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Executives

Jim Mazzola - Senior Vice President of Global Marketing and Communication

Kieran T. Gallahue - Chairman and Chief Executive Officer

James F. Hinrichs - Chief Financial Officer

Analysts

Matthew Taylor - Barclays Capital, Research Division

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

Richard Newitter - Leerink Swann LLC, Research Division

Amit Bhalla - Citigroup Inc, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

James Francescone - Morgan Stanley, Research Division

Topher Orr - Goldman Sachs Group Inc., Research Division

Matthew S. Miksic - Piper Jaffray Companies, Research Division

Rajeev Jashnani - UBS Investment Bank, Research Division

Joanne K. Wuensch - BMO Capital Markets U.S.

CareFusion (CFN) Q2 2013 Earnings Call February 7, 2013 5:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Quarter 2 2013 CareFusion Corporation Earnings Conference Call. My name is Patrick, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to the conference over to your host for today, Mr. Jim Mazzola, Senior Vice President of Marketing, Communications and Investor Relations. Please proceed, sir.

Jim Mazzola

Okay. Thanks, Patrick. Thanks, everyone, for joining the call today. Today, Jim and Kieran are going to talk about our results for the quarter and 6 months ended December 31, as well as our guidance for fiscal 2013.

We issued a news release about an hour ago with our financial results, which is posted on our website at carefusion.com and filed on a Form 8-K with the Securities and Exchange Commission. We also filed and posted slides to accompany today's webcast, which may be found on our Investors homepage with our earnings materials. Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis. We believe these adjusted financial measures can facilitate a more complete analysis and greater transparency into our results, particularly when comparing underlying results from period to period.

Before I turn the call over to Kieran, I'd like to remind you that during today's call, we will be making forward-looking statements, including statements about our fiscal...

Operator

Pardon me, Mr. [indiscernible]?

Unknown Executive

Yes?

Operator

[Indiscernible] open your line.

Jim Mazzola

Excuse me, you're on the main line.

Operator

You could hear that call [indiscernible] you're okay.

Unknown Executive

Yes, I would like to hear it. I'm sorry, that's -- he's going to listen to it.

Operator

Yes, I'm going to go ahead and open that for you now.

Unknown Executive

Perfect. Have they started?

Operator

They've just kicked off.

Unknown Executive

Oh, they can be...

[Technical Difficulty ]

Jim Mazzola

Sorry, folks, for the -- sorry, everyone, for the interruption. So just keep going.

Let me just say that on today's call, we're going to be making forward-looking statements, that our actual results could differ materially from those expressed in our forward-looking statements due to risks and uncertainties, including the risk factors set forth in today's release and our filings with the SEC. With that, let me turn the call over to Kieran.

Kieran T. Gallahue

Great. Thanks, Jim. Good afternoon, everybody, and thanks for joining. With the benefit of having our 2012 Form 10-K filed last week and a line of sight to filing of our Form 10-Q for Q1 and Q2 for this fiscal year, we're eager to catch you up on the performance of the business. We intend to provide a full update this afternoon on our results for the first half of fiscal 2013 and how we are tracking with our full year goals.

Jim will go through Q1 and Q2 in some detail. But on a consolidated basis, our first half was in line with our expectation and reflects continued progress in building our foundation in the short term and setting us on the right strategic path for the long term.

Revenue grew 2% on a constant currency basis in the first quarter and 2% in the second quarter, both in line with our guidance for the year of 1% to 3% revenue growth. Gross margins made meaningful improvements over last year, increasing 100 basis points in Q1 and 160 basis points in Q2. We're beginning to see the gross margin expansion resulting from the share we took last year in the Infusion business as our larger installed base of devices begins to pull through higher-margin disposables, software and other modules.

Our efforts to lower SG&A expenses and reinvest in R&D continue to show progress in the P&L. In the second quarter, adjusted SG&A declined 3% as we increased R&D spending by 33%. Looking ahead to the second half of the year, we've reached the appropriate level of R&D spending and will begin to moderate the growth. We expect to continue to reduce core SG&A expenses, which will provide additional leverage over the long term. Remember, the medical device tax will begin to negatively affect SG&A in the second half of this fiscal year.

Adjusted operating margins improved by 170 basis points in Q1 and 180 basis points in Q2. At 20.8% in Q2, we are seeing meaningful progress towards our goal of at least 21.5% operating margins exiting fiscal 2014. Double-digit growth in operating earnings drove adjusted earnings per share for Q1 to $0.44 and to $0.54 in Q2.

As I said on our last call, we feel good about the progress we have made and the strong competitive position of our business. In particular, during the first half of the year, the results of all the foundational work we did last year in Procedural Solutions segment exceeded our expectations. For Q2, the team again executed well and drove high single-digit growth in the Infection Prevention and Medical Specialties businesses and mid-single-digit growth in Specialty Disposables. We spent fiscal 2012 reconfiguring the sales organization, centralizing R&D, transitioning our third-party logistics partner, repositioning our portfolio of products and, frankly, stabilizing customer issues as we managed such a large amount of change in a short period of time. It was necessary to undertake many of these changes as part of our final separation from Cardinal Health. Vivek Jain and the Procedural Solutions team remain focused and helped us emerge a stronger, healthier business. We still have work to do, but I'm pleased to report these initial positive results.

In Medical Systems, the first half shaped up about as we expected with Infusion performing a bit ahead of our plans. Our Medical Systems customers continue to be excited about the opportunity. We have to deliver mortar between our capital products. Mortar is a software connectivity and analytics surrounding our bricks, our 3 capital businesses. It includes solutions like Pharmagistics software for managing perpetual pharmaceutical inventory, Infusion Viewer to monitor the efficiency and safety of infusions throughout an IDN, the CareFusion Ventilation System to help manage a patient weaning from vents and the CareFusion Coordination Engine to simplify the interface with the HIT system.

As we introduce more of these solutions, we create even greater value in our capital products and, therefore, greater stickiness in our customer base. It's a strategy that is already working and creates headroom for us to grow over the long term.

Now let me transition to our guidance for the rest of the fiscal year. As I look to the second half, we are on track with the guidance we provided you in August. We were conservative then about growth in our end markets, and we see the environment playing out as we forecasted.

