McKesson Corp. F2Q09 (Qtr. End 09/30/08) Earnings Conference Call Transcript

 |  About: McKesson Corporation (MCK)
by: SA Transcripts


Good afternoon and welcome to McKesson Corporation Fiscal 2009 Second Quarter Conference Call. All participants are in a listen-only mode. [Operator Instructions]. Today's conference is being recorded, if you have any objections you may disconnect at this time.

I would now like to introduce Ms. Ana Schrank, Vice President of Investor Relations. Please go ahead, Ma'am.

Ana Schrank - Vice President of Investor Relations

Thank you Angie. Good afternoon and welcome to the McKesson fiscal 2009 second quarter conference call for the financial community. With me today are John Hammergren, McKesson's Chairman and CEO and Jeff Campbell, our CFO. John will first provide a business update and we'll 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 6:00 PM Eastern Time.

Before we begin, I'll remind listeners that during the course of this call, we will make forward-looking statements within the meaning of the Federal Securities Laws. These forward-looking statements involve risks and uncertainties regarding the operations and Q3 results of McKesson. In addition to the company's periodic, current and annual reports filed with the Securities and Exchange Commission, please refer to the text of our press release for a discussion of the risk associated with such forward-looking statements.

Thanks and here is John Hammergren.

John H. Hammergren - Chairman, President and Chief Executive Officer

Thanks, Ana and thanks everyone for joining us on our call today. I'm please that McKesson turned in solid results for the quarter despite tough economic conditions. While we're not immune from the effects of a weak economy, our second quarter performance demonstrates that our diverse portfolio of businesses operated in resilient markets with an impact to our overall financial model thus far has been relatively modest. But it isn't enough to operate in great market, it's even more important to have a leadership position which we do.

We are the leader in pharmaceutical distribution not only in the United Sates but across North America. We have a leading position in medical surgical distribution, in the alternate-site market and our strategic acquisition of Oncology Therapeutic Networks made us a much stronger player in the specialty market. And with the broadest portfolio in the industry, we are the leader in Healthcare Technology Solutions.

Although the equity markets may not responding favorably to healthcare right now, our second quarter earnings demonstrate that despite a challenging macro environment, we continue to post solid financial results. The majority of products and services that we provide has steady demand and we've seen our businesses maintain their volume momentum across most parts of our company.

Our solid base of revenue and profits, our range of products and services that deliver value to clients and a strong and flexible financial foundation give McKesson the competitive edge. Even with slight moderation in the short term demand, we remain confident in our business outlook.

Turning to our second quarter results, our solid performance for the quarter was driven by the distribution solution segment, which accounted for the largest portion of earnings and provides a great base for our company. We gave guidance at the start of our fiscal year that we would grow revenues at the market and adjust that gross rate based on our mix of business which is very positive. Our mix of customers is very favorable, as our customers have grown slightly faster than the market.

We also are integrating two acquisitions, Oncology Therapeutics Network in our Specialty Care Solutions business and McQueary Brothers in our U.S. pharmaceutical business, both of which have helped accelerate revenue growth.

Despite industry concerns about slowing prescription trends, we see steady growth from our customers. In U.S. Pharmaceutical, excluding in our acquisition of OTN and McQueary and one extra day of sales, our core-direct revenues grew a healthy 7%. In Canada, revenues wrap at solid 30% excluding one extra day of sales.

Short-term, we do not view our distribution business as particularly sensitive just growing prescription trends. Our strong revenue growth this quarter again demonstrates that we grow faster than the growth rates reported by IMS. We believe IMS is directionally correct, but not appropriate correlation to our top line.

Looking long term we remain bullish about the broader demographics in North America, and what that would do for future demands for pharmaceuticals. Now most of you are familiar with the two main sources of gross margin value in our business, our relationships of branded manufacturers and our relationships with generic manufacturers. For those of you that are new to our story and are modeled or those who might have questions about how we'll perform in a difficult economic climate, here is how it works.

For our branded manufacturing partners we are a highly effective logistics provider, ensuring products to reach patients safely and on time. We manage the complex financial transactions associated with pharmaceutical delivery, ensure the integrity of the supply chain and manage the credit risk of our customer base.

Our sophisticated systems, particularly our redistribution center allow manufacturers to minimize supply chain cost and maintain consistency across all markets. Of the various services we provide to branded manufacturers, we are typically compensated through formal arrangement to specify the level and type of compensation, based on each service we provide.

These agreements have improved the visibility and the predictability of our compensation. We do have a big role in serving the demand created by inform consumers that are not only aging but also recognizing that drugs are the first and best line of defense against increased costs and more medical challenges later in life. It all starts with the complete supply of the product as the time the drug is needed and grows much further as we improve the operation and dispensing for both manufacturers and our retail and hospital customers.

In addition to the services we provide to branded manufacturers, we provide the generics manufacturers for significantly more value. Because we manage an influenced demand, we are compensated with higher margins than on the branded side. We deliver significant market share to the generic manufacturers and we have greater execution with rapid and complete customer supply.

We pick the right partners on both side of the transaction and we make a market that is efficient and effective. It couldn't happen without the wholesaler. This has made McKesson a crucial launch partner for generics manufacturers, both at the time of the launch, but also well into the later life cycle of the products.

The market is more efficient and effective with us putting together buyers and sellers and then managing the details of the business. McKesson, our customers and patients all benefit because the cost base for the generic drug is lower than the branded drug. Because we add the value I described earlier, we earn a much higher margin and have developed business model to deliver a higher return on investment.

So the generic model has superior profitability and lower working capital investment resulting in higher return on capital. We've been able to grow our generic penetration faster than the market using our customer eccentric approach; the program is designed for each segment of our customer base. We have tremendous value for our customers when we take over the generic purchasing. They trust us and we deliver. They win as we win.

While we are reasonably well penetrated with generics in the independent segment, we are positioned for growth with retail chains, hospitals and long-term care. The programs for these customer segments have been developed over the last several years and are now gaining momentum.

All of our customer segments have opportunities for incremental sales growth as market momentum build and customers' look for generic drug purchasing and distribution solutions with a proven track record.

A strong generics pipeline and our ability to grow our base of customers, in OneStop generics, our proprietary generics program, are crucial components of our strategy to drive margin expansion over the next several years.

