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COVANCE Q2 EARNINGS OF $0.21/SHARE BEATS CONSENSUS ESTIMATES
Net Income YTD Increased 40%; Company Raises Full Year EPS Guidance Following Strong First Half

Princeton, New Jersey, July 24, 2002 — Covance Inc. (NYSE: CVD) today reported earnings for its second quarter ended June 30, 2002 of $0.21/diluted share, ahead of analysts' consensus estimates of $0.20/share.

"For the second consecutive quarter, Covance delivered stronger than expected results reflecting the continued strong demand for our Early Development services and significant margin improvement in our Late-Stage Development segment," said Chris Kuebler, Chairman and CEO. "In light of this stronger performance, expectations for continued acceleration in revenue growth and our growing backlog of business, we currently anticipate 2002 full-year EPS in the $0.83 to $0.85 range and we reiterate our comfort with our ability to continue to deliver earnings growth of at least 30% from this higher base in 2003."

Commenting on recent developments in the pharmaceutical industry, Mr. Kuebler added, "In 2001, we re-focused our portfolio around our laboratory services which currently contribute about two-thirds of our total revenues. In addition to optimizing our leadership position in these markets, this move also reduced our Company's exposure to volatility in the important, but highly competitive, market for Phase III clinical trials management services. With our balanced portfolio, diverse customer base, and strong balance sheet, Covance is well-positioned to deliver stable growth in this dynamic industry." The Company also noted that its preclinical laboratory services are not typically subject to significant project cancellations and central laboratory services have not been as vulnerable to the impact of pharmaceutical industry consolidations since clients do not have competing internal capacity in this area.

Consolidated Results

($ in millions except EPS)	2Q'02	2Q'01*	Change	'02YTD	'01 YTD*	Change
Net Revenues	$219.2	$203.9	7.5%	$427.8	$399.5	7.1%
Reimbursable Out-of-Pockets	$10.6	$10.3		$20.3	$20.2
Total Revenues	$229.8	$214.1		$448.1	$419.7
Costs and Expenses	$196.7	$188.0	4.6%	$386.2	$368.6	4.8%
Reimbursable Out-of-Pockets	$10.6	$10.3		$20.3	$20.2
Total Costs and Expenses	$207.3	$198.3		$406.5	$388.8
Operating Income	$22.5	$15.8	41.9%	$41.6	$30.9	34.9%
Operating Margin %	10.3%	7.8%		9.7%	7.7%
Net Income	$13.1	$9.2	43.1%	$24.9	$17.8	40.0%
Diluted EPS	$0.21	$0.15	40%	$0.40	$0.30	33%

* All 2001 amounts in this release have been adjusted to exclude the 2001 divestitures of packaging and biomanufacturing businesses, restructuring charge, and the amortization of goodwill in accordance with SFAS 142.

Net revenues for the second quarter of 2002 increased 7.5% to $219.2 million compared to $203.9 million in the second quarter of 2001, and up 5.1% sequentially from $208.5 million last quarter. Year-to-date net revenues increased 7.1% to $427.8 million compared to $399.5 million for the prior year.

Costs and expenses for the second quarter of 2002 increased 4.6% to $196.7 million, compared to $188.0 million in the second quarter of 2001. Year-to-date, costs and expenses increased 4.8% to $386.2 million compared to $368.6 million in the prior year.

Consolidated operating income for the second quarter of 2002 increased 41.9% to $22.5 million, compared to $15.8 million in the second quarter of 2001. Operating margin for the second quarter of 2002 was 10.3% compared to 7.8% for the second quarter of last year. Year-to-date operating income increased 34.9% to $41.6 million compared to $30.9 million in the prior year.

Net income for the second quarter of 2002 increased 43.1% to $13.1 million or $0.21/share compared to $0.15/share for the second quarter of last year and increased sequentially by 11.0% over the prior quarter. Year-to-date net income increased 40% to $24.9 million or $0.40/share compared to $0.30/share for the same period in 2001. All periods exclude the amortization of goodwill.

Operating Segment Results
Early Development

($in millions)	2Q02	2Q01	Change	2002 YTD	2001 YTD	Change
Net Revenues	$91.4	$78.7	16.1%	$176.8	$152.8	15.7%
Operating Income	$16.9	$11.9	42.8%	$31.1	$23.3	33.4%
Margin %	18.5%	15.1%		17.6%	15.3%

The Company's Early Development segment includes preclinical and Phase I clinical trial services. Early Development net revenues for the second quarter of 2002 grew 16.1% to $91.4 million compared to $78.7 million in the second quarter of 2001. Year-to-date 2002 net revenues grew 15.7% to $176.8 million compared to $152.8 million in the prior year. Covance's industry leading toxicology services continued to drive strong quarterly and year-over-year revenue growth in the segment, which is expected to continue to accelerate in the second half of the year.

