Cardinal Health, Inc. (CAH) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Cardinal Health, Inc. First Quarter Fiscal Year 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Sally Curley, Senior Vice President of Investor Relations. Ma'am, you may begin.

Thank you, Kate, and welcome to Cardinal Health's first quarter fiscal 2013 earnings conference call. Today, we will be making forward-looking statements. The matters addressed in the statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to the SEC filings and the forward-looking statements slide at the beginning of the presentation which can be found on the Investor page of our website for a description of risks and uncertainties. In addition, we will reference non-GAAP financial measures. Information about these measures is included at the end of the slides. I would also like to remind you of a few upcoming investment conferences and events in which we will be webcasting. Notably, our Annual Meeting of Shareholders at 8:00 a.m. local time this Friday, November 2, at our company headquarters here in Dublin, Ohio and the Credit Suisse Healthcare Conference at 8:30 a.m. local time on November 14 at the Arizona Biltmore Hotel in Phoenix. The detail of these events are or will be posted in the IR section of our website at cardinalhealth.com, so please make sure to visit the site often for updated information. We look forward to seeing you at the upcoming events. Now I'd like to turn over the call to our Chairman and CEO, Mr. George Barrett.

Thanks, Sally. Good morning, everyone, and thanks for joining us on our first quarter call today. I know that those of you on the East Coast are going through an extraordinarily difficult time and hope that your families and your homes are safe. I'll touch on this again after I cover our performance for the quarter. We're off to a solid start to our fiscal year 2013. Total revenue for the quarter was $25.9 billion, a decline of 3.4% from the prior year. As you know, we expected revenue to be down for the quarter and for the full year primarily due to the continued shift in dollars associated with the conversion of brand to generic drugs. Non-GAAP operating earnings increased by 6% to $469 million. Our non-GAAP EPS grew 11% to $0.81, up from last year's $0.73. Our Pharmaceutical segment delivered strong profit growth of 10% on a revenue decline of 4%. This revenue decline resulting from the generic conversions masked the positive sales growth from net customer wins and higher volume in Specialty Solutions. The Pharma segment realized significant margin improvement due to the robust performance under our generic programs and a result of our continued focus on customer and product mix. Medical segment revenues were up slightly versus the same period a year ago and profit declined by 6%. The profit contribution for medical was less than we expected for the period due to the impact of lower volume with existing customers, as well as the net negative year-on-year impact from our systems implementation we initiated in fiscal 2012. I'll come back to both of these subjects in a moment when I review the segments. First, the Pharmaceutical segment. Our Pharmaceutical distribution business continued its momentum coming out of fiscal year 2012. From a customer and product…

Thanks, George. Good morning, everyone. My thoughts and best wishes also go out to everyone affected by the storm. Today, I plan to cover the drivers of our Q1 performance and key financial trends, and then make a few comments on our full year outlook. I'll also discuss our recent capital deployment actions. You can refer to the slide presentation posted on our website as a guide to this discussion. With our first quarter 11% non-GAAP EPS growth, I believe we're off to a solid start to the year. Our Q1 EPS growth was driven by 6% non-GAAP operating earnings growth, favorable interest and other and a lower share count versus 2012. Gross margin dollars increased 7%, with a rate up 43 basis points. Distribution, selling and G&A expenses also rose 7%, driven by recent acquisitions which are worth about 2 percentage points of this growth, as well as an increase in IT costs, including our Medical Business Transformation, investments in certain key strategic priorities and $10 million of higher relative deferred compensation costs year-on-year, an amount that is offset in our other expense line. Our consolidated non-GAAP operating margin rate increased 16 basis points to 1.81%. Interest and other expense came in $9 million favorable compared to last year, largely driven by the changes in the value of our deferred compensation plan that I just mentioned, as well as income related to an outstanding equity investment we hold. If you look at net interest expense only, that line was about $3 million higher in Q1 of FY '13 versus last year. Our non-GAAP tax rate for the quarter was 37.8%, which is consistent with our prior year's quarter and slightly higher than our expectations. During Q1, we repurchased $200 million of shares, including the $100 million we mentioned in…

[Operator Instructions] Our first question comes from the line of John Kreger with William Blair. John Kreger - William Blair & Company L.L.C., Research Division: George, can you maybe just expand on some of your utilization and volume comments in the prepared remarks? It's -- I think in the past, you guys have talked about volumes being relatively stable versus your expectations. It sounds like, at least on the Medical side, they were a bit lighter than you thought. What about on the Pharma side, how were volumes there?

