McKesson Corporation (MCK) Q4 2008 Earnings Report, Transcript and Summary

Good afternoon, and welcome to McKesson's Corporate Fiscal 2008 Fourth Quarter Conference Call. All participants are in a listen-only mode. [Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Ms. Ana Schrank, Vice President, Investor Relations. Please go ahead, Ma'am.

Thank you, Tracy. Good afternoon, and welcome to the McKesson fiscal 2008 fourth quarter conference call for the financial community. With me today are John Hammergren, McKesson's Chairman and CEO, and Jeff Campbell, our CFO. John will provide a business update and will then introduce Jeff, who will review the financial results for the quarter. After Jeff's comments, we'll open the call for your questions. We plan to end the call promptly after one hour at 6:00 P.M. Eastern Time. Before we begin, I remind listeners that during the course of this call, we'll make forward-looking statements within the meaning of the Federal Securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of McKesson. In addition to the company's periodic, current, and annual reports filed with the Securities and Exchange Commission, please refer to the text of our press release for a discussion of the risks associated with such forward-looking statements. Thanks, and here is John Hammergren.

Thank, Ana, and thanks everyone for joining us on our call today. McKesson had a great fourth quarter capping off another year of excellent financial performance. For the full year we achieved a significant milestone for the company. Our revenues grew 9%, exceeding $100 billion for the first time, a terrific way to celebrate McKesson's 175th year in the business. Earnings per diluted share from continuing operations were $3.31, excluding adjustments to the Securities Litigation reserves. That's a 15% increase from last year. Our financial performance and operating excellence provide great momentum for fiscal 2009 and we expect to deliver earnings of $3.75 to $3.90 per diluted share, which represents EPS growth of 13% to 18% from $3.31. For those of you who have followed McKesson for the past three years, you've heard us speak consistently about certain drivers in our business. They are the importance of our relationships with customers and our manufacturing partners, solid revenue growth and operational excellence which drivers margin expansion, and our portfolio approach to capital deployment made possible by our healthy balance sheet and strong cash flow. Each of these drivers contributed to our financial performance of past year and will continue to be integral to our financial performance in fiscal 2009 and beyond. For this call, I am going to take a somewhat different tact and review our performance in the context of these drivers in each of our two segments: Distribution Solutions and Technology Solutions. Beginning with Distribution Solutions, let me highlight the strength of our relationships with customers and our manufacturing partners. We take pride in the value we deliver to our customers to create long-term relationships, and I'm pleased to report that our customer relationships have never been stronger. In Distribution Solutions this year, we resigned every US pharmaceutical top 20 direct distribution customer whose contract was up for renewal, including Rite Aid, Safeway, Cigna and Costco. We have a track record of renewing our large customers because of the comprehensive service offering and excellent customer service we provide. We constantly find new ways to add value for customers, and I'm particularly pleased that we re-signed these customers while achieving the tremendous financial results reported this year. We continue to receive recognition for outstanding service. In the fourth quarter, Kinedrug [ph] named McKesson “Business Partner Of The Year.” We also were awarded the 2008 VHA Service Excellence Award recognized by VHA members and Novation’s senior leadership team for excellent service and support of VHA's member hospitals. McKesson was the only pharmaceutical wholesaler to receive this award. These awards continue a long track record for leading service. You may recall in past years, we've received similar awards from customers such as Wal-Mart, and other large retailers. We continue to maintain the industry standard for quality while focusing on reducing our expenses to ensure we have the best cost advantage. We delivered the same high degree of service to our smaller customers as well. The results are evident in the growth of our Health Mart franchise, which provides our independent pharmacy customers with a strong portfolio of programs and services to meet their dynamic needs and approve their competitive position. During the year, we added more than 500 new Health Mart franchises, bringing our total to more than 1,900 stores. Through Health Mart, independent pharmacies participate in our proprietary OneStop Generics program, which delivers great value to our customers. In fiscal 2008, we executed well on our opportunities, and as a result, sales growth for OneStop increased 19% for the quarter and 11% for the year, significantly above overall market growth and clearly demonstrating our ability to penetrate our customer base. We believe we have the industry-leading generics program and OneStop Generics has participation across a wide range of customers, including independents, regional chains and hospital group purchasing organization. With such a large and diverse base of customers, we are well-positioned to take advantage of the considerable number of branded products that will lose patent protection during the next fiscal year. Our relationships with manufacturers of both generic and branded drugs are the strongest they have ever been. We are the singe largest distributor of generics in the world, which ensures that manufacturers will have access to significant market share through their relationship with McKesson. Additionally, we have the best track record for rapid and complete customer stocking, which has made McKesson a crucial launch partner for generic manufacturers. With the evolution of our agreements with branded manufacturers, our collaborations with them continued to improve. With greater information exchange, manufacturers have more visibility to continue to service customers, and therefore can plan their production accordingly. We have more stable and predictable compensation and working capital has been decreased significantly, resulting in a positive impact on our cash flow from operations. The strength of our relationships with customers and with manufacturing partners and some very successful acquisitions have helped us achieve above market revenue growth in Distribution Solutions. In fiscal 2008, revenues grew 9% anchored by the performance of our US pharmaceutical distribution business. US pharmaceuticals has consistently grow at or slightly above the market. While our revenues moved directionally with the pharmaceutical industry revenues, our growth rate has typically been slightly higher. We have continued to convert product flow that had previously gone direct from manufacturers to customers. Our greater efficiencies have helped us continues to gain share from regional distributors and from customer warehouses, and we benefit from the success of our stronger customers. When our customers win, McKesson wins. In addition, acquisitions have enhanced our value proposition in the US pharmaceutical business. The acquisition of D&K Healthcare in fiscal 2006 demonstrated McKesson's commitment to the independent segment. D&K was a natural fit for McKesson in terms of geographic presence and their business model and customer approach greatly enhanced and expanded our opportunities for generics. The acquisition of Oncology Therapeutics Network or OTN, one of the nation's largest distributors of specialty drug products, enhanced our position in the specialty drug category of the market. OTN and McKesson's Specialty each have strong value based relationship with physicians and manufacturers based on high-quality service and technologies that align clinical outcomes with financial incentives. The integration of these two businesses has enhanced our position in one of the most fastest growing categories of drugs in the United States. Beyond US pharmaceutical, there was significant contribution to growth from other businesses within Distribution Solutions, such as McKesson Canada, which has been a strong contributor to our success for several years and McKesson Medical-Surgical, which continued to make progress this year. In fiscal 2008, growth in the Canadian Distribution business was outstanding due to new and expanded customer agreements. While focusing on the long-term customer relationships and operational excellence, McKesson Canada has been able to maintain its status as a leading distributor in Canada. Our Medical-Surgical business continues to execute well and we are benefiting from its new focus. I'm very pleased with the continuous strong performance of our Distribution Solutions business and I feel good about our momentum