Accendra Health, Inc. (ACH) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Owens & Minor first quarter 2017 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Trudi Allcott. Ma'am, you may begin. Truitt Allcott - Owens & Minor, Inc.: Thank you, operator. Good morning, everyone, and welcome to the Owens & Minor First Quarter 2017 Earnings Call. I'm Trudi Allcott, and on behalf of the team, I'd like to read the Safe Harbor statement before we begin. Our comments today will be focused on financial results for the first quarter 2017, 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 the most comparable GAAP financial measures are included in our press release and in the supplemental information posted on our website. In the course of our discussion today, we may make forward-looking statements. These statements are subject to risk and uncertainty that could cause actual results to differ materially from those projected. Please see our press release and our SEC filings for a full discussion of these risk factors. Participating on our call this morning are Cody Phipps, our President and CEO, who will provide an overview of the business and the new strategy; and Randy Meier, EVP and Chief Financial Officer and President, International, who will give an update on our results and insight into the performance of our three segments. Now, I'd like to turn the call over to Cody Phipps, our President and CEO, who will start things off this morning. Cody? Paul Cody Phipps - Owens & Minor, Inc.: Thank you, Trudi, and good morning, everyone. Thank you for joining us on the call today. I'm sure you saw our news last night that we have signed a definitive purchase agreement to acquire Byram Healthcare for approximately $380 million in cash. We are pleased with this transaction and look forward to working through the final closing conditions. Byram will give us immediate entry into the direct-to-patient non-acute care market, and it represents a significant step forward for our strategy to expand our services along the continuum of care. Byram is a national market leader in the direct-to-patient home health market, and has unique product specialization and expertise. With a seasoned management team and an experienced sales force, Byram has nationwide coverage and strong access to managed care contracts. Today, they have leading positions in the diabetes, urology, wound care, ostomy, breast pumps and incontinence product markets. Byram is well positioned to grow with a strategic focus on managed care customers and attractive product categories. Byram's revenues topped $450 million last year across their network of five distribution centers, nine sales and service centers, and two national pharmacies. As I mentioned, this transaction aligns with our strategy to expand along the continuum of care and offers exciting growth opportunities for us. Now let me comment on our first quarter results. Despite weakness in several segments of our business, results for the quarter were largely consistent with our expectations. However, we're not satisfied with these results. The loss of a major domestic customer last year, along with production challenges in our CPS unit, had a significant impact on our results for the quarter. Our teams are working hard to address these areas. As you know, the health care industry is changing rapidly. In the last few weeks, we've seen tangible evidence of this as two very large manufacturer transactions were announced. We also believe that significant cost pressures will persist up and down the value chain, resulting in stepped-up competitive dynamics, margin pressure and additional industry consolidation. However, these challenges also present us with opportunities. For example, we are strategic partners with all of the parties involved in these two large transactions. We are well positioned to help manufacturers address their cost pressures and provide them with superior channel access. As we outlined at our Investor Day, our four-part strategy is designed to position Owens & Minor for sustained profitable growth, and our teams are actively engaged in implementing these strategies. The goal is to strengthen and change our business model so that we are more relevant and valuable to our partners, and clearly aligned with the emerging opportunities in this market. To remind you, the four elements of our enterprise strategy are the following. First, we are building the most intelligent route to market by investing in our supply chain to bring scale, efficiency and enhanced connectivity to the flow of medical products from the point of manufacture all the way to the point of care. Developing a track record of continuous operations improvement is a key element of this strategy, and we're already making strides in Lean, productivity improvements, safety, and overall continuous improvement in our operations. Our second strategy is expanding our services along the continuum of care to help our provider customers follow their patients. This part of the market is growing fast, and our customers are asking for our help in managing the additional complexities of their expanding networks. Non-acute services are important to our provider and manufacturer customers and to us. Building new logistics and service capabilities increases our relevance and represents an exciting growth opportunity for Owens & Minor. The Byram acquisition will give us significant momentum in this area. Our third strategy is to become the preferred outsourcer for leading manufacturers. Just like us, our manufacturing partners are facing significant cost pressures, and we remain their trusted partner. We continue to make progress with large-scale medical device manufacturers, and initial results with several companies are promising. We recently brought on Stuart Morris-Hipkins as EVP of Global Manufacturing Services to unify our manufacturer strategy in the U.S. and Europe, and to accelerate our growth in this important area. Our manufacturers are important partners, and we believe industry dynamics and their needs represent additional growth opportunities for us. Finally, our fourth strategy is to drive value through data, analytics and services. Because we are in the middle of the flow of goods, funds and information from the point of manufacturer to the point of care, we see great opportunity to aggregate and analyze data for our customers to reduce complexity and to create value at the point of care. Our IT and operating teams are building a roadmap to deliver the data architecture necessary to realize this strategy. Going forward, we have a realistic view of the market, and we are taking steps to control what we can control. In the near term, we have improvement levers and growth initiatives that can help us achieve better performance. We have a broad operations improvement agenda underway, and we're using a disciplined process to implement these initiatives. At the same