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Kendle International Inc. (NASDAQ:KNDL)

Q4 2008 Earnings Call

February 25, 2009; 08:30 am ET

Executives

Michael Lawson - Director of Investor Relations,

Candace Kendle - Chairman and Chief Executive Officer

Chris Bergen - Chief Operating Officer

Buzz Brenkert - Senior Vice President and Chief Financial Officer

Analysts

[Unidentified Analyst] - Wachovia Capital

Dave Windley - Jefferies & Co

Todd Van Fleet - First Analysis

Stefan Goetz - Goldman Sachs

Sandy Draper - Raymond James

Jeff Nelson - Ladenburg

Douglas Tsao - Barclays Capital

Eric Coldwell - Robert W. Baird

Stephen Shankman - Natixis

Operator

Welcome to the Kendle Fourth-Quarter and Full Year 2008 Earnings and 2009 Outlook Conference Call and Webcast. As a reminder, this call is being recorded. At this time, for opening remarks, I would like to turn the call over to the Director of Investor Relations, Mr. Michael Lawson. Please go ahead, sir.

Michael Lawson

Thanks, Cynthia. Good morning and welcome, everyone. Joining me on the call today are, Dr. Candace Kendle, Chairman and CEO; Chris Bergen, Chief Operating Officer; and Buzz Brenkert, Senior Vice President and Chief Financial Officer.

Once we have concluded our prepared remarks, we will be happy to take your questions. Before I turn the call over to Dr. Kendle, I would like to remind everyone that statements made during today’s call that are not based on historical facts should be considered forward-looking statements.

Today, we will be talking about our expectations regarding a number of activities in which Kendle is engaged. Reliance should not be placed on such forward-looking statements, because they involve certain risks and uncertainties that may cause our actual results to differ materially from those which we are going to discuss or which we may imply.

Those risks and uncertainties are outlined in our Securities and Exchange Commission’s filings. With that, I would now like to turn the call over to Dr. Kendle.

Candace Kendle

Thank you, Mike. We will begin the call with the CFO remarks. I will then comment on our business development market and industry trends and what we are doing to stay competitive in a global recession, and return then the call to Buzz for an update on our guidance. Buzz?

Buzz Brenkert

Thanks, Candace. Welcome to the call, everyone. Let me start out by covering some of the highlights for the quarter. Net service revenues for the fourth quarter totaled a little over $109 million. This represents a 5% increase over last year’s fourth quarter. Changes in foreign exchange rates had a significant impact on revenue for the quarter. On a constant currency basis, revenue grew 18% over Q4 of last year, consisting of 12% organic growth and 6% growth from acquisitions.

Geographically, North America made up 51% of net service revenues compared to 50% in Q4 of 2007. European revenues declined slightly from 40% in Q4 ‘07 to 37% this year. Latin American revenues grew by 50% from last year’s fourth quarter and now comprise 9% of the total, while Asia Pacific revenues fell slightly from 4% of the total in Q4 2007 to 3% in Q4 2008.

Our five largest customers accounted for 27% of revenue for the quarter, down from 29% in the fourth quarter of last year. Our top 10 customers accounted for 41%, down from 42% in Q4 ‘07. As we stated in the press release, 2008 fourth-quarter results were impacted by a programming issue unique to one study for one customer.

As a result of the rework required to complete the study, net service revenues were reduced by about $2.3 million for the quarter and additional direct costs were accrued at year-end. In total, this reduced earnings per share by $0.18 to $0.20. We believe there is potential to recoup most of these additional expenses through insurance proceeds.

At this time, however, we do not know the timing or amount of those potential proceeds. Operating income for the quarter was $10.9 million or 10% of net revenues, compared to $15.2 million or 14.6% of net revenues for the same period last year. The decrease in operating income in the quarter is largely due to the impact of the programming issue I just mentioned.

Pretax income for the quarter totaled just over $7.7 million and the tax rate for the quarter was 35.9%. Items affecting pretax income in the quarter include other income and expense representing primarily foreign exchange gains and losses, which netted to a $1.2 million loss for the quarter, mostly reflecting a stronger euro versus the British pound.

Net income for the quarter was $5 million compared to $6.4 million for Q4 of the prior year. Earnings per share on a diluted basis were $0.33 versus $0.43 for the same period last year. Looking at operating results by segment, net service revenues in our Early Stage business in Q4 ‘08 totaling $9.7 million increased 70% over fourth quarter 2007 totals with operating income of $2.3 million representing a 56% increase over the same period. Both the increase in net service revenues and operating income in the quarter are largely due to the results of our Toronto unit, which was acquired in June of this year.

Looking at our Late Stage business, net service revenues in the fourth quarter totaled $98.5 million, a 4% increase over Q4 2007 revenues and operating income of over $25 million was up 16% over the same period last year. For the full year, net service revenues totaled a little over $475 million, representing a 19% increase over net service revenue for the full year 2007, 16% of the growth in revenues was organic with 3% coming from acquisitions. Foreign exchange rate differences between years had little impact on full-year revenues.

For the full year, North America contributed 48% of net service revenues compared to 50% in 2007. Europe’s percent of the total declined to 40% from 42%. Latin America’s contribution grew from 5% to 8% in 2008 while the Asia-Pacific region grew from 3% to 4% this year.

In terms of customer concentration, our five largest customers accounted for 27% of revenue for the year, up from 25% last year and our top 10 customers accounted for 38%, down from 39% in 2007. No customer accounted for as much as 10% of revenue for any quarter during the year.

Operating income for the full year 2008 was almost $57 million or 12% of net service revenues compared to operating income of almost $53 million or 13.3% of revenues for the full year 2007. 2008 net income of $29.4 million represents a 57% increase over last year’s net income of $18.7 million.

Earnings per share for the full year 2008 totaled $1.96 on a diluted basis, a 56% improvement over last year’s diluted EPS of $1.26. Last year’s EPS includes a charge for the write-off of deferred financing costs totaling $4.2 million or $0.18 per share. Excluding this charge, pro forma earnings per share for 2007 were $1.44.

Turning to the balance sheet, we ended the quarter and the year with cash and marketable securities totaling about $36 million, down from over $46 million at the end of 2007. Cash flow from operations for 2008 totaled over $37 million compared to $61 million for the same period last year and capital expenditures for 2008 totaled just over $27 million compared to over $15 million in the prior year.

