McKesson Corporation
Q4 2013 Earnings Call Transcript

Published: 8 May 2013

[Operator:]

Good day, everyone, and welcome to the McKesson Corporation fourth quarter earnings call. [Operator Instructions] As a reminder, today's call is being recorded. And if you have any objections, you may disconnect at this time. I would now like to introduce Ms. Erin Lampert. Please go ahead, ma'am.

[Erin Lampert:]

Thank you, Lisa. Good afternoon, and welcome to the McKesson Fiscal 2013 Fourth Quarter Earnings Call. With me today are John Hammergren, McKesson's Chairman and CEO; and Jeff Campbell, our CFO. John will first provide a business update and will then introduce Jeff, who will review the financial results for the quarter. After Jeff's comments, we will open the call for your questions. We plan to end the call promptly after one hour at 6

[John H. Hammergren:]

Thanks, Erin, and thanks, everyone, for joining us on our call today. Today, we reported results for the fourth quarter and full year that reflects strong operating performance across all businesses in our Distribution Solutions segment. We generated $2.5 billion in operating cash flow for the year, capping off another great year of cash flow performance. In addition to completing our acquisition of PSS World Medical in the fourth quarter, we repurchased shares valued at $800 million, bringing our total share repurchases for the year to just over $1.2 billion. As we discussed in our third quarter earnings conference call, we have anticipated the challenge of the low level of new generic launches in our industry and its affect on McKesson in fiscal 2014. As a result, during the fourth quarter, we took a number of strategic and operational actions to position the company for fiscal 2014 and beyond. Today, we also provided fiscal 2014 guidance of $7.90 to $8.20 per diluted share from continuing operations, reflecting solid growth across our broad portfolio of businesses, aided by the continued strength of our balance sheet. Given the challenges we anticipated as we head into fiscal 2014, I believe we have a plan that balances investment for the future and delivering solid financial returns for our shareholders. To summarize our fourth quarter and full year fiscal 2013 results, I'm pleased by the strong performance in Distribution Solutions, with all businesses performing ahead of their operating plan for the year. I'm also proud of the strong cash flow and balance sheet, which continue to provide us continued opportunities to create value for our shareholders through our portfolio approach to capital deployment. While the actions we took in the fourth quarter lowered our financial results, I believe we, as a management team, have a responsibility to regularly evaluate our strategy and ensure we position the company for long-term success. Let me step back for a moment and provide some context for the strategic and operational actions we took in the fourth quarter. I would remind you that, on the January earnings call, we talked about a number of actions we plan to take to position the company for the challenges we face in 2014 and beyond. I'll put these actions into 3 broad categories

[Jeffrey C. Campbell:]

Well, thanks, John, and good afternoon, everyone. As you just heard, this was another quarter of strong operating performance in Distribution Solutions, capping off a great year of operating performance in this segment. We also had another great year of cash flow and deployed a record amount of capital in the fourth quarter, which contributed significantly to the positive outlook we have for fiscal 2014. Looking forward, we believe that the strategic and operational actions we took in the March quarter better position us for both FY '14 and for the years beyond. In my remarks today, I'll cover both the fourth quarter and full year results. As you know, we provide our guidance on an annual basis, due to both the seasonality and the quarter-to-quarter variability that is inherent in many of our businesses. In this context, an annual look at our financial results can provide more meaningful insight into some of the key trends. So I'll focus more today on the annual numbers than the quarterly ones, and I will also comment on what the trends we see in the annual numbers for FY '13 might mean for fiscal 2014. My comments today will also focus on our full year FY '13 adjusted EPS of $6.33, which as you recall, excludes 3 types of well-defined items

[Operator:]

[Operator Instructions] Our first question comes from Glen Santangelo with Credit Suisse.