In the U.S., capital spending remains largely unchanged. Acute care hospitals, our primary customers, continue to prioritize their spending, funding the important infrastructure products that we provide. Inpatient procedure volumes remain steady, moving slightly up or down month-to-month but not accelerating in either direction. We're seeing some early lift from the strong flu season in the U.S., but that's a seasonal issue and will ease in the coming months.

Outside the U.S., where we have less exposure, Europe remains very constrained. We have not wavered from making necessary investments in our go-to-market infrastructure there. The same is true in emerging markets, where our footprint is even smaller. So we are making planned investments with a payoff horizon that will stretch into fiscal 2014. But we are committed to growth outside the U.S. and, therefore, resolve to make these investments.

The way we achieve our fiscal year guidance will differ somewhat from how we expected to achieve it in the beginning of the year. We have a very good story in the Dispensing business that will create a short-term shift in revenue during the second half.

The good news part of the story is that our team has unquestionably hit the mark with the introduction of our new Pyxis ES platform. The challenging part of the story is customers are willing to wait to upgrade until we've filled out the entire platform and feature set, which releases in May and August of this year. The fact that customers are not converting as quickly as we originally forecasted creates a short-term revenue delay.

But our current product generation, the 4000 line, are very competitively positioned, so we are not losing business. In fact, we continue to strengthen our market position, taking more competitive accounts than we gave up during the past quarter. So the very positive feedback we're receiving on the ES platform, combined with our predictably high renewal rates in this business, give us quite a bit of confidence for fiscal year '14. In the meantime, our customers are happy to lease their existing systems from us until the upgrade, leaving our strong and predictable cash flows in this business unchanged.

As I said earlier, we remain on track to deliver our commitments for this fiscal year. And as important, we are making meaningful progress against our multiyear goals to improve margins and deploy capital.

We continue to evaluate M&A that will be a strong fit with CareFusion. As I said last August, we are committed to creating value by deploying $2 billion toward stock buybacks and accretive acquisitions during the next 3 years. We have a pipeline of opportunities and remain disciplined buyers. I am pleased that we closed on the Brazil Intermed acquisition during the quarter, and I'm unsatisfied with the progress we're already making. Intermed has a promising footprint in a large and fast-growing health care market.

As I look out to our goals for fiscal 2013, we are on the right trajectory and will continue to manage conservatively given the global environment and where we're at in our transformation. We remain in a good position to help our customers in this environment with our product and service offerings that can help lower costs, improve hospital productivity and increase patient safety.

I'm looking forward to taking your questions, but first, let me turn it over to Jim. Jim?

James F. Hinrichs

Thanks, Kieran. As always, I'd like to start with what I think are the 3 key headlines for our second quarter.

First, our results show strong operating performance in the first half of the year with meaningful year-on-year margin expansion in each quarter at both the gross and adjusted operating margin lines.

Second, within these results, we continue to see significant positive contributions by Procedural Solutions. This is really the result of the work that we completed last year to optimize the segment's operations. PS had another great quarter, and we expect this segment to overperform for the year versus our original plan.

Finally, we reiterated our fiscal '13 guidance today. Of course, nothing ever really happens exactly the way you plan it, so the manner in which we expect to achieve our targets is a little different than our original expectations, and I'll provide more detail shortly on how we see our performance shaping up for the second half.

So starting with the consolidated results. Second quarter adjusted EPS from continuing ops of $0.54 increased 10% on a year-over-year basis on revenue growth of 2%. As Kieran said, gross margins of 51.8% increased approximately 160 basis points over the prior year primarily driven by Infusion capital pricing and the expected increased volume of Infusion dedicated disposable sets. We expect that gross margin expansion to continue into the second half of the year.

R&D spend increased 33% versus last year with total spend of $48 million, generally in line with the last few quarters' run rate. As noted in prior quarters, the increased spend is directly -- is directed primarily towards next-gen platform development in our Dispensing, Infusion and Respiratory capital equipment product lines.

Adjusted SG&A for the quarter declined $8 million on a year-over-year basis and 150 basis points as a percent of revenue. This decline reflects the continuation of savings from the corporate support functions.

Adjusted operating earnings of $189 million were 12% higher than last year. Adjusted operating margins improved by approximately 180 basis points driven by gross margin favorability, SG&A reductions and offset in part by the increased R&D spend.

Interest and other of $19 million was in line with our expectations, and it represents a normalized run rate under our existing debt levels.

The adjusted effective tax rate of 29.6% was higher than our original expectations. This is due to a revised forecast of income mix for the full year. More on that in a minute.

Cash flow from operations and free cash flow totaled $179 million and $156 million, respectively. At December 31, 2012, we had cash of $1.6 billion, of which $1.2 billion was held outside the United States.

Now turning to the operating performance of the segments. Medical Systems revenue of $602 million declined 0.5% primarily due to an expected 4% decline in Infusion Systems revenue. Within Medical Systems, Dispensing Technologies second quarter revenue of $260 million was up 1% versus last year and also up 1% for the first half of the fiscal year. And while the first quarter Dispensing revenue was generally in line with our expectations, second quarter revenue was modestly below our expectations due at least in part to customers waiting for the full ES release that Kieran mentioned in his remarks.

Infusion Systems revenue declined by 4% to $229 million, as I mentioned, which was again slightly better than the expectations that we set at the beginning of the year. As you remember, we began to install a significant number of competitive pump wins around this time last year, which had a positive impact on the revenue line in the second quarter and the back half of fiscal '12. Importantly, we have seen the increase in volume of higher-margin dedicated disposables that we expected during the first half of fiscal '13 and the related improvements in gross margins in both dollar and percentage terms that we expected to come from these disposable sales.

Finally, a quick comment on Infusion pump pricing. We continue to see the same improved trends that we've seen all year with pricing somewhat better than our expectations. This is the tailwind that we believe will help Infusion's top line for the remainder of fiscal '13.

Respiratory Technologies revenue, $106 million, increased 4% year-over-year and is on a growth trend line that we believe will continue through the remainder of the fiscal year.

Moving to the Procedural Solutions segment, second quarter revenue of $307 million was up 7% year-over-year, reflecting meaningful revenue growth in each business unit.

Infection Prevention revenue of $152 million increased 7% year-over-year. This is the best quarterly growth that we've seen from this business in a while. We see a stable growth trend in our ChloraPrep franchise, strong year-over-year growth in the MaxGuard product line and meaningful growth outside the U.S. as these products are introduced into the international market.

