Good afternoon, and welcome to the McKesson Corporation Quarterly Earnings Call. All participants are in a listen-only mode. Today's call is being recorded. If you have objections, you may disconnect at this time. I would now like to introduce Ms. Erin Lampert, Senior Vice President, Investor Relations.

Thank you, Vicky. Good afternoon, and welcome to the McKesson Fiscal 2015 Fourth Quarter Earnings Call. I'm joined today by John Hammergren, McKesson's Chairman and CEO; and James Beer, McKesson's Executive Vice President and Chief Financial Officer. John will first provide a business update and then James will review the financial results for the quarter and the full year. After James comments, we will 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 will make forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and uncertainties regarding 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. Finally, please note that on today's call, we will refer to certain non-GAAP financial measures in which we exclude from our GAAP financial results amortization acquisition-related intangible assets, acquisition expenses and related adjustments, certain claim and litigation reserve adjustments and LIFO-related adjustments. We believe these non-GAAP measures will provide useful information for investors. Please refer to our press release announcing fourth quarter fiscal 2015 results available on our website for a reconciliation of the non-GAAP performance measures to the GAAP financial results. Thanks and here's John Hammergren. John H. Hammergren - Chairman, President & Chief Executive Officer: Thanks, Erin, and thanks, everyone, for joining us on our call. Our fourth-quarter results wrap up another year of outstanding earnings growth led by strong performance in our Distribution Solutions segment. For the full year, revenues increased 30% to $179 billion and…

Thank you. We'll take our first question from George Hill with Deutsche Bank.

Hey. Good afternoon, guys, and thank you very much for taking the question. John or Jim, maybe just a little bit on Celesio. You guys – Celesio has put forward the plan to delist the shares. How should we think about how that accelerates whether or not investors in Europe are going to put the shares back to McKesson? And, I guess, can you guys provide us any update on when we might expect to see the shares delisted? John H. Hammergren - Chairman, President & Chief Executive Officer: Well, George, I think the objective we have is to focus on down listing now and it will probably lead or could lead to delisting in the end but our focus now is to down list. It provides certain efficiencies and it streamlines some of our reporting requirements in Europe. As to how the minority shareholders may behave as a result of this, it certainly would be speculation on my part. As you know they have a price that's already been fixed through this process that they can put their shares to us and clearly we'd have an obligation to buy them at those prices and to the extent that this accelerates their interest in doing so then we have to have the wherewithal available to us to make that transaction possible, but I guess other than that I don't have much else to say about it.

Okay. Then maybe just a quick follow up would be, you are a few more months now into your majority ownership of Celesio. Any kind of surprises or anything new the company's learned either to the positive or the negative side? Thanks. John H. Hammergren - Chairman, President & Chief Executive Officer: That's a good question. I appreciate it. I think that as you might have noticed in the quarter we announced that we were going to put for sale our Brazilian assets and I think that's an example of what McKesson typically does in these types of situations, is to look carefully at the portfolio of businesses that are represented, particularly in a large asset like Celesio, and begin to focus our efforts and our management team on those assets that we believe will deliver the best long-term value for our company and for our shareholders. And as such this portfolio modification or optimization was contemplated and announced as a result. We continue to be very encouraged by the progress we're making in the U.K., in particular in our retail strategies. Several of our other markets are performing well and we are continuing I think to make progress. You may have noticed in the conversation, I talked about the revenues being relatively flat and it's principally driven by two factors, and that is in addition to the Brazilian operation going into discontinued ops, the Norway business loss, the large hospital customer, which affected our revenues in that market, and we also continue to have some challenges in the French market as reimbursement continues to be a pressure point there. But I would say that we see signs of Germany continuing to stabilize and as I mentioned the U.K. business in particular is performing well.

Okay. I appreciate the color. Thank you.

We'll go next to Lisa Gill with JPMorgan.