[Glen J. Santangelo:]

Just 2 quick ones, if I could. John, in your sort of prepared remarks, you talked about the health care IT business, and I think you suggested that revs would be up based on some recent acquisitions. But I think you also suggested that the margins would rebound strongly in that business. And I was wondering if you could elaborate a little bit on what's driving that improved profitability in that segment.

[John H. Hammergren:]

Thanks, Glen, for the question. I think certainly the first thing is we won't have some of the onetime events that are flowing through our adjusted earnings. We talked about some of the changes we did at the end of the year here that caused that to happen. We also don't expect some of the issues we had in the businesses that we plan to put it into discontinued operations, obviously it won't be in part of our adjusted earnings going forward. And probably third and most important, I think we're regaining some of our momentum in these businesses and hope that we will experience a nice margin lift, because of positive mix change and because of just a more focused and performance-oriented process into this year's plan.

[Glen J. Santangelo:]

Okay. Maybe if I can just ask one follow-up on the distribution segment and, Jeff, I want to make sure I kind of heard you correctly. We're looking for improved revenue growth in drug distribution due to the factors you kind of talked about. And I thought you said maybe for the operating profit assumption, we'd be up mid- to high-single digit basis points off of an adjusted number in the base year because of the impairment. Did I hear that correctly?

[Jeffrey C. Campbell:]

Well, let me be very clear. So if you look at FY '13, Glen, you see a 207 basis point margin rate in Distribution Solutions for the year, and that does include the Nadro impairment. As we look at FY '14, we'd expect a mid-single-digit basis point improvement off that 207. And I think what's important to realize here are 2 things. Number one, that, as we've been talking about for a very long time, you have a really unprecedented 1 year drop, in our fiscal year, in the number of brand-to-generic conversions, and that is a significant impact on our margin rate. Sort of related is you have tremendous growth returning on the revenue line, particularly around brand and particularly where we expect even a little above-market growth from some of our largest existing customers, where the business is mostly brand. So you have really factored into that margin rate assumption for FY '14, both the brand-to-generic conversion downside and the fact that you're going to have a big revenue number that obviously has a dampening effect on the margins.

[Operator:]

We'll take our next question from Ricky Goldwasser with Morgan Stanley.

[Ricky Goldwasser:]

We've been hearing a lot about creating global scale recently, and you just exited Mexico, obviously, one particular market. But do you think that you need to go global to further improve your sourcing?

[John H. Hammergren:]

I think that we generally don't comment on our market expansion plans, and we have and will continue to consider many strategic options, both within and outside the United States. And as in the past, we'll pursue those options and find the ones that drive the most value for our shareholders. I think we have significant scale today. And clearly, our sourcing programs are quite significant. And we think we have very good relationships. And we have been working globally for many years to drive efficiencies and source private-label products for our pharmaceutical and Medical-Surgical supply customers. So in the end, we think we have very significant scale today and terrific sourcing capabilities and expertise that we refined over decades, actually. And I believe we're doing a great job for our customers and we'll remain very well positioned. But does not mean that we're not going to continue to evolve and innovate for the future. And the partnership you refer to, that was recently announced, is an important industry move, but it's not going to change our strategy. And at the same time, however, our management philosophy is that, in order to keep our leadership position, we have to constantly evolve and be open to new approaches and ideas.

[Jeffrey C. Campbell:]

Ricky, I'd also, just on the specific question of Mexico, remind you that this is a minority investment for us, where we had no management control or position. And it's probably not so much a commentary on the market as it is just on the fact that the governance didn't work for us.

[John H. Hammergren:]

And I would say, in follow up to that, the governance in Canada has worked for us in our ability to leverage our skills, across both the U.S. and Canada it's proven to be quite effective. So I think had we, perhaps, had a different position in Mexico, we would have had a different result.

[Ricky Goldwasser:]

Okay. And then just to clarify on the margin question, so when we back up the charges and the benefit, we get to operating profit margin of around 3.07% in Distribution segment for the quarter, so very nice expansion. So I just wanted to make sure that we're thinking about that number correctly. And then as we think about fiscal year '14 guidance, I think the reported number was 2.07%. Once we back off that, we get back of the envelope to around 2.20%, 2.22%. Should we use that number as we model fiscal year '14?

