Labcorp Holdings Inc. (LH) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q4 2013 Laboratory Corporation of America Holdings Earnings Conference Call. My name is Glenn, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. David King, Chairman and Chief Executive Officer. Please proceed, Mr. King.

Thank you, Glenn. Good morning, and welcome to LabCorp's Fourth Quarter 2013 Conference Call. Joining me today from LabCorp are Brad Hayes, Executive Vice President and Chief Financial Officer; Ed Dodson, Senior Vice President and Chief Accounting Officer; Adam Feinstein, Senior Vice President, Corporate Development and Strategy; and Steve Anderson, Vice President, Investor Relations. This morning, we will discuss our fourth quarter and full year 2013 financial results, update 2014 guidance, highlight our progress on our five pillar strategy and provide answers to several frequently asked questions. I'd now like to turn the call over to Steve Anderson who has a few comments before we begin.

Before we get started, I would like to point out that there will be a replay of this conference call available via telephone and Internet. Please refer to today's press release for replay information. This morning, the company filed a Form 8-K that included additional information on our business and operations. This information is also available on our website. Analysts and investors are directed to this 8-K and our website to review this supplemental information. Additionally, we refer you to today's press release, which is available on our website, for a reconciliation of non-GAAP financial measures discussed during today's call to GAAP. These non-GAAP measures include adjusted EPS excluding amortization, free cash flow and adjusted operating income. I would also like to point out that we are making forward-looking statements during this conference call. These forward-looking statements include, among others, statements about our expected financial results, the implementation of our business strategy and the ongoing benefits from acquisitions. These statements are based upon current expectations and are subject to change based upon various factors that could affect the company's financial results. Some of these factors are set forth in detail in our 2012 10-K and subsequent filings. The company has no obligation to provide any updates to these forward-looking statements, even if our expectations change. Now Brad Hayes will review our financial results.

Thank you, Steve. On today's call, I will review 4 key measures of our financial performance: Cash flow, revenue growth, margin and liquidity. I'll also update our 2014 guidance. First, cash flow. Our cash flow continues to be solid. Free cash flow for the 12 months ended December 31, 2013, was $616.5 million. DSO at the end of December was 49 days, which was down 1 day sequentially. In addition to our run rate bad debt expense during the fourth quarter, we increased our allowance for doubtful accounts by $5 million due to an increase in patient responsibility. For the year, our bad debt expense was 4.4% of revenue compared with 4.3% in 2012. As we've previously discussed, our 2014 guidance assumes a slight increase in our bad debt rate. Second, revenue growth. Revenue increased 2.3% year-over-year in the fourth quarter. During the quarter, total company volume increased 5%. Organic volume increased approximately 2% year-over-year. Revenue per requisition was flat sequentially but decreased 2.6% year-over-year. It is important to note that managed care revenue per requisition increased year-over-year and was flat sequentially. Third, margin. For the fourth quarter, our adjusted operating income margin was 15.2% compared to 17.2% in the fourth quarter of 2012. During the fourth quarter, government payment reductions and molecular pathology payment issues reduced our year-over-year margins by approximately 170 basis points, reduced year-over-year revenue per requisition by approximately 2% and reduced year-over-year operating cash flow by more than $30 million. Also, growth in our toxicology business reduced year-over-year revenue per requisition by approximately 2% in the fourth quarter. Fourth, liquidity. We remain well-capitalized. At the end of December, we had cash of $404 million and no borrowings outstanding under our $1 billion credit facility. During the fourth quarter, we repurchased $251.6 million of stock, representing 2.5 million shares. For the full year of 2013, the company repurchased approximately $1 billion of stock representing 10.4 million shares. At the end of December, approximately $1.1 billion of repurchased authorization remained under our share repurchase program. Our share repurchase activity reflects our continued disciplined capital allocation program and commitment to return capital to our shareholders. This morning, we updated our 2014 financial guidance. We expect revenue growth of approximately 2%; adjusted EPS, excluding amortization, of $6.35 to $6.65; operating cash flow of approximately $780 million to $820 million; and capital expenditures of approximately $185 million to $205 million. The guidance excludes the impact of any share repurchase activity after December 31, 2013. There's already been an unusual amount of inclement weather in the first quarter of 2014. Our guidance does not take into account business losses due to weather. Consistent with our past practice, we will comment on the impact of weather to our performance during our earnings releases. I will now turn the call over to Dave.

