Covance Inc. Reports Second Quarter Pro Forma Net Revenue of $538 Million, Pro Forma EPS of $0.65 and Adjusted Net Orders Of $701 Million
PRINCETON, N.J., July 25, 2012 /PRNewswire/ -- Covance Inc. (NYSE: CVD) today reported results for its second quarter ended June 30, 2012. On a GAAP basis, net revenue was $543 million. Excluding revenue from facilities where closure activities have commenced (as described below), pro forma net revenue was $538 million. On a GAAP basis, the company reported a loss of $0.23 per share in the second quarter. Excluding losses from facilities where closure activities have commenced, restructuring costs, and asset impairments, the company reported earnings per diluted share of $0.65.
"In the second quarter pro forma net revenues grew sequentially in both of our business segments, pro forma operating margin expanded 30 basis points sequentially to 9.0%, and pro forma EPS increased to $0.65," said Joe Herring, Chairman and Chief Executive Officer. "Continued strong commercial performance, led by another record order performance in clinical development, drove a third consecutive quarter of adjusted net orders of at least $700 million, representing a 14% year-on-year increase and an adjusted book-to-bill of 1.30 to 1. In addition, our strategic information technology projects continue to progress on time and on budget.
"In terms of segment performance in the quarter, Late-Stage Development revenues grew 12.8% year-on-year, led again by revenue growth in excess of 25% in clinical development and continued year-on-year and sequential growth in central laboratories, which more than offset a decline in our market access services. Operating margins increased 110 basis points year-on-year to 21.1%, but declined as expected from the exceptional first quarter level on increased staffing in clinical development, lower profitability in market access services and increased spending on strategic IT projects. Late-Stage margins are expected to decline in the back half of 2012 due to increased IT spending, continued hiring in clinical, normal seasonality, and the impact of the stronger US dollar.
"In Early Development, we continued to drive our cost reduction and capacity rationalization actions in order to better align supply with demand and improve margins. In addition to the $20 million of annualized profit improvement announced in May, today we are announcing an incremental $15 million, bringing the total annualized impact of these actions to approximately $35 million from the cost reductions and capacity rationalizations, with approximately one-third expected to be realized in 2012. The 2012 savings are largely expected to offset a slower ramp in Early Development earnings this year. New actions include the further streamlining of operations, closure activities at our Phase I clinics in Honolulu and Basel, and a one-third reduction in our Muenster toxicology capacity (the actions in Muenster and Basel are pending the completion of customary employee consultations). In addition, we are pursuing further cost actions, including a reduction of our corporate spending.
"In terms of Early Development's second quarter results, pro forma revenue and earnings (which exclude restructuring costs; losses incurred in Chandler, Honolulu, and Basel; and asset impairments) improved sequentially from first quarter levels. Pro forma net revenues increased $3.7 million sequentially to $215.4 million while pro forma operating margin increased 340 basis points sequentially to 8.7%. We expect a sequential increase in revenue and operating margins for the segment in the third quarter as somewhat higher volumes in toxicology and discovery support are expected to more than offset a decline in clinical pharmacology results.
"Looking forward to the third quarter of 2012, we expect pro forma revenue and EPS to be slightly higher than the second quarter level. For the full year, we are revising our revenue growth forecast to the low- to mid-single-digit range primarily due to foreign exchange headwinds and more modest sequential growth in Early Development. We now expect pro forma diluted earnings per share to be in the range of $2.50 to $2.70 (excluding impairment charges, restructuring costs and losses from facilities in wind-down, and using June 30 foreign exchange rates)."