[Jeffrey C. Campbell:]

Well, to be clear on fiscal year '14, Ricky, what we're saying is, off the 207 number for FY '13, we would expect mid-single-digit basis point growth, because of the very significant dampening impact of a rebound in revenue growth and the drop-off in brand-to-generic conversions.

[Ricky Goldwasser:]

Okay. And that's includes already the positive margin contribution from PSS?

[Jeffrey C. Campbell:]

Correct.

[Operator:]

We'll take our next question from Lisa Gill with JPMorgan.

[Lisa C. Gill:]

John, I just wanted to follow up on some of your thoughts on the overall distribution market right now. I mean, clearly, there's been a number of changes in contracts over the last several months. You've renewed your contract with CVS. But can you maybe just give us some of your thoughts around the overall competitive and pricing environment today?

[John H. Hammergren:]

Sure, Lisa. I see a market that is competitive today, just as it has always been, I guess. And while there has been some attention recently to some of these big customer switches in the industry, I think we've been very pleased to have renewed a large portion of McKesson's U.S. pharmaceutical business headed into this fiscal '14. And those renewals are actually more of our base than we typically would experience in a typical year. So we're quite pleased that we have continued to renew those partnerships. And I think it's really based on our broad capabilities and our track record for driving substantial financial efficiencies for our customers. It is terrific service levels, and I mentioned the fact that we're opening up our renewed or replacement RDC, which is going to be, I think, a continued big hit for our customers. And I think our customers have continued to choose us because we provide the best value proposition on a myriad of dimensions. And so I'm quite pleased with it and I think we're quite optimistic as it relates to, at least, our position with our customers going into the next fiscal year.

[Lisa C. Gill:]

And then just as my follow up, I know you made comments earlier around the value proposition you offer around oncology. Maybe, Jeff, can you talk about any kind of earnings impact that you'll have for any headwinds on the oncology distributions side -- I'm sorry on the oncology reimbursement side, whether it's a shift from ASP plus 6, were other cuts due to sequestration?

[Jeffrey C. Campbell:]

Well, Lisa, clearly, the cuts for oncologists as part -- that happened as part of the sequestration, are a serious issue for our physician customers. When you step back, when you think about the overall scale of McKesson and the size or specialty business relative to the whole company and our role, I would say that it's not a material item for McKesson, even within the guidance range that we've given you. I think we'd also make -- I'd go back to some of the points John made in his comments, which is we also believe that the overall model we've developed in our specialty business is particularly attractive to physicians and practices at times when reimbursement is really putting a lot of pressure on the practices.

[Lisa C. Gill:]

And just so I understand, are you seeing a pickup in the number of physicians that are now coming under that model for U.S. oncology, because of the tough brand reimbursement environment?

[John H. Hammergren:]

I think it's too early to suggest that the sequester, which only began to take effect April 1, had any impact on our quarter. I would say, Lisa, though, that if you think about what we've been doing over time, is evolving the strategy so that we can compete in a way that our customers look at us differently, perhaps, than others in the marketplace. And they come to us as a place that can help them improve their operating performance in ways that simple price discounts on distribution can't provide. And so the partnership we've created with U.S. oncology physicians is quite significant. And we have seen a nice increase in the number of physicians who have joined the U.S. oncology network during last fiscal year. So our comments are really pre-sequester comments related to physician adoption of our model. Clearly, we think the pressure is a 2-edged sword. It clearly is a negative impact as it relates to the current economics of physicians that are outside of the benefit that we can provide in a more holistic way and, to some extent, a drag on those inside of our network. But we work very well with our doctors to help offset those negatives to the extent that we can. And clearly, doctors that are not in the network are attracted to a place where they can find an expanded partnership that can help them deal with some of those challenges. So much like what we found with Health Mart and independent pharmacies, sometimes the pressure that's exerted causes people to open their minds to a different model that will expand their ability to operate more profitably.

