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Kendle Announces Fourth Quarter and Full-Year 2009 Results

CINCINNATI, Feb. 24 /PRNewswire-FirstCall/ -- Kendle (Nasdaq: KNDL), a leading, global full-service clinical research organization, today reported its results for the fourth quarter and full-year 2009. Net income for the fourth quarter of 2009 was $2.3 million or $0.16 per diluted share. On a non-GAAP basis, net income for the fourth quarter of 2009 was $6.5 million or $0.44 per diluted share, compared with $5.1 million or $0.34 per diluted share for the fourth quarter of 2008, an increase in EPS of 29.4 percent.

Fourth Quarter 2009 Results

Net revenues for the fourth quarter ended Dec. 31, 2009, were $96.6 million, compared with $109.2 million for the same period of the prior year.

Operating income for the fourth quarter of 2009 was $4.9 million or 5.1 percent of net revenue.  On a non-GAAP basis, excluding the restructuring charge, operating income for the quarter was $8.7 million or 9.0 percent compared with $10.9 million or 10.0 percent for the same period in 2008.

New business awards for the fourth quarter of 2009 totaled $134.7 million versus $137.2 million in the third quarter of 2009. Gross book-to-bill for the quarter improved sequentially over the third quarter of 2009 to 1.4 to 1.0. As a result of contract cancellations and adjustments arising outside of the control of the Company during the quarter, the net book-to-bill is 0.8 to 1.0.  Gross new business awards for the full-year 2009 totaled $486.0 million. Total business authorizations amounted to $829.5 million at Dec. 31, 2009.

Open Market Repurchases

During the fourth quarter of 2009, the Company repurchased $5.5 million par value of its convertible notes in the open market for a total cost of $4.9 million. For the full-year 2009, the Company repurchased $45.5 million par value of its convertible notes for a total cost of $36.5 million. As a result of this repurchase program, interest expense will be reduced by $11.0 million over the remaining term of the convertible notes, with $1.5 million realized in the Company's 2009 results. The convertible notes mature in July 2012.

Balance Sheet Information

Cash, cash equivalents and marketable securities at Dec. 31, 2009, totaled $53.2 million compared with $36.1 million at Dec. 31, 2008. Days sales outstanding in accounts receivables were 34 days compared with 35 days at Dec. 31, 2008. Capital expenditures for the quarter totaled $4.8 million and for the year totaled $19.0 million. Capital expenditures for both the quarter and the full year primarily include investments in IT infrastructure related to the Company's implementation of a global ERP system.

Workforce Initiatives

In an effort to balance staffing levels with customer demand and sales, the Company is reducing its staffing levels in the first quarter of 2010. As a result of this initiative, the Company is taking a severance charge in the fourth quarter of 2009 of approximately $3.8 million. Once fully implemented, we anticipate this initiative will deliver cost reductions in the range of $16 million to $18 million in 2010 or between $21 million and $23 million on an annualized basis.

Full-Year 2009 Results

For the full-year 2009, net revenues were $416.7 million, compared with $475.1 million for the full-year 2008. Operating income for the 12-month period ended Dec. 31, 2009 was $35.6 million or 8.5 percent of net revenues. On a non-GAAP basis, excluding the restructuring charges taken in 2009, operating income for the full year 2009 was $45.7 million or 11.0 percent compared with $56.8 million or 12.0 percent for the full-year 2008.

Net income for the full-year 2009 was $15.2 million or $1.02 per diluted share compared with net income of $23.1 million or $1.54 per diluted share for the prior year.

On a non-GAAP basis, net income for the full-year 2009, as adjusted, was $31.1 million or $2.07 per diluted share compared with $29.8 million or $1.99 per diluted share for the full-year 2008.

2010 Guidance

Given the continued volatility in the CRO market, particularly with regard to late stage project cancellations and delays, the Company will not be reinstating guidance at this time. The Company continues to review its guidance policy on an ongoing basis.

Fourth Quarter and Full-Year 2009 Conference Call and Webcast Details

Kendle will host its Fourth Quarter 2009 conference call on Feb. 25, 2010, at 8 a.m. Eastern Time. The call will be broadcast live over the Internet and can be accessed at A replay of the Webcast will be available at shortly after the call for on-demand replay through 5 p.m. Eastern Time on March 25, 2010.