This quarter we benefited both from new launches and penetration of the customer base to bring additional generic volume into the channel. As a result sales grew for OneStop an impressive 49% once again significantly above market growth. We continue to deliver great value to our customers and they continue to reward us. Just one year after becoming a U.S. pharmaceutical distribution customer, Pamida a regional retailer with restores primarily in the Midwest, named McKesson as the vendor partner of the year. The customer was recognized for the flawless integration of its 144 pharmacies into the U.S. pharma network and for the value we provide through our proprietary generics programs.

In addition to participating in OneStop generics, Pamida uses our RxPak program and is a customer of RelayHealth. Turning now to our specialty business, we are now a clear number two player in this space, which is important to us as the market continues to include some of the fastest growing categories of drugs in the United States.

Last week, you learned of our decision to sell our specialty pharmacy business to Walgreen's. At the time of the OTN acquisition, we determined we would dispose the specialty pharmacy. But we wanted to do a careful review as we went through integrated process.

Specialty pharmacy was a small part of our overall Specialty Care Solutions business. So, this sale would not have a material impact on our financial expectations. We did not see a way to get this business to the level of share and profitability that McKesson requires. This business and the McKesson teammates that help drive it should be a good fit for Walgreen's which have an existing business in this space.

The remaining parts of Specialty Care Solutions will continue to deliver services to manufacturers, payers and providers including distribution, coordinated reimbursement and clinical services. Our Onmark GPO, our world- class Lynx technology platforms in clinical tools provide value added information that helps improve efficiency and patient safety.

On going beyond U.S. pharmaceutical they were strong performance from other businesses within Distribution Solutions. In the second quarter, we have solid growth in Canadian Distribution Businesses, from new and expanded customer agreements. We also had positive results in medical surgical distribution with particularly strong results again reported from our homecare group. In the second quarter we also benefited from an early sale season for the flu vaccine.

In summary I am pleased with the solid performance of Distribution Solutions. We have a terrific combination of assets that performed exceptionally well. That's why I feel confident about our momentum and our ability to grow in this tough environment and our ability to achieve our full year plan in these businesses.

Turning now to Technology Solutions, our second quarter growth of 7% reflected higher revenues from maintenance and outsourcing and from our expanded customer base and strong performance from within our payer businesses. Operating profit was up 8% and we held margin steady despite a difficult economic environment. For several months we've been monitoring the impact of the weakening economy on our customer base. In this quarter particularly in the last two weeks we saw customers delay purchasing decisions. So while our second quarter results reflected growth, they did not meet our expectations.

It's still too earlier to say for certain what will happen in the near term. There are parts of Technology Solutions that have been stable despite challenges in the economy. For example, we have a steady stream of recurring maintenance revenues from our large installed base. In addition, our automation business continues to perform well and this quarter we had strong revenue growth across the product lines, including robots, cabinets and our medcare cell.

We gained share with both new customer wins and competitive replacements. We have also seen success with our RelayHealth business, which processes more than $1 trillion in charges and payments each year. And we are experiencing strong demand for RelayHealth financial clearance and settlement solutions, which enjoyed a record quarter. In addition, our medical imaging base has grown to more than 1600 unique facilities. And competitive replacements represent the majority of bookings this year for all imaging solutions. Our rise in cardiology has seen strong growth during the past three years from a minor presence in 2005 to capturing more than 10% market share last year. These products and service offerings are relatively quick to deploy and help customers improve their financial position.

Earlier this year, we introduced our Horizon Enterprise revenue management solution. As you know, hospitals today are under tremendous pressure to manage their revenue streams in a world of complex reimbursement models that are too sophisticated for their old patient accounting systems. This results in a significant amount of uncollected payments that negatively impacts the hospital's bottom-line. Horizon ERM is designed to improve the economics of hospital care delivery.

I'm pleased to report that during the quarter, Horizon ERM went live at Gwyneth Health System in Georgia. In the September, Gwyneth turned on the access management part of the product and is using it to reinvent 23 access points for registration within their health system. As we continue to roll out the solution at Gwyneth, we're also moving forward with our second pilot, which will also focus on revenue management portion ... on revenue management portions of the solution.

We're making good progress introducing the Horizon ERM to our customer base and they are excited about the functionality of this solution. You've heard me talk about the tremendous difficulties that payer face today, they struggle to manage their medical loss ratios and manage their administrative costs. These are very complex processes that require sophisticate and analytics. McKesson supplies payers with solutions to give them visibility and transparency to the costs associated with managing their populations.

A good example is our successful implementation of claims extent at Wellpoint's affiliated health plant in Georgia. Initially this will support over 300 million members and will help with their ongoing efforts to achieve consistency, accuracy, efficiency and transparency in claims processing. Another good example is the relationship that was recently announced with IBM to create an enterprise wide payer analytic solution to address increasing medical loss ratios. By combining our clinical content with IBM's world-class technology we will create a new solution to enable payers to facilitate smarter, faster decision making across their businesses.

Despite these positive developments there are parts of our technology business that maybe more susceptible to the economy. We are seeing a temporary slowdown in some of our hospital solutions and physician office products. It's difficult to determine if the delay in purchasing we experienced in late September was temporary or if it will continue. Therefore we're going to take a slightly more conservative view at the back of the year. Given this view we are following a prudent course of action in positioning our technology business more conservatively until we have better visibility till timing of the markets recover. We are focused on controlling our cost and driving efficiency through our organization.

In the interim, we are uniquely prepared to support our customers through this period of new technologies that can be installed quickly; and will directly impact cash flow and financial performance. Before I turn this over to Jeff, I want to touch on topics of capital deployment and balance sheet management, which would become even more critical during the past 6 weeks. We continue to take a portfolio approach to capital deployment, year-to-date we had deployed capital at about the same level as we did during the first 6 months of last fiscal year.

Jeff will provide more details that we are comfortable with our balance sheet and our liquidity position. However we do believe that with the lack of visibility to when the financial markets will stabilize and the impact of higher borrowing cost, it is prudent to run the company more conservatively. We remain committed to using acquisitions and share re-purchases to further enhance shareholder value, although the broader economic environment could impact how active we are in the near term. We do plan to remain opportunistic but are mindful of the realities of today.

