Accendra Health, Inc. (ACH) Q1 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Owens & Minor First Quarter 2015 Financial Results Conference Call. My name is Marcus and I will be your operator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference call. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. James Bierman, President and Chief Executive Officer of Owens & Minor. Please proceed, sir. James L. Bierman - President, Chief Executive Officer & Director: Thank you, Marcus. Good morning everyone and thank you for your interest in Owens & Minor. This morning, we will be reviewing our first quarter 2015 financial results. With me are Randy Meier, our Chief Financial Officer and Grace den Hartog, our General Counsel. But before we begin, Trudi Allcott will read a Safe Harbor statement. Trudi? Truitt Allcott - Director-Investor & Media Relations: Thank you, Jim. Our comments today will be focused on financial results for the first quarter of 2015, which are included in our press release. In our discussion today, we will reference certain non-GAAP financial measures. Information about these measures and reconciliations to GAAP financial measures are included in our press release and in the supplemental slide presentation, both of which are posted on our website. Also, our call today will be archived on the website. In the course of our discussion today, we may make forward-looking statements. These statements are subject to risk and uncertainty, could cause actual results to differ materially from those projected. Please see our press release and our SEC filings for full discussions of these risk factors. And finally, we will be participating in the Bank of America Merrill Lynch Healthcare Conference on May 13 and UBS Healthcare conference on May 19. We look forward to seeing you in the coming months. Thank you. Jim? James L. Bierman - President, Chief Executive Officer & Director: Thanks, Trudi. I'd like to now call on Randy Meier for his presentation of the financial results. Randy? Richard A. Meier - Executive Vice President & Chief Financial Officer: Thanks, Jim and good morning everyone. I'd like to begin our conversation this morning with a review of our financial results. For the quarter, consolidated revenues was $2.39 billion, improved 6% from the same period last year. Excluding the impact of two acquisitions made in the fourth quarter of last year, consolidated revenues improved by 4%. On an adjusted basis, consolidated operating earnings improved $1.3 million to $50.9 million, or 2.13% of revenues. And looking at the segments, for the Domestic segment, first quarter revenues were $2.29 billion, improved 6.4% when compared to last year. Even after excluding the impact of revenues from the acquisition, Domestic revenues increased 4.7% for the quarter. Quarterly sales growth came from our larger healthcare provider customers as well as new customers offsetting declines from smaller customer accounts. Domestic segment revenues also benefited from improving market trend including stronger healthcare utilization rates. Domestic segment operating earnings declined by about $2.2 billion, when compared to the year before; as a reminder, when making comparisons, last year's first quarter included $5.3 million recovery from the settlement of a direct purchaser antitrust class action lawsuit in other operating income. While revenue growth generated improvements in gross margin, these gains were partially offset by increased expenses to support the strong sales growth. In the International segment, revenues declined by 1.8% for the quarter. However, excluding both the benefit of the packaging acquisition and the headwind of foreign currency translation, International segment revenue improved nearly 3% compared to the last year's first quarter. As we mentioned in our Investor Day, our growth this year would be somewhat lower than last year due to a transition of a multi-country customer from a buy-sell arrangement to a fee-for-service agreement. We continue to see about two-thirds of our International segment revenues are generated by fee-for-service arrangements. As for the International segment operating earnings, the team achieved positive operating earnings of $400,000 for the quarter. This is a significant positive swing from a year ago when the segment reported a quarterly operating loss of $3.2 million. We are pleased that the International team achieved positive results for the first quarter. We have made real progress in improving our performance by closing facilities, streamlining regions and reporting structures. These changes have enabled us to improve profitability and accountability across the network. At the same time, the integration of our Irish packaging company has gone well and we're pleased with the potential to leverage our European platform and further penetrate our existing customers with these services. We now support more than 4 million procedures each year with our combined packaging services. As we indicated last quarter, we have been engaged in talks with the UK customer about our business arrangement. After trying to reach consensus on our strategic operating agreement, we were unable to do so, and we determined that it was in our best interest to step away from this relationship. As such, we mutually agreed to a settlement and the termination of the existing agreement as of mid-March. Under the settlement, we entered into a transition services agreement which went into effect on April 1. Now that we are freed from this distraction, we can accelerate the return to growth and improve the profitability of the UK effort and our broader business in Europe. Overall, our International teams turned in a solid performance for the quarter. Now, turning back to our consolidated results for the quarter, while the adjustments to consolidated operating incomes (sic) [operating earnings] are outlined in the table in our press release, I would note the following. Acquisition-related charges