Thank you, Brad. We are pleased with our fourth quarter results. During the quarter, we grew volume 5% on organic volume by approximately 2% and we continue to execute well on our key growth initiatives. Although our nominal revenue per requisition was down 2.6% year-over-year, managed care revenue per requisition increased year-over-year and was flat versus last quarter. The drag on year-over-year revenue per requisition was due to government reimbursement reductions, molecular pathology payment issues and test mix. We repurchased $251.6 million of our shares, demonstrating our commitment to our stated capital allocation objective to return capital to shareholders. We are also pleased with our full year 2013 results, particularly when we take into account the significant government payment reductions and the unexpected reimbursement issues related to new molecular pathology codes that we faced through the year. As a reminder, our reported results for the year were negatively impacted by Medicare payment reductions and molecular pathology payment issues that lowered revenue by approximately $100 million and adjusted EPS, excluding amortization, by $0.68. Finally, during 2013, we repurchased approximately $1 billion of our stock representing 10.4 million shares. I would now like to update our progress on each aspect of our five-pillar strategy. The first pillar of our strategy is that we deploy capital to investments that enhance our business and return capital to shareholders. I have just reviewed our share repurchase activity during the fourth quarter and the year. Our share repurchase to date brings us closer to our target leverage ratio of 2.5x debt to EBITDA. In addition, our acquisition pipeline remains attractive and we believe that components of health care reform will drive consolidation in our industry. Thus, acquisition should provide an attractive way to expand our test menu and geographic footprint for the next several years. We will maintain a disciplined approach to valuation as we look for the best strategic opportunities. The second pillar of our strategy is to enhance our IT capabilities to improve the physician and patient experience. We continue to enhance our Beacon analytics platform for managing practice and population health data as we add new clients and plans to the platform. This platform helps clients unify the multiple components of population health management, providing primary care physicians with complete access to their patients' health care picture, rules for monitoring gaps and care and reporting that addresses more than 600 quality measures. Beacon Analytics helps providers reduce expenses, improve outcomes and enhance patient satisfaction. The robust rules engine is highly-customizable and provides compliance with meaningful use requirements, as well as ACO, Joint Commission on accreditation of health care organizations, and physician quality reporting system reporting requirements. These industry-leading data-driven services position LabCorp as a trusted partner to health care stakeholders, providing knowledge to optimize decision-making, improve health outcomes and reduce treatment costs. We also continue to improve our tools to assist physicians and patients in understanding test results and optimizing decision-making. We introduced a new report format for Pap results, which provides a result history chart and improves clarity of results delivery. In addition, we now have more than 400,000 registrations on our patient portal and this figure continues to grow every day. Looking ahead, we will expand the conditions covered by our comprehensive clinical reports that integrate and track test results for at-risk patients. We will continue help customers analyze their population health and clinical practice data with new tools for hospitals, physician practices and ACOs, supplemented with insights derived from our extensive patient database. We are working with clients to use our data to benchmark ordering patterns and to determine preclinical markers in specific diseases. Insights gained from these efforts help payors and physicians better manage health care expenses and patient outcomes. The third pillar of our strategy is to continue to improve efficiency to offer the most compelling value in laboratory services. The second installation of our Propel robot is underway at our major laboratory in Tampa. Propel has begun to drive expense reductions, increase throughput and accuracy and enhance specimen management at our Burlington lab. We continue to consolidate facilities into our new Phoenix campus and we are now processing more than 23,000 specimens per day at this state-of-the-art facility. We have continued the installation of our new automated chemistry platform and upgrades have now been completed in our Burlington, Phoenix, San Diego and Seattle labs. Our Raritan, New Jersey lab will be converted later this quarter. These instruments, enabled by advanced software systems, are expected to increase testing throughput and reduce labor and supply expenses. Finally, as part of our ongoing commitment to efficiency, we have begun a comprehensive enterprise-wide review of our cost structure. The fourth pillar of our strategy is to continue scientific innovation at reasonable and appropriate pricing. We introduced new tests and collaborate with leading companies and academic institutions to provide our physicians and patients with the most scientifically-advanced testing in our industry. We launched 152 new tests in 2013, many of which we expect to drive growth in our genomic and oncology testing businesses. This reflects our commitment to offer products and services on the cutting-edge of science, as well as our strategy to develop real revenue growth opportunities. One such growth opportunity relates to our recent entry into the sizable bracket testing market, which is composed of a suite of test for the assessment of breast cancer risk that the payor community values and reimburses. Our bracket test menu now includes a comprehensive panel of BRCA 1 and 2 complete gene sequence analysis and deletion duplication testing, targeted analysis test for other family members once a mutation is identified and a panel for mutations prevalent among the Ashkenazi Jewish population. Our BRCA testing capabilities and services give physicians and patients powerful tools to better comprehend and predict breast cancer risk. In combination with our care coordination pre-authorization service, LabCorp offers an end-to-end program that includes compliance with insurance requirements, comprehensive testing and expert interpretation from our license directors and a team of 122 Board-certified genetic counselors and 9 medical geneticists. We expanded our next-generation sequencing test menu by launching our first multi-gene oncology panel. The intelligent assay provides an assessment of targetable mutations with a panel profile of 50 cancer genes known to be involved in the development, progression and treatment of cancers. IntelliGEN will be useful tool to multiple clinical settings, including when guideline-recommended biomarker evaluations yield no targeted therapeutic option, when relapse or disease progression occurs or when a tumor is poorly differentiated and have a uncertain origin. We continue to expand our oncology offerings to enhance our women's health initiatives. We recently lost the Prosigna Breast Cancer Prognostic Gene Signature Assay, an FDA-cleared assay developed by NanoString Technologies, Inc. This test enters a large existing market and is routinely by the payor community. Studies showed that Prosigna is able to better categorize high-risk patients, providing more prognostic clarity than other predictive breast cancer assays. The fifth pillar of our strategy is the development of knowledge services. LabCorp recently performed a comprehensive retrospective study involving over 55,000 patients comparing the treatment of patients enrolled in our innovative chronic kidney disease management program with those patients diagnosed with CKD who were not in the program. The study showed that patients who were enrolled in LabCorp's CKD program showed an approximate 10 percentage points increase in compliance with guideline-recommended testing, meaning that their physicians were more closely monitoring their disease state and progression. The study concluded that the use of a laboratory-based point-of-care CKD clinical decision support program is associated with increased compliance with guideline-recommended disease monitoring, particularly among primary care physicians. LabCorp leads the industry in the development of decision-support tools for kidney stones, CKD and coagulation, as well as for cardiovascular risk assessment. These tools are an important differentiator and we will continue to develop them and integrate them into the fifth pillar of our strategy. We have also begun work with United Healthcare to implement BeaconLBS across its physician and patient base in Florida. We remain on schedule to launch the program in the latter half of 2014 and we are excited about the valuable services that BeaconLBS will provide physicians, patients and payors. Health care reform is upon us and delivery systems continues to change. The critical components of success will be quality, efficiency, scale and a central role in improving patient outcomes. LabCorp is uniquely-positioned to achieve these goals in the years to come. Now, Steve Anderson will review anticipated questions and our specific answers to those questions.

Thank you, Dave. Can you elaborate on LabCorp's capital allocation policy? As we have stated, we are committed to achieving a 2.5x debt-to-EBITDA ratio and we have taken steps toward this goal over the last year. Based on our capital allocation history, we target half of our free cash flow for acquisitions and half for share repurchase. In the absence of a large acquisition over the next year, we would anticipate using additional leverage to repurchase shares. We have a strong history of returning capital to our shareholders. Over the last decade, we have repurchased $5.4 billion of our stock, representing 76.9 million shares, at a price of approximately $71. How big of an opportunity is the recently-released Alberta RFP? The size of this opportunity is approximately $200 million annually and the RFP is for a sole-source private provider. DynaLIFE is currently the sole-source private provider in Alberta and we are a minority partner in this business. The performance of this strength venture is captured on the equity method income line item on our P&L and is not consolidated into a revenue line. Can you remind us of how drugs of abuse volume trended during the year? In the fourth quarter, our drugs of abuse volume increased approximately 15% year-over-year. This compares to a year-over-year increase of 14% in Q3 of 2013, 10.6% in Q2 of 2013, 10.2% in Q1 of 2013. We also delivered strong year-over-year growth this quarter in our wellness and pain management businesses, which fall within our occupational testing services operation. We believe wellness and pain management testing will provide a great growth opportunity for LabCorp over the next several years. Now I'd like to turn the call back over to Dave.