We remain confident in the tremendous earnings potential of the company, driven by both distribution and technology growth. We are making moves now to take out cost where demand is slowing and to manage both the company and the balance sheet more conservatively. We believe this is a sensible course of action. Like all companies, we have to be a little more visible for the timing of the markets and aware of their recovery.

Based on the healthy fundamentals underlining our business and our ability to execute on our objectives, we are maintaining our guidance of $4.00 to $4.15 per diluted share, from continuing operations for fiscal 2009. I look forward to reporting to you on our continued success throughout the year. With that, I'll turn the call over to Jeff and we'll return to address your questions when he finishes. Jeff?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Well, thanks John and good afternoon everyone. As you just heard, McKesson posted a solid quarter in light of the challenging economic environment. We are confident in our overall earnings potential despite some additional caution around the back half of our fiscal year resulting from the lack of visibility into the timing of an economic recovery particularly, as it impacts our technology business. We'll talk more about this later.

But let me begin by just focusing on our financial results for this quarter. As always, our first preview are consolidated results providing more color when I discussed each segment in more detail. Similar to what you saw in our June quarter consolidated revenues for the September quarter grew 9% at $26.6 billion and $24.5 billion last year.

While our overall revenue growth is, of course, driven by the growth in Distribution Solutions was up 9% from last year, Technology Solutions posted revenue growth just a bit below this rate, coming in at 7%. Gross profit this quarter was up 10% at $1.3 billion. Distribution Solutions gross profit increased 12% providing nice gross expansion in the segment while Technology Solutions gross profit was up 5s%.

Moving below the gross profit line, our total operating expenses were up 12% to $921 million for the quarter. Higher expenses in the quarter were primarily driven by growth in the business and the impact of several acquisitions particularly OTN. Operating income for the quarter grew 6% to $381 million and $359 million a year ago. Moving below operating income, other income of $33 million was 8% below last year.

There are two things going on here. First, as we have discussed beginning with our guidance assumptions last May, lower interest rates and short term investments combined with our lower cash balances this year have resulted in a significant drop in our interest income. This drop is partially offset this quarter by the sale of our equity investments in Verispan. The pre-tax gain on the sale was $24 million and is included in the other income line.

The after tax gain was $14 million or approximately $0.05 per diluted share. Interest expense of $35 million was relatively unchanged from the prior year. Now you should note that the expense associated with the use of our receivable sales facility is reported as an administrative cost in operating expenses and does not show up in interest expense. In the second quarter this administrative expense was approximately $3 million.

Moving to taxes, our effective tax rate of 13.7% primarily reflects two factors; first, our run rate which remains at 33% that we've been using all year. Second, $76 million in positive discrete tax items in the quarter equating to $0.27 per diluted share which included the tax reserve release we had mention last quarter. Going forward, we continue to expect our run-rate to be 33% for the year excluding the impact of further discrete items.

Net income in the quarter was $327 million up 32% from the prior year while earnings per diluted share of $1.17 was up 41% from $0.83 a year ago. The EPS leverage was driven by the impact of the aggressive $1.3 billion in share repurchases we have made over the last four quarters, which lowered our diluted shares outstanding by 6% year-over-year to 280 million shares.

Year-to-date, our portfolio approach to capital deployment has resulted in net deployment at about the same level as we did in the first half of last year. We have spent more on acquisitions, $320 million as compared to $51 million last year and on our increased dividends $50 million as compared to $36 million last year.

We have repurchased left stock $334 million as compared to $684 million last year. But this was some what offset by the lower number of auction exercises we have seen this year, bringing in just $65 million of proceeds as compared to $183 million last year. Obviously in the recent weeks we have become more cautious about the financial climate. And so you should expect to see us act more conservatively in our share repurchase activity going forward until we have more visibility into the reality of the climate in which we will be operating.

Let's now move on to Distribution Solutions. In this segment we achieved overall revenue growth of 9% compared to the same quarter last year. U.S. Pharmaceutical direct distribution and services revenue grew 16% to $16.6 billion. About seven points of this growth stands from our acquisitions of OTN and McQueary Brothers with another two points coming from having an additional sales day this year. That leaves 7% growth driven primarily by strong performance across our entire customer base.

Warehouse revenues declined 7% to $6.3 billion. As we've seen over the last few quarters now that the primary driver of the warehouse decline was the loss of a contract by a large warehouse customer coupled with decreased purchases from several other customers.

Canadian revenues continue to grow strongly, increasing 15% for the quarter to $2.2 billion. While we did have one additional sales day this quarter, for the first time in a few quarters there was no currency impact on our Canadian results. So this performance is driven by our continued success in securing new and expanded distribution agreements across our customer base.

Medical-surgical distribution revenues were up 9% for the quarter to $700 million. We have earlier sales flu vaccine this year which accounted for two to three points of growth, with the core business, growing at what we believe to be market rates.

Gross profit for the segment was up 12% to $951 million on 9% revenue growth representing in nice improvement in gross margin of 11 basis points. The increase in gross profit for the quarter was driven by an improved mix of higher margin products and services, particularly sales of OneStop generics with some benefits also from the lower mix of warehouse sales.

These gains were partially offset by the timing of when we received compensation under our agreements with branded pharmaceutical manufacturers which in this quarter showed a modest decline year-over-year. As you recall, we talked last quarter about the fact that we experienced a stronger buying side impact year-over-year. So our June quarter was stronger than the prior year while the September quarter was weaker just due to a shift in the timing of our compensation between the two quarters.

Year-to-date, these quarters mostly offset one another and our compensation is on track relative to our expectations. Our Distribution Solutions' operating expenses were up 16% for the quarter to $570 million reflecting growth in our businesses and the acquisitions of OTN and McQueary Brothers.

Operating margin rate for the quarter was a 157 basis points compared to a 154 basis points in the prior year, of this year's result for this segment included the impact of the sale of our interest in Verispan. As you know, given the quarterly volatility of this segment, we always focused on full year margins.

In this context, we remain on track for the full year to see modest expansion in the operating margin segment. In Technology Solutions, revenues were up 7% for the quarter to $762 million. Services revenues were up 8% in the quarter while software and software systems revenues of a $140 million in a quarter were relatively unchanged from a year ago.