Yes, why don't we start with the Pharma first. I think Pharma volumes were largely as we expected, very low-single digit increase, and Rx is up probably about as we expected. As a commentary, the Pharmaceutical part of the Health System is, in many ways, the most efficient. And so to the extent that there is sort of movement up and down in the system, I would expect the Pharmaceutical to be a little bit more predictable, and it has been. On the Medical side, it's probably been more choppy, and again, that's the word we've used before, and I probably say again, it tends to bounce up and down. If you look at, let's say, August surveys, outpatient visits were slightly up, inpatient surgeries were down a bit. And so when we look at the quarter -- overall, in the quarter, we saw inpatient surgeries being down. Outpatient were up -- were slightly up. So I would say relative to what we were expecting, office visits, for example, in September were down. So it's been really difficult to discern a pattern, but it was a bit lighter in the Medical side than we would have anticipated. John Kreger - William Blair & Company L.L.C., Research Division: And then a quick follow-up, particularly in light of the recent consolidation announcement on the ambulatory side, how do you feel about that part of your business? How is it doing? And is it still a strategic priority for you?

Yes it remains a strategic priority for us, largely, in that, we believe that the integration of the health system is going to require patients to be able to be followed throughout the continuum of care. So we now see a much -- a more highly attempt -- a greater attempt to coordinate care as patients move from acute care into ambulatory settings or surgery settings to physician's office. And you could argue the home as well. So strategically, it remains very important to us. It was a bit of a tough quarter for us on the ambulatory side primarily in that the MBT that, that transformation referred to, which required a lot of change management issues, was probably more challenging for small office practices than you might find for major acute care customers. We're asking people to make changes and they're probably less equipped. But we do expect that our renewed attention to generating business, rather than resolving administrative issues or invoicing issues, will get us back on track. So we continue to see this as a strategic area and we're doing some interesting work to grow that business.

Our next question comes from the line of Robert Jones with Goldman Sachs.

So George, discuss the procedure volumes, one that caused the soft revenue in Medical or maybe softer-than-expected revenue in Medical? Your large acute care medical the 2 of you [ph] mentioned a lack of price inflation and they continue to talk about some pressure from the larger provider networks now on their ability to price. Are you seeing anything different on pricing? And I was wondering if maybe you could also comment on the progression of the consolidation that we're seeing at the provider -- on the provider level in Medical?

Yes, Robert, I would say that we were more surprised by some of the changes in utilization rather than in pricing. I think the pricing environment has been relatively consistent. It's competitive as we always expect. I think where we saw a bit more shift than we had modeled was just this balancing of volume and -- so that was a little bit less than we had modeled. But I would say, that was probably the more noteworthy issue for us during the period. As it relates to consolidation, I think we're going to continue to see a lot of movement in the medical space. As you know, there's sort of a large consolidation across different segments of health care. You're seeing it in the insurance world. We're seeing it in the health care provider world and certainly the Health System's world. So we'll expect to continue to see consolidation. For us, this is a familiar place. We're used to dealing with large integrated health systems. In many ways, it plays to our strength. And so not unexpected for us.

Just to follow up, just trying to understand the Medical segment guidance a little bit better in light of this quarter's results. So you guys are still expecting the double-digit profit growth. Is that because you know that specific costs there are going to fall away that will help that margin in the profit as we move forward? Or is there some expectations there around volumes picking up again? Just trying to get a better sense of the confidence in your guidance from here.

I'm not sure we're projecting a dramatic change in utilization or volume, but I think in particular, some of the issues around our first quarter where we really had to devote a lot of energy on making sure that the administratively, we were well aligned with customers on the changes. In a way, it took our attention away from driving new business, promoting the new products, driving our ambulatory settings. So we spent, for us as a business, probably more of our energy making sure the system was completely stable and that customers were being served effectively. And so I think our ability to get back to business will be very important for us. We also expect, I think, the continued growth of our preferred products will contribute to that margin expansion.

