Covance Reports Fourth Quarter Net Revenue Of $623 Million, Pro Forma EPS Of $0.87 And Adjusted Net Orders Of $769 Million
-- Issues FY2014 Pro Forma EPS Target of $3.65 to $4.00 --
PRINCETON, N.J., Feb. 4, 2014 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its fourth quarter and year ended December 31, 2013. Net revenue in the fourth quarter was $623.1 million, representing 10.8% growth from the fourth quarter of 2012's GAAP result of $562.2 million, and 11.1% growth from the fourth quarter of 2012's pro forma result of $560.7 million. On a GAAP basis, the company reported earnings of $0.80 per diluted share in the fourth quarter of 2013 as compared to GAAP earnings of $0.61 in the fourth quarter of 2012. Excluding charges associated with restructuring, other cost reduction actions and other items in both periods, the company reported pro forma earnings per diluted share of $0.87, up 18.6% over the pro forma earnings of $0.73 for the fourth quarter of 2012.
On a full-year basis, net revenue in 2013 was $2.4 billion, representing 10.2% growth from 2012's GAAP result of $2.18 billion, and 10.6% growth from 2012's pro forma result of $2.17 billion. On a GAAP basis, the company reported earnings per diluted share of $3.15 in 2013 as compared to GAAP earnings of $1.68 in 2012. Excluding charges associated with restructuring, other cost reduction actions and other items in both periods, the company reported pro forma earnings per diluted share of $3.23 in 2013, up 19.6% over the pro forma earnings of $2.70 for 2012.
"In 2013, Covance continued to benefit from market share gains in central laboratories, strong operational delivery in clinical development, improving market conditions in toxicology, and successful execution of our on-going strategic IT projects. This performance enabled us to significantly exceed our 2013 financial targets, with a return to double-digit revenue growth, pro forma EPS of $3.23, and free cash flow in excess of $240 million. In addition, we delivered strong orders throughout the year, resulting in record adjusted net orders of $3 billion, and an adjusted net book-to-bill of 1.25 to 1 for the year," said Joe Herring, Chairman and Chief Executive Officer. "For the fourth quarter, revenue grew to $623 million, up 11.1% from 2012 pro forma revenue, and pro forma earnings per share grew 18.6% to $0.87. Adjusted net orders in the fourth quarter were $769 million, representing an adjusted net book-to-bill of 1.23 to 1.
"Late-Stage Development fourth quarter revenues grew 14.5% year-on-year to $395 million. This increase was led by 17% growth in central laboratories and 13% growth in clinical development. Late-Stage Development pro forma operating margins increased 140 basis points year-on-year and 10 basis points sequentially to 22.7%. In Early Development, revenue grew 5.7% year-on-year on a pro forma basis, led by growth in clinical pharmacology and toxicology. Sequentially, revenues grew $7.9 million from the third quarter, driven primarily by strong sequential growth in toxicology. Early Development fourth quarter pro forma operating margins of 12.1% were flat sequentially after normalizing for the UK R&D credits, as strength in toxicology was offset by normal seasonality in clinical pharmacology.
"Looking ahead to 2014, for the full year, we expect year-on-year revenue growth in the 6% to 10% range and pro forma diluted earnings per share, excluding costs from our ongoing restructuring activities, in the range of $3.65 to $4.00 (assuming foreign exchange rates remain at year-end 2013 levels). In the first quarter of 2014, we expect revenue to be up from the fourth quarter level and pro forma earnings per share to increase sequentially by a couple of cents, as we forecast an increase in Late-Stage Development net revenues and earnings to be partially off-set by seasonally-lower first quarter Early Development results."
