820 |
| ||
|
Other assets |
|
34,557 |
|
29,168 |
| ||
|
Total Assets |
|
$ |
2,532,328 |
|
$ |
2,556,588 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES and STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Current Liabilities: |
|
|
|
|
| ||
|
Accounts payable |
|
$ |
53,937 |
|
$ |
59,713 |
|
|
Accrued payroll and benefits |
|
129,891 |
|
170,806 |
| ||
|
Accrued expenses and other current liabilities |
|
113,304 |
|
153,808 |
| ||
|
Unearned revenue |
|
219,764 |
|
240,398 |
| ||
|
Income taxes payable |
|
26,263 |
|
7,952 |
| ||
|
Total Current Liabilities |
|
543,159 |
|
632,677 |
| ||
|
|
|
|
|
|
| ||
|
Long-term debt |
|
250,000 |
|
250,000 |
| ||
|
Deferred income taxes |
|
13,022 |
|
32,035 |
| ||
|
Other liabilities |
|
77,002 |
|
76,630 |
| ||
|
Total Liabilities |
|
883,183 |
|
991,342 |
| ||
|
|
|
|
|
|
| ||
|
Stockholders’ Equity: |
|
|
|
|
| ||
|
Common stock |
|
825 |
|
809 |
| ||
|
Paid-in capital |
|
959,398 |
|
859,535 |
| ||
|
Retained earnings |
|
1,913,585 |
|
1,779,833 |
| ||
|
Accumulated other comprehensive (loss) income |
|
(10,080 |
) |
25,746 |
| ||
|
Treasury stock |
|
(1,214,583 |
) |
(1,100,677 |
) | ||
|
Total Stockholders’ Equity |
|
1,649,145 |
|
1,565,246 |
| ||
|
Total Liabilities and Stockholders’ Equity |
|
$ |
2,532,328 |
|
$ |
2,556,588 |
|
COVANCE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
(Dollars in thousands)
(UNAUDITED)
|
|
|
Nine Months Ended September 30 |
| ||||
|
|
|
2014 |
|
2013 |
| ||
|
Cash flows from operating activities: |
|
|
|
|
| ||
|
Net income |
|
$ |
133,752 |
|
$ |
133,361 |
|
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
|
Depreciation and amortization |
|
102,151 |
|
95,072 |
| ||
|
Non-cash impairment charges |
|
52,564 |
|
— |
| ||
|
Non-cash compensation expense associated with employee benefit and stock compensation plans |
|
30,962 |
|
29,863 |
| ||
|
Deferred income tax benefit |
|
(23,901 |
) |
(6,787 |
) | ||
|
Gain on sale of businesses |
|
(15,096 |
) |
— |
| ||
|
Gain on sale of investments |
|
— |
|
(16,400 |
) | ||
|
Loss on disposal of property and equipment |
|
626 |
|
487 |
| ||
|
Changes in operating assets and liabilities, net of businesses sold and acquired: |
|
|
|
|
| ||
|
Accounts receivable |
|
1,324 |
|
(14,382 |
) | ||
|
Unbilled services |
|
(17,370 |
) |
(10,477 |
) | ||
|
Inventory |
|
(7,682 |
) |
(246 |
) | ||
|
Accounts payable |
|
(5,818 |
) |
17,590 |
| ||
|
Accrued liabilities |
|
(81,395 |
) |
(24,736 |
) | ||
|
Unearned revenue |
|
(20,663 |
) |
10,746 |
| ||
|
Income taxes |
|
23,681 |
|
20,228 |
| ||
|
Other assets and liabilities, net |
|
(40,530 |
) |
(21,474 |
) | ||
|
Net cash provided by operating activities |
|
132,605 |
|
212,845 |
| ||
|
|
|
|
|
|
| ||
|
Cash flows from investing activities: |
|
|
|
|
| ||
|
Capital expenditures |
|
(105,484 |
) |
(103,703 |
) | ||
|
Acquisition of business |
|
(10,516 |
) |
— |
| ||
|
Proceeds from sale of businesses |
|
28,287 |
|
— |
| ||
|
Short-term investments proceeds (purchases) |
|
109,794 |
|
(109,794 |
) | ||
|
Proceeds from sale of investments |
|
— |
|
17,781 |
| ||
|
Other, net |
|
3,546 |
|
528 |
| ||
|
Net cash provided by (used in) investing activities |
|
25,627 |
|
(195,188 |
) | ||
|
|
|
|
|
|
| ||
|
Cash flows from financing activities: |
|
|
|
|
| ||
|
Net repayments under revolving credit facility |
|
— |
|
(55,000 |
) | ||
|
Stock issued under option plans |
|
63,257 |
|
57,172 |
| ||
|
Purchase of treasury stock |
|
(113,906 |
) |
(29,505 |
) | ||
|
Net cash used in financing activities |
|
(50,649 |
) |
(27,333 |
) | ||
|
|
|
|
|
|
| ||
|
Effect of exchange rate changes on cash |
|
(20,447 |
) |
(348 |
) | ||
|
|
|
|
|
|
| ||
|
Net change in cash and cash equivalents |
|
87,136 |
|
(10,024 |
) | ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents, beginning of period |
|
617,686 |
|
492,824 |
| ||
|
|
|
|
|
|
| ||
|
Cash and cash equivalents, end of period |
|
$ |
704,822 |
|
$ |
482,800 |
|
COVANCE INC.