Thank you, Steve. And thank you very much for listening. We are now ready to take your questions.

[Operator Instructions] And your first question comes from the line of Bob Willoughby with Bank of America.

Dave, has anything changed since you gave your preliminary guidance of 6 54 back in December? What -- and into the positive or negative on that front?

Bob, nothing has changed to the positive or negative in terms of how we think about the guidance. Obviously, we provide a range because there's a range of outcomes within the guidance. I guess, the one factor I would point to that we know is different is, as Brad mentioned, we have had a pretty significant amount of weather in the first quarter, which is going to have an impact. But maybe if I just can expand a little bit on the thrust to your question, there are some things that are not included in the guidance and that would be, as we've mentioned, share repurchase. The second thing would be improvement in test mix, so specifically, there's nothing material in the guidance for growth in bracket testing, allergy or some of our other new tests. The guidance assumes that the MoPath situation remains the same going forward. So if we start getting paid for MoPath by some of the payors, which we're optimistic that we will, and, obviously, if we were to receive retro payments for what we did not get paid for in 2013, none of that is included in the guidance. The guidance also does not include any future acquisitions and the guidance does not include any significant expense reduction activity. On the other side, the guidance also does not include whatever may occur as a result of congress' decision to round the SGR fix. I mentioned weather and the guidance doesn't include any potential disruption if, in fact, ICD-10 is implemented in October. So hopefully, that gives you a good sense of how we're thinking about the guidance today and how it looks versus December.

But I guess, Dave, you have stated goals of half the cash flow going into share repurchases, why wouldn't it assume $400 million in buybacks at a bare minimum? And we know you've done some deals in the first quarter. Covance kind of spoke to one of them. Does the guidance contemplate activity in the first quarter as yet?

The Covance deal is not going to be material from a revenue or an earnings perspective. It's a strategic deal, it's not a -- but it's not a large deal. And the reason that we don't incorporate share repurchases in the guidance is that we have never incorporated share repurchase in the guidance. And so it just -- that's been our long-standing way of approaching guidance and we felt that the change at this year would, number one, assume that you're going to do that amount of share repurchase, which could inflate the number that we put out; and two, just be a major change in the way we think about how we guide.

Okay. But it just seems, Dave, you've got a stated rule but then did not put it in. There's a bit of disconnect there. But, okay, that's the policy, I guess, going forward or what it's been. Any update on the CFO search?

We continue to speak to candidates. I feel confident that we will -- and we have terrific candidates, by the way. And I feel confident that within this upcoming quarter, we will have a candidate identified and in place and start the transition.

[Operator Instructions] And your next question comes from the line of Bill Bonello with Craig-Hallum.

As we look at sort of longer term here and think about how you might position for the future, Dave, just 2 questions on that. First of all, on the cost side. Can you give us a sense, I mean, is there on opportunity here in this environment to maybe streamline the infrastructure and substantially reduce the number of labs that you have, maybe even the number of Patient Service Centers, phlebotomists and couriers? I don't mean just head -- little headcount reductions, but is there something on a more significant scale that you might be able to do here? And then I'll have a follow-up.

Bill, obviously given the environment and as I think you know, we always had been attentive to how we can reduce cost by incremental amounts, $20 million, $30 million a year and I think we've done that very consistently. I think, given the environment, we're going to look at whether there are bigger cost opportunities. And that would include lab infrastructure, that would include patient service centers, that would include G&A and the corporate infrastructure. So I don't think we're ready to talk about scale or numbers at this point but we are looking at that. And if there are significant opportunities, we will tell you what they are and we'll do the very best we can to quantify them as soon as they become more certain.

Okay. That's helpful. And then the second piece is just sort of on the price/business mix side of the equation. It seems like for the last 5 years or so, this industry, the large players had pretty much been price-takers. And I know you have no choice with the government. But is there on opportunity here to sort of look at your customer base and maybe walk away from some less profitable payors, some less profitable physician practices, some less profitable regions? Is that a process you're going to go through to try and really determine where you're getting marginal profitability and where the return isn't so great?

Yes, it's a great question. And I think I'd highlight a couple of things. I mean, first of all, as we mentioned, year-over-year, managed care pricing was up and quarter-over-quarter sequentially, it was flat. So I think we've done an excellent job in balancing the managed-care plans desire for price relief against the fundamental economics of our business. And also I think of demonstrating to them that in a high-fixed cost business continually looking for price decreases, is going to have an impact on the service that their patients are going to receive. And by that, I don't mean the quality of the testing but I mean the number of Patient Service Centers, the wait times, all of those things that they focus on. So I think we've done a good job in terms of our nongovernment pricing. At the same time, we have to look at every relationship and, particularly, some of our smaller relationships and determine whether there's enough value in continuing to provide those services to justify the cost that we're putting into. And we do that regularly and we will continue to do it. And if we find business that isn't profitable or that is absorbing more costs than we're gaining value from it, we have in the past and won't hesitate in the future, to move away from that business.

And your next question come from the line of Gary Lieberman with Wells Fargo.

It seems like when you were first talking about the pressure from government reimbursement, at least to me, it seemed like you were more optimistic about receiving the revenue and maybe receiving it in more a timely fashion. Is that accurate, or can you maybe characterize kind of what you're thinking is now in terms of eventually getting that?

Well, there's 2 aspects of it. As you know, Gary, the sequestration and the SGR reduction and the various technical extenders that accounted for the $55 million last year are not coming back and we're not going to get those, so those are just -- they're in the run rate now but it is important to note that, that -- when you look at the year-over-year comparison and you say why is the price down 2.6%, well, one of the reasons is, last year, we were being paid at a 1% higher rate by the government, so that is not insignificant. As to the MoPath, yes, I think we were more optimistic originally that the payors, TRICARE and some of these Medicaid plans, would be more reasonable in the way that they approached reimbursement. Quite frankly, it's still a mystery to me why tests that are medical standard of care that have been paid for, for years are suddenly on lists of tests that are not going to be paid for. And it's harmful to patients. It ultimately would be harmful to physicians who are going to be ordering standard-of-care testing that's not going to be delivered and exposing them to potential malpractice liability. So I was fairly optimistic all throughout last year that we would get paid fairly promptly. I still think we will get paid in time. And if we don't, then we'll take steps to make sure that we're not doing $40-plus million of free testing in the future. But this has been a long and frustrating and, my view, unreasonable process on the payor side. And we either got to get paid or we got to stop doing the testing.

