NEWS RELEASE FOR RELEASE OCT. 30, 2003
6 a.m. Eastern Time
CONTACTS:
Keith A. Cheesman, Investors, (513) 763-1936
Lori Dorer, Media, (513) 345-1685
KENDLE INTERNATIONAL INC. REPORTS THIRD QUARTER 2003 RESULTS
EPS of $0.03 Exceeds Estimates; Earnings Represent
Strong Performance by Kendle's European Operations
- Net service revenues back on track with prior year
- Cash flow from operations strong at $8.4 million for the quarter
- DSOs at 46 days down from 54 at second quarter 2003
CINCINNATI, Oct. 30, 2003-- Kendle International Inc. (Nasdaq: KNDL), a leading
full-service contract research organization, today reported third quarter 2003
financial results.
Net service revenues for third quarter 2003 were $40.4 million compared to net
service revenues of $41.0 million for third quarter 2002. Net service revenues
by geographic region were 63 percent in North America, 33 percent in Europe and
4 percent in the Asia-Pacific region. The top five customers based on net
service revenues accounted for 52 percent of net service revenues for third
quarter 2003.
Reimbursable out-of-pocket revenues and expenses were $12.7 million for third
quarter 2003 compared to $11.5 million in the same quarter a year ago.
Income from operations for third quarter 2003 was approximately $1.0 million or
2.6 percent of net service revenues. Included in income from operations for the
quarter is a $897,000 charge for severance and outplacement costs related to the
workforce realignment plan that was implemented during the quarter. Including
the charge related to the workforce realignment plan, net income for the quarter
was approximately $344,000, or $0.03 per basic and diluted share. Excluding this
charge, net income for the quarter was approximately $890,000, or $0.07 per
diluted share.
"Kendle delivered higher-than-expected results for the quarter, reflecting
strong revenue growth from our European operations," said Chairman and Chief
Executive Officer Dr. Candace Kendle. "Our focus continues to be on operational
excellence through the new operating unit structure we are putting into place to
better serve our customers over the long term. We are pleased with our progress
during the quarter in transitioning to this more project-focused approach to
serving our customers, and believe the efficiencies we are putting into place
now position us well for future productivity and profitability."
-more-
Cash flow from operations for the quarter was $8.4 million. Cash and marketable
securities totaled $25.8 million and bank borrowings totaled $10.5 million at
Sept. 30, 2003. Days sales outstanding in accounts receivable were 46 compared
to 55 at Sept. 30, 2002, and capital expenditures for third quarter 2003 totaled
$800,000.
New business awards were $47 million for third quarter 2003. Contract
cancellations for the quarter were $11 million. "We are encouraged by the
increase in outsourcing activity from our customers globally and our largest
customer in particular thus far in the second half of 2003, and believe these
factors further demonstrate our business and the industry environment are
improving," said Dr. Kendle. Total business authorizations, which consist of
signed backlog and verbally awarded business, totaled $170 million at Sept. 30,
2003, compared to $187 million at Sept. 30, 2002.
"Also during the quarter, we continued to execute against our global growth
strategy through the signing of an agreement to acquire Mexican CRO Estadisticos
y Clinicos Asociados, S.A. (ECA), furthering our capability to conduct clinical
trials in the expanding Latin American market for pharmaceutical development,"
added Dr. Kendle. "We continue to evaluate strategic acquisition opportunities
to build our geographic and service capabilities for our customers worldwide."
Net service revenues for the nine months ended Sept. 30, 2003, were $116.1
million compared to net service revenues of $128.6 million for the nine months
ended Sept. 30, 2002. Net service revenues by geographic region were 67 percent
in North America, 30 percent in Europe and 3 percent in the Asia-Pacific region.
The top five customers based on net service revenues accounted for 49 percent of
net service revenues for the nine months ended Sept. 30, 2003.
Reimbursable out-of-pocket revenues and expenses were $38.6 million for the nine
months ended Sept. 30, 2003, compared to $36.0 million in the same period a year
ago.
For the nine months ended Sept. 30, 2003, the Company recorded income from
operations of approximately $77,000, which includes charges of $576,000 in
severance and office consolidation costs recorded in the first and second
quarters of 2003 as well as the $897,000 charge recorded in the third quarter.
In addition, in the second quarter of 2003, the Company recorded a gain on the
partial early extinguishment of debt in the amount of $558,000. The Company also
recorded a $405,000 non-cash impairment charge to reduce the carrying value of
its investment in KendleWits, a 50 percent-owned joint venture in the People's
Republic of China. Including these amounts, the net loss for the nine months
ended Sept. 30, 2003, was $2.2 million or $0.17 per basic and diluted share.