Medical Specialties revenue of $86 million increased 9% year-over-year. Growth was primarily driven by strength in pleural effusion and biopsy as well as growth outside the U.S.

Finally, Specialty Disposables revenue of $69 million was an increase of 6% over last year, the first period of growth in this business in quite a while. Results in this business benefited from a strong and early flu season and our ongoing work to transition the portfolio to a more strategic and clinically differentiated product line. We're optimistic that this business unit can finish the year on par or slightly better than in fiscal '12.

Now moving to the fiscal 2013 guidance. As I said earlier, we are reiterating our full year '13 guidance, but we now expect to achieve these results in a different fashion than we originally envisioned, most notably a shift in revenue and income from Q3 to Q4 and a slightly different product revenue growth profile.

We continue to expect overall corporate revenue growth of 1% to 3% on a constant currency basis for the full year with foreign exchange representing a headwind of about 0.5% based on current rates. We also continue to expect the Medical Systems revenue to grow 1% to 3% on a constant currency basis, just as we forecasted in the beginning of the year.

Within Medical Systems, our previous guidance for Dispensing suggested growth above the 1% to 3% segment average. Our revised forecast identify a meaningful shift in installations into fiscal '14 as the ES platform is fully released. And as a result, this business will likely be flat to down low single digits for the full year. Kieran mentioned while the delayed installations are challenging from a P&L perspective in the short term, this is a good story for the long term. We're obviously pleased with the reception of the ES platform, and this reinforces our decision over a year ago to increase our total R&D spend in order to the win [ph] in next-gen platforms across Med Systems. This shift in installation timing will compound what was already a difficult comparison in Q3, resulting in our expectations for low double-digit declines in year-over-year Dispensing revenue in the third quarter.

Last year, as I'm sure you'll remember, we were able to work with customers to accelerate installations into the third quarter, [indiscernible] a 15% organic growth rate and a record Q3 last year in this business.

A positive offset within Medical Systems to this change in Dispensing revenue will come from Infusion, where, as a result of better pump pricing, higher disposable sales and a continued strong competitive win rate, we now expect Infusion to be approximately flat or slightly better than last year with revenue weighted toward the fourth quarter, consistent with the typical seasonality in that business.

Moving to Procedural Solutions. We expect that PS will overachieve our initial estimates in each of its businesses. And as a result, we now expect Procedural Solutions on a constant currency basis to grow revenue between 3% [ph] and 5% for the full fiscal year.

With respect to operating margin, our current forecast indicates that we will modestly exceed our prior adjusted operating margin guidance of 19.5% to 20% driven by continued year-over-year gross margin expansion in the back half of the year.

Just as a reminder, on the SG&A line, you should be expecting SG&A run rate to increase in the back half of the year due to the medical device tax, the Intermed acquisition and our continued go-to-market resource investments outside the U.S.

As you might expect from our first half results, we believe our full year effective tax rate will be at the top of our 27% to 29% guidance range based on a revised forecast of income for the full year. As we've said in the past, our tax rate is sensitive to shifts in income mix, both from a product and geography standpoint.

Our revised expectations for business line revenue for the full year, the continued pressure in Western Europe capital equipment markets and the commercial investments that we're making outside the U.S. combines to affect the composition of our income mix and, therefore, by extension, our effective tax rate. The third quarter tax rate will come down a bit, aided by the reinstatement of the R&D tax credit, which is treated as a discrete item. But our full -- and that's why our full year estimated rate will be lower than our first half rate.

We continue to expect diluted earnings per share from continuing operations to be in our existing $2.11 to $2.21 range. Operating income remains on track because we continue to do a good job in managing our cost structure, the Infusion pricing and mix tailwind and the investments we made in Procedural Solutions, which are now paying off. The increased tax rate is partially offsetting these gains and, of course, creates a bit of downward pressure on the EPS line.

Just a quick comment on the quarterly split from the back half of the year. While our full year guidance remain -- range remains unchanged, the shift in product and geographic revenue mix will translate not only into the higher tax rate I described but also into income that is more heavily weighted towards our fourth quarter. This shift will result in a modest push from third quarter earnings into the fourth quarter, so please keep that in mind as you adjust your second half models.

Finally, operating cash flow and capital expenditure guidance of $525 million to $575 million and $110 million, respectively, remain unchanged.

The last time we spoke, we indicated our plans to become current in our SEC filings by February 11. You saw us file our fiscal '12 Form 10-K on January 31, and we intend to file our first and second quarter Form 10-Qs by Monday, in line with our commitment. As our press release indicated, there were revisions made to our prior periods as a result of the changes in our accounting for Pyxis sales-type leases as well as subsequent events, which impacted the fourth quarter of fiscal '12. Those of you with follow-up questions in this regard may contact Jim or Bill after the call. They'll be happy to help.

Finally, on this matter, there are a number of folks here on the CareFusion finance team that I'd like to publicly recognize for all their hard work and determination over the last several months since we began our review of the Pyxis sales-type lease accounting. Jean Maschal, our Controller and Chief Accounting Officer; Jonathan Wygant, our Assistant Controller; and Josh Radcoft [ph] and Kat Hennington [ph] on our Dispensing accounting team have spent countless hours revising our fair value methodology and determining the impact of these modified valuations on our prior period financials. Without each of them and their teams, there is no telling how much longer this process could have taken. And so for that, I want to say thank you to all of them for stepping up to this challenge and getting it through the finish line.

So just wrapping things up, I want to highlight we remain on track to achieve our fiscal '13 financial goals and our margin improvement goals exiting '14. First half results for fiscal '13 reflect the leverage we expected on the gross margin and operating margin lines. We have a line of sight to these important goals for the remainder of the year. We continue to execute on our plans to reduce corporate infrastructure costs, reinvest in growth accretive actions such as R&D, all while achieving our adjusted operating margin goal of at least 21.5% as we exit fiscal '14.

So with that, I'll stop. And as always, we look forward to your questions.

Jim Mazzola

Okay, great. Thanks. Patrick, if you could read the instructions for Q&A. [Operator Instructions]

Question-and-Answer Session

Operator

[Operator Instructions] And gentlemen, your first question comes from the line of Matt Taylor with Barclays.