And so I take that to mean, so you haven't reached the point yet where you stop doing some of the testing that you've pointed out in the past that you might?

I'm not going to talk specifically about that. I'm just going to repeat that we're either going to get paid or we're going to stop doing the testing, or the patients are going to start getting billed for it. And you may have seen the article that came out yesterday in Stars and Stripes, the military publication, about a colonel in the military who has cancer, who a test result from a nonmilitary facility and he got a bill for $1,100 from the laboratory because TRICARE said they didn't cover that because it was ordered at a nonmilitary facility. However, if it had been ordered at a military treatment facility, TRICARE would covered the test. Now, somebody needs to explain to me how that makes any kind a sense in terms of logic or patient care or fairness to the laboratory industry.

Okay. And then maybe just finally, in terms of accruing the revenue for those tests. Can you talk about sort of what the methodology is in terms of deciding not to accrue it versus if you were, what's the threshold for accruing it in terms of believing you're going to get paid for it?

Gary, this is Brad. We have actually -- I mean, there are many payors who are paying us. So this does not apply to every payor. So those payors are in the normal revenue recognition process. We have a list of payors that we have issues with and for each one of those payors, we do a probability assessment of how those discussions and where we think that's going to end up and that dictates the reserve we place on the revenue for that group of payors.

But Gary, it's Dave, just one further comment. Most of that you're not seeing in the revenue line and you're not seeing it in price. So again, the value -- this is high-value testing and it's not hitting the revenue line or the revenue per requisition line and that's another 1% of the year-over-year price compares.

And your next question comes from the line of Amanda Murphy with William Blair. Amanda Murphy - William Blair & Company L.L.C., Research Division: So I had a question on the volume side. It seems like utilization, underlying utilization seems to hold up pretty decently at 2%. I'm just curious how to think about that. Is that driven by -- and obviously, there's tuck-in acquisitions in there. But how should we look at underlying utilization on a per-patient basis, is that going up? And then also how to think about seasonality just given some of the higher deductible plans that are going into effect at the beginning of the year. How to think about utilization through the year going forward.

Amanda, it's Dave. So I think the seasonality, based on what we saw in 2013, is less pronounced than it has been historically in terms of there used to be -- as we move toward these high deductible plans, there used to be higher utilization, probably, in the third and fourth quarters as people got through their deductibles. And I would not say that we saw that in 2013. I mean, I think the demand was relatively steady throughout the year. From an organic volume perspective, I think organic volume was in the 2% range this quarter, it was in the 2% range last quarter. I feel pretty good about the fact that organic volume seems to be quite stable and volume generally has been strong in the last 2 quarters and strong for the year. So it's very hard to say what -- it's very hard to say how volume and demand are going to play out going forward, but we're pleased with both the reported volume growth and the organic volume growth over the last couple of quarters. Amanda Murphy - William Blair & Company L.L.C., Research Division: Got it. Okay. And just a follow-up on some of the reimbursement questions. I'm curious, since you just launched IntelliGEN and I know it's a bit early, but how are payors looking at some of these newer higher value-add tests at this point? And then also just thinking about some of the issues on the single-gene testing that you've had from a reimbursement perspective, how you're thinking about reimbursement in context of some of your R&D-type decisions for next-gen sequencing, for example.

Yes. So obviously, with tests like BRCA and the Prosigna assay, you're entering a market where there's a well-established market and where payor reimbursement is well-established. So we talk to the payors but we feel good that we're not going to have major hurdles in getting paid. With things like the next-gen sequencing, the IntelliGEN panel, those are ongoing conversations with payors about the value that you're delivering, the price relative to the price of other tests in the marketplace. The thing I like about the IntelliGEN panel is it's very targeted with 50 markers. Those markers are highly-correlated to development, progression, treatment and relapse of cancer and toward targeted therapies that will help to address the patient's cancer. So I think payors will be pleased at the idea that we are introducing a targeted and therapeutically well-correlated test into the market. And those will be the continuing discussions that we'll have to make sure that we're well-positioned for getting those tests reimbursed.

And your next question comes from the line of Kevin Ellich with Piper Jaffray.

Dave, I was just wondering if you could give us a little color as to what's behind the strong drugs abuse growth. And then how should we think about the wellness and pain management business? What's the market opportunity? What type of growth are we looking at and, I guess, what should we expect for contribution?

Well, I think the drivers behind the drugs of abuse and toxicology testing, Kevin, obviously employment growth is helping and pre-employment screening is helping. I think there's just a broader -- there certainly has been a broader use of pain management and therapeutic drug monitoring given the intense focus from the DEA and from the state governments on over-utilization and diversion of pain drugs. So those have been, I would say, the primary drivers of growth. In terms of what the total market is, it's hard to size that market. As you know, there are several laboratories that really specialize in pain management testing, in particular, and we do quite a bit of therapeutic drug monitoring. So I think it's a nice opportunity for growth over time. You'll certainly see continued demand because of, I think, physician concern over patients being compliant with pain drug regimens and the risk of diversion of pain drugs. And I think we're very well-positioned to take advantage of that market movement.

Got it. Okay. And then just wondering, you called out the $0.03 impact from weather during the quarter, just wondering if that had an impact on revenues or volumes. And if so, could you quantify that for us?

Kevin, it's Brad. Absolutely, they did. And we take -- we neutralized weather for the 2% organic growth.

Okay. So 2%. Got it. That's helpful, Brad. And then since I have you, you talked about the managed care, rev per req increasing year-over-year. Can we say -- could you quantify that?

No.

Okay. And then lastly, since your organic volume of 2% seems to be stable, Dave, what do you think the overall market's growing at this point? Is it flattish? And if so, do you -- are you taking share? And if so, which -- I guess, which categories would it be?

Kevin, I think the market is relatively flat. I think there is share moving around. We've talked about health systems acquiring physician practices and in-sourcing some share. On the other hand, there are some health systems that are getting out of the outreach lab business and so they're -- so share is definitely moving around. I think it's always -- given the general uncertainty around market size and numbers, I think it's always risky to say that you're taking share, that you're losing share. What I would say is, again, we're pleased with the volume. We're certainly growing the drugs of abuse, toxicology and pain management testing business very, very well and our operators are doing a terrific job capitalizing on the opportunity there. And organic volume is stable and it's pretty decent, so we're happy about that.