Use of Non-GAAP Financial Measures

This press release contains adjustments to net service revenues, income from operations, net income and earnings per share calculated in accordance with generally accepted accounting principles ("GAAP") in the United States. The non-GAAP reconciliation can be found on page 7 of this press release. These adjusted or "pro forma" results are and should be read in connection with the reconciliation provided in this press release. We believe that investors' understanding of performance is enhanced by disclosing these non-GAAP financial measures as a reasonable basis for comparison of our ongoing results of operations. Non-GAAP measures should not be considered a substitute for GAAP-based measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies.

About Kendle

Kendle International Inc. (Nasdaq: KNDL) is a leading global clinical research organization providing the full range of early- to late-stage clinical development services for the world's biopharmaceutical industry. Our focus is on innovative solutions that reduce cycle times for our customers and accelerate the delivery of life-enhancing drugs to market for the benefit of patients worldwide. As one of the world's largest global providers of Phase I-IV services, we offer experience spanning more than 100 countries, along with industry-leading patient access and retention capabilities and broad therapeutic expertise, to meet our customers' clinical development challenges.

Additional information and investor kits are available upon request from Kendle, 441 Vine Street, Suite 500, Cincinnati, OH 45202 or from the Company's Web site at

Forward-Looking Statements

Certain statements and information contained in this press release may be deemed to be forward-looking statements under federal securities laws and the provisions of the Private Securities Litigation Reform Act of 1995 and Kendle intends that such forward-looking statements be subject to the safe-harbor created thereby. 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, but are not limited to, (a) competitive factors in the industry, (b) drug-development activity and outsourcing trends in the biopharmaceutical industry, (c) the Company's ability to manage growth, including integration of acquired businesses and implementation of information technology solutions, (d) the Company's dependence on the skills, experience and efforts of its employees and management team in the geographic regions and therapeutic areas in which the Company operates and the risks associated with hiring, managing and retaining members of this team (e) the fixed-price nature of contracts and cost overruns, (f) the loss, cancellation or delay of contracts or amendments thereto, (g) the mix of contracts in the Company's backlog and the sales cycle for these contracts, (h) the Company's ability to service its indebtedness and maintain adequate credit facilities and credit lines, (i) the effects of exchange rate fluctuations, (j) the risks related to the Company's international operations, (k) the amount of goodwill and other intangible assets on the Company's balance sheet and the potential for write-downs of these assets if they become impaired under accounting rules; (l) changes in regulation of the drug-development process, (m) litigation that might arise from patient volunteers in the drug development process, (n) natural disasters, acts of war or other similar events that could have an adverse effect on the Company's operations, and (o) other risks as detailed from time to time in Kendle's Annual Report on Form 10-K as well as periodic reports filed with the SEC. In addition, no assurance can be given that the Company will be able to realize the net service revenues included in backlog. The Company believes that its aggregate backlog is not necessarily a meaningful indicator of future results. All information in this press release is current as of Feb. 24, 2010. 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.

