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COVANCE Q3 EARNINGS BEATS CONSENSUS ESTIMATES
Covance Reports Q3 EPS Growth of 56%, Excluding One-Time Tax Gain
Company Raises 2002 and 2003 Full-Year EPS Guidance

Princeton, New Jersey, October 23, 2002 — Covance Inc. (NYSE: CVD) today reported earnings for its third quarter ended September 30, 2002 of $0.25/diluted share, $0.03 ahead of analysts' consensus expectations, excluding a one-time favorable income tax gain. Including the impact of this one-time gain, EPS for the quarter was $0.36/diluted share.

"For the third consecutive quarter, Covance delivered higher than expected results reflecting the strength of our diversified business model. We experienced continued robust demand for our Early Development services and significant margin improvement in our Late-Stage Development segment," said Chris Kuebler, Chairman and CEO. "Year-over-year revenue growth accelerated to 12.5% for the quarter and we continue to expect double digit revenue growth on a go forward basis. Solid performance across a broad range of our services this quarter delivered results which significantly exceeded expectations. In addition, we generated $32.4 million in free cash flow in the third quarter and $60.5 million year-to-date."

"In light of our outstanding third quarter performance, we are raising our 2002 full-year diluted EPS guidance to at least $0.90/share, excluding the impact of the one-time income tax gain," added Mr. Kuebler. "In addition, our expectation for continued double digit revenue growth throughout next year leads us to believe that our full year 2003 diluted EPS will be at least $1.13/share, exceeding the high end of the previously announced guidance."

Consolidated Results

($ in millions except EPS)	3Q'02	3Q'01*	Change	2002 YTD	2001 YTD*	Change
Net Revenues	$221.0	$196.4	12.5%	$648.8	$595.9	8.9%
Reimbursable Out-of-Pockets	$9.9	$9.7		$30.2	$29.9
Total Revenues	$230.9	$206.1		$679.0	$625.8
Costs and Expenses	$196.1	$180.5	8.6%	$582.3	$549.1	6.0%
Reimbursable Out-of-Pockets	$9.9	$9.7		$30.2	$29.9
Total Costs and Expenses	$206.0	$190.2		$612.5	$579.0
Operating Income	$24.9	$16.0	55.6%	$66.5	$46.8	42.1%
Operating Margin %	11.3%	8.1%		10.3%	7.9%
Net Income	$15.4	$9.8	57.1%	$40.3	$27.5	46.5%
Diluted EPS	$0.25	$0.16	56.2%	$0.65	$0.46	41.3%

* 2002 net income and diluted EPS amounts have been reduced to exclude the $6.5 million ($0.11/diluted share) favorable income tax reserve reversal reported during the third quarter. All 2001 amounts in this release have been adjusted to exclude the 2001 divestitures of our packaging and biomanufacturing businesses, restructuring charge, and the amortization of goodwill in accordance with SFAS 142.

Net revenues for the third quarter of 2002 increased 12.5% to $221.0 million compared to $196.4 million in the third quarter of 2001, up sequentially from $219.2 million reported last quarter. Year-to-date net revenues are now up 8.9% to $648.8 million compared to $595.9 million for the prior year.

Costs and expenses for the third quarter of 2002 increased 8.6% to $196.1 million, compared to $180.5 million in the third quarter of 2001. Year-to-date, costs and expenses increased 6.0% to $582.3 million compared to $549.1 million in the prior year.

Consolidated operating income for the third quarter of 2002 increased 55.6% to $24.9 million, compared to $16.0 million in the third quarter of 2001. Operating margin for the third quarter of 2002 was 11.3% compared to 8.1% for the third quarter of last year and 10.3% last quarter, making this quarter the eighth consecutive quarter of margin expansion. Year-to-date, operating income is now up 42.1% to $66.5 million from $46.8 million for the prior year.

Net income for the third quarter of 2002 increased 57.1% to $15.4 million or $0.25/diluted share compared to $9.8 million or $0.16/diluted share for the third quarter of last year and $13.1 million or $0.21/diluted share last quarter (a sequential increase of 19.0%). Year-to-date, net income is now up 46.5% to $40.3 million or $0.65/diluted share compared to $27.5 million or $0.46/diluted share for the same 2001 period.

"Our focus on attracting, retaining and developing people; driving process improvements; and strengthening client relationships has led to much of this year's improvement in operating margin," said Joe Herring, President and COO. "We anticipate that our commitment to operational excellence will continue to pay off in the future."