time, we are executing our four-part strategy to reposition our business for long-term success. Before I close, I want to again thank Craig Smith, who will retire as board Chairman later this week at the Annual Shareholders Meeting. Over the last 30 years, Craig helped to grow our company and expand our reach into new geographies and markets. Craig has been a mentor, leader and friend to all of us. On behalf of the team, I want to thank Craig for his service and wish him the best in retirement. With that, Randy will review our financial results and provide an overview of our segment results. Randy? Richard A. Meier - Owens & Minor, Inc.: Thank you, Cody, and good morning, everyone. Today, I'll update you on our financial and operational results, and provide a review of the performance across our three segments. But first, I would like to comment on our announcement on the Byram transaction. As Cody said, we are pleased that we have signed an agreement to acquire Byram Healthcare, a leading provider in the market, and look forward to bringing this organization on board. This transaction will give us immediate entry in the direct-to-patient, non-acute care market with a sizable player. Byram will give us a big step forward in our strategic objective to expand our services along the continuum of care. I would like to brief you on some of the high-level details of the agreement. As we said in the announcement, we are acquiring the business for approximately $380 million in cash. After we complete the transition, we expect Byram will add approximately $450 million in incremental revenue. We estimate the acquisition will have limited impact to our adjusted earnings per share in 2017, and will be modestly accretive in 2018. This is a new market for us, so the Byram team and their collective knowledge and experience are important to us. They bring a strategic skill set and expertise to the table that we highly value. As with most acquisitions, there are closing conditions and regulatory approvals for us to work through, so we will provide more information about the financial projections and the details of the transition plan once we close the transaction, which we expect to occur in the third quarter of 2017. We are pleased with this transaction as it will enable us to add another growth driver to our business. As we said at Investor Day, we had planned to look to M&A as a means to expand our services along the continuum of care, one of our four elements of our strategic plan. We look forward to working through the closing process, and we welcome the Byram team aboard. Turning to the quarter, our results were largely in line with our expectations for the quarter, although we experienced some underperformance in certain areas of the business. Despite these challenges, teams across the enterprise have launched a variety of initiatives aimed at growing revenues, achieving gains in productivity and efficiency, and reducing costs across the company. We believe these projects will provide added momentum as we move through the year and beyond. I'll start this morning with an update on consolidated results, and then I'll provide some color on each of the three segments. As we pointed out at our Investor Day, the CPS segment is now known as the Proprietary Products segment, which includes the CPS business, as well as our Global Sourcing operations. As we discuss our results, please keep in mind that these adjustments made into our reported results are outlined in our press release. For the first quarter, we achieved consolidated GAAP net income of $18.8 million or $0.31 per share, and on an adjusted net income of $24.8 million or $0.41 per share. Our results reflect our efforts to adapt to the loss of the major customer in the third quarter of 2016, as well as continuing competitive pressures in the market. Consolidated revenues for the first quarter were $2.33 billion compared to $2.46 billion last year. Excluding the impact of the lost customer, revenues for the quarter grew by nearly 1%. GAAP consolidated operating earnings were $35.5 million for the quarter compared to $45 million, while adjusted operating earnings were $45.4 million compared to $55.5 million. Excluding the impact of the lost customer, adjusted operating earnings would have declined $2.6 million. The work our teams are doing to transform the company helped to offset the impact of the loss of the larger customer and the underperformance of our CPT business. The effective tax rate for the quarter was 34.7%. An improvement in the effective tax rate resulted in the higher percentage of pre-tax income earned in our lower tax jurisdictions. The adjusted effective tax rate for the quarter was 35.8%. Asset management metrics included DSO of 22.7 days and inventory turns of 8.9 times. During the quarter, the company used cash of $26 million compared to operating cash flow of $45 million last year. The decline was largely due to routine changes in working capital, including timing of vendor payments. Now, let's look at the three segments. Domestic segment revenues for the quarter were $2.19 billion compared to $2.32 billion for the prior year. Revenue declines reflect the loss of a significant domestic customer, which transitioned away from Owens & Minor late last year. Excluding the impact of the lost customers, revenue for the quarter grew approximately 1%. First quarter Domestic operating earnings were $37.3 million versus $41.7 million one year ago. Again, this change was largely due to the loss of a customer and lower income from manufacturer product price changes when compared to the year before. We expect that these changes, as well as ongoing competitive market dynamics, will continue to affect our results in the year ahead. Turning to the International segment, quarterly International segment revenues increased 14% to $95 million, driven by growth from existing customers and new business, partially offset by unfavorable currency translation impacts of $8.4 million. Operating earnings in the International segment were approximately $700,000 compared to $1.1 million last year. The decline resulted from onboarding costs associated with new business. As for the Proprietary Products segment, first quarter revenues were $137 million compared to $141 million last year. Decreased sales of sourced products contributed to the decline in revenues. Operating earnings for the segment were $8.1 million compared to $13.3 million in the prior year as a result of lower revenues and production challenges in the first quarter. At this point, based on our first quarter performance and the expected contributions of the company-wide initiatives, we are reiterating our financial outlook for the year of adjusted earnings per share in the range of $1.75 to $1.85. For 2018, we continue to target financial guidance in the range of $2.05 to $2.20. Thank you. And with that, we'll turn the call over to the operator for questions.

