Covance
Covance Reports Full-Year 2007 Revenue Growth Of 15.4% and Seventh Consecutive Year of EPS Growth in Excess of 20%

- 4Q EPS Grows 21.8% to $0.72 on 19.8% Revenue Growth -

PRINCETON, N.J., Jan. 30 /PRNewswire-FirstCall/ -- Covance Inc. (NYSE: CVD) today reported earnings for its fourth quarter ended December 31, 2007 of $0.78 per diluted share and full-year EPS of $2.71; both periods include a $0.06 per share gain from the sale of its centralized ECG business. Excluding the gain on sale, earnings were $0.72 per diluted share in the fourth quarter, representing 21.8% year-over-year EPS growth, and $2.65 per diluted share for the full-year, representing annual EPS growth of 20.5% over 2006 EPS of $2.20 (which excludes a $0.04 per share tax gain from the 2006 results).

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"I congratulate the entire Covance team for another year of outstanding achievement for our clients and shareholders. Increasing levels of client satisfaction led to strong repeat work resulting in more than $500 million in net orders for the quarter and a 20.6% growth in our backlog to $2.7 billion," said Joe Herring, Chairman and Chief Executive Officer. "In the fourth quarter, revenue growth was robust at 19.8% and operating margins remained solid at 14.8%. Performance reflected strong demand for both our early- and late-stage development service offerings. In addition, we significantly reduced our DSO to 36 days, the lowest level in more than 5 years, helping to drive strong free cash flow for the quarter and the year.

"In 2007, our capital expenditures exceeded $200 million, with a substantial portion allocated to investments in capacity expansion and IT infrastructure to support our future growth. Covance's consistent history of generating strong returns on capital combined with the increasing demand for our drug development services, leads us to increase strategic capital investment in 2008 in order to support our long-term growth opportunity.

"Our ongoing success with productivity enhancements made a significant contribution again in 2007, as evidenced by a 4.3% increase in revenue per FTE, incremental Six Sigma benefits of $12 million, and a 40 basis point expansion in operating margin for the year. In 2008, we continue to target low- to mid-teens revenue growth and a 20% year-over-year growth in EPS to $3.18 per diluted share."


    Consolidated Results

    ($ in millions except   4Q07   4Q06   Change  FY 2007   FY 2006   Change
     EPS)
    Total Revenues        $435.7  $359.1          $1,631.5  $1,406.1
    Less: Reimbursable
     Out-of-Pockets        $24.7   $16.1             $85.1     $65.9
    Net Revenues          $411.0  $343.0   19.8%  $1,546.4  $1,340.2   15.4%
    Operating Income       $61.0   $51.3   18.9%    $228.6    $193.2   18.3%
       Operating Margin %  14.8%   15.0%             14.8%     14.4%
    Net Income             $50.9   $38.3   32.9%    $175.9    $145.0   21.3%
    Diluted EPS            $0.78   $0.59   32.7%     $2.71     $2.24   21.3%
    Income Tax Gain          -       -                -        $ 2.5
    Gain on Sale, net of
     tax                    $4.1     -                $4.1       -
    Net Income Excluding
     Gain on Sale and Tax
      Tax Gain             $46.8   $38.3   22.0%    $171.8    $142.5  20.5%
    Diluted EPS Excluding
     Gain on Sale
      and Tax Gain         $0.72   $0.59    21.8%    $2.65     $2.20   20.5%



    Operating Segment Results

    Early Development

    ($ in millions) 4Q07       4Q06    Change   FY 2007    FY 2006    Change

    Net Revenues   $207.9     $167.2    24.3%    $777.7     $632.8     22.9%
    Operating
     Income         $51.5      $38.6    33.3%    $195.9     $153.6     27.6%
    Margin %        24.8%      23.1%              25.2%      24.3%

The Company's Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology services, and research products. Early Development net revenues for the fourth quarter of 2007 grew 24.3% year- on-year to $207.9 million, compared to $167.2 million in the fourth quarter of 2006, representing exceptionally strong performances across the segment's service offerings. For the full year 2007, net revenues increased 22.9% to $777.7 million compared to $632.8 million in 2006.

Operating income for the fourth quarter of 2007 increased 33.3% to $51.5 million compared to $38.6 million for the fourth quarter of last year. Operating margins for the fourth quarter of 2007 grew 170 basis points to 24.8% versus 23.1% in the fourth quarter of the prior year on the strong performances across the segment. Full year operating margins grew 90 basis points to 25.2% compared to 24.3% in the prior year. We expect continued expansion in Early Development operating margin in 2008 on a full-year basis.