Thanks very much. John, can you maybe just give us an update on the London procurement operation? At what point, what percentage of contracts have you signed, I mean just to give us an indication as to how much more work you have to do on the procurement side? John H. Hammergren - Chairman, President & Chief Executive Officer: Well, thanks for the question, Lisa. As you know, we were delayed in getting operational control of Celesio, so it delayed our ability to really begin to execute against the procurement synergies that we believe exist for us as we create a global footprint and a single relationship with these manufacturers on a global basis. And so that work was delayed. As I mentioned, we've launched that opening of that office in January. We're in the midst of our discussions with, as you might imagine, the very largest of our manufacturing partners, talking about how we can streamline the relationship between our companies and make sure that they win when we win, and those discussions are probably too early to describe relative to how far along we are or certainly percentages of completion. I would say that we're getting a terrific response, however, and the manufacturers are eager to work with a company like McKesson where we can deliver such significant value. And I think it also helps that we can sort of have a unified message globally with what we're trying to do. And clearly our footprint in the U.S., our strength with Rite Aid, our strength with Omnicare, our Health Mart capabilities, I mentioned the 1,900 banner pharmacies in Canada along with the several thousand pharmacies in Europe, both owned under the Lloyds brand as well as franchised, give us a significant footprint that manufacturers are very interested in. So I'm excited about the early progress and we'll clearly keep you guys informed as we continue to make progress.

And in fact just staying on that generic theme, I was surprised to hear in fiscal 2016 you expect generics to be below 2015. Is that because of the timing of the way Nexium came in, or am I missing something as I just look at what's expected to lose patent protection over the next 12 months? John H. Hammergren - Chairman, President & Chief Executive Officer: That's a good question. I think we actually expect more dollar value of generic launches, or I should say branded generic launches – launches of branded drugs in fiscal 2016 than there were in 2015. So you're right, there's more dollar value of product going generic. I think as we look at our portfolio of generic estimates, we frankly see the character and characteristics of some of those generics being not quite as favorable for us as the launches that took place in FY 2015. So an example would be a generic that might have many, many participants, and the value back to the supply chain as a result of that competitive activity wouldn't be as great. So I would just say there are some nuancial differences between our view of the portfolio of generics. It's not so much size-based as it is characteristic of the launches.

Okay. Great. That's helpful. Thanks, John. John H. Hammergren - Chairman, President & Chief Executive Officer: Yep.

We'll go next to Robert Jones with Goldman Sachs. Robert Patrick Jones - Goldman Sachs & Co.: Thanks for the question. You're obviously ending with a cash balance very strong, over $5 billion. It looks like the free cash flow you're calling for in fiscal 2016, about $2.4 billion. And based on your comments, both John and James, it sounds like maybe share repurchases for next year aren't quite as high a priority as M&A. I'm curious if A, there's anything specific leading to this maybe slight re-prioritization for next year? And then, John, I guess more importantly, can you share maybe what in your mind are the priorities right now as you think about where you maybe want more exposure across healthcare? John H. Hammergren - Chairman, President & Chief Executive Officer: Why don't I start with the answer and let James fill in some of the details. Clearly based on our belief at this point and what we've described as our expectations for fiscal 2016, we will have a very strong balance sheet at the end of the year. We've also talked about our priority related to maintaining investment grade. We did talk in the call about debt that's going to be extinguished this year as it comes due and in an earlier conversation we talked about the rights of the minority shareholders of Celesio. So there are some uses of capital including internal investment that James and I have described for fiscal 2016 that will consume some of this financial strength. We've also talked over time about our – in addition to the priority of remaining investment grade, the priority of high-value transactions and the ability for McKesson to execute on those transactions in a strategic way that produces very positive returns, above our cost of capital…

We'll go next to Dave Francis with RBC Capital Markets.

Hi. Good afternoon. Thanks for the question, guys. John, I'm curious. It's – I know your business is kind of second derivative in nature but with King Burwell kind of weeks away from a decision of the Supreme Court, how would you view a negative Supreme Court ruling on ACA subsidies relative to your outlook on the core U.S. Pharmaceutical and Med-Surg business? John H. Hammergren - Chairman, President & Chief Executive Officer: Well, it's been difficult for us all along to quantify ACA's effect on the demand in our businesses albeit we do believe there is a positive effect associated with people getting access to care in the fashion that ACA is providing. I would say that in my conversation with people on the Hill and at the state level around markets, I believe that the countries are going to have to position itself to take care of folks that are not able to afford their own care or to do so in a way that is an effective and efficient for the businesses and for our country. And so I think the end result or even if something were to come from the Supreme Court ruling that may put a question mark on the subsidy or support for these patients I think that there'll be a quick reaction on the Hill to try to find another way to provide low-cost quality care to patients so they don't fall through the crack and end up in the emergency rooms in America. And I would remind also to the listeners that know this well that pharmaceutical use and the appropriate use of pharmaceuticals and primary care physicians is the best way to treat patients as opposed to letting them their situations falter and having them end up in an acute situation in one of our Great American hospitals and that I think needs to be avoided. So, I think it's early to call but I think that this combined with the continued pressure from the demographic perspective and all the things that we see from a growth and opportunity perspective in our industry keeps me very excited about the future for McKesson.