going into fiscal 2009. Now turning to Technology Solutions. In this segment, we have also a great track record of long-term customer relationships, which enables us to sell new products and services into our existing customer base. We continued to see growth in our base one McKesson customers, which use McKesson to address multiple needs in information technology, automation, and distribution. We've talked in the past about our great partnerships with customers such as Duke, Vanderbilt, Spartanburg, and Atlantic Health. And one of our strategic goals in Technology Solutions is to create totally integrated systems for our customers that include software solutions, automation and distribution. On this call, I want to highlight our relationship with St. Luke's Episcopal Health System in Houston, which underscores the power of over One McKesson approach. For over almost a decade, St. Luke's has been an important development partner for many McKesson solutions. Recently, they decided to implement key clinical solutions, including the purchase of 300 medication dispensing cabinets to optimize medication management and the use of technology. St. Luke's is also a customer of US Pharmaceutical Distribution and is a great example of our One McKesson approach. In Technology Solutions, our focus on innovation has kept our software offerings among the best rated in the industry. McKesson's dedication to excellence is demonstrated by our consistently high presence in class rate rankings. In the past three years, there have been approximately 20 products ranked among the class top three. Our reputation for product and service quality continues to drive strong demand for our products. Bookings were up strongly in the second half of the year, especially in medical imaging, cardiology imaging, revenue cycle outsourcing, automation and RelayHealth. While most of these sales went into our customer base, we also had sales that were very significant, displacing products from our range of competitors. In our payor business, we have renewed or extended all expiring disease management contracts in fiscal 2008, a strong validation of the value we deliver to our customers. The governors of Illinois and Pennsylvania recently publicized the value of McKesson's care management programs for Medicaid populations. The state Illinois announced that McKesson’s disease management program generated a net savings of $34 million during the program's first year. In Pennsylvania, Governor Randall announced that our access plus program, which delivers disease management services to Pennsylvania beneficiaries in 42 rural counties, as a finalist in the 2008 Innovations in American Government Awards competition. On a software side of our payor business, in fiscal 2008, we signed the two largest contracts in our history with Etna and WellPoint. As a reminder, we serve more than 85% of the payors and continue to sell these products and customers... continue to sell these customers new products and services to strengthen our relationships. One final note of positive news in technology solutions, McKesson completed the implementation of its payroll and human resources information system for the National Health Service at England and Wales, with 586 trusts live representing 1.2 million workers. In summary, Technology Solutions has achieved solid revenue growth over the past three years reflecting continued demand for our clinical and imaging solutions, our payor software and services program and our more recent RelayHealth offering. The segment has also benefited from acquisitions like Per-Se Technologies, a leading provider of financial and administrative healthcare solutions for hospitals, physicians and retail pharmacies, and Awarix, which offers a solution designed to identify and help eliminate the bottlenecks that delay treatment and extend the patient’s stay. Our long-term goal for Technology Solutions operating margin is in the low-to-mid teens. I'm pleased with the progress the team made in fiscal 2008 by expanding margin 149 basis points to 10.7%. This includes the restructuring charges that we took in the December quarter. Turning now to capital deployment, the three-year trend of our strong operating performances in distribution solutions and technology solutions produced significant cash flow from operations that strengthened our balance sheet and enabled us to pursue a more aggressive strategy for value creation. We've taken a portfolio approach to capital deployment and over the past three years, we have reshaped the organization consistently with our evolving strategy. In fiscal 2006, we have completed a total of $3.1 billion of synergistic acquisitions, many of which were small tuck-in acquisitions that enhanced our value proposition to customers in both distribution and information technology. But several others such as D&K, OTN and Per-Se were important extensions of our platforms that expanded our offerings to critical customer segments. Recently, we announced three acquisitions that are also consistent with our strategy. The largest is our proposed acquisition of McQueary Brothers Drug Company, a regional distributor to independent and regional chain pharmacies in the Midwest for approximately $190 million. We also made two smaller acquisitions in Technology Solutions, Rosebud, which expanded our materials management and surgery offerings further strengthening... strengthens our leadership role in surgical solutions. Rosebud is a highly rated product that we can also cross-sell into our existing customer base as well as to non-McKesson customers. And HTP Inc., a leading provider of revenue cycle management technology, which enhances our RelayHealth customer offering. HTP further strengthens our position as the leader in using automation and connectivity to help customers improve their financial performance by accelerating reimbursement and minimizing bad debt. Our portfolio approach to capital deployment includes share repurchases. Over the past three years, we repurchased $3.7 billion of our shares including $772 million in the past quarter. Based on our positive outlook for the business, the Board of Directors has authorized an additional $1 billion share repurchase, which brings the total authorization to $1.3 billion. We're also committed to returning capital directly to shareholders. At its last meeting, the Board approved a new policy doubling our quarterly dividend from $0.06 to $0.12 per share effective with our July dividend. This demonstrates our confidence in the business and stability of our future cash flow. In summary, the fundamentals of our business remains strong and across the full range of our business, we have not seen the impact of a slowing economy or tightening credit markets. We had strong top line growth in both segments in fiscal 2008 And while revenues, revenue growth rates have slowed from the double-digit pace of several years ago, they remain solidly positive as we enter fiscal 2009. Despite continued moderating growth in the US pharmaceutical market as projected by IMS, McKesson is strategically well positioned to deliver continued solid revenue growth in Distribution Solutions. Our customers include some of the largest pharmacy operators in the United States and Canada with a particularly strong position in the mail-order segment, which continues to be a fast-growing part of the market. We've also enhanced our position in the fastest growing sector of the market, specialty distribution. Although, the trend toward increased generic substitution has a dampening effect on revenues, it has a positive effect on our profitability. Technology Solutions continues benefit from our broad portfolio of highly rated technology and automation solution that are widely used in healthcare. Continued demand for these solutions from our large installed base gives us confidence in our ability to sustain revenue growth at the high-end of the market in this segment. We have unique offerings for the emerging physician office in consumer-directed healthcare sectors of the market. With RelayHealth, we have unmatched portfolio of clinical, financial and administrative connectivity and communications solutions for hospitals, physicians and retail pharmacies. And our payor business is well-positioned with proven softer and service solutions. In fiscal 2008, both segments of our business delivered steady balanced revenue growth and solid operating margin performance in the fourth quarter and for the full year. A strong balance sheet and operating cash flow provided resources to further the creation of shareholder value. We're executing well across the company and we have great momentum as we head into fiscal 2009. Based on solid fiscal 2008 performance and the strong fundamentals underlying our business, our earnings growth progression should continue as we expect fiscal 2009 earnings per share to be between $3.75 and $3.90. I look forward to reporting to you on our results for the first quarter. With that I will turn the call over to Jeff, and will return to address your questions when he finishes. Jeff?

