Attached files
file | filename |
---|---|
EX-32.1 - EXHIBIT 32.1 - KENDLE INTERNATIONAL INC | c04489exv32w1.htm |
EX-31.1 - EXHIBIT 31.1 - KENDLE INTERNATIONAL INC | c04489exv31w1.htm |
EX-32.2 - EXHIBIT 32.2 - KENDLE INTERNATIONAL INC | c04489exv32w2.htm |
EX-31.2 - EXHIBIT 31.2 - KENDLE INTERNATIONAL INC | c04489exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 30, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-23019
KENDLE INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Ohio | 31-1274091 | |
(State or other jurisdiction | (IRS Employer Identification No.) | |
of incorporation or organization) | ||
441 Vine Street, Suite 500, Cincinnati, Ohio | 45202 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code (513) 381-5550
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: 14,905,579 shares of Common Stock, no par value, as of July 30, 2010.
KENDLE INTERNATIONAL INC.
Index
Index
Page | ||||||||
Part I. Financial Information | ||||||||
Item 1. |
Financial Statements (Unaudited) |
|||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
7 | ||||||||
18 | ||||||||
30 | ||||||||
30 | ||||||||
Part II. Other Information | ||||||||
31 | ||||||||
31 | ||||||||
31 | ||||||||
31 | ||||||||
31 | ||||||||
31 | ||||||||
31 | ||||||||
Signatures | 32 | |||||||
Exhibit Index | 33 | |||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
2
Table of Contents
KENDLE INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, | December 31, | |||||||
(in thousands, except share data) | 2010 | 2009 | ||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 32,179 | $ | 52,103 | ||||
Restricted cash |
731 | 1,112 | ||||||
Accounts receivable, net |
97,323 | 125,287 | ||||||
Deferred tax assets current |
7,457 | 8,147 | ||||||
Other current assets |
22,477 | 20,676 | ||||||
Total current assets |
160,167 | 207,325 | ||||||
Property and equipment, net |
57,009 | 53,539 | ||||||
Goodwill |
241,719 | 243,589 | ||||||
Other finite-lived intangible assets, net |
13,351 | 15,164 | ||||||
Long-term deferred tax assets |
11,646 | 12,716 | ||||||
Other assets |
7,373 | 7,390 | ||||||
Total assets |
$ | 491,265 | $ | 539,723 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of obligations under capital leases |
$ | 40 | $ | 52 | ||||
Trade payables |
11,628 | 14,928 | ||||||
Advance billings |
67,699 | 76,202 | ||||||
Other accrued liabilities |
41,630 | 59,667 | ||||||
Total current liabilities |
120,997 | 150,849 | ||||||
Obligations under capital leases, less current portion |
14 | 34 | ||||||
Convertible notes, net |
130,271 | 138,308 | ||||||
Deferred tax liabilities |
2,551 | 7,508 | ||||||
Non-current income taxes payable |
1,903 | 1,872 | ||||||
Other liabilities |
4,552 | 5,105 | ||||||
Total liabilities |
$ | 260,288 | $ | 303,676 | ||||
Commitments and contingencies |
||||||||
Shareholders equity: |
||||||||
Preferred stock no par value; 100,000 shares
authorized; none
issued and outstanding |
||||||||
Common stock no par value; 45,000,000 shares
authorized;
14,924,796 and 14,912,327 shares issued and
14,901,744 and 14,889,275
outstanding at June 30, 2010 and December 31,
2009, respectively |
$ | 75 | $ | 75 | ||||
Additional paid in capital |
181,200 | 180,534 | ||||||
Accumulated earnings |
36,810 | 33,736 | ||||||
Accumulated other comprehensive income: |
||||||||
Foreign currency translation adjustment |
13,384 | 22,194 | ||||||
Less: Cost of common stock held in treasury,
23,052 shares at
June 30, 2010 and December 31, 2009, respectively |
(492 | ) | (492 | ) | ||||
Total shareholders equity |
230,977 | 236,047 | ||||||
Total liabilities and shareholders equity |
$ | 491,265 | $ | 539,723 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
KENDLE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands, except per share data) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net service revenues |
$ | 82,445 | $ | 107,351 | $ | 172,672 | $ | 215,454 | ||||||||
Reimbursable out-of-pocket revenues |
28,870 | 34,804 | 55,099 | 71,762 | ||||||||||||
Total revenues |
111,315 | 142,155 | 227,771 | 287,216 | ||||||||||||
Costs and expenses: |
||||||||||||||||
Direct costs |
42,833 | 55,204 | 90,272 | 113,182 | ||||||||||||
Reimbursable out-of-pocket costs |
28,870 | 34,804 | 55,099 | 71,762 | ||||||||||||
Selling, general and
administrative expenses |
34,094 | 35,226 | 68,831 | 73,256 | ||||||||||||
Restructuring expense |
1,153 | 6,006 | 1,153 | 6,006 | ||||||||||||
Depreciation and amortization |
3,701 | 3,937 | 7,486 | 7,895 | ||||||||||||
Total costs and expenses |
110,651 | 135,177 | 222,841 | 272,101 | ||||||||||||
Income from operations |
664 | 6,978 | 4,930 | 15,115 | ||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
33 | 133 | 55 | 363 | ||||||||||||
Interest expense |
(2,871 | ) | (3,728 | ) | (6,099 | ) | (7,604 | ) | ||||||||
Gain on extinguishment of debt |
| 3,133 | | 3,133 | ||||||||||||
Other |
5,403 | 1,029 | 7,123 | 4,194 | ||||||||||||
Total other income |
2,565 | 567 | 1,079 | 86 | ||||||||||||
Income before income taxes |
3,229 | 7,545 | 6,009 | 15,201 | ||||||||||||
Income taxes |
1,366 | 4,352 | 2,935 | 11,121 | ||||||||||||
Net income |
$ | 1,863 | $ | 3,193 | $ | 3,074 | $ | 4,080 | ||||||||
Income per share data: |
||||||||||||||||
Basic: |
||||||||||||||||
Net income per share |
$ | 0.13 | $ | 0.22 | $ | 0.21 | $ | 0.27 | ||||||||
Weighted average shares |
14,900 | 14,849 | 14,897 | 14,845 | ||||||||||||
Diluted: |
||||||||||||||||
Net income per share |
$ | 0.12 | $ | 0.21 | $ | 0.20 | $ | 0.27 | ||||||||
Weighted average shares |
15,028 | 14,955 | 15,041 | 14,971 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents
KENDLE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net income |
$ | 1,863 | $ | 3,193 | $ | 3,074 | $ | 4,080 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Foreign currency translation
adjustment |
(8,184 | ) | 5,387 | (8,810 | ) | 1,610 | ||||||||||
Comprehensive income (loss) |
$ | (6,321 | ) | $ | 8,580 | $ | (5,736 | ) | $ | 5,690 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Table of Contents
KENDLE INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended | ||||||||
June 30, | ||||||||
(in thousands) | 2010 | 2009 | ||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 3,074 | $ | 4,080 | ||||
Adjustments to reconcile net income to cash provided by
operating activities: |
||||||||
Depreciation and amortization |
7,486 | 7,895 | ||||||
Deferred income taxes |
(3,189 | ) | 101 | |||||
Compensation expense on stock grants |
945 | 611 | ||||||
Debt issue cost amortization |
3,942 | 4,070 | ||||||
Foreign currency exchange gain |
(4,584 | ) | (4,599 | ) | ||||
(Gain) / loss on extinguishment of debt |
71 | (3,133 | ) | |||||
Other |
334 | 824 | ||||||
Changes in operating assets and liabilities, net of effects
from acquisitions: |
||||||||
Restricted cash |
272 | (2,243 | ) | |||||
Accounts receivable |
24,037 | 18,622 | ||||||
Other current assets |
(2,486 | ) | (3,459 | ) | ||||
Other assets |
(111 | ) | (3 | ) | ||||
Trade payables |
(930 | ) | 1,440 | |||||
Advance billings |
(6,725 | ) | (99 | ) | ||||
Accrued liabilities and other |
(15,736 | ) | 15,276 | |||||
Net cash provided by operating activities |
6,400 | 39,383 | ||||||
Cash flows from investing activities: |
||||||||
Proceeds from termination of foreign currency hedges |
| 17,312 | ||||||
Acquisitions of property and equipment and internally
developed software |
(11,014 | ) | (11,178 | ) | ||||
Acquisitions of businesses, less cash acquired |
(2,400 | ) | (2,875 | ) | ||||
Other |
(34 | ) | 17 | |||||
Net cash provided by (used in) investing activities |
(13,448 | ) | 3,276 | |||||
Cash flows from financing activities: |
||||||||
Repurchase of convertible notes |
(11,145 | ) | (18,239 | ) | ||||
Debt issue costs |
(413 | ) | (482 | ) | ||||
Payments on capital lease obligations |
(32 | ) | (124 | ) | ||||
Repurchase of note hedges and warrants |
(3 | ) | (79 | ) | ||||
Amounts payable book overdraft |
656 | 470 | ||||||
Proceeds from issuance of common stock |
66 | 47 | ||||||
Income tax benefit from stock option exercises |
8 | | ||||||
Net cash used in financing activities |
(10,863 | ) | (18,407 | ) | ||||
Effects of exchange rates on cash and cash equivalents |
(2,013 | ) | 2,354 | |||||
Net increase (decrease) in cash and cash equivalents |
(19,924 | ) | 26,606 | |||||
Cash and cash equivalents: |
||||||||
Beginning of period |
52,103 | 35,169 | ||||||
End of period |
$ | 32,179 | $ | 61,775 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Table of Contents
KENDLE INTERNATIONAL INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(Unaudited)
1. Summary of Significant Accounting Policies:
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP) for interim financial information and the instructions to the Quarterly Report on Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
notes required by U.S. GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the six months ended June 30, 2010 are not
necessarily indicative of the results that may be expected for the year ending December 31, 2010.
