NEWS RELEASE FOR RELEASE FEB. 12, 2004
6 a.m. Eastern Time
CONTACTS:
Keith A. Cheesman, Investors, (513) 763-1936
Lori Dorer, Media, (513) 345-1685
KENDLE INTERNATIONAL INC. REPORTS
FOURTH QUARTER AND YEAR END 2003 RESULTS
Fourth Quarter EPS of $0.04 Exceeds Estimates;
Operating Margin Continues to Improve
- Fourth quarter net service revenues of $40.1 million represent a 9.6
percent increase over the same quarter a year ago.
- Income from operations increased to $2.1 million for the fourth
quarter up from $1.0 million for third quarter 2003.
- Cash flow from operations strong at $11.7 million for the quarter;
DSOs at an all-time record low of 33 days.
CINCINNATI, Feb. 12, 2004-- Kendle International Inc. (Nasdaq: KNDL), a leading
full-service contract research organization, today reported fourth quarter and
year end 2003 financial results.
Net service revenues for fourth quarter 2003 were $40.1 million compared to net
service revenues of $36.6 million for fourth quarter 2002. Net service revenues
by geographic region were 63 percent in North America, 34 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 fourth
quarter 2003.
Reimbursable out-of-pocket revenues and expenses were $14.8 million for fourth
quarter 2003 compared to $12.8 million in the same quarter a year ago.
Income from operations for fourth quarter 2003 was approximately $2.1 million or
5.2 percent of net service revenues. Net income for the quarter was
approximately $513,000, or $0.04 per diluted share.
"We are pleased with the continued overall improvement in our operating results
experienced during the second half of 2003, particularly in the fourth quarter,"
said Chairman and CEO Candace Kendle, Pharm.D. "Continued growth in global sales
activity is an early sign that our new organizational structure is yielding the
positive results we expected. Our goal is to build on this positive momentum to
deliver improved value for our shareholders in 2004 and beyond."
Cash flow from operations for the quarter was $11.7 million. Cash and marketable
securities totaled $32.4 million and bank borrowings totaled $9.8 million at
December 31, 2003. Days sales outstanding in accounts receivable were 33
compared to 45 at December 31, 2002, and capital expenditures for fourth quarter
2003 totaled $1.0 million.
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New business awards were $55 million for fourth quarter 2003. Contract
cancellations for the quarter were $2 million, matching an all-time Company low.
Total business authorizations, which consist of signed backlog and verbally
awarded business, totaled $186 million at December 31, 2003, compared to $192
million at December 31, 2002.
Commenting on the year, Dr. Kendle said, "Significant market changes in the
biopharmaceutical industry in 2003 have led to a heightened focus on the life
cycle management of already-approved drugs and a shifting reliance away from
blockbuster-driven R&D to more targeted drug candidates. Kendle has responded by
realigning its business in specialized operating units with the expertise to
meet these needs for our customers. Kendle's new, more project-focused
organization and strengthened clinical leadership team position us well to
capitalize on the increased outsourcing opportunities for CROs in 2004 and
beyond."
Net service revenues for the year ended December 31, 2003, were $156.2 million
compared to net service revenues of $165.2 million for the year ended December
31, 2002. Net service revenues by geographic region were 66 percent in North
America, 31 percent in Europe and 3 percent in the Asia-Pacific region. The top
five customers based on net service revenues accounted for 47 percent of net
service revenues for the year ended December 31, 2003.
Reimbursable out-of-pocket revenues and expenses were $53.4 million for the year
ended December 31, 2003, compared to $48.8 million in the same period a year
ago.
For the year ended December 31, 2003, the Company recorded income from
operations of approximately $2.2 million, 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 to zero 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 year
ended December 31, 2003, was $1.7 million or $0.13 per basic and diluted share.
Excluding these amounts, the net loss for the same period was $632,000 or $0.05
per basic and diluted share.
Capital expenditures for the year ended December 31, 2003, totaled $5.6 million.
Cash flow from operations for this same period was $15.9 million.