[Operator:]

Our next question comes from Steven Valiquette with UBS.

[Steven Valiquette:]

So you obviously have a lot to sort through here in a short amount of time. But I guess when we talk about these collective exit, realignment and restructuring charges in the fiscal fourth quarter of '13, is there any color just on how material the EPS savings are expected to be in the new fiscal '14 EPS guidance? So would that range of $7.90 to $8.20 have been completely different if you didn't take these actions, or it would have been around the same range? Just trying to get more color on the EPS.

[Jeffrey C. Campbell:]

That's a fair question, Steven. The short answer is no, it wouldn't have materially changed. Our Nadro -- remember, Nadro is just an investment. So the equity earnings on that have been de minimis in recent years. And the combination of our International Technology business and our automation business was also de minimis when you look at FY '13. For FY '14, now it depends a little bit on how the transactional process goes here, but we'll report all that in the discontinued ops line. The bottom line is that this $7.90 to $8.20 EPS from continuing operations is not significantly impacted by any of those 3.

[Steven Valiquette:]

Okay. And then quickly, not to make you put on your political prediction hat, but I know there is a bill in the House that calls for the removal of the oncology drug sequester cuts. I guess the way you see it now, do you think there is maybe a reasonable chance that these cuts could be reversed? Or is it more in the category of not holding your breath? Or do you just not want to comment on probabilities on that?

[John H. Hammergren:]

Well, while the beginning of the political spectrum is difficult to comment on, and I certainly don't want to put myself in the shoes of the policymakers, I do think that oncologists have been perhaps more uniquely impacted in a negative way than the general health care industry through the sequester. And so we're very sympathetic and supportive of the moves to help our physicians get outside of this, what we think is an unfair and perhaps more heavily impacting their business model than others in the sector. Having said all of that, I think our financial forecasts for this year, going forward, are not going to be materially impacted one way or the other relative to the sequester. And so we feel comfortable that, as a corporation, we can work through these challenges. Clearly, at the physician level, depending on their mix of business, that's Medicare, Medicaid kind of oriented, the larger the impact. And we're working on those physician customers to try to find efficiencies to offset those hits.

[Operator:]

Our next question comes from Tom Gallucci with Lazard Capital Markets.

[Thomas Gallucci:]

I guess sort of 2 housekeeping questions, if I could. First, fiscal '13 cash flow was very strong, as you mentioned, Jeff, down, I guess, a bit year-over-year based on your expectations for fiscal '14. Generic profitability is a difficult comp. Can you talk about any other key moving parts that we should be thinking about there on the cash side?

[Jeffrey C. Campbell:]

No, the drop, Tom, in the guidance for '14 versus '13 is just the classic day of week that the relative years happen to end on. And given the magnitude of our revenues and receivables and payables, when you get a Monday or a Friday, is a huge difference. And that's really the main driver of the decline.

[Steven Valiquette:]

Okay. So '13 was maybe exaggerated a little bit up by timing and '14 exaggerated down, so the differential in reality isn't all that extreme.

[Jeffrey C. Campbell:]

I think that's an excellent way to look at it.

[Steven Valiquette:]

Okay. And then I think you also mentioned in the text of the release on fiscal '14 outlook, you're expecting branded and generic price trends to sort of be similar in '14 as '13. Can you tell us what you saw in those 2 areas?