Consolidated Results
| ($ in millions except EPS) |
4Q13 |
4Q12 |
Change |
FY13 |
FY12 |
Change |
| Total Revenues |
$669.8 |
$609.1 |
$2,595.1 |
$2,365.7 |
||
| Less: Reimbursable Out-of-Pockets |
$46.7 |
$46.9 |
$192.8 |
$185.1 |
||
| Net Revenues |
$623.1 |
$562.2 |
10.8% |
$2,402.3 |
$2,180.6 |
10.2% |
| Operating Income |
$55.0 |
$43.1 |
27.5% |
$217.3 |
$115.9 |
87.6% |
| Operating Margin |
8.8% |
7.7% |
9.0% |
5.3% |
||
| Net Income |
$45.8 |
$33.9 |
35.3% |
$179.2 |
$94.7 |
89.2% |
| Diluted Earnings per Share |
$0.80 |
$0.61 |
30.5% |
$3.15 |
$1.68 |
87.2% |
| Revenue from Facilities Closed in 2012** |
- |
$1.5 |
- |
$8.8 |
||
| Net Revenue, continuing ops* |
$623.1 |
$560.7 |
11.1% |
$2,402.3 |
$2,171.9 |
10.6% |
| Restructuring Costs and Other Items |
($9.8) |
($6.6) |
($26.8) |
($73.1) |
||
| Loss from Facilities Closed in 2012** |
- |
($2.9) |
- |
($9.3) |
||
| Operating Income, excluding items* |
$64.7 |
$52.5 |
23.2% |
$244.2 |
$198.2 |
23.2% |
| Operating Margin, excluding items* |
10.4% |
9.4% |
10.2% |
9.1% |
||
| Gain on Sale of Investments |
- |
- |
$16.4 |
$1.5 |
||
| Impairment of Equity Investment |
- |
- |
- |
($7.4) |
||
| Favorable Income Tax Developments |
$3.0 |
- |
$3.0 |
$11.5 |
||
| Net Income, excluding items* |
$49.6 |
$40.3 |
23.0% |
$183.7 |
$151.9 |
20.9% |
| Diluted EPS, excluding items* |
$0.87 |
$0.73 |
18.6% |
$3.23 |
$2.70 |
19.6% |
| * See attached pro forma income statements for reconciliation of 2013 and 2012 GAAP to pro forma amounts. |
| ** Facilities closed in 2012 include Chandler, Honolulu and Basel. |
Operating Segment Results
Early Development
| ($ in millions) |
4Q13 |
4Q12 |
Change |
FY13 |
FY12 |
Change |
| Net Revenues |
$228.3 |
$217.4 |
5.0% |
$870.5 |
$869.5 |
0.1% |
| Operating Income |
$21.9 |
$18.7 |
17.3% |
$87.5 |
$4.0 |
2,087.6% |
| Operating Margin |
9.6% |
8.6% |
10.1% |
0.5% |
||
| Revenue from Facilities Closed in 2012** |
- |
$1.5 |
- |
$8.8 |
||
| Net Revenue, continuing ops |
$228.3 |
$215.9 |
5.7% |
$870.5 |
$860.8 |
1.1% |
| Restructuring Costs and Other Items |
($5.7) |
($4.3) |
($13.2) |
($69.5) |
||
| Loss from Facilities Closed in 2012** |
- |
($2.9) |
- |
($9.3) |
||
| Operating Income, excluding items |
$27.6 |
$25.9 |
6.7% |
$100.7 |
$82.7 |
21.7% |
| Operating Margin, excluding items |
12.1% |
12.0% |
11.6% |
9.6% |
| ** 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 fourth quarter of 2013 were $228.3 million, compared to $217.4 million on a GAAP basis and $215.9 million on a pro forma basis in the fourth quarter of last year. Last year's pro forma revenue excluded $1.5 million in revenue from the three sites closed by the end of 2012. On a pro forma basis, net revenue increased 5.7%, including a 60 basis point foreign exchange tailwind, as continued strong growth in clinical pharmacology and improved results in toxicology were partially offset by declines in discovery support and certain pharmaceutical chemistry services. Sequential growth of $7.9 million was primarily driven by toxicology.
GAAP operating income in the fourth quarter of 2013 was $21.9 million, and included $0.8 million in costs associated with our previously-announced restructuring actions and $4.9 million in asset impairment charges relating to our Manassas and Basel properties, which are being marketed for sale. This compares to GAAP operating income of $18.7 million in the fourth quarter of 2012, which included restructuring costs of $4.3 million and losses at facilities closed in 2012 of $2.9 million. Pro forma operating income, excluding these costs, was $27.6 million in the fourth quarter of this year, a 6.7% increase from the $25.9 million reported in the fourth quarter of 2012 as growth in clinical pharmacology and toxicology and the shift to above margin treatment for the UK R&D credit more than offset declines in discovery support and certain chemistry services. Pro forma operating margins were 12.1% in the fourth quarter of 2013, versus 12.0% in the fourth quarter of 2012 and 13.1% last quarter. Third quarter 2013 margins included a six month impact of the shift to above margin treatment of the UK R&D credit (as the law was signed in July 2013, but applied retroactive to April 1, 2013) versus only a three month impact in the current quarter.