The bulk of the increase in CapEx for the year is related to the Company’s investments in IT-related hardware and software. Accounts receivable as of year-end totaled nearly $158 million including about $63 million of unbilled receivables and $95 million of billed receivables. DSOs were 35 days compared to the 33 days in December of 2007. Working capital aggregated $68.6 million.

On the liability side, borrowings include $200 million of convertible notes outstanding at the end of the quarter. Speaking of the convertible, as I said, we have $200 million outstanding at a coupon of 3 3/8% that matures in 2012. As you know, effective January 2009, we have adopted APB 14-1, which changes the way we will account for convertible debt.

Effectively, the amount of the convertible notes will be discounted to reflect the fair value of the debt component of the notes. This is done using an interest rate comparable to that of non-convertible debt at the time of the debt issuance. The resultant discount will be amortized income as additional non-cash interest expense over the life of the convertible note.

We estimate that the adoption of 14-1 will result in an increase in reported non-cash interest expense of approximately $7 million or $0.46 per share in 2009. And with that, I will turn the call back to you, Candace.

Candace Kendle

Thanks, Buzz. I would like to focus my remarks today on three separate areas, business development activities, market and industry trends, and what Kendle is doing to stay competitive in a global recession. With regard to business development, gross sales for the quarter, totaled $163 million, down 20% from Q3 ‘08 and 2% from Q4 ‘07. Cancellations were 15%.

Net sales for the quarter were $139 million with a book-to-bill of 1.3. For the full year, gross sales totaled $759 million, an improvement of over 14% from the full year 2007. Cancellations for the full year were 15%. Net sales for the full year 2008 were $654 million compared to $598 million for the full year 2009.

New business authorizations totaled just over $1 billion flat on a sequential basis from the third quarter and an increase of 18% over the backlog at the end of 2007. Our full-year cancellation rate was also 15%. The number of RFPs in the fourth quarter was at its lowest point when tracked over eight quarters.

This should be viewed in light of the fact that the fourth quarter is frequently softer than earlier quarters. The RFP dollar volume was at the lowest point for seven quarters. The largest number, largest dollar volume, and largest average size of RFPs was seen in the first half of 2008 over that eight-quarter period.

As we begin 2009, the RFPs -- the number of RFPs has increased and while not as high as the first half of 2008, appears to be returning to numbers seen in Q3 ‘08 and throughout 2007. The dollar volumes with regard to RFPs is trending higher and closer to the values of the first half 2008.

It is much too early to draw a conclusion, but trends are encouraging. While the RFP numbers shifted downward in the fourth quarter, we witnessed a considerable increase in the number of requests for information or RFIs. These are comprehensive documents which review in detail the CROs geographic reach, therapeutic experience, and business mix as a basis for strategic partnerships selection with no promise of immediate participation or specific award.

We saw an 18% year-over-year increase in our RFI participation. Given the fourth-quarter timing of the RFI activity, we can speculate that at the end of the year more customers were moving to the strategic partnership models. Customers currently using strategic partners were rethinking their partnerships going forward, and more customers were including Kendle in strategic partnership discussions due to our increased size and experience.

Only the largest players are eligible for these types of relationships. Before moving away from new business awards, I want to spend a few minutes updating you on our total business authorizations, our backlog. During appropriate periods, in an effort to give you more visibility to our opportunities as well as risks, we will continue our practice of breaking out our backlog into four customer types.

Large, multinational biopharmaceutical companies with over $1 billion in revenue; midsize and smaller biopharmaceutical companies with less than $1 billion in revenue; midsize to small biophRMAs with no revenues, but who have large, multinational clinical development partners; and, finally, midsize to small biophRMAs with no revenue and no partner.

Looking at our backlog at year-end, large phRMAs with more than $1 billion in revenue made up 66% of Kendle’s backlog versus 65% at the end of Q3. Midsize to smaller firms with less than $1 billion in revenues comprised 6% of the backlog compared to 3% at the end of Q3.

Midsized to small firms with no revenues, but with a large partner totaled 22% of the backlog compared to 25% in Q3. Small firms with no revenue or large partner makeup 6% of the backlog at the end of Q4 compared to 7% at the end of Q3. This final category is the piece of our backlog that is at greatest risk for potential cancellations.

Unfortunately, we have had a large cancellation from one of these customers in the first quarter of 2009. This small biopharm is working in an important therapeutic area as confidence in the drug and in Kendle. They are actively seeking a partner to finance the drug development.

If you remove this particular award from our backlog, the percentage of small firms with no revenue and no partner shrinks to less than 3%. If you drill down a little further to look at any additional exposure Kendle may have to this type of customer and look at pending proposals, less than 7% of the total dollar volume of pending proposals, some percentage of which will be awarded is attributed to small biophRMAs with no revenue or large multinational partner.

Within these customer opportunities, we have escalated our credit-watch policy. We are actively moving to a very low risk profile for our backlog. One final comment on our backlog, many of you have asked us about industry consolidation and in particular the Pfizer acquisition of Wyeth.

We understand Pfizer is working through an internal restructure that has slowed outsourcing activities in the fourth quarter of 2008 and into the first quarter of 2009. We are told we should expect that outsourcing will ramp up in Q2 and Q3 as the new organization settles and executes.

We expect that the FSP work we perform for Pfizer will continue at current levels and may increase during or after the acquisition. We have no other comparable risks with either Pfizer or Wyeth organizations. This morning or late yesterday Pfizer announced discontinuation of several Phase III programs. We anticipate that this will have no effect on Kendle.

Moving to the marketplace, for the first time in over a decade, prescription drug sales dropped to negative growth in 2008. There is little indication that this trend will reverse in the near term. With limited pipelines and economic crisis driving patients to generic drugs or non-compliance, governments and institutions demanding lower prescription costs, it is imperative that biopharmaceutical companies find alternative, cost-effective, drug development solutions.

The biopharmaceutical industry is accelerating its efforts to deliver drug costs effectively; looking to consolidation in order to build a pipeline, streamlining core competencies and areas of therapeutic focus to build excellence, narrowing down the numbers of vendors and partners, improving productivity and shrinking workforces in an effort to boost revenues and shrink costs.

As a part of this process, the biopharmaceutical industry continues to migrate towards true strategic partnerships with multinational CROs. According to a recent phRMA contract survey, 58% of large and medium biopharmaceutical organizations are using some level of strategic outsourcing. Half of their spend goes to preferred providers.

Moreover, data from the study by Tufts University in conjunction with the Association of Clinical Research Organizations reported that 20% of all outsourcing is in the FSP preferred provider business model.