And your next question comes from the line of Tom Gallucci with FBR. Thomas Gallucci - FBR Capital Markets & Co., Research Division: I guess, I just first want to clarify, in that 2% organic number, you mentioned toxicology and drug testing being very strong, what is that area contributing to that 2%, if you could identify it?

We don't specifically break down all the bits and pieces, Tom. It is a significant contributor to the 2%. That's an accurate statement. Thomas Gallucci - FBR Capital Markets & Co., Research Division: Okay. And then I guess, I was just wondering about reform. You listed it as sort of one of the uncertainties for this year. I'm curious, is that stemming more from the pace of the roll out or are there other things, as we're sort of seeing reform evolve here, that make you a little bit more uncertain about even the longer-term potential of the Affordable Care Act?

Well, there's 2 things in terms of this year impact of reform, which we basically see little to no impact on our -- the guidance assumes little to no impact positive or negative from reform. So we all know about the rollout and I don't need to tell you that it has been bumpy. The latest numbers that I have been seeing, whether from McKinsey or Kaiser Family Foundation are that somewhere between 10% and 20% of the enrollees in the exchanges are actually new patients and that about 80% of the enrollees to the exchanges are people who previously had other types of coverage. So we just focus on that for a second. It's a relatively small increase in the number of covered patients. And many of those exchange products, even though the patients qualify for premium subsidies, have significant deductibles and the patients may or may not qualify for deductible subsidies. So you may actually have people coming from their prior insurance and having a less attractive product through the exchange. The premium may be lower but the deductibles may be higher. I'm sure you saw it in the paper yesterday, the concern expressed about the narrowing of networks through the exchanges and the number of physicians who are not going to be participating. And so I think the impact of the exchange is very much a question mark. And then the third area where I think, indisputably, there's been growth is Medicaid and Medicaid expansion. Obviously, as you know both from a price perspective and getting back in to these molecular pathology issues, those are somewhat positive, somewhat negative and very hard to quantify in the near term. So for 2014, not assuming anything material, positive or negative, from reform. In the long run, Tom, I still think reform is a positive because of all the things that we've talked about, it's going to favor the most efficient provider, it's going to favor the scale of provider, it's going to favor the provider who's able to deliver the highest quality in the most cost-effective manner. And think if you add onto that, all of the other strategic initiatives that we've been pursuing, the knowledge services, the LBS, we're going to be very, very well-positioned to capitalize on the opportunities that reform brings us. So I view it, long term, as definitely a positive for LabCorp.

And your next question comes from the line of Gary Taylor with Citigroup.

Just a couple of questions. Dave, you had mentioned, I think 2 or 3 times, that the managed care revenue per requisition was up year-over-year. I thought maybe the second time you actually quantified that but you said it quickly, so I wasn't sure if I missed that.

No, I did not quantify it quickly or slowly.

Okay. Would you be willing to, or you're not going to disclose that?

No, we're not going to -- for practical and competitive reasons, there's really no reason to disclose it, but it was up year-over-year and flat quarter-over-quarter.

Okay. On the acquisition opportunities you were talking about, you had mentioned you thought health care reform continue to drive acquisition opportunities. Just more specifically, is there any type of your historic business that you think it becomes more active? Is there any type of your historic business that you wouldn't be interested in? For example, would you still be willing to buy an AP business? And then also what are your latest thoughts on international?

There's nothing in our historic business that has become less attractive or less interesting. I actually think the right anatomic pathology assets might be more attractive now that they've been for the last couple of years just because the payment reduction to the 88305 code has reversed a lot of physician in-sourcing. Some of the business practices that we were not comfortable with had been weeded out of the marketplace by competitive pressures and others. And again, the anatomic pathology is an area in which I think scale is starting to become a greater advantage than it has been in the past. The key question there, Gary, is just valuation. We're not going to overpay for these assets and so we got to make sure that if we're looking at anatomic pathology assets, that we're looking at the right assets and that the price range is right. In terms of international, as I've said a number of times in the last couple of months, I think the international market is probably more attractive to us than it has been historically, simply because there are growth opportunities there and it helps us to diversify our revenue base away from kind of our traditional revenue base and specifically helps us to reduce the percentage of revenue that comes from the government. I will be clear that we are not contemplating some big international transaction. I think when we talk about being interested in international opportunity, there's a -- the question is can we do it in a "capital light" way. So can we do it with partners? Can we do it without big investments? Can we focus on markets where there's high population density, good transportation, good understanding of the value of diagnostics, the environment is not a politically or economically-corrupt environment? So there are some specific things we're looking for around the potential for international expansion, but it's very much something that we're thinking through.

That's very helpful. If I could just do one more. I thought the quarter looked really unique, actually, from an expense-control perspective. If we look at COGS per requisition, flat, year-over-year. I think that's the first time in 5 years that we've seen that in the model. So I know you've touched on potential new cost initiatives for 2014. But could you just talk about just kind of what your base assumptions are right now for cost of good inflation in '14 and G&A inflation in '14?

Well, the biggest driver of all of our cost inflation is people. And so we just assume -- and I'm not going to give you a specific number, but we assume kind of low single-digit wage inflation as part of our -- as part of the model. We also assumed that if we get improved test mix, that we will see an increase in supply cost trend; that's not because unit price is going up, it's because utilization and mix, if they move positively for us, obviously, there's a supply cost associated with every incremental specimen that we process. The other kind of pressure point from an expense perspective is bad debt, which we've mentioned as we're likely to see a slight increase in 2014. And you can see even in 4Q of 2013 that SG&A was flat, but that was because of the increase to bad debt, if you actually -- or the increase to the reserve. If you actually took that $5 million out of SG&A as a percentage of revenue, would have been down year-over-year. And then we have the whole uncertainty around the implementation of ICD-10 as a potential for us to drive some cost, but it also drives some uncertainty in the model. So we are very much focused on improvement of gross margin. We are very much focused on improvement of SG&A as a percentage of revenue. And I would say if you think about where we look at the cost opportunities being, those are the highest priorities.

And your next question comes from the line of Isaac Ro with Goldman Sachs.

I wanted to ask sort of a big-picture question. The pharmacies are clearly placing a greater focus on their role as wellness centers here in the U.S. and not just retail outlets and supply chain partners. So I'm wondering, if you look at that trend and see that as an opportunity, for you to expand your footprint, do partnerships or perhaps as a competitive threat, just wondering if you have a thought on the pharmacies.