On January 31, 2014, Covance sold its high-complexity genomics laboratory, located in Seattle, Washington, to Laboratory Corporation of America Holdings, and entered into a five year services agreement, pursuant to which Covance will collaborate with LabCorp to continue to offer these services to its clients. Covance expects to report a small gain on this sale in its first quarter ending March 31, 2014, which will be excluded from its pro forma earnings per share. Covance will continue to provide other genomics services to its clients through its central laboratories.
Late-Stage Development
| ($ in millions) |
4Q13 |
4Q12 |
Change |
FY13 |
FY12 |
Change |
| Net Revenues |
$394.8 |
$344.8 |
14.5% |
$1,531.8 |
$1,311.1 |
16.8% |
| Operating Income |
$89.2 |
$72.7 |
22.8% |
$338.5 |
$277.6 |
22.0% |
| Operating Margin |
22.6% |
21.1% |
22.1% |
21.2% |
||
| Restructuring Costs |
($0.3) |
($0.7) |
($4.1) |
($1.3) |
||
| Operating Income, excluding items |
$89.5 |
$73.4 |
22.0% |
$342.6 |
$278.8 |
22.9% |
| Operating Margin, excluding items |
22.7% |
21.3% |
22.4% |
21.3% |
The Late-Stage Development segment includes central laboratory, Phase IIb-IV clinical development, and market access services. Net revenues for the fourth quarter of 2013 grew 14.5% year-on-year to $394.8 million, and increased $8.5 million sequentially from the third quarter level. In the quarter, foreign exchange favorably impacted revenue growth by 170 basis points. Year-over-year growth was driven by increases of 17% in central laboratories and 13% in clinical development, while the sequential revenue increase was led by growth in clinical development followed by growth in central laboratories.
Operating income for the fourth quarter was $89.2 million on a GAAP basis and included $0.3 million in costs associated with our ongoing restructuring actions. On a pro forma basis, operating income was $89.5 million, up 22.0% year-over-year. Pro Forma operating income also increased $2.1 million sequentially. Pro forma operating margins were 22.7% in the fourth quarter of 2013, versus 21.3% in the fourth quarter of 2012 and 22.6% last quarter. The year-on-year increase in profitability was driven by operating leverage in both clinical development and central laboratories, partially offset by increased spending on strategic IT projects. On a sequential basis, operating margins increased 10 basis points overcoming a headwind from the normalization of the UK R&D credit and increased IT spending due primarily to margin expansion in clinical development.
Corporate Information
The company reported fourth quarter adjusted net orders of $769 million. Backlog at December 31, 2013 grew to $6.92 billion compared to $6.83 billion at September 30, 2013 and $6.64 billion at December 31, 2012. Foreign exchange contributed $36 million to backlog growth on a sequential basis.
Corporate expenses totaled $56.2 million in the fourth quarter of 2013 (including $3.8 million in restructuring costs) compared to $51.4 million last quarter (including $2.8 million in restructuring costs) and $48.3 million in the fourth quarter of 2012 (including $1.5 million in restructuring costs). The largest driver of the year-over-year and sequential increases in corporate expenses are 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 December 31, 2013 were $729 million compared to $593 million at September 30, 2013 and $493 million at December 31, 2012. During the fourth quarter, the company raised $250 million from the issuance of senior notes. Proceeds from these notes and cash from operations were used to fully repay the $265 million outstanding balance on the revolving credit facility. The revolving credit facility will be maintained to provide flexibility to execute our growth strategy over the long-term.
Net Days Sales Outstanding (DSO) declined one day in the fourth quarter to 34 days at December 31, 2013 compared to 35 days at September 30, 2013 and 36 days at December 31, 2012.
Free cash flow (defined as operating cash flow less capital expenditures) for the fourth quarter of 2013 was $134 million, consisting of operating cash flow of $193 million less capital expenditures of $58 million. Free cash flow for the year was $243 million, consisting of operating cash flow of $406 million less capital expenditures of $162 million. Free cash flow in both the fourth quarter and full year of 2013 include a client payment of approximately $28 million for Value Added Tax, which had been pending resolution between the client and the tax authorities during the year. Following resolution in the fourth quarter, the client paid this amount to Covance, which will in turn be remitted to the tax authorities in the first quarter of 2014.
The pro forma effective tax rate in the fourth quarter was 21.6%, down 670 basis points sequentially from the pro forma effective tax rate of 28.3% last quarter. The effective tax rate in the third quarter included a six month impact, or approximately 900 basis points, from the shift in accounting of the UK R&D credit. The fourth quarter effective tax rate included a benefit of approximately 220 basis points (contributing approximately $0.02 in earnings per share) attributable to the finalization of our 2013 pre-tax earnings mix, where a greater proportion of our earnings came from operations in tax jurisdictions with lower income tax rates. The 2013 full year pro forma effective tax rate was 22.9% and is expected to be approximately 24.5% in 2014.