[Jeffrey C. Campbell:]

Well, yes, although I'll give you the caveat that every company and every consultant measures inflation differently. On the branded side for our internal purposes, we measure inflation looking at our particular product mix and doing a dollar-volume weighted calculation of the average price increase. And that is influenced not just by the average size of the price increase, but by how many you have, and some products take more than one in a year. When you do all that calculation, our index was in the 10% to 11% range last year, and we expect that same kind of range next year. The generics side is even trickier to talk about a number, because we model every new launch individually. For mature products, we calculate a dollar volume weighted average of how the overall price trends are going. As you know, if you go back 4 or 5 years, that indices used to often go down quite significantly, 10% or 15% a year. In recent years, it's been flat to up a little bit to down a little bit, and that's the same kind of trend we would anticipate for next year.

[Operator:]

Our next question comes from Robert Willoughby with Bank of America Merrill Lynch.

[Robert M. Willoughby:]

Jeff, on the last call, you did reference $46 million in deferred Technology revenues. I assume nothing was recognized in the fourth quarter. And did the divestitures impact that number at all?

[Jeffrey C. Campbell:]

Well, to be clear, you're correct that, on the particular sales that we deferred in the December quarter, none of that was recognized in the March quarter. To be clear, we have lots of other ongoing business in that International Technology business, where the revenue continues to be recognized, and we have a great contract with the NHS, and we have lots of legacy clinical business, and all of that continues to just be recognized as is. But of the deferral piece, you are quite correct, that none of it was recognized in the March quarter. If look at FY '14, that entire business will now be reported down in discontinued operations, along with our Hospital Automation business and the revenues and profits of those business, as well as the costs and gains associated with their sales, will ultimately all flow through that line.

[John H. Hammergren:]

Robert, we do not expect any of those revenues to be recognized in this quarter as well. So there was no change in our plan there.

[Robert M. Willoughby:]

Okay. And John, I heard a strong yes and a strong no on the international expansion. Can you -- kind of what's the disconnect? We're getting pitched these wonderful synergies of international collaboration. The rest of the industry seems to say wait and see, and you seem very much on the fence as well. Is there a stronger statement you could make one way or the other on that?

[John H. Hammergren:]

Well, it's been our practice really not to talk about our strategy until it's ready to be revealed. I guess the point is that we think we have significant scale today. We don't think that our success is dependent on some type of a joint purchasing program or some type of an acquisition. Having said all of that, we also think that we can be successful on an ongoing basis by keeping our minds open and evolving our strategy and being aware of what our markets are doing. So at this point, I wouldn't count on us doing anything, and I wouldn't count us out on doing anything. I think the focus has to be on remaining agile in our approach. And I think you can -- if you look at our history as a company, we have -- we sometimes missed an opportunity and sometimes we missed a problem, and we'd like to keep that track record going. So we're going to continue to think about what we need to do, if anything, in addition to just outright execution everyday against a strategy we've had in place. We've been doing this private label generics thing for almost a decade now, from the beginning of the thought process to the execution we have today, and now we're bringing it to Canada. These are not easy things to do, and it takes a long time to do them right. And we're certainly not going to mess up our reputation or our customers' confidence in us by going halfhearted at something. And usually, like we did in that private label, we don't talk about it until it's successful.

[Operator:]

Our next question comes from Robert Jones with Goldman Sachs.

[Robert P. Jones:]

Just a couple on PSS. Jeff, I understand that you're saying that your operating performance expectations for PSS are unchanged. But if I go back, I think the original guidance, EPS guidance, that it's based off of a much higher interest rate than what you ended up securing. Would you mind sharing with us just what the actual new EPS contribution range is? Or is it as simple as just applying what the final rate was in order to get what you're thinking about EPS contribution from PSS in '14?

[Jeffrey C. Campbell:]

Well, the short answer is really what you just said at the end there. But just to level set for everyone, back in the original earnings call, we said, just to help people work through the math, that if you were to 100% debt-finance PSS at a 4% interest rate, we'd expect the resultant accretion to be $0.15 to $0.25. If you look at the last 6 months, we've done a couple of financing, raised about $1.8 billion, at an average interest rate of about 2.1%, not 4%. So if you were to plug 2.1% into that calculation instead of 4%, it would add about another $0.05 to the accretion. It's always a little bit tricky to say, "Well, does that debt all serve to finance PSS or did part of it fund the $800 million of share repurchase we did in the March quarter, cash funded [ph] ?" But I'm just trying to help people understand, however you want to model the capital structure, our view of the earnings power of PSS remains unchanged.