    Late-Stage Development

    ($ in millions) 4Q07       4Q06     Change    FY 2007   FY 2006  Change

    Net Revenues   $203.1     $175.8     15.6%    $768.8    $707.4    8.7%
    Operating
     Income         $32.6      $32.7     -0.4%    $128.1    $123.6    3.6%
    Margin %        16.0%      18.6%               16.7%     17.5%

The Late-Stage Development segment includes central laboratory, Phase II- III clinical development, and commercialization services (periapproval services and market access services). Late-Stage Development net revenues for the fourth quarter of 2007 grew 15.6% to $203.1 million compared to $175.8 million in the fourth quarter of 2006. Central laboratory and clinical development services each delivered revenue growth in excess of 20% in the quarter. Full year Late-Stage Development net revenues grew 8.7% to $768.8 million compared to $707.4 million in 2006. The sale of the centralized ECG business, which will remain in the base of the comparison year, will impact revenue growth in 2008 by approximately 350 basis points.

Operating income for the fourth quarter of 2007 was $32.6 million compared to $32.7 million in the fourth quarter of the prior year. Operating margins for the fourth quarter of 2007 were 16.0% versus 18.6% in the fourth quarter of 2006 and 17.5% last quarter. Late-Stage Development margins were impacted by an issue within a large clinical development study. Excluding this impact, operating margin would have expanded on a sequential basis. Full year operating margins were 16.7% compared to 17.5% in the prior year. We expect operating margin expansion in Late-Stage Development in 2008 on a full-year basis.

Corporate Information

The Company's backlog at December 31, 2007 grew 20.6% year-over-year to $2.68 billion compared to $2.23 billion at December 31, 2006. Net orders were $502 million in the fourth quarter of 2007 and $1.99 billion for the full year.

Corporate expenses totaled $23.0 million in the fourth quarter of 2007 compared to $26.1 million last quarter and $20.0 million in the fourth quarter of last year. Looking forward to 2008, we expect corporate expenses, as a percent of revenue, to return to the range of 6.5% as we continue to make investments in infrastructure to enhance our ability to manage future growth.

Cash and cash equivalents at December 31, 2007 grew to a record $319 million compared to $260 million at September 30, 2007 and $220 million at the end of last year, due to strong cash generation from business operations and $35 million in proceeds from the sale of Cardiac Safety Services.

Free cash flow for the fourth quarter was $21 million, consisting of operating cash flow of $117 million less capital expenditures of $96 million, which included a $20 million site purchase in Virginia. Full-year free cash flow was a robust $93 million, consisting of operating cash flow of $294 million less capital expenditures of $201 million. We expect full year 2008 capital spending to increase to approximately $250 million and free cash flow to be approximately $40 million, including significant expenditures for the new Arizona preclinical facility and investments in information technology infrastructure.

Net Days Sales Outstanding (DSO) decreased significantly to 36 days at December 31, 2007 compared to 47 days at September 30, 2007 and 49 days at December 31, 2006.

The Company's investor conference call will be webcast on January 31 at 9:00 am EDT. 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 $1.5 billion, global operations in more than 20 countries, and more than 8,700 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 of large contracts, 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, 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, 2007 AND 2006

                  (Dollars in thousands, except per share data)


                             Three Months Ended           Years Ended
                                 December 31              December 31
                             2007           2006       2007         2006
                                (UNAUDITED)

    Net revenues           $410,966     $342,976   $1,546,419    $1,340,203
    Reimbursable out-of-
     pockets                 24,736       16,111       85,097        65,855
      Total revenues        435,702      359,087    1,631,516     1,406,058

    Costs and expenses:
     Cost of revenue        273,874      222,145    1,017,686       882,190
     Reimbursed out-of-
      pocket expenses        24,736       16,111       85,097        65,855
      Selling, general
       and administrative    58,918       53,594      233,890       207,388
     Depreciation and
      amortization           17,182       15,920       66,197        57,388
      Total costs and
       expenses             374,710      307,770    1,402,870     1,212,821

    Income from operations   60,992       51,317      228,646       193,237

    Other (income) expense,
     net:
     Interest income, net    (3,030)      (2,376)      (9,801)       (7,564)
      Foreign exchange
      transaction
      (gain) loss, net       (1,137)         240       (1,375)          212
     Gain on sale of
       business              (6,590)          -        (6,590)          -

      Other income, net     (10,757)(a)  (2,136)      (17,766)(a)    (7,352)

    Income before taxes
     and equity investee
     earnings                71,749(a)    53,453      246,412(a)    200,589

    Taxes on income          21,608(a)    15,790       72,934(a)     57,179(b)

    Equity investee
     earnings                   768          650        2,451         1,588

    Net income              $50,909(a)   $38,313     $175,929(a)   $144,998(b)

    Basic earnings per
     share                    $0.80(a)     $0.60        $2.76(a)      $2.28(b)

    Weighted average
     shares outstanding
     - basic             63,834,768   63,716,880   63,747,732    63,585,722

    Diluted earnings per
     share                    $0.78(a)     $0.59        $2.71(a)      $2.24(b)

    Weighted average
     shares outstanding
     - diluted           64,921,515    64,795,375  64,820,406    64,782,212

    (a) Includes the impact of a $6,590 gain on sale of Cardiac Safety
        Services ($4,152 net of tax) during the fourth quarter of 2007.