                                     Kendle International Inc.
                                  Consolidated Statement of Income
                               (In thousands, except per share data)
                              Three Months Ended             Year Ended
                                December 31,                December 31,
                             ------------------          --------------------
                             2009       2008(1)          2009         2008(1)
                             ----       -------          ----         -------
    Net service revenues  $96,646      $109,151      $416,688        $475,092
     revenues              34,290        52,143       135,224         203,489
                           ------        ------       -------         -------
    Total revenues        130,936       161,294       551,912         678,581
                          -------       -------       -------         -------
    Costs and expenses:
      Direct costs         48,490        60,673       210,586         247,436
       costs               34,290        52,143       135,224         203,489
      Selling, general
       and administrative
       expenses            35,549        33,568       144,659         155,577
       expense              3,771             -        10,157               -
      Depreciation and
       amortization         3,910         4,008        15,712          15,253
                            -----         -----        ------          ------
      Total costs and
       expenses           126,010       150,392       516,338         621,755
                          -------       -------       -------         -------
    Income from
     operations             4,926        10,902        35,574          56,826
    Other expense:
      Interest expense     (3,337)       (3,812)      (14,403)        (15,891)
      Interest income         144           277           579             760
      Gain (loss) on
       extinguishment of
       debt                   (64)            -         2,887               -
      Other                    53        (1,228)        4,034          (2,043)
                              ---        ------         -----          ------
      Total other expense  (3,204)       (4,763)       (6,903)        (17,174)
                           ------        ------        ------         -------
    Income before
     income taxes           1,722         6,139        28,671          39,652
    Income tax
     provision (benefit)     (609)        2,784        13,434          16,509
                             ----         -----        ------          ------
    Net income             $2,331        $3,355       $15,237         $23,143
                           ======        ======       =======         =======
    Income per share data:
      Net income per share  $0.16         $0.23         $1.03           $1.57
                            =====         =====         =====           =====
      Weighted average 
       shares outstanding  14,887        14,837        14,862          14,751
      Net income per share  $0.16         $0.22         $1.02           $1.54
                            =====         =====         =====           =====
      Weighted average 
       shares outstanding  15,008        15,000        14,992          14,993
    (1) As adjusted due to the implementation of accounting guidance for 
        convertible debt, as of January 1, 2009.
                                 Kendle International Inc.
                       Selected Balance Sheet and Other Information
                                      (In thousands)
    Selected Balance Sheet Information:
                                  December 31, 2009   December 31, 2008(1)
                                  -----------------   -------------------
    Cash, cash equivalents and
      marketable securities 
      (including restricted cash)     $53,215                  $36,053
    Receivables, net of
     advance billings                  49,084                   63,410
    Convertible notes,
     net of discount                  138,308                  171,848
    Net Service Revenues by Geographic Region:
                                Three Months Ended        Year Ended
                                  December 31,           December 31,
                                --------------       -------------------
                                2009      2008       2009           2008
                                ----      ----       ----           ----
    North America                47%       52%        48%            48%
    Europe                       39%       36%        38%            40%
    Latin America                 9%        9%        10%             8%
    Asia-Pacific                  5%        3%         4%             4%
    Segment Information:
                               Three Months Ended        Year Ended
                                  December 31,          December 31,
                               ------------------     -----------------
                                2009        2008      2009         2008
                                ----        ----      ----         ----
    Early Stage:
       Net service revenues  $10,246      $9,699   $37,473      $35,199
       Operating income        1,488       2,301     4,187        6,177
    Late Stage:
       Net service revenues  $85,487     $98,524  $370,178     $430,317
       Operating income       17,975      25,177    81,109      105,140
    Support and Other:
       Net service revenues     $913        $928    $9,037       $9,576
       Operating loss        (14,537)    (16,576)  (49,722)     (54,491)
    (1) As adjusted due to the implementation of accounting guidance for
        convertible debt, as of January 1, 2009.
                         Kendle International Inc.
                      Reconciliation of Non-GAAP Measures
                     (In thousands, except per share data)
                                                      December 31, 2009
                                                  Three Months
                                                     Ended        Year Ended
                                                  ------------    ----------
    Reconciliation of pro forma income from 
    Income from operations, as reported               $4,926         $35,574
    Restructuring charge, as reported                  3,771          10,157
                                                       -----          ------
    Income from operations, as adjusted for
     restructuring                                    $8,697         $45,731
                                                      ======         =======
                                   Three Months Ended         Year Ended
                                      December 31,           December 31,
                                   -----------------       ----------------
                                   2009      2008(1)       2009     2008(1)
                                   ----      -------       ----     -------
    Reconciliation of pro forma 
     net income:
    Net income, as reported       $2,331       $3,355    $15,237     $23,143
    Additional interest
     expense related to
     convertible debt              1,487        1,695      6,456       6,630
    Restructuring expense,
     net of tax                    2,712            -      6,799           -
    Gain on extinguishment
     of debt, net of tax              -             -     (1,887)          -
    Discrete tax item related
     to foreign currency hedge        -             -      4,441           -
                                    ---           ---      -----         ---
    Pro forma net income         $6,530        $5,050    $31,046     $29,773
                                 ======        ======    =======     =======
    Pro forma net income per 
    Basic                         $0.44         $0.34      $2.09       $2.02
    Diluted                       $0.44         $0.34      $2.07       $1.99
    (1) As adjusted due to the implementation of accounting guidance for 
        convertible debt, as of January 1, 2009.
    See Use of Non-GAAP Measures section in the body of the press release.

SOURCE Kendle International Inc.

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SOURCE Kendle International Inc.
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