As John mentioned, we have clearly seen some of our hospital acquisition customers to foreign purchase decisions and this impact is reflected in the software line in particular. Gross profit was up 5% from the prior year to $351 million. For the quarter, Technology Solutions had total gross R&D spending of $100 million an increase of 10% from the prior year. Of this amount, we capped 17% compared to just 11% a year ago.

Technology Solutions operating expenses increased 4% in the quarter to $282 million. As we have kept fairly tight controls on expenses, even in advance of some of the changes John talked about. Our operating profits in our Technology Solutions segment this quarter was $71 million up 8% from a year ago. Operating margins in this segment were 9.32% for the quarter compared to 9.27% in the prior year.

Leaving our segment performance, and turning now to the balance sheet. Let me start by reminding you about our liquidity profile given the financially turbulence in time. We have a total of $2.3 billion in short-term liquidity facilities. This consist of a $1 billion account receivable sales facility which we renew annually each June and $1.3 billion unsecured revolving credit facility that expires in June 2012. Both of these facilities are lead by large money center banks.

Historically, we have had access to short-term capital through the receivable sales facility and the revolving credit facility that I just discussed, as well as reselling commercial paper. As we have discussed in the past, we used these vehicles to manage our short-term cash flows which can vary significantly on a daily basis. At times, commercial paper is our best short-term borrowing option.

When you look at our cash flow statement, you will see $3.5 billion in short-term borrowings and repayments year-to-date, most of which was done using a commercial paper market. More recently we have not had access to the commercial paper market, but we have had no trouble with access to short-term capital because we are able to rely on our receivable sales facility and revolving credit facility.

Turning to long-term debt, we have no scheduled payments due before February 2010 when our senior notes for $215 million. Our cash is invested very conservatively, generally and over night government security back repos or money market funds. We have no significant derivative exposure that will expose us to counter party risk.

Now to our working capital metrics; you will see in each of our working capital metrics the impact of timing, both in terms of the particular day at quarter ends and in terms of the pattern of our inventory buying which can impact both our inventory and payable balances. Adding back the $497 million sale-of-art at quarter end, our receivables increased 10% to $7.5 billion just a bit faster than our rate of sales growth.

Our days sales outstanding therefore increased to-date to 23 days. We have not seen any changes in payment pattern driven by the economic climate. The added day this year is just a function of our customer mix and time.

Our inventories were $9.2 billion on September 30 and a 11% increase over last year. And our day sales in inventory of 33 was one day higher than a year ago. Compared to a year ago payables were up just 3% to $12.1 billion, so our day sales in payables decreased 3 days from a year ago to 43.

Year-to-date we have generated $51 million in operating cash flow excluding the benefit of the $497 million receivable sale. Slow relative to the last 2 years and was driven primarily by the timing of inventory purchases including the fact that we did some of our normal seasonal inventory build for the winter a bit early this year impacting both for DSIs and DSPs. There are also a few other pure timing related timing impact ... issues that impacted our year-to-date cash flow. Going forward, we continue to target generating over $1.5 billion of operating cash in fiscal 2009. Capital spending was $80 million for the first two quarters about flat with the prior year, capitalized software expenditures were $90 million up from $78 million last year. Our annual guidance for capital and software expenditures in the range of $350 million to $400 million remains unchanged.

We ended the quarter with a $1.1 billion of cash and cash equivalent down from the $1.4 billion we held at year end. So, overall our second quarter results were solid and on track. However, we have become more cautious about the back half of the year operating results given the current economic environment. This caution is translated into us maintaining our EPS guidance from continuing operations for the year at $4.15.

Our caution about our operating results is offset by two non-operating items we recognized in the September quarter. Let me take you through each of these in turn. First, in terms of non-operating items, we are benefiting from the $0.05 gain on the Verispan sale and second, the discreet tax items this quarter came in $0.04 above what we had communicated to you as our expectation last quarter.

As John discussed, we are more cautious in our outlook for our Technology Solution segment, given the uncertain environment for technology spending. Also in today's financial climate, we are planning on being a bit more conservative with our share repurchases. This combined with the higher cost of our short term borrowings and lower interest rates on our cash balances both lower our back half earnings. So the gain from the Verispan sale and the discreet tax benefits are tempered by the cautious tone of the latter two items which leaves us maintaining our guidance.

Our cautious tone for the Technology Solutions segment particularly applies for the December quarter. Overall, as is historically the case, and as we've discussed all year, we expect the March quarter to be our strongest quarter. In conclusion, we feel that McKesson is well positioned with a current difficult environment. Thanks and with that, I turn the call over to the operator for your questions.

Question And Answer


[Operator Instructions]. Our first question today will come from Tom Gallucci. Please state your company name and then you may ask your question.

Thomas Gallucci - Merrill Lynch

Merrill Lynch. Good evening everybody. Two quick questions here, first in the IT business, you talked about reducing cost trying to be more efficient. Can you give us some ideas how flexible that business really is and the types of things you can do? And then the second one is just a quick one. You said you built inventory a little earlier this year. Given the credit environment, you seem to be spending a bit less on buybacks and things but you built inventory early, so any reasoning there would be helpful. Thank you?

John H. Hammergren - Chairman, President and Chief Executive Officer

Thanks, Tom for the question. I'll take the IT question and ask Jeff to comment a little bit about inventory. Clearly, the first thing we could do really companywide is to crank back on some of our discretionary spend, things like travel and other kinds of activities that will hopefully have nominal effect on sales, but that have a big effect on expense are places we'll go to first.

In the Technology Business in particular, we're not likely to touch any of our development activities or any of the things that have a long term paybacks. But in some areas where customers may not be ramping up to their deployments on products, our implementations because they're trying to reduce their own costs or in areas where they maybe shifting their purchases of one product to another, and we could reorient our organization in a different direction. And in some places we may have some more cost reductions.

So I think we will be able to effectively offset some of the change in demand here, clearly we're not likely to get the kind of margin expansion we had hoped for in the IT business this year. But we still expect to get positive leverage in both of our businesses. And I think one of the real positive things that Jeff mentioned, definitely when he was talking about Distribution Solutions in fact on a full year basis, we still expect to get margin lift. And if you look at our sales rate in that business, it is very strong. So if we get margin lift on a business that's going that well in sales, we're going to get greater earning throughput the last half of this year, particularly the fourth quarter. So, we're still excited about that business in particular and how it's positioned.

