CINCINNATI, Oct. 31 /PRNewswire-FirstCall/ -- Kendle , a leading, global full-service clinical research organization, today reported third quarter 2006 financial results. Reflected in the Company’s third quarter performance are results from mid-August through Sept. 30 related to its acquisition of the Phase II-IV clinical services business of Charles River Laboratories International Inc. Kendle completed this acquisition on Aug. 16.
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Net service revenues for third quarter 2006 were $75.2 million, an increase of 46 percent over net service revenues of $51.6 million for third quarter 2005. Of the growth in net service revenues, 24 percent was organic growth with the remainder of the growth due to the acquisition. Earnings per share of $0.27 for the third quarter 2006 compares favorably to the $0.24 per share reported for the third quarter 2005.
Income from operations for the third quarter 2006 was approximately $8.1 million, or 11 percent of net service revenues, compared to income from operations of approximately $5.5 million in third quarter 2005. Net income for the quarter was approximately $4.0 million after accounting for certain acquisition-related expenses, or $0.27 per diluted share, compared to net income of $3.4 million, or $0.24 per share, in third quarter 2005.
New business awards were a record $148 million for third quarter 2006, an increase of 76% over new business awards in second quarter 2006. Contract cancellations for the quarter were $7 million. Total business authorizations, which consist of signed backlog and verbally awarded business, totaled a record $590 million at Sept. 30, 2006, a 69% increase from June 30, 2006.
“Kendle continues to focus first and foremost on meeting the global clinical development needs of our customers,” said Candace Kendle, PharmD, Chairman and Chief Executive Officer. “Our enhanced position in the marketplace and expanded therapeutic expertise are already having a strong impact on our results. During the quarter we delivered significant growth in backlog and new business awards, further strengthening and diversifying our customer base and demonstrating the confidence our customers have in Kendle as a global provider.” She continued, “We are very pleased with the pace at which the integration is progressing and believe we are well positioned to meet the increasing needs of our customers for large global programs across all therapeutic areas and geographic regions.”
Net service revenues by geographic region for the third quarter were 59 percent in the Americas, 38 percent in Europe and 3 percent in the Asia/Pacific region. The top five customers based on net service revenues accounted for 30 percent of net service revenues for third quarter 2006 compared to 34 percent of net service revenues for third quarter 2005.
Reimbursable out-of-pocket revenues and expenses were $21.5 million for third quarter 2006 compared to $12.9 million in the same quarter a year ago.
Cash flow from operations for the quarter was a positive $9.6 million. Cash and marketable securities totaled $27.9 million, including $2.6 million of restricted cash. Days sales outstanding in accounts receivable were 46 and capital expenditures for third quarter 2006 totaled $1.9 million.
Net service revenues for the nine months ended Sept. 30, 2006, were $197.1 million compared to net service revenues of $149.2 million for the nine months ended Sept. 30, 2005. Earnings per share of $0.89 for the nine months ended Sept. 30, 2006, compares favorably to the $0.50 per share reported for the first nine months of 2005.
Net service revenues by geographic region for the nine months ended Sept. 30, 2006, were 60 percent in the Americas, 37 percent in Europe and 3 percent in the Asia/Pacific region. The top five customers based on net service revenues accounted for 29 percent of net service revenues for the first nine months of 2006 compared to 35 percent of net service revenues for the first nine months of 2005.
Income from operations for the nine months ended Sept. 30, 2006, was approximately $21.8 million, or 11 percent of net service revenues, compared to income from operations of approximately $12.0 million, or 8 percent of net services revenues, in the first nine months of 2005.
Cash flow from operations for the nine months ended Sept. 30, 2006, was a positive $17.1 million. Capital expenditures for the nine-month period totaled $6.1 million.
Kendle will host its third quarter 2006 conference call on Oct. 31, 2006, at 8:30 a.m. Eastern Time. The call will be broadcast live over the Internet and can be accessed at http://www.kendle.com. A replay of the Webcast will be available at http://www.kendle.com shortly after the call for on-demand replay through 5 p.m. Eastern Time on Nov. 30, 2006.
About Kendle
Kendle International Inc. is among the world’s leading global clinical research organizations and is the fourth-largest provider of Phase II-IV clinical development services worldwide. We deliver innovative and robust clinical development solutions -- from first-in-human studies through market launch and surveillance -- to help the world’s biopharmaceutical companies maximize product life cycles and grow market share. Our global clinical development business is focused on five regions -- North America, Europe, Asia/Pacific, Latin America and Africa -- to meet customer needs. With the expertise of our 3,000 associates worldwide, Kendle has conducted clinical trials and provided regulatory and pharmacovigilance services in more than 80 countries.