Isaac, it's Dave. I think the pharmacies and, generally, the in-store clinic models are very interesting in kind of a sense of a petri dish on how we can look at the health care evolving. So you probably remember when the in-store clinic started, managed care discouraged their use, did not pay for them. And there was an evolution of -- and they were -- as a result, they had a very tough time getting off the ground. And you can probably remember multiple grocery store and pharmacy chains that started these clinics and then closed them because they weren't generating any profits from them. As managed care's view evolved to this is a way to keep people out of the emergency room, it's a way to keep people from additional doctor visits for things like earaches and infections and even things as like flu shots, kind of simple levels of care, you saw that clinics start to gain some traction in the marketplace. I guess, I think it remains to be seen whether they're going to be able to and beyond sort of routine services like sore throats, ear infections, flu shots, other types of vaccinations. I will say, historically, the amount of laboratory work done on these clinics has been very small. And I think it'll be interesting to watch the trend and see whether it is an opportunity, whether it is a threat or whether it is -- whether it continues to be very -- have very little impact on the clinical laboratory business in general.

Got you. That's helpful. And just follow-up more specifically on the BRCA opportunity. Can you maybe give us a qualitative sense of payor willingness to adopt some of the new offerings, either from yourselves or others? I'm just trying to get a sense of whether you think the market will expand as a result of some of these new entrants and better awareness of BRCA testing in general, or if it's really more of a dynamic where you think there'll be chipping away of share from the incumbents.

I think the payors are absolutely willing to pay. I will say many of them have moved to a pre-authorization model. Again, I think, that's -- with the test of that high value in that specific application, I can understand that. I do think our genetic counseling capability puts us in a unique position to be able to help payors with that pre-authorization model. So I do not see resistance to paying for BRCA assuming that the test ordering guidelines are met. In terms of the market and the potential market expansion, I mean, clearly pricing is being adjusted even as we speak because of the lack of patent protection. But if you look at just the reported quarter that Myriad just had, I mean, they had very sizable growth in tests and revenue. And so that suggests to me that as price comes down, awareness broadens, other competitors enter the marketplace, that there is an expanding market and there is great opportunity. And nobody's really even considered the international market opportunity as we think about the BRCA market broadly. So I think there's good opportunity for us there as there are for others and that we'll see good reimbursement as well.

And your next question comes from the line of Darren Lehrich with Deutsche Bank.

I just wanted to go back to the comprehensive enterprise-wide review that you referenced, Dave, a couple of times. Maybe can you just help us understand when you began that review, when you expect to be complete in terms of having a plan or not, to share with us. And specifically, if you can just talk about the kind of folks you've engaged to help with that review.

Sure. We began the review basically back in October internally. We've since evaluated some external support as well. And that I really don't have much more to say at this point other than once we have better definition around our plan, we will tell you and that will include timing and what we see as the cost opportunities and the time frame for implementation. So we have -- this is a -- I don't want people to think that we haven't been looking at cost historically, because we have. But again, given the environment and given the guidance, we felt that it was very important to really take an in-depth detailed look at all of our expenses and where there might be opportunity for us to resize them.

Okay. And so just to be clear, is this something you'd expect in the first half to have some better definition around? Is that the right time frame to be thinking about?

Yes. I think that's the right time frame.

Okay. And then if I could just ask you, Dave, just about the fee schedule and the 2015 and beyond re-basing process, I guess, I'd be curious just to get, from your perspective, what are the key priorities here? I think the original proposal was that this would be a 5-year process, but it's not clear that, that's the case in the final rule. Is there any sort of indication that they may tackle a certain number of tests per year? Can you just give us a sense for what may be your priorities, ACLA's priorities are and how you think this might be framed by CMS?

Sure. So at the outset, Darren, we all recognized that the entire health care system, including CMS, are focused on reducing the cost of care. And we've been focused on that for a long time, so it's no surprise that in thinking about potential ways to reduce the cost of care, everybody is thinking about what providers are paid. I will say that -- and we can spend a lot of time on this, which we're not going to, but I will say that if you look at what the lab industry is getting paid in real dollars versus what they have historically gotten paid in real dollars, we've -- I think a test that we are getting paid $10 in the 1990s for, we're now getting paid about $6 for and we took a huge reimbursement cut this year, $55 million, which represented almost 1% of our company revenue. And others took the same cut. So I put that in the -- to give some context to these discussions about the clinical lab fee schedules. What we are looking for at ACLA -- what we are looking for as an industry and what I am looking for, is a fair process. And I'll say it again, a fair process. The process of reimbursement adjustment that has occurred over the past several years has not been a fair process. It has not been a transparent process, it's been an arbitrary process. We are perfectly willing to engage in a fair process with CMS. And in fact, we, as an industry, have been suggesting for years, a negotiated rule making around the fee schedule with transparency and fairness because one could argue that there are some tests on the fee schedule that the technology has improved dramatically and the ability to run those tests has improved dramatically for some labs, not all labs and that there would be a reason to adjust the price. On the other hand, there are many tests on the fee schedule that didn't exist at the time that the fee schedule was initially created and those tests that are being grossly underpaid by comparison with what we receive from other payors. So we would like to have a fair process in which there is transparency and engagement by the government in reviewing this fee schedule. Now -- and I just go back to this TRICARE example again and I don't mean to dwell on it, but I go back to this TRICARE example of a test that's been paid for, for years, is suddenly not paid for and there's a scramble on the part of the government agency to explain and come up with a rationalization for why they've decided to stop paying for standard-of-care of testing that they've been paying for, for years on end. There's no transparency. It's a completely opaque decision-making process. There's no rationality to it and that's not good for everybody. It's not good for the government, it's not good for the industry, it's not good for the patients, which at the end of the day, that's who we're here for, the patients. So we've been working with Congress on a proposal to make this a fair process, to limit the number of codes that could be reduced in a given year, to make sure that there are transparent inputs and outputs from the process, to limit the percentage reductions to a particular CPT code that could be done on a given year. And this is very much a work-in-process. And I think ACLA has done a terrific job and the industry has done a terrific job coming together. The proposal is supported by AdvaMedDx and by the 21st Century Coalition and by the Clinical Lab Coalition. So the industry has done a terrific job of coming together to put a constructive and responsible proposal in front of Congress and I hope it will be met with a constructive and responsible response.

And your next question comes from the line of Ricky Goldwasser with Morgan Stanley.