were $2.6 million, resulting primarily from the integration costs such as severance to former management, IT-related costs, and other administrative expenses. As for the exit and realignment line, we reported charges of $7.3 million, resulting from ongoing efforts to optimize our operations in the U.S. and Europe as well as the ongoing strategic organizational realignment throughout our system. In our first quarter results, interest expense was $6.9 million reflecting the impact of last year's refinancing. Our tax rate was 44.4%, increased from last year's 40.8% due primarily from the impact of foreign taxes. On an adjusted basis, the quarterly tax rate was 37.4%. For the first quarter, operating cash flow was $169 million compared to $93 million for the same period last year. This also compares favorably on a sequential basis as the timing of the payments in the fourth quarter of 2014 caused us to use cash. The company continues to report strong consolidated asset management metrics such as DSO of 21.2 days and inventory turns of 9.7 times. Turning to the bottom-line, first quarter adjusted net income was $27.5 million, or $0.44 per diluted share, unchanged when compared to last year. Finally, our guidance for 2015 remains unchanged. We are targeting adjusted net income per diluted share of $1.90 to $1.95, which is consistent with our stated goal of 10% earnings per share growth for the year. Thank you. And with that, I'll turn the call back over to Jim. James L. Bierman - President, Chief Executive Officer & Director: Thank you, Randy. This morning I'd like to reflect on our performance for the first quarter of 2015 and our positioning for the future, after which we would be pleased to take your questions. I continue to believe that the investments we have made over the last five years have positioned Owens & Minor for sustainable, profitable growth. With a network of more than 60 logistic centers spanning the U.S. and Europe, we have expanded our reach and added depth to our service offering with the acquisition of two packaging companies. Over this five-year period, we've more than doubled the size of our addressable market. With our expanded platform, services and capabilities and 8,000 dedicated teammates around the world, we're truly Connecting the World of Medical Products to the Point of Care. This quarter, I traveled extensively, meeting with our teammates and a number of key manufacturers and provider customers. I'm pleased and humbled by the enthusiastic support our initiatives are receiving in the marketplace. Healthcare companies that are positioning themselves to be relevant, long-term players find our value proposition compelling. They appreciate the assets we have aggregated and are discussing with us opportunities to collaborate to achieve positive change in the healthcare supply chain process. As for the quarter, we achieved the majority of our financial and operational goals, and we are essentially where we had targeted to be at this point in the year. With that in mind, let me share a qualitative update on our progress by commenting on the four components of our targeted growth for 2015 that we highlighted during our December Investor Day event. First, let's start with our Domestic segment excluding the packaging business. Our team posted strong operational results for the quarter, while we successfully brought online our Southern California regional distribution center. This regional facility further enhances our ability to leverage our comprehensive logistics network. Domestic revenue growth of 4.7% was excellent although, we do acknowledge that it was compared to a weak 2014 first quarter. For the next component of growth, let's look at our International segment excluding the packaging business. Operational improvements and a series of strategic investments led to improved profitability for the quarter after the team worked through the challenges of last year. Achieving breakeven status in the first quarter of this year was a key milestone for us and resolution of the uncertainty relating to the UK customer reduces some of the inherent variability around achieving our targeted results. As for the third component, the two packaging company acquisitions that we closed in the fourth quarter of 2014, we are slightly ahead of schedule in realizing our targeted cost synergies. During the quarter, we worked through the initial integration activities with both companies. As planned, we closed the former headquarters building in Long Island of our Domestic packaging business. Excitement in the market continues to grow about the new dimension this capability brings to both our provider and manufacturer customers. Our offerings will continue to evolve and expand as the market adapts to the changing times. In terms of the last component of growth that we highlighted, improving our tax rate, our adjusted results for the quarter were in line with our expectations for the year. Starting 2015 on such a positive note, help set the tone for the rest of the year. Our teams are very focused on executing and achieving their annual goals. As we look at the continuing evolution of the healthcare market, we believe that we offer the greatest value to the healthcare customers that seek the advanced supply chain services that we offer. These customers, providers and manufacturers alike are motivated to partner closely with us to achieve real improvement in their supply chains. They come to us knowing that we will provide the solutions, the expertise and the techniques that achieve a sustainable, competitive advantage. 2015 is a year of execution for Owens & Minor, as we begin to harvest the return on a series of investments we've made in recent years. Today, Owens & Minor's greatest asset is our teammates, working on three different continents, dedicated to serving our customers and as a result, win market share and grow our presence in healthcare. Thank you. And with that, we'll now take your questions. Operator?