[Robert P. Jones:]

Got it. And then, I guess, just a broader question on the medical market share in ambulatory. We saw some significant growth from one of your U.S. competitors in the ambulatory space reported earlier today. I'm just wondering if you would comment on your positioning there, maybe how the transition has been going early days and specifically any comments around sales force engagement since the deal had been announced?

[John H. Hammergren:]

Well, you can see in our prepared remarks, we had tremendous revenue growth, both pre-integration of the PSS number, and once you put it in, obviously, it grew even more nicely. But both PSS and McKesson, independently, grew very nice in the quarter. And you know that our footprint is quite significant in the physician or ambulatory space. That includes surgery centers. It includes independent physicians. It includes physicians that are owned by hospitals. It includes home health care. It includes long-term care. And so we do believe we have the strongest footprint in the industry in all of those settings of care. And we're really pleased that we've been able to evolve our product offering, our strategy, our technology in a way that enhances our go-to-market strategy. And so I think what you're at least seeing from us, and perhaps others are following, is a more holistic approach to the market and to the challenges our customers face. And as you also know, although we are quite significant now in the nonhospital or non-acute care settings, we have significant opportunity to grow because the market is highly fragmented. And our ability to attract new customers based on our value prop, we think will continue. As to the integration of the team at PSS, I think everybody remains engaged and enthusiastic. I mentioned Gary Corless on my phone call, and I also want to put a shout out to Stanton McComb. The 2 leaders of that business have come together with their teams and are doing a great job of putting the integration plans together. Our going-in assumption was that we would not lose a sales rep and, certainly, not eliminate one on purpose. And I can tell you that we've had almost 100% retention -- not quite, but almost 100% retention of our field selling forces. And we're working out the territory overlaps and the customers, and we feel quite confident we'll retain our people and we'll retain our customers. We're excited about that. Now clearly over time, there'll be some difficult decisions to make on synergies and taking cost out of our networks. But we have such a large opportunity here, we think that any employee negatively impacted should have an opportunity to explore other opportunities inside of McKesson. So we're off to a good early start. The businesses are performing well, and our customers are reacting very favorably.

[Operator:]

Our next question comes from Eric Coldwell with Robert W. Baird.

[Eric W. Coldwell:]

My main questions are taken care of, so I'll just ask a quick one. I heard on the call several times about a fee pivot in revenue, a significant rebound, et cetera. The Street was modeling fiscal 2013 a little higher, so the growth rate is not exactly comparable, but the Street was looking for about 2.6% revenue growth in fiscal '14. My sense is that fee pivots and significant rebounds are more than 3% growth. So I'm hoping you can just give us a little more sense on what you are really signaling here.

[Jeffrey C. Campbell:]

Yes, the short answer to your question, significant pivot, significant growth is well beyond 2.6%. We're always a little cautious, Eric, to give an overly precise number, because our revenue growth will be dominated by just pharmaceutical distribution. And it will be, in particular, dominated by the couple of large customers and exactly what their purchasing patterns are around brand. And of course, the impact on our bottom line of all that is far less than the impact on the revenue growth. All that said, our view probably of the markets' growth itself is probably a little more robust than I think some other pundits out there. Our view of our own customers growth, particularly a couple of large customers, is that when we look at their pipelines, we expect a few of our larger customers to grow above the market. And then you do have the added impact of just the math of adding in PSS. So in our Distribution Solutions segment, which drives the revenue growth for the whole company, we would expect to be much higher than the 2.6% you just cited.