One other thing I've mentioned as we get towards second quarter and beyond, we do expect to get more benefit from the turnaround commodity prices. As I mentioned in Q1, that was a slight positive for the quarter. In fact, the commodity benefit was about $3 million benefit year-on-year. We do expect that benefit to pick up, at least in Q2 and Q3, which is the quarters that we're beginning to get some visibility in, although beyond that will still depend on how market prices fluctuate.

Our next question comes from the line of David Larsen with Leerink Swann.

The operating margin in the distribution division came in better than what I was looking for. And according to what we've done, it looks like it was a very good generic launch quarter. Can you just give a sense as to, do you agree with that and how you expect margins to trend sort of for the remainder of the year? Do you expect to be able to sustain that type of growth or was it really just a real good generic launch quarter relative to the rest of the fiscal year?

Dave, this is Jeff. I would say it was a good generic launch quarter. We had a number of, what I would say, smaller launches than what we experienced last year, but they added up to a fairly healthy number. And in fact, as I said in my prepared remarks, the total benefit from new generic launches in the quarter this year was actually slightly above last year, which is good and a little bit better than our expectations. But probably the bigger contributor over the quarter was really just our overall performance in the base generics business. We continue to work on penetration. We continue to improve our sourcing. We continue to see the benefits of the expansions we've made into retail independent and other generic sales we've been making. And we benefit from a lack of deflation. In fact, there was actually net inflation for the quarter. So I think all of those things contributed to our strong generics performance. I'm a little bit loathe to provide segment-specific guidance going forward, although I think a common theme you'll see this year is the continued strength of our overall generics portfolio. As we said when we gave guidance for the year, we do expect our overall profitability from generics to be higher in fiscal '13 than it was in fiscal '12. And we're doing -- everyone in our Pharmaceutical segment is doing what they can to ensure that performance continues not only this year, but beyond.

Great. So it sounds like it's somewhat sustainable.

Our next question comes from the line of Lisa Gill of JPMorgan. Lisa C. Gill - JP Morgan Chase & Co, Research Division: I just had an overall question on the acquisition environment, George. Can you maybe just talk about what you're seeing out in the marketplace right now? I think everyone is applauding your increase in the dividend. But as we think about the acquisition strategy, whether China or the U.S., how should we think about deployment in those areas? And what are the key areas or products that you're really looking to deploy from an acquisition perspective?

Yes, I think we've said relatively consistently that our goal is a sustainable growth model. We're doing everything we can, of course, with our existing portfolio to make sure that, that's happening, but we also recognize that an evolving system, we need to be very aware of the opportunities that might enhance that position for us to compete on the long term. And so we continue to be looking and looking very actively at opportunities to drive value for our shareholders through the right strategic acquisitions. We've highlighted areas, I think, for us that are important. We've talked about everything that grows our business and improves our mix in the retail space. We've done some things there over the past years to improve that. We've talked about how important preferred products are to us and so opportunities to look at moves that enhance our preferred product position. We're an important service provider to health care systems and we've done some small, sort of tuck-in moves to enhance our ability to serve health systems across the continuum of care. And so we've looked at areas in and around specialty, which as you probably know, covers a lot of territory depending on who you're speaking to and what specialty means, but strategically to us, this continues to be an important area and so we continue to look in there. China, of course, strategically, we believe, is an enormously important platform for us. So those are just some of the areas that we continue to look at, and we do believe that every great company has to be replenishing its portfolio, both through internal moves and stretch moves, but also now and again from external moves, and we'll continue to look for those opportunities. Lisa C. Gill - JP Morgan Chase & Co, Research Division: And so George, what do think is holding you back from making recent acquisitions? Is it price in the marketplace, I mean especially when you think about specialty, did the assets look very expensive? But is there something else? Is it not the right strategic fit? How should we think about what assets are available and what really fits into Cardinal Health?

Well, I hope you'll think of us as disciplined in the way we look at creating value for our shareholders. So we'll look at opportunities -- there are many businesses that may fall in a space that people regard as hot or exciting, but on deep examination, we might find that there's not enough value creation on a sustainable way for our shareholders. And so we look at virtually everything, but we'll take a disciplined approach to it. I think our perspective is, we want to make sure that if we acquire something, we add value to it. We're not just a financial instrument. We believe that we're a strategic health care provider and that -- service provider and that we'll want to make sure that whatever we acquire, that we bring something to the table. And so there are times where you find that, but the price may not be attractive for us and we'll just try to be very disciplined about our thinking here.