Thank you. Our first question comes from the line of Lisa Gill of JPMorgan. Your line is open. Lisa Gill - JPMorgan Chase & Co.: Thanks very much, and good morning. Let me first start with your commentary around margin pressure on the distribution side of the business. Randy, I didn't hear you go into any detail specifics to that. Is that just kind of normal pressure? I mean, you did call it out in the press release. Is there something specific that's happening in the marketplace right now on the competitive side? Richard A. Meier - Owens & Minor, Inc.: Hello, Lisa. Thanks for the question. And I think all we're just trying to allude to – over the past three or four quarters, we've just been alluding to the fact that there's been broad-based margin pressure as an industry consequence. And we keep pointing it out that it's going to continue to be a headwind as we move forward into the year. So it wasn't anything unique to the quarter, it's just been an area that we've been highlighting for folks. Lisa Gill - JPMorgan Chase & Co.: Okay. And then... Paul Cody Phipps - Owens & Minor, Inc.: Lisa, it's Cody. I would just add that as you see industry consolidation accelerating, and obviously, there's significant cost pressures up and down the value chain, we just think the margin pressure is a natural outgrowth of those two factors. Lisa Gill - JPMorgan Chase & Co.: And as we think about the announcements that have been made, specifically the Medtronic announcement with Cardinal, who's one of your larger competitors, do you think, Cody, that that's going to change any of the – perhaps increase margin pressure now that you're going to have to be sourcing some product from them? I mean, will there be more channel conflict because of that? I mean, how do I think about it now that they'll own something that is a pretty big component of your revenue today? Paul Cody Phipps - Owens & Minor, Inc.: Yeah, no. I think it's a very good question. First of all, it's kind of a good news, bad news story. Obviously, consolidation, over the long run, is concerning. But in the short run, when we look at that transaction in particular, we are significant trading partners with both Cardinal and the other company that you mentioned. We're very strategic partners to both of them. So at the same time, on the surface, you might say consolidation's bad. We actually see some opportunities in that. As they come together, they're looking to take out costs. They're looking to streamline their operations, and we're kind of a neutral partner to the manufacturers. So we actually see some opportunities in that. So it's not an all bad news story. Lisa Gill - JPMorgan Chase & Co.: Okay. That's great. And if I can just squeeze one last thing in, I just want to better understand the acquisition on Byram. How do I think about the margins in that business? I know you talked about $450 million of revenue, but are the margins fairly comparable with the other business? I generally think of these kinds of businesses as having better margins than the traditional business. Paul Cody Phipps - Owens & Minor, Inc.: Yeah. Yeah. A couple comments on that. First of all, it's a growth area. As the population ages, more and more chronic disease states and points of care are moving to the home and outside the hospital. So first and foremost, we see it as a growth opportunity. Second, the margins are better. It's a more unique service delivery experience, and so there's better margin there. It's better growth. And we're excited by the Byram transaction because we've bought the number two player in the industry, an experienced management team with a proven track record for growth. And so this is very much down the center plate of our strategy to move across the continuum of care. Lisa Gill - JPMorgan Chase & Co.: Okay. Great. Thank you. Paul Cody Phipps - Owens & Minor, Inc.: Thank you.

