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Covance's CEO Discusses Q3 2011 Results - Earnings Call Transcript

In addition to the press release, 18 slides corresponding to the commentary you are about to hear are available on our website at www.covance.com.

Before we begin the commentary, I would like to remind you that statements made during today's conference call and webcast, which are not historical facts, might be considered forward-looking statements. Such statements may include comments regarding future financial results and are subject to a number of risks and uncertainties, certain of which are beyond Covance's control. Actual results could differ materially from such statements due to a variety of facts, including the ones outlined in our SEC filings.

Certain of the financial measures we will discuss on this call are non-GAAP measures, which exclude the effects of events outside of our normal operations, such as costs associated with restructuring or impact of the resolution of certain income tax matters. We believe that providing these measures helps investors gain a more complete understanding of our results and is consistent with how management views our financial results. For a reconciliation of GAAP to pro forma results, please refer to the supplemental schedules included in our press release issued last night.

Now, I will turn it over to Bill for a review of our financial performance, which begins on Page 4 of the slide show.

William E. Klitgaard

Thank you, Paul, and good morning, everyone. Net revenues for the third quarter were $543 million, an increase of 13.9% over the third quarter of last year. Growth was 8.7% on a constant-dollar basis. Sequentially, net revenues increased $25 million. Operating income on a GAAP basis in the third quarter was $51 million and on a pro forma basis was $56.3 million. Pro forma operating margin this quarter was 10.4% of net revenue, a 10-basis-point increase from last quarter, despite the impact of merit increases, which went into effect on July 1. EPS on a GAAP basis was $0.67 per share and on a pro forma basis was $0.71 per share. Sequentially, pro forma EPS increased $0.05. The pro forma effective tax rate for the quarter was 22.4%, and we expect our tax rate to remain in this range as we look ahead to the fourth quarter of 2011.

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