The Company's investor conference call will be webcast on February 5 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 $2.4 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 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 MONTHS AND YEARS ENDED DECEMBER 31, 2013 AND 2012 |
|||||||||
| (Dollars in thousands, except per share data) |
|||||||||
| Three Months Ended December 31 |
Years Ended December 31 |
||||||||
| 2013 |
2012 |
2013 |
2012 |
||||||
| (UNAUDITED) |
|||||||||
| Net revenues |
$ 623,094 |
$ 562,180 |
$ 2,402,313 |
$ 2,180,621 |
|||||
| Reimbursable out-of-pocket expenses |
46,675 |
46,964 |
192,817 |
185,138 |
|||||
| Total revenues |
669,769 |
609,144 |
2,595,130 |
2,365,759 |
|||||
| Costs and expenses: |
|||||||||
| Cost of revenue |
436,857 |
395,841 |
1,692,173 |
1,570,223 |
|||||
| Reimbursable out-of-pocket expenses |
46,675 |
46,964 |
192,817 |
185,138 |
|||||
| Selling, general and administrative |
93,564 |
92,823 |
360,012 |
358,854 |
|||||
| Depreciation and amortization |
32,845 |
30,423 |
127,917 |
117,708 |
|||||
| Impairment charges |
4,877 |
- |
4,877 |
17,959 |
|||||
| Total costs and expenses |
614,818 |
(a) |
566,051 |
(c) |
2,377,796 |
(b) |
2,249,882 |
(d) |
|
| Income from operations |
54,951 |
(a) |
43,093 |
(c) |
217,334 |
(b) |
115,877 |
(d) |
|
| Other expense (income), net: |
|||||||||
| Interest expense, net |
1,450 |
1,153 |
4,084 |
3,506 |
|||||
| Foreign exchange transaction loss, net |
14 |
173 |
1,925 |
1,474 |
|||||
| Gain on sale of investments |
- |
- |
(16,400) |
(1,459) |
|||||
| Impairment of equity investment |
- |
- |
- |
7,373 |
|||||
| Loss on sale of business |
- |
- |
- |
169 |
|||||
| Other expense (income), net |
1,464 |
1,326 |
(10,391) |
(b) |
11,063 |
(d) |
|||
| Income before taxes and equity investee earnings |
53,487 |
(a) |
41,767 |
(c) |
227,725 |
(b) |
104,814 |
(d) |
|
| Taxes on income |
7,641 |
(a) |
7,870 |
(c) |
48,518 |
(b) |
10,099 |
(d) |
|
| Equity investee earnings |
- |
- |
- |
17 |
|||||
| Net income |
$ 45,846 |
(a) |
$ 33,897 |
(c) |
$ 179,207 |
(b) |
$ 94,732 |
(d) |
|
| Basic earnings per share |
$ 0.83 |
(a) |
$ 0.63 |
(c) |
$ 3.28 |
(b) |
$ 1.73 |
(d) |
|
| Weighted average shares outstanding - basic |
55,021,244 |
53,698,334 |
54,648,533 |
54,844,641 |
|||||
| Diluted earnings per share |
$ 0.80 |
(a) |
$ 0.61 |
(c) |
$ 3.15 |
(b) |
$ 1.68 |
(d) |
|
| Weighted average shares outstanding - diluted |
57,205,147 |
55,197,968 |
56,899,013 |
56,290,010 |
|||||
| (a) Three months ended December 31, 2013 includes, as applicable, $4,874 in charges associated with restructuring and other cost reduction actions ($3,224 net of tax), $4,877 of asset impairment charges ($3,568 net of tax) and favorable income tax items totaling $3,035. |
|||||||||
| (b) Year ended December 31, 2013 includes, as applicable, $21,950 in charges associated with restructuring and other cost reduction actions ($14,576 net of tax), $16,400 gain on sale of investments ($10,654 net of tax), $4,877 of asset impairment charges ($3,568 net of tax) and favorable income tax items totaling $3,035. |
|||||||||
| (c) Three months ended December 31, 2012 includes, as applicable, $10,191 in restructuring costs ($6,968 net of tax), $3,613 favorable inventory adjustment ($2,502 net of tax) and $2,850 in losses at sites that were closed during the period ($1,966 net of tax). |
|||||||||
