Kendle International (KNDL) 8-K/A Financial Statements and Exhibits

Exhibit 99.2

KENDLE INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS

On August 11, 2006, the Company completed its acquisition of the Acquired Business for $215.0 million in cash plus acquisition costs and a working capital adjustment in accordance with the terms and conditions of the Stock Purchase Agreement, as amended. The purchase price was funded, in part, by the Company’s draw on the term credit facility described below.

The Credit Agreement provides for a $200.0 million senior secured term loan facility and a $25.0 million senior secured revolving credit facility. The term loan facility matures six years from the Closing Date, while the revolving credit facility matures five years from the Closing Date. The term loan facility was drawn in full by the Company on the Closing Date to finance the acquisition of the Acquired Businesses (as described in Item 2.01 and incorporated herein by reference), and to pay fees, commissions, and expenses in connection with the acquisition. The revolving credit facility is available to provide financing for Permitted Acquisitions, working capital and general corporate purposes. Indebtedness under these facilities will be guaranteed by all of the existing and future direct and indirect subsidiaries of the Company, subject to certain exceptions. The interest rates applicable to the loans under the Credit Agreement, at the Company’s option, are either a U.S. base rate or a LIBOR rate plus a specified margin.

The unaudited pro forma condensed combined financial information reflecting the combination of Kendle International Inc. and the Acquired Business is provided for informational purposes only. The pro forma information is not necessarily indicative of what the companies’ results of operations actually would have been had the merger been completed at the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.

In the unaudited pro forma condensed combined statements of income, a provision for amortization of identified intangible assets including customer relationships and backlog has been made. The amounts allocated to acquired assets and liabilities in the unaudited pro forma financial statements are based on management’s preliminary valuation estimates using the assistance of outside valuation specialists. Definitive allocations will be performed and finalized. Accordingly, the purchase price allocation pro forma adjustments included in the unaudited financial statements are preliminary and have been made for the purpose of providing unaudited pro forma condensed combined financial information and are subject to revision based on a final determination of fair value.

The unaudited pro forma financial statements also include certain purchase accounting adjustments, including items expected to have a continuing impact on the consolidated results, such as increased depreciation and amortization expense on acquired tangible and intangible assets. The unaudited pro forma statements do not include the impacts of any revenue, cost or other operating synergies that may result from the merger.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2005
(IN THOUSANDS, EXCEPT PER SHARE DATA)

	Kendle			Acquired			Pro Forma					Pro Forma
	International Inc.			Business			Adjustments			Note		Combined
Total revenues	$	250,639		$	114,846			—				$	365,485
Costs and expenses:
Direct costs		157,189			77,802								234,991
Selling, general and administrative expenses		68,216			27,476								95,692
Depreciation and amortization		7,991			10,239			(4,542	)		(a)		13,688
		233,396			115,517			(4,542	)				344,371
Income from operations		17,243			(671	)		4,542					21,114
Other income (expense):
Interest income		1,019			191								1,210
Interest expense		(460	)		—			(16,000	)		(b)		(16,460	)
Other		(287	)		38								(249	)
Gain on debt extinguishment		300			—								300
Income before income taxes		17,815			(442	)		(11,458	)				5,915
Income tax expense		7,141			1,462			(4,583	)		(c)		4,020
Net income	$	10,674		$	(1,904	)	$	(6,875	)			$	1,895
Income per share data:
Basic:
Net income per share	$	0.79										$	0.14
Weighted average shares		13,572											13,572
Diluted:
Net income per share	$	0.76										$	0.13
Weighted average shares		14,120											14,120

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements,which are an integral part of these statements.

Selected Financial Data
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
For the Year Ended December 31, 2005

(a)	To reflect amortization expense on aquired intangibles of approximately $5.7 million. To reverse 2005 amortization expense of $10.2 million on prior intangibles.
(b)	To record interest expense of $16.0 million on debt of $200 million at approximately 8% interest.
(c)	Adjustment to apply the Company’s effective tax rate of 40% to the pretax earnings/(loss) of the pro forma adjustments for the twelve months ended December 31, 2005.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS-ENDED JUNE 30, 2006
(IN THOUSANDS, EXCEPT PER SHARE DATA)