And, finally, in a recent ACRO member and phRMA industry conference unanimous agreements was achieved among phRMA companies and CROs that clinical outsourcing will continue to grow.

Only a handful of CROs have the right therapeutic alignment, the right service offerings, and the right geographic reach to successfully win and execute large strategic outsourcing agreements. Kendle is in a strong position for strategic relationship growth over the next 18 to 24 months.

With regard to labor availability and costs in the market, biopharmaceutical companies are reducing costs and reducing workforces in the wake of these reduced sales. R&D investment is shifting to late stage development as companies are urgently trying to get new products to market.

The downsizing that has been occurring in biopharmaceutical companies creates opportunity for Kendle to attract well-qualified candidates, deepening our experience space. Since September 2008, there have been over 40,000 layoffs in the phRMA sector and over 80,000 in the last two years with an estimated 10% to 15% coming from early and late stage clinical development.

Intentions to further reduce workforces have been announced in recent months. The tight labor market of the last five years has been a management challenge for all multinational CROs. Today, we can look to stabilizing labor costs; improve access to experienced personnel, even in emerging markets; building deeper experience through retention of existing personnel; and driving management depth and succession planning.

In point of fact, our turnover rate is at the lowest level in our recent history. We continue to build our staff by recruiting and retaining experienced personnel. At year-end, we had 4,155 employees, a 25% increase over the total at the end of the fourth quarter of 2007. I want to make one final comment about the market.

With regard to the new U.S. administration, we expect that see increased regulatory activism and a conservative approval environment at the FDA. The impact is an increase in U.S. government-funded work, already the largest funding source for biomedical research, and longer U.S. approval times with a focus on increased safety surveillance and clinical trials.

Sponsoring companies have anticipated these changes and as a result, we are seeing a greater willingness to outsource large post-marketing surveillance pharmacoviligence programs, as well as an increasing interest in functional service provider alliances in the safety area.

I would like to spend a minute talking about what Kendle is doing to manage its business in the midst of a global recession. It is important in this environment to stay very close to the customer, work to facilitate change quickly. It is a time when we need to increasingly examine and re-examine processes and systems, looking for ways in which to streamline operations, provide cost-effective solutions working together with sponsoring companies. Squeeze the costs out of the drug development process.

Like many companies, we are tightening the reins on spending, looking for ways to reduce overhead and take out costs. As companies, we have executive managed task force looking at both discretionary spending and increasing productivity. As we move through 2009 and 2010, our major areas of focus will continue to be driving growth, increasing productivity, reducing costs, and enhancing our workforce. At this time, I would like to move back to Buzz for the guidance.

Buzz Brenkert

Thanks, Candace. We estimate the full year 2009 net service revenues will be in the range of $510 million to $530 million, representing growth of 7% to 10% over 2008. Our expectations for 2009 revenues assume average foreign exchange rates for the year equal to rates as of the end of January of 2009.

We expect that operating margins for the full year of 2009 will be somewhere between 12% and 13% of total net service revenues. Net income and earnings per share in 2009 will be significantly impacted by both the change in accounting for convertible debt and a significant transaction we completed early this year.

In January of this year, the Company entered into a transaction to unwind part of the cross-currency hedge associated with inter-company notes denominated in British pounds. This transaction resulted in a cash gain of about $17 million and a tax liability of $5.8 million, netting the Company about $11 million of cash.

This gain has been recognized in prior years through mark-to-market accounting and, therefore, will not be included in 2000 operating results. The tax liability however, has not been previously recognized and will affect net income in 2009. The affect of this additional income tax will reduce 2009 earnings per share by $0.38.

Pro forma earnings per share for the full year, absent only the additional non-cash interest expense resulting from the adoption of APB 14-1, pro forma earnings per share are anticipated to be in the range of $2.01 to $2.31 per share. On a GAAP basis, that is between $1.55 and $1.85.

Both the GAAP and pro forma numbers assume an annual effective tax rate in excess of 40%. This high effective tax rate is the result of the unwinding of the cross-currency hedge we completed in January. As I mentioned previously, this discrete tax expense adversely impacts EPS in 2009 by about $0.38 per share. That is it for guidance, Candace.

Candace Kendle

Thank you, Buzz. Operator, we can move to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Greg Bolan - Wachovia Capital.

[Unidentified Analyst] - Wachovia Capital

This is [Eric Hebert] on behalf of Greg Bolan. First question here is on the guidance. Do you plan and recognizing the tax liability of $5.8 million rateably throughout the year or all in one quarter? And then excluding this additional income tax, what do you believe your effective tax rate would be?

Buzz Brenkert

This will be reflected throughout the year in the projected tax rate for the full year. So, I am not sure will be rateable, but it will be proportional, if you will. Sorry, Eric. Without that, I would say it’s probably comparable to our rate this year, which is about 36% for the full year.

Unidentified Analyst - Wachovia Capital

Okay, perfect. Moving on, what is the net book-to-bill that you have assumed in your 2009 revenue guidance? And does it include that significant cancellation Candace described in her remarks?

Buzz Brenkert

The net book-to-bill we have assumed is in range of 1.2 to 1.3. And I am sorry, Eric what was the second part of the question?

Candace Kendle

Yes, it does include that cancellation.

Buzz Brenkert

Yes.

Unidentified Analyst - Wachovia Capital

It does, okay. And then last question here, can you just break down the $1.2 million expense in the other income line. We were kind of expecting a gain in this line. I know last quarter you broke it down into the impact from the inter-company notes cross-currency hedges and FX transaction gains. Is it possible for you to do that for us today?

Buzz Brenkert

Yes, I have got a schedule. Let me find it and come back to you, Eric, later on in the Q&A session.

Operator

Your next question comes from Dave Windley - Jefferies & Co.

Dave Windley - Jefferies & Co

Candace, on the programming issue, the rework events, I was hoping we could understand, I am interpreting that as data management, programming issue . Is that correct?

Candace Kendle

Not specifically, not data management, but it is a single event. There are no customer, no patients at risk and there are no long-term damages to the customer, if that is what you are getting at. But it is a one-time event that is being resolved amicably with the customer

Dave Windley - Jefferies & Co

Okay, I was just trying to gain an understanding of those things as well, but I guess what kind of programming are we talking about? I presume computer programming?

Candace Kendle

Yes, I am sorry, yes. Computer programming, but with an agreement with the customer and we really don’t want to get specific about this issue.