For further information, refer to the Consolidated Financial Statements and notes thereto included
in the Annual Report on Form 10-K for the year ended December 31, 2009 filed by Kendle
International Inc. (the Company) with the Securities and Exchange Commission.
The Condensed Consolidated Balance Sheet at December 31, 2009 has been derived from the audited
consolidated financial statements at that date, but does not include all of the information and
notes required by U.S. GAAP for complete financial statements.
Net Income Per Share Data
Net income per basic share is computed using the weighted average common shares outstanding. Net
income per diluted share is computed using the weighted average common shares and potential common
shares outstanding.
7
Table of Contents
The following table sets forth the computation for basic and diluted net income per share or
earnings per share (in thousands, except per share information):
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Basic earnings per share calculation: |
||||||||||||||||
Net income |
$ | 1,863 | $ | 3,193 | $ | 3,074 | $ | 4,080 | ||||||||
Weighted average shares outstanding for basic EPS computation |
14,900 | 14,849 | 14,897 | 14,845 | ||||||||||||
Earnings per share basic |
$ | 0.13 | $ | 0.22 | $ | 0.21 | $ | 0.27 | ||||||||
Diluted earnings per share calculation: |
||||||||||||||||
Net income |
$ | 1,863 | $ | 3,193 | $ | 3,074 | $ | 4,080 | ||||||||
Weighted average shares outstanding |
14,900 | 14,849 | 14,897 | 14,845 | ||||||||||||
Dilutive effect of stock options and restricted stock |
128 | 106 | 144 | 126 | ||||||||||||
Weighted average shares outstanding for diluted EPS computation |
15,028 | 14,955 | 15,041 | 14,971 | ||||||||||||
Earnings per share assuming dilution |
$ | 0.12 | $ | 0.21 | $ | 0.20 | $ | 0.27 | ||||||||
For the six months ended June 30, 2010, approximately 128,000 of outstanding options were
antidilutive compared to approximately 161,000 for the same period of 2009.
Under accounting guidance related to contingently convertible instruments on diluted earnings per
share, due to the Companys obligation to settle the par value of its Convertible Notes (defined
in Note 3) in cash, the Company is not required to include any shares underlying the Convertible
Notes in its weighted average shares outstanding used in calculating diluted earnings per share
until the average price per share for the quarter exceeds the $47.71 conversion price and only to
the extent of the additional shares that the Company may be required to issue in the event that
the Companys conversion obligation exceeds the principal amount of the Convertible Notes
converted. These conditions have not been met as of the quarter ended June 30, 2010. At any
such time in the future that these conditions are met, only the number of shares that would be
issuable (under the treasury method of accounting for the share dilution) will be included,
which is based upon the amount by which the average stock price exceeds the conversion price.
The following table provides examples of how changes in the Companys stock price will require
the inclusion of additional shares in the denominator of the weighted average shares outstanding
assuming dilution calculation. The table also reflects the impact on the number of shares
that the Company would expect to issue upon concurrent settlement of the Convertible Notes and
the bond hedges and warrants mentioned below:
8
Table of Contents
Incremental Shares | ||||||||||||||||||||
Total Treasury | Shares Due to the | Issued by the | ||||||||||||||||||
Convertible | Warrant | Method Incremental | Company under Note | Company Upon | ||||||||||||||||
Share Price | Notes Shares | Shares | Shares (1) | Hedges | Conversion (2) | |||||||||||||||
$40.00 |
| | | | | |||||||||||||||
$45.00 |
| | | | | |||||||||||||||
$50.00 |
136,592 | | 136,592 | (136,592 | ) | | ||||||||||||||
$55.00 |
395,683 | | 395,683 | (395,683 | ) | | ||||||||||||||
$60.00 |
611,592 | | 611,592 | (611,592 | ) | | ||||||||||||||
$65.00 |
794,284 | 173,820 | 968,104 | (794,284 | ) | 173,820 | ||||||||||||||
$70.00 |
950,877 | 374,732 | 1,325,609 | (950,877 | ) | 374,732 |
(1) | Represents the number of incremental shares that must be included in the calculation of fully diluted shares. | |
(2) | Represents the number of incremental shares to be issued by the Company upon conversion of the Convertible Notes, assuming concurrent settlement of the bond hedges and warrants. |
Accounting for Uncertainty in Income Taxes
At June 30, 2010, the total amount of unrecognized tax benefits was approximately $1.8 million, of
which $1.7 million would impact the effective tax rate, if recognized.
Interest and penalties associated with uncertain tax positions are recognized as components of the
income tax expense in the Companys Condensed Consolidated Statements of Operations. Tax-related
interest and penalties and the related recorded liability were not material at June 30, 2010.
The Company does not have a material amount of unrecognized tax benefits for which the statute of
limitations is expected to expire within the next 12 months. The remaining unrecognized tax
benefits primarily include potential transfer pricing exposures from allocation of income between
tax jurisdictions and potential deemed foreign dividends.
The tax years that remain subject to examination for the Companys major tax jurisdictions are
shown below:
Jurisdiction | Open Years | |||
United States |
2006 - 2009 | |||
Germany |
2007 - 2009 | |||
United Kingdom |
2006 - 2009 | |||
Netherlands |
2005 - 2009 |
The Company operates in various state and local jurisdictions. Open tax years for state and
local jurisdictions approximate the open years reflected above for the United States.
9
Table of Contents
Subsequent Events
Accounting guidance related to subsequent events requires entities to evaluate events or
transactions occurring after the balance sheet date through the date of issuance of the condensed
consolidated financial statements to determine whether events require recognition or nonrecognition
and disclosure. Recognition is required for the effects of all subsequent events that provide
additional evidence about conditions that existed at the date of the balance sheet, including
estimates inherent in the process of preparing financial statements. Nonrecognized subsequent
events may require disclosure. The Company has evaluated subsequent events through the issuance
date of its Condensed Consolidated Financial Statements.
New Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards
Update (ASU) 2009-13, Revenue Recognition (Topic 605) related to revenue recognition for multiple
deliverable revenue arrangements. The guidance must be adopted no later than the beginning of the
first fiscal year beginning on or after June 15, 2010 (January 1, 2011 for the Company). The
Company is currently evaluating the impact, if any, of this guidance on its consolidated financial
statements.