Matthew Taylor - Barclays Capital, Research Division

So I guess first question I want to ask was just about the contribution from acquisitions. You had this small Brazilian deal. Is that the kind of thing that we should be looking for you to do in terms of extending your footprint geographically but kind of keeping it under the same umbrellas? And any comments you can make on the performance in terms of quantifying that deal would be great.

Kieran T. Gallahue

Sure. Let me talk to -- take the first part and then I'll throw it over to Jim. So the Intermed acquisition is a great example of types of deals we love. I mean, it was -- it's in a category in the Respiratory space where we were able to expand geographically, we were able to get some technology. They've got a great team down there that is already interacting extremely well with our global R&D teams, so we're able to share technology and ideas and supply chain, et cetera. And it gets us a footprint, both from a manufacturing perspective and a distribution perspective, and that in a developing market, that's quite attractive to us. So that is, I would call, an example of kind of transaction we do. But I wouldn't limit your thought process to that. We look at -- across our businesses, both business segments, we have opportunities, in some cases, to grow scale. We have opportunities to expand our product portfolio. We have opportunities to expand geographically. So the good news is there is -- over the last couple of years, we've been building this foundation for growth. Every -- literally, every month that we -- that goes by, this organization is better and better prepared to be able to accept in acquisitions of different sizes, of different natures and in different geographies. And our success to date in doing the 7-or-so acquisitions that we've done over the last 24 months has been quite good. We've had a very good success at learning how to integrate these acquisitions, how to take advantage of the management teams in a way to integrate them into the CareFusion team. And in fact, in some cases, we've even done secondary acquisitions into the original. So we feel very comfortable with the progress we're making in that category. It's a good example, but I wouldn't limit yourself to thinking that is the only kind of acquisition we do. Jim, tell them our moves.

James F. Hinrichs

Yes, sure thing. Matt, from a contributions standpoint, relatively de minimis. We closed on this acquisition midway through the quarter. And as a result, it was a couple of million dollars in the quarter. Maybe slightly bigger impact in the future quarters just because we'll have the full quarters there.

Matthew Taylor - Barclays Capital, Research Division

And then just on the revenues. So obviously, the biggest change here is some timing with Dispensing. But it sounds like you're offsetting that with some strength in procedural care and maybe Infusion coming in a little bit better. Is that the right way to think about it? And also, you called out flu as being a driver. Was that a big driver or also pretty small this quarter?

Kieran T. Gallahue

So first off, you're thinking about it exactly right. You heard our message loud and clear. From a flu standpoint, it had a reasonable effect on our business that have been declining. So I would say overall for the corporation, it's not a gigantic impact. But certainly, for that business, it had a meaningful impact and it got them up into positive territory for the first time in a couple of years.

Operator

Your next question comes from the line of Mike Weinstein with JPMorgan.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

I just wanted to touch on your confidence around, maybe just 2 items. Obviously, a very strong performance in Procedural Solutions, and I was hoping you could just spend a few more minutes on that and give your thoughts on sustainability of some of the drivers. And then what you described at Pyxis, could you just actually get into a little bit more detail to give us a sense of the sales process there and what that looks like as to why customers are waiting for it rather than just do the normal upgrade process? So why wait? And how good is your visibility on what that pipeline looks like?

Kieran T. Gallahue

Great. I'll be glad to answer both those questions. So first of all on the Procedural Solutions side, the simple answer on sustainability is, it is sustainable. If you look fundamentally at what's going on in that business, Vivek Jain and the team spent last year just doing a lot of the hard work of integrating teams, of setting up a more efficient sales structure, of creating a very effective and coordinated research and development team, of creating an organization that was communicating and acting in concert with one another. And those fundamental elements remain. In fact, each day we go along, I think they strengthen and they continue to improve. In addition, there were some good work across the aisle, if you will, between Procedural Solutions and Medical Systems businesses, where there was better coordination on the way that we construct certain deals where we get more pull-through in the process. And that, again, is something that we expect to continue because we've got the processes and we've been shown why that works and why it's in the self-interest of everybody in the organization to do that. So I think both those elements were very much foundation setting. We're making good progress, and I would fully expect them to continue. With your question on the Pyxis, yes, I mean, it's a good story when it comes down to it. We're introducing this ES platform, and it is the first major platform change in 20 years in this business, right? And what you've seen with the prior generation, the latest one being the 4000, the 4000 itself is still an extremely competitive product. I'd put that product and product series against any product in the marketplace. And in fact, if you look at the last quarter and you look at our win-loss ratio, we won far more accounts than we lost over the last quarter. So I think that, that's just a good example of the sustainably of the 4000 platform. That being said, as we transition to the ES, we've really hit the mark with this thing. And it's particularly important for hospitals that are becoming hospital systems, so -- where they're trying to manage pharmaceuticals across a number of different hospitals and they want visibility into that supply chain and to the movement of that and the safety factors inherent in that across the supply chain. And as we're introducing it, we're doing it in a very thoughtful way where the first drop of the ES doesn't have all the functionality of the 20-year-old platform on the 4000. It has a core element to it. And then over the course of a number of months building up to some really significant upgrades around the August time frame, you're seeing increased functionality. As we hit each of those benchmarks, the new platform becomes even more relevant to the operations within certain hospitals, right? So you get this increasing functionability -- functionality and capability. So what we're finding with our customers is when they have started to see the ES and particularly started after ASHP in the December time frame and with a lot of customer visits that we've had to our safety centers, they've seen the functionality of this ES, and they love it. And so what we're doing is they're extending out their leases. So they're staying on the platform that they have today. They're staying on their Pyxis, which is fine with us. We continue to get the cash flows, et cetera, and -- to be able to support those customers and their needs. And we're saying, "As soon as you get that functionality in ES, that's what I'm waiting for, that's what I'm going to upgrade to." So we've got a lot of visibility, and the reason we have the visibility is these customers are coming back to us and they're extending out their leases until that ES platform is right for them. So I -- we feel real good about it.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Okay. And maybe just, Kieran, just so I'm clear with some -- what is it that -- what's the functionality that they're waiting for that's not in kind of the early part of the rollout that they want to have in the system?