Lisa, this is Jeff. Let me expand a little bit further on the China situation, which is somewhat unique as you know. Since the original acquisition of Yong Yu almost 2 years ago now, we've actually signed 5 further, what I would describe as small-ish tuck-in acquisitions. Four of those have closed and the fifth is actually in the final approval processes and we expect to close later this year. All of these acquisitions, I would describe as relatively small. The total equity investment -- by the way, these are all majority portfolio and acquisitions as well, but the total equity investment totals under $100 million. Four of them are really part of our plans to expand geographically, to expand the number of major cities that we have physical infrastructure in. And I would say the fifth is in the category of rounding out our offering to the manufacturers, and specifically, it was buying a channel data management company that allows us to provide to the health care manufacturers much better insights into how their products are being distributed and utilized in the market. So those are the types of acquisitions that we continue to look at. We're being very selective. There's lots of assets in China but a relatively small number that we would actually consider buying, in part, because we want to make sure the cultural fit is right with our organization and they understand our focus on compliance and Western management, et cetera. But there are assets out there we continue to have good success in identifying them and we will continue to make these sort of acquisitions going forward.

Our next question comes from the line of Ross Muken with ISI Group.

So as we think about -- just going back to sort of specialty and then the growth areas have obviously been off of a low base and that sort of contrasts against what we've seen in Nuclear. I mean, in terms of your differentiated businesses there, I mean, how do you feel about how that strategy is coming together? Where are you putting more of your attention? Is it on continuing to sort of find new areas for Specialty? Is it sort of fixing some of the pieces in Nuclear that aren't working? Just trying to get a sense for where we should be focused.

So I would -- Ross, I would sort of distinguish the Specialty from the Nuclear space at the moment on as it relates to the way we're approaching it. Specialty is really a business that, for us, is just 3 years old, and so it's about building the platform, about building new tools, some of those technology-based, and about really exploring different business models that allow sort of this connection of the pharma company, the payer and the provider to connect. And we're actually having some very encouraging results there. So we've signed a number of new contracts, both on the provider side and the payer side. Of course, at the same time, we're building our specialty distribution. This probably tends to be a lower margin part of that overall mix, but I would say in general, we're actually encouraged by the growth there. We're early enough in our evolution to continue to really experiment with new models and we're doing a fair bit of that. Obviously, as I mentioned to Lisa, to the extent that we find the right opportunities externally, that sort of supercharge, that we would certainly consider it. But we're making some really good progress there. Our Nuclear situation is a bit different. We have inside the Nuclear business 2 different dynamics at work. One is our traditional legacy business which is in the cardiac imaging, which we're extremely good at, very efficient, really strong position in the market, very much a company that cardiac imaging centers depend on, but procedures have been down. So our key is about optimization there, it's about making sure we've got the right alignment, the right number of pharmacies and that we're building efficiencies. We actually invested in some technology to increase efficiency there. The second part of Nuclear business is really in the diagnostic space for oncology and neurology, and that's where PET comes into play. And while that's early and certainly a smaller business, we remain pretty excited about the evolution of what's happening in the pharma side. Certainly cracking the code on Alzheimer's has been challenging for everyone, but I think the opportunities in diagnostics around oncology and around neurology create opportunity for us.

Our next question comes from the line of Charles Rhyee with Cowen and Company.

Jeff, maybe you want to touch on the guidance a little bit. I think last quarter, you had made some comments on the segment side. On the Pharma looking for op growth, I think, in the mid-single digits. Is that still correct? And then on the med-surg side, I think in your comments you said that you still expect a benefit from the MBT here in the back half of the year, but that -- for it to be accretive, there's a little bit of stress. Does that kind of imply that we should assume op profit -- total op profit is still down year-over-year? And does that also include the impact of the med device tax?