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

And Tom, on the inventory side, there's really quite a number of factors that go into this both in terms of manufacturers and their own production patterns, incentives they offer depending on when we buy certain inventory, really we have some of the same factors on the customers side; where customers buy in different patterns, and we are constantly evolving our relationship with customers. Those all happen to come together as of September 30th to give you the results we had this year which caused us to use a little bit more cash on inventory than we usually do on the first six months of the year, as I said as we look out for rest of the year we would expect those things to reverse and wouldn't necessarily see it as indicative of how the rest of year will ... well progress.

John H. Hammergren - Chairman, President and Chief Executive Officer

Next question, please


Thank you. Lisa Gill, please state your company name and you may ask your question.

Lisa Gill - J.P. Morgan

Okay. Good afternoon. It's J. P. Morgan. Jeff thank you for all the detail on the guidance. I'm just wondering if maybe you could just give us some idea as to why the guidance range remains so wide, at $4 ... just $4.15 maybe just some thoughts on what's on the upper end and the lower end of your guidance?

And then secondly John, when you talked about generics and you talked about providing value to your customers, do you believe that in this economic slowdown, we'll see more utilization of generics, so could that be a great driver for you and opportunities around some of these additional customers or is it just additional penetration into the existing customer base. Thanks.

John H. Hammergren - Chairman, President and Chief Executive Officer

Thanks, Lisa. Let me take the second question first and then Jeff can comment on the guidance. First of all the set up for the guidance, I think clearly, we're trying to be cautionary about the Technology Business. Time will tell us as to how concerned we should be or need to be about that business. And clearly, the products that we're selling have high demand and we're very optimistic that customers will need to buy these products. And once these financial markets settle out they will begin to sign those orders.

So part of the range is gee, how much are they going to buy and how soon are they going to buy, is part of that question. And there are other factors that Jeff will cover. On the generic side I do think that customers are going to be much more sensitive to the purchase of generics. I think the transitions have already been very robust relative to brand to generic switches. So that will accelerate as well. I think people will just ... anyway that they can get to the generic faster they're going to do it. McKesson has a great track record of delivering generics to our retail customers. As soon as anybody gets in the market our customers get them, so I think that's real positive.

And really the last point and the highlight of many of the comments I made on this call and on the previous calls, the adoption rate of McKesson's generic programs continues to accelerate and I think that's a sign that we're doing a great job for our customers and our costumers are finding that not only are we more efficient but we get them better economics in that entire transaction. So I remained very bullish on both Distribution

Lisa Gill - J.P. Morgan

But just a follow-up to that John, I mean we're very early in the stages of this economic downturn are you already starting to see some, just a prescription trend basis more generic utilization at the hospital level at the chain pharmacies long term care et cetera, or is it just that you're seeing the opportunity because you're penetrating your account. I'm just trying to understand where each of the pieces are coming from?

John H. Hammergren - Chairman, President and Chief Executive Officer

I think it's probably difficult for us to see the dispensing activity with the kind of clarity that a retailer might see, but clearly our pull through of generics is expanding and increasing. So I would say we'll probably get in a combination of more generics at the retail and but certainly more retailers and hospitals choosing to buy their generics from us and that's a big part of the equation for us.

Lisa Gill - J.P. Morgan

Okay great.

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

And Lisa on the guidance, I think actually historically for this time of the year we're not particularly any wider in the range than we have been historically. There are really two sets of big uncertainties, you've got the uncertainty about IT area which John talked about and we're just trying to be prudent and cautious in our forward comments. And frankly we had uncertainty in the capital markets area, so our short-term borrowing costs have spiked up and frankly the interest income we get off sticking cash and overnight government back repos has gone down quite a little bit.

We are also, not quite sure when the longer term capital markets will open up and when and how much we'll feel comfortable really opening up this biggest on share repurchase. So, those are really the big drivers of why I feel.... I certainly feel more comfortable with a little wider range as we go into the rest of the year. I would say in the Distribution Solution segment I feel pretty confident of our results and you don't have the kind of uncertainty there that you do probably in these the two areas.

Lisa Gill - J.P. Morgan

Okay. That's very helpful. And I guess this as a follow-up to that though, Jeff you don't believe that we'll see any changes in utilization patterns, and should we see unemployment go up dramatically from where it is today. And that does have anything to do with the current guidance range?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

It really does and I guess a couple of points I'd make is those affects tend to happen over a period of time and where couple of steps removed from the immediate impact. The second point I'd remind you of is, we're 150 basis points business in our distribution business. So short term impacts in volume, especially a very little impact, not zero but very little impact on our bottom line. We are much more sensitive to trend in generics, which I think it will impact people moving in our direction and to what happened to our compensation from the branded manufacturers.

Lisa Gill - J.P. Morgan

Okay, great. Thank you very much.


Thank you. Glen Santangelo, please state your company name and you may ask your question.

Glen Santangelo - Credit Suisse-North America

Yes, thanks, it's Credit Suisse. Hey, Jeff, I just want to follow-up on one more guidance question. It kind of seems like you maintain the guidance, but now you're including an additional $0.09 of those two items that you outlined. Could you maybe give us a sense for how much you intend to scale back your share repurchasing and maybe how much less interest income you have. I am trying to get a sense for how you really changing you projections on IT versus how you intend to deploy your cash?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Well you're correct Glen, at $0.09 it's really the number you're solving for and the biggest piece of that is our conservatism or our caution around the Technology Solutions business. The... certainly we don't give guidance on exactly how much share repurchase we're going to do, but I'd say through a combination of being or making some assumptions around higher interest rates on our borrowings, lower interest rates on our investments and a little less share repurchase you'll get a couple of cents $0.02 to $0.04 and the rest is probably somewhere in the technology business.

Glen Santangelo - Credit Suisse-North America

Okay, and thanks. And maybe if I could just ask one more follow-up question for John with respect to the balance sheet, obviously compared to a lot of your competitors your balance sheets are in a lot better shape and it seems like you're taking a little bit more of a conservative turn here in terms of deploying that cash. How do you think about your priorities as you move into 2009 with respect to maybe acquisitions as valuations in the marketplace maybe down compared to your own stock, which is out of single-digit PE multiple, which we've never seen before.