Dave Windley - Jefferies & Co

I understand you don’t want to get specific about the customer. How is the relationship with the customer as a result of the rework?

Candace Kendle

We are working very amicably with the customer. It’s a long-term customer. We are assuming the cost of the error and there was never any question about that. And I just don’t see any long-term damage associated with this. Chris is reminding me that maybe what you are getting at, it has not impacted the timeline of their drug approval process. This is a very discrete issue.

Dave Windley - Jefferies & Co

Okay, so it hasn’t resulted in having to, say start a trial over and lose the time from the initial setup of this study?

Candace Kendle

It’s not a critical path on the program.

Dave Windley - Jefferies & Co

And I guess the other question around that then; you are taking accounting adjustments related to the rework in the fourth quarter, which I presume that must be driven by the fact that some of the original work was 2008 work.

Candace Kendle

It was covered very late in the fourth quarter.

Dave Windley - Jefferies & Co

At what point did the discussion with the client about the error arise? And the question comes from the fact that you did pre-announce your fourth quarter in January and did not include this. So, I guess I am wondering at what point did Kendle learn about this and learn that it was going to be an issue? And why was it not included in the preannouncement?

Candace Kendle

Fair enough, fair enough. Up until yesterday we had very good reason to believe that we could get the insurance coverage into the quarter and not have to have this discussion. And so, while we can’t promise that it will be resolved in the first quarter, the indications are strong that we will see a very near-term resolution. But that is why it was not included.

Dave Windley - Jefferies & Co

That helps a lot. And then on that insurance amount, so obviously some uncertainty came into the picture. As a result of that, because of that uncertainty around amount and timing of the insurance proceeds, as I think was the characterization in the prepared remarks, are those then not included in the guidance?

Candace Kendle

That is correct.

Dave Windley - Jefferies & Co

Buzz, in the fourth quarter, it looks like maybe the accounting for this particular issue is or maybe the cost at least is reflected in the support and other line. Is that correct? And if so, can you quantify the abnormal amount in that line?

Buzz Brenkert

You are correct. It is in segment reporting and it is in support and other. The amount is a little more difficult to quantify and that is why we gave you a range as far as the EPS. And the reason I say that is because, I mean, obviously this had an impact. The accounting for the rework had an impact on earnings. There are some expenses accrued throughout the year, the amount of which is dependent upon results for the year. That range that we have given you reflects the likely range of outcomes for the discretionary portion of those sort of income-dependent expenses had this rework not been needed. So there is the cost in there, but there is an off-setting reduction in those income-dependent expenses as well.

Dave Windley - Jefferies & Co

Okay. So just to rephrase, the corporate support and the other would include the cost of the rework and then, so increased cost there offset by decreased costs, basically, kind of bonus compensation and the like as a result of lower results triggered by this expense?

Buzz Brenkert

Yes.

Operator

Your next question comes from Todd Van Fleet - First Analysis.

Todd Van Fleet - First Analysis

Just to add onto that or trying to finish up that line of thinking I guess. On the rework, the $2.3 million of revenue that was not recorded I guess in the quarter, should we think of that as kind of, had you recorded that $2.3 million that would have been more or less peer profit, had you been able to record that?

And then I guess because the impact was $0.18 to $0.20, I guess the way I am interpreting the $0.18 to $0.20 is that you missed revenue that was peer profit of $2.3 million and you had another maybe $1.8 million to $2.3 million of rework expense that you have accrued in the fourth quarter related to this issue. Is that the right way to interpret it?

Buzz Brenkert

I would say yes on the revenue; that is the right way to interpret it. The expense numbers that you are talking about would be net of these other adjustments that we were talking about.

Todd Van Fleet - First Analysis

Buzz, if we were to reduce the corporate expense in the quarter by maybe, I am just try to normalize for this event, reduce corporate expense by $2 million or so and then add the $2.3 million to revenue , would that give us a normalized picture in the quarter of the support and other in the corporate expense line?

Buzz Brenkert

I think you would be awfully close.

Todd Van Fleet - First Analysis

Okay. Wanted to ask you about the guidance for 2009?

Candace Kendle

Could I just make one more comment so that you know going forward to just finish up on this topic that we are doing, continuing the work and the revenue will come into 2009?

Todd Van Fleet - First Analysis

The revenue will come in to 2009?

Candace Kendle

In other words, the revenue that came out for the rework, Kendle is contracted to do that work in 2009.

Todd Van Fleet - First Analysis

Okay. So the $2.3 million in revenue will come back in 2009 and the insurance proceeds are meant to cover the rework expense?

Candace Kendle

Portions of it.

Todd Van Fleet - First Analysis

Portions of it, okay. All right, thanks for that. On the guidance for 2009, with respect to the EBITDA margin forecast, I think you said it was going to be in the neighborhood of 12% to 13%, if I am not mistaken. If we kind of normalize for the fourth-quarter event, I think, I guess my back of the envelope says that operating margin would have ended 2008 for the full year kind of in the mid-12% range. Buzz, does that sound about right?

Buzz Brenkert

Yes, it would be mid to high 12%.

Todd Van Fleet - First Analysis

Mid to high 12%. So you are basically forecasting operating margin to basically be about flattish, maybe even down slightly for 2009. But, Candace, I think we heard you say that you are going to be really focused on expense management, minding the cost structure, that sort of thing in 2009.

So that leaves me to conclude that there must have been a significant impact from foreign currency or you expect a significant impact from foreign currency in 2009 that you didn’t necessarily have in 2008.

So I am just wondering if you can quantify what the operating margin impact was on 2008 and how that carries over into 2009. So is it a 50 basis point drag? Is it a 100 basis point drag related to ForEx?

Candace Kendle

Just let me say first and then Buzz can comment on the specifics, but our approach here is to stay conservative in this environment. We are looking to move to lower-cost work environments, our customers are; certainly we are feeling price pressure. We are just really trying to be conservative going into 2009 in this environment.

Todd Van Fleet - First Analysis

Buzz, did you have a figure on the margin impact from ForEx?

Buzz Brenkert

I don’t have a figure on that. I, frankly, have not tried to figure that out or compare 2008 with 2009. As Candace said, we have been awfully conservative. We have assumed that foreign exchange that the rates in effect at the end of January are the ones that we will use in our guidance numbers; those reflect a very strong dollar.