Just a few follow-up questions here. So first of all, on the top line growth in the quarter, I think that you said that 2% was organic and 5% was reported. I think that implies that you've had some pretty significant tuck-in acquisitions. So can you give us some more -- some color on how many tuck-in acquisitions did you do throughout the year, because we might have missed something. And, again, to confirm that the guidance really does not include any in the future.

Ricky, it's Brad. I'll start. One thing that -- one of things to get from 5% to 2% is year-over-year, from a volume-growth perspective, weather was a tailwind. We had Sandy last year. We did have weather this year, which we called out as part of our EPS because we did not expect that in our guidance. But year-over-year, that is an easier comp. The drugs-of-abuse testing business we had an acquisition in that we are excluding there from our reported to get to our organic. And then as Dave mentioned earlier, the drugs-of-abuse testing business is a strong contributor to that 2% organic.

So when you think about what's kind of like true from acquisitions in the quarter, can you quantify that for us? Because you had easy comps, right, you have organic growth and then you have the acquisitions.

Ricky, it's Dave. Again, I just think going into every bit and piece of every number isn't particularly constructive. As Brad said, the acquisitions, particularly in the toxicology area, helped us, the weather helped us. I go back to the numbers; we had 5% reported volume growth and 2% of it was organic and we're quite pleased with that.

Okay. And then my next question would be around managed care. And we're hearing so much about the talk about move from fee-for-service to risk-sharing and outcome-based reimbursement. How does lab reimbursement fit into that?

Well, I think we need to create a distinction between what we're hearing about and what's happening in the marketplace. So everybody is talking about bundled payments and value-based reimbursement and all of these things. However, in the real world, our capitated revenue is, I believe, about 4% of total revenue, 3% of total revenue. And it is not increased; it's actually been decreasing. So as I talked to my colleagues who run health systems, they're talking about 5% or less, in the largest case maybe 10% of their business are on some kind of a bundled payment demonstration plan. That does not include, obviously, the DRG and the outpatient prospective payment and the daily rates that they're paid. So it's a very small component of the business today. And while there is great discussion about it growing over time, I think there are a lot of obstacles to this whole -- to the whole bundled payment methodology growing over time, including how do you deal with catastrophic events, how do physicians get fairly reimbursed or health systems get fairly reimbursed in a risk-sharing model where an unexpected risk occurs. So there's a lot to be worked out. And I think the notion that there's going to be this very rapid migration to some sort of bundled payment or capitated system is really misplaced. Having said that, in any kind of a fee-per-value payment system, the payments are going to be based on the value that you bring and the value that the lab brings is 3% of health care spend, driving 70% to 80% of decisions. The value that the laboratory brings is a highly cost-effective way to diagnose and treat disease. The value that LabCorp brings is high-quality, efficiency, low-cost and all of the other innovations that we have built around laboratory services like the CKD program, like decision-support, like the LBS. So I think fee-for-value is a great for LabCorp because we bring an enormous amount of value, particularly by comparison with other providers of lab services, including much higher-priced providers. So we're excited about that opportunity. And as I said earlier, in the long term, health care reform has to be a positive for us if it works at all.

And your next question comes from the line of Lisa Gill with JP Morgan. Lisa C. Gill - JP Morgan Chase & Co, Research Division: Dave, just to follow-up on one of your earlier comments around LBS and the new relationship with United in Florida. Can you maybe just talk in terms of growth drivers around BeaconLBS and what are the opportunities, number one; and number two, just remind us how you -- what the revenue model is and the profit model around that piece of business?

So we haven't talked about the revenue or the profit model and we won't in detail, except to say that the revenue model is based on -- the revenue model for BeaconLBS is based on a fee for the service provided and then a shared savings opportunity in terms of helping United to improve its laboratory spending trend. In terms of how it works and what the opportunity is, BeaconLBS provides front-end decision-support tools for key tests identified by payors that they are concerned about, typically growth in utilization trend or growth in expense trend. All of the front-end utilization tools are designed by an independent group of physicians and medical personnel. And they are implemented in accordance with the payor's desires. And the opportunity is twofold. One, it's to bring into the BeaconLBS network RVUs that are now going outside the network to higher cost providers and, often, to providers that don't have the quality standards that the payors would like. And second of all is to help manage the utilization of higher-value tests and make sure that, just like with BRCA pre-authorization, that the standards for those tests are being met. Lisa C. Gill - JP Morgan Chase & Co, Research Division: And so, Dave, when we think about that and you think about the list of drugs, do you -- I'm sorry, of lab tests, should we be thinking about this as almost like a lab formulary as being part of this outside entity making the decisions around what is the best lab test and where it should be done? And will this only be adopted via BeaconLBS clients, or do you think that this is something that's going to be more widespread adopted across the lab industry over time?

I don't think you should think of it as a formulary, because a formulary is really a structure to say you have to use -- as I understand a formulary, it's a structure that sort of says you have to use this drug and you can't use that drug. You should think of it as a decision-support tool that says if you want to use this test, these are the criteria for ordering it. And these criteria are not set by LabCorp or anybody else, they're set by this independent group and they're implemented by BeaconLBS. So I think of it more that way than a pure formulary. And the opportunity over time depends, first of all, on us getting BeaconLBS to be successful in the test market. And second of all, I'm showing that it can do the things that we're committed to, which are making sure that we're getting the highest quality, lowest cost and most -- and best practical utilization of lab testing, which I feel good that we'll be able to do. Lisa C. Gill - JP Morgan Chase & Co, Research Division: So based on those comments, so you wouldn't expect a material change in overall utilization of lab test, just potentially where they're done and the quality of the test that's done, is that the right way to think about it?

Yes, I don't -- I mean, obviously, it's too early to tell because this has only been a product that's been beta-tested. So I think it's hard to say, yes, we expect a material change in utilization. I think the idea is to make sure that utilization meets the guidelines for ordering particular tests. And I think, as it become standard in almost every area of health care except laboratory services, which is before you can utilize -- before you can do a procedure you got to make sure that it meets the guidelines -- the practice guidelines for performing that procedure. So we're at 10 past the hour here and we're going to wrap it up in the next 5 minutes. I'd like to encourage you, if your question has already been answered, please don't ask it again. And let's try to limit ourselves to things that will be new.

[Operator Instructions] And your next question comes from the line of A.J. Rice with UBS.

I just thought I might ask you about large payor contract renewals. You haven't talked about that in a while. How does 2014 shape up relative to the last year or 2?

A.J., it's Dave. We don't have any significant renewals coming up this year, so nothing to report on that front.

