"On a consolidated basis, second quarter net revenues grew 6.7% year-on-year (13.1% excluding the impact of foreign exchange), operating margin expanded sequentially to 12.9%, and EPS of
"On the commercial front, adjusted net orders in the second quarter were
"To reflect the weakening of the US dollar and a slightly lower tax rate, we are upwardly adjusting our 2009 revenue growth target to the mid- to upper-single digits and our earnings per share target to a range of
Consolidated Results
($in millions except EPS) 2Q09 2Q08 Change 1H09 1H08 Change
---- ---- ------ ---- ---- ------
Total Revenues $489.2 $461.8 $957.7 $895.9
Less: Reimbursable
Out-of-Pockets $23.2 $24.9 $50.4 $46.5
Net Revenues $466.0 $436.9 6.7% $907.3 $849.4 6.8%
Operating Income $60.0 $67.5 (11.1)% $115.9 $130.2 (10.9)%
Operating Margin % 12.9% 15.4% 12.8% 15.3%
Net Income $43.0 $50.9 (15.5)% $83.3 $100.0 (16.7)%
Diluted EPS $0.67 $0.80 (16.0)% $1.30 $1.56 (16.7)%
----- ----- ------ ----- ----- ------
Gain on Sale, net of
tax $0.4 $0.6 $0.4 $2.6
Net Income Excluding
Gain on Sale $42.6 $50.3 (15.3)% $82.9 $97.4 (14.9)%
Diluted EPS Excluding
Gain on Sale $0.66 $0.79 (15.9)% $1.29 $1.52 (14.9)%
----- ----- ------ ----- ----- ------
Operating Segment Results
Early Development
($in millions) 2Q09 2Q08 Change 1H09 1H08 Change
---- ---- ------ ---- ---- ------
Net Revenues $199.8 $213.1 (6.3)% $392.3 $415.2 (5.5)%
Operating Income $27.1 $54.2 (50.0)% $54.2 $104.8 (48.2)%
Margin % 13.6% 25.4% 13.8% 25.2%
---- ---- ---- ----
The Company's Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology services, and research products. Early Development net revenues for the second quarter of 2009 were
Operating income for the second quarter of 2009 declined 50.0% year-over-year to
Late-Stage Development
($in millions) 2Q09 2Q08 Change 1H09 1H08 Change
---- ---- ------ ---- ---- ------
Net Revenues $266.3 $223.8 19.0% $515.0 $434.2 18.6%
Operating Income $65.5 $43.0 52.4% $121.8 $81.9 48.8%
Margin % 24.6% 19.2% 23.7% 18.9%
---- ---- ---- ----
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 second quarter of 2009 grew 19.0% to
Operating income for the second quarter of 2009 increased 52.4% to
Corporate Information
The Company's backlog at
Corporate expenses totaled
Cash and cash equivalents at
Free cash flow (defined as operating cash flow less capital expenditures) for the second quarter of 2009 was
Net Days Sales Outstanding (DSO) were 41 days at
The effective tax rate in the second quarter was 27.0%, down from the 29.0% rate last quarter, due primarily to a shift in the geographic mix of our earnings. We expect that the effective tax rate will be in the 28.0% range on a prospective basis.
The Company's investor conference call will be webcast on
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 closings of the acquisition of
Financial Exhibits Follow
COVANCE INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Dollars in thousands, except per share data)
(UNAUDITED)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
2009 2008 2009 2008
---- ---- ---- ----
Net revenues $466,049 $436,912 $907,285 $849,344
Reimbursable
out-of-pockets 23,226 24,911 50,447 46,516
------ ------ ------ ------
Total revenues 489,275 461,823 957,732 895,860
------- ------- ------- -------
Costs and expenses:
Cost of revenue 313,210 286,884 614,935 560,214
Reimbursable
out-of-pocket
expenses 23,226 24,911 50,447 46,516
Selling, general and
administrative 69,569 65,242 133,523 124,259
Depreciation
and amortization 23,273 17,331 42,887 34,679
------ ------ ------ ------
Total costs
and expenses 429,278 394,368 841,792 765,668
------- ------- ------- -------
Income from operations 59,997 67,455 115,940 130,192
Other expense (income), net:
Interest expense
(income), net 160 (1,501) 77 (4,097)
Foreign exchange
transaction
loss (gain), net 1,241 (481) 795 (1,546)
Gain on sale of
business (655) (949) (655) (3,927)
---- ---- ---- ------
Other expense
(income), net 746(a) (2,931)(b) 217(a) (9,570)(c)
--- ------ --- ------
Income before
taxes and equity
investee earnings 59,251(a) 70,386(b) 115,723(a) 139,762(c)
Taxes on income 16,051(a) 20,330(b) 32,400(a) 41,053(c)
Equity investee
(loss) earnings (210) 817 (38) 1,266
------- ------- ------- -------
Net income $42,990(a) $50,873(b) $83,285(a) $99,975(c)
======= ======= ======= =======
Basic earnings per share $0.67(a) $0.81(b) $1.31(a) $1.59(c)
Weighted average shares
outstanding - basic 63,823,792 62,825,444 63,705,105 63,069,018
Diluted earnings
per share $0.67(a) $0.80(b) $1.30(a) $1.56(c)
Weighted average
shares outstanding
- diluted 64,193,664 63,756,789 64,024,143 64,058,649
(a) Includes the impact of a $655 gain on sale of Cardiac Safety Services
($426 net of tax) during the second quarter of 2009.