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Glen, I think it's clear that we have a great balance sheet going into this environment and it's also clear that there are many opportunities that are much more affordable to us including the repurchase of our own shares. I think the phenomenon we're describing we believe is a relatively sort term phenomenon and we don't expect the markets will stay in this kind of credit condition for the long haul.

So I think that we have the sort of tamper our discussion by short term versus long term and the problem is the definition of those two, the tales of both of those statements. I think that our view is that we will continue the use the portfolio approach to capital deployment, we will continue to use share repurchases, we'll continue to be opportunistic in acquisitions and obviously we've already doubled our dividend and we continue to pay it. So I think your point is right, we're in a great position and we should be in a position to take advantage in this marketplace.

Glen Santangelo - Credit Suisse-North America

Okay and thank you.

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

You're welcome.


Larry Marsh, please state your company name and you may ask your question.

Larry Marsh - Barclays Capital

Thanks, Barclays Capital. For the record... one of the goals I guess that John I wanted to get your comment on, that the Paul Julian highlighted at the Analyst Day this past year was to retain 100% of your key customers this fiscal year. I just check in is that still on track and how do you think about in terms of customer renewals given the economic environment and just even more broadly, how do you even think about things like customer receivables reserves when the environment is so challenging on the distribution side?

John H. Hammergren - Chairman, President and Chief Executive Officer

Well, it's clear that from a track record perspective we've done a great job of retaining our customers and we generally retain our customers. And our goal is always to retain a 100% of the customers and I might refine just a little bit. 100% of the customers we want and so sometimes we get into the positions where we maybe in a place where the returns are where we want them to be, or we have other reasons that cause us to move in a different direction. But overall, I'd say that we're on track for the renewals that we expect this year and our teams continue to work very closely with our customers to earn the privilege of continuing to service their needs. And there is... as there are typically is very little sort of customer churn in our industry, on occasion clearly that you have some movement, but it typically is not really across the board.

As it relates to receivables, we're working very closely with our customers and I would say, out of all of our businesses, our pharmaceutical distribution business probably does the best job of maintaining visibility to receivable risk and managing the collection process and we have very little customer delinquency in that business. Very little age receivable and I think we feel pretty comfortable with the kind of small reserves we have on our books for receivables are adequate. So, our largest receivables, from our largest customers are continued to be paid on time and we have very close working relationships with them, and a very close dialogue.

So I think it's sort of steady as it goes clearly we have to be aware in this environment of the credit issues our customers may face, and we need to be prudent about new business we bring on and how we manage existing business and contract renewals. But I think at this point, we are sort of fairly as she goes.

Larry Marsh - Barclays Capital

And just a quick clarification, when you talk about sort of your more cautious view of technology business, and suggest that the timing delay maybe temporary. When you think about that, John, are there sort of gaining factors, is it an access to capital issue. Where you heard about early this year with the auction rate securities, is it impairment of current capital or is it really a change in the business environment for your customers that sort of, that dealt in terms of temporary versus a more permanent change?

John H. Hammergren - Chairman, President and Chief Executive Officer

I am not sure that we know clearly at across the board, what it is today or where it's ultimately going to go. I would say first off that our technology is really the solution to many of the problems our customers face. So I think, in my mind, it's not a question of if they buy our stock, it's a question of when they buy our stock. I think they may put off a new wing on the hospital the rehab to the emergency department that they are going to have to put in systems to reduce, so we will make their labor for more efficient and to reduce errors and some of this is going to be mandated through government regulations that have already been passed around error reductions in hospitals and not being paid for rework associated with errors and some of this is going to be simply the great return on the capital they get when they invest in our systems.

That being said, I think the snapshot we had at the end of the quarter was just fear induced. I mean, customers, if they haven't purchased the system, I'm sure that CEO and CFO looked at each other and said we probably can wait another couple of weeks to sign this PO even though it's been approved up through our Board. And I think some of that occurred. And so I think that fear, that uncertainty are opening up the Wall Street Journal everyday cause people to have an immediate kind of pullback to some degree and some settings.

I think the reality is what happened in the marketplace relative to access to credit, which I think has temporarily, probably caused some more people, to sit back and maybe not finish those signatures. And I think over the long term, the financial condition of our customers may deteriorate slightly. But I think the demands are still there and I think that the reimbursement team that are likely to come up with the next administration are unlikely to negatively affect our customers in such a way that they can't afford to do any systems purchases. So I think it was the immediate first blush Larry was wow, I think I have to stop doing what I am doing for a moment and take a breath. And then after that it's probably a process of working through their own analysis of their balance sheets?

Larry Marsh - Barclays Capital

Yes, very good. Thanks a lot.


Eric Coldwell, please state your company name and you may ask your question.

Eric Coldwell - Robert W. Baird & Co.

Thanks, it's Robert W. Baird. I have two questions. The first one is brief, John or Jeff can we quantify the growth of OneStop generics excluding the transition of McQueary accounts?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

I think most of that was non McQueary. McQueary really hasn't started yet. I'm trying to read lips here. I don't think McQueary is really rolled in. We haven't started it. We converted it to our distribution center network and that integration has been done. But the real selling process to move into our generics really has not happened yet. So, I think what you're seeing is the uptick of our existing customers ... I will not remind you, we did buy D&K, a year ago ... a year and a half ago and that rolled through ... two years ago and I guess that roll through has already happened.

So I think this is primarily net new customers I've talked about per mida [ph] and the fact that they came on with our generics. Last quarter I talked about safe way renewing with our generics. So there were some big wins in generics in the last couple of quarters that you're seeing evidence in our results.

Eric Coldwell - Robert W. Baird & Co.

That's actually fantastic. I was thinking some of that might have been McQueary derived. The second question is ... maybe a bit of statement, a bit of a question but I just want to make sure that we're all in the same page with growth, obviously given some of the comments about caution in the environment which I think are very, very understandable. As we look at the December quarter ahead, we're going to have a very tough year-over-year comp on growth, you are going to annualize OTN, once fewer sales day, Canada will probably go negative on the FX contribution and possibly materially so. You sold the Specialty Business or are in the process of doing so and you've also pulled some of your flu vaccine forward within earlier than expected start this year.

Top line growth is going obviously be pretty challenged in the December quarter. Are there any other things that we're missing and how do we prevent maybe the market from interpreting some of these one time issues or comparisons or optics items from leading people to believe that the actual fundamentals of the core business have slowed even more than perhaps they are. Is it ... does that make sense or is it too...?