Most of the people that we have talked to, indicate that they expect the dollar to remain strong in the first and second quarter and then start to weaken in the third and fourth quarter. To that extent that those projections hold, there is certainly opportunity in our guidance numbers, an opportunity for the operating margin to increase.

Todd Van Fleet - First Analysis

You embedded in your guidance then for 2009 as some weakening of the U.S. dollar in the back half of the year?

Buzz Brenkert

No, that is not what I am saying. We are assuming an average rate throughout the year that is equal to really a period when it’s very strong. The end of January it strengthened even more during January than it was at the end of 2008.

Todd Van Fleet - First Analysis

One more if I could, before I jump off here. With respect to APB-14, Buzz, you had said $7 million. I am assuming that is an after-tax number. Is that right?

Buzz Brenkert

$7 million is both before tax and after-tax. For tax purposes, interest expense has been calculated on this convertible debt in a very similar manner to what APB-14 requires. So it has always been included in tax expense that way. So we will not get any additional tax benefit from this expense.

Todd Van Fleet - First Analysis

Okay, all right. So effectively what is going to show up on your interest expense line is the $200 million at 3 3/8% plus this amortized piece of $7 million, I guess, annually over four quarters?

Buzz Brenkert

Correct. I am sorry. If I can, just to let you know, the requirement we will restate for any comparable period, so you will see prior-year numbers reduced reflecting this same interest expense component in our reports going forward.

Operator

Your next question comes from Randall Stanicky - Goldman Sachs.

Stefan Goetz - Goldman Sachs

This is actually Stefan calling in for Randall. I just had a couple quick questions. I know you guys just mentioned that the $2.3 million lost revenue from the fourth quarter you guys will see it in 2009. I’m assuming it is included in your guidance?

Buzz Brenkert

Yes, it is.

Stefan Goetz - Goldman Sachs

And in terms of Early Stage, the margins were pretty good there and I assume decision line added around 6% growth is top line again. Can you guys give a little color around demand in that part of the business?

Candace Kendle

We have not seen a decline in the demand in Early Stage, albeit we believe it to be due to, first of all, the small size of our business and also the uniqueness of the Toronto unit expertise. So we are not naive about the pressures in Early Stage. We continue to work on diversifying the customer base successfully in Morgantown and also building synergies between our Toronto and Utrecht units. Decision line acquisition has been not only positive from a financial point of view, but from a very strong leadership point of view.

Stefan Goetz - Goldman Sachs

Going towards employee additions and hiring trends, do you have a specific number for employee additions for fourth quarter?

Candace Kendle

I do not, but I can get that number for you.

Stefan Goetz - Goldman Sachs

Any specific cost cuts and initiatives in 2009 that we should know about that would maintain margins?

Candace Kendle

No.

Stefan Goetz - Goldman Sachs

I just had one more question about, I guess, the general macro environment. You mentioned that clients are already looking towards the more strategic outsourcing deals. Do you guys think there are any areas for M&A activity in the CRO space, because of this? Trying to increase sizes to match clients’ requests?

Candace Kendle

We continue to believe that in this market there probably is significant; there are values in the M&A environment. We have looked aggressively at a number of opportunities, but continue to think that it has to be high-value and aligned with our strategic focus of geographic and therapeutic expertise. A lot of looking, not a lot of execution at this point.

Operator

Your next question comes from Sandy Draper - Raymond James.

Sandy Draper - Raymond James

A couple of questions. One I wanted to follow-up Buzz, I may have gotten myself confused when you were responding to Dave’s question about the expenses relative to the guidance. Did you say that the range of your guidance is dependent or some of the reason for that variability is what you get back in insurance? Or is that completely excluded and it’s really just the cost of the rework or your cost? I wasn’t quite clear there. That is the first question.

Buzz Brenkert

I am sorry, Sandy; let me clarify that because I was not talking at all about guidance when I talked about the range. When we talked about the cost of this and the impact of this on 2008, we gave a range of impact of $0.18 to $0.20 impact on 2008. I was explaining that range, why there was a range there.

Sandy Draper - Raymond James

So in the guidance you have given for 2009 EPS, there is nothing in there that would include any recovery from the insurance claim?

Buzz Brenkert

That is correct, yes.

Sandy Draper - Raymond James

Okay, great. Second question is, I think you may have given it and I missed it. Can you just break out again the acquisition revenue in the quarter between Early Stage and Late Stage?

Buzz Brenkert

The only acquisition that we had was an Early Stage, so there is no acquisition revenue from Late Stage.

Sandy Draper - Raymond James

Okay, so then remind that number was how much?

Buzz Brenkert

You are looking for revenue from acquisition?

Sandy Draper - Raymond James

Yes.

Buzz Brenkert

I gave it to on a constant currency basis, because that is the best way to look at it. You know, on a constant currency basis it represented 6% of our growth.

Sandy Draper - Raymond James

6%; okay, great. And then in terms of your guidance, is there a way to think about, I certainly appreciate the conservatism of pegging it at January. In terms of putting a number, I mean obviously in the fourth quarter you had a major hit 12%, 13% drag because of FX. So basically, I would expect you are looking at least at probably 8% to 10% drag in revenue for 2009, because of FX. Is that about the right range?

Buzz Brenkert

I am not sure what you are comparing to when you talk about the drag. Are you talking about as compared to average rates in 2008?

Sandy Draper - Raymond James

Well, yes, just in terms of the negative impact. So in the quarter to get to your organic growth number, it looks like the FX had a negative impact of 12%-ish in the fourth quarter. So, I would assume that you were going to cycle over that in the fourth quarter. So if you keep a pretty high rate of currency in the first three quarters, your overall negative impact of currency is going to be maybe even close to 10% for 2009. Or maybe I am doing some wrong math here.

Buzz Brenkert

Yes, you have got me a little confused here, Sandy.

Sandy Draper - Raymond James

Okay, well maybe I will just follow up on that one off-line there. And then maybe just one final question and I will jump out. This is maybe for Candace. Candace, what are your thoughts and what are you seeing out there? There is a lot of talk about with all the transitions out there not just strategic partnerships with CROs in terms of larger trials, but actually potentially asset transfers, more meaningful tie-ins between the R&D groups and the CROs. What are your thoughts on the willingness to take on phRMA assets and what are you just generally seeing out there in the marketplace? Thanks.