(b) Includes the impact of a $949 gain on sale of Cardiac Safety Services
($617 net of tax) during the second quarter of 2008.
(c) Includes the impact of a $3,927 gain on sale of Cardiac Safety
Services ($2,553 net of tax) during the first six months of 2008.
Excluding the impact of the gain on sale of business:
-----------------------------------------------------
Income before taxes and
equity investee
earnings $58,596 $69,437 $115,068 $135,835
Taxes on income $15,822 $19,998 $32,171 $39,679
Net income $42,564 $50,256 $82,859 $97,422
Basic earnings per share $0.67 $0.80 $1.30 $1.54
Diluted earnings per
share $0.66 $0.79 $1.29 $1.52
COVANCE INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2009 and DECEMBER 31, 2008
(Dollars in thousands)
June 30 December 31
2009 2008
---- ----
(UNAUDITED)
ASSETS
Current Assets:
Cash & cash equivalents $204,351 $221,334
Accounts receivable, net 281,362 228,951
Unbilled services 105,417 112,719
Inventory 75,962 68,206
Deferred income taxes 16,767 15,029
Prepaid expenses and other current assets 102,735 91,451
------- ------
Total Current Assets 786,594 737,690
Property and equipment, net 907,185 860,957
Goodwill, net 123,663 105,486
Other assets 49,654 48,955
------ ------
Total Assets $1,867,096 $1,753,088
========== ==========
LIABILITIES and STOCKHOLDERS'
EQUITY
Current Liabilities:
Accounts payable $31,940 $41,887
Accrued payroll and benefits 80,664 104,607
Accrued expenses and other current
liabilities 79,389 86,521
Unearned revenue 174,552 162,556
Short-term debt 58,000 50,000
Income taxes payable 29,693 14,224
------ ------
Total Current Liabilities 454,238 459,795
Deferred income taxes 52,121 51,385
Other liabilities 50,746 47,059
------ ------
Total Liabilities 557,105 558,239
------- -------
Stockholders' Equity:
Common stock 761 754
Paid-in capital 570,243 551,598
Retained earnings 1,212,854 1,129,569
Accumulated other comprehensive income
(loss) 1,546 (13,975)
Treasury stock (475,413) (473,097)
-------- --------
Total Stockholders' Equity 1,309,991 1,194,849
--------- ---------
Total Liabilities and Stockholders'
Equity $1,867,096 $1,753,088
========== ==========
COVANCE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Dollars in thousands)
(UNAUDITED)
Six Months Ended
June 30
----------------
2009 2008
---- ----
Cash flows from operating activities:
Net income $83,285 $99,975
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,887 34,679
Non-cash compensation expense associated With
employee benefit and stock compensation plans 13,238 12,540
Deferred income tax benefit (1,387) (2,277)
Gain on sale of business (655) (3,927)
Loss on sale of property and equipment 264 253
Equity investee loss (earnings) 38 (1,266)
Changes in operating assets and liabilities,
net of business acquired:
Accounts receivable (51,478) (6,775)
Unbilled services 8,468 (17,914)
Inventory (7,756) (6,544)
Accounts payable (10,040) (5,512)
Accrued liabilities (32,000) (12,331)
Unearned revenue 11,111 (942)
Income taxes payable 15,694 2,565
Other assets and liabilities, net (13,033) (6,676)
------- ------
Net cash provided by operating activities 58,636 85,848
------ ------
Cash flows from investing activities:
Capital expenditures (70,911) (143,163)
Acquisition of business, net of cash acquired (18,620) -
Proceeds from sale of business 655 3,927
Other, net 15 96
-- --
Net cash used in investing activities (88,861) (139,140)
------- --------
Cash flows from financing activities:
Net borrowings under revolving credit facility 8,000 35,000
Payment of debt assumed upon acquisition of
business (5,431) -
Stock issued under employee stock purchase and
option plans 5,189 14,691
Purchase of treasury stock (2,316) (130,427)
------ --------
Net cash provided by (used in) financing activities 5,442 (80,736)
----- -------
Effect of exchange rate changes on cash 7,800 10,198
----- ------
Net change in cash and cash equivalents (16,983) (123,830)
Cash and cash equivalents, beginning of period 221,334 319,485
------- -------
Cash and cash equivalents, end of period $204,351 $195,655
======== ========