Operating Segment Results
Early Development

($in millions)	3Q02	3Q01	Change	2002 YTD	2001 YTD	Change
Net Revenues	$93.8	$79.7	17.7%	$270.6	$232.5	16.4%
Operating Income	$18.2	$12.7	43.3%	$49.3	$36.0	36.9%
Margin %	19.4%	15.9%		18.2%	15.5%

The Company's Early Development segment includes preclinical and Phase I clinical trial services. Early Development net revenues for the third quarter of 2002 grew 17.7% to $93.8 million compared to $79.7 million in the third quarter of 2001 and $91.4 million last quarter. Year-to-date, 2002 net revenues are now up 16.4% to $270.6 million compared to $232.5 million for the prior year. Covance's industry leading toxicology services continued to drive strong quarterly and year-over-year revenue growth in the segment. Growth in this segment is expected to continue to accelerate as the North American toxicology expansion became operational at the start of October.

Operating income for the third quarter of 2002 increased 43.3% to $18.2 million compared to $12.7 million for the third quarter of last year and $16.9 million last quarter. Operating margins for the third quarter of 2002 grew to 19.4% from 15.9% in the prior year and 18.5% last quarter. Year-to-date, operating margins are now 18.2% compared to 15.5% 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 and Phase I operations.

Late-Stage Development

($in millions)	3Q02	3Q01	Change	2002 YTD	2001 YTD	Change
Net Revenues	$127.2	$116.7	9.0%	$378.2	$363.4	4.1%
Operating Income	$18.2	$9.7	87.6%	$48.8	$30.1	62.1%
Margin %	14.3%	8.3%		12.9%	8.3%

The Late-Stage Development segment includes central laboratory, Phase II-III clinical development, commercialization services (including Phase IV studies), and other clinical support services. Late-Stage Development net revenues for the third quarter of 2002 increased 9.0% to $127.2 million compared to $116.7 million in the third quarter of 2001. Revenue growth in the quarter was driven primarily by improved performance in its Phase III and central laboratory services.

Operating income for the third quarter of 2002 increased 87.6% to $18.2 million compared to $9.7 million in the third quarter of the prior year and $16.6 million last quarter. Operating margins increased significantly year-over-year and sequentially. For the third quarter of 2002, operating margins were 14.3%, up from 8.3% for the third quarter last year and 13.0% last quarter. Margin improvement in the quarter was driven primarily by its Phase III and central laboratory services. Year-to-date, operating margins are now 12.9% compared to 8.3% in the prior year. Year-to-date, margin improvement reflects strong performance in its Phase III and commercialization service areas as well as effective cost management.

Corporate Information
During the third quarter, Covance reduced its income tax reserve by $6.5 million, primarily as a result of the settlement of a longstanding multi-year foreign income tax audit. This reduction increased reported diluted earnings per share by $0.11.

The Company's backlog was $1,083 million at September 30, 2002 compared to $1,057 million at June 30, 2002, and $996 million at September 30, 2001.

The Company reported cash and cash equivalents of $66.1 million and continues to have no debt outstanding. The Company's capital expenditures were $19.3 million for the third quarter of 2002 and are now $38.5 million year-to-date. In connection with its previously announced stock buy back program, the Company repurchased $16.2 million of its stock during the quarter. Positive free cash flow was $32.4 million during the third quarter and $60.5 million for the first nine months of this year.

Net Days Sales Outstanding (DSO) were 42 days at September 30, 2002 versus 46 days at June 30, 2002 and 45 days at September 30, 2001. Current DSOs continue to track below the Company's internal target and historical average.

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 6,900 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, risks associated with acquisitions and investments, 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 services 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 October 23, 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.

                    PROFORMA UNAUDITED INCOME STATEMENTS

        FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

                (Dollars in thousands, except per share data)


                              Three Months Ended September 30   Nine Months Ended September 30
                                         2002(a)      2001(b)        2002(a)      2001(b)

Net revenues                         $   220,968  $   196,394    $   648,756  $   595,861 
Reimbursable out-of-pockets                9,924        9,731         30,247       29,957 
    Total revenues                   $  230,892   $  206,125     $   679,003  $   625,818 

Costs and expenses:								
  Cost of revenue                        152,568      141,664        452,924      429,627 
  Reimbursed out-of-pocket expenses        9,924        9,731         30,247       29,957 
  Selling, general and administrative     33,201       29,241         98,681       90,231 
  Depreciation and amortization           10,329        9,534         30,640       29,184 
    Total                                206,022      190,170        612,492      578,999 

Income from operations                    24,870       15,955         66,511       46,819 

Other (income) expense, net:
  Interest expense, net                      260          334            745        2,143 
  Foreign exchange transaction               541         (201)         1,919          (66)
  loss (gain), net
    Other expense, net                       801          133          2,664        2,077 

Income before taxes                       24,069       15,822         63,847       44,742 

Taxes on income                            8,686        6,051         23,584       17,205 

Net income                           $    15,383  $     9,771    $    40,263  $    27,537 

Basic earnings per share             $      0.26  $      0.16    $      0.67  $      0.47 

Weighted average shares outstanding   60,076,986   59,381,407     60,294,923   58,650,730 
  - basic
Diluted earnings per share           $      0.25  $      0.16    $      0.65  $      0.46 

Weighted average shares outstanding   61,192,298   61,317,564     61,613,852   60,134,970 
  - diluted


(a) 2002 adjusted to exclude the reversal of a $6.5 million income tax reserve relating
primarily to the favorable settlement of a longstanding multi-year foreign income tax audit.
								