That's helpful. And a quick follow up, flipping over the IT side of the business with the doc fix legislation and some of the focus there being on interoperability and what have you, what do you see as kind of the status of CommonWell and opportunities relative to both CommonWell continued move forward and revenue opportunities for Relay Health in particular as it relates to work that you guys do in there? Thanks. John H. Hammergren - Chairman, President & Chief Executive Officer: Well, thanks for the question. We are excited to be a participant in CommonWell, and as you know the CommonWell is a not-for-profit gathering of roughly 70% or so of the systems provider volumes in the country for physician offices and hospitals, and that aggregation of technology companies who have decided to come together and create a method by which we can move information between our non-native systems or between each other's competitors' systems, said another way, is a landmark opportunity for this country to actually get interoperability and exchange data in a way that's never been done before. So this opportunity for McKesson, I guess, translates into our ability to continue to support CommonWell's mission through the services that have been offered by Relay Health, and Relay is one of probably many in the future providers of capabilities to CommonWell that will facilitate this movement of patient data and financial data that'll be very helpful. So I'm quite excited about it. I'm frankly right now more excited about what it's going to do for healthcare in this country than I am necessarily for the revenues of Relay, which will follow over the years. But I think the adoption curve is going to be steep and I think people are going to benefit from CommonWell's efforts.

Thank you. John H. Hammergren - Chairman, President & Chief Executive Officer: Yep.

We'll go next to Ricky Goldwasser with Morgan Stanley. Ricky Goldwasser - Morgan Stanley & Co. LLC: Yeah, hi. Good afternoon, and congrats on a great quarter and guidance. A couple follow-up questions. First on the Tech Solutions, so, John, obviously you expressed your excitement around CommonWell, but when you think about the Tech Solutions segment in performance over the last few years, when you think about the different parts of the business does the segment still fit strategically with the rest of the McKesson portfolio? John H. Hammergren - Chairman, President & Chief Executive Officer: Why, I think the way we think about our technology businesses is the value that it delivers to customers and our ability to make sure that we're delivering against those needs. As we think about the overall portfolio of McKesson's companies, you can see that we are always active in our management of that portfolio, and that's frankly one of the reasons that the Technology Solutions segment, which is an aggregation of many different companies, revenue has been down as a result of that portfolio activity. But there are assets in there that are very directly correlated to other business unit strategies in our corporation. It could be things like our Relay pharmacy business, which is the connectivity provider for most of America's pharmacies, or it could be our outsourcing business for physician offices, which is heavily correlated with our practice management activities where we're supporting the efforts of community oncology or community physician work, and then there's other businesses that may not be as correlated to the strategy of the rest of our businesses, and in those cases the key for us is can we optimize the performance of those companies as standalone companies vis-à-vis their competitors. So I don't ever rule anything…

We'll go next to Steven Valiquette with UBS.

Thanks. Good afternoon. I guess just from me just a quick question on the FY 2016 guidance. While EPS at the midpoint is just a touch below The Street consensus, it seems to me, it may just be due primarily to slightly higher tax rate year-over-year also that that flash share count $500 million buyback authorization. I my sense is investors probably are not going to be too concerned about but I guess for me just big picture, just curious that there's still potential for the combined company tax rate to still come down over the next few years despite the fact that they may be up a little in FY 2016. Thanks. James A. Beer - Chief Financial Officer & Executive Vice President: Well, the tax rate guidance that we've offered for FY 2016 reflects the expected mix of profits between our international businesses, which tend to be taxed at a lower rate versus our domestic businesses. And recall, of course, those domestic businesses have been growing very nicely in recent years. And so that's a fact in the thought behind the 31.5% tax rate guide for fiscal 2016. We're not looking to try to project out beyond fiscal 2016 at this point in time.

Okay. Fair enough. Thanks.