Excluding these amounts, the net loss for the same period was $1.1 million or
$0.09 per diluted share.
Capital expenditures for the nine months ended Sept. 30, 2003, totaled $4.5
million. Cash flow from operations for this same period was $4.2 million.
-more-
Kendle International will host its third quarter 2003 conference call Oct. 30,
2003, at 8:30 a.m. Eastern Time. The call will be broadcast live over the
Internet and can be accessed at www.kendle.com. A replay of the Webcast will be
available at www.kendle.com shortly after the call for on-demand replay through
5 p.m. Eastern Time on Nov. 30, 2003.
ABOUT KENDLE INTERNATIONAL INC.
Kendle International is a global provider of quality clinical research and
development services for the pharmaceutical and biotechnology industries.
Headquartered in Cincinnati, Ohio, Kendle is among the world's largest publicly
held clinical research organizations, with approximately 1,600 associates
worldwide. The company has conducted clinical trials or provided regulatory and
validation services in 60 countries. Investor kits are available upon request
from Kendle International Inc., 1200 Carew Tower, 441 Vine Street, Cincinnati,
OH 45202 or from the Company's web site at 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,
outsourcing trends in the pharmaceutical industry, 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, competition
and consolidation within the industry, the fixed price nature of contracts or
the loss of large contracts, cancellation or delay of contracts, the progress of
ongoing contracts, the ability to maintain existing customer relationships or
enter into new ones, cost overruns, the Company's sales cycle, the effects of
exchange rate fluctuations, 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 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. 30, 2003. 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,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net service revenues $ 40,424 $ 40,966 $ 116,101 $ 128,581
Reimbursable out-of-pocket revenues 12,716 11,468 38,642 35,997
--------- --------- --------- ---------
Total revenues 53,140 52,434 154,743 164,578
--------- --------- --------- ---------
Costs and expenses:
Direct costs 22,404 23,900 68,573 76,438
Reimbursable out-of-pocket costs 12,716 11,468 38,642 35,997
Selling, general and administrative expenses 13,833 11,321 39,322 36,032
Depreciation and amortization 2,244 2,141 6,656 6,196
Severance costs 897 321 1,473 321
--------- --------- --------- ---------
Total costs and expenses 52,094 49,151 154,666 154,984
--------- --------- --------- ---------
Income from operations 1,046 3,283 77 9,594
Other income (expense):
Interest expense (251) (361) (799) (907)
Interest income 67 173 266 474
Other (162) 128 (586) 186
Investment impairment -- -- (405) (1,938)
Gain on debt extinguishment -- -- 558 --
--------- --------- --------- ---------
Income (loss) before income taxes 700 3,223 (889) 7,409
Income taxes 356 1,320 1,314 3,756
--------- --------- --------- ---------
Net income (loss) $ 344 $ 1,903 ($ 2,203) $ 3,653
========= ========= ========= =========
Income (loss) per share data:
Basic:
Net income (loss) per share $ 0.03 $ 0.15 ($ 0.17) $ 0.29
========= ========= ========= =========
Weighted average shares outstanding 13,013 12,777 12,943 12,707
Diluted:
Net income (loss) per share $ 0.03 $ 0.14 ($ 0.17) $ 0.28
========= ========= ========= =========
Weighted average shares outstanding 13,244 13,441 12,943 13,188
PRO FORMA:
Pro forma net income (loss) per diluted share: $ 0.07 $ 0.16 ($ 0.09) $ 0.44
========= ========= ========= =========
Kendle International Inc.
Reconciliation of GAAP EPS to Pro forma EPS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2003 2002 2003 2002
-------- -------- -------- --------
GAAP net income (loss) per share $ 0.03 $ 0.14 ($ 0.17) $ 0.28
Severance costs 0.04 0.02 0.08 $ 0.02
Investment impairment -- -- 0.03 $ 0.14
Gain on extinguishment of debt -- -- (0.03) --
-------- -------- -------- --------
Pro forma net income (loss) per diluted share $ 0.07 $ 0.16 ($ 0.09) $ 0.44
======== ======== ======== ========
Kendle International Inc.
Selected Balance Sheet Information
(In thousands)
(Unaudited)
September 30, 2003 December 31, 2002
------------------ -----------------
Cash, cash equivalents and
marketable securities $ 25,763 $ 29,975
Working capital 39,753 41,451
Total assets 149,239 155,397
Bank borrowings 10,500 12,750
Shareholders' equity 94,674 94,360