Kieran T. Gallahue

It varies by customers. In some cases, it's things like the ability to use bar code scanning when you're taking pharmaceuticals out of the system. In some cases, it's an integration with Phacts, that company that we acquired recently. The seamless integration with that, that's a drop that we're going to have this summer. So it's really about managing the systems in a hospital. And that's what customers are doing, that's what they expect and that's what we can deliver.

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Okay. And then just one last question for Jim. You reiterated your share count guidance. I assume that means you'll be buying back the stock in -- call it the last 4 to 5 months of the year that you were originally planning over the course of the year?

James F. Hinrichs

Yes, once we get our filings made, our plan is to get back into the market, Mike.

Operator

Your next question comes from the line of Rick Wise with Stifel, Nicolaus.

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Let me start with -- I'll come back to gross margins. I think, Jim, you indicated that gross margin expansion is going to continue into the second half. I just want to make sure. Certainly, that's going to happen year-over-year. But are we going to see it versus the first half? I mean, how should we think about it?

James F. Hinrichs

Right, okay. So my comment -- thank you, Rick for the clarification. Comment was on a year-over-year basis, [indiscernible] hit the margins on a -- we like to look at margin expansion on a year-over-year basis. That's sort of what we're targeting. So first half to second half, sequentially, if you look at last year -- and in most years, it can decline a little bit. Last year, it did decline a little bit. So I think we're just going to see the continued year-over-year expansion that we saw in the first half. We're going to see a continuation of that trend in the second half on a year-over-year basis.

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

And another clarification. I mean, obviously, you have some tough comps in the second half, particularly in the third quarter. We're talking about this push-out of the Pyxis ES. Could you help us think through what it would take to get to the upper end of your guidance range? Is it -- I mean, clearly, Infusions did better-than-expected, Procedural Solutions has done well. Is it just -- if that continues -- is that streak continuing or accelerating? Is that what it does? Or can you just help us understand the moving pieces there.

James F. Hinrichs

I mean, certainly, it's probably revenue driven and/or mix driven. So if you drive -- if we get greater gross margin expansion than we hoped through a mix, then that drives higher-than-expected earnings. If there's a little bit of an acceleration that's beyond what we have expected in Infusion, which had been great this year, we continue to see getting better through the rest of the year. That could drive us to the top end. Right now, we're very comfortable within the range. But...

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And just the last -- just one. In general -- just in general, is there any impact should we be thinking at all about just the resolution of the accounting issues, Jim? Any impact on the company or the business or how we're thinking about forecasting going forward?

James F. Hinrichs

Oh, no, yes. Thanks for the question. Right now, no. I mean, you saw -- what you saw from us when we released or we filed our 10-K and all the changes, that there was an immaterial change to our prior period financials. We only accounted for Pyxis leases in one way, and that is the new way that we've got. And so it's -- to know precisely what the impact is for the full year, we will never know that. All I can tell you is what I know from historical, and that is historically, these things were immaterial. I'm assuming it's going to be material going forward. But like I said, we're not going to -- we're doing it only one way and one way right now.

Operator

Your next question comes from the line of Jonathan Palmer with CLSA.

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

First one, for Kieran. You mentioned in your opening comments that Europe remains constrained. Can you just give us a little deeper dive into what you're seeing and maybe how you changed your go-to-market strategy there?

Kieran T. Gallahue

Yes, the -- well, there's really just hasn't been a lot of change, right? And we all know that throughout Europe, you've got governments that are struggling with trying to light themselves at this point. That slowed down certainly a lot of capital spending that we've seen in those marketplaces. We've seen it basically over the last couple of quarters. It's been relatively consistent, maybe a little bit more challenging even in -- we saw a couple of quarters ago. But in general, it's sort of maintained itself. From our viewpoint, we look at it -- there are certain core investments in these markets, both in Western Europe and around the globe, that we're not going to back off of, so in building certain core capabilities, building the strength of the management team, making selective acquisitions, as we did with U.K. Medical, in order to go direct where we think it's appropriate. But there are other cases where, if there's -- let's say we have some excess installation capacity, et cetera, we certainly are going to and have been rightsizing those parts of the organization. So the key is to continue to invest in those things that make a difference over the long term. And if there are some short-term overcapacity and some very specific skill sets, then we obviously rightsize those areas.

Jonathan J. Palmer - Credit Agricole Securities (USA) Inc., Research Division

That was very helpful. And then one for Jim. Can you just give us some color on the ongoing corporate cost reduction initiatives with maybe an eye here towards which initiatives are largely complete and which of the meaningful ones are still ongoing?

James F. Hinrichs

Yes, sure. I mean, this is sort of a never-ending quest for continuous improvement here, which you might expect. So some of the bigger -- and we just first take a step back. We've cut tens of millions of dollars out of some of the corporate staff functions as we've realigned to support 2 operating segments instead of 3 as we've harmonized systems, automated and improved processes. So that -- it's been very successful so far, and you've seen it in the results. Going forward, we continue to look at things. We continue to look at sourcing -- strategic sourcing as a big lever to pull both in the direct and indirect materials area. We continue to look at things like process consolidation, process harmonization, system harmonization as a way to drive costs out. There are a wide variety of smaller projects that we're just going after on an individual basis that will move it at the margin and, in total, are driving the kind of expense reductions that you see. The biggest contributors in the last 6 months have been finance, HR and legal. Those costs have come down quite a bit on a percentage basis, and some of that money is being pushed back into R&D. Some of it is being taken down to the bottom line. I think we've got a continued ability to drive these kind of changes through some of the things that we've been talking about. So I don't see a big change going forward. I think we've got more room here on -- in all of these areas.

Operator

Your next question comes from line of Richard Newitter with Leerink Swann.

Richard Newitter - Leerink Swann LLC, Research Division

Just to start off on a quick one. For the tax rate for 2013, I understand there are some moving parts in there and there's mix shift. Can you just give us a sense of where that normalizes and what we should be thinking about in '14 and beyond?