Well, thank you, John, and good afternoon, everyone. As you just heard, this was a great quarter, capping of another solid year for McKesson. We exceeded our original EPS guidance for the year and carry strong momentum into fiscal 2009. We look forward to another year of double-digit profit growth driven by strong organic growth in our business. In my remarks today, I will cover both the fourth quarter and full-year results. As you’ve heard me say before, we provide our EPS guidance on an annual basis due to both seasonality and the quarter-to-quarter fluctuations that are inherent in our business. In this context, an annual look at our financial results can provide more meaningful insight into some of the key trends. And I will also comment on what these trends might mean for fiscal 2009. Let me begin by reviewing the consolidated statement of operations. We had total revenue growth in the quarter and the year of 9%, bringing our full-year revenues to $101.7 billion. Distribution Solutions revenues, which remain the primary driver of our overall revenue growth and account for 97% of total revenues, increased 9% for the year, while Technology Solutions revenue grew 33%, benefiting from the Per-Se acquisition and organic growth. Overall gross profit of $1.4 billion in the quarter and $5 billion for the year were both up 16% year-over-year. This nice leverage on our 9% revenue growth was primarily driven by the growing size of our higher gross margins in Technology Solutions segment. Moving to operating expenses, in the quarter, our total operating expenses increased 9% to $966 million, which compares to a 15% full year increase in operating expenses, excluding securities litigation credits. Our full-year operating expenses were higher primarily due to the growth in the business, the impact of our Per-Se and OTN acquisitions, $31 million of incremental FAS 123R expenses, and the charges we took in our December quarter. While we got a bit of leverage relative to the 16% growth in gross profit for the year, going forward, our operating expense leverage should accelerate as we get into the last half of our fiscal 2009 and lap the OTN acquisition. Continuing my walk down the P&L, our operating income was up 31% to $481 million for the quarter and up 17% to $1.5 billion on a full-year basis. Other income was down 35% for the quarter after being flat for the first three quarters of the year, primarily due to lower interest income. Our cash balance declined in the fourth quarter to our targeted levels, due primarily to our aggressive share repurchases and, of course, short-term interest rates have come down dramatically. Our cash is invested very conservatively, predominantly in overnight repurchase agreements secured by US Treasury or US Agency collateral, and we have very little floating rate debt. So, we are sensitive to short-term interest rate movements. I would anticipate that our fourth-quarter level of other income will be the new baseline as we get into our fiscal 2009. Interest expense of $34 million in the quarter and $142 million in the year were up 10% and 43% respectively due to the $1 billion in debt we added to finance the acquisition of Per-Se. Moving to taxes for the full year, we had a tax rate of 32.1%. This was a bit better than the future rate of 33% that we have provided as guidance for fiscal 2009, due primarily to the net positive impact of various tax settlements we reached in fiscal 2008. Diluted EPS from continuing operations was a $1.04 in the quarter versus $0.85 in the prior year, an increase of 22%. We had a strong performance in the fourth quarter on an absolute basis and relative to the guidance we provided last quarter. There was no one primary driver as almost every part of our business came in at the high end of our previous forecast. This is a great testament to our execution across all of our business and the great businesses that we are in. This is also our third consecutive year of having our march quarter EPS grow by more than 20%, a trend that we currently anticipate continuing in fiscal 2009. Our full year diluted EPS from continuing operations excluding securities litigation credits was $3.31 this year versus $2.89 of prior year, a 15% increase. To wrap up, our consolidated results, both in the quarter and the full year, our weighted average diluted shares outstanding declined primarily due to the cumulative impact of our share repurchases, including $772 million of stock repurchases in the fourth quarter, which brought our total share repurchase for the fiscal year to $1.7 billion. The sizeable fourth quarter share repurchases did not have much of an impact on our March quarter EPS but it will have a bigger impact on our fiscal 2009 earnings. Before moving on to our two segments, let me take a minute here to go over some of the aspects of our business that create fluctuations in our quarterly EPS results. As we look back on fiscal 2008, we're very pleased with our annual results and the fact that we exceeded our original annual guidance of $3.15 to $3.30 per share. Within the year, there were a number of material impacts on our quarterly earnings progression. Over the course of a full fiscal year, these factors tend to even out, but within the year they can create challenges when comparing year-over-year results on a quarterly basis. First, in Distribution Solutions, although our agreements with branded pharmaceutical manufacturers provide a higher level of annual predictability for compensation, the structures of many agreements use price increases as the determinant of compensation timing, which we can't always foresee accurately by quarter. You saw this in the material shift of price increases between our September and December quarters of fiscal 2008. Second, also in Distribution Solutions and generics, while across our entire portfolio of products we are confident of meeting or exceeding expected profitability levels on an annual basis, we cannot predict with certainty the launch timing of any specific generic molecule, which can cause quarterly fluctuations in this increasingly important component of gross profit. You saw this in the lapping challenges we had in our September and December quarters compared to our fiscal 2007 results. Third, in Technology Solutions, there are timing impacts in revenue recognition both in software and in disease management. Many of our software and software services sales required customer acceptance to complete the earnings process and our performance-based disease management contracts require validation of program performance prior to revenue recognition while related costs are expensed as incurred. These two realities can cause fluctuations quarter-over-quarter. You saw this in our June quarter results, which included $21 million of previously deferred revenue for a disease management contract. This will create a challenging comparison in our Technology segment in the June quarter of fiscal 2009. Last, as for all companies, tax is another area where we see quarterly fluctuations due to discrete adjustments that we make from time to time. While these adjustments may change our tax rate from quarter to quarter, in fiscal 2008, for example, we ranged from 27% to 34%. We believe that our annual tax rate is a better overall measure of our tax expense. So the point here is that we run the company for the long-term. On an annual basis, we feel confident of our ability to provide guidance to our investors. On a quarterly basis, however, there may be fluctuations in our earnings that we will not always be able to foresee. Let's now move on to our two segments. Distribution Solutions revenues were up 8% to $25.4 billion for the fourth quarter and up 9% to $98.7 billion for the year. US pharmaceuticals direct distribution revenues grew 14% for the quarter, primarily reflecting customer growth, the OTN acquisition and a couple of customer shifting warehouse purchases to direct distribution revenues. The flipside of this last point is reflected in our warehouse revenues, which were down 10% for the quarter. While this is primarily due to lower purchases from one of our customers due to a contract loss, it was also due to the couple of customers choosing to shift a portion of their warehouse purchases to direct store delivery, taking advantage of our great service levels and working capital management. As a result of these factors warehouse revenues were flat for the year and US direct revenues were up 12%. Overall, our revenue results demonstrate that we are growing faster than market growth rates through acquisitions, our strong customer mix and by expanding our relationships with existing customers to provide more value added offerings. Canadian revenues increased 38% for the quarter primarily due to new and expanded distribution agreements and a favorable currency impact of 20%. For the full year Canadian revenues grow 21% and included a favorable currency impact of 12%. Medical-Surgical revenues were up 9% in the fourth quarter and 6% for the full year. Gross profit for the segment was up 15% for the quarter and 10% for