2. Goodwill and Other Intangible Assets:
Goodwill at June 30, 2010 and December 31, 2009 consisted of the following:
(In thousands) | Early Stage | Late Stage | Total | |||||||||
Balance at December 31, 2009 |
$ | 18,313 | $ | 225,276 | $ | 243,589 | ||||||
Foreign currency
translation adjustments |
14 | (1,884 | ) | (1,870 | ) | |||||||
Balance at June 30, 2010 |
$ | 18,327 | $ | 223,392 | $ | 241,719 | ||||||
10
Table of Contents
Amortizable intangible assets consisted of the following:
As of June 30, | As of December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Amortizable intangible assets: |
||||||||
Carrying amount: |
||||||||
Customer relationships |
$ | 22,174 | $ | 22,169 | ||||
Completed technology |
2,600 | 2,600 | ||||||
Backlog |
6,200 | 6,200 | ||||||
Internally developed software (a) |
18,115 | 17,963 | ||||||
Total carrying amount |
$ | 49,089 | $ | 48,932 | ||||
Accumulated Amortization: |
||||||||
Customer relationships |
$ | (9,579 | ) | $ | (8,098 | ) | ||
Completed technology |
(2,031 | ) | (1,771 | ) | ||||
Backlog |
(6,013 | ) | (5,936 | ) | ||||
Internally developed software (a) |
(16,458 | ) | (16,187 | ) | ||||
Total accumulated amortization |
$ | (34,081 | ) | $ | (31,992 | ) | ||
Net amortizable intangible assets |
$ | 15,008 | $ | 16,940 | ||||
(a) | Internally developed software is included in Other Assets in the Companys Condensed Consolidated Balance Sheets. |
3. Debt:
In March 2010, the Company entered into a new credit agreement (the Facility). The Facility is
comprised of a $35 million revolving loan commitment, with up to $10 million of such commitment
available for issuance of letters of credit and up to $5 million of such commitment available for
same-day swing line loans. At the Companys request and with the consent of the current lender or
additional lenders, the total commitment may be increased by, or incremental term loans be obtained
for, up to an additional $15 million. At the Companys election, loans under the Facility are
available either at (i) an adjusted base rate plus an applicable margin; or (ii) an adjusted LIBOR
plus an applicable margin. The applicable margin for each interest rate is calculated in
accordance with the terms of the Facility.
The Facility, as amended on April 27, 2010, matures on March 31, 2015. Before this amendment, the
Facility had the potential for accelerated maturity on January 15, 2012 in the
event that five percent (5%) or more of the currently outstanding principal amount of the
Convertible Notes discussed below had not been redeemed or repaid in full on or prior to January
15, 2012.
Borrowings under the Facility are collateralized by substantially all of the Companys assets
pursuant to the terms of a Pledge and Security Agreement. The Facility contains various
affirmative and negative covenants including those regarding limitations on the Companys ability
to incur certain indebtedness, limitations on certain investments, limitations on capital
expenditures and limitations on certain acquisitions and asset sales outside the ordinary course of
business, as well as financial covenants regarding limitations on the Companys total leverage
ratio, senior secured leverage ratio and interest coverage ratio. As of June 30, 2010, the Company
is in compliance with the covenants.
11
Table of Contents
The Company also maintains an existing $5.0 million Multicurrency Facility that is renewable
annually and is used in connection with the Companys European operations.
As of June 30, 2010 and December 31, 2009, there were no amounts outstanding under the revolving
credit loan portion of the Old Facility, the Facility or the Multicurrency Facility.
In July 2007, the Company entered into a Purchase Agreement with UBS Securities LLC (the
Underwriter) for the issuance and sale by the Company of $200 million, including a $25 million
over-allotment of the Companys Convertible Notes (Convertible Notes). The Convertible Notes have
a maturity date of July 15, 2012 and were sold to the Underwriters at a price of $1,000 per
Convertible Note, less an underwriting discount of 3% per Convertible Note.
In May 2010, the Company repurchased on the open market a portion of its Convertible Notes with a
par value of $12 million for cash in the amount of $11.1 million, resulting in a loss of $71,000.
Debt issuance costs of $154,000 were written off in conjunction with this repurchase.
Consideration in the amount of $348,000 was allocated to the retirement of the equity component
and was recorded as a reduction to additional paid in capital.
The carrying amounts of the equity and debt components were as follows:
(in thousands) | As of June 30, 2010 | As of December 31, 2009 | ||||||
Equity component, carrying amount |
$ | 35,860 | $ | 36,208 | ||||
Principal component, at par |
$ | 142,500 | $ | 154,500 | ||||
Unamortized discount |
(12,229 | ) | (16,192 | ) | ||||
Principal component, carrying amount |
$ | 130,271 | $ | 138,308 | ||||
The net carrying amounts of the Convertible Notes are classified as long-term in the
accompanying Condensed Consolidated Balance Sheets. The debt discount and adjusted debt issuance
costs are being amortized, using the effective interest rate method, over the term of the
Convertible Notes which mature on July 15, 2012. Interest expense on the Convertible Notes has
been recorded at an effective rate of 8.02%.
Interest expense recognized related to the Convertible Notes was as follows:
For the three months | For the six months | |||||||||||||||
ended June 30, | ended June 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Interest cost at coupon rate |
$ | 1,265 | $ | 1,606 | $ | 2,568 | $ | 3,294 | ||||||||
Discount amortization |
1,406 | 1,675 | 2,856 | 3,427 | ||||||||||||
Total interest expense recognized |
$ | 2,671 | $ | 3,281 | $ | 5,424 | $ | 6,721 | ||||||||
12
Table of Contents
4. Stock Based Compensation:
In the first six months of 2010, the Company issued 32,252 shares of time vested restricted share
units (RSUs) under the 2007 Stock Incentive Plan. Of this award, 17,288 shares vest in their
entirety after 18 months, 12,464 shares split-vest over 24 months and the remaining 2,500 shares
vest in their entirety after 15 months. Of the 32,252 shares awarded, 5,971 RSUs were issued to
retirement eligible associates and resulted in immediate vesting and expense recognition. The
expense for the remaining RSUs will be recorded on a straight-line basis over the vesting period.
In the first six months of 2010, the Company issued 51,432 shares of performance-based restricted
stock units. The vesting of these shares is dependent upon a performance condition, the Company
meeting a certain EPS target for 2010, and a service condition, as 33% vest in March 2011, 33% vest
in January 2012, and 33% vest in January 2013. If the performance condition is not met at least at
the 90% of target level, the award does not vest. If the performance condition is met at greater
than 90% of target level but below 100% of target level, the number of shares is adjusted to
between 50% and 90% of the original award based upon the target tier level achieved. Of the total
of 51,432 shares issued, 27,362 were issued to retirement eligible associates. Under the terms of
the award, regardless of whether or not the performance condition is achieved, should an event
similar to retirement occur during the first half of 2010, one-half of the RSUs granted would
immediately vest. Similarly, should an event similar to retirement occur during the second half of
2010, the full amount of the RSUs granted would immediately vest. The Company has therefore
recorded one-half of the expense for the retirement eligible associates in the first quarter of
2010 and would expect to record the second half of the expense in the third quarter of 2010.
Expense for non retirement-eligible associates is being recorded over the vesting period (33
months).
The following is a summary of stock based compensation expense recorded by the Company for the
following periods:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Stock options |
$ | 247 | $ | 236 | $ | 288 | $ | 285 | ||||||||
Non-vested restricted common stock |
150 | 18 | 604 | 326 | ||||||||||||
Total stock based compensation |
$ | 397 | $ | 254 | $ | 892 | $ | 611 | ||||||||
As of June 30, 2010, there was approximately $1,516,000 of total unrecognized compensation
cost, approximately $336,000 of which relates to options and $1,180,000 of which relates to
non-vested common stock. The cost is expected to be recognized over a weighted-average period of
2.1 years for options and 1.4 years for non-vested common stock.
13
Table of Contents
Stock Options:
The following table summarizes information regarding stock option activity in the first six months
of 2010:
Weighted | Aggregate | |||||||||||||||
Weighted | Average | Intrinsic | ||||||||||||||
Average | Remaining | Value | ||||||||||||||
Shares | Exercise Price | Contractual Life | ($ in thousands) | |||||||||||||
Options outstanding at December 31, 2009 |
379,875 | $ | 16.44 | |||||||||||||
Granted |
38,000 | 13.88 | ||||||||||||||
Canceled |
(20,640 | ) | 22.72 | |||||||||||||
Exercised |
(8,715 | ) | 7.62 | |||||||||||||
Options outstanding at June 30, 2010 |
388,520 | $ | 16.05 | 5.00 | $ | 708 | ||||||||||
Exercisable at June 30, 2010 |
353,170 | $ | 15.61 | 4.63 | $ | 708 |
Substantially all of the outstanding options are expected to vest.
Under the provisions of accounting guidance pertaining to Stock Compensation, the Company is
required to estimate on the date of grant the fair value of each option using an option-pricing
model. Accordingly, the Black-Scholes pricing model is used with the following weighted-average
assumptions:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Dividend yield |
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Expected volatility |
70.1 | % | 70.7 | % | 70.1 | % | 70.7 | % | ||||||||
Risk-free interest
rate |
2.1 | % | 2.1 | % | 2.1 | % | 2.1 | % | ||||||||
Expected term |
3.2 | 3.2 | 3.2 | 3.2 |
The expected volatility is based on the Companys stock price over a historical period which
approximates the expected term of the option as well as a comparison to volatility for other
companies in the Companys industry and expectations of future volatility. The risk free interest
rate is based on the implied yield in U.S Treasury issues with a remaining term approximating the
expected term of the option. The expected option term is calculated as the historic weighted
average life of similar awards.