Yes. Our first question comes from the line of Glen Santangelo, Credit Suisse. Please proceed with your question. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Yeah, thanks and good morning. Just two quick ones. Jim, first on the International segment, you obviously posted the second consecutive quarter of profits within that division. I know the revenue line might be difficult to predict given some of the transition of fee-for-service, but do you feel comfortable with all the customer movement that from a profitability perspective we should be profitable now every single quarter, sort of, going forward or do you think there's, given some of the recent contract noise you talked about that we could dip into negative profitability again at some point this year? James L. Bierman - President, Chief Executive Officer & Director: Yeah, Glen, great question. I would say that as we look at the guidance that we gave for the full year and the additional insight that we provided relative to the major, I would call, either success factors or components of achieving that targeted guidance, probably the section that had the greatest degree of variability around it had to do with the International segment. Not only were we reversing a negative trend, as you alluded to in earnings, but we had a customer that we had a dispute with. I definitely think as we look at where we are at the end of the first quarter that we have significantly reduced the level of variability around that component. That being said and the fact that we don't give quarterly guidance, I'd stop short of predicting what the ebbs and flows may be going forward, other than to say we're feeling more comfortable today than we did back in December. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Okay. Maybe if I just can ask a second question on gross margins. It looks like you put up about a 12.45% gross margin this quarter, slightly below I think your targeted range for the year of 12.50% to 13%. Looking at this company for many years, it always seems like it's difficult to kind of expand gross margins and it seems like you are seeing some accelerating revenue growth from your bigger customers, maybe consolidating, getting bigger, less revenue coming from smaller customers, is that weighing on your gross margin and what sort of gives you confidence over the next several quarters that you can get those gross margins up into the range that you talked about for the balance of the year? Richard A. Meier - Executive Vice President & Chief Financial Officer: Hi, Glen, this is Randy. Great question. I think we're pretty comfortable with where our gross margin guidance was, 12.5% to 12.75%. If you look at the first quarter, with the currency headwinds, we had about 5 basis points of impact relative to currency. So we would have been ex-currency inside the range relatively speaking, going forward. So, we remain very confident that both the U.S. business and as well as our international business will continue to improve both at the gross margin line, so we remain pretty confident with our guidance. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Is there anything specific... James L. Bierman - President, Chief Executive Officer & Director: On the part of your question, Glen, having to do with a more forward-looking outlook on trends, we do think that as we have expanded the services and capabilities, we offer along the more advanced supply chain, that with that does come a higher margin. And so I think some of the investments we've made and the expansion of service offerings will, in the future, definitely contribute to an expansion in the gross margin range. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): Okay. Thanks for the comments.