Candace Kendle

I think that the sponsoring companies are now looking for suggestions, including asset transfers. Kendle, because of our Late Stage uniqueness would be less likely to take asset transfers, but you certainly could imagine whole workforce transfers. In the Early Stage environment, the assets that are out there probably don’t match or at least we are not aware of ones that match our strategic goals. So yes, there are lots of conversations. I am not sure for Kendle other than lots of workforces that may be suitable matches.

Just to respond to the HR question, the employee question, there is a net gain of 70 employees over the quarter. I don’t have the new hire to attrition number, but there is a 70% increase over the quarter, if that helps.

Operator

Your next question comes from Jeff Nelson - Ladenburg.

Jeff Nelson - Ladenburg

I had a question surrounding the tax liability and the unwinding of the hedge.

Candace Kendle

I am sorry, we can’t hear you.

Jeff Nelson – Ladenburg

Sorry about that. Just a question regarding this tax liability regarded to the unwinding of the currency hedge. Do you have any essentially realized gains from other currency hedges through this mark-to-market that could be exposed to tax liability in the future if you unwind them?

Buzz Brenkert

Yes, let me explain a little bit of how this came about, if you will. The hedges in place to hedge inter-company notes between Kendle U.S. and, basically, we have subsidiaries in the UK and Germany. So we have got a couple of hedges on the notes in the UK and a hedge on the note in Germany. In euros, in Germany, in pounds in the UK. The hedge really is, mirrors almost exactly the cash flow of these notes so that any increase in value of the hedge is offset by a reduction in the value of the note.

And, therefore, all of those are unrealized until there is a payment on the note and the two offset. Through the life of the note and the hedge, then you get an exact offset. The reason it’s accounted for this way is because there was no intention to separate the two. It’s basically an integrated transaction, if you will. And it’s the fact that we no longer needed the hedge and unwound it that triggered this tax event.

If we were to do that with the remaining hedges, a similar tax event would be triggered. Right now, when we mark-to-market we end up with an unrealized gain really or loss, depending on what is happening with exchange rates, completely offset by an unrealized gain or loss in the value of the notes.

Jeff Nelson – Ladenburg

And then can you give some guidance as to where you expect CapEx and cash flow to go in 2009?

Buzz Brenkert

Certainly capital expenditures; would anticipate those would be in the range of $24 million.

Operator

Your next question comes from Douglas Tsao - Barclays Capital.

Douglas Tsao - Barclays Capital

Just turning to this programming issue, I just wanted to get some clarity that this sort of problem has been resolved and that there is no systemic risk of this occurring in other studies that you are conducting for other clients.

Candace Kendle

Yes, it was a discrete, single error in a single study, in a single customer. And there was a total QC done and no other indicators of risks were determined. We are very confident that this is a one-time event.

Douglas Tsao - Barclays Capital

Okay, fantastic. Then, Candace, you mentioned seeing some pricing pressure. Was this largely driven by clients looking to sort of leverage their outsourcing spend or are you seeing pricing pressures from competitors who are sharpening their pencils, given what you talked about, some RFPs being down little bit in the second half of the year and trying to perhaps take a little market share back?

Candace Kendle

The former, when I speak of the pricing pressure, I am talking about directly from a large customer base that says we have to get these costs off the table. I think as a CRO industry, we have been very vocal that there are lots of costs that can come out. There are processes and systems that are outdated, that are not necessary in this regulatory environment. And so the response to customers when they say we have got to have lower prices is I think been across the board. We can get to lower prices. It is not difficult to get to lower prices. What needs to happen is we need to take costs out of the drug development system.

And I think for the first time -- and I have said this for the last several quarters, we have a very willing customer base in this environment. Tell us what it is that we can do differently? And so I don’t think that the concern about competitors sharpening their pencils, certainly there are unique events. But, overall, this is about taking out costs in drug development, of which there are many. that are unnecessary.

Douglas Tsao - Barclays Capital

And so you would interpret this as clients being more willing to make the outsourcing process more efficient, and so net-net your margin would stay more or less the same?

Candace Kendle

Yes, and I think that is, when you say why would Kendle get an 18% increase in RFIs year-over-year? Certainly because we are bigger, have more experience, are included in the process. But as I mentioned in my formal remarks, I think it’s customers saying what can we do in strategic partnerships to get the costs down? Tell us your best effort. What is the most efficient way to carry out this process? So I think we have a willing audience partnership, if you will, on getting costs off the table, which will drive prices down significantly.

Operator

Your next question comes from Dave Windley - Jefferies & Co.

Dave Windley - Jefferies & Co

Thanks for taking a few follow-ups here. Just a future reporting question, Buzz, do you plan to break out fairly clearly the non-cash portion of the interest expense that you will be reflecting for APB 14-1 going forward?

Buzz Brenkert

Absolutely.

Dave Windley - Jefferies & Co

Okay. Getting back to this acquisition question, you mentioned both in your prepared remarks and I think it was Sandy’s question about this kind of 6% on a constant dollar basis. I guess what I’m wondering is; there was significant appreciation on the dollar versus the Canadian dollar. I guess I’m just straightforward, can you tell us how much revenue in dollars that contributed as reported in the quarter?

I’m just trying to get to, because I can do an overall, but this is in one segment; and I don’t know if I can back into the dollars of contribution in the segment with constant dollar breakout. Maybe I can.

Buzz Brenkert

Let me tell you it was in the range of about 5% of total revenue.

Dave Windley - Jefferies & Co

Okay. As reported?

Buzz Brenkert

As reported. And then, Candace, I think in your prepared remarks about new business you also mentioned expectations of a more rigorous environment, slow FDA, etc. But as part of those comments I thought that you mentioned some things around pharmacovigilance and safety. I guess I was wondering, should I interpret that as there’s more discussion going on about that but there is nothing firm? Or we are actually starting to see real increases in RFPs for longer-term pharmacovigilant studies? I wondered if you could put some more detail around that for me.

Candace Kendle

Yes. Separating the two pieces, long-term pharmacovigilance is one and FSP safety alliances, each of those have had increased activity at Kendle in terms of RFP activity. The first I think is an industry trend. We’ve been in that space for quite a while, and so you wouldn’t necessarily think about the increase in activity as a result of a new penetration strategy for Kendle. So I think it’s evidence that the industry is upticking.

In the safety FSP alliance business, we have been in FSP is for as long as anyone; and safety has never been an area where companies have been willing to use an FSP model a sort of sacred territory or part of the full-service environment.

We do have a strong safety group. We may be ahead of the curve on the FSP safety alliance, but again I believe it’s an industry trend to consider this work in an FSP model. So slightly different, but I believe both are indicative of industry thinking.