the year. I'd note that gross profit in the fourth quarter included a $5 million pre-tax LIFO credit compared to $26 million in the fourth quarter a year ago. For the full year, the pre-tax LIFO credit was $14 million compared to $64 million a year ago. We have now fully utilized our pharmaceutical product LIFO reserve. Distribution Solutions operating expenses were up 16% for the quarter to $597 million and 13% for the year to $2.1 billion. Operating profit was up 12% for the quarter and 6% for the year. Operating margin rate for the fourth quarter was 183 basis points, up seven basis points compared to a 176 basis points a year ago. And it was 150 basis points for the full year compared to 154 basis points a year ago. Going forward, we continue to see opportunities to get leverage in this segment and to move our margin rate up steadily within our 150 to 200 basis points target range. Excluding the $50 million year-over-year decline in LIFO credits, the core operations of our Distribution Solutions segment achieved leverage in fiscal 2008. As we've said, the acquisition of OTN also reduced our margin rate this year as we worked through OTN's acquisition. Both of these headwinds lessen in fiscal 2009, which should allow the solid fundamentals of this segment to show through in an increased margin rate. Turning now to Technology Solutions, revenues were up 19% for the quarter to $806, million reflecting the impact of revenues from Per-Se and continued strong demand for clinical software and imaging solutions. Services revenues grew 25% to $596 million in the fourth quarter and software and software systems revenues increased 9% to $164 million. Full year revenues increased 33% to almost $3 billion. Services revenues increased 46% to $2.2 billion primarily due to additional Per-Se revenues and software and software systems revenues increased 10% to $591 million. We're very pleased by our revenue mix, the service component of which is recurring and speaks volumes to the sustainability of our business prospects. We continue to see strong demand for our products and services in the quarter and have yet to see a slowdown in our customers spend. Our software deferral rate was 76.6% in the fourth quarter compared to 79.4% in the prior-year; in line with revenue growth, gross profit increased 19% for the quarter and 32% for the year. Technology Solutions operating expenses increased 4% in the quarter to $288 million, and increased 26% for the full-year to $1.1 billion. Higher expenses for the year were primarily due to the impact of Per-Se and restructuring charges that we discussed last quarter. In the quarter, Technology Solutions capitalized 22% of their R&D expenditures compared to 20% a year ago, and for the year, capitalized 18% compared to 21% a year ago. Total gross R&D spending for the full year was $393 million, up 16% for the prior year. Quarter operating profit was up 89% to $104 million and operating margin was 12.9%. Operating profit in the segment, as in Distribution Solutions, is strongest always in the fourth quarter. For the year, operating profit grew 55% to $319 million and our operating margin rose from 9.2% to 10.7%. Now on to balance sheet, on the working capital side, our receivables are up 10% from the prior year to $7.2 billion and our days sales outstanding was up to 22 [ph] days. Compared to a year ago, our inventories increased 10% to $9 billion and our payables were up 11% to $12 billion. Our day sales in inventory of 33 days and days sales in payables of 44 days were up one day from a year ago. Stepping back, if you totaled the four key operational components of our working capital, receivables, inventory, payables and deferred revenue, we have just completed our second straight year of tremendous revenue growth, almost $6 billion of growth in '07 and over $8 billion in revenue growth in '08, while investing under a $100 million each year in these operational components of working capital. This strongly demonstrates the maturity and stability of our business model. In fiscal 2008, this model resulted in operating cash flows of $1.8 billion. This now gives us the comfort to raise our cash flow guidance from prior years. In fiscal 2009, we expect the cash flow from operations to again exceed $1.5 billion. We ended the year with $1.4 billion of cash on our balance sheet within our target range of $1 billion to $1.5 billion that we think optimal to run day today operations. Capital spending was $195 million for the year higher than $126 million we spent in the prior year due to higher investments in our pharmaceutical distribution network as well as continued investments in our internal systems. Capitalized software expenditures were $161 million for the year down from $180 million we spent last year. Overall, we spent $356 million in internal investments in fiscal 2008 and expect to spend in the same general range, $350 million to $400 million in fiscal 2009. In fiscal 2008, we repurchased stock in the amount of $1.7 billion. As John said, given our strong balance sheet and expected strong cash flow from operations, the Board has authorized a new $1 billion share repurchase program bringing the total to $1.3 billion. Given the shares repurchased in fiscal 2008 and this new authorization, our fiscal 2009 EPS guidance is based on expectations of 281 million shares in our dilution calculation down from 298 million in fiscal 2008. Our gross debt-to-capital ratio of 23% remains below our long-term target, 30% to 40%. We expect to continue our portfolio approach to capital deployment creating shareholder value while making progress towards our target rate. Let me now provide a few additional comments about our fiscal 2009 earnings guidance of $3.75 to $3.90 per diluted share. Revenue growth for Distribution Solutions should be at market growth rate, adjusted for our mix of business and the acquisition of OTN, which will have a positive impact in the first half of our fiscal year. You should expect our warehouse revenues to grow slower than direct revenues as we worked through the lost contract by our customer. Technology Solutions revenue growth should be at the high-end of market revenue growth. Due to strong demand for our healthcare information solutions and a continued steady pace of software implementations, we have now completely lapped the acquisition of Per-Se Technologies. Returning to distribution solutions, we assume that branded price inflation in fiscal 2009 will moderate from fiscal 2008 levels toward levels experienced in fiscal 2006 and fiscal 2007. We expect another year of strong growth in sales and profits from generic pharmaceuticals. We do expect the second half of our fiscal year to be stronger for generic launches, which will impact quarterly comparisons. Overall, as we look at fiscal 2009, we see our core businesses growing in line with our guidance. Given our fiscal 2008 EPS of $3.31 and our guidance of $3.75 to $3.90, this means 13% to 18% growth. There are some non-operating ins and outs in our EPS in both years, but they essentially net to zero when considering the year-over-year growth. At a high level, the way we think about this is that in fiscal 2009, we have some one-time and accounting headwinds in the $0.15 incremental FAS 123R expense, LIFO credits going away and 401 (k) contributions that will now cost us... that will cost us more now that our 1980s era ESOP has run out. In aggregate, these headwinds in 2009 are similar in size and essentially offset the $0.11 in charges that we took in the December quarter of fiscal 2008, which we do include in our $3.31 earnings per share for fiscal 2008. In addition, we have a significant good guy in fiscal 2009 from the much slower share count we expect, which of course we were able to do because of the strength of our balance sheet and our portfolio approach to capital deployment. This good guy is essentially offset by the much lower interest income we expect, given lower interest rates and the lower cash balances stemming partially from the aggressive share repurchases, along with the fact that our expected tax rate is going up from the 32% in fiscal 2008 and 33% in fiscal 2009. As we see it, our fiscal 2008 results and fiscal 2009 EPS growth of 13% to 18% is reflective of the operating growth of the business. And now last to the issue of quarterly progression, we do not provide quarterly EPS guidance for all the reasons articulated in my earlier remarks around our fiscal 2008 results. That said, at this moment, our best directional estimate based on the assumptions provided and the pattern of quarterly results in fiscal 2008 is that the June quarter of fiscal 2009 will be up slightly compared to the prior year, the second quarter relatively flat with significant EPS growth in the final two quarters. In summary then, we had a solid fourth quarter in fiscal 2008, have a sustainable business model anchored by great customers and expect another year of strong earnings per share growth in fiscal 2009. Thank you, and with that I'll turn the call over to the operator. Question and Answer Question and Answer