The total intrinsic value of stock options exercised was approximately $34,000 and $87,000 in the
three and six months ended June 30, 2010, respectively, compared to approximately $46,000 and
$98,000 in the three and six months ended June 30, 2009, respectively.
14
Table of Contents
Non-Vested Common Stock:
A summary of non-vested common stock activity during the first six months of 2010 is as follows:
Non-Vested Stock
Shares | ||||
Shares outstanding at December 31, 2009 |
52,316 | |||
Granted |
83,684 | |||
Vested |
(850 | ) | ||
Canceled |
(6,400 | ) | ||
Shares outstanding at June 30, 2010 |
128,750 |
The weighted-average per share fair value of non-vested shares that were granted in the first six
months of 2010 was $17.38 per share.
The weighted-average per share fair value (as of grant date) of non-vested shares that vested
during the first six months of 2010 was $23.84 per share.
5. Fair Value of Financial Instruments:
Accounting guidance related to fair value measurements enables the reader of the financial
statements to assess the inputs used to develop those measurements by establishing a hierarchy for
ranking the quality and reliability of the information used to determine fair values. This guidance
requires that assets and liabilities carried at fair value be classified and disclosed in one of
the following three categories:
Level 1: | Quoted market prices in active markets for identical assets or liabilities. | ||
Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data. | ||
Level 3: | Unobservable inputs that are not corroborated by market data. |
The Company generally applies fair value techniques on a non-recurring basis associated with, (1)
valuing potential impairment loss related to goodwill pursuant to accounting guidance related to
goodwill and other intangible assets and, (2) valuing potential impairment loss related to
long-lived assets accounted for pursuant to accounting guidance related to impairment or disposal
of long-lived assets.
The following table summarizes the carrying amounts and fair values of certain financial assets and
liabilities at June 30, 2010:
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
Carrying | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
(in thousands) | Amount | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Money Market Accounts |
$ | 5,706 | $ | 5,706 | $ | | $ | |
15
Table of Contents
The following table summarizes the carrying amounts and fair values of certain financial
assets and liabilities at December 31, 2009:
Quoted Prices in | ||||||||||||||||
Active Markets for | Significant Other | Significant | ||||||||||||||
Carrying | Identical Assets | Observable Inputs | Unobservable Inputs | |||||||||||||
(in thousands) | Amount | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Money Market Accounts |
$ | 16,627 | $ | 16,627 | $ | | $ | |
The carrying amounts of cash, accounts receivable, and accounts payable approximate fair
value. The fair value of the Companys Convertible Notes was approximately 91% and 89% of the par
value at June 30, 2010 and December 31, 2009, respectively.
6. Segment Information:
The Company operates its business in two reportable segments, Early Stage and Late Stage. The
Early Stage business currently focuses on the Companys Phase I operations, while Late Stage is
comprised of contract services related to Phase II through IV clinical trials, regulatory affairs
and biometrics offerings. Support and Other consists of unallocated corporate expenses, primarily
information technology, marketing and communications, human resources, finance and legal.
16
Table of Contents
Segment information for the three and six months ended June 30, 2010 and 2009 is as follows:
Early | Late | Support | ||||||||||||||
(in thousands) | Stage | Stage | & Other | Total | ||||||||||||
Three months ended June 30, 2010 |
||||||||||||||||
Net service revenues |
$ | 5,932 | $ | 75,967 | $ | 546 | $ | 82,445 | ||||||||
Reimbursable out-of-pocket
revenues |
$ | 574 | $ | 28,296 | $ | | $ | 28,870 | ||||||||
Total revenues |
$ | 6,506 | $ | 104,263 | $ | 546 | $ | 111,315 | ||||||||
Operating income (loss) |
$ | (488 | ) | $ | 13,896 | $ | (12,744 | ) | $ | 664 | ||||||
Three months ended June 30, 2009 |
||||||||||||||||
Net service revenues |
$ | 7,381 | $ | 96,557 | $ | 3,413 | $ | 107,351 | ||||||||
Reimbursable out-of-pocket
revenues |
$ | | $ | 34,804 | $ | | $ | 34,804 | ||||||||
Total revenues |
$ | 7,381 | $ | 131,361 | $ | 3,413 | $ | 142,155 | ||||||||
Operating income (loss) |
$ | (106 | ) | $ | 18,946 | $ | (11,862 | ) | $ | 6,978 | ||||||
Early | Late | Support | ||||||||||||||
(in thousands) | Stage | Stage | & Other | Total | ||||||||||||
Six months ended June 30, 2010 |
||||||||||||||||
Net service revenues |
$ | 13,303 | $ | 158,071 | $ | 1,298 | $ | 172,672 | ||||||||
Reimbursable
out-of-pocket revenues |
$ | 1,164 | $ | 53,935 | $ | | $ | 55,099 | ||||||||
Total revenues |
$ | 14,467 | $ | 212,006 | $ | 1,298 | $ | 227,771 | ||||||||
Operating income (loss) |
$ | (430 | ) | $ | 30,883 | $ | (25,523 | ) | $ | 4,930 | ||||||
Six months ended June 30, 2009 |
||||||||||||||||
Net service revenues |
$ | 16,463 | $ | 193,195 | $ | 5,796 | $ | 215,454 | ||||||||
Reimbursable
out-of-pocket revenues |
$ | | $ | 71,762 | $ | | $ | 71,762 | ||||||||
Total revenues |
$ | 16,463 | $ | 264,957 | $ | 5,796 | $ | 287,216 | ||||||||
Operating income (loss) |
$ | 914 | $ | 40,132 | $ | (25,931 | ) | $ | 15,115 |
Identifiable assets by segment as of June 30, 2010 and December 31, 2009 are as follows:
(in thousands) | June 30, 2010 | December 31, 2009 | ||||||
Identifiable assets: |
||||||||
Early Stage |
$ | 44,529 | $ | 48,070 | ||||
Late Stage |
$ | 380,757 | $ | 406,832 | ||||
Support & Other (a) |
$ | 65,979 | $ | 84,821 | ||||
Total assets |
$ | 491,265 | $ | 539,723 | ||||
(a) | Primarily comprised of cash and tax-related assets. |
17
Table of Contents
7. Restructuring Expenses:
In an effort to manage costs, the Company continues to evaluate measures to more appropriately
match its workforce size to anticipated customer demand and workload and match facilities to
anticipated workforce needs. As a result, the Company committed to consolidate certain of its U.K.
offices and to an additional workforce action to reduce headcount, primarily in the Late Stage and
Support and Other segments in the U.S. and Western Europe, in the amount of $1.2 million.
Approximately half of this amount relates to the U.K. office consolidation. During the second
quarter of 2010, $1.2 million was added to the accrual, $1.0 million was paid and $1.5 million
remains accrued as of June 30, 2010.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
The information discussed below is derived from the Condensed Consolidated Financial Statements
included in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2010 and
should be read in conjunction therewith. The Companys results of operations for a particular
quarter may not be indicative of results expected during subsequent quarters or for the entire
year.
Company Overview
Kendle International Inc. (the Company or Kendle) is a global clinical research organization (CRO)
that delivers integrated clinical development services, including clinical trial management,
clinical data management, statistical analysis, medical writing, regulatory consulting and
organizational meeting management and publications services, among other services, on a contract
basis to the biopharmaceutical industry. The Company operates in North America, Europe,
Asia/Pacific, Latin America and Africa. The Company operates its business in two reportable
operating segments, Early Stage and Late Stage. The Early Stage business currently focuses on the
Companys Phase I operations while Late Stage is comprised of clinical development services related
to Phase II through IV clinical trials, regulatory affairs and biometrics and statistics offerings.
The Company has aggregated its Clinical and Data Monitoring operating unit, Regulatory, Site and
Medical affairs operating unit, Biostatistics and Statistical Programming operating unit and its
Project Management and Late Phase operating unit into the Late Stage segment under the aggregation
criteria in accounting guidance related to disclosures about segments of an enterprise and related
information. The aggregation criteria met include a similar nature of services provided, a similar
type of customer, similar methods used to distribute services, similar economic characteristics and
a similar regulatory environment. In addition, the Company reports support functions primarily
composed of unallocated corporate expenses for information technology, marketing and
communications, human resources, finance and legal under the Support and Other category for
purposes of segment reporting. A portion of the costs incurred by the support units are allocated
to the Early and Late Stage reportable operating segments.