Our next question comes from the line of Lisa Gill from JPMorgan. Please proceed.

Hi, thanks very much. Randy, can you quantify what the FX impact was on the quarter? Richard A. Meier - Executive Vice President & Chief Financial Officer: Sure. We had about $17 million of top-line exposure. When you drop down to gross profit, it was significantly reduced, and when you get down to the operating margin, it was about a push. We remain fairly, naturally hedged to currencies, although you will continue to see exposure on the revenue line. So, net-net, as we have said for the past year or so, we remained pretty well hedged naturally based on just our operating expenses to our gross margin.

And then just a bigger picture question for you, Jim, would just be around what you are seeing out there in the environment right now, you talked about working more collaboratively with your clients, your customers that the hospitals, as we think about the changing reimbursement landscape, how will that impact your business going forward? And can you give us more color on what you see as the expansion of service offerings that you believe can improve your margins over time? James L. Bierman - President, Chief Executive Officer & Director: Sure, again, I think the expansion of our service offerings is probably best embodied in the acquisition of the packaging capabilities that we – the transactions that we did towards the end of 2014. Remember we draw a distinction that the acquisition of the packaging business here domestically in the United States had primarily a provider focus, whereas the acquisition of the packaging capabilities in the UK or Ireland had much more to do with focusing on the manufacturer segment of the business. We think there's real opportunity in bringing those skill-sets together and we're referring to it in our terminology as a new offering that is a unitized delivery. So, it has everything to do with getting the product to the point of care, but most importantly, getting it at the right unit of measure and bundled with or packaged with additional products that would be needed for a procedure or for a service to a patient. We think that we're uniquely positioned to do that and we're finding a significant interest and traction in that offering in the marketplace. As to the first part of your question, as to the future of reimbursement and its knock on impact to either margin or revenue model for healthcare distributors, I think that's still evolving. We're in conversations with some of the leading healthcare companies in the United States who have thought leaders around this space. Certainly the whole concept of a bundled payment and risk-based payments are the topic of discussion. How that plays out still remains to be seen, and I think it's premature to offer any conjecture at this point.

Jim, just so I understand this, when you talk about your new offering for a unitized delivery, can you talk about how big that is in your business today? Just so we can have an idea of where it could potentially go. I mean, how penetrated can you get? How big of an opportunity is this? James L. Bierman - President, Chief Executive Officer & Director: Yeah, I think there will be more on this as the year unfolds. I would characterize it as a new offering in contrast of that which has historically been offered by the Medical Action business here in the United States or the packaging business in the UK. So, I think it will evolve, but the interest around it is significant. And the fact that providers and manufacturers can work with a packaging company such as ourselves, that really is neutral in a sense to the product that's placed and bundled is the differentiator we have in the marketplace.

Okay. That's helpful. Thank you.

Our next question comes from the line of Robert Jones from Goldman Sachs. Please proceed with your question. Robert P. Jones - Goldman Sachs & Co.: Thanks for the questions. Jim, the quarter saw solid domestic revenue growth and I think you guys called out a bit of a mix shift towards your larger clients is helping that. I was wondering if you could give us any sense of the underlying domestic utilization from your existing customers that you saw in the quarter? James L. Bierman - President, Chief Executive Officer & Director: Help me understand that question just a little more, Robert, if you will... Robert P. Jones - Goldman Sachs & Co.: So, it sounds like you guys say... James L. Bierman - President, Chief Executive Officer & Director: What do you call underlying...? Robert P. Jones - Goldman Sachs & Co.: Well, I mean, like are you seeing a pickup in core demand at your customers? Are they coming to you saying volumes are up on a same-store basis within your larger customer base? James L. Bierman - President, Chief Executive Officer & Director: I see. Yeah, so I think when we comment on that, we are looking and distilling down to the concept of a comparable period, comparable set of customers, stop short of using same-store sales, but I mean that ostensibly is how one would think about it and refer to it, to get to the core of the utilization trend in the United States. So, yes, we have seen a pickup in that. Robert P. Jones - Goldman Sachs & Co.: That's helpful. And then you talked a little bit about your customers being excited about some of the new offerings, you mentioned packaging, unitized delivery. Your major U.S. competitor has been pretty aggressive in pursuing a private label strategy and getting deeper into commoditized product categories. I'm curious when you speak to your provider customers, do they show an interest in you offering a similar value proposition of private label? Actually I'd be curious, if on both sides, both the providers and the manufacturers, are they expressing this as something that they would want you to get more involved with? James L. Bierman - President, Chief Executive Officer & Director: I think as the market has evolved over the last number of years, I think the distinction between us and our major competitors has become clearer and clearer to the marketplace. And I think our value proposition appeals to a strata of the market that we're very keen to penetrate and retain. We have a significant share of that market today. Correspondingly, we think those customers will also be ones that are very successful in the market out into the future. I think the offering resonates very much so with the manufacturing community in that the points of conflict or contention are dramatically reduced because we do not have competing product out there in the market that we're attempting to put through our channel, at least competing product that we own, private label, that we would put through. So, I think in both cases, the distinction is becoming clearer and clearer, and I think that's good. And I think there will be some customers that will opt for the alternative model and there will be customers that will opt for our model. And drawing that distinction, it has been important to us over the last couple of years, and we think that the market, the messaging and the story is being understood in the marketplace. Robert P. Jones - Goldman Sachs & Co.: Got it. Thanks, Jim.