Thank you. And our next question comes from the line of Michael Cherny with UBS. Your line is open.

Good morning, guys, and thank you for the details so far. Paul Cody Phipps - Owens & Minor, Inc.: Hey, Mike.

First, just one – hey, how are you? One technical question on the Byram deal in particular. I noticed you didn't buy any shares in the quarter. Are we to assume that this means you'll be halting your share buyback on a intermediate basis? Richard A. Meier - Owens & Minor, Inc.: Mike, no. We just decided as we moved in to this year, because of the significant amount of shares that we bought back in the second half of the year, that we'd just moderate repurchase. We continue to look at just being neutral to our share count throughout this year. So I wouldn't think that we would halt – or we're not planning on halting it, but I think we'd go back to more modest levels as we had in 2014 and 2015.

Got it. Thank you for that, Randy. And then just, I guess, to follow up on Lisa's question related to the manufacturer consolidation, is it possible to look back at other periods in time where you've had this level of consolidation, and maybe talk about some of the areas where Owens & Minor's been able to help the manufacturers, maybe give a couple specific examples? And if there are any areas where there have been some choke points or any type of supply disruption as these players try to sort out their path going forward. I guess, just to understand the puts and takes given what history has told us would be helpful given the pretty sizable level of M&A over the last couple weeks. Paul Cody Phipps - Owens & Minor, Inc.: Again, Mike, what I'd point out is if you look at the two big transactions that were announced in the last couple weeks, we're terrific strategic partners to all four of those parties. And again, our view is that the value of a logistics partner is actually increasing. So when those companies come together, in both of those cases, they're very much focused on enhancing their product portfolios, and they're looking for ways to drive synergistic value of (20:52) companies together, and we think we can play a major role in that up and down the value chain. So not only are they looking for logistics cost reductions, but they're looking, we believe, more and more, they're going to look for services at the point of care that can differentiate their products at the point of care. So again, in both of those big transactions, again, on the surface, consolidation looks bad. We see opportunities in both of those cases.

Got it. Great. Thanks, Cody. Paul Cody Phipps - Owens & Minor, Inc.: Thank you.

Thank you. And our next question comes from the line of David Larsen with Leerink. Your line is open.

Hi. Can you talk a bit more about the CPS segment? And I think you mentioned that there were production challenges. The EBIT was a bit lower than what we had been modeling. Obviously, a pretty – I think there was a significant decline year-over-year. So any color there that you can provide would be very helpful. Richard A. Meier - Owens & Minor, Inc.: Sure, Dave. We've been highlighting a transition in the CPS business for the past couple of quarters. As you may recall, we onboarded a fairly significant customer towards the second half of last year. That onboarding created a bit of capacity issues for us, which had kind of created some challenges from the operational side in the second half. A lot of those capacity issues, we've been able to mitigate as we've moved through the fourth quarter and into the first quarter. So I think we're in a much better position now. The performance and the steps that we needed to take to do that created some cost issues for us, as you're seeing. Some of those – that impact happened in the fourth and certainly, in the first quarter. But I think as we look towards the balance of the year, you'll begin to start seeing some gradual improvement in that business as we continue to improve our service levels and our delivery levels with our customers. I think one of the impacts, though, on a year-over-year basis, we did have a third-party customer that we did some special manufacturing for first quarter of 2016, so that did have a bit of a benefit. We had it in the fourth quarter and into the first quarter, so it was a little bit of a difficult comp. Nevertheless though, we did have some challenges that we were working through second half of the year and into the first quarter. But we do see that improving as we go through the remainder of the year.

Okay. So operating margins as a percentage of revenue in CPS should sort of, I guess, get back up to, let's call it 10% by 4Q of 2017? Richard A. Meier - Owens & Minor, Inc.: Well, we haven't provided operating margin directly for the CPS business. It's kind of a combination of our sourcing and our CPS business, so a little hard to talk about operating margins per se. But we do see second half of the year, us moving at a much more positive direction and ending the year on a positive note.