John H. Hammergren - Chairman, President and Chief Executive Officer

Well I mean, I think you had a very good list of items there and clearly many of those items are fact based and we've try to discuss a lot of them and that's one of the reasons that Jeff and I tried to map [ph] the day in this conversation. This quarter, we tried to take out OTN and McQueary from our revenue number when I gave you a, sort of a same store growth number.

And so I ... yes, our growth rates are going to come down. We won't have a 16% increase in direct store revenues in pharmaceutical distribution. But I do think that we feel comfortable that we will continue to grow in that high-end of the range for the mix of customers we have that IMS has provided. And I know IMS recently took down their range and we really don't see the kind of softening in our revenues that that indication would ... portray as is in our future.

So I think we're still feel pretty comfortable, yes things are going to slow because we're lacking a lot of the stuff but we're still going to get a great leverage in our business. And Jeff?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

And Eric just to put a fine point on it in terms of guidance, we obviously don't provide quarterly guidance. I would just point to you however to the comments I made in the prepared remarks that are cautioned about Technology Solutions particularly implies to the December quarter on top of all the other things you cited. And certainly historically the March quarter is always our biggest quarter and we'd expect that to be true. If you look at Distribution Solutions and you go back to last year's December quarter we also had some things happening there that will be more challenging as we lap them. So we feel very good about the back half of the year and the guidance we've given but it certainly will be heavily Q4 related.

Eric Coldwell - Robert W. Baird & Co.

I completely understand and pretty admirable results given the environment we are in. So thanks guys.

John H. Hammergren - Chairman, President and Chief Executive Officer

Great. Thank you, Eric.


Thank you. Charles Rhyee. Please state your company name and you may ask your question.

Charles Rhyee - Oppenheimer & Co.

Yeah, Oppenheimer. I just had a couple of clarification questions if I could particularly in the IT section. You talked about the slowdown of some of your customers, can you give us a sense on for the revenue cycle piece particularly in the Persay business, have you seen sort a slowdown in terms of the number of claims that you're processing on behalf positions in other words are you able to get any read on whether we're seeing a slowdown in physician visits, certainly anecdotal evidence would suggest that doctors are seeing fewer patients at least over the last couple of months.

And then also just a clarification on the Verispan sale, obviously it looks like it comes out of the other income on distribution. Is that amount about ... am I right in thinking that ... did you say is at $24 million?

John H. Hammergren - Chairman, President and Chief Executive Officer

Jeff why don't you talk about Verispan?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Yes Verispan is in the other income line of Distribution Solutions on schedule two if you will, in our press release. And if you look at the consolidated income statement shows up in the other income line as well.

John H. Hammergren - Chairman, President and Chief Executive Officer

And as it relates to Persay, that acquisition case continues to perform well for us. We actually have seen I think an increase in interest in Persay's revenue cycle outsourcing business which is the business that you referred to where we might be able to see some indication of slowdown at the physician level in terms of billings or office visits.

I think people are beginning to say, you know what I don't need to carry the cost of some of these operations. So increasingly people are coming to us saying can you take on my back office responsibilities and so we're optimistic that we'll find even more opportunities in sort of this challenging time as customers look for things that ... to unload that aren't core to their operations.

As to whether physicians are seeing less patients or whether demand has fallen, clearly there are some anecdotal conversations we have with people about cancelled physicians visits or scripts that weren't picked up or those kinds of things. But once again it's such a small amount of evidence that I think it's difficult for us to comment on it and in the scheme of our medical surgical distribution business or in our revenue cycle outsourcing business, sometimes it's hard to discern what was a missing unit because the patient didn't show up versus share gains that we picked up in our business or other kinds of items that offset those things.

So, I don't think we're experts on physician office visit activity, but I'll tell you that those businesses are continuing to be very promising. Though you saw on our med/surge business, have good performance there and even if you take the flu vaccine out, that business is performing well and getting good leverage in its operations.

Charles Rhyee - Oppenheimer & Co.

Thanks for the comments. One more follow up question on distribution. We have obviously saw a pretty strong quarterly in terms of gross margins. We also had a kind of a pickup at least sequentially in the SG&A for distribution. Was there anything in there that might be different or that was sort of one time in nature, might not necessarily repeat as we move to back end of the year?

John H. Hammergren - Chairman, President and Chief Executive Officer

What I would say that there's a bunch of acquisition and costs that still exists in those SG&A lines and so one, of the reasons that Jeff and I are remaining so bullish on the distribution solutions segment is that they actually look at the revenue rate and the gross margin pick ups. When we get those expenses down because we lap OTN and McQueary and some of the other items that fall into those categories, we should get good leverage back in that P&L and that's how we get the margin expansion back in the business particularly in the fourth quarter. And so that's really where we're headed and why are we optimistic.

But you got to ... its got to start with gross margins and even if the revenue starts to diminish a little bit, if we can make up for those revenues short falls by selling more generics and get gross margins to grow which is really our focus, how do we grow gross margin and then get leverage off the gross margin to our expenses, that's a great model to grow operating income.

Charles Rhyee - Oppenheimer & Co.

Okay. Thanks for the comments guys.

John H. Hammergren - Chairman, President and Chief Executive Officer



Thank you. John Ransom, please state your company name and you may ask your question.

John Ransom - Raymond James

Thanks. Raymond James. Two quick questions, all in generics if we take a typical generic today and kind of run it through the profit cycle, is there any change in sort of the diminution of the profit as you move from say 180 day to the Wal-Mart $4 model. Are there profits roughing [ph] for you anymore quickly than they always have or does it still look like about the same?

John H. Hammergren - Chairman, President and Chief Executive Officer

Actually the model is the same and I think that the big advantage we have is have is what's improving in a model for us is more generics and more customers buying generics. The actual way the profits move through it John are very similar to what they were before.

John Ransom - Raymond James

Okay. That's good. And just shifting gears to your technology business, what percent of that business would you estimate is hospital based versus physician and other alternate type base at this point?