James F. Hinrichs

Yes, that's a great question. I think the answer is right now, what you're seeing is a little bit of a slowdown in Europe, which we've talked about. We continue our investments in Europe. That drives down o U.S. income. And so it's sort of a doubling effect, if you will, a kind of a double negative there. And so what you're seeing is a mix shift. And as I mentioned in the remarks, we have a tax rate that is very sensitive to mix shift. We have 2 big pools of income in this company: one in the U.S., taxed at a very high rate; one big pool offshore taxed at a very low rate. Small changes in that mix can drive the tax rate in a meaningful way. That's exactly what you've seen this year. I think as our investments start to get traction and we drive revenue o U.S., we'll see those income levels kind of rebalance themselves and get back to a more normalized rate. And we could see a move down in the tax rate simply as a result of that in the coming years. In addition, we continue to work to refine our corporate structure and do some tax planning work. I think that could drive some improvement in the rate over the next couple of years. I'm not talking about big, big moves here but it's just continuing to sort of mitigate this negative that you've seen this year.

Richard Newitter - Leerink Swann LLC, Research Division

Okay, that's really helpful. And just a quick follow-up. Within Infection Prevention, a nice growth rate there, 7% year-over-year. ChloraPrep has been a driver. Can you maybe just give us a color -- a little bit more color on kind of what level of growth we're seeing? Is that double digits? Is that a key driver? And should we expect that going forward to be the key driver?

Kieran T. Gallahue

It is one of the drivers. I mean, certainly, ChloraPrep is a great franchise. It's a well-protected technology that's well accepted by our customers. But it's just one of the drivers. We've got multiple drivers for our Procedural Solutions. As far as growth rate in that, we don't get into the details of that. But you can think of it more in the mid-single-digits sort of range as opposed to double-digit growth, which is very consistent with what we've seen over the past year.

Operator

Your next question comes from the line of Amit Bhalla of Citi.

Amit Bhalla - Citigroup Inc, Research Division

Jim, Kieran, I appreciate the comments you've made on the strength in Procedural Solutions. I was thinking more specifically on the Medical Specialties side. The increase that you saw there was greater than we've seen in past years. You did point to PleurX and overseas as drivers. Were there any onetime orders of size, any other color you can give to why that was so strong compared to historical trends?

James F. Hinrichs

None I'm aware of. I mean, it was a relatively easy comp for them, to be honest with you. But, I mean, that's nothing other than that. I mean, I would tell you, V. Mueller, which has been declining, as we talked about being in decline sort of the open instruments and the Snowden-Pencer laparoscopic instruments, that stabilized a little bit. That drove -- so it's -- so the absence of a negative creates a positive. PleurX, biopsy continued to do very, very well. o U.S. we've started -- we're starting to see some strength there as well. So it's a lot of little things that led to a really good quarter.

Amit Bhalla - Citigroup Inc, Research Division

Okay. And Jim, on the R&D tax credit, can you just talk -- can you just give us a number for the third quarter? What's the impact there?

James F. Hinrichs

It's probably going to take our tax rate down sort of on a reported basis towards the lower end of our annual guidance range. So if you think of our guidance range of 27% to 29%, the first half of the year it was closer to 30%. Third quarter is going to come in 1 point or 2 lower as a result of -- probably more like 2 points lower as a result of the R&D tax credit. I think you'll see it moderate back in the fourth quarter kind of where we've been so far this year, and that's our current projection right now.

Operator

Your next question comes from the line of Kristen Stewart with Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

I just want to circle back around on the acquisition impact in the quarter. I know you said it was a couple million from Intermed, but can you give us the aggregate impact of acquisitions? Because I guess you had U.K. Medical, that still hasn't an anniversary-ed. And I think Phacts as well.

James F. Hinrichs

Yes, U.K. Medical was another couple of million dollars. So if you think about it as sort of in the $4 million to $5 million range for both of those, that will give you the total number.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay, perfect. And then just going back to gross margins and just kind of your operating margin guidance, I think the last update that you had, you were expecting gross margins to come in above 100, I guess, basis points from prior year. It sounds like most of the maybe higher confidence in the higher operating margins is more driven on gross margins, but I just want to double check that.

James F. Hinrichs

That is correct, yes. We're seeing a nice effect at the top -- the gross margin line. Infusion pump pricing is helping. And some of the direct sourcing work that we're doing is helping the mix factor of more Infusion. And overall, more Disposables in general, and then Infusion dedicated sets is helping. All of that is driving a little bit of strength -- more strength at the gross margin line, and that carries down through to the operating margin line.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay, perfect. And then just, Kieran, just kind of picture. We haven't -- we see you do some smaller acquisitions, obviously, Intermed you closed on this quarter. But to what extent, I guess, shall we be expecting a lot of activity over the next kind of 6 months from you guys from an M&A perspective? I know you had offered some commentary in your prepared remarks, so maybe just dive a little bit more deeply into how you're thinking of M&A.

Kieran T. Gallahue

Sure. So first of all, as we all know, M&A timing is very difficult to predict. And so I try to stay away from any given period of time predicting anything specific because I think that just puts everybody in a difficult position and creates motivation to make, in some cases, not the best decisions. So I'll try to stay away from any specific timing. What I can tell you is that the pipeline is very active, that the team is very active, that they remain disciplined in what to look at, what to walk away from throughout the entire process. I can tell you this organization is better prepared today than at any time that I can recall in its ability to accept in and to integrate acquisitions. And that gives us a significant amount of flexibility as we look at the world of opportunities.

Operator

Your next question comes from the line of David Lewis with Morgan Stanley.

James Francescone - Morgan Stanley, Research Division

This is actually James in for David. So I'm hoping you can help me out a little bit on revenue guidance. So the mid-point of Procedural Solutions coming up 300 basis points, Medical Systems staying the same, but the total corporation still the same at 1% to 3%. I mean, should I think that, that because the Procedural Solutions guidance is coming up, maybe you're going to be more weighted towards the top end of the corporate range? Or does the downside in Dispensing drive you towards the bottom end of the Med Systems range? Or am I just trying to put too fine a point on it?

James F. Hinrichs

I mean, I wouldn't try to put too fine a point on it. I think within a range, you can come in, in different spots. MS is obviously a much more heavily weighted component of our total P&L. You obviously know that. So if you've been asking yourself, it's somewhere within that range, and then the PS side being somewhere in their range, you -- it's relatively easy to put yourself into our overall corporate range. So like I said, I wouldn't put too fine a point on it. I think we're -- we -- what we've seen is Dispensing is going to be a little less than we thought, and a little bit of Infusion will make up for that. And then on the PS side, we'll make up for that. But net-net, corporate revenues actually look remarkably similar to what we kind of saw at the beginning of the year.