Okay. Great. And then, Cody, can you maybe expand a bit on the technology piece of your strategic vision? What is ultimately sort of the end product that you have in mind that you want to build for your clients that they don't have now? And you said that your team is putting together a blueprint. Like what is the ultimate sort of product that you want to have created? Paul Cody Phipps - Owens & Minor, Inc.: Yeah, good question, Dave. We're excited about that. Again, we see the value of a very robust supply chain increasing in the industry. Now, when I look at the health care industry vis-à-vis the other industries, it's behind. And one of the areas we're very excited about is the ability to bring end-to-end connectivity to the supply chain from point of manufacture to point of care. We think we're in a great position to do that. And that information and data can be used to reduce cost, reduce complexity, and that's music to the ears of both the provider customers we serve and the manufacturers we serve. So first and foremost, the outcome we're looking for is end-to-end connectivity and a better data architecture to capture that information. The second thing we're looking for is more and more information about the use of products at the point of care. And so, again, there's a lot of focus on patient outcomes, improving patient outcomes, preventing re-admits to the hospital. A lot of other players are focused there, but we think we can bring valuable new information to what's happening at the point of care. And the third thing I'd say is that the combination of those two things, we think, provides the opportunity for us to invent new services for both manufacturers and providers. So it's probably – of our four-part strategy, it's the least developed at this point. But our teams, our operating teams and our IT teams, are working through the first component of that, which is the end-to-end connectivity and the data architecture to bring that data to life.

Okay. And then with the Byram deal, can you maybe talk a bit about reimbursement? Like how do these products get reimbursed for? If they're being shipped to the members at home or to home health agencies, is Medicare a big piece of reimbursement? Can you size what percentage of revenue might come from Medicare? Is it like 50%? And then have you done diligence on how those reimbursement rates are trending? Richard A. Meier - Owens & Minor, Inc.: Sure, Dave. It's a great question, and I think this leads to why we're so excited about adding not just the new line of business, but a very experienced management team with the breadth and depth to manage these resources as we go forward. For the most part, we engage in managed care contracts across the spectrum. It's a nationwide enterprise. So we have contracts with various entities across the country. Specifically to your question, we have about – all about 30% to 35% of the business is related to Medicare or Medicaid, so not a large portion. And as you may know, with some of the shifts going on, that should be reduced over the coming years. We see this as a tremendous asset in a sort of direct-to-patient billing market, and expanding our ability to complement what we do with the acute-care center, and go all the way to the home. So we see this as a nice adjunct to our business as something complementary as we expand down the continuum of care.

Okay. Great. And then just one last one. Sorry. I think you said in your K that maybe 13% of your 2016 revenue was from Medtronic. Can you – like, any sense for what portion of that would now be Cardinal? Richard A. Meier - Owens & Minor, Inc.: What I think we were alluding to in that is just as a supplier to us, with the consolidation of Covidien into the Medtronic, Medtronic became a significant supplier to us. And as Cody mentioned earlier, Cardinal is one of our major suppliers, so we see this as continuing a very solid relationship with one of our major suppliers.

Okay. Appreciate it. Thank you. Paul Cody Phipps - Owens & Minor, Inc.: Thank you.

Thank you. Our next question comes from the line of Robert Jones with Goldman Sachs. Your line is open. Robert Patrick Jones - Goldman Sachs & Co.: Okay. Great. Yeah, I'll just try to stick to the two questions here this morning. Just to go back to the acquisition, could you maybe talk about the growth in margin profile of Byram? Just trying to get a better sense of how we should think about the accretion or the modest accretion you guys touched on in 2018. You mentioned it being the third player in the market. Curious if maybe the first player in the market would be a good comp for us to use. Richard A. Meier - Owens & Minor, Inc.: Just to correct you, I think we mentioned it's the number two player in the market out there. Byram, as an asset, has been growing in the mid-teens top line for a while, and has margins well above our own margins. So again, as Cody pointed out earlier, we should see some nice benefits to this as we move forward. And I think as we sort of move ahead here, we would see a continuation of that. So I'm not sure that when we look at this asset that we see any difference in the performance going forward. We would continue to see a very nice top line growth and continue to expand in the market. Robert Patrick Jones - Goldman Sachs & Co.: All right. So then, I guess, just to be clear, that there's nothing structurally different than the number one player in the market that would preclude it as being a good comp as far as the growth in margin profile? Richard A. Meier - Owens & Minor, Inc.: I think the number one player in the market is Edgepark. And that's kind of fairly embedded in Cardinal's performance. So I'm not sure you have a lot of ability to see through that. But I think there is a fair amount of growth in this area. I think when you just look at the direct-to-patient market and in the non-acute space, that's one of the reasons we've been looking to expand into it. It's one of the more significant growth areas of health care today. Robert Patrick Jones - Goldman Sachs & Co.: Great. And, I guess, just to follow up on the domestic margins, pretty good performance in the quarter despite the competitive pressures you mentioned. And I know there's got to be some incremental investments based on what you outlined at the Analyst Day. Was just hoping on the Domestic business, you could maybe help us think through the cadence of those margins as we progress through the year, in particular, wondering how we should be factoring in any incremental investments quarter-to-quarter. Richard A. Meier - Owens & Minor, Inc.: Well, I think when we think about our business, what we tried to do this quarter was just give you a sense of what our margins were, excluding the impact of Kaiser on a going-forward basis. And I think that's why even though revenue on an aggregated basis was down year-over-year, excluding that impact, we were up about 1%. Some of our costs were down in an aggregate business on a direct comparison. The percentage of revenues, obviously, were up as a result of the lower revenue. So I think when you start looking through that towards the second half of the year, you can continue to see opportunities for us to start to see some – or return to growth. Robert Patrick Jones - Goldman Sachs & Co.: Great. Thanks so much. Paul Cody Phipps - Owens & Minor, Inc.: Thank you.

