Covance Updates 2008 Financial Targets and Provides 2009 Guidance
18 December 2008 - 10:59PM
PR Newswire (US)
PRINCETON, N.J., Dec. 18 /PRNewswire-FirstCall/ -- Covance Inc.
(NYSE: CVD) today revised its financial expectations for 2008 and
provided financial guidance for 2009. Covance now expects 2008
full-year earnings per share to be $3.02 on low double-digit
revenue growth versus the previous expectation of earnings per
share of $3.18 on low-teens revenue growth (both EPS targets
exclude the gain from the sale of centralized ECG services).
Adjusted net book-to-bill in the fourth quarter is currently
forecasted to be in-line with the third quarter level of 1.2:1.
"Despite the fact that both the volume and dollar value of proposal
activity for our late-stage service offerings are increasing in the
fourth quarter on a sequential and year-on-year basis, we are
experiencing reduced demand for our early development services due
to a combination of a lower level of new project initiations and
increased project delays," said Joe Herring, Chairman and Chief
Executive Officer. "In addition, as nearly 40% of our revenues
originate overseas, our fourth quarter results are being
significantly impacted by the continued rapid strengthening of the
US dollar, even since we last updated our outlook in October."
Covance expects full-year 2009 revenue growth to be in the range of
approximately 5% to 10% over 2008 and earnings per share to be in
the range of $3.00 to $3.20. These results assume foreign exchange
rates remain at budgeted levels throughout 2009, which would
negatively impact year-on-year growth in revenue by approximately
$100 million and earnings per share by $0.27 versus the average
2008 exchange rates. Excluding the impact of foreign exchange,
revenue growth is expected to be in the range of approximately 10%
to 15% and earnings growth is expected to be in the range of
approximately 8% to 15%. Looking to the first quarter of 2009, we
expect a modest sequential decline in earnings per share from the
fourth quarter of 2008, relating largely to new operations coming
online. "The extraordinary strengthening of the US dollar will have
a significant impact on our results in 2009," continued Mr.
Herring. "Additionally, the slower project starts in early
development are expected to continue into the first quarter and
perhaps longer. The combination of these two issues is expected to
more than offset the expected growth of our late-stage development
services next year. Despite these near-term challenges, we continue
to remain positive on our longer-term outlook. Our clients have an
urgent need to develop new medicines and improve the productivity
of their R&D methods. We believe Covance is the best-positioned
CRO to help our pharmaceutical and biotechnology clients increase
their R&D productivity, make cost structures more flexible, and
reduce the time and cost of bringing a new drug through all stages
of the development process." Capital expenditures in 2009 are
expected to be approximately $200 million, down $115 million from
the $315 million target for 2008. Free cash flow (defined as
operating cash flow less capital expenditures) in 2009 is expected
to be approximately $90 million versus the expected use of $25
million in 2008. Both free cash flow targets assume DSOs remain at
their current level of approximately 40 days. The effective tax
rate for 2009 is expected to be approximately 29%. The Company's
investor conference call will be webcast on December 18 at 9:00 am
EST. Management's commentary and presentation slides will be
available through http://www.covance.com/. Covance, with
headquarters in Princeton, New Jersey, is one of the world's
largest and most comprehensive drug development services companies
with annual revenues greater than $1.5 billion, global operations
in more than 20 countries, and approximately 9,600 employees
worldwide. Information on Covance's products and services, recent
press releases, and SEC filings can be obtained through its website
at http://www.covance.com/. 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
Company's ability to increase order volume, the pace of translation
of orders into revenue in late-stage development services, 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. 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. DATASOURCE: Covance Inc. CONTACT: Paul Surdez of
Covance, +1-609-452-4807 Web Site: http://www.covance.com/
Copyright