John H. Hammergren - Chairman, President and Chief Executive Officer

Well. I would guess that quite a bit of it is hospital based. Especially in what we would have called MPT, that is primarily a software business for hospitals and physicians along with our revenue cycle outsourcing business. Now RelayHealth is a transaction processing business that obviously sits above all of that and then you've got our payer business in there. So I'm going to kind of give it some quick relativity, but I'm guessing that we have somewhere in the neighborhood of ... our profits are probably half out of the hospital business and half out of the other businesses.

John Ransom - Raymond James

And when you see the slowdown, is it more pronounced in hospital or are you just kind of taking it across the board sort of the recent one?

John H. Hammergren - Chairman, President and Chief Executive Officer

It's much more... it's really across the board but most of it is in the hospital and the physician business. I would say that the payer and pharmacy businesses is actually are growing nicely for us and remember the pharmacy business is the transaction engine and so that is really an issue of volume growing through pharmacies and the payer business those customers are large customers that are using technology to improve their operations. And so I think the biggest slow down we saw was really in the hospital business and obviously a little bit in the physician marketplace, but that's not as material for us.

John Ransom - Raymond James


John H. Hammergren - Chairman, President and Chief Executive Officer

Hospital CFOs was holding up the TOs.

John Ransom - Raymond James

Well, thank you. And just to drill down one more step. Have you noticed any difference in behavior of say large investment grade hospitals compared to BBB hospitals in Blur if you've got that granular in your analysis?

John H. Hammergren - Chairman, President and Chief Executive Officer

I think it's a little too early to tell. I would say that... like I've said the first couple of weeks of this mess, I think it didn't really matter, I think it was kind of sporadic. You have some people to say, listen we're going to stop everything for a while and think about things and we had in the people that we're moving forward and I'm not sure that it was a necessarily related to their credit rating. But, clearly as we settle these things out, our larger more credit worthy customers are going to continue to advance the fall.

John Ransom - Raymond James

And I guess, the last question I mean on share repos what's kind of ironic and frustrating at the very moment your stock is roughly a nine-tenths PE, at a very moment this year pulling back from the market and you have kind of earned your self a pretty good balance sheet, I mean specifically, are you just concerned when the commercial paper market goes away, are you just concerned that you're going get a freak out in the bank market and you'll find yourself available your cash available to you at some point in time. What's the nightmare scenario for companies like yourself which really shouldn't have to worry about the things that you're trying to guard against?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Well John, you should rest assure that we are frustrated by the puzzle that you have just sighted which is obviously with our multiples where they are, we would see that is an opportunity time to buy stocks. Now on the other hand, multiples are where they are because the financial environment is unprecedented and who would have thought, four months ago that you would see many of the events that we've seen. So, clearly the most important thing for our shareholders is that we manage the company prudently for the long term, that we position ourselves. So, that as John said our strong balance sheet allows us to take advantage of opportunities that are sure to arise in this environment but that may not mean in the very near term being really aggressive about buying stock.

John Ransom - Raymond James

Is it liquidity just specifically here just want to make sure you have liquidity to work through the kind of 1929 scenario?

Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer


John Ransom - Raymond James


Jeffrey C. Campbell - Executive Vice President and Chief Financial Officer

Short answer.

John Ransom - Raymond James

All right, thank you.

John H. Hammergren - Chairman, President and Chief Executive Officer

Well, we've got time for one more question, operator if we've got it.


Thank you. Our last question comes from Brett Jones, please state your company name and you may ask your question.

Brett Jones - Leerink Swann

Thank you good evening, from Leerink Swann. Just not to beat a dead horse here John, but I just want to get a sense for how severe of a slowdown you really seeing within the IT business. I know you've talked about delays in the purchasing decisions and but I think it's the comment you made on the slowing implementations. Have you seen the slowdown really spread beyond purchasing and into actually customers delaying implementations. Thank you.

John H. Hammergren - Chairman, President and Chief Executive Officer

Well, I guess... no we haven't to be frank about it. Yes, I guess the question is what will people... it takes money on the hospital side to deploy and to implement and it takes staffing. And so I think one of the cautionary things that Jeff and I are trying to talk about in a very transparent way is to see what happens if these customers don't have their way with all to implement the products they've already purchased at the timeframe that we have expected them to purchase them, because we want to make sure that we have an opportunity to understand that before we take away that caution.

And as to the buying cycle, I think they are still very focused on making these decisions and you have most of our product champions at the customer level continuing to tell us that they're going to buy the systems that they're working on and our sales forces remain very optimistic and bullish about the funnels and about the progress of the product lines and sales cycle through the funnels.

So, one of the reasons that Jeff and I kept a range wider than some of you may appreciate for the rest of this year is that, as we are closer and closer to the fourth quarter, we're going to see how these orders start to loosen up. And obviously, there's a whole bunch of this business that isn't order dependent and that's why we haven't, the bottom hasn't fallen out of our guidance.

And if our... in excess of $3 billion in revenues there, there's a preponderant stuff that it is repeating revenue, that stays there in a steady state. Well over $2.5 billion of it is recurring kind of business in its nature. So, we're really talking about the high margin software that has a chance to move us upper end of those ranges that we've given you or not come in and that's really what we're focused on. How do we get those orders across the finish line? None of the customers have said to us, we're not going to buy them and none of the customers have said we're not going to buy the rest of the year. They basically just said, Listen we just want to take a pause here for a second and reevaluate our economic position from the balance sheet perspective before we make anymore major capital or commitments.

And I think that's fair and I think it's probably proved certainly for some of our customers who have taken that position at the end of our quarter. Frankly, as it stands right at this moment, many of them might actually be moving through the bicycle as these markets begin to become more clear for our customers.

So thank you for that last question and I want to thank you operator also and I want to thank all of you on the call today. We do remain very excited about our operating across healthcare and our ability to turn that into value for our customers and our shareholders. We appreciate your support and the questions you asked today. And with that I'll turn it over to Ana to give us some ideas of what we're going to be here in the coming weeks.

Ana Schrank - Vice President of Investor Relations

Thank you, John. I have a preview of our upcoming events. On November 4th, we will present at the Oppenheimer Annual Healthcare Conference in New York and on November 12th, we will present at the Credit Suisse Healthcare Conference in Phoenix. Our third quarter earnings release will be in late January and we look forward to seeing you at one or more of those events. Thanks and good bye.


Thank you. That concludes today's conference. You may now disconnect from the audio portion. And thank you for your participation. .

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