(b) Three months ended September 30, 2001 adjusted to exclude goodwill amortization in
accordance with SFAS No. 142.
				
(c) Nine months ended September 30, 2001 adjusted to exclude results of divested businesses
(including reduced interest expense from the application of the net sales proceeds to
outstanding debt and gain on sale).  2001 also has been adjusted to exclude a restructuring
charge recorded during the second quarter of 2001 and goodwill amortization in accordance
with SFAS No. 142.				
				
See supplemental schedule for details.
				


                                        COVANCE INC.

                                CONSOLIDATED BALANCE SHEETS

                           SEPTEMBER 30, 2002 AND DECEMBER 31, 2001

                                   (Dollars in thousands)

                                                                    
                                            September 30  December 31
                                                    2002         2001
                                             (UNAUDITED)
ASSETS						
Cash & cash equivalents                       $   66,139    $  35,404
Accounts receivable, net                         153,921      167,840
Unbilled services                                 41,218       40,895
Inventory                                         36,666       36,131
Deferred income taxes                             13,901       13,445
Prepaid expenses and other current assets         28,723       30,778
   Total Current Assets                          340,568      324,493

Property and equipment, net                      240,447      228,092
Goodwill, net                                     56,720       54,038
Other assets                                       6,056        5,405
   Total Assets                                $ 643,791    $ 612,028

LIABILITIES and STOCKHOLDERS' EQUITY
Accounts payable                               $  17,213    $  21,134
Accrued payroll and benefits                      56,717       45,902
Accrued expenses and other current liabilities    39,372       40,296
Unearned revenue                                  93,312      116,712
Income taxes payable                              15,532        2,739
   Total Current Liabilities                     222,146      226,783

Long-term debt                                         -       15,000
Deferred income taxes                             12,338       11,613
Other liabilities                                 14,941       13,687
   Total Liabilities                             249,425      267,083

Common stock                                         629          619
Paid-in capital                                  134,503      122,217
Retained earnings                                302,089      255,326
Cumulative translation adjustment                 (5,528)     (12,310)
Treasury stock                                   (37,327)     (20,907)
   Total Stockholders' Equity                    394,366      344,945

   Total Liabilities and Stockholders' Equity  $ 643,791    $ 612,028




                                     COVANCE INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

                               (Dollars in thousands)

                                     (UNAUDITED)
                                    
                                                                    Nine Months Ended September 30
                                                                                       PROFORMA(*)
                                                                  2002         2001           2001

Cash flows from operating activities:						
  Net income                                                  $  46,763   $  38,125      $  17,371
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Depreciation and amortization                                30,640      36,615         31,831 
    Stock issued under employee benefit                           7,813      10,004         10,004
      and stock compensation plans
    Deferred income tax benefit (provision)                         500        (423)         1,141 
    Gain on sale of businesses, net                                   -     (30,803)             -
    Restructuring charge, net of cash paid                            -       7,668          7,668 
    Other                                                           793       1,173          1,173 
Changes in operating assets and liabilities, net of businesses
acquired and sold:
  Accounts receivable                                            14,512      (9,796)       (14,369)
  Unbilled services                                                (323)     (3,961)        (1,500)
  Inventory                                                        (535)     (5,085)        (5,152)
  Accounts payable                                               (4,043)     (5,362)        (2,771)
  Accrued liabilities                                             9,214     (11,011)        (1,672)
  Unearned revenue                                              (23,544)      8,369         11,979 
  Income taxes payable                                           12,793       7,295          9,719 
  Other assets and liabilities, net                               4,429      (1,968)        11,311 
Net cash provided by operating activities                        99,012      40,840         76,733 

Cash flows from investing activities:
  Capital expenditures                                          (38,545)    (38,770)       (31,463)
  Acquisition of business, net of cash acquired                  (2,796)          -              -
  Proceeds from sale of businesses                                    -     251,059              -
  Other, net                                                          1          75             75 
Net cash (used in) provided by investing activities             (41,340)    212,364        (31,388)

Cash flows from financing activities:
  Net (repayments) borrowings under revolving credit facilities (15,000)   (214,000)       (29,000)
  Repayments of long-term debt                                        -     (18,723)             -
  Stock issued under employee stock purchase and option plans     4,483      12,705         12,705 
  Purchase of treasury stock                                    (16,420)       (146)          (146)
Net cash used in financing activities                           (26,937)   (220,164)       (16,441)
Net change in cash and cash equivalents                          30,735      33,040         28,904 

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

Cash and cash equivalents, end of period                      $  66,139   $  40,231      $  40,231 


* Proforma cash flow for the nine months ended September 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 nine months of 2001).
   