| (d) Year ended December 31, 2012 includes, as applicable, $33,930 in restructuring costs ($23,145 net of tax), $21,168 in inventory impairment charges and costs associated with the settlement of an inventory supply agreement ($14,645 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), $9,274 in losses at sites that were closed during the year ($6,533 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, gain on sale of investments, |
|||||||||
| costs associated with the settlement of an inventory supply agreement, losses at sites that were closed during the period and favorable |
|||||||||
| tax items, as applicable: |
|||||||||
| Income from operations |
$ 64,702 |
$ 52,521 |
$ 244,161 |
$ 198,208 |
|||||
| Taxes on income |
$ 13,635 |
$ 10,866 |
$ 54,490 |
$ 41,135 |
|||||
| Net income |
$ 49,603 |
$ 40,329 |
$ 183,662 |
$ 151,941 |
|||||
| Basic earnings per share |
$ 0.90 |
$ 0.75 |
$ 3.36 |
$ 2.77 |
|||||
| Diluted earnings per share |
$ 0.87 |
$ 0.73 |
$ 3.23 |
$ 2.70 |
|||||
| COVANCE INC. |
|||||
| CONSOLIDATED BALANCE SHEETS |
|||||
| DECEMBER 31, 2013 and DECEMBER 31, 2012 |
|||||
| (Dollars in thousands) |
|||||
| December 31 |
December 31 |
||||
| 2013 |
2012 |
||||
| ASSETS |
|||||
| Current Assets: |
|||||
| Cash & cash equivalents |
$ 617,686 |
$ 492,824 |
|||
| Short-term investments |
111,359 |
- |
|||
| Accounts receivable, net |
331,815 |
339,558 |
|||
| Unbilled services |
141,707 |
136,878 |
|||
| Inventory |
48,257 |
49,270 |
|||
| Deferred income taxes |
51,543 |
44,903 |
|||
| Income taxes receivable |
- |
3,642 |
|||
| Prepaid expenses and other current assets |
201,621 |
167,629 |
|||
| Total Current Assets |
1,503,988 |
1,234,704 |
|||
| Property and equipment, net |
913,612 |
891,319 |
|||
| Goodwill |
109,820 |
109,820 |
|||
| Other assets |
29,168 |
52,499 |
|||
| Total Assets |
$ 2,556,588 |
$ 2,288,342 |
|||
| LIABILITIES and STOCKHOLDERS' EQUITY |
|||||
| Current Liabilities: |
|||||
| Accounts payable |
$ 59,713 |
$ 34,430 |
|||
| Accrued payroll and benefits |
170,806 |
144,681 |
|||
| Accrued expenses and other current liabilities |
153,808 |
127,686 |
|||
| Unearned revenue |
240,398 |
255,776 |
|||
| Short-term debt |
- |
320,000 |
|||
| Income taxes payable |
7,952 |
- |
|||
| Total Current Liabilities |
632,677 |
882,573 |
|||
| Long-term debt |
250,000 |
- |
|||
| Deferred income taxes |
32,035 |
27,912 |
|||
| Other liabilities |
76,630 |
70,665 |
|||
| Total Liabilities |
991,342 |
981,150 |
|||
| Stockholders' Equity: |
|||||
| Common stock |
809 |
791 |
|||
| Paid-in capital |
859,535 |
744,114 |
|||
| Retained earnings |
1,779,833 |
1,600,626 |
|||
| Accumulated other comprehensive income |
25,746 |
28,520 |
|||
| Treasury stock |
(1,100,677) |
(1,066,859) |
|||
| Total Stockholders' Equity |
1,565,246 |
1,307,192 |
|||
| Total Liabilities and Stockholders' Equity |
$ 2,556,588 |
$ 2,288,342 |
|||
| COVANCE INC. |
||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||
| FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 |
||||
| (Dollars in thousands) |
||||
| Years Ended December 31 |
||||
| 2013 |
2012 |
|||
| Cash flows from operating activities: |
||||
| Net income |
$ 179,207 |
$ 94,732 |
||
| Adjustments to reconcile net income to net cash provided by |
||||
| operating activities: |
||||
| Depreciation and amortization |
127,917 |
117,708 |
||
| Non-cash impairment charges |
4,877 |
41,736 |
||
| Non-cash compensation expense associated with employee benefit |
||||
| and stock compensation plans |
41,538 |
40,759 |
||
| Deferred income tax expense (benefit) |
5,023 |
(8,404) |
||
| Gain on sale of investments |