[Eric W. Coldwell:]

That's fair. And if I could just one add-on, is the growth related to one of the better new drug approval years from the last 15 at the FDA, or is it that you're seeing market volumes and just customer mix, as you mentioned, being stronger?

[John H. Hammergren:]

Well, clearly, we're optimistic about new drug approvals, but I think that much of our view on revenue growth is being driven just by the growth our customers are going to receive this year and the lack of a dilutive effect of significant generic launches, which were pulling back our revenue in previous years. And clearly, just like Jeff said, there's a -- I think we have a more positive view on overall revenue growth for the industry than perhaps some others might have, because of this generic pullback.

[Operator:]

We'll take our next question from David Larsen with Leerink Swann.

[David Larsen:]

Jeff, can you just comment on the sequential decline in direct and bulk revenue, please?

[Jeffrey C. Campbell:]

Well, let me take those backwards. If you look at bulk revenue, remember, that's less than a handful of our large customers, for whom we do a warehouse service as part of a much broader relationship. Some of the good news about the sequential decline is it's driven by some of those large customers putting more of their business through our direct model, which is actually much better for us. So that's really the story on warehouse. On direct, it's really just a function of the way the brand-to-generic conversions have rolled out through the year and, of course, it's the reversal of that trend, beginning next quarter and then really happening to a much greater extent as you get into the second, third and fourth quarters of FY '14, that causes such a pivot in the revenue growth rates.

[David Larsen:]

Okay, and then just one more. You mentioned a potential, I think, LIFO charge for fiscal '14. That is included, I think, in your adjusted EPS. That's new from previous year's guidance. Any color around the size of that?

[John H. Hammergren:]

Well, it's not in our guidance, but it would be included in our adjusted result. We won't adjust it out, if that's the question you're asking.

[Jeffrey C. Campbell:]

It is so hard, David, to forecast this because it's a mathematical calculation we do once a year, which is driven by a methodology developed over 30 years ago, when the company first started doing LIFO accounting. And once you start it, you can never adjust it. And it is just very hard to predict. What we do know, however, is that the significant change in FY '14, in terms of the number of brand-to-generic conversions, will cause that calculation, potentially, to be significantly different than it has been. That's why we're calling it out, just so people understand that we have not included that in our guidance.

[Operator:]

And our last question comes from George Hill with Citi.

[George Hill:]

Jeff, a little bit of an accounting question for you. Am I thinking about the IT segment right, where the Better Health 2020 investment spend, the bulk of that should be behind us as we go into fiscal 2014 and is that contributing to the margin improvements?

[John H. Hammergren:]

Actually our investment -- if you listened to Jeff's comments, our R&D investment actually goes up in fiscal '14, so I think that we are -- versus '13, and I think you'll see that we are continuing to invest against that strategy. So we are not de-investing in the business yet, plus you know we have -- we'll have full year effect of some acquisitions we did in the prior year as well. So I think over time, we're hoping to get the return on investment from increased revenues and an improved mix in the business as opposed to reducing our investment in the business. Well, I want to thank all of you and thank the operator for our help today and for paying attention to the call. We do have a solid plan for fiscal 2014, combining our expectations for expanded revenue growth in both of our segments and continued capital deployment. I'm proud of our track record of delivering value to our customers and strong financial returns to our shareholders. And I want to acknowledge all of our employees here at McKesson for their passion and commitment to our goal of bringing better health to our customers and the patients they serve. With that, I'll turn it over to Erin for a view of the upcoming events for the financial community.

[Erin Lampert:]

Thank you, John. I have a preview of upcoming events. We will participate in the Bank of America Merrill Lynch Health Care Conference in Las Vegas on May 15 and The Goldman Sachs Health Care Conference in Ranchos Palos Verdes on June 11. We will release first quarter earnings results in late July. We look forward to seeing you at one of these upcoming events. Thank you, and goodbye.

[Operator:]

Thank you for joining today's conference call. You may now disconnect. Have a good day.