Segment Information

6 Months Ended

Jun. 30, 2014

Segment Information

Segment Information

12.  Segment Information

Covance has two reportable segments: early development and late-stage development. Early development services, which includes Covance’s discovery support services, preclinical and clinical pharmacology service capabilities, involve evaluating a new compound for safety and early effectiveness as well as evaluating the absorption, distribution, metabolism and excretion of the compound in the human body. It is at this stage that a pharmaceutical company, based on available data, will generally decide whether to continue further development of a drug. Late-stage development services, which includes Covance’s central laboratory, Phase II-IV clinical development and market access services, are geared toward demonstrating the clinical effectiveness of a compound in treating certain diseases or conditions, obtaining regulatory approval and maximizing the drug’s commercial potential. The accounting policies of the reportable segments are the same as those described in Note 2.

Segment revenues, operating income and total assets for the three and six months ended June 30, 2014 and 2013 are as follows:

	Early Development			Late-Stage Development			Other Reconciling Items			Total
Three months ended June 30, 2014
Total revenues from external customers	$	231,198		$	408,258		$	47,652	(a)	$	687,108
Operating income	$	(22,424	)(d)	$	87,051	(e)	$	(45,363	)(b)	$	19,264
Total assets	$	1,083,416		$	1,230,042		$	225,186	(c)	$	2,538,644
Three months ended June 30, 2013
Total revenues from external customers	$	214,582		$	377,716		$	51,678	(a)	$	643,976
Operating income	$	21,882	(d)	$	79,500	(e)	$	(49,872	)(b)	$	51,510
Total assets	$	1,123,348		$	1,001,028		$	216,898	(c)	$	2,341,274
Six months ended June 30, 2014
Total revenues from external customers	$	449,422		$	810,086		$	93,888	(a)	$	1,353,396
Operating income	$	(2,948	)(d)	$	180,103	(e)	$	(91,003	)(b)	$	86,152
Total assets	$	1,083,416		$	1,230,042		$	225,186	(c)	$	2,538,644
Six months ended June 30, 2013
Total revenues from external customers	$	421,858		$	750,639		$	105,814	(a)	$	1,278,311
Operating income	$	38,439	(d)	$	162,449	(e)	$	(101,127	)(b)	$	99,761
Total assets	$	1,123,348		$	1,001,028		$	216,898	(c)	$	2,341,274

(a) Represents revenues associated with reimbursable out-of-pocket expenses.

(b) Represents corporate expenses (primarily information technology, marketing, communications, human resources, finance, legal and stock-based compensation expense). Corporate expenses include charges associated with restructuring and cost reduction actions of $397 and $2,658 for the three and six months ended June 30, 2014, respectively, and $2,308 and $3,027 for the three and six months ended June 30, 2013, respectively.

(c) Represents corporate assets.

(d) Early Development operating income includes asset impairment charges totaling $52,564 for both the three and six months ended June 30, 2014, and charges associated with restructuring and cost reduction actions of $651 and $2,281 for the three and six months ended June 30, 2014, respectively, and $2,342 and $5,895 for the three and six months ended June 30, 2013, respectively.

(e) Late-Stage Development operating income includes charges associated with restructuring and cost reduction actions of $3,150 and $3,396 for the three and six months ended June 30, 2014, respectively, and $1,363 and $3,261 for the three and six months ended June 30, 2013, respectively.