(16,400) |
(1,459) |
||
| Loss on sale of business |
- |
169 |
||
| Loss on disposal of property and equipment |
1,236 |
1,181 |
||
| Equity investee earnings |
- |
(17) |
||
| Changes in operating assets and liabilities, net of business sold: |
||||
| Accounts receivable |
7,743 |
(28,541) |
||
| Unbilled services |
(4,829) |
(23,419) |
||
| Inventory |
(1,300) |
10,918 |
||
| Accounts payable |
25,283 |
(1,963) |
||
| Accrued liabilities |
50,885 |
8,205 |
||
| Unearned revenue |
(15,378) |
54,998 |
||
| Income taxes |
14,315 |
(10,522) |
||
| Other assets and liabilities, net |
(14,467) |
(35,920) |
||
| Net cash provided by operating activities |
405,650 |
260,161 |
||
| Cash flows from investing activities: |
||||
| Capital expenditures |
(162,170) |
(151,679) |
||
| Purchase of short-term investments |
(109,794) |
- |
||
| Proceeds from sale of investments |
17,781 |
4,682 |
||
| Other, net |
648 |
1,017 |
||
| Net cash used in investing activities |
(253,535) |
(145,980) |
||
| Cash flows from financing activities: |
||||
| Net (repayments) borrowings under revolving credit facility |
(320,000) |
290,000 |
||
| Borrowings under long-term debt |
250,000 |
- |
||
| Stock issued under option plans |
71,180 |
13,772 |
||
| Purchase of treasury stock |
(33,818) |
(323,773) |
||
| Net cash used in financing activities |
(32,638) |
(20,001) |
||
| Effect of exchange rate changes on cash |
5,385 |
9,541 |
||
| Net change in cash and cash equivalents |
124,862 |
103,721 |
||
| Cash and cash equivalents, beginning of period |
492,824 |
389,103 |
||
| Cash and cash equivalents, end of period |
$ 617,686 |
$ 492,824 |
||
| COVANCE INC. |
|||||||||
| GAAP to Pro Forma Reconciliation |
|||||||||
| Q4 2013 |
|||||||||
| (Dollars in thousands, except per share data) |
|||||||||
| (UNAUDITED) |
|||||||||
| Adjustments |
|||||||||
| GAAP |
Restructuring |
Other |
Income Tax |
Pro Forma |
|||||
| Net revenues |
$ 623,094 |
$ 623,094 |
|||||||
| Reimbursable out-of-pocket expenses |
46,675 |
46,675 |
|||||||
| Total revenues |
669,769 |
- |
- |
- |
669,769 |
||||
| Costs and expenses: |
|||||||||
| Cost of revenue |
436,857 |
436,857 |
|||||||
| Reimbursable out-of-pocket expenses |
46,675 |
46,675 |
|||||||
| Selling, general and administrative |
93,564 |
(4,456) |
89,108 |
||||||
| Depreciation and amortization |
32,845 |
(418) |
32,427 |
||||||
| Impairment charges |
4,877 |
(4,877) |
- |
||||||
| Total costs and expenses |
614,818 |
(4,874) |
(4,877) |
- |
605,067 |
||||
| Income from operations |
54,951 |
4,874 |
4,877 |
- |
64,702 |
||||
| Other expense, net: |
|||||||||
| Interest expense, net |
1,450 |
1,450 |
|||||||
| Foreign exchange transaction loss, net |
14 |
14 |
|||||||
| Other expense, net |
1,464 |
- |
- |
- |
1,464 |
||||
| Income before taxes |
53,487 |
4,874 |
4,877 |
- |
63,238 |
||||
| Taxes on income |
7,641 |
1,650 |
1,309 |
3,035 |
13,635 |
||||
| Net income |
$ 45,846 |
$ 3,224 |
$ 3,568 |
$ (3,035) |
$ 49,603 |
||||
| Basic earnings per share |
$ 0.83 |
$ 0.06 |
$ 0.06 |
$ (0.06) |
$ 0.90 |
||||
| Weighted average shares outstanding - basic |
55,021,244 |
55,021,244 |
55,021,244 |
55,021,244 |
55,021,244 |
||||
| Diluted earnings per share |
$ 0.80 |
$ 0.06 |
$ 0.06 |
$ (0.05) |
$ 0.87 |
||||
| Weighted average shares outstanding - diluted |
57,205,147 |
57,205,147 |
57,205,147 |
57,205,147 |
57,205,147 |
||||
| (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. |
|||||||||
| (2) Represents asset impairment charges. |
