Kendle International Inc. (KNDL)

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Kendle Announces First Quarter 2009 Results

* On Wednesday May 6, 2009, 8:16 pm EDT

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* Kendle International Inc.

CINCINNATI, May 6 /PRNewswire-FirstCall/ -- Kendle (Nasdaq: KNDL - News), a leading, global full-service clinical research organization, today reported net income of $886,000 or $0.06 per share for the first quarter 2009 compared with net income of $4.1 million or $0.27 per diluted share for the first quarter 2008. On a pro forma basis, net income for the first quarter of 2009 was $0.47 per diluted share compared with $0.38 per diluted share in the first quarter of 2008.
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First Quarter 2009 Results

Net service revenues for the quarter ended March 31, 2009, totaled $108.1 million, a decrease of 5 percent compared with the same period in 2008. Excluding the impact of foreign exchange rates, revenues for the quarter increased 8 percent compared with the same period in 2008.

Income from operations for the three months ended March 31, 2009, was $8.1 million or 7.5 percent of net service revenues versus $14.0 million or 12.2 percent of net service revenues for first quarter 2008. The reduction in operating income is largely attributable to the decline of net service revenues for the quarter. Excluding the impact of foreign exchange rates, income from operations for the period ended March 31, 2009 would have been $11.4 million or 9.3 percent of net service revenues on a constant currency basis.

Effective Jan. 1, 2009, Kendle adopted APB 14-1 which increased interest expense for additional non-cash interest amounting to $1.7 million and $1.5 million for the periods ended March 31, 2009 and 2008 respectively.

The effective tax rate for the first quarter of 2009 was 88.4 percent compared with the as adjusted effective tax rate for 2008 of 42.9 percent. Included in the first quarter 2009 tax expense and effective tax rate is $4.4 million or $0.30 per diluted share of tax expense relating to the unwinding of a Pound Sterling foreign currency hedge.

Pro forma earnings per share, excluding the impact of APB 14-1 and the additional expense related to the foreign currency hedge, is $0.47 per diluted share compared with $0.38 per diluted share for the same period last year.

Cash flow from operations for first quarter 2009 was $8.3 million. Cash, cash equivalents and marketable securities at March 31, 2009, totaled $56.0 million. Days sales outstanding in accounts receivables were 38 days compared with 45 days in the first quarter of 2008. Capital expenditures for the quarter ended March 31, 2009, totaled $5.4 million.

Total new business authorizations at March 31, 2009 were $930 million compared with $1.0 billion at Dec. 31, 2008 and $917 million at March 31, 2008. New business awards in first quarter 2009 were $72 million compared with $180 million for the same period last year. Contract cancellations in the first quarter were $52 million.

Margin Improvement and Cost Reduction Initiatives

In the second quarter 2009, the Company implemented a series of initiatives to reduce its variable costs. These initiatives include strict controls over all discretionary spending, a hiring and wage freeze, and workforce and capacity optimization initiatives to better balance our staffing levels with customer demand. The Company expects to take a one-time charge in the second quarter of 2009 for severance-related and other expenses in the range of $3.5 million to $4.5 million. The Company anticipates these initiatives will generate savings of between $17.5 million and $22.5 million in the second half of 2009.

Organizational Structure

The Company announced that it plans to adjust its organizational and leadership structure in order to deliver operational excellence, efficiency, and cost savings for customers. In addition to enhancing business development efforts, the Company plans to consolidate positions in a number of operational groups and by year end, operations will be more functional in structure, driving costs from middle management and building synergies across various groups such as Phase II-III Clinical Development and Late Phase, and Clinical Monitoring and Clinical Data Management.

"We are taking aggressive steps to enhance our business development efforts, realign our leadership and organizational structure and implement a series of margin improvement and cost reduction initiatives to move our business to the next level," said Chairman and CEO Candace Kendle, PharmD.

Dr. Kendle continued, "Kendle is well-positioned with the leadership, financial strength and industry-leading service offerings necessary to weather the current challenges and emerge even stronger. Over the long term we believe the fundamentals of the CRO industry will remain quite positive."

First Quarter 2009 Conference Call and Webcast Details

Kendle will host its First Quarter 2009 conference call on May 7, 2009, 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 June 5, 2009.