The Company primarily earns net service revenues through performance under Late Stage segment
full-service contracts. The Company also recognizes revenues through limited or functional
service contracts, consulting contracts, and Early Stage segment contracts. For a detailed
discussion regarding the Companys Late Stage segment contracts, Early Stage segment contracts,
revenue recognition process and other Critical Accounting Policies and Estimates, please see
Managements Discussion and Analysis of Financial Condition and Results of Operations included in
the Annual Report on Form 10-K for the year ended December 31, 2009.
18
Table of Contents
The CRO industry in general continues to be dependent on the research and development efforts of
the principal pharmaceutical and biotechnology companies as major customers, and the Company
believes this dependence will continue. The loss of business from any of its major customers could
have a material adverse effect on the Company.
New Business Awards and Backlog
New business awards, representing new sales of our services and additional services provided on existing contracts, are added to backlog when the Company
enters into a contract, letter of intent or other forms of commitments. Awards can vary
significantly from quarter to quarter and contracts generally have terms ranging from several
months to several years. The Companys new business awards for the three months ended June 30,
2010 and 2009 were approximately $132 million for both periods.
In 2009 and continuing into 2010, new business awards declined significantly from historical levels
due to a variety of reasons, some of which are the continued delays in and lengthening of the
selling cycle. Mergers and acquisitions by and between the Companys customers in the
biopharmaceutical industry are resulting in delays in signed contracts, as well as extending the
time in which our customers make final project decisions, as our customers are re-evaluating their
research and development spending priorities in an effort to control costs. We believe that
biopharmaceutical research and development spending has slowed from the historical levels and that
growth rates in the next few years may not return to historical levels. In addition, smaller
customers without large partners have experienced difficulty obtaining financing. However, we also
believe that outsourcing penetration is likely to increase, as outsourcing is an effective means
for our customers to reduce their costs.
In general, in 2009 and continuing into 2010, the Company experienced cancellations at a higher
level than its historical norms. Cancellations have largely been outside of the Companys control
and substantially attributable to development pipeline reprioritization, lack of drug efficacy and
safety and sponsor funding issues. Recent experience indicates that cancellations are beginning to
moderate, however the Company remains uncertain as to whether the current level of cancellation
experience will continue.
Backlog consists of new business awards for which the work has not started but is anticipated to
begin in the future, as well as contracts in process that have not been completed. The average
duration of the contracts in backlog fluctuates from quarter to quarter based on the contracts
constituting backlog at any given time. The Company generally experiences a longer period of time
between contract award and revenue recognition with respect to large contracts covering global
services. Backlog at June 30, 2010 was approximately $778 million. The net book-to-bill ratio was
1.2 to 1 and .7 to 1, respectively, for the three months ended June 30, 2010 and 2009.
As discussed in Item 1 Backlog in the Companys Annual Report on Form 10-K for the year ended
December 31, 2009, the Companys backlog might never be recognized as revenue and is not
necessarily a meaningful predictor of future performance.
19
Table of Contents
Results of Operations
Revenues
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
(in thousands) | 2010 | 2009 | % Decrease | 2010 | 2009 | % Decrease | ||||||||||||||||||
Net service revenues |
||||||||||||||||||||||||
Late stage |
$ | 75,967 | $ | 96,557 | -21.3 | % | $ | 158,071 | $ | 193,195 | -18.2 | % | ||||||||||||
Early stage |
5,932 | 7,381 | -19.6 | % | 13,303 | 16,463 | -19.2 | % | ||||||||||||||||
Support & other |
546 | 3,413 | -84.0 | % | 1,298 | 5,796 | -77.6 | % | ||||||||||||||||
Total net service revenues |
82,445 | 107,351 | -23.2 | % | 172,672 | 215,454 | -19.9 | % | ||||||||||||||||
Reimbursable out-of-pocket revenues* |
28,870 | 34,804 | -17.0 | % | 55,099 | 71,762 | -23.2 | % | ||||||||||||||||
Total revenues |
$ | 111,315 | $ | 142,155 | -21.7 | % | $ | 227,771 | $ | 287,216 | -20.7 | % | ||||||||||||
* | Reimbursable out-of-pocket revenues and expenses fluctuate from period to period, primarily due to the level of investigator activity in a particular period. |
Net service revenues declined approximately $24.9 million and $42.8 million for the three and
six month periods ended June 30, 2010, respectively, as a result of reduced volume of services
provided, partially offset in the year to date period by benefits from foreign currency exchange
rates.
Net service revenues in the Late Stage segment for the three and six month periods in 2010
decreased from the same periods of the prior year by approximately $20.6 million and $35.1 million,
respectively. The declines are the result of the lower sales volume in 2009 and continuing into
2010 arising out of continued delays in the selling cycle, more specifically, advancing contracts
from the awarded status to the signed contract status. The Company also experienced a
significantly higher than normal cancellation rate on previously awarded studies in 2009 and
continuing into 2010. In the second quarter, the Company has begun to see this rate moderate,
however it is still not yet at historical or normal levels experienced by the Company or industry
average. The Company believes this situation is the result of weakness in the current global
economy and its customers cost control efforts. Additionally, pharmaceutical company mergers, as
well as slowed prescription drug sales and uncertainty in the global economy, delayed customer
decisions on previously awarded contracts and a slowdown in the contract signature process as
pharmaceutical companies continue to re-evaluate their pipelines have contributed to reduced
revenues.
Net service revenues from the Early Stage segment decreased from the same periods of the prior year
by approximately $1.4 million in the current quarter and $3.2 million for the year to date,
primarily due to lower sales volumes and continued project delays, similar to those discussed for
the Late Stage segment.
20
Table of Contents
A summary of net service revenues by geographic region for the three and six months ended June 30,
2010 and 2009 is presented below.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
(in thousands) | 2010 | 2009 | % Decrease | 2010 | 2009 | % Decrease | ||||||||||||||||||
North America |
$ | 37,281 | $ | 51,707 | -27.9 | % | $ | 79,379 | $ | 108,911 | -27.1 | % | ||||||||||||
Europe |
33,078 | 40,174 | -17.7 | % | 69,703 | 75,658 | -7.9 | % | ||||||||||||||||
Latin America |
8,867 | 10,948 | -19.0 | % | 17,212 | 22,987 | -25.1 | % | ||||||||||||||||
Asia-Pacific |
3,219 | 4,522 | -28.8 | % | 6,378 | 7,898 | -19.2 | % | ||||||||||||||||
Total net service
revenues |
$ | 82,445 | $ | 107,351 | -23.2 | % | $ | 172,672 | $ | 215,454 | -19.9 | % | ||||||||||||
As mentioned above, as a result of lower sales or new business awards in 2009, revenues in all
regions decreased from the same periods of the previous year. In the second quarter of 2010, the
European regions revenues were particularly affected by the recent unfavorable exchange rate
fluctuations, however this was offset by benefits in the other regions. Additionally, the decline
in revenues in the Latin American region is due to the winding down and completion of several large
customer projects.
The top five customers based on net service revenues contributed approximately 25% of net service
revenues during both the three month and six month periods ended June 30, 2010 and 28% of net
service revenues for both of the same periods of 2009. No customer accounted for more than 10% of
total net service revenues in any period presented.
The Companys results of operations are subject to volatility due to a variety of factors. The
cancellation or delay of contracts and cost overruns could have adverse effects on the Condensed
Consolidated Financial Statements. Fluctuations in the Companys sales cycle and the ability to
maintain large customer contracts or to enter into new contracts could negatively affect the
Companys long-term growth. For a more detailed discussion regarding the risk factors associated
with the Companys results of operations, among other things, see Item 1A-Risk Factors, included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
Operating Expenses
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
(in thousands) | 2010 | 2009 | % Decrease | 2010 | 2009 | % Decrease | ||||||||||||||||||
Direct costs |
$ | 42,833 | $ | 55,204 | -22.4 | % | $ | 90,272 | $ | 113,182 | -20.2 | % | ||||||||||||
Reimbursable out-of-pocket costs* |
28,870 | 34,804 | -17.0 | % | 55,099 | 71,762 | -23.2 | % | ||||||||||||||||
SG&A expenses |
34,094 | 35,226 | -3.2 | % | 68,831 | 73,256 | -6.0 | % | ||||||||||||||||
Restructuring expenses |
1,153 | 6,006 | -80.8 | % | 1,153 | 6,006 | -80.8 | % | ||||||||||||||||
Depreciation and amortization |
3,701 | 3,937 | -6.0 | % | 7,486 | 7,895 | -5.2 | % | ||||||||||||||||
Total operating expenses |
$ | 110,651 | $ | 135,177 | -18.1 | % | $ | 222,841 | $ | 272,101 | -18.1 | % | ||||||||||||
* | Reimbursable out-of-pocket revenues and expenses fluctuate from period to period, primarily due to the level of investigator activity in a particular period. |
21
Table of Contents
Direct costs decreased from last year by approximately $12.4 million and $22.9 million for the
three and six months ended June 30, 2010 primarily as a result of the cost savings activities
initiated in 2009 and reduced work volumes. Direct costs expressed as a percentage of net service
revenues were 51.9% and 51.4% for the three months ended June 30, 2010 and 2009, respectively and
were 52.3% and 52.5% for the respective six month periods.