Charles, I'm not sure I understood the second part of your question. Let me try to answer the first one and maybe you can repeat the second. I may not have just heard you properly. We didn't give specific Pharma segment profitability guidance for FY '13. We did indicate that we expected revenue to be down given the brand-to-generic conversions and the impact of the Express Scripts nonrenewal. And we also indicated that we expected a positive year-on-year contribution from our generics programs. I would say those statements are still very much intact. In fact, I'd probably say, based on Q1, we're slightly ahead of where we thought we'd be, really driven by the strength of our generics programs. So I would say, generally, our view of the Pharma segment for the rest of the year remains intact, although we're feeling increasingly bullish about where generics are coming out. But clearly, there's still lots here to go, lots of generic launches to happen or not happen, so I don't want too ahead of ourselves on that one. And Charles, maybe you can repeat your second question, please.

Yes, sure. On the Medical side, when we think about the puts and takes here with your expectations for the business transformation, how it ramps for the rest of the year versus some of the volumes, and I think the medical device tax starts ticking in next year, how should we think about overall operating profit growth or should we -- or decline relative to fiscal '12?

Now I get it. Thanks, Charles. So I would say our basic guidance for the Medical segment, which we gave in August really hasn't changed, in that, we still expect mid-single-ish digit revenue growth versus the prior year and are targeting double-digit segment profit growth versus the prior year. Those haven't changed. But some of the drivers of that have varied somewhat. For example, at that time, we did expect the Medical Business Transformation to be net slightly accretive net of the depreciation. I would say that goal now is probably a bit of a stretch and we may not be able to achieve that given the slow start we got to Q1. On the flip side, the commodity prices have moved in our favor over the past few months, particularly based -- related to latex and oil-based resins. So that will give us a bit of an offset to the shortfall on Medical Business Transformation and some pickup in the latter part of the year as I referenced earlier. Our assumptions regarding the medical device tax impact, which kicked in, in January, have remained about the same, we quantify that in the range of $13 million to $23 million. That's still the likely range, and we're working in Washington and elsewhere to try to get more clarification as to exactly how that will be applied. And our views on volumes, Q1 was a little bit lighter than we expected, particularly as it relates to procedural volumes. We would hope we would get a slight pickup from that in the last 3 quarters of the year but we're making sure that from a cost standpoint, we're ready for a range of outcomes in that regard. So those are basically the moving parts, but the basic guidance in terms of revenue and segment profit really hasn't changed.

Our next question comes from the line of John Ransom with Raymond James. John W. Ransom - Raymond James & Associates, Inc., Research Division: Just trying to understand the breakdown of volume. If you look at your Pharmaceutical distribution, would you say that your same customer volumes were up in the first quarter -- or excuse me, in the September quarter?

Honestly, that is such a hard calculation to make because of the brand-to-generic conversions. I mean, if you're looking at sales dollars, they're down, right? Just because of the sheer dynamics of the transition from branded products to generics that we're seeing. I would say, overall -- and again, keep in mind that our large retail customers, when we go brand-to-generic, may purchase a portion of their generics directly from the manufacturer, so that would impact our unit volume as well. But I would say our view of the overall industry volumes, if that's your question, is, I would say, fairly consistent with what IMS is reporting, sort of in the 2-ish percent growth range. When you cut out all that noise, that's a lot of noise, but I think our fundamental view of units is pretty consistent with IMS.

John, I'd probably add that given the distribution of our business, we probably are pretty good comparisons to the overall system. John W. Ransom - Raymond James & Associates, Inc., Research Division: Well, maybe asked another way, let's just take your non-bulk customers for a minute. If you were to look at your non-bulk customers, I mean, would you think your -- you mentioned that your revenues were up, so I assume your volumes were up and you're capturing more generics this year versus last year on the same customer non-bulk basis.

Yes, John, just to be careful, we rarely have a just bulk and non-bulk. Although, on the independent side, it is non-bulk, but in terms of our chain business, it is often a blend of bulk and non-bulk. So I just have to be just a little bit careful in using that as a barometer. I would say, our independent business -- actually all of our classes of trade, have gone reasonably well. Again, I don't know that -- and probably our generic penetration has been strong, but I don't know how best to characterize each account analysis that you're asking.

I mean, I would just summarize it, I think, generally, same-store sales when you adjust for brand-to-generic conversions and everything else, we're fairly robust with our non-bulk customers. And keep in mind that we had a significant customer win that came into effect April 1 of last year. So we're benefiting from that as well. And finally, keep in mind that our specialty volume also impacts our non-bulk rates. So all those factors helped drive that 7% increase.