Operating income for the second quarter of 2002 increased 42.8% to $16.9 million compared to $11.9 million for the second quarter of last year. Operating margins for the second quarter of 2002 grew to 18.5% from 15.1% in the prior year. Year to date, operating margins were 17.6 % compared to 15.3% for the prior year. Margin improvement for the quarter and year to date was driven primarily by stronger toxicology margins and improvements in pharmaceutical chemistry services.

Late-Stage Development

($in millions)	2Q02	2Q01	Change	2002 YTD	2001 YTD	Change
Net Revenues	$127.8	$125.1	2.2%	$251.0	$246.7	1.8%
Operating Income	$16.6	$11.0	50.5%	$30.6	$20.3	50.5%
Margin %	13.0%	8.8%		12.2%	8.2%

The Late-Stage Development segment includes central laboratory, Phase II-III clinical development, periapproval services (including Phase IV studies), and other clinical support services. Late-Stage Development net revenues for the second quarter of 2002 increased 2.2% to $127.8 million compared to $125.1 million in the second quarter of 2001. As expected, revenues in this segment continued to increase on a sequential basis up 3.8% from $123.2 million last quarter. Year to date, revenues increased 1.8% to $251.0 million compared to $246.7 million in the prior year. The modest revenue growth for the quarter and year-to-date will accelerate in the second half due to easier central laboratory revenue comparisons and the conversion of central labs backlog for very large contracts to revenues.

Operating income for the second quarter of 2002 increased 50.5% to $16.6 million compared to $11.0 million in the prior year. Operating margins increased significantly year-over-year and sequentially. For the second quarter of 2002 operating margins were 13.0%, up from 8.8% for the second quarter last year and 11.4% for the prior quarter. Year to date, operating margins were 12.2% compared to 8.2% in the prior year. Margin improvement for the second quarter and year-to-date reflects continued strong performance in our Phase IV services, improving Phase III margins and effective cost management.

Corporate Information
The Company's backlog was $1,057 million on June 30, 2002, up 15.5% from the same period last year. Backlog was $1,030 million on March 31, 2002, and $915 million on June 30, 2001.

The Company reported cash and cash equivalents of $51.7 million and has no debt outstanding as of June 30, 2002. The Company's capital expenditures were $11.6 million for the second quarter of 2002 and are now $19.3 million year to date. Positive free cash flow was $28.1 million during the first half.

Net Days Sales Outstanding (DSO) for the Company were 46 days at June 30, 2002 versus 41 days at December 31, 2001. Current DSOs continue to track below our internal target and historical average.

Covance intends to resume the repurchase of up to approximately one million shares of its common stock. These shares remain from the Board of Directors authorization to repurchase up to three million shares announced previously. Additionally, the company will consider the repurchase of additional shares, subject to Board approval. Both of these actions are subject to market conditions.

Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with 2001 pro forma revenues of $800 million, global operations in 17 countries, and approximately 7,000 employees worldwide. Much more informtaion about Covance can be found throughout the site, including our products and services, other recent press releases, and SEC filings.

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, the Company's ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss of large contracts, the Company's ability to increase profitability of its clinical development services and to increase order volume in central laboratory services, and continued growth in demand for bioanalytical sevices and Covance's ability to provide these services on a large scale basis, 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. All information in this release is as of July 24th, 2002. 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.


	SEC Filings

	Annual Reports

	Quarterly Reports

	Press Releases


Financial Exhibits follow

                              COVANCE INC.

                     UNAUDITED INCOME STATEMENTS

        FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001

               (Dollars in thousands, except per share data)



                                   Three Months Ended June 30    Six Months Ended June 30

                                                 PRO FORMA(*)                 PROFORMA(*)

                                            2002         2001           2002         2001

Net revenues                         $   219,206  $   203,858    $   427,788  $   399,467

Reimbursable out-of-pockets               10,623       10,279         20,323       20,226

       Total revenues                $   229,829  $   214,137    $   448,111  $   419,693

Costs and expenses:

  Cost of revenue                        152,297      146,515        300,356      287,963

  Reimbursed out-of-pocket expenses       10,623       10,279         20,323       20,226

  Selling, general and administrative     34,215       31,779         65,480       60,990

  Depreciation and amortization           10,205        9,718         20,311       19,650

       Total                             207,340      198,291        406,470      388,829

Income from operations                    22,489       15,846         41,641       30,864

Other (income) expense, net:

  Interest expense, net                      167          788            485        1,809

  Foreign exchange transaction losses, net 1,522          159          1,378          135

       Other expense, net                  1,689          947          1,863        1,944

Income before taxes                       20,800       14,899         39,778       28,920