   

                              COVANCE INC.

                           Supplemental Schedule

                        PRO FORMA INCOME STATEMENTS 
          FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

               (Dollars in thousands, except per share data)
                               (UNAUDITED)


                                                       Pro Forma
                                              As       to Remove     Pro Forma
                                        Reported  Tax Adjustment       Results

Three Months Ended September 30, 2002

  Net revenues                         $ 220,968     $       -       $ 220,968
  Income from operations                  24,870             -          24,870
  Income before taxes                     24,069             -          24,069
  Taxes on income                          2,186         6,500           8,686
  Net income                              21,883        (6,500)         15,383
  Diluted earnings per share           $    0.36      $  (0.11)      $    0.25
Nine Months Ended September 30, 2002

  Net revenues                         $ 648,756             -       $ 648,756
  Income from operations                  66,511             -          66,511
  Income before taxes                     63,847             -          63,847
  Taxes on income                         17,084         6,500          23,584
  Net income                              46,763        (6,500)         40,263
  Diluted earnings per share           $    0.76      $  (0.11)      $    0.65

                                              As     Pro Forma to    Pro Forma
                                        Reported  Remove Goodwill      Results
                                                     Amortization
Three Months Ended September 30, 2001

  Net revenues                         $ 196,394              -      $ 196,394
  Income from operations                  15,070            885         15,955
  Income before taxes                     14,937            885         15,822
  Taxes on income                          5,878            173          6,051
  Net income                               9,059            712          9,771
  Diluted earnings per share           $    0.15      $    0.01      $    0.16
  
                                                            Pro Forma Adjustments to Remove
                                            As                              Net Gain                     Goodwill   Pro Forma
                                      Reported   Packaging          Bio     on Sales  Restructuring  Amortization     Results

Nine Months Ended September 30, 2001

  Net revenues                       $ 651,473   $ (11,439)   $ (44,173)   $       -     $       -     $        -   $ 595,861 
															
  Income from operations                38,295      (3,806)       1,489            -         8,178          2,663      46,819 
															
  Income before taxes                   62,313      (2,579)       4,970      (30,803)        8,178          2,663      44,742 
															
  Taxes on income                       24,188        (762)       1,954      (11,888)        3,193            520      17,205 
															
  Net income                            38,125      (1,817)       3,016      (18,915)        4,985          2,143      27,537 
															
  Diluted earnings per share         $    0.63   $   (0.03)   $    0.05    $   (0.31)     $   0.08      $    0.04    $   0.46 



                                 COVANCE INC.

                      INCOME STATEMENTS - INCLUDING SPECIAL ITEMS

             FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

                 (Dollars in thousands, except per share data)
                                 (UNAUDITED)

                                   Three Months Ended September 30   Nine Months Ended September 30
                                                2002          2001             2002          2001

Net revenues                             $   220,968   $   196,394      $   648,756   $   651,473
Reimbursable out-of-pockets                    9,924         9,731           30,247        29,957 
    Total revenues                       $   230,892   $   206,125      $   679,003   $   681,430 

Costs and expenses:
  Cost of revenue                            152,568       141,664          452,924       473,676 
  Reimbursed out-of-pocket expenses            9,924         9,731           30,247        29,957 
  Selling, general and administrative         33,201        29,241           98,681        94,709 
  Depreciation and amortization               10,329        10,419           30,640        36,615 
  Restructuring charge                             -             -                -         8,178 
    Total                                    206,022       191,055          612,492       643,135 

Income from operations                        24,870        15,070           66,511        38,295 

Other (income) expense, net:
  Interest expense, net                          260           334              745         6,833 
  Foreign exchange transaction loss (gain), net  541          (201)           1,919           (48)
  Gain on sale of businesses, net                  -             -                -       (30,803)
    Other (income) expense, net                  801           133            2,664       (24,018)

Income before taxes                           24,069        14,937           63,847        62,313 

Taxes on income                                2,186         5,878           17,084        24,188 

Net income                               $    21,883   $     9,059       $   46,763   $    38,125 

Basic earnings per share                 $      0.36   $      0.15       $     0.78   $      0.65 

Weighted average shares outstanding       60,076,986    59,381,407       60,294,923    58,650,730 
  - basic
Diluted earnings per share               $      0.36   $      0.15       $     0.76   $      0.63 

Weighted average shares outstanding       61,192,298    61,317,564       61,613,852    60,134,970
 - diluted