Our next question comes from the line of Robert Willoughby from Bank of America. Please proceed.

Thanks. Maybe I think to Glen's question, looking at sort of the earnings progression over the course, I know you mentioned providing quarterly guidance per se, but I guess we're modeling, obviously improving revenues and a bigger improvement in profitability over the course of the year. But what are you assuming below the line? How much debt will you pay down and the tax rate for the year did you mention? Richard A. Meier - Executive Vice President & Chief Financial Officer: Glen, this is Randy. We haven't given any guidance particularly to that and we wouldn't expect to see any dramatic change in our balance sheet as we move forward. And we've given guidance to the tax rate being in the high 30%s. I believe we had a 38% to 39% range, which on an adjusted basis, were slightly below that for the quarter. So, I think when you add that all up, we feel comfortable with where we positioned ourself with the first quarter. And we think as with the guidance that we gave and kind of the segment that Jim outlined in his remarks, that the first step towards the full year has been a real positive one and we can build on that as we go throughout the year. So, I don't think we've got any change. We reiterated guidance and we're pretty comfortable with being able to hit the range that we've offered folks.

For uses of cash then, Randy, just haven't accumulated on the balance sheet or... Richard A. Meier - Executive Vice President & Chief Financial Officer: I think over the past couple of years, we've been pretty aggressive with both the dividend rate and how we've deployed capital and returned capital to shareholders, so I would think that what we did last quarter in terms of our dividend and we had historically tried to maintain share count in terms of our repurchase. I'd think those things would continue throughout the year. And then we've got some modest expectations about capital expenditures, consistent with last year and our guidance. So, again, I wouldn't expect we're going to see too much building of cash. We have a pretty good first quarter. I think that gave everybody some comfort that the yearend number on the cash flow is a bit of an anomaly and some timing differences. So I think we're, again, in good position to continue to execute our game plans for 2015.

Great. Thank you.