Our next question comes from the line of May Zhan with Morgan Stanley.

I'm in for Ricky Goldwasser for Morgan Stanley. Can you just talk a little bit about the competitive environment, especially given the recent McKesson acquisition and just kind of give a little bit more detail there?

Well, we really have a number of competitive environments. Obviously, you mentioned the McKesson acquisition, which is an acquisition that's primarily in the office-based medical surgical supply area. We have our Nuclear business, we've got Pharmaceutical Distribution, we've got acute care. So we really, in many ways, operate in a number of competitive environments and they have their own unique characteristics. I guess as a starting point, I don't know that I would describe any noteworthy change that I could offer you versus our last conversation 3 months ago on an earnings call. Each -- and I've said this before, in many of our businesses, each customer situation has its own unique competitive set. But if you ask me, could I describe an overall general trend or a trend break as it relates to our competitive environments, other than the acquisition you just mentioned which is noteworthy, it would be hard to characterize. Obviously, in the medical surgical office-based area, the McKesson acquisition is noteworthy. Obviously, we continue to evolve our strategy in the ambulatory space and sort of believe that we have a bit of a unique situation there in that our portfolio of products and services, our presence across channels, positions us somewhat uniquely to be able to serve large health systems across their continuum of care, including physicians' office. But I would not describe a major trend break today or a particular trend that I could discern.

I was just going to say, I'm just looking at what are some of the key generic launches we should focus on for the rest of the year?

We generally do not forecast or speak to specific launches in the future. There's a lot of moving parts, as you know, May, as it relates to generic launches, and much of the discussion between us and our vendor suppliers can be proprietary. So we continue to see a solid environment. As Jeff mentioned, there have been some noteworthy launches during this past few months, including Singulair and Actos, 2 of the launches. But going forward, we generally don't provide a lot of guidance on specific product launches.

Operator, I think we've got time for one more question.

Okay. Our final question comes from the line of Eric Coldwell with Baird. Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division: Largely covered a couple of quick technical ones. Bulk sales, can you give us the operating margin for the quarter?

Eric, we're trying to get out of the habit of providing the bulk and non-bulk rates on a quarterly basis for a few reasons. Number one, on a quarterly basis, they can fluctuate quite a bit, and it's not really representative of our longer-term trends. And secondly, it's not really the way we look at the business. That all said, I will say that both bulk and non-bulk rates were up in the quarter both versus last year, as well as versus the average of last year. Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division: Got it. I didn't know if you were kind of pulling back some of that data given the Express Scripts change, but I guess we'll live with that for now. It looks like you made a few acquisitions in the quarter. Can you maybe tell us specifically what they were?

Yes. The only one of any significant note was the Dik Drug acquisition that we had announced last quarter. It actually closed in Q1 and that's what really caused the increase in our guided intangible amortization for the year. As you recall, that was a regional distributor based in the Chicago area that serviced primarily retail independents. That acquisition, now that it's closed and is being integrated, going extraordinarily well, I think both from a customer standpoint as well as the employees that we've taken into the Cardinal Health family. So we're extremely happy the way that's progressed. Eric W. Coldwell - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then the last one is a little more strategic. CMS early in the month released detailed data on pharmacy acquisition costs and pharmacy revenues by payer type, subsequently pulled the data, I think it was literally within a day. But any ripple impact from that increased transparency? I'm just curious what you're thinking, and if you guys have had to kind of revisit any of your thoughts in terms of pricing or if your customers are revisiting thoughts on pricing now that all of the data became available, albeit briefly.

Right, right. Eric, this is George. We sort of said in the past that the implementation of a reimbursement mechanism like AMP, as designed, was likely to be problematic. That is, in fact, what's happened. The amount of variability in the data coming out of this made it unnavigable. So as a result, I think, this is going to take time to play out. So actually it doesn't really change our views because the transparency did not provide meaningful utilizable data. And so, as we expected, this would take some time to sort out and that the mechanism used here is probably not, at this point, going to be valid. And so that's not suggesting some kind of change for us.

That does conclude our question-and-answer session for today's conference. Ladies and gentlemen, thank you for participating in today's call. This does conclude the program, and you may all disconnect. Everyone, have a great day.