Taxes on income                            7,698        5,746         14,898       11,154

Net income                           $    13,102  $     9,153     $   24,880  $    17,766

Basic earnings per share             $      0.22  $      0.16     $     0.41  $      0.30

								

Weighted average shares outstanding   60,527,636   58,534,186     60,403,936   58,285,392

  - basic

Diluted earnings per share           $      0.21  $      0.15     $     0.40  $      0.30

Weighted average shares outstanding   61,940,577   60,454,375     61,826,881   59,707,635

  - diluted

 

* 2001 adjusted to exclude: (a) results of divested businesses (including reduced interest

expense from the application of the net sales proceeds to outstanding debt and the gain/loss

on sale); (b) the second quarter restructuring provision; and (c) goodwill amortization in

accordance with SFAS No. 142.  See supplemental schedule for details.



                                        COVANCE INC.

                                CONSOLIDATED BALANCE SHEETS

                           JUNE 30, 2002 AND DECEMBER 31, 2001

                                   (Dollars in thousands)

                                                                    

                                                 June 30  December 31

                                                    2002         2001

                                             (UNAUDITED)

ASSETS						

Cash & cash equivalents                    $  51,695    $  35,404

Accounts receivable, net                         163,382      167,840

Unbilled services                                 47,551       40,895

Inventory                                         36,070       36,131

Deferred income taxes                             10,689       13,445

Prepaid expenses and other current assets         32,301       30,778

   Total Current Assets                          341,688      324,493

Property and equipment, net                      229,880      228,092

Goodwill, net                                     54,107       54,038

Other assets                                       5,058        5,405

   Total Assets                                $ 630,733    $ 612,028

LIABILITIES and STOCKHOLDERS' EQUITY

Accounts payable                               $  21,113    $  21,134

Accrued payroll and benefits                      46,621       45,902

Accrued expenses and other current liabilities    42,127       40,296

Unearned revenue                                 101,853      116,712

Income taxes payable                              10,503        2,739

   Total Current Liabilities                     222,217      226,783

Long-term debt                                         -       15,000

Deferred income taxes                             11,233       11,613

Other liabilities                                 14,638       13,687

   Total Liabilities                             248,088      267,083

Common stock                                         624          619

Paid-in capital                                  130,668      122,217

Retained earnings                                280,206      255,326

Cumulative translation adjustment                (7,781)     (12,310)

Treasury stock                                  (21,072)     (20,907)

   Total Stockholders' Equity                    382,645      344,945

   Total Liabilities and Stockholders' Equity  $ 630,733    $ 612,028



                                     COVANCE INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                  FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

                               (Dollars in thousands)

                                     (UNAUDITED)

                                    

                                                                      Six Months Ended June 30

                                                                                       PROFORMA(*)

                                                                  2002         2001           2001

Cash flows from operating activities:						

  Net income                                                  $  24,880   $  29,066      $  29,066

  Adjustments to reconcile net income to net cash provided by

    operating activities:

    Depreciation and amortization                                20,311      26,196         21,428

    Stock issued under employee benefit                           5,074       6,139          6,139

      and stock compensation plans

    Deferred income tax provision                                 2,376     (1,369)            195

    Gain on sale of businesses                                        -    (30,803)              -  

    Restructuring charge, net                                         -       8,178          8,178

    Other                                                           371         993            993

Changes in operating assets and liabilities, net of businesses sold:

  Accounts receivable                                             4,458     (4,619)        (9,192)

  Unbilled services                                             (6,656)         615          3,076

  Inventory                                                          61     (1,816)        (1,883)

  Accounts payable                                                 (21)     (5,887)        (3,296)

  Accrued liabilities                                             2,550    (16,959)        (7,620)

  Unearned revenue                                             (14,859)       5,645          9,255

  Income taxes payable                                            7,764       3,644          6,068

  Other assets and liabilities, net                               1,044    (15,273)        (2,010)

Net cash provided by operating activities                        47,353       3,750         39,643

Cash flows from investing activities:

  Capital expenditures                                         (19,273)    (27,886)       (20,579)

  Proceeds from sale of businesses                                    -     251,059              -

  Other, net                                                        (6)         101            101

Net cash provided by (used in) investing activities            (19,279)     223,274       (20,478)

Cash flows from financing activities:

  Net (repayments) borrowings under revolving credit facilities(15,000)    (199,000)        25,000

  Repayments of long-term debt                                        -     (18,723)      (39,000)

  Stock issued under employee stock purchase and option plans     3,382        5,870         5,870

  Purchase of treasury stock                                      (165)        (146)         (146)

Net cash used in financing activities                          (11,783)    (211,999)       (8,276)

Net change in cash and cash equivalents                          16,291       15,025        10,889

Cash and cash equivalents, beginning of period                   35,404        7,191        11,327

Cash and cash equivalents, end of period                      $  51,695    $  22,216     $  22,216

* Proforma cash flow for the six months ended June 30, 2001 was computed as if the divestitures of

Packaging and Biomanufacturing had occurred in 2000 (i.e., it is intended to reflect the cash flow

of Covance's continuing operations for the first six months of 2001).