Dave Windley - Jefferies & Co

Okay, great. And one last question for Buzz. Hoping not to confuse the issue to much more, but on this cross-currency hedge, my understanding from our previous conversations was that this one or a particularly large amount of inter-company notes and then cross-currency hedge on top of that were put in place at the time of your initial term loan circa the Charles River CS acquisition.

Buzz Brenkert

Correct.

Dave Windley - Jefferies & Co

Are these all related to that?

Buzz Brenkert

Yes.

Operator

Your next question comes from Sandy Draper - Raymond James.

Sandy Draper - Raymond James

Thanks, one more follow-up on that. Buzz, I would assume since you actually sounds like got a cash gain on unwinding the cash currency hedge, are there actual cash taxes to be paid in ‘09?

Buzz Brenkert

Absolutely.

Sandy Draper - Raymond James

Okay, and then one follow-up. I know you are not giving 2010 guidance, but I would assume this is something that really is tied into 2009. By 2010, assuming you don’t do any other unwinding of hedges, all this goes away and you are back to a more normalized tax rate.

Buzz Brenkert

That is correct. This is a discrete 2009 item. While I still have the microphone here, let me follow up on a promise I made earlier in the Q&A. Unrealized gains or losses in foreign exchange included in other income, gross totaled a $3.2 million loss. That is almost exclusively due to the strengthening of the euro versus the pound. It’s offset somewhat by a $2.1 million gain on the cross-currency hedges.

Operator

Your next question comes from Eric Coldwell - Robert Baird.

Eric Coldwell - Robert W. Baird

Thanks. I guess we will all keep beating this horse to death. The tax impact from the FX hedge unwinding, can you just describe for us why that is going to be shown rateably through the year as opposed to a one-time event? Because, Buzz, you yourself said this was a discrete item and the impact of that was all a January 2009 event.

Buzz Brenkert

Yes, and, frankly, I used the term discreet not in the tax sense, but in the more sense of a unique item, Eric. So it will be paid along with our normal tax payments, quarterly payments, and it will be recognized as part of just the normal tax rate through the year.

Eric Coldwell - Robert W. Baird

And, Buzz, would you be willing each quarter to separate that impact from, say, basically you are continuing operations taxes or your pro forma taxes? If the Street chooses to exclude that from numbers and results that are presented to First Call, would you care to provide that color each quarter, so we can make that adjustment if we determine that is necessary?

Buzz Brenkert

Yes, I will Eric, if that will be helpful to you folks, I will take a look at how we can do that. Again, because of the way the calculations are done, it’s kind of embedded in the projected effective rate. But I think we can come up with something that will help you with that.

Eric Coldwell - Robert W. Baird

Okay. On the insurance recovery or lack thereof in the fourth quarter for the trial issue, I am more curious what was the impediment to obtaining that insurance recovery? And so trying to risk-adjust the recovery of that in, say, the first quarter or later this year?

Candace Kendle

The holidays.

Eric Coldwell - Robert W. Baird

I’m sorry?

Candace Kendle

The holidays.

Eric Coldwell - Robert W. Baird

So it happened late in the year and you just couldn’t --?

Candace Kendle

Everybody was aware of the timing, but understandably, this sort of thing has to work through a lot of different groups and there has been absolutely no evidence that there isn’t a willingness to get this done in as timely a fashion as possible.

Eric Coldwell - Robert W. Baird

And so there should be a fairly high confidence level that you will get that recovery in the first quarter then or by the second-quarter minimum. So I guess my question is would you update the Street if that recovery is coming? Because if you don’t, then we are looking at a quarter where the Street will come up with a consensus and then suddenly all else constant you beat that consensus by $0.18 or $0.20 or whatever the ultimate number is. I am just curious whether you will give us an update on if and when you receive that recovery.

Candace Kendle

Fair enough, fair enough. Let us talk with the proper parties that seems like an awfully fair request to me.

Eric Coldwell - Robert W. Baird

Candace; thanks a lot for all of the detail on your backlog and your bookings. That was clearly the most thorough discussion in the industry, so we appreciate that and it’s helpful. You also took some time to talk about Pfizer and your exposure there, relationship there and mentioned that the cancels announced yesterday would have not expected to have an impact on you.

My question is do they not have an impact because while those might be drugs that you are working on under your FSP model, they would only be two of over 100 that you are performing work on under FSP? Or is this one of the more unique cases at Pfizer where those drugs have either been internalized or are outsourced in more of a full-service model to another vendor?

Candace Kendle

It’s the first. What happens is that they deploy all of their resources against programs, so even when a program is canceled and they don’t announce it the money just moves across the FSP in a different way.

Eric Coldwell - Robert W. Baird

Right that is what we would have is expected. With Latin America growing to almost 10% of the business today, do we need to, as to we are trying to calculate FX impact going forward, do we need to start thinking about pesos or reals or other Latin American currencies as part of our calculation and be more serious about that? Or what can you tell us in terms of how those contracts are written? Are they written in US dollar terms? What is the thought process?

Candace Kendle

Buzz, do you want to talk about the currency review?

Buzz Brenkert

Certainly, most of those contracts are written in US dollars and we receive US dollars for them. There are -- unfortunately, Latin America is not like Europe where there is only a handful of currencies. Every country has their own currency, so it’s quite a basket, if you will, of currencies there.

Eric Coldwell - Robert W. Baird

With the one small no revenue, no partner customer that has a cancellation of the first quarter, I think the simple math would suggest that cancellation is in the ballpark of $30 million, $35 million, somewhere like that. On that premise, when you talk about having 2009 guidance predicated on a 1.2 to 1.3 net book to bill, obviously you said that includes the big cancellation known in Q1.

My question is for Q1 how do we marry your comments about RFP volumes and dollar sizes increasing with the fact that we have got a known cancellation of size? Are we looking at a Q1 book-to-bill that might be more modest than what we have historically seen in this group? Or do you think there is enough activity in terms of RFPs as well as dollar side that perhaps you can offset and Q1 net book to bill looks similar to your full-year guidance? And I realize we are a month away from the end of the quarter, so.

Candace Kendle

Certainly, it’s challenging in the first quarter, but we are not prepared to say that we won’t fall within the full-year guidance, because we know about that cancellation. So as I said, the first quarter is shaping up to be encouraging. I don’t want to overstate the case here.