Larry Marsh your line is open. If you would like to state your company name please

Lehman brothers.

Go ahead with your question.

Well, okay. Thanks good afternoon everyone and thanks John and Jeff for the rundown and good results. I guess, a big future question mainly for John, you talk about the opportunities in the market to take some of this book business and move it to direct as you think about customers addressing significant opportunities does that changed the profit equation for your business, what would be the catalyst for that and sort of why there is any sort of fluctuation in that trend as you think about fiscal '09?

Yes. To the point Larry, we are seeing a trend where our customers are looking for us to provide more service for their stores than we might have in the past, particularly on the warehousing side of the business. When we go to a direct model, we have more responsibility for service levels, we obviously have a bigger stake in the inventory and perform more of our customers and as a result we actually charge more for the service and make more on the service as well. So, we both have improved profitability as well as, I think, additional momentum with our customers and better engagement with our customers when we're doing direct store deliveries rather than warehouse business.

Okay. But I guess, the question is, is there a particular trend in that business where you would see a major changes as you go forward?

No. I think, it's better trend than we've seen for some time but we see it accelerating perhaps. And this is both the business that that may have done on their own around us as well as business that may be doing with us through the warehouse that would transition to a more direct store kind of delivery model from McKesson. So, we've talked about for some time, our interest in providing more and more service to our customers and I think that in addition to our strong balance sheet, our ability to manage generics, our ability to do things that our customers haven't relied on us to do in the past or increasing their reliance on McKesson as a value business partners. So, even with some of these independence that we have penetrated with OneStop Generics, they might have purchased around us their generic volume in the past and now they are buying it from McKesson. So, this more holistic approach is improving the value that we are delivering to our customers and also as a byproduct improving the profitability of the business on a marginal rate basis.

Okay. Very good. Two other quick things, John, you highlighted your continued success in renewing your key customers like you said your top 20 customers where you have renewals who are all re-signed. Do we assume those for the typical multi-year periods and are there any particular renewals that you're now anticipating this year and I’ll asked... the same question I have asked for last couple of times, do we assume CVS' fiscal 2010 renewal?

Yes. We typically don't talk about specific contracts. But in general, what you're suggesting is right Larry. We have about a third of our book of business expires every year. This are roughly usually three-year kind of a contracts and relationships. And I guess the reason that I highlighted them this quarter is not because... this year is not because they are really different than prior year. It's just that I think we do questioned occasionally by investors about the stability of the marketplace and are we worried about customer switching etcetera. And I think the best evidence to refute concerns in that area is our ability to continue to renew our business and the stability of these customer relationships. Not only are they recognizing us for our service and giving us awards and not only they have been with us for years and sometimes decades even in the most recent period and we have renewed all of those major arrangements. It's not to suggest that we won't lose a customer from time to time but what it is to suggest is that if we service our customers, we point out our value to our customers and we continue to deliver and obviously keep our pricing competitive with the marketplace, we will continue to retain those key customers going forward and we are really proud of what our [inaudible] accomplish in that area.

Okay. And just a clarification. Thank you. For Jeff, you're calling out, while you're not saying specific in quarterly guidance, some participation and slight improvement in Q1 versus last year, I guess that's versus reported $0.78 per share, just to make sure I'm hearing that correctly. And then secondly, in terms of the share repurchase, do we just assume fairly a steady progression to get down to 281 million by the end of the year or is there any estimate in terms of timing that we could see a change in share count?

Well, let me work those backwards, Larry. The share repurchase, of course, we never comment on the pace at which we will buy. It will be a function of stock prices and cash balances and interest rates and other factors still are the placeholder. I think you should assume a... you should not assume that the March quarter registered represents a new standard. I'd say that was an unusual quarter driven by combination of stock price and our interest rates. In terms of my comments about the quarterly progression, I think it is a good question and I guess I would make the point – all of my comments are basis of what we reported our earnings. Of course we reported our earnings on a GAAP basis. We focus on the numbers that's continuing operations excluding Securities Litigation. So that number last June quarter was $0.77.

Very good. Thank you.

Thank you.

Our next question comes from Tom Gallucci and state your business please.

Merrill Lynch, thank you. Just two quick ones. First on branded price inflation, I guess what were the level that you were referring to a couple of fiscal years ago? Just to make sure we are on the same page there. Are you seeing anything specific that leads you to believe it would be a little less in the next year than the last year, or just being a little bit conservative there?