James Francescone - Morgan Stanley, Research Division

Okay. And then second, you had 2 items, a product recall and a litigation settlement that I believe occurred in fiscal '13 but were booked back into the fourth quarter of '12 due to the delay in your filings. Did original fiscal '13 guidance capture the impact of those items? Or, I mean, -- or said a different way, did putting those expenses in fiscal '12 as opposed to fiscal '13 factor into your higher outlook for margins this year?

James F. Hinrichs

No, those things, obviously we don't budget for recalls, we don't budget for litigation. And so those things would have -- were unbudgeted for. So the guidance would have been unaffected by either of those items.

Operator

Your next question comes from the line of Topher Orr with Goldman Sachs.

Topher Orr - Goldman Sachs Group Inc., Research Division

My first one relates to emerging markets. I know you guys in your prepared remarks had that comment on the fact that you guys continue to invest there. I was just wondering if you could provide a little bit more color on what exactly those investments look like and, when they do roll off, how we should think about the margin impact there or whether those dollars are going to be reallocated.

Kieran T. Gallahue

Yes, I'll start and then hand it over to Jim. When you're getting into these markets, as you well know, it's not something that you do overnight. It's something that you need to have a long-term vision on, and it's something you need to be consistent on. And then periodically, you see opportunities to accelerate that through some M&A, and you take advantage of that. And the more work that you've done in those markets to start with, the better off you are when you look for M&A because you've got a better eye, you've got an organization you can plug into, et cetera. So I think the key with those is, we've begun a journey, we are investing what we think is appropriate levels. It varies very much depending on which country you're in and what -- where we see the opportunities. I'm encouraged to say that we've seen some nice wins. I mean, if you look over the last several months in Dispensing, as an example, we've seen some really good wins in Middle East, we've seen good wins in China, we just saw a nice win in India. So you start seeing some successes, but it takes a bit of time before those things add up to something material.

James F. Hinrichs

Yes, thanks. And, I mean, I would add to that just in terms of trying to think about quantification or taking a step back. And we've got -- if you look at Europe, where we're kind of peeling money out of, Europe capital is slow. It's slow as expected. So we continue to pull investment and resources out of that market and reinvest them where the areas of growth are. So we've really 2 areas of growth. One is emerging markets in the entire company, Kieran touched on that. The other is frankly developed markets and, in many cases, Western European markets, which are otherwise slow but receptive to our new, innovative products like the ChloraPrep, like our MaxGuard. So those almost feel like the developing markets to us. I would say that the investment that we're redirecting from the slower growth, developed capital markets into those 2 areas that I described clearly is in the multiple millions of dollars. The payoff hasn't kicked in yet in a pronounced way in the P&L, which is why we've sort of been talking a little bit about a higher tax rate. But ultimately, over time and into '14, we think they will.

Topher Orr - Goldman Sachs Group Inc., Research Division

And then turning back to -- I know you've got a couple of questions here on the M&A picture, but I was thinking about a little bit of a different way. If -- you guys have set this road map for 3 years of roughly $1 billion to acquisitions, roughly $1 billion of share repurchases. At the end of every year, do you kind of look back at the M&A picture and say, at this point, maybe we should be doing a little bit more share repurchases? Or at what point in that 3-year period, if the M&A hasn't come through, do you start to look, hey, maybe we should be doing a little bit more on the share repo side?

Kieran T. Gallahue

Look, we look at that constantly. Every quarter, certainly, we would review it with our board of directors. If we think, for whatever reason, M&A balanced with -- share repurchase is only one element of that. We look at capital allocation. If we think that the best way to generate shareholder value at that point in time is to build a valuable company is to do share repurchases, then we look at it closely.

James F. Hinrichs

Yes. I think that is...

Kieran T. Gallahue

So it's dynamic.

James F. Hinrichs

Yes.

Topher Orr - Goldman Sachs Group Inc., Research Division

And then just last question real quick. Have you guys quantified at all what the impact of flu was this quarter? And if not, anything qualitative you can provide on that front?

James F. Hinrichs

We haven't quantified it. What we've said was the growth in Respiratory, what we call Specialty Disposables, was possibly impacted by the early and strong flu season. Again, that's the business that's been in decline mode for the last couple of quarters. That actually grew 5% or 6% this quarter, and a lot of that was attributable to the flu season.

Operator

Your next question comes from the line of Matt Miksic with Piper Jaffray.

Matthew S. Miksic - Piper Jaffray Companies, Research Division

So just for a minute about Dispensing. I wanted to follow up on some of your comments on Infusion Systems. You mentioned better-than-expected pricing or better than your guidance. Maybe if -- and you'll plan for pricing. If you expand a little bit on what some of the other drivers are of that performance competitively or in terms of product differentiator or the reception you're getting at the hospitals and so on.

Kieran T. Gallahue

Yes, so what we were referring to is, as you recall on the base year last year, we were -- we had a high volume of installs that were driven off of a competitor's situation where we had sort of a period of a landgrab, if you will, where there was a lot of big accounts that were able to be converted. Those things, by their nature, tend to be a bit lower priced. And so there was a period of time where we saw some degradation in the average pricing. We had said that we believe that we're going to see some bounce back from that, that we never expected to get back fully to the beginning point. But we thought we'd see some material bounce back. In fact, we've seen that, and, quite frankly, we've seen it even a bit better than we had thought. And at this point, that seems to be continuing. From a competitive perspective, we are selling much the way we have in the past, which is we've got a very competitive, high-quality product that allows our customers to more cost-effectively be able to provide their services and do it in a way that protects patient safety. It's a platform that continues to evolve and continues to improve. And, quite frankly, we're selling quite a bit on the mortar as well. And we have the capabilities and the informatics on different parts of the solutions that we're building around our Infusion Systems just as we're building around our Dispensing systems, just as we're building around our Respiratory technology systems. And it's really not only individually where that's proving powerful, but it is across the spectrum of those products where it's proving powerful. And it's resonating in a customer base that, quite frankly, needs help and needs our support. And our message of being able to help our hospital customers be able to improve productivity while at the same time helping them do what they want to do, which is to protect patient care, is resonating. And we're seeing that in the results.