Kendle International will host its fourth quarter and year end 2003 conference
call February 12, 2004, 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 March 12, 2004.
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ABOUT KENDLE INTERNATIONAL INC.
Kendle International is a global provider of quality clinical research and
development services for the pharmaceutical and biotechnology industries. The
Company is organized in five major operating units (OU), including the Americas,
Europe and Strategic Partners OUs, which provide Phase I-III clinical
development services; the Medical Affairs, Marketing and Communications (MAM&C)
OU; and the Global Regulatory Affairs OU. Headquartered in Cincinnati, Ohio,
Kendle is among the world's largest publicly held clinical research
organizations, with nearly 1,700 associates worldwide. The Company has conducted
clinical trials or provided regulatory and validation services in more than 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 February 12, 2004. 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 Twelve Months Ended
December 31, December 31,
---------------------- -----------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Net service revenues $ 40,120 $ 36,592 $ 156,221 $ 165,173
Reimbursable out-of-pocket revenues 14,794 12,844 53,436 48,841
--------- --------- --------- ---------
Total revenues 54,914 49,436 209,657 214,014
--------- --------- --------- ---------
Costs and expenses:
Direct costs 22,560 22,000 91,133 98,438
Reimbursable out-of-pocket costs 14,794 12,844 53,436 48,841
Selling, general and administrative expenses 13,080 12,614 52,402 48,646
Depreciation and amortization 2,401 2,151 9,057 8,347
Goodwill impairment -- 67,745 -- 67,745
Severance costs (5) 87 1,468 408
--------- --------- --------- ---------
Total costs and expenses 52,830 117,441 207,496 272,425
--------- --------- --------- ---------
Income from operations 2,084 (68,005) 2,161 (58,411)
Other income (expense):
Interest expense (240) (312) (1,039) (1,219)
Interest income 68 60 334 534
Other (139) (247) (725) (61)
Investment impairment -- -- (405) (1,938)
Gain on debt extinguishment -- -- 558 --
--------- --------- --------- ---------
Income (loss) before income taxes 1,773 (68,504) 884 (61,095)
Income taxes 1,260 (10,051) 2,574 (6,295)
--------- --------- --------- ---------
Net income (loss) $ 513 ($ 58,453) (1,690) ($ 54,800)
========= ========= ========= =========
Income (loss) per share data:
Basic:
Net income (loss) per share $ 0.04 ($ 4.56) ($ 0.13) ($ 4.30)
========= ========= ========= =========
Weighted average shares outstanding 13,060 12,813 12,973 12,734
Diluted:
Net income (loss) per share $ 0.04 ($ 4.56) ($ 0.13) ($ 4.30)
========= ========= ========= =========
Weighted average shares outstanding 13,263 12,813 12,973 12,734
PRO FORMA:
Pro forma net income (loss) per diluted share: $ 0.04 ($ 0.06) ($ 0.05) $ 0.38
========= ========= ========= =========
Kendle International Inc.
Reconciliation of GAAP EPS to Pro forma EPS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------------ --------------------------------
2003 2002 2003 2002
------------- ------------- ------------- ------------
GAAP net income (loss) per share $0.04 ($4.56) ($0.13) ($4.30)
Goodwill impairment - 4.23 - 4.24
Severance costs - - 0.08 0.02
Investment impairment - - 0.03 0.15
Valuation reserves for deferred tax assets - 0.27 - 0.27
Gain on extinguishment of debt - - (0.03) -
------------- ------------- ------------- ------------
Pro forma net income (loss) per diluted share $0.04 ($0.06) ($0.05) $0.38
============= ============= ============= ============
Kendle International Inc.
Selected Balance Sheet Information
(In thousands)
(Unaudited)
December 31, 2003 December 31, 2002
----------------- -----------------
Cash, cash equivalents and
marketable securities (including
restricted cash) $ 32,408 $29,975
Working capital 38,523 41,451
Total assets 154,415 155,397
Bank borrowings 9,750 12,750
Shareholders' equity 96,369 94,360