Covance Inc. (Covance), an in vitro diagnostics company, has reported total revenues of $468.4 million for the first quarter of 2009, compared with the total revenues of $434 million in the year-ago quarter. It has also reported net income of $40.3 million, or $0.63 per diluted share, for the first quarter of 2009, compared with the net income of $49.1 million, or $0.76 per diluted share, in the year-ago quarter.
On a consolidated basis, first quarter net revenues grew 7.0% (13.8% excluding the impact of foreign exchange), operating margin was 12.7%, and diluted EPS of $0.63 met our first quarter expectation, said Joe Herring, chairman and chief executive officer. First quarter results were impacted by reduced market demand in Early Development, resulting in year-on-year and sequential declines in revenue and profitability, offset by record results in Late-Stage Development. Our forecast for Early Development results is to be sequentially flat in the second quarter, followed by sequential growth in the third and fourth quarters. In Late-Stage Development, increased demand led to accelerated revenue growth of 18.2% in the quarter (25.0% excluding the impact of foreign exchange) and exceptional operating margins of 22.6% (a 290 basis point increase above our previous record high).
On the commercial front, adjusted net orders in the first quarter were $589 million, representing an adjusted book-to-bill ratio of 1.34 to 1. Central laboratory and clinical development services each delivered record adjusted net orders in the quarter, leading to a trailing twelve month book-to-bill for Late-Stage Development greater than 1.5 to 1.
In December we released our initial financial targets for 2009, including revenue growth of 5% to 10% over 2008 and earnings per share in the range of $3.00 to $3.20. As previously outlined, these targets assumed foreign exchange rates would remain at budgeted levels throughout the year, Late-Stage backlog would continue to convert to revenue at historical rates, and demand for early development services would remain flat coming into the year and would begin to pick up between the second and third quarters of 2009. Relative to these assumptions, the dollar has remained close to our budget assumption and first quarter Late-Stage Development performance exceeded our expectations. However, first quarter results in Early Development were well below our expectations and, while we believe a bottoming of demand is underway, we expect growth to return later and slower than originally projected and from a lower base of revenue. As a result, we are now lowering our 2009 revenue growth rate expectation to the single-digit range and our earnings per share target to $2.50 to $2.70.
The company’s backlog at March 31, 2009 grew 54.4% year-over-year to $4.42 billion against $2.86 billion at March 31, 2008 and $4.33 billion at year-end. Foreign exchange negatively impacted sequential backlog growth by about $30 million. Adjusted net orders (net orders adjusted for dedicated capacity contracts) were $589 million in the first quarter of 2009.
Corporate expenses totaled $27.5 million in the first quarter of 2009 against $26.3 million last quarter and $26.7 million in the first quarter of last year. The company expects corporate expenses to average between 6.0% and 7.0% of revenues going forward as we continue to make investments in infrastructure to enhance our ability to manage future growth.
Cash and cash equivalents at March 31, 2009 were $190 million against $221 million at December 31, 2008 and $233 million at March 31, 2008. At March 31, 2009, short-term debt totaled $80 million.
Free cash flow (defined as operating cash flow less capital expenditures) for the first quarter of 2009 was negative $31 million, consisting of operating cash flow of $9 million (which includes the payment of annual bonuses) less capital expenditures of $40 million. In 2009, we now expect free cash flow to be about $75 million and capital expenditures to be about $180 million. The free cash flow target for 2009 assumes net Days Sales Outstanding (DSO) at 40 days.
Net DSO were 39 days at March 31, 2009 against 37 days at December 31, 2008 and 39 days at March 31, 2008.