Eric Coldwell - Robert W. Baird

Yes, that is fair. And I had one more question in my mind. My mind is blanking on it, so I will follow-up off-line if needed. Thanks very much for your answers.

Operator

Your next question comes from Stephen Shankman - Natixis.

Stephen Shankman - Natixis

Thanks very much for taking the question. Just continuing on that one large cancellation in the first quarter of this year. Candace, I was hoping you could give us some color as to any potential waiting in the backlog as to some of the larger contracts. I mean, do they favor that top group of the large multinationals or evenly spread throughout or any type of color would be helpful there?

Candace Kendle

Just like your numbers, they lean towards the top but, again, they are totally eliminated from that bottom high-risk group now. So I would say that we are not talking about much risk around the high contracts at this point, the high-volume contracts at this point.

Stephen Shankman - Natixis

That is what I was getting at. And then maybe a question for Buzz here, it looks like the revenue range for 2009 is fairly narrow and then backing up to your comments regarding the assumptions of the dollar remaining strong and then weakening a little bit, I guess, towards the second half of the year, I mean, if you are in a situation where the dollar does remain strong throughout the rest of the year here, do you think there is any risk to that revenue number?

It looks like you gave yourself a little bit more cushion on the bottom line. But based on what has happened I guess in the fourth quarter, I am wondering if there might be some risk to that top line if the dollar does happen to remain strong throughout this year, as I have seen in the forecast. I just said that you had seen some forecasts were you expect the dollar to weaken a little bit in the second half and I have seen a forecast where the dollars remains strong and maybe even gets stronger throughout the rest of the year. So I am just kind of wondering on the cushion on that top line type of number.

Buzz Brenkert

We have used for that top-line number average rates that are the same as they were at the end of January. So it does not anticipate a weakening of the U.S. dollar in those revenue numbers that we have got in the guidance. I was trying to give some indication that there is opportunity in those numbers if the dollar does weaken as most of the projections that I have seen recently would seem to indicate. But I agree with you. I have seen some were it has stayed high and strong throughout the year.

Stephen Shankman – Natixis

So I guess what you are saying is --

Candace Kendle

Just so we are really clear, because this is come up a couple times, the guidance is using the dollar at the end of January. Even though we believe that it might weaken, we have not moved off using the exchange rates at the end of January for the guidance.

Stephen Shankman - Natixis

Correct. Just to paraphrase, I think robust assumption is, you use that rate about I think it is 1.28 for the euro, he dollar stretches a little bit during the first half of the year, weakens a little bit, net-net, end of the year and you are still around 128 and that’s what’s implied in the guidance.

Buzz Brenkert

Correct.

Operator

Your next question comes from Todd Van Fleet - First Analysis.

Todd Van Fleet - First Analysis

Just quickly, Buzz assumed in the guidance for 2009 the other line below the operating income line, which was a little bit more than $2 million of expense this year. Can you tell us what you have assumed for that for 2009?

Buzz Brenkert

We have assumed sort of a similar level. It bounced, as you will recall, it bounced around quite a bit this year with some high expense in that other line in the first two quarters and then a gain in the third quarter. And then a smaller loss in the fourth quarter. We have taken some steps. One of which is, for instance, on this cross-currency hedge that we unwound we have left some of that note receivable on the US books naked.

Most of the note we contributed to capital in the UK, but we left some of it naked in order to offset the exposures that we have on the inter-company payables on the U.S. books. We have done some other items to reduce the payables working on netting of inter-company accounts rather than trying to settle in cash and some other things. So I think our exposure on the FX and the other income and expense line is going to be reduced in ‘09.

Todd Van Fleet - First Analysis

And then one more quick clarification, the 40% tax rate or little bit north of 40%, I guess, that is what is assumed in the guidance, so that ignores the impact of the $5.8 million of taxes that are resulting from the cross-currency hedging.

Buzz Brenkert

No, that is what drives it up above 40% is that $5.8 million.

Todd Van Fleet - First Analysis

Okay. Because I think I also heard you say that absent that charge and I think is it also absent any changes to the accounting for APB, related to APB-14 that you would have been in about the 36% range for 2009?

Buzz Brenkert

Correct.

Todd Van Fleet - First Analysis

Because by my calc you get above 40% on the changes as a result of APB-14 just in and of themselves. So if you have $7 million that is not going to be deductible, that is going to increase your tax rate considerably. Right?

Buzz Brenkert

Yes, it has a significant impact on the tax rate.

Todd Van Fleet - First Analysis

Okay. So you were at 36% just absent APB-14, absent the $0.38 related to the cross-currency hedge. You were at 36% and then the impact of APB-14, like I said, by my back of the envelope here, as you at 41% for the full year. And then if you were to add back or consider the impact of the $0.38 or the $5.8 million, the $0.38 that gets you up considerably higher than 41%.

Candace Kendle

APB, comment, Buzz, on the impact of the 14-1.

Buzz Brenkert

Yes, 14-1, the effect of that is already included in the 36% rate that I mentioned.

Todd Van Fleet - First Analysis

Okay. So apples-to-apples with 2008 then I guess we see a much lower rate for 2009?

Buzz Brenkert

Correct.

Operator

Your next question comes from Eric Coldwell - Robert W. Baird.

Eric Coldwell - Robert W. Baird

This could go down as the longest conference call in history. So I had to ask the question on the call, because I don’t think you would answer it off-line if you don’t say publicly. The biotech cancellation that you commented on that again I am thinking is probably $30 million, $35 million.

But the question is how much of that contract was expected to be recognized in 2009 and was there any phasing that we should be aware of through the year? If this was a three or four year project that wasn’t really ramping, then the impact on your model this year would be pretty de minimis. But, conversely, if it was in the heat of recruiting it could be a little more impactful. I am just trying to get a sense on how much was expected to be booked this year.

Candace Kendle

It’s a multi-year contract in early stages, so it will have an impact on the year. But it is a multi-year contract.

Eric Coldwell - Robert W. Baird

It will have an impact, but if it’s multi-year then certainly not the full $30 million or more impact?

Candace Kendle

That is correct.

Operator

Your next question comes from Dave Windley - Jefferies & Co.

Dave Windley - Jefferies & Co

Might as well take it to the limit here. So on Eric’s question is there any bad debt exposure related to that client?

Candace Kendle

No.

Operator

At this time, there are no further questions. Management, are there any closing remarks?

Candace Kendle

We want thank you for participating in this call.

Operator

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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Source: Kendle International Inc. Q4 2008 Earnings Call Transcript
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