Tom, I think the level of price increase that is publicly available and discussed is probably different for every one of the people that participate in the pharmaceutical business. When we talk about our price increase expectations, it's really how we saw it fall into our business. And clearly there is some relativity. As whatever benchmark you want to look at is that rises, we're going to rise in some proportion, they are going to decrease, we are going to decrease in some proportion. So the purpose of our comments were really designed to give people a flavor for how bullish we were relative to price increases and to the expectations that we've delivered. In other words, let's you risk bound those expectations at least as in relation to price increases. So we look historically at how well we've done. When we plan future years and when we looked at this year, we didn't plan this year off of '08 necessarily, we really planned it more off of an '06, ‘70 kind of look back. And that was slightly less than what we experienced in '08. So I just didn't want you to think from an expectation prospective, we’ve put the pedal to the wall and then inflated '08 and kept going. As to our view on price increases this year, clearly, we think that the one we just gave you is an accurate if not slightly conservative view but each of you as investors will have to make your own decision as to where you think price increases will go and based on your own diligence. But that's what’s baked into the guidance that Jeff and I have discussed.

Okay. That's helpful, one more thing, you mentioned being sort of increasingly a launch partner for generic manufacturers. I was just sort of curious, what does that do for you particularly at a time when maybe people are expecting some more at-risk launches and how does that really help differentiate you versus your competition?

That's a good question. First of all let me just make sure that everybody knows it that in our guidance clearly is expectations around generics but we don't really build at-risk launches into our go-forward comments and so we clearly map these things out and we work aggressively with manufacturers to make sure we are their preferred partner on their go-to-market strategy and particularly in environments where they might be somewhat supply constrained. They're not going to provide everyone in the world of generic distribution access to the same amount of products. So we try to... as a value partner, give them the ability to get the product to market quickly and to do a very good job for our customers and for our manufacturing partners and getting the product out. And clearly, in periods of exclusivity there is better margin available for all of us in the channel and that clearly is a positive aspect of what we see going forward.

Thanks.

Yes.

Okay. Our next question comes from Glen Santangelo. And please state your company name.

Close enough, credit Suisse. John, I just had a quick question regarding the Healthcare IT business. Couple of weeks ago, we heard from GE saying they are seeing a slow down in hospital spending and obviously all the issues in the credit markets have been well publicized. You obviously had great results in this business Cerner did as well. Now you are forecasting a growth in the Healthcare IT to be at the upper end of the guidance range. Could you give us maybe a sense for what the disconnect might be there or what your hospital customers are telling you, kind of any sort of commentary there would be helpful?

I would say that, they probably start with several different layers Glen. First of all you have to have satisfied customers in very contemporary products. If your customers aren't happy and your products aren't what they're looking to buy and aren't working then you are out of the game to begin with. But, setting those obvious points aside, the subtleties in these are... really I think the biggers are getting bigger and the littlers are getting littlers. And the best of breed-fragmented approach to Healthcare IT isn't going to work. And a more portfolio approach, which we were able to deploy here at McKesson is a significant advantage for us. So you hear us talk about our product portfolios in our Technology Solutions segment in a very broad context. And so if hospitals aren't buying clinical systems anymore gee, maybe they are buying revenue cycle and maybe there is a physician market and a payer market and a connectivity business we can wrap around this. So, what was a less than a billion-dollar technology business several years ago is now a $3 billion technology business with multiple channels and multiple avenues to grow and I think the quality of our products, the quality of our relationships with our customers in addition to the breadth of our offering gives us a great opportunity to continue to grow the business and that's why we're bullish. And we are seeing competitive wins now from companies that we normally would not have been market our customers are saying, listen we see a go-forward strategy with you for the next decade or two. We are going to start building our platform out with you even though we might have an existing base of business with your competitors. So I think that increasingly we're seeing a transition to fewer, more significant players in the healthcare/IT space.

Okay. Thank you.

Welcome.

Our next question comes from Richard Close. State your company, please.

Yes, Jefferies & Co. Quick question here. You mentioned the 19% fourth-quarter growth in the one-stop program seems to be accelerating as we progress through the year. Can you give us some commentary around how you expect that to trend in fiscal '09?

Well, we clearly are very optimistic about our generic business as we going into '09 and there are several things that fuel our growth, Richard. One is the continued expansion of our customer base. I'll talk about the store counts at Health Mart and other kinds of contracts. We have chains that are now beginning to use our generic program that might not have used it in the past, food/drug combos, people that would have had very robust programs on their own have now turned to McKesson to provide their generic. So, this idea of improving our channel of customers is a very significant fuel to our optimism. And the second thing that's a fuel for our optimism is the fact that the generic pipeline is expanding. So, you really... it's a machine with McKesson in the middle [inaudible] customers that are expanded on one end and a bigger group of raw ingredients from the generic manufacturers coming in the other end, it's a great place to be.

So, as a follow-up to that the strength that I think you mentioned in the earlier part of fiscal '08, people switching on generics to you guys is continuing a trend that is supposed to continue throughout next year?

Yes, we certainly expect it to continue and it's... we're beginning to go beyond the typical customer segments that we competed in the past. We used to talk primarily about independence. On this call, you heard me talking about chains, you heard me talk about food/drug combos and you heard me talk about hospitals in the past. So, we do not feel constrained to design generics to independent pharmacies. We think we have a complete market opportunity in front of us and now we have a... at least a couple of year runway here of a great portfolio of new products going generic.

Okay. Thank you.

Yes.

Ricky Goldwasser. Your line is open, state your company name

UBS.

Thank you. Ricky Goldwasser – UBS: Congratulations for a great quarter.

Thank you. Ricky Goldwasser – UBS: A few questions. First of all, when you think about the quarterly progression of fiscal year '09, what is the key variable in the June quarter... in the June, September quarter? Is it branded price inflation or are there other things that--?

Well Ricky, there is... the short answer to your question is yes. It's sort of all of the above. The one thing in particular that I did mention in my remarks is that you had a particularly strong bit of revenue recognition in our FY '08 June quarter in our disease management business that dropped $21 million of revenue pretty much straight to the bottom line. So obviously that is not something that we would expect to repeat in our June quarter this year and in general we had pretty strong June and September quarters in fiscal '08 and as we look at the range of general launches and timing of branded price increases to get the guidance that I provided a little bit earlier.

But one that we know, Ricky is the guidance that we gave you on a quarterly basis is rough. That's why we don't give you EPS on a quarterly basis, but we wanted to do is provide at least directionally some sense for how we see it flowing the quarters wrong. When we think about it from a forecast perspective. We typically get the year right. We don't know absolutely when those price increases are going to come. We don't know absolutely when the generics are going to launch and things happen in our businesses like, Jeff mentioned where you have a product goal generally available and you recognize some revenue or you proved the case to the State of Illinois and you recognized income. All of those things happen in a year and then you try to compare it against the year prior that had the same variability in it and you basically compound the variability challenge that we have. So we remain very confident in the progression that we've given you and then the range we have given you for the full year. We just can't be any more specific than that. Ricky Goldwasser – UBS: So. from where you stand today and thinking about the profit drivers that you guys outlined and I think generic introductions obviously is one, generic penetration off of existing customers, new customers and branded price inflation, with some of the information that you have today sort of the information that you have today, can you [inaudible] for us in terms of the impact into fiscal year '09 versus fiscal year '08?