We'll go next to Glen Santangelo with Credit Suisse. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Thanks, and good evening. I also wanted to follow up with one quick question on the guidance. It seems like one of the components of your guidance you talk about maybe lower pricing on the generic side in fiscal 2016 versus fiscal 2015. It's kind of nice to have a conference call that is not dominated about generic price inflation but, John, I'm kind of curious. Could you give us your perspective in terms of what you are seeing there? And are you actually seeing any changes in the market? Or do you just believe it's prudent to assume some level of normalization? Thanks. John H. Hammergren - Chairman, President & Chief Executive Officer: Well, Glen, I think you hit the same word I was going to use and that was prudent. I think we've seen a very robust cycle of generic inflation at least as we view it. And clearly, we expect it to continue at least we expect it to moderate as we give our guidance for next year to the extent that our prudent guidance proves to be incorrectly low and then at some point we'll over achieve our expectations to the extent that we projected to be too high in our crystal ball, then we'll be disappointed with what happens with the generics. But I think overall we remain very optimistic about our portfolio and how we manage it and I think we get good job of forecasting where the business is going to be. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Okay. Thank you. John H. Hammergren - Chairman, President & Chief Executive Officer: Yes.

We'll go next to Eric Coldwell with Robert W. Baird. Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker): Hi, thanks very much. First I was just hoping that perhaps you could size the U.S. Specialty business and growth rate? But really my question is around specialty pharmacy. To be fair you have a specialty pharmacy operations ex-U.S. You interact with patients in U.S. Oncology. You own pharmacies, you have pharmacy franchises globally. So I'm just not sure why specialty pharmacy would truly be a foreign business to you, no pun intended on that or why you might not actually be interested in moving more in that direction and I'll leave it at that. Thanks so much. John H. Hammergren - Chairman, President & Chief Executive Officer: Well, thanks for the question. We are in the Specialty Pharmacy business in various aspects of our strategy. And certainly if you think about it globally, particularly where we own pharmacies we have specialty pharmacy activity and you pointed out oncology is one example. I think we've always been sensitive to supporting our customers and their activities and we are reluctant to compete with our customers in any real significant way. So to the extent that specialty pharmacy can support our overall strategy and not be in conflict with what our customers expect from us and we'll continue to pursue and it in certain areas it makes a lot of sense for us to be there and in other areas it makes sense for us to support other people's Specialty Pharmacy businesses. Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker): Is there any chance I could get you to put some figures around the size of specialty overall in the U.S., and the growth rate, you did mention you were growing above market? John H. Hammergren - Chairman, President & Chief Executive Officer: No chance. Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker): What do you think the market's growing? John H. Hammergren - Chairman, President & Chief Executive Officer: Slower than we are. Eric W. Coldwell - Robert W. Baird & Co., Inc. (Broker): Fair enough. Have a good night. John H. Hammergren - Chairman, President & Chief Executive Officer: Thanks.

We'll go next to Ross Muken with Evercore ISI.

Good afternoon. So, sticking on sort of the international parts of the business, you've owned the asset now for some time, you guys have done a tremendous job historically of rolling up various industries and obviously you have plenty of firepower to do deals. What have you learned about the various geographies so far where you play and where you don't play? And what is sort of your view of Brazil? How did that impact your view in emerging versus more developed markets to move into with that asset? And then how would you characterize valuations in some of those geographies versus what we see in the U.S., so a kind of a broad-reaching question on the M&A outlook in some of those newer markets? John H. Hammergren - Chairman, President & Chief Executive Officer: Ross, that's a very interesting question and I think it has a very complex answer that is – that I'll try to deal with. I think the way we think about Europe is the way I think about McKesson 16 years ago when I landed in this seat. How do we – how can we optimize the performance of the businesses we have and focus on those businesses and then how do we branch from those businesses to adjacencies that we know how to operate in markets where we can compete. And I think the situation with Brazil, it was not obvious that we could create a market-leading strategy there particularly given the vertical nature of some of the retailers in that market. And nuances associated with the business models down there and clearly whether it was scaled properly, et cetera, that I think the conclusion was reached that we should have our focus on Europe and in those markets where we currently have a strong beachhead. And in many of those markets we're number one or number two already from a distribution or a retailing perspective. And in many of those markets the hospital business is still direct, the specialty business is nascent. There aren't a lot of services that are similar to what we provide here in the U.S., both to manufacturers and to the end customers. And so I think we do see an opportunity both through organic growth as well as M&A in several of those markets and that'll be part of our focus as we think about the strength of our balance sheet.