GAAP to Pro Forma Reconciliation
Q3 2014
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||
|
|
|
GAAP |
|
Restructuring |
|
Other |
|
Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
627,075 |
|
|
|
|
|
$ |
627,075 |
| ||
|
Reimbursable out-of-pocket expenses |
|
43,922 |
|
|
|
|
|
43,922 |
| ||||
|
Total revenues |
|
670,997 |
|
— |
|
— |
|
670,997 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
431,006 |
|
|
|
|
|
431,006 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
43,922 |
|
|
|
|
|
43,922 |
| ||||
|
Selling, general and administrative |
|
84,373 |
|
(1,810 |
) |
|
|
82,563 |
| ||||
|
Depreciation and amortization |
|
35,177 |
|
(1,393 |
) |
|
|
33,784 |
| ||||
|
Total costs and expenses |
|
594,478 |
|
(3,203 |
) |
— |
|
591,275 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
76,519 |
|
3,203 |
|
— |
|
79,722 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
2,622 |
|
|
|
|
|
2,622 |
| ||||
|
Foreign exchange transaction loss, net |
|
1,608 |
|
|
|
|
|
1,608 |
| ||||
|
Gain on sale of business |
|
(13,448 |
) |
|
|
13,448 |
|
— |
| ||||
|
Other (income) expense, net |
|
(9,218 |
) |
— |
|
13,448 |
|
4,230 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes |
|
85,737 |
|
3,203 |
|
(13,448 |
) |
75,492 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
19,738 |
|
1,240 |
|
(1,544 |
) |
19,434 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
65,999 |
|
$ |
1,963 |
|
$ |
(11,904 |
) |
$ |
56,058 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
1.20 |
|
$ |
0.04 |
|
$ |
(0.22 |
) |
$ |
1.02 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
55,219,766 |
|
55,219,766 |
|
55,219,766 |
|
55,219,766 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
1.16 |
|
$ |
0.03 |
|
$ |
(0.21 |
) |
$ |
0.98 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
57,119,595 |
|
57,119,595 |
|
57,119,595 |
|
57,119,595 |
| ||||
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.
(2) Represents gain on sale of business.
COVANCE INC.
GAAP to Pro Forma Reconciliation
Q3 2013
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| |||
|
|
|
GAAP |
|
Restructuring |
|
Pro Forma |
| |||
|
|
|
|
|
|
|
|
| |||
|
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 expense, net: |
|
|
|
|
|
|
| |||
|
Interest expense, net |
|
759 |
|
|
|
759 |
| |||
|
Foreign exchange transaction loss, net |
|
882 |
|
|
|
882 |
| |||
|
Other 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
YTD Q3 2014
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||
|
|
|
GAAP |
|
Restructuring |
|
Other |
|
Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net revenues |
|
$ |
1,886,583 |
|
|
|
|
|
$ |
1,886,583 |
| ||
|
Reimbursable out-of-pocket expenses |
|
137,810 |
|
|
|
|
|
137,810 |
| ||||
|
Total revenues |
|
2,024,393 |
|
— |
|
— |
|
2,024,393 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Costs and expenses: |
|
|
|
|
|
|
|
|
| ||||
|
Cost of revenue |
|
1,310,218 |
|
|
|
|
|
1,310,218 |
| ||||
|
Reimbursable out-of-pocket expenses |
|
137,810 |
|
|
|
|
|
137,810 |
| ||||
|
Selling, general and administrative |
|
258,979 |
|
(9,314 |
) |
|
|
249,665 |
| ||||
|
Depreciation and amortization |
|
102,151 |
|
(2,225 |
) |
|
|
99,926 |
| ||||
|
Impairment charges |
|
52,564 |
|
|
|
(52,564 |
) |
— |
| ||||
|
Total costs and expenses |
|
1,861,722 |
|
(11,539 |
) |
(52,564 |
) |
1,797,619 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income from operations |
|
162,671 |
|
11,539 |
|
52,564 |
|
226,774 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Other (income) expense, net: |
|
|
|
|
|
|
|
|
| ||||
|
Interest expense, net |
|
7,879 |
|
|
|
|
|
7,879 |
| ||||
|
Foreign exchange transaction loss, net |
|
3,552 |
|
|
|
|
|
3,552 |
| ||||
|
Gain on sale of businesses |
|
(15,096 |
) |
|
|
15,096 |
|
— |
| ||||
|
Other (income) expense, net |
|
(3,665 |
) |
— |
|
15,096 |
|
11,431 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Income before taxes |
|
166,336 |
|
11,539 |
|
37,468 |
|
215,343 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Taxes on income |
|
32,584 |
|
4,125 |
|
15,539 |
|
52,248 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Net income |
|
$ |
133,752 |
|
$ |
7,414 |
|
$ |
21,929 |
|
$ |
163,095 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Basic earnings per share |
|
$ |
2.41 |
|
$ |
0.13 |
|
$ |
0.40 |
|
$ |
2.94 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - basic |
|
55,485,756 |
|
55,485,756 |
|
55,485,756 |
|
55,485,756 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Diluted earnings per share |
|
$ |
2.32 |
|
$ |
0.13 |
|
$ |
0.38 |
|
$ |
2.83 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Weighted average shares outstanding - diluted |
|
57,553,096 |
|
57,553,096 |
|
57,553,096 |
|
57,553,096 |
| ||||
(1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure.
(2) Represents asset impairment charges $52,564 and gain on sale of businesses $15,096.
COVANCE INC.
GAAP to Pro Forma Reconciliation
YTD Q3 2013
(Dollars in thousands, except per share data)
(UNAUDITED)
|
|
|
|
|
Adjustments |
|
|
| ||||||
|
|
|
GAAP |
|
Restructuring |
|
Other |
|
Pro Forma |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
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.