Thank you. Our next question comes from the line of Steven Valiquette with Bank of America Merrill Lynch. Your line is open.

Hey, thanks. Good morning, Cody and Randy. Paul Cody Phipps - Owens & Minor, Inc.: Steve.

So as we try to analyze the Byram revenues and we look at your deal financing costs, then your comments around limited impact to 2017 earnings, but then modestly accretive in 2018, when we try to triangulate all that, we get the EBIT margins might be in the 3% to 5% range. I'm wondering if that's a reasonable assumption. Because, I guess, if you're saying the margins are way higher than yours, if it's way higher than 3% to 5%, then it seems like the accretion could be also way higher than what you're suggesting, which obviously would be a good thing for you. So we're just trying to triangulate, is that 3% to 5% operating margin reasonable for where Byram is right now? Richard A. Meier - Owens & Minor, Inc.: Well, I think what we were trying to allude to, and obviously, in any transaction, year one, you get a tremendous amount of transaction costs embedded in it, so it kind of – it's a bit of opaqueness to the overall performance in that first year. And given that we had given two-year guidance on Investor Day, we wanted to give people the impression that there is certainly going to be some accretion associated with this. But depending on the timing of the close, we'll probably have limited benefit in 2017, and then transitioning up given that – would sort of see that first full year of operations trail into 2018, that there'd be modest accretion in 2018. So I think you're probably underestimating what the broader margins of this asset would be. But I think when you look at how that gets integrated into our business, it's just a lot of the transaction costs and the nature of whether we do it beginning in the third quarter or it trails off into the tail end of the third quarter. Paul Cody Phipps - Owens & Minor, Inc.: And, Steve, we'll provide more guidance on this. Obviously, we just announced the transaction. So we'll provide more guidance going forward on this. But the other thing I'd say, too, is we're very excited about this new platform and we want to get it off to a good start. So we're analyzing some of the investments we want to make to accelerate their growth. So I think, as Randy said, the margin profile is better than what you outlined, but we also want to make sure we take the right steps to continue on the great track record of growth that they've had, even accelerate that. So, we'll provide more guidance on that as we go forward.

Okay. Yeah, that'll be helpful. I think if you got a lot of the one-time charges and the stuff that you're including in the neutral to earnings for 2017, that helps to triangulate all that. One other quick question on Byram now, just curious if there's going to be a lot of a cost-cutting synergy with that deal or is this kind of more of a bolt-on deal where it still runs independently? I think we're all just curious how much integration work you plan to do with that asset. Thanks. Paul Cody Phipps - Owens & Minor, Inc.: Yeah. I think your characterization as a bolt-on strategic acquisition is better. We obviously see some synergies, particularly on the distribution side, but our primary focus is going to be bringing them into the fold, accelerating growth. So it's not a big – we don't see a big cost-cutting agenda early on with this. If anything, we want to take this strong management team, their track record for growth, and accelerate that. So our focus is more on that.

Okay. Got it. Okay. All right. Thanks. And congrats on the deal. Paul Cody Phipps - Owens & Minor, Inc.: Thank you.

Thank you. And I am showing no further questions at this time. I'd like to turn the call back to Mr. Phipps for closing remarks. Paul Cody Phipps - Owens & Minor, Inc.: Thank you for participating on the call today. We're very excited about the acquisition of Byram, and we're encouraged by the work our teams are doing to drive operating improvements and to execute our strategy. We look forward to sharing more detail about the acquisition on our next call and on the progress of our strategic agenda. Thank you, and have a good day.

Ladies and gentlemen, thank you for participating in today's call. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.