    (b) Includes the impact of a $2,467 income tax gain from the resolution of
        several income tax matters during the third quarter of 2006.


    Excluding the impact of the $6.6 million pre-tax gain on sale of business
    in Q4'07 and the $2.5 million income tax gain recorded in Q3'06:

    Income before taxes and
     equity investee
      earnings              $65,159    n/a    $239,822     n/a

    Taxes on income         $19,170    n/a     $70,496    $59,646

    Net income              $46,757    n/a    $171,777   $142,531

    Basic earnings per
     share                    $0.73    n/a       $2.69      $2.24

    Diluted earnings per
     share                    $0.72    n/a       $2.65      $2.20



                                  COVANCE INC.

                           CONSOLIDATED BALANCE SHEETS

                           DECEMBER 31, 2007 and 2006

                             (Dollars in thousands)


                                               December 31       December 31
                                                  2007              2006
    ASSETS
    Current Assets:
     Cash & cash equivalents                    $319,485          $219,810
     Accounts receivable, net                    217,657           205,473
     Unbilled services                            88,835            89,139
     Inventory                                    54,788            49,628
     Deferred income taxes                         7,825             4,320
     Prepaid expenses and other current
      assets                                      81,467            71,196
       Total Current Assets                      770,057           639,566

    Property and equipment, net                  646,040           500,057
    Goodwill, net                                105,486           119,725
    Other assets                                  38,602            38,330
       Total Assets                           $1,560,185        $1,297,678

    LIABILITIES and STOCKHOLDERS' EQUITY
    Current Liabilities:
     Accounts payable                            $32,252           $35,479
     Accrued payroll and benefits                 95,313            76,657
     Accrued expenses and other current
      liabilities                                 66,838            50,855
     Unearned revenue                            144,870           109,559
     Income taxes payable                         18,887            17,154
       Total Current Liabilities                 358,160           289,704

    Deferred income taxes                         32,562            31,052
    Other liabilities                             59,275            53,627
       Total Liabilities                         449,997           374,383

    Stockholders' Equity:
     Common stock                                    746               734
     Paid-in capital                             492,373           426,806
     Retained earnings                           933,106           757,809
     Other Comprehensive Income:
       Cumulative translation
        adjustment                                45,328            35,170
       FAS 158 adjustment                        (21,174)          (23,389)
     Treasury stock                             (340,191)         (273,835)
       Total Stockholders' Equity              1,110,188           923,295
       Total Liabilities and
       Stockholders' Equity                   $1,560,185        $1,297,678



                                 COVANCE INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006

                            (Dollars in thousands)

                                                   Years Ended December 31

                                                    2007              2006
    Cash flows from operating activities:
      Net income                                  $175,929          $144,998
      Adjustments to reconcile net income
       to net cash provided by
       operating activities:
        Depreciation and amortization               66,197            57,388
        Non-cash compensation expense
         associated with employee benefit
         and stock compensation plans               26,508            30,397
        Deferred income tax (benefit)
         provision                                  (4,903)              561
        Gain on sale of business                    (6,590)              -
        (Gain) loss on sale of property
         and equipment                              (1,346)               11
        Equity investee earnings                    (2,451)           (1,588)
        Changes in operating assets and
         liabilities, net of businesses
         acquired and sold:
           Accounts receivable                     (16,847)            6,332
           Unbilled services                           304              (842)
           Inventory                                (5,336)           (8,921)
           Accounts payable                         (2,836)            8,380
           Accrued liabilities                      37,153            12,547
           Unearned revenue                         35,392            10,544
           Income taxes payable                      9,310             6,754
           Other assets and liabilities, net       (16,954)          (12,392)
    Net cash provided by operating
     activities                                    293,530           254,169

    Cash flows from investing activities:
      Capital expenditures                        (201,037)         (136,800)
      Proceeds from sale of business                35,200               -
      Acquisition of businesses                        -             (75,668)
      Other, net                                       322               806
    Net cash used in investing activities         (165,515)         (211,662)

    Cash flows from financing activities:
      Stock issued under employee stock
       purchase and option plans                    33,423            39,905
      Purchase of treasury stock                   (66,356)          (28,032)
    Net cash (used in) provided by
     financing activities                          (32,933)           11,873
    Effect of exchange rate changes on cash          4,593             4,713
    Net change in cash and cash equivalents         99,675            59,093

    Cash and cash equivalents, beginning
     of period                                     219,810           160,717

    Cash and cash equivalents, end of
     period                                       $319,485          $219,810