That's perfect. It's 6 o'clock, so I'll end there. John H. Hammergren - Chairman, President & Chief Executive Officer: Thanks. I know there are a few other folks that are still on the line hoping to ask questions. So if you want to go a little bit further I'm happy to do that.

We will go next to David Larsen with Leerink.

Yes. Congratulations on a great quarter. Can you just highlight again what the growth rate was in the OneStop Generics program? I thought I heard a very high number? And then maybe some descriptions around what drove that would be very helpful. Thanks. John H. Hammergren - Chairman, President & Chief Executive Officer: Yeah, the OneStop program has been and continues to be very successful for us and this last year, the number I quoted was a 40% growth rate year-over-year, which was quite significant. Now, obviously a portion of that was our success with Rite Aid but the business still grew very significantly even outside of the Rite Aid business.

Okay, great. Thanks a lot.

We will go next to Garen Sarafian with Citigroup.

Thanks for taking the question. I want to ask on Health Mart. The growth of 15% seems much stronger than the market so what portion of this is due to market growth as you define it? And where is the remainder of the growth coming from? Is it more taking share or small change that you did, (62:06) some of these activities in-house that are now going to the Health Mart franchise? Can you just elaborate there a little bit? John H. Hammergren - Chairman, President & Chief Executive Officer: Sure. Just to be clear, the growth rate was in store count not in revenue of those stores. And so the stores, I'm sure some of them did come from competitors but I would imagine there's a portion of them that just came from great customers that have been doing business with us for a while and realized that Health Mart added a bigger opportunity for us and for them, and that expansion of our footprint with them and the services we provide gave us a better position with those customers. So it expands our footprint at Health Mart across the country and our objective with our customers is hopefully to earn the privilege to be Health Mart for all of them, obviously with the exception of the large chains which are creating their own brands.

Got it. And then the follow up is just a bigger picture question, of ongoing M&A among pharmaceutical manufacturers and what we read about in the press. To ask the question a little bit differently though, at what point would you begin to get concerned of too much consolidation in the pharmaceutical space? John H. Hammergren - Chairman, President & Chief Executive Officer: Well, I'm not concerned yet, and I would say that the manufacturing advantages (63:26) we have are very significant. Clearly to the extent that we can create value by delivering channel or volume to them, they're interested in working closely with us, and that's our objective. And I certainly don't see on the horizon a situation where manufacturers no longer need McKesson as part of their solution.

Great. Thanks a lot.

We'll go next to Eric Percher with Barclays.

Thanks for sneaking me in there. A simple one would be, the London organization that you've created, is that independent from the international distribution business, meaning it doesn't roll up – the profits would roll up within the Celesio business? John H. Hammergren - Chairman, President & Chief Executive Officer: Well, Eric, I guess the best way to describe it is that it's a separate operation that is organized in London and it reports directly to Paul Julian, and its job is to focus on a global relationship with large global manufacturers. And as to the financial effect of those businesses, of this activity, you probably would find it in many different parts of our corporation, including maybe even Medical Supplies as we source globally for medical supplies and private label. So it really will – it'll end up in various P&Ls as success is reached there.

Perfect. Thank you. John H. Hammergren - Chairman, President & Chief Executive Officer: Yep.

At this time we have no further questions so I return the call back over to our speakers for any additional or closing remarks. John H. Hammergren - Chairman, President & Chief Executive Officer: Well, I certainly want to thank everybody for their time today and for being on the call. I know we ran a little bit over but it was our year end and we spent a little time chatting, so I wanted to make sure that we spent some time making sure we have all of your questions answered. We think we have a very strong operating plan for fiscal 2016 and certainly exciting growth opportunities across McKesson. I'm certainly proud of our track record of delivering value to our customers and strong financial returns to our shareholders and to each of you, and I'm certainly proud of our terrific McKesson team which continues to deliver year in and year out. So with that, I'll turn it over to Erin for upcoming events for the financial community.

Thank you, John. I have a preview of some upcoming events. We will participate at the Bank of America Merrill Lynch Healthcare Conference in Las Vegas tomorrow, May 13, and the Goldman Sachs Global Healthcare Conference in Rancho Palos Verdes on June 9. We look forward to seeing you at one of these upcoming events. Thank you, and goodbye.

Thank you for joining today's conference call. You may now disconnect. Have a good day.