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Covance Inc. Reports Operating Results (10-Q)

November 05, 2010 | About:

Covance Inc. (CVD) filed Quarterly Report for the period ended 2010-09-30.

Covance Inc. has a market cap of $2.9 billion; its shares were traded at around $45.15 with a P/E ratio of 18.6 and P/S ratio of 1.4. Covance Inc. had an annual average earning growth of 13.4% over the past 10 years. GuruFocus rated Covance Inc. the business predictability rank of 3-star.CVD is in the portfolios of Ron Baron of Baron Funds, Jeremy Grantham of GMO LLC, Chuck Royce of Royce& Associates, RS Investment Management, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

As of September 30, 2010, the balance of the reserve for unrecognized tax benefits was $14.8 million, including accrued interest of $1.8 million and is recorded as a long-term liability in other liabilities on the consolidated balance sheet. This reserve relates to exposures for income tax matters such as transfer pricing, nexus, deemed income and research and development credits. During the third quarter of 2010, the Company recorded a $3.2 million reduction to the reserve for unrecognized tax benefits due to the favorable resolution of an income tax inquiry, partially offset by a net increase in the accrual for additional reserves and interest on matters still outstanding of $0.5 million.

Impairment of Assets. Covance reviews its long-lived assets other than goodwill and other indefinite lived intangible assets for impairment, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based upon Covances judgment of its ability to recover the value of the asset from the expected future undiscounted cash flows of the related operations. Actual future cash flows may be greater or less than estimated. During the third quarter of 2010, Covance determined that long-lived assets, in our North American toxicology operations, located in Chandler, Arizona and Manassas, Virginia with carrying values of $182.7 million and $23.4 million, respectively, were no longer fully recoverable from the cash flows expected from those assets. Accordingly, as of September 30, 2010, Covance recorded an asset impairment charge totaling $119.2 million ($103.0 million of which relates to the Chandler, Arizona assets and $16.2 million relates to the Manassas, Virginia assets), representing the excess of the carrying value of those assets over their respective fair market values.

Three Months Ended September 30, 2010 Compared with Three Months Ended September 30, 2009. Net revenues totaled $477.0 million for the three months ended September 30, 2010, an increase of 0.4%, or 1.0% excluding the unfavorable impact of foreign exchange rate variances between both periods, as compared to $475.3 million for the corresponding 2009 period. Net revenues from Covances early development

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