Our next question comes from the line of Evan Stover from Robert W. Baird. Please proceed with your question. Evan A. Stover - Robert W. Baird & Co., Inc. (Broker): Hey, wanted to talk about International for a second. So if I strip out FX and the ArcRoyal acquisition, looks like the constant dollar organic growth there was about 5% to 6% this quarter. How should I think about that growth rate moving forward through the rest of 2015? And I guess in particular in light of the comments you made today, I'm wondering how the exited UK customer will impact the – at least the topline outlook in that business this year. Richard A. Meier - Executive Vice President & Chief Financial Officer: I think when you take the negative 1.8% and you back out acquisitions and some of the FX, we were at about 3% year-over-year growth rate. We did point out that that did incorporate a pretty significant change of one customer from a buy/sell to a fee-for-service, which fairly dramatically changes the orientation of both revenue to more of a gross profit position. So that did have some headwind related to our trend. Overall, our European business, we continue to expect it to grow nicely year-over-year. And as we said in the fourth quarter and I think back at Investor Day, if we didn't get to an amicable relationship with a particular customer in the UK that we'd probably have a little bit of cost associated with unwinding that, but as again, we reiterated guidance, so we're pretty comfortable with being able to work through that. Clearly that will have some impact to top line growth. That will probably be more of a – little bit of a second half of the year impact as we wind that relationship down. But we would expect to offset at least a significant portion of that as we continue to grow the business. So we feel comfortable that the UK business as well as the rest of Europe is on a positive track. Evan A. Stover - Robert W. Baird & Co., Inc. (Broker): Okay. I wanted to shift to a bigger picture question on supplier M&A. There has obviously been a lot of M&A among your suppliers recently. I'm thinking about Becton, Dickinson-CareFusion, Medtronic-Covidien, Cardinal-Cordis. I mean CareFusion is your anchor client in U.S. 3PL. Covidien is your second largest supplier. I mean, some of these deals have closed now. I'm sure you've had conversations with these manufacturers. Just broadly speaking, how have the conversations gone and how do you think some of these I guess bigger deals versus what we have been used to historically, how does that impact OMI and your relationship with these key suppliers, either good or bad? James L. Bierman - President, Chief Executive Officer & Director: Sure, Evan. Well, certainly change can provide opportunity. And as these companies come together and get bigger, there is definitely a broadened array of opportunities that are available to both of us. As you will note in all of those transactions, there are relatively aggressive, robust cost-savings expectations that those companies have put forth, and we think that our value proposition plays very well into that. We know the business as well that we had served in the past, and we can help new owners operationalize many of the concepts that they had as they were designing the list of cost strategies as part of a transaction. So all-in-all, I think it's a great opportunity. We have teams assigned to any of those transactions – all of those transactions that are working with those customers as we speak. And we are excited about the potential opportunities that exist. Evan A. Stover - Robert W. Baird & Co., Inc. (Broker): Okay, great. Thanks for that color. And my last one is largely just a tax rate question. So I believe you said the roughly 37% tax rate this quarter was indicative of the 2015 outlook overall. I remember last guidance had 38% to 39%, so it seems like maybe a little bit favorable on tax rates. Can you confirm that? And can you also tell me specifically what are some of the initiatives you are taking on, on tax rate that maybe are causing it to be a little favorable? Richard A. Meier - Executive Vice President & Chief Financial Officer: Sure, Evan. I think our guidance was clearly around a 38% to 39% range. We were on adjusted basis just a hair under that at about 37.5% for the quarter. Now with the acquisitions that we made last year and the continued change in profitability of our broader European-based business, we continue to be able to leverage our European platform favorably. So we've at this point, I think, where we look is out to the rest of the year, we think that 38% to 39% is probably the appropriate range as we look to the full year. I don't think we're doing anything out of the ordinary. So we're not contemplating any inversions or anything unique like that. So this is just kind of plain vanilla stuff. Our usual leveraging of a lower tax jurisdiction and as we move to greater profitability outside the United States, we're just getting the benefit of that. Evan A. Stover - Robert W. Baird & Co., Inc. (Broker): Thank you.

Our next question comes from the line of Sean Dodge from Jefferies. Please proceed with your question.

Hi. Good morning. Thanks. Jim, can we maybe start with an update on the search for your successor? James L. Bierman - President, Chief Executive Officer & Director: Sure, Sean. Well, I think the search committee of our board of directors has been actively involved in candidate interviews. I think they're very pleased with the progress of the search and the opportunities that they've seen. So, it's underway and any additional comments probably would be premature at this time.

Okay. Now that the International segment appears to be stabilizing somewhat, can you give us a sense of timing around when you'll begin to contemplate or look at introducing more provider-focused services into Europe? Richard A. Meier - Executive Vice President & Chief Financial Officer: Sure, Sean. I think, as we look out in the future, we continue to look at different ways to continue to expand the business. Certainly UK is not as homogenous market as the U.S. is as well, so you've got to approach it in a slightly different fashion. Today we do have a few provider customers in the UK that we provide some basic services to, so it's not as if we aren't doing that today as we look to the future. So, I think there's a platform and a basis for us to do those things, although we don't have any plans today to directly invest into a particular provider platform in Europe.

Got it. All right. Thank you.

Our next question comes from the line of David Larsen from Leerink. Your line is now open.

Hi. On the International side in 1Q of 2015, was there good client retention in the quarter? I'm just comparing the back half of 2014 revenue to 1Q of 2015. I mean were there any significant customer losses that occurred in 1Q of 2015 internationally or was there like 100% retention? Thanks. Richard A. Meier - Executive Vice President & Chief Financial Officer: Well, other than the fact that we terminated a relationship with our customer in the UK, we saw fairly reasonable customer retention and we've got a European-wide price increase going on with the vast majority of our customers. We've had some good wins that continue to improve and sustain the growth rate. But clearly, as with all the businesses, we've had some minor losses. This year, though, I would characterize is we haven't had any significant or major losses in any particular market. We've had a pretty good retention rate and we're seeing a lot of activity around a lot of what I'd characterize are multi-country customers looking to expand into other countries or other regions, which is all part of the leveraging of the platform in Europe. So we continue to feel pretty good about where the European business is moving. We have now almost had a full year of profitability on the European Continental side of it as we continue to work through the UK challenges. But overall, I think we're pleased with where we are at the end of the first quarter.