	Kendle			Acquired			Pro Forma					Pro Forma
	International Inc.			Business			Adjustments			Note		Combined
Total revenues	$	159,116		$	56,355							$	215,471
Costs and expenses:
Direct costs		102,057			38,975								141,032
Selling, general and administrative expenses		39,841			13,093								52,934
Depreciation and amortization		3,544			5,497			(1,406	)		(b)		7,635
		145,442			57,565			(1,406	)				201,601
Income from operations		13,674			(1,210	)		1,406					13,870
Other income (expense):
Interest income		1,180			192								1,372
Interest expense		(114	)		—			(8,000	)		(c)		(8,114	)
Other		(394	)		(365	)							(759	)
Income before income taxes		14,346			(1,383	)		(6,594	)				6,369
Income tax expense		5,157			(466	)		(2,638	)		(d)		2,053
Net income		9,189			(917	)		(3,956	)			$	4,316
Income per share data:
Basic:
Net income per share	$	0.64										$	0.30
Weighted average shares		14,254											14,254
Diluted:
Net income per share	$	0.62										$	0.29
Weighted average shares		14,754											14,754

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements,which are an integral part of these statements.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2006
(IN THOUSANDS)

	Kendle			Acquired			Pro Forma					Pro Forma
	International Inc.			Business			Adjustments			Note		Combined
ASSETS
Current assets		139,517			55,281			(52,087	)		(a)		142,711
Property and equipment, net		16,869			7,371			(313	)		(a)		23,927
Goodwill		24,704			320,075			(117,063	)		(a)		227,716
Other finite-lived intangible assets		870			19,951			(2,851	)		(a)		17,970
Other indefinite-lived intangible assets		15,000			—								15,000
Other assets		6,833			2,696			(2,471	)		(a)		7,058
Total assets	$	203,793		$	405,374		$	(174,785	)			$	434,382
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current liabilities		63,931			33,260			(18,505	)		(a)		78,686
Long-term debt		—			—			200,000			(a)		200,000
Other noncurrent liabilities		1,525			8,167			7,667			(a)		17,359
Total liabilities		65,456			41,427			189,162					296,045
Commitments and contingencies
Shareholders’ equity:
Preferred stock — no par value; 100,000 shares authorized; no shares issued and outstanding
Common stock — no par value; 45,000,000 shares shares authorized; 14,381,763 shares issued and 14,358,711 outstanding at June 30, 2006		75			—								75
Additional paid in capital		153,645			364,005			(364,005	)		(a)		153,645
Accumulated deficit /		(14,891	)		(58	)		58			(a)		(14,891	)
Other comprehensive income
Less: Cost of common stock held in treasury, 23,052 shares at June 30, 2006		(492	)		—								(492	)
Total shareholders’ equity		138,337			363,947			(363,947	)				138,337
Total liabilities and shareholders’ equity	$	203,793		$	405,374		$	(174,785	)			$	434,382

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements,which are an integral part of these statements.

Unaudited Pro Forma Condensed Combined Balance Sheet

(a) Acquisition

To reflect the purchase of the Phase II-IV Clinical Services business of Charles River Clniical Laboratories Inc. Total purchase price was approximately $215 million plus a preliminary working captial adjustment of $14.7 million.

Under the purchase method of accounting, the total estimated purchase price of $229.7 million plus preliminary acquisition costs of $6.7 million, is allocated to Charles River Clinical Laboratories Inc’s net tangible and identifiable intangible assets acquired and liabilities assumed. The preliminary amounts allocated to intangibles are as follows, based on the pro-forma information at June 30, 2006:

Amortizable intangibles	17,100
Goodwill	203,012

The acquisition was financed with $200 million in debt less $5.2 million in debt issue costs and $36.3 million (inclusive of acquisition costs) of the Company’s existing cash and avilable-for-sale securities. The Balance Sheet adjustments presented below are to allocate the total estimated purchase price to the Phase II-IV Clinical Services Business of Charles River Laboratories International, Inc.’s net tangible and identifiable intangible assets acquired and liabilities assumed based on the estimated fair values.

	As of June 30		Fair Value		Adjustment
Current assets		55,281		39,542		(15,739	)
Property and Equipment		7,371		7,058		(313	)
Goodwill		320,075		203,012		(117,063	)
Other finite-lived intangibles		19,951		17,100		(2,851	)
Other assets		2,696		225		(2,471	)
Current liabilities		33,260		14,755		(18,505	)
Other non-current liabilities		8,167		15,834		7,667

Pursuant to Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized; rather impairment tests are performed at least annually or more frequently if circumstances indicate an impairment may have occurred. If an impairment exists, the goodwill is immediately written down to its fair value through a current charge to earnings. Accordingly, the goodwill arising from the mergers will be subject to an impairment test at least annually.

Unaudited Pro Forma Condensed Combined Statement of Income

(b)	To reflect amortization expense on aquired intangibles of approximately $2.8 million and the reversal of amortization expense of $4.2 million on prior intangibles that had been allocated to Charles River Clinical Laboratories Inc.
(c)	To record interest expense on debt of $200 million at approximately 8% interest.
(d)	Adjustment to apply the Company’s effective tax rate of 40% to the pretax earnings/(loss) of the pro forma adjustments for the six months ended June 30, 2006.