Matthew S. Miksic - Piper Jaffray Companies, Research Division

That's great. And then just a couple of quick housekeeping questions. You've touched on a couple of these, Jim, already, but I want it to be crystal clear. On the share count, you had a certain amount of sort of your buyback in front of you that you would be doing in the marketplace repurchases. Are you going to catch up, do you think, before the end of the year? I know Mike had a question earlier about this, I just want to be crystal clear. Are you going to be sort of back on track?

James F. Hinrichs

Well, our goal is certainly to catch up. And like I said, we'll back in the market once we -- we plan to be back in the market once we get our filings done. So our goal is certainly to get caught up. There are different ways to do it. We're evaluating different ways to do it. And -- but like I said, our goal is to get caught up.

Matthew S. Miksic - Piper Jaffray Companies, Research Division

And then the other is just has there been any change I know a lot of other companies have changed the rate that they're looking at, dollar level that they're staking out for the med tech tax. Have you taken another look at that? Or is your prior comment still valid there?

James F. Hinrichs

Well, I mean, obviously -- as it's being implemented, we're learning more and more. I would say that we did a pretty deep analysis on it a year or so ago. We came up with some pretty solid estimates. Those estimates haven't changed. So we're sort of anticipating a back half effect of $15 million or $16 million in the back half of the year. But it's very consistent with everything we've said so far.

Operator

Your next question comes from the line of Rajeev Jashnani with UBS.

Rajeev Jashnani - UBS Investment Bank, Research Division

My first question was just on the margins. Gross margin was pretty good this quarter. And the Pyxis was a little bit lighter, and my thought was that, that was a higher-margin business. You had strength in Procedural Solutions, which I thought was generally a lower-margin business. And then at the same time, you're taking up the operating margin guidance for the year. So maybe just speak to what's happening there. That seems to be pretty favorable if that in fact, is the shift. And then I had one follow-up after that.

James F. Hinrichs

So that's -- I mean, Pyxis is one of our higher-margin businesses, and it was a little bit weaker than expected. But that weakness was more than offset by this mix thing that I described on the Infusion side of the business, which had a lot of Disposable sets flowing through it, very high margins. It was also aided, as we mentioned, by Infusion pump pricing. Price is the best kind of revenue you can get because it's 100% margin. And then also, remember on the Procedural Solutions side of the business, while in total the margin profile looks similar or maybe just slightly less at the operating margin line, there are certain products that are much higher margin. Those were the ones that were actually driving our strength in Procedural Solutions. So that provides a mix benefit as well. So peeling it back a little bit more leads you to the higher margin for all the reasons I just described.

Rajeev Jashnani - UBS Investment Bank, Research Division

Okay. And then so when you're talking about the operating margins being better, that's really coming on the gross margin side?

James F. Hinrichs

Absolutely. All the things I just described, yes.

Rajeev Jashnani - UBS Investment Bank, Research Division

And then the other question I had was just on the visibility you have on the Infusion business going forward. There are obviously a lot of dynamics in that market right now that could be helpful. At the same time, it could be a relatively sticky business. I was wondering if you could just comment about how you feel about the opportunities that may be there in that market.

Kieran T. Gallahue

Thanks for the question. We continue to be excited about the Infusion market. We've got about a 50% market share or so in the United States today. We feel very comfortable with the competitive standard of our offering. And as we build out the mortar around our products, we believe that we can continue to add more and more value to our customers. And as we do so, we think that it will be recognized. We think there'll be some stickiness in the product offerings and feel very comfortable with that business. So it's a good business, and we feel very comfortable with it.

Operator

Gentlemen, your last question comes from the line of Joanne Wuensch with BMO Capital Markets.

Joanne K. Wuensch - BMO Capital Markets U.S.

A very boring question first. Can you talk about the FX impact to each of the major businesses?

James F. Hinrichs

FX for the company for the quarter was relatively small or less than a couple of million dollars headwind for the second quarter. For the full year, it's probably a 50-basis-point headwind for the company. And on the bottom line, less than $0.01 headwind for the company. For each of the businesses, Med Systems tends to be affected more heavily by it. I don't have the exact numbers in front of me. We can follow up with you on that, Joanne. But in general, Med Systems tends to take a slightly bigger hit or lift from FX just because it's got more international exposure. But we'll get those exact numbers to you.

Joanne K. Wuensch - BMO Capital Markets U.S.

Perfect. And then my second question has to do with your sales force. I understand that austerity measures in Europe don't exactly help as you try to expand into Europe. But I suspect you're doing something unique with the sales force there. Can you sort of give us an update on those efforts?

Kieran T. Gallahue

I'm not really sure what you're referring to on unique. I think what we're doing is we've been adjusting that sales force over time, just our entire go-to-market strategy over the last year, to be able to, number one, be able to recognize where we're at in our maturity, if you will, by product line and by the attractiveness to those markets. So a good example of that is we felt in the Procedural Solutions side of the business that there was significant opportunity in the U.K., as an example, and that we felt by getting direct presence there, that we could better leverage our abilities and the opportunities in that market, which is why we forward integrated with U.K. Medical. There are other product lines in other countries where we might have had been basically underscale, as an example, in a market or in a certain market segment that we didn't think the best way in the world to go to market was to be direct. In those cases, we've teamed up with partners, distribution partners, et cetera. So we've been modifying and very thoughtfully going through country by country, product line by product line and making determinations about how to optimize the best distribution policy, both for penetration and for profitability over time. So it -- then maybe that's what you're referring to. And yes, it's been a very active year, and the team's been doing a heck of a job in centering itself.

Jim Mazzola

Thanks for the questions, everyone. Sorry, we're a couple of minutes over. Bill [ph] and I are certainly available after the call to answer any follow-ups that you have. And Kieran, any closing comments you might have?

Kieran T. Gallahue

No, I just want to thank everybody again for -- certainly for your patience over the course of the last 6 months while we've become current in our regulatory filings. Certainly, what you've seen from that is that there were immaterial effects. But, quite frankly, there was a lot of effort that was put into it. So I'd like to add my thanks to Jim's earlier to certain key individuals for their above-and-beyond efforts during that time period and, of course, as always, thank CareFusion team members throughout the globe for their continued efforts in supporting patient safety and improving the businesses with each of our customers. So thanks, everybody. We look forward to updating you as we go through the year.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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