|||||||||
| (3) Primarily represents favorable resolutions of income tax matters. |
|||||||||
| COVANCE INC. |
|||||||||
| GAAP to Pro Forma Reconciliation |
|||||||||
| Q4 2012 |
|||||||||
| (Dollars in thousands, except per share data) |
|||||||||
| (UNAUDITED) |
|||||||||
| Adjustments |
|||||||||
| GAAP |
Restructuring |
Other |
Operating |
Pro Forma |
|||||
| Net revenues |
$ 562,180 |
$ (1,498) |
$ 560,682 |
||||||
| Reimbursable out-of-pocket expenses |
46,964 |
46,964 |
|||||||
| Total revenues |
609,144 |
- |
- |
(1,498) |
607,646 |
||||
| Costs and expenses: |
|||||||||
| Cost of revenue |
395,841 |
3,613 |
(3,697) |
395,757 |
|||||
| Reimbursable out-of-pocket expenses |
46,964 |
46,964 |
|||||||
| Selling, general and administrative |
92,823 |
(9,013) |
(117) |
83,693 |
|||||
| Depreciation and amortization |
30,423 |
(1,178) |
(534) |
28,711 |
|||||
| Total costs and expenses |
566,051 |
(10,191) |
3,613 |
(4,348) |
555,125 |
||||
| Income from operations |
43,093 |
10,191 |
(3,613) |
2,850 |
52,521 |
||||
| Other expense, net: |
|||||||||
| Interest expense, net |
1,153 |
1,153 |
|||||||
| Foreign exchange transaction loss, net |
173 |
173 |
|||||||
| Other expense, net |
1,326 |
- |
- |
- |
1,326 |
||||
| Income before taxes |
41,767 |
10,191 |
(3,613) |
2,850 |
51,195 |
||||
| Taxes on income |
7,870 |
3,223 |
(1,111) |
884 |
10,866 |
||||
| Net income |
$ 33,897 |
$ 6,968 |
$ (2,502) |
$ 1,966 |
$ 40,329 |
||||
| Basic earnings per share |
$ 0.63 |
$ 0.13 |
$ (0.05) |
$ 0.04 |
$ 0.75 |
||||
| Weighted average shares outstanding - basic |
53,698,334 |
53,698,334 |
53,698,334 |
53,698,334 |
53,698,334 |
||||
| Diluted earnings per share |
$ 0.61 |
$ 0.13 |
$ (0.05) |
$ 0.04 |
$ 0.73 |
||||
| Weighted average shares outstanding - diluted |
55,197,968 |
55,197,968 |
55,197,968 |
55,197,968 |
55,197,968 |
||||
| (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. |
|||||||||
| (2) Reduction of inventory impairment based upon determination of actual impaired inventory. |
|||||||||
| (3) Represents results of operations at sites that were closed during the period. |
|||||||||
| COVANCE INC. |
|||||||||
| GAAP to Pro Forma Reconciliation |
|||||||||
| For the year ended December 31, 2013 |
|||||||||
| (Dollars in thousands, except per share data) |
|||||||||
| (UNAUDITED) |
|||||||||
| Adjustments |
|||||||||
| GAAP |
Restructuring |
Other |
Income Tax |
Pro Forma |
|||||
| Net revenues |
$ 2,402,313 |
$ 2,402,313 |
|||||||
| Reimbursable out-of-pocket expenses |
192,817 |
192,817 |
|||||||
| Total revenues |
2,595,130 |
- |
- |
- |
2,595,130 |
||||
| Costs and expenses: |
|||||||||
| Cost of revenue |
1,692,173 |
1,692,173 |
|||||||
| Reimbursable out-of-pocket expenses |
192,817 |
192,817 |
|||||||
| Selling, general and administrative |
360,012 |
(19,032) |
340,980 |
||||||
| Depreciation and amortization |
127,917 |
(2,918) |
124,999 |
||||||
| Impairment charges |
4,877 |
(4,877) |
- |
||||||
| Total costs and expenses |
2,377,796 |
(21,950) |
(4,877) |
- |
2,350,969 |
||||
| Income from operations |
217,334 |
21,950 |
4,877 |
- |
244,161 |
||||
| Other (income) expense, net: |
|||||||||
| Interest expense, net |
4,084 |
4,084 |
|||||||
| Foreign exchange transaction loss, net |
1,925 |
1,925 |
|||||||
| Gain on sale of investments |
(16,400) |
16,400 |
- |
||||||
| Other (income) expense, net |
(10,391) |
- |
16,400 |
- |
6,009 |
||||
| Income before taxes |
227,725 |
21,950 |
(11,523) |
- |
238,152 |
||||
| Taxes on income |
48,518 |