Yes, I mean, we clearly, inside of our business, have the ability to look at where our profit drivers are going forward. Rather than getting into that type of detail on a call like this, I think the idea that we still get a lot of our margin from our relationships with branded manufacturers and those relationships are complex and individually crafted, we get a lot of margin from our generic manufacturing partners and the throughput and the timing and the ability for our customers to buy the products from us versus other alternatives they might have. And our ability to continue to manage expenses in a very refined way are all very important drivers of operating income to us and the issue for us is to make sure that our field sales organization, the management team has remained disciplined and focused on making sure our customers see the value that we are delivering and that we compete on that value rather than competing on price. And if we were able to do that we will be able to protect the margin that we're earning and not see it erode in some unfortunate way. So that's really the way we think about the business. Manage the manufacturer relationships of the branded side, manage the channel both the customer relationships side as well as the generic manufacturer relationships side in generics, control expenses, deliver great service, to make sure your customers understand that service so that when you are in a competitive situation they provide value points in their mind to what we deliver everyday. Ricky Goldwasser – UBS: But again in fiscal '09, what for example, generic introductions had a great contribution than it did in fiscal '08?

Well, clearly generics are important to us this year, especially later in the year... Ricky Goldwasser – UBS: Are there any specific product [inaudible] later in the year?

There are whole series of products that are over the next couple of years expected to launch and we have estimates as to when we think they will and we know our estimates are wrong. Some will happen faster than we expect and some will happen later than we expect. But in aggregate, we usually do a pretty good job of managing our generic projections and our forecast in that business. So we really don't get much more specific than that, Ricky.

Okay. One last try. The Pfizer price increase from last week, was this something that you're expecting and is it incremental to the guidance you gave us today? And do you think that we might see more of these type of increases coming through before year-end?

Surely one part of that question that I'll answer is and that is that is built into the guidance that we gave you today. We clearly... everything we talked about today is based on what we know as of today. As to whether it's incremental or whether it was expected etcetera those are all questions that are probably impossible to answer unless you have somebody at Pfizer they going to tell you what they are going to tell you what they are going to do with their price increases for the rest of the year etcetera. So, I think, as I said, we have some estimates as to where we think this is going to fall out. We try to give some guidance early on about our expectations around branded price increases, buffering a little bit our '08 so that people had a perspective as what was built into our guidance and hopefully that has been of some help. Ricky Goldwasser – UBS: Okay, thank you.

You are welcome.

Robert Willoughby, your line is open. State your company please.

Bank of America Securities. John or Jeff can you speak to any remaining opportunities with OTN here? Have you captured the synergies you'd hoped to realize there or is there still work left to do there? And similarly some for McQueary what's the magnitude of cost and/or capital savings on that deal?

Well, those are both good questions. I think the best way to describe the OTN situation is on our plans, on the case that we've established and developed for and we feel comfortable with. The team is doing a great job of executing against that gauge. So we're very optimistic. On the McQueary transaction, that transaction hasn't even closed yet. So probably it's premature for us to make any comments about that. Jeff?

I'd just remind you Bob that the OTN business case which we've talked about in the past had $0.05 or $0.06 solution in fiscal '08 and another $0.05 or $0.06 in '09, that becomes accretive in FY '10. As you can imagine that's part of what drives us therefore to having a stronger back half in the '09 because we complete the integration as we go through the year.

That's great. Thank you.

Thank you.

Eric Coldwell, your line is open, please state your company name. Eric Coldwell - Robert W. Baird & Co.: Thank you. It's Robert W. Baird. And most of my strategic questions have been asked and answered, so I’ll ask a few technical ones. First up, Jeff, I think that in your past SEC documents, there was a reference to some FIN 48 accounting true-ups that might occur in fiscal '09. Can you give us an update on that and it does not appear as though there is any of that in your tax guidance or your continuing ops guidance for fiscal '09? What do you expect to see coming through there, if anything, please?

Well, you are correct that the guidance we've provided assumes a tax rate of 33%. As I mentioned when talking about the volatility of our tax rate, you always have, in many quarters, various settlements and other discrete items true-ups to tax returns, et cetera. You are correct in some of our SEC filings now under FIN 48. As with all companies, there is some disclosures around things that might happen in the future, but we certainly don't include those kinds of highly speculative things in our guidance. Eric Coldwell - Robert W. Baird & Co.: If you were to achieve a benefit in fiscal '09 from the true up or the conclusion of FIN 48 audits, would that be excluded from your continuing ops guidance and treated as a one-off event?

Well, certainly if there was something of an extraordinary nature, yes. Eric Coldwell - Robert W. Baird & Co.: Okay. Final question, congrats on getting the DEA controlled substances issue cleared up. Can you just quantify for us the impact in the quarter, if there was any kind of a drag in your P&L in the quarter related that? I missed it if it was in the press release.

No. We didn't... we really didn't have any... other than the provision we took the last quarter for the settlement, that really is the economic drag on the business, and you might also have noticed in the settlement release we made yesterday, there is a couple of distribution centers and a couple of drugs we are going to have to shift them from neighboring DCs, but that's already been operationalized and our customers will see no interruption in service from that perspective. So, we're pleased to have the DEA issue behind us, and our teams are focused on making sure that on a go-forward basis, we continue to do a great job. Eric Coldwell - Robert W. Baird & Co.: And in the guidance with the commentary on the June and September quarters, are there any incremental expenses from those? I don't know if you want to call them redundant shipments, or the shipments from the other DCs, are any of those expenses in the guidance for the first half of the year that would also lead to better performance in the second half?

Yes. The guidance is guidance, but we don't anticipate this stuff is inconsequential. It won't make any difference at all. Eric Coldwell - Robert W. Baird & Co.: Great. Let me add my congrats on a wonderful quarter. Thanks.

Thank you.

Bret Jones, your line is open. State your company name please.

Hi, Leerink Swann. Good afternoon. I had a couple of questions, hoping to circle back on the HIT business, and maybe I am reading too much into your earlier answer, John. But it sounded to me like there might be a mix shift, a noticeable mix shift between clinical systems and revenue cycle management, and I was wondering if you could speak to that a little bit as far as what the growth is in clinical systems that you're showing?