Additional information and investor kits are available upon request from Kendle, 1200 Carew Tower, 441 Vine Street, Cincinnati, OH 45202 or from the Company’s Web site at http://www.kendle.com.
Information provided herein, which is not historical information, such as statements about prospective earnings, revenue and earnings growth, are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, without limitation, competitive factors and industry consolidation, outsourcing trends in the pharmaceutical and biotechnology industries, the Company’s ability to manage growth and to continue to attract and retain qualified personnel, the Company’s ability to complete additional acquisitions and to integrate newly acquired businesses, the Company’s ability to penetrate new markets, the fixed price nature of contracts and cost overruns, the loss, cancellation or delay of contracts, the ability to maintain existing customer relationships or enter into new ones, the Company’s sales cycle, the effects of exchange rate fluctuations, risks related to non-US operations and other factors described in the Company’s filings with the Securities and Exchange Commission including Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K. No assurance can be given that the Company will be able to realize the net service revenues included in backlog and verbal awards. Kendle believes that its aggregate backlog and verbal awards are not necessarily a meaningful indicator of future results. All information in this release is current as of Oct. 31, 2006. 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. Condensed Consolidated Statement of Income (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2006 2005 2006 2005 Net service revenues $75,236 $51,581 $197,075 $149,233 Reimbursable out-of-pocket revenues 21,497 12,865 58,774 34,936 Total revenues 96,733 64,446 255,849 184,169 Costs and expenses: Direct costs 40,940 27,451 105,720 80,329 Reimbursable out-of-pocket costs 21,497 12,865 58,774 34,936 Selling, general and administrative expenses 23,403 16,738 63,244 50,634 Depreciation and amortization 2,800 1,851 6,344 6,228 Total costs and expenses 88,640 58,905 234,082 172,127 Income from operations 8,093 5,541 21,767 12,042 Other income (expense): Interest expense (2,283) (92) (2,397) (380) Interest income 438 234 1,618 674 Other (259) (370) (653) (77) Gain on debt extinguishment - - - 300 Income before income taxes 5,989 5,313 20,335 12,559 Income taxes 1,992 1,919 7,149 5,578 Net income $3,997 $3,394 $13,186 $6,981 Income per share data: Basic: Net income per share $0.28 $0.25 $0.92 $0.52 Weighted average shares outstanding 14,371 13,633 14,294 13,413 Diluted: Net income per share $0.27 $0.24 $0.89 $0.50 Weighted average shares outstanding 14,789 14,258 14,756 13,926 Reconciliation of adjusted income from operations: Income from operations 8,093 5,541 21,767 12,042 Stock-based compensation expense 195 - 1,438 - Amortization of acquired intangibles 705 - 705 - Severance accrual -- quarter 3 2006 236 - 236 - Other acquisition related expenses 353 - 353 - Write-off of deferred state taxes - - - - Adjusted income from operations (1) 9,582 5,541 24,499 12,042 Reconciliation of adjusted net income: Net income 3,997 3,394 13,186 6,981 Stock-based compensation expense (net of tax) 163 - 1,063 - Amortization of acquired intangibles 447 - 447 - Severance accrual -- quarter 3 2006 150 - 150 - Other acquisition related expenses 224 - 224 - Write-off of deferred state tax asset - - - 1,181 Adjusted net income (1) 4,981 3,394 15,070 8,162 Adjusted net income per share (1) Basic $0.35 $0.25 $1.05 $0.61 Diluted $0.34 $0.24 $1.02 $0.59 (1) Each of the “adjusted income operations,” “adjusted net income,” and “adjusted net income per share” (i) are measures of performance that are not required by, or presented in with, GAAP; (ii) should not be considered as alternatives to net income or any other measures derived in accordance with GAAP; and (iii) should not be considered in isolation or as a substitute for analysis of GAAP results. Kendle International Inc. Selected Balance Sheet Information (In thousands) (Unaudited) September 30, 2006 December 31, 2005 Cash, cash equivalents and marketable securities (including restricted cash) $27,889 $48,755 Net Receivables 59,382 33,154 Total assets 473,560 184,759 Bank borrowings 200,000 3,839 Shareholders’ equity 143,135 122,504
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CONTACT: Investors, Buzz Brenkert, +1-513-345-1525, or Media, Lori Dorer,+1-513-345-1685, both of Kendle International Inc.
Web site: http://www.kendle.com//