7,374 |
(4,437) |
3,035 |
54,490 |
||||
| Net income |
$ 179,207 |
$ 14,576 |
$ (7,086) |
$ (3,035) |
$ 183,662 |
||||
| Basic earnings per share |
$ 3.28 |
$ 0.27 |
$ (0.13) |
$ (0.06) |
$ 3.36 |
||||
| Weighted average shares outstanding - basic |
54,648,533 |
54,648,533 |
54,648,533 |
54,648,533 |
54,648,533 |
||||
| Diluted earnings per share |
$ 3.15 |
$ 0.26 |
$ (0.12) |
$ (0.05) |
$ 3.23 |
||||
| Weighted average shares outstanding - diluted |
56,899,013 |
56,899,013 |
56,899,013 |
56,899,013 |
56,899,013 |
||||
| (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. |
|||||||||
| (2) Consists of gain on sale of investments $16,400 and asset impairment charges ($4,877). |
|||||||||
| (3) Primarily represents favorable resolutions of income tax matters. |
|||||||||
| COVANCE INC. |
||||||||||||
| GAAP to Pro Forma Reconciliation |
||||||||||||
| For the year ended December 31, 2012 |
||||||||||||
| (Dollars in thousands, except per share data) |
||||||||||||
| (UNAUDITED) |
||||||||||||
| Adjustments |
||||||||||||
| GAAP |
Restructuring |
Other |
Operating |
Income Tax |
Pro Forma |
|||||||
| Net revenues |
$ 2,180,621 |
$ (8,754) |
$ 2,171,867 |
|||||||||
| Reimbursable out-of-pocket expenses |
185,138 |
185,138 |
||||||||||
| Total revenues |
2,365,759 |
- |
- |
(8,754) |
- |
2,357,005 |
||||||
| Costs and expenses: |
||||||||||||
| Cost of revenue |
1,570,223 |
(21,168) |
(15,180) |
1,533,875 |
||||||||
| Reimbursable out-of-pocket expenses |
185,138 |
185,138 |
||||||||||
| Selling, general and administrative |
358,854 |
(30,460) |
(501) |
327,893 |
||||||||
| Depreciation and amortization |
117,708 |
(3,470) |
(2,347) |
111,891 |
||||||||
| Goodwill impairment charge |
17,959 |
(17,959) |
- |
|||||||||
| Total costs and expenses |
2,249,882 |
(33,930) |
(39,127) |
(18,028) |
- |
2,158,797 |
||||||
| Income from operations |
115,877 |
33,930 |
39,127 |
9,274 |
- |
198,208 |
||||||
| Other expense, net: |
||||||||||||
| Interest expense, net |
3,506 |
3,506 |
||||||||||
| Foreign exchange transaction loss, net |
1,474 |
1,474 |
||||||||||
| 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 expense, net |
11,063 |
- |
(5,914) |
- |
- |
5,149 |
||||||
| Income before taxes and equity investee earnings |
104,814 |
33,930 |
45,041 |
9,274 |
- |
193,059 |
||||||
| Taxes on income |
10,099 |
10,785 |
6,009 |
2,741 |
11,501 |
41,135 |
||||||
| Equity investee earnings |
17 |
17 |
||||||||||
| Net income |
$ 94,732 |
$ 23,145 |
$ 39,032 |
$ 6,533 |
$ (11,501) |
$ 151,941 |
||||||
| Basic earnings per share |
$ 1.73 |
$ 0.42 |
$ 0.71 |
$ 0.12 |
$ (0.21) |
$ 2.77 |
||||||
| Weighted average shares outstanding - basic |
54,844,641 |
54,844,641 |
54,844,641 |
54,844,641 |
54,844,641 |
54,844,641 |
||||||
| Diluted earnings per share |
$ 1.68 |
$ 0.41 |
$ 0.69 |
$ 0.12 |
$ (0.20) |
$ 2.70 |
||||||
| Weighted average shares outstanding - diluted |
56,290,010 |
56,290,010 |
56,290,010 |
56,290,010 |
56,290,010 |
56,290,010 |
||||||
| (1) Represents costs incurred to better align capacity to preclinical market demand and reduce overall cost structure. |
||||||||||||
| (2) Consists of inventory impairment and costs associated with the settlement of an inventory supply agreement ($21,168), 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 that were closed during the period. |
||||||||||||
| (4) Primarily represents favorable resolutions of income tax matters. |
||||||||||||
SOURCE Covance Inc.
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