Okay. And if I could just slip in just real quick competition on the independents. You commented on the competition in the hospital outreach area. Anything to say about independents and regionals. I know Solstas just traded hands. Do you see more acquisition opportunities? Is the competitive environment easing in any way there?

Well, I think there's going to be acquisition opportunities. The key questions are going to be, does it complement our geographic footprint, does it complement our test menu, is the valuation reasonable? And we'll continue to look at those and try to select the right -- the ones that fit our model best.

And your next question comes from the line of Bryan Brokmeier with Maxim Group.

Dave, you mentioned in your prepared remarks that you introduced 152 new tests in 2013, which is up from 123 in 2012. And consistent with the longer-term trend of adding, increasing number of the tests each year, do you expect that the number of new tests introduced in 2014 to again increase? And what impact does the current molecular pathology payment issues have on types of tests you introduce?

I would expect the number of test introductions to be about the same. I mean, it typically is in that 125 to 150 new tests. And, look, as I think you can tell, I am extremely frustrated about the molecular pathology payment issues, but I will go back to the thing that I said before, which is we're here for the patients, we're here for the physicians, our job is to get clinically-relevant valuable tests into the market and we're not going to stop doing it because we get resistance from payors. We're going to have to figure out how to make sure that we get paid for the innovation that we're doing but we're not going to stop innovating because we're getting resistance to reimbursement.

And to follow-up, I think, it was on Gary's question on international. Canada, I believe, is about 6% of your total revenues. If you also include your U.K. forensics business and clinical trials and any other international revenues you have, what percent of revenues is international today and where would you like to see those go in 3 years?

If I had to give you an off the -- so first of all, we already do business in 40 countries, so we are an international company although we don't have sizable international presence anywhere other than in Canada. If I had to give you a round number for our international business, I would say it's probably in the range of 8% to 10% of revenue. And where would I like to see it be in 5 years? I'd like to see it be 20% of revenue. But I'm not committing that it's going to be 20% revenue. I'm saying that is where would like to see it be through taking advantage of the right opportunities and growing where the growing markets are.

And your next question comes from the line of Michael Cherny with ISI Group.

Any thoughts on tax rate for the year?

No.

And your next question comes from the line of Whit Mayo, Robert W. Baird. Whit Mayo - Robert W. Baird & Co. Incorporated, Research Division: Just 2 quick ones. Would you be willing to share the implementation costs of ICD-10? You called that out as not being in your guidance. But is that really a cost risk that you see, or is it more an operational disruption risk? And my second question is just on the investment income, the $7.2 million in the quarter, looks just a little high. Anything unusual there?

Whit, it's Dave. I'm going to let Brad do the investment income. On the ICD-10, I think there's a cost of implementation and that's in the $5 million to $10 million range. But I want you to recognize that, that cost has been an ongoing cost. We have spent an enormous amount of money already on ICD 10 so it's just the incremental cost in 2014 is in the $5 million to $10 million range. The risk that we've identified with ICD-10 is just that there's disruption; there's payor disruption, there's cash flow disruption. As you probably know, there's only 1 week, to my knowledge, there's only 1 week or 2 weeks of government payor testing for ICD-10 before implementation. And I think if we look at the health care reform implementation experience, that's enough to cause me a lot of concern about whether the government's going to be ready from their side to receive ICD-10. So that's a high-level sense of the cost and the risk.

And on the investment income line, nothing specific jumps out as a driver there.

And your next question comes from the line of Jose Haresco with JMP Securities.

Just as a follow-up on the BRCA questions. You said that they -- excuse me, payors are requiring pre-authorization. But how are you thinking, or what are you assuming about pricing over the next year or 2 given -- from private payors, given that CMS has reduced or at least looks like it's going to permanently reduce pricing for BRCA 1?

We don't -- it's too early to tell what pricing is going to be, so rather than make assumptions about it, we're going to perform some tests, get them authorized, see what pricing comes in and then we'll be able to give you a better sense.

Okay. And sort of as a follow-up, as you think about your entering of the market, do have a sense or do you have a sense that some early talks with physicians or your customers what type of specialist groups you think you're going to get the biggest traction with?

Well, I think, there's women's health. I think there's a relatively significant amount of this type of testing that's ordered from primary care. Those would probably my 2 biggest hypotheses for where the demand's going to come from.

And your final question comes from the line of Bill Bonello with Craig-Hallum.

Just -- and maybe this is sort of to sum everything up. But obviously, from everything you've talked today, Dave, you're going to be facing price pressure from CMS at the least over the next 5 years probably, whether it's in a reasonable or unreasonable fashion. So when you take that in mind, or keep that in mind, do you think beyond 2014 that you can achieve operating income growth? And if so, what's kind of an acceptable level of growth for you even knowing that there's cuts and what's key to get there?

Well, absolutely, I think, we can achieve operating income growth. And I'll give you 4 things that I think are critically important to doing that and then we really are going to finish. One, is share gain. So whether it's through acquisitions or whether it's through gaining share from hospitals or whether it's through better selling, we need to continue to gain share because it takes advantage of the scale on the business. Two, is our test mix. So the toxicology business drives great volume growth, but from a price and revenue per requisition perspective, it doesn't give us as many dollars of profit per test. So we need to continue to work, as we've talked about throughout the call, on innovation, on new tests, on things that are going to give us the opportunity to improve mix and that will help us to grow operating income. Historically, we have benefited from the price driven by mix. And if you look at this year, as we said, mix was a drag on price by 2% in the fourth quarter and by 1% for the full year. So normally, that goes the other way and we got to change that dynamic. Three, diversification of our revenue base. We've talked about international on this call. We think there are many other opportunities around our data, around our genetic counseling, to monetize things that currently are -- we are not monetizing and to use those to gain greater share and greater attraction to customers. LBS is another area in which we've talked about on this call as a way to diversify our revenue base. So that's the third point of how we're going to get back to operating income growth. And the fourth point is the expense side. And we absolutely are going to have to take some actions to reduce expenses, to rightsize the business given what we're seeing in terms of the demand and the environment. And so the answer to your question, Bill, is absolutely, we can grow operating income. We have a clear plan for how we're going to do that and we've got to execute it. And I look forward to updating you on future calls on how we're doing that.

At this time, we have no further questions. I would now turn the call over to Mr. David King for closing remarks.

Thank you very much for listening, and we appreciate your time this morning and hope you have a good day.

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