That's very helpful. And then can you just comment on the sales force internationally? Any sense for how many sales people there are and how long they've been there and just any metrics you could put around that would be very helpful. Thanks. Richard A. Meier - Executive Vice President & Chief Financial Officer: There's a fairly lean sales organization in Europe. Again, it's a different sales organization than the one we have here. It's more focused on the manufacturing side of the fence. It's selling 3PL services, and again, you've got more of a regional and local focus in some areas. We've spent a particularly long period of time in how we want to position that organization, both last year and as we move into this year. But I would say we manage a fairly lean organization that is looking both on a pan-European basis to leverage our European and global customers as we align with some of our U.S. manufacturing activities as well as continue to service our local customers as well. So we incorporate a lot of key account and customer service managers as well into that organization.

Okay. That's helpful. And then is International still two-thirds fee-for-service and how much did ArcRoyal contribute in terms of revenue in the quarter? Richard A. Meier - Executive Vice President & Chief Financial Officer: It is still a two-thirds fee-for-service. That's about where we are, and that would include ArcRoyal, as ArcRoyal is providing services to the manufacturer. And we don't break out our products and packaging segment. So we'll have to leave a little mystery to that going forward. But suffice to say, they did contribute in the quarter and we continue to see very good activity in leveraging our packaging business across our manufacturing platform, both over in Europe as well as here in the United States.

Okay. Thanks a lot. Appreciate it.

Our next question comes from the line of Steven Valiquette from UBS. Please proceed with your question.

Yes, thanks. Just a couple of quick ones here at this stage of the call. First, you touched on this earlier, but it was good to see a nice recovery in the operating cash flow in the first quarter of 2015 after the result in calendar 2014. So I guess is there any just rough approximation for what you think that OCF will shake out for the full-year 2015 recognizing that some of it may be a pull forward from 2014? Richard A. Meier - Executive Vice President & Chief Financial Officer: We don't give particular specific guidance around cash flow, but if you look back over the last couple of years and you look at what, generally speaking, our cash flow has been, it's always been, on average, on a rolling basis about $150 million to $175 million. So, I think if you kind of take that as a proxy, I think that's a reasonable place to where any given quarter, certainly last quarter highlighted it, we've got some timing issues where we had some use of cash and otherwise, but generally if you go back and do a rolling four quarters, you're going to probably see us oscillate around that $150 million to $175 million range.

Okay. I'm not sure if somebody just asked this or not, but just on the Medical Action, is there any update on where the accretion may shake out for 2015 now that you've owned that asset for little bit longer? Maybe any quantification as opposed to just simply the word accretive would be helpful? Thanks. James L. Bierman - President, Chief Executive Officer & Director: I guess, Steven, what I would do is go back to what we said at Investor Day in that the bridging schedule that we've provided that talked about our acquisition, so this would be both Medical Action and ArcRoyal, net of the new financing that we did that Randy has referred to, we fundamentally were saying that it would contribute around 4% to 6% of the 10% targeted growth rate that we were looking at. And I think the other color we offered is that in the initial year of ownership that had more to do with getting cost synergies and cost reduction as to anything else. And then my final comment on this would be – and this was in part of the prepared remarks – that we're generally on schedule or on what we've targeted at this point of the year, we're slightly ahead on some of the timing of some of the cost reduction efforts we've put in place. So that's a fair amount of color around the acquisitions.

Yes, okay. That's perfect. Thanks.

Next we have a follow-up from the line of Glen Santangelo from Credit Suisse. Please proceed. Glen J. Santangelo - Credit Suisse Securities (USA) LLC (Broker): My follow-up has been answered. Thank you. James L. Bierman - President, Chief Executive Officer & Director: Thank you, Glen.

There are no further questions at this time. I will now turn the call back over to Mr. Bierman for his closing remarks. James L. Bierman - President, Chief Executive Officer & Director: Thank you, Marcus. Well, that concludes our first quarter 2015 conference call. And again, thank you all for your interest in Owens & Minor. Have a good day.