Selling, general and administrative expenses (SG&A) decreased approximately $1.1 million for the
quarter ended June 30, 2010 and $4.4 million for the six month period when compared to the
corresponding periods of 2009. The decrease in selling, general and administrative expenses relates
primarily to the cost-savings initiatives begun in the second quarter of 2009, as discussed in more
detail below. As a percentage of net service revenues, SG&A expenses were 41.3% for the quarter
ended June 30, 2010 compared to 32.8% for the same period a year ago. For the year to date periods
of 2010 and 2009, SG&A as a percent of revenues was 39.9% and 34.0%, respectively. SG&A as a
percent of revenues has increased when compared to the previous period as a significant portion of
these costs are more fixed in nature and do not tend to fluctuate with net service revenues.
Additionally, in the second quarter of 2010, the Company awarded annual salary merit increases to
its employees for the first time since 2008, reinstated some benefits that had previously been
suspended, continued on its path to implement its new ERP system and continued to invest in its new
business development and global sales organization, which partially offset the benefits of our cost
savings efforts.
Beginning in the second quarter of 2009, the Company commenced several initiatives to optimize its
workforce and match capacity with demand and reduce operating expenses. These activities included
a reduction of discretionary spending, limiting previously planned headcount additions, delay or
elimination of annual salary merit increases, reduction or elimination of other benefits, workforce
reductions or furloughs, and other cost savings in an attempt to reduce expenses. In the six month
periods of 2009 and 2010, the Company recorded restructuring charges totaling $6.0 million ($10.2
million for the full year 2009) and $1.2 million, respectively, for severance-related and other
expenses (primarily related to facility closures). These measures resulted in lower costs in 2010
as compared to 2009. Since the bulk of the Companys expenses are typically incurred in the Late
Stage and Support and Other reportable segments, the majority of the costs removed from the
business also affected those two segments.
Income from Operations
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
% Increase | % Increase | |||||||||||||||||||||||
(in thousands) | 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | ||||||||||||||||||
Operating income (loss) |
||||||||||||||||||||||||
Late stage |
$ | 13,896 | $ | 18,946 | -26.7 | % | $ | 30,883 | $ | 40,132 | -23.0 | % | ||||||||||||
Early stage |
(488 | ) | (106 | ) | 360.4 | % | (430 | ) | 914 | -147.0 | % | |||||||||||||
Support & other |
(12,744 | ) | (11,862 | ) | 7.4 | % | (25,523 | ) | (25,931 | ) | -1.6 | % | ||||||||||||
Total operating income |
$ | 664 | $ | 6,978 | -90.5 | % | $ | 4,930 | $ | 15,115 | -67.4 | % | ||||||||||||
22
Table of Contents
Income from operations declined in 2010
from 2009 primarily as a result of the decline in net
service revenues, partially offset by the Companys cost reduction efforts. Total operating
margins for the three and six month periods ended June 30, 2010 were approximately 1% and 3%,
respectively, compared to approximately 6.5% and 7.0% for the same periods of the prior year. As
mentioned in the previous section, restructuring charges were incurred in both 2009 and 2010.
Excluding the impact of these restructuring charges, operating margin for the three and six month
periods of 2010 were approximately 2% and 3.5%, respectively, and approximately 12% and 10% for the
same periods of 2009. See Use of Non-GAAP Measures section for the reconciliation to the U.S. GAAP
measure.
Late Stage segment income from operations declined by $5.0 million and $9.3 million for the quarter
and year to date periods ended June 30, 2010, respectively, when compared to the same periods of
the prior year. As discussed in earlier sections, lower sales or new business award volumes in
2009 have manifested in lower actual revenues in 2010. The impact of the decline in revenues
exceeded the cost reduction efforts resulting in lower operating income. Operating margin for the
three and six month periods ended June 30, 2010 for the Late Stage segment were approximately 18%
and 19.5%, respectively, compared to approximately 20% and 21% for the same periods of the prior
year.
Early Stage operating results declined significantly in 2010 from the same periods in 2009 as
a result of the decline in net service revenues, partially offset by cost reduction efforts. Early
Stage operations generally have higher fixed costs making a decline in revenues more difficult to
absorb. Operating margins for the three and six month periods ended June 30, 2010 for the Early
Stage segment were approximately (8)% and (3)%, respectively, compared to approximately (1)% and 6%
for the same periods of the prior year.
Other Income (Expense)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
Increase | Increase | |||||||||||||||||||||||
(in thousands) | 2010 | 2009 | (Decrease) | 2010 | 2009 | (Decrease) | ||||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||
Interest income |
$ | 33 | $ | 133 | $ | (100 | ) | $ | 55 | $ | 363 | $ | (308 | ) | ||||||||||
Interest expense |
(2,871 | ) | (3,728 | ) | 857 | (6,099 | ) | (7,604 | ) | 1,505 | ||||||||||||||
Gain on extinguishment of debt |
| 3,133 | (3,133 | ) | | 3,133 | (3,133 | ) | ||||||||||||||||
Foreign currency gains / (losses) |
5,655 | 1,287 | 4,368 | 7,525 | 4,877 | 2,648 | ||||||||||||||||||
Other expenses |
(252 | ) | (258 | ) | 6 | (402 | ) | (683 | ) | 281 | ||||||||||||||
Total other income (expense) |
$ | 2,565 | $ | 567 | $ | 1,998 | $ | 1,079 | $ | 86 | $ | 993 | ||||||||||||
Interest Expense
The primary component of interest expense is interest on the Companys 3.375% Convertible Notes
issued in 2007. Interest expense on the Convertible Notes was recorded at an effective rate of
8.02%. During the quarter and six months ended June 30, 2010, the amount of interest expense
recognized for the contractual interest rate and the discount amortization totaled $2.7 million
and $5.4 million, respectively. During the quarter and six months ended June 30, 2009, the
amount of interest expense recognized for the contractual interest rate and the discount
amortization totaled $3.3 million and $6.7 million, respectively. The decrease in interest
expense from the previous year is due to the Companys repurchases of Convertible Notes on the
open market, which reduced the principal balance outstanding. See discussion about the Companys
open market repurchase transaction completed in the second quarter of 2010 in the Liquidity and
Capital Resources section below. The remainder of interest expense relates to interest on
capital lease obligations and amortization of debt issuance costs, net of capitalized interest.
23
Table of Contents
Foreign Currency
The Company incurs foreign currency exchange gains and losses as part of the normal course of
business as it has subsidiaries in many countries outside the U.S. The exchange rate transaction
gains and losses typically occur when the Company holds assets in a currency other than the
functional currency of the reporting location or as a result of regional cash pooling arrangements.
In the three and six month periods of 2010, these foreign exchange transactions resulted in net
gains of $5.7 million and $7.5 million, respectively, as compared to $1.3 million and $4.9 million,
respectively, for the same periods of 2009. The foreign exchange gains are due primarily to the
strengthening of most currencies against the Euro in the second quarter. The U.S. dollar
strengthened against the Euro by approximately 10% when comparing June 30, 2010 to March 31, 2010
and the British Pound Sterling strengthened against the Euro by approximately 9% when comparing the
same dates. The Companys U.S. subsidiaries have a significant amount of Euro denominated payables
owed to subsidiaries with a functional currency of Euro. The strengthening of the U.S. dollar
resulted in a gain in the second quarter of 2010 on these intercompany balances. Additionally, one
of the Companys U.K. subsidiaries with a functional currency of British Pounds, has Euro-based
liabilities with a U.S. dollar equivalent amount of $20.4 million. As a result of the British
Pound strengthening against the Euro, the Company recorded significant unrealized foreign currency
exchange gains in the second quarter of 2010 on this balance also.
