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Net service revenues for the quarter ended Sept. 30, 2008, were $124.8million, an increase of 25 percent over the same period in 2007. Net servicerevenues from the June 2, 2008, acquisition of DecisionLine Clinical ResearchCorporation accounted for approximately 6 percent of the growth in thirdquarter 2008 net service revenues. The top five customers based on net servicerevenues accounted for 24 percent of net service revenues for both the thirdquarter of 2008 and the third quarter 2007.
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New business awards for the quarter totaled a record $212 million, anincrease of 21 percent over the same period in 2007. Total businessauthorizations at Sept. 30, 2008, were $1.0 billion, an increase of 16 percentfrom Dec. 31, 2007, and an increase of 22 percent from Sept. 30, 2007.Contract cancellations for the third quarter 2008 totaled $38 million or 18percent of gross sales for the quarter. The net book-to-bill ratio for thethree months ended Sept. 30, 2008, was 1.4 to 1.
"Our impressive results for the quarter are a testament to the strength ofour late stage markets, the value of our business model and the expertise anddetermination of our associates worldwide," said Chairman and CEO CandaceKendle, PharmD. "Coupled with our broad therapeutic and geographic reach, webelieve we are well positioned to achieve our strategic growth initiatives andto meet our customers emerging outsourcing needs."
Income from operations for the three months ended Sept. 30, 2008, was$15.9 million, or 12.7 percent of net service revenues, compared to incomefrom operations of $14.2 million, or 14.2 percent of net service revenues, forthe same period of the prior year.
Cash flow from operations for the third quarter 2008 was $6.7 millioncompared with $13.7 million for the same period in 2007. Cash and marketablesecurities at Sept. 30, 2008, totaled $18.4 million, including $850,000 ofrestricted cash, compared with $29.1 million, which included $1.2 million ofrestricted cash at Sept. 30, 2007. In addition to the convertible notes thatwere outstanding at Sept. 30, 2008, the Company had $2.0 million of debtoutstanding under its revolving credit facility. Days sales outstanding inaccounts receivable were 46 days for the third quarter 2008 compared with 40days for the same period of the prior year. Capital expenditures totaled $6.1million compared with $3.4 million for the same period in 2007.
Nine-Month Results
Net income for the nine months ended Sept. 30, 2008, was $24.4 million or$1.63 on a diluted basis, an increase of 98 percent, compared to $12.3 millionor $0.83 per share on a diluted basis for the same period in 2007. Net incomefor the nine month period ended Sept. 30, 2007 includes a charge for thewrite-off of deferred financing costs related to the Company's term debt,which was paid off in the third quarter of 2007 in the amount of $4.2 millionor $0.18 per diluted share. Excluding the effect of this item, earnings pershare for the nine months ended Sept. 30, 2007 were $1.01 on a diluted basis.
Net service revenues for the nine-month period ended Sept. 30, 2008, were$365.9 million, an increase of 25 percent over net service revenues of $293.3million for the same period in 2007. Net service revenues from DecisionLineClinical Research Corporation accounted for approximately 3 percent of thegrowth in net service revenues.
Income from operations for the nine-month period ended Sept. 30, 2008, was$45.9 million, or 12.5 percent of net service revenues, compared to incomefrom operations of $37.6 million, or 12.8 percent of net service revenues forthe same period of the prior year.
Cash flow from operations for the first nine months of 2008 totaled $3.4million compared with $38.1 million for the same period last year. Capitalexpenditures for the first nine months of 2008 totaled $18.1 million comparedto $10.8 million for the same period in the prior year.
Updated Full-Year Guidance
For the full year 2008, Kendle is now projecting net service revenues inthe range of $485 million to $500 million, earnings per share on a dilutedbasis of $2.10 to $2.25 and operating margin between 12.5 and 13.5 percent.Kendle previously had projected net service revenues in the range of $490million to $500 million, earnings per share on a diluted basis of $2.00 to$2.15 and operating margin between 13 and 14 percent.
Third Quarter 2008 Conference Call and Webcast Details
Kendle will host its Third Quarter 2008 conference call Nov. 5, 2008, at8:30 a.m. Eastern Time. The call will be broadcast live over the Internet andcan be accessed at www.kendle.com. A replay of the Webcast will be availableat www.kendle.com shortly after the call for on-demand replay through 5 p.m.Eastern Time on Dec. 5, 2008.
About Kendle
Kendle International Inc. (Nasdaq: KNDL) is a leading global clinicalresearch organization providing the full range of early- to late-stageclinical development services for the world's biopharmaceutical industry. Ourfocus is on innovative solutions that reduce cycle times for our customers andaccelerate the delivery of life-enhancing drugs to market for the benefit ofpatients worldwide. As one of the fastest-growing global providers of PhaseI-IV services, we offer experience spanning 90 countries, along withindustry-leading patient access and retention capabilities and broadtherapeutic expertise, to meet our customers' clinical development challenges.
