- Record Adjusted Net Orders of $623 Million; 1.31 Adjusted Book-to-Bill -
Oct. 21, 2009 (PR Newswire) --
PRINCETON, N.J., Oct. 21 /PRNewswire-FirstCall/ -- Covance Inc. (NYSE: CVD) today reported GAAP earnings for its third quarter ended September 30, 2009 of $0.79 per diluted share, inclusive of a $0.09 per share gain related to the sale of its IVRS business and $0.03 cents from favorable income tax resolutions. Excluding the gain on sale and tax items in the quarter, earnings were $0.67 per diluted share.
"On a consolidated basis, third quarter net revenues grew 8.0% year-on-year and EPS was $0.67. In addition, adjusted net orders grew approximately 20% both year-on-year and sequentially and free-cash-flow was strong at $88 million," said Joe Herring, Chairman and Chief Executive Officer. "In Early Development, results were below our expectations, as revenues and operating margins declined sequentially, primarily due to weaker performance in clinical pharmacology and some of our chemistry services. Toxicology revenue was up modestly from the second quarter with lower operating margin. In Late-Stage Development, better than expected performances in central laboratory and clinical development led to accelerated revenue growth of 24.1% and record operating margin of 24.7%.
"On the commercial front, continued strong business awards in clinical development and central laboratory led to record adjusted net orders in the third quarter of $623 million, representing an adjusted book-to-bill ratio of 1.31 to 1. For the first time this year, Early Development recorded a quarterly adjusted book-to-bill greater than 1.0 to 1. On a trailing twelve month basis, our Late-Stage Development adjusted book-to-bill remained at 1.5 to 1.
"We are encouraged by the exceptional strength of our Late-Stage Development segment, which represented 59% of Covance's third quarter revenues. In Early Development, overall demand has been lower and the timing of study starts has been less predictable. We are projecting relatively flat Early Development results until we see a sustained recovery in demand. Accordingly, using September 30 exchange rates, we expect consolidated fourth quarter earnings per share to be in the $0.64 to $0.67 range, which would bring full-year earnings per share to the low end of our previous targeted range of $2.60 to $2.80 (excluding gains on sales and favorable income tax resolutions)."
Consolidated Results
($in millions
except EPS) 3Q09 3Q08 Change 2009YTD 2008YTD Change
Total Revenues 493.7 $467.4 $1,451.5 $1,363.2
Less: Reimbursable
Out-of-Pockets $18.4 $27.3 $68.9 $73.8
Net Revenues $475.3 $440.1 8.0% $1,382.6 $1,289.4 7.2%
Operating Income $57.8 $70.0 (17.4)% $173.7 $200.2 (13.2)%
Operating Margin % 12.2% 15.9% 12.6% 15.5%
Net Income $51.1 $51.1 (0.1)% $134.3 $151.1 (11.1)%
Diluted EPS $0.79 $0.80 (0.8)% $2.09 $2.36 (11.4)%
Gain on Sale,
net of tax $5.9 - $6.3 $2.6
Favorable Income
Tax Resolutions $2.1 - $2.1 -
Net Income ex Gain
on Sale and
Favorable Income
Tax Resolutions $43.1 $51.1 (15.6)% $126.0 $148.5 (15.2)%
Diluted EPS
Excluding Gain
on Sale and
Favorable Income
Tax Resolut. $0.67 $0.80 (16.3)% $1.96 $2.32 (15.4)%
Operating Segment Results
Early Development
($in millions) 3Q09 3Q08 Change 2009 YTD 2008 YTD Change
Net Revenues $196.4 $215.4 (8.8)% $588.7 $630.6 (6.6)%
Operating Income $22.4 $54.8 (59.1)% $76.7 $159.6 (52.0)%
Margin % 11.4% 25.5% 13.0% 25.3%
The Company's Early Development segment includes preclinical toxicology, analytical chemistry, clinical pharmacology services, and research products. Early Development net revenues for the third quarter of 2009 were $196.4 million compared to $215.4 million in the third quarter of 2008. Reduced demand for Early Development service offerings led to the 8.8% year-on-year decline in revenues. In the quarter, foreign exchange negatively impacted year-on-year revenue growth by 330 basis points. Clinical pharmacology revenue and operating income in the quarter were down from the second quarter level and are expected to decline further in the fourth quarter primarily due to lower market demand.
Operating income for the third quarter of 2009 declined 59.1% year-over-year to $22.4 million, compared to $54.8 million in the third quarter of last year. Operating margins for the third quarter of 2009 were 11.4% compared to 25.5% in the third quarter of 2008 and 13.6% last quarter. Year-over-year, operating margins were impacted by a lower level of study activity, delays of scheduled study starts, start-up losses in our new Chandler facility, lower early development pricing, and staffing levels above current demand.
Late-Stage Development
($in millions) 3Q09 3Q08 Change 2009 YTD 2008 YTD Change
Net Revenues $278.9 $224.7 24.1% $793.9 $658.9 20.5%
Operating Income $68.9 $44.3 55.6% $190.7 $126.1 51.2%
Margin % 24.7% 19.7% 24.0% 19.1%
The Late-Stage Development segment includes central laboratory, Phase II-III clinical development, and commercialization services (periapproval and market access services). Late-Stage Development net revenues for the third quarter of 2009 grew 24.1% to $278.9 million compared to $224.7 million in the third quarter of 2008. Sequentially, revenues grew $12.6 million, or 4.7%. The sequential and year-on-year growth was led by the continued exceptional performances of central laboratory and clinical development. Foreign exchange negatively impacted year-on-year revenue growth in the quarter by 290 basis points.
Operating income for the third quarter of 2009 increased 55.6% to $68.9 million compared to $44.3 million in the third quarter of the prior year. Central laboratory and clinical development services drove the record operating margins of 24.7% for the third quarter of 2009 compared to 19.7% in the third quarter of last year and 24.6% last quarter. Operating margin in Late-Stage Development is expected to moderate slightly in the fourth quarter.