In the first quarter of 2009, the Company terminated an intercompany loan and unwound related
foreign currency hedges. As a result of these actions, $1.7 million in foreign exchange losses
were recorded for the first quarter of 2009. This loss is included in the year to date gains for 2009 mentioned above.
Income Taxes
The effective income tax rate was 42.3% in the quarter ended June 30, 2010, compared to 57.7% in
the quarter ended June 30, 2009. Tax expense for June 30, 2009 included approximately $1.0 million
related to the gain on extinguishment of debt recorded in that period.
The effective income tax rate was 48.8% for the six months ended June 30, 2010 and 73.2% for the
same period of the prior year. Included in the Companys tax expense for 2010 of approximately $2.9
million is a charge of approximately $400,000 related to the expiration of certain tax legislation
that occurred on December 31, 2009. A proposal to extend this legislation retroactively to January
1, 2010 has been included in various tax proposals considered by
Congress during 2010, however such legislation has not been enacted as of June 30, 2010. Should tax
legislation providing an extension be enacted in the second half of 2010, the Company will adjust
its tax expense discretely in the quarter in which such legislation is passed. Such an adjustment
could have a material effect on the Companys tax expense in that quarter. Tax expense for the year
to date period ended June 30, 2009 included discrete tax expense of approximately $4.4 million
related to the unwinding of certain foreign currency hedge agreements and related intercompany
notes, as well as $1.0 million of tax expense related to the extinguishment of debt.
24
Table of Contents
The Company continues to maintain full valuation allowances against the net operating losses
incurred in some of its subsidiaries. The Company also maintains valuation allowances for portions
of its foreign tax credits that are not expected to be realizable. Because Kendle operates on a
global basis, the effective tax rate varies from quarter to quarter based on the relative mix of
pretax earnings or losses at the various locations.
Net Income
The net income for the quarter ended June 30, 2010 was approximately $1.9 million, or $0.13 and
$0.12 per basic and diluted share. Net income for the quarter ended June 30, 2009 was $3.2 million
or $0.22 and $0.21 per basic and diluted share.
The net income for the six months ended June 30, 2010 was approximately $3.1 million, or $0.21 and
$0.20 per basic and diluted share. Net income for the same period of the prior year was $4.1
million or $0.27 per basic and diluted share.
Liquidity and Capital Resources
Cash Flows
Cash and cash equivalents decreased by $19.9 million at June 30, 2010 when compared with December
31, 2009, primarily the result of cash provided by operating activities of $6.4 million, net of
cash used in investing and financing activities of $13.4 million and $10.9 million, respectively.
Foreign exchange rates had a negative impact on cash and cash equivalents in the six months of 2010
of approximately $2.0 million. At June 30, 2010, cash and cash equivalents were $32.2 million. In
addition, the Company has approximately $.7 million in restricted cash that represents cash
received from customers that is segregated in separate Company bank accounts and available for use
only for specific project expenses.
Net cash provided by operating activities for the period consisted primarily of net income adjusted
for noncash expenses such as depreciation and amortization combined with a reduction in net
accounts receivable. Total noncash depreciation, amortization and debt issuance cost amortization
totaled $11.4 million for the six months ended June 30, 2010. Fluctuations in accounts receivable
and advance billings occur on a regular basis as services are performed, milestones or other
billing criteria are achieved, invoices are sent to customers, and payments for outstanding
accounts receivable are collected from customers. Such activity varies by individual customer and
contract. Accounts receivable, net of advance billings, was approximately $29.6 million at June
30, 2010, and $49.1 million at December 31, 2009. The decrease in accounts receivable was primarily
due to the decline in revenues. The Company has been and continues to be vigilant in monitoring and
collecting its accounts receivable. The other significant change affecting operating cash flows was
severance payments made as discussed in Note 7 in the Notes to the Condensed Consolidated Financial
Statements and the settlement of a liability related to the customer issue discussed in the
Companys Quarterly Report on Form 10-Q for the period ended March 31, 2010.
Investing activities for the six months ended June 30, 2010 consisted primarily of $11.0 million in
cash used for capital expenditures, the majority of which relates to computer equipment and
software purchases, including internally developed software, and $2.4 million for the final payment
related to the earnout agreement from the 2008 DecisionLine acquisition.
25
Table of Contents
Financing activities for the six months ended June 30, 2010 consisted primarily of $11.1 million in
cash used to repurchase a portion of the Companys Convertible Notes on the open market discussed
in the next section below.
Capital Resources
On March 15, 2010, the Company terminated its existing credit agreement (including all amendments
and related agreements, the Old Facility) and entered into a new credit agreement (the
Facility). The Facility is comprised of a $35 million revolving loan commitment, with up to $10
million of such commitment available for issuance of letters of credit and up to $5 million of such
commitment available for same-day swing line loans. At the Companys request and with the consent
of the current lender or additional lenders, the total commitment may be increased by, or
incremental term loans be obtained for, up to an additional $15 million. At the Companys
election, loans under the Facility are available either at (i) an adjusted base rate plus an
applicable margin; or (ii) an adjusted LIBOR plus an applicable margin. The applicable margin for
each interest rate is calculated in accordance with the terms of the Facility.
The Facility, as amended on April 27, 2010, matures on March 31, 2015. Before the amendment, the
Facility had the potential for accelerated maturity on January 15, 2012 in the event that five
percent (5%) or more of the currently outstanding principal amount of the Convertible Notes
discussed below had not been redeemed or repaid in full on or prior to January 15, 2012.
Borrowings under the Facility are collateralized by substantially all of the Companys assets
pursuant to the terms of a Pledge and Security Agreement. The Facility contains various
affirmative and negative covenants including those regarding limitations on the Companys ability
to incur certain indebtedness, limitations on certain investments, limitations on capital
expenditures and limitations on certain acquisitions and asset sales outside the ordinary course of
business, as well as financial covenants regarding limitations on the Companys total leverage
ratio, senior secured leverage ratio and interest coverage ratio. The Company is in compliance
with the covenants as of June 30, 2010.
The Company also maintains an existing $5.0 million Multicurrency Facility that is renewable
annually and is used in connection with the Companys European operations.
As of June 30, 2010 and December 31, 2009, there were no amounts outstanding under the revolving
credit loan portion of the Old Facility, the Facility or the Multicurrency Facility.
In the second quarter of 2010, the Company repurchased a total of $12 million in par value of its
Convertible Notes on the open market for $11.1 million. The amortized carrying value of these
repurchased notes exceeded the consideration allocated to the debt component resulting in a
$71,000 loss. As part of the repurchase transaction, the proportionate share of debt issuance
costs of $154,000 was written off. This transaction is expected to result in reduced cash
interest expense and noncash discount amortization of $600,000 in the current year and a total of
$2.1 million over the remaining term of the Convertible Notes. Of the consideration paid to
repurchase the Convertible Notes, $348,000 was allocated to the equity component. This is
considered to be a reacquisition of a portion of the equity component of the Convertible Notes
and as such is recorded as a reduction of additional paid in capital.
26
Table of Contents
Including the above mentioned repurchase transaction, in 2009 and 2010, the Company has
repurchased a total of $57.5 million in par value of its Convertible Notes for cash totaling
$47.6 million. At June 30, 2010, the remaining outstanding balance, at par value, is $142.5
million. As a result of this repurchase program, which commenced in the second quarter of 2009,
the Company will reduce its interest expense by $13.0 million over the term of the Convertible
Notes, $3.4 million of which has already been realized through June 30, 2010.
The Companys primary cash needs on both a short-term and long-term basis are for the payment of
salaries and fringe benefits, business development costs, capital expenditures, hiring and
recruiting expenses, acquisitions and facility-related expenses. The Company believes that its
existing capital resources, together with cash flows from operations and borrowing capacity under
the Facility and the Multicurrency Facility, will be sufficient to meet its foreseeable cash needs
for both the short and long term.
The Company has not historically experienced regular liquidity or collections issues with the large
majority of its customers. However, the Company does have contracts with biotechnology and small
pharmaceutical companies, some of which are dependent upon external financing to fund their
contractual commitments. The Company is continuing to monitor the financial status of its
customers.
As more of the Companys revenues are generated in locations other than the U.S., repatriation of
those cash flows in a tax efficient manner is increasingly challenging. The Company is continually
evaluating strategies to enable it to repatriate non-U.S. cash flows in a tax efficient manner.
In the future, the Company will continue to consider the acquisition of businesses to enhance its
service offerings, therapeutic base and global presence. Any such acquisitions may require
additional external financings and the Company may from time to time seek to obtain funds from
public or private issuances of equity or debt securities. There can be no such assurances that
financings will be available on terms acceptable to the Company.