Kendle was recognized by FORTUNE magazine as one of the 100fastest-growing companies in the United States for 2008. The company also hasbeen recognized as "Top CRO to Work With" in the Thomson CenterWatch 2007survey of U.S. investigative sites and "Best CRO" for 2007 and 2006 by leadingglobal pharmaceutical publication Scrip World Pharmaceutical News.
Additional information and investor kits are available upon request fromKendle, 441 Vine Street, Suite 1200, Cincinnati, OH 45202 or from theCompany's Web site at www.kendle.com.
Information provided herein, which is not historical information, such asstatements about prospective earnings, revenue and earnings growth, areforward-looking statements pursuant to the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995. All such forward-lookingstatements, including the statements contained herein regarding anticipatedtrends in the Company's business, are based largely on management'sexpectations and are subject to and qualified by risks and uncertainties thatcould cause actual results to differ materially from those expressed orimplied by such statements. These risks and uncertainties include, withoutlimitation, competitive factors and industry consolidation, outsourcing trendsin the pharmaceutical and biotechnology industries, the Company's ability tomanage growth and continue to attract and retain qualified personnel, theCompany's ability to complete additional acquisitions and to integrate newlyacquired businesses, the Company's ability to penetrate new markets, the fixedprice nature of contracts and cost overruns, the loss, cancellation or delayof contracts or amendments thereto, the ability to maintain existing customerrelationships or enter into new ones, the Company's sales cycle, the Company'sability to obtain financing on terms acceptable to the Company, the effects ofexchange rate fluctuations, risks related to non-US operations and otherfactors described in the Company's filings with the Securities and ExchangeCommission, including Quarterly Reports on Form 10-Q and the Annual Report onForm 10-K. No assurance can be given that the Company will be able to realizethe net service revenues included in backlog and verbal awards. Kendlebelieves that its aggregate backlog and verbal awards are not necessarily ameaningful indicator of future results. All information in this release iscurrent as of Nov. 4, 2008. The Company undertakes no duty to update anyforward-looking statement to conform the statement to actual results orchanges in the Company's expectations.Kendle International Inc. Condensed Consolidated Statements of Income (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 2008 2007 2008 2007 Net service revenues $124,828 $100,070 $365,941 $293,311 Reimbursable out-of-pocket revenues 56,254 42,366 151,346 120,864 Total revenues 181,082 142,436 517,287 414,175 Costs and expenses: Direct costs 64,070 49,119 186,763 150,062 Reimbursable out-of-pocket costs 56,254 42,366 151,346 120,864 Selling, general and administrative expenses 40,649 32,830 122,009 94,571 Depreciation and amortization 4,240 3,876 11,245 11,065 Total costs and expenses 165,213 128,191 471,363 376,562 Income from operations 15,869 14,245 45,924 37,613 Other income (expense): Interest expense (2,237) (3,316) (7,432) (11,988) Interest income 94 341 483 1,108 Write-off of deferred financing costs - (4,152) - (4,152) Other 3,364 (2,076) (815) (4,388) Total other income (expense) 1,221 (9,203) (7,764) (19,420) Income before income taxes 17,090 5,042 38,160 18,193 Income taxes 6,114 1,256 13,725 5,872 Net income $10,976 $3,786 $24,435 $12,321 Income per share data: Basic: Net income per share $0.74 $0.26 $1.66 $0.85 Weighted average shares outstanding 14,769 14,534 14,721 14,483 Diluted: Net income per share $0.73 $0.25 $1.63 $0.83 Weighted average shares outstanding 15,018 14,895 14,982 14,864 Kendle International Inc. Selected Balance Sheet and Other Information (In thousands) (Unaudited) Selected Balance Sheet Information: September 30, 2008 December 31, 2007 Cash, cash equivalents and marketable securities (including restricted cash) $18,419 $46,356 Receivables, net of advance billings 91,909 57,148 Borrowings under revolving credit facility 2,000 - Convertible notes 200,000 200,000 Net Services Revenues by Geographic Region: Three Months Ended Nine Months Ended September 30 September 30 2008 2007 2008 2007 North America 50% 51% 47% 50% Europe 37% 41% 41% 42% Latin America 9% 5% 8% 5% Asia-Pacific 4% 3% 4% 3% Segment Information: Three Months Ended Nine Months Ended September 30 September 30 2008 2007 2008 2007 Early Stage: Net Service Revenues $11,225 $4,687 $25,500 $15,660 Operating Income 1,208 118 3,745 1,468 Late Stage: Net Service Revenues $110,879 $93,381 $331,793 $271,769 Operating Income 26,674 24,961 79,963 64,297 Support and Other: Net Service Revenues $2,724 $2,002 $8,648 $5,882 Operating Income (12,013) (10,834) (37,784) (28,152)
SOURCE Kendle International Inc.