   

   



                                 COVANCE INC.

                              INCOME STATEMENTS

            INCLUDING RESULTS OF DIVESTED BUSINESSES AND SPECIAL ITEMS*

             FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001

                 (Dollars in thousands, except per share data)

                                 (UNAUDITED)

                                        Three Months Ended June 30       Six Months Ended June 30

                                                2002          2001*            2002          2001*

Net revenues                             $   219,206   $   226,421      $   427,788   $   455,079

Reimbursable out-of-pockets                   10,623        10,279           20,323        20,226

    Total revenues                       $   229,829   $   236,700      $   448,111   $   475,305

Costs and expenses:

  Cost of revenue                            152,297       165,496          300,356       332,012

  Reimbursed out-of-pocket expenses           10,623        10,279           20,323        20,226

  Selling, general and administrative         34,215        33,171           65,480        65,468

  Depreciation and amortization               10,205        12,577           20,311        26,196

  Restructuring charge                             -         8,178                -         8,178

    Total                                    207,340       229,701          406,470       452,080

Income from operations                        22,489         6,999           41,641        23,225

Other (income) expense, net:

  Interest expense, net                          167         2,284              485         6,499

  Foreign exchange transaction losses, net     1,522           159            1,378           153

  Loss (gain) on sale of businesses                -         8,430                -      (30,803)

    Other (income) expense, net                1,689        10,873            1,863      (24,151)

Income (loss) before taxes                    20,800       (3,874)           39,778        47,376

Provision (benefit) for income taxes           7,698       (1,115)           14,898        18,310

Net income (loss)                        $    13,102   $   (2,759)       $   24,880   $    29,066

Basic earnings (loss) per share          $      0.22   $    (0.05)       $     0.41   $      0.50

Weighted average shares outstanding       60,527,636    58,534,186       60,403,936    58,285,392

  - basic

Diluted earnings (loss) per share		 $      0.21   $    (0.05)       $     0.40   $      0.49

Weighted average shares outstanding       61,940,577    60,454,375       61,826,881    59,707,635

  - diluted

* 2001 amounts include results of divested businesses from January 1, 2001 until the dates those

businesses were divested, the gain/loss reported on such divestitures, the second quarter

restructuring provision and goodwill amortization.



                                       COVANCE INC.

                                  Supplemental Schedule

                    2001 PRO FORMA INCOME STATEMENTS - RECONCILIATION*

                     FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001

                        (Dollars in thousands, except per share data)

                                        (UNAUDITED)

* Supplemental schedule is provided to reconcile amounts reported under US GAAP to pro forma results.

Pro forma results exclude the results of divested businesses (including reduced interest expense from

the application of the net sales proceeds to outstanding debt and the gain/loss on sale), the second

quarter restructuring provision and goodwill amortization.



                                           Pro Forma Adjustments to Remove

                                 As                          Loss (Gain)                     Goodwill  Pro Forma

                           Reported  Packaging        Bio       on Sales  Restructuring  Amortization    Results

Three Months Ended June 30, 2001

  Net revenues            $ 226,421        n/a   $(22,563)     $       -      $       -     $       -  $ 203,858

  Income from operations      6,999        n/a       (228)             -          8,178           897     15,846

  Income (loss) before taxes (3,874)       n/a      1,268          8,430          8,178           897     14,899

  Taxes on income            (1,115)       n/a        473          3,020          3,193           175      5,746

  Net income (loss)          (2,759)       n/a        795          5,410          4,985           722      9,153

  Diluted earnings (loss) $   (0.05)       n/a   $   0.01       $   0.09       $   0.08      $   0.01   $   0.15

    per share



Six Months Ended June 30, 2001

  Net revenues            $ 455,079   $(11,439)  $(44,173)     $       -      $       -     $       -  $ 399,467

  Income from operations     23,225     (3,806)     1,489              -          8,178         1,778     30,864

  Income before taxes        47,376     (2,579)     4,970        (30,803)         8,178         1,778     28,920

  Taxes on income            18,310       (762)     1,954        (11,888)         3,193           347     11,154

  Net income (loss)          29,066     (1,817)     3,016        (18,915)         4,985         1,431     17,766

  Diluted earnings (loss) $    0.49   $  (0.03)  $   0.05      $   (0.32)     $    0.08     $    0.02  $    0.30

    per share