Market Risk and Derivative Instruments
Interest Rates
The Company is exposed to changes in interest rates on any amounts outstanding under the Facility
and Multicurrency Facility. At June 30, 2010, no amounts were outstanding under either the
Facility or the Multicurrency Facility.
Foreign Currency
The Company operates on a global basis and is therefore exposed to various types of currency risks.
There are specific transaction risks which arise from the nature of the contracts the Company
executes with its customers. From time to time contracts are denominated in a currency different
than the particular local currency. This contract currency denomination issue is applicable only
to a portion of the contracts executed by the Company.
The first risk occurs as revenue recognized for services rendered is denominated in a currency
different from the currency in which the subsidiarys expenses are incurred. As a result, the
subsidiarys net service revenues and resultant net income or loss can be affected by fluctuations
in exchange rates.
27
Table of Contents
The second risk results from the passage of time between the invoicing of customers under these
contracts and the ultimate collection of customer payments against such invoices. Because the
contract is denominated in a currency other than the subsidiarys local currency, the Company
recognizes a receivable at the time of invoicing at the local currency equivalent of the foreign
currency invoice amount. Changes in exchange rates from the time the invoice is prepared until the
payment from the customer is received will result in the Company receiving either more or less in
local currency than the local currency equivalent of the invoice amount at the time the invoice was
prepared and the receivable established. This difference is recognized by the Company as a foreign
currency transaction gain or loss, as applicable, and is reported in Other Income (Expense) in the
Condensed Consolidated Statements of Operations.
A third type of transaction risk arises from transactions denominated in multiple currencies
between any two of the Companys various subsidiary locations. For each subsidiary, the Company
maintains an intercompany receivable and payable, which is denominated in multiple currencies.
Changes in exchange rates from the time the intercompany receivable/payable balance arises until
the balance is settled or measured for reporting purposes, results in exchange rate gains and
losses. This intercompany receivable/payable arises when work is performed by a Kendle location in
one country on behalf of a Kendle location in a different country under contract with the customer.
Additionally, there are occasions when funds are transferred between subsidiaries for working
capital purposes. The foreign currency transaction gain or loss is reported in Other Income
(Expense) in the Condensed Consolidated Statements of Operations.
The Company does not currently have hedges in place to mitigate exposure due to foreign exchange
rate fluctuations. Due to uncertainties regarding the timing of and currencies involved in the
majority of the Companys foreign exchange rate transactions, it is impracticable to implement
hedging instruments to match the Companys foreign currency inflows and outflows. The Company has
implemented procedures intended to mitigate the impact of foreign currency exchange rate
fluctuations including an intercompany procedure to allow for regular settlement of intercompany
balances where practical. The Company will continue to evaluate ways to mitigate the risk of this
impact in the future.
The Companys Condensed Consolidated Financial Statements are denominated in U.S. dollars.
Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar
will affect the translation of each foreign subsidiarys financial results into U.S. dollars for
purposes of reporting Condensed Consolidated Financial Statements. The Companys foreign
subsidiaries translate their financial results from local currency into U.S. dollars as follows:
income statement accounts are translated at average exchange rates for the period; balance sheet
asset and liability accounts are translated at end of period exchange rates; and equity accounts
are translated at historical exchange rates. Translation of the balance sheet in this manner
affects the shareholders equity account referred to as the foreign currency translation adjustment
account. This account exists only in the foreign subsidiaries U.S. dollar balance sheet and is
necessary to keep the foreign subsidiaries balance sheet stated in U.S. dollars in balance.
Foreign currency translation adjustments, which are reported as a separate component of
Shareholders Equity, were approximately $13.4 million at June 30, 2010 and $22.2 million at
December 31, 2009.
28
Table of Contents
Use of Non-GAAP Financial Measures
The Results of Operations section of this Quarterly Report on Form 10-Q may, from time to time,
contain adjustments to amounts calculated in accordance with generally accepted accounting
principles (GAAP) in the United States. The Companys management believes that investors
understanding of the Companys performance is enhanced by disclosing these non-GAAP financial
measures as a reasonable basis for comparison of ongoing results of operations. Non-GAAP measures
should not be considered a substitute for GAAP-based measures and results. The Companys non-GAAP
measures may not be comparable to non-GAAP measures of other companies.
A reconciliation between GAAP financial measures and non-GAAP financial measures is as follows:
Reconciliation of pro forma income from operations:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Income from operations, as reported |
$ | 664 | $ | 6,978 | $ | 4,930 | $ | 15,115 | ||||||||
Restructuring expense |
1,153 | 6,006 | 1,153 | 6,006 | ||||||||||||
Pro forma income from operations |
$ | 1,817 | $ | 12,984 | $ | 6,083 | $ | 21,121 | ||||||||
Pro forma operating margin |
2.2 | % | 12.1 | % | 3.5 | % | 9.8 | % |
Restructuring Expense
Non-GAAP operating income excludes restructuring costs, primarily costs related to facility
consolidations and employee severance costs. Restructuring costs have occurred in prior periods
and may or may not occur in future periods. Management believes this presentation provides a
reasonable basis for comparison of ongoing results of operations and is helpful for understanding
the Companys performance.
Cautionary Statement for Forward-Looking Information
Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts
constitute forward-looking statements, within the meaning of the Private Securities Litigation
Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act.
Reliance should not be placed on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors that may cause actual results, performance or achievements
to differ materially from those expressed or implied. Any forward-looking statement speaks only as
of the date made. The Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances arising after the date on which they are made.
29
Table of Contents
Statements concerning expected financial performance, on-going business strategies and possible
future action which the Company intends to pursue to achieve strategic objectives constitute
forward-looking information. Implementation of these strategies and the achievement of such
financial performance are each subject to numerous conditions, uncertainties and risk factors.
Factors that could cause actual performance to differ materially from these forward-looking
statements include those risk factors set forth in Item 1A of the Companys Annual Report on Form
10-K for the year ended December 31, 2009, which risk factors may be updated from time to time by
the Companys Quarterly Reports on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
See Managements Discussion and Analysis of Financial Condition and Results of Operations included
in this Quarterly Report on Form 10-Q and in the Companys Annual Report on Form 10-K for the year
ended December 31, 2009.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Companys Chief Executive Officer and Chief Financial Officer have reviewed and evaluated
the effectiveness of the Companys disclosure controls and procedures (as defined in the Exchange
Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report.
Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that the Companys disclosure controls and procedures are effective and designed to
ensure that material information relating to the Company and the Companys consolidated
subsidiaries are made known to them by others within those entities.
Changes in Internal Control
In addition, the Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, has determined that there were no changes in the Companys internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
the internal controls over financial reporting during the period covered by this report.
The Company is in the process of implementing a new enterprise resource planning (ERP) system which
will be implemented in phases which commenced in the second quarter of 2010. This conversion will
affect key financial reporting applications such as general ledger and revenue recognition
applications, among others. The Company expects the transition from legacy systems to continue
throughout the year and be substantially completed by the end of 2010. The Company is evaluating,
and will continue to evaluate, the impact of the implementation on its internal controls related to
financial reporting. At this juncture, the Company does not anticipate any adverse impact.
30
Table of Contents
Part II. Other Information
Item 1. | Legal Proceedings
The Company is party to lawsuits and administrative proceedings incidental to the normal course of business. The Company currently is not a party to any pending material proceedings under Item 103 of Regulation S-K. |
Item 1A. | Risk Factors
There have been no material changes from the information previously reported under Item 1A of the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
None |
Item 3. | Defaults upon Senior Securities
Not applicable |
Item 4. | Removed and Reserved |
Item 5. | Other Information
None |
Item 6. | Exhibits |
Exhibit | Filing | |||
Number | Description of Exhibit | Status | ||
31.1
|
Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | A | ||
31.2
|
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | A | ||
32.1
|
Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | A | ||
32.2
|
Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | A |
Filing | ||
Status | Description of Filing Status | |
A
|
Filed herewith |
31
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
KENDLE INTERNATIONAL INC. |
||||
By: | /s/ Candace Kendle | |||
Date: August 9, 2010 | Candace Kendle, PharmD | |||
Chairman of the Board and Chief Executive Officer | ||||
By: | /s/ Keith A. Cheesman | |||
Date: August 9, 2010 | Keith A. Cheesman | |||
Senior Vice President - Chief Financial Officer |
32
Table of Contents
KENDLE INTERNATIONAL INC.
Exhibit Index
Exhibits | Description | |
31.1
|
Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2
|
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1
|
Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2
|
Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
33