We're still... we still have a robust clinical systems business and probably led by our medical imaging business, which just has gotten phenomenal attraction and we continue to me great progress. We're now I think replacing those early generation PACS system with McKesson's more contemporary PACS system and probably saw an announcement on Canada where we're going to do some additional work up there with that business. So, I think we're really excited that we're making progress across the board, but the point that I made on revenue cycle is that many people probably define us more as a hospital healthcare clinical IT company, whereas I would like to think about us as a healthcare IT company that touches all parts of it, not just the clinical side, and revenue cycle is a spot where our customers have a particular interest. Once they have kind of accomplished their hospital clinical mission, they are focused on how can they improve their financial workflow. And in an environment where consumer is going to increasingly have responsibility for payment in the healthcare system having robust revenue cycle systems at both the physician level as well as the hospital level will be extremely important.

Okay. If I could just follow up on that real quick, as far as the core clinical systems, are you still seeming growth in that segment of the business, excluding the medical imaging component?

Oh, yes. Sure, yes, we are.

I just wanted to make sure. And then finally, I’d just like to ask about... I was just curious about how you feel about the disease management programs that you have in place and the work that is being done there and the business intelligence analytics that you are developing, do you think that they would benefit from a core claims processing system targeted towards players?

Well, we had a business like that at one point and we understand it very well, and when we integrate with other providers of those core claims processing systems and clearly we work with our customers on that front. We really have a very integrated approach whether we own all of the software underlying these approaches or not. On the DM side of the business, we are pleased with the progress we have made and I think that our teams continue to prove as I talked about in my prepared comments with these large Medicaid contracts at the state levels that we've the ability to deliver real savings, economic savings for our Medicaid customers. But as important, if you were talk to the patients enrolled in these programs, there's a tremendous boost and satisfaction at the state level, and that's why these governors are bragging about how well these programs are doing for their constituents. So, we are optimistic about the DM business and continue to pursue opportunities in these areas.

All right. Great. Thank you.

Thank you.

Our next question comes from John Ransom. Please state your company name, please.

Hi, Raymond James. Just to clarify for fiscal '09, is OTN going to be mutual accretive or slight drag or kind of immaterial at this point?

OTN was $0.05 to $0.06 diluted in '08. We expect that same level of dilution in '09, and accretive beginning in '10. So, as you can imagine, that means by the back half of fiscal '09, it will be helping us.

So maybe some of the confusion, John, was my comment about it being on its business case. So, we had originally said it was going to be dilutive, and what I was referring to is, we're on our... on the plan that we'd originally established and we're pleased with our progress.

And can you just remind me what leads to that earnings progression as adjusted to a synergy capture or is there something else going on in that business that causes that kind of earnings progression?

No, it’s just synergy capture primarily.

Okay. And I don't [inaudible] but some terrific results, especially relative to your peers this morning. Thanks.

Great. Thank you very much.

Charles Boorady, may you go ahead and announce your company name please?

Thanks, with Citi. The first question on the OTN accretion, I just wanted to be clear, that was on a GAAP basis after amortization expense, so on a cash-basis it would be less dilutive than that?

Absolutely. In fact that's all in, including one-time integration cost and everything. Charles Boorady – Citigroup: And if you excluded amortization in those integration costs, roughly what would it be adding on a cash EPS basis? If you could remind us what the amortization expense is expected to be annually?

I must confess, Charles, I don't have that number off the top of my head. Obviously, it will be much... particularly since we've got the integration cost in there in '09, if you take out those and the amortization, you'd have a very positive looking number. Charles Boorady – Citigroup: All right. And then just a question on the guidance, you said that it assumes that market growth for distribution solutions which I assume will look at IMS projections unless you have better ones to guide us forward, but on the Technology Solutions, you mentioned high-end of market revenue growth, what do you see as the range in the high-end for the market revenue growth in Tech Solutions?

Those numbers move around a little bit as well, and we're... when we are talking about this, we usually see a range of 6% to 8% kind of ranges for Tech Solutions, and so we will be at the high-end of that range, that's what really what we're referring to. Charles Boorady – Citigroup: Got it. And that's organic, or is that with the addition of acquisitions?

That's primarily organic. In our conversation today that... we're not talking about anything other than organic growth for both those businesses. Charles Boorady – Citigroup: Great. And just last question if you can, and it’s a big picture one, just your general outlook for independent pharmacies, and any data points you can give us on your Health Mart franchise? Yes, specifically and later than McQueary acquisition, are you seeing less risk from AMP to independents or anything emerging on the independent front that makes that an attractive business to be investing in right now?

Well, the independent business has always been an attractive business for us. And 175 years ago, we started really in the independent pharmacy business, now they might have been wagons back then, but it is a big part of our view of… an important aspect of the way healthcare is delivered in this country, and we are... are seeing at least that our independent customers have pretty solid base of business and growing slightly less obviously than the market because they don't have the same momentum perhaps as other players. But they are growing, and our store comps are growing in our important programs like Health Mart, and I mentioned that that's almost 2,000 stores now. So, I think we believe strongly that the independent segment is here to stay and that it is a worthy and an important segment and it is one that we need to be in and need to support and we saw great benefit from our D&K wholesale...which is… purchase, which is not that different than the McQueary Brothers. There is obviously a scale difference, but we are optimistic and feel strongly that this would be successful also, and as important that our customers will be more successful because they do business with McKesson. I think we’ve run out of time for questions today. I want to thank everybody for participating, and thank you operator for helping us on the call. We had excellent results last year. We are very excited about our unique offerings and our positions in healthcare and we think we can turn that value on an ongoing basis like we have in the past into value for our customers and value for our shareholders. Now we will complement Ana on her inaugural press release as the new Head of Investor Relations for us and I hand the call off to her to talk about our upcoming events. Ana?

Thank you, John. I have a preview of upcoming events for the financial community. On May 14, we will present at the Banc of America Healthcare Conference in Las Vegas. On May 20th, we will present at the JMP Conference in San Francisco. On June 3rd, we will present at the UBS Supply Chain Conference in New York City. We are participating in a panel discussion on healthcare information technology at Stifel, Nicolaus in Baltimore on June 10. On June 11th, we will present at Goldman Sachs in Laguna Niguel, and we will hold our annual Investor Day the morning of June 19th in New York City. Our first quarter earnings release will be in late July and our annual meeting with shareholders will be in San Francisco on July 23rd. We look forward to seeing you at one of these upcoming events. Thank you and good bye.

This concludes today's conference. Thank you for your participation.