Owens & Minor Inc (OMI) 2012 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Owens & Minor fourth-quarter and full-year 2012 earnings conference call. My name is Kevin, 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 today's conference.

(Operator Instructions)

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. Craig Smith, President and Chief Executive Officer of Owens & Minor. Please begin, sir.

Thank you, Kevin; and good morning, everyone. Welcome to the Owens & Minor fourth-quarter 2012 conference call. This morning, we will review our results and take your questions; but first, let me introduce my colleagues on the call today. Jim Bierman, our Chief Operating Officer; Grace den Hartog, our General Counsel; and Michael Lowry, our Interim Chief Financial Officer.

Before we begin, Trudi Allcott, from our Investor Relations team, will read a Safe Harbor Statement. Trudi?

Thank you, Craig.

Our comments today will be focused on financial results for the fourth quarter and full year of 2012, 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 fourth quarter supplemental slide presentation, both of which are posted on our website. Our call today will also be archived 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 those projected. Please see our press release and our SEC filings for a full discussion of these risk factors. Finally, upcoming investor events are spelled out in our press release.

Thank you. Craig?

Thank you, Trudi. Now, I'd like to call on Jim Bierman for a financial and operational overview.

Thank you, Craig. Good morning, everyone. In interest of time, we will assume you have had a chance to read our press release, where we provided a bit more detail this quarter, including comments regarding both the domestic and international segments. Therefore, I will use the time we have this morning to provide further insight in a few areas of our results.

Consolidated revenue growth was 5.9% for the quarter and 3.2% for the year, with the increase resulting primarily from revenues associated with our acquisition of Movianto. Domestic revenue growth was flat for the quarter and increased 1.2% for the full year, consistent with where we indicated it would be, both during our third quarter and our November 2012 Investor Day. As we mentioned throughout the year, revenue growth reflected the impact of softer healthcare utilization, lower comparative product price inflation, lower levels of spending by the federal government, and our ongoing supplier rationalization efforts. As for the international segment, Movianto contributed $127 million in revenue for the quarter and $177 million of revenue for the four months we have owned the business. Please keep in mind, there is some seasonality in the Movianto business.

Turning, now, to gross margin results. Consolidated gross margin for the year of $925 million increased $67 million, primarily due to the positive impact of four months of Movianto operations. Please keep in mind that Movianto has both buy-sell wholesaler contracts and fee-for-service third-party logistics contracts. The fee-for-service business impacts gross margin on a dollar-per-dollar basis since there is no associated product cost. The components of gross margin in 2012 include a comparative decline in domestic distribution gross margin, which was more than offset by a positive contribution from our international fee-for-service offerings. If you will recall, we completed contract renewals with Novation and Premier in 2012. Based on results to date, both contracts were renewed within the bounds of what we have been targeting.

For the year, SG&A expenses increased nearly $72 million, largely due to the Movianto acquisition. The increase from Movianto was partially offset by decreased SG&A expense for domestic segment fee-for-service operations, including lower costs for our third-party logistics business that converted a large new customer during 2011. SG&A expenses unrelated to Movianto and the fee-for-service operations declined $5.1 million in 2012, due to lower labor costs; lower distribution center occupancy costs, primarily resulting from our exit and organizational realignment in the fourth quarter of 2011; and recovery previously uncollectible notes receivable. The decrease in labor costs include decreased incentive compensation for lower achievement against performance thresholds in 2012. These decreases SG&A expenses in 2012 were partially offset by increased delivery expenses, resulting from increased fuel costs and business growth.

During the transitional period with Movianto, we are incurring expenses as we pay the seller to perform certain business functions, such as information technology, accounting, and human resource activities, under a number of transition services agreements. At the same time, we are also incurring conversion costs and duplicate expenses as we establish and transition to parallel functions in Europe. While running these activities side-by-side is costly, it is also necessary. Fortunately, the redundancy will gradually be phased out as we operationalize our own systems and functions. On a non-GAAP basis, adjusted earnings per share declined to $1.85 in 2012, compared with $1.94 in 2011, due to a decrease in adjusted consolidated operating earnings of $9.8 million. The domestic segment operating earnings were $212 million, a decrease of $4.4 million when compared to the prior year.

Most of the decline in the year-over-year domestic segment operating earnings is associated with a series of unique events. In 2012, domestic operating earnings were reduced by a net of $900,000, due to California-specific legal expenses and loss contingencies, offset by a gain from a litigation settlement. When you compare that to 2011, when we reported a gain of approximately $2.2 million from settlement of an antitrust class-action lawsuit, we see a comparative decline of $3.1 million, representing the majority of the year-over-year decline in domestic segment operating earnings. The international segment incurred an operating loss of $5.4 million for 2012, resulting from operating costs to support underutilized capacity and expenses associated with services provided by the seller during the transition of the business to Owens & Minor.

As we reflect on the year, I'd like to take a few minutes to review some of the improvements that we made during 2012. For example, the fourth-quarter exit and realignment charges in each of the last two fourth quarters were from a systematic planned review of our network in response to the changing needs of our customers. We see that actions taken in 2011 have produced expense benefits this year. As we have said, our goal is to align our network to the needs of our customers. We continue to invest in our information technology platform; and this year, we will be in the second year of a planned $50 million IT investment. This investment will enable us to retain significant flexibility while we improve our systems and keep our day-to-day IT expenses relatively consistent as a percent of revenues. We are taking a planned phased approach to upgrading our systems so that we minimize any potential disruption to our customers. So far, our approach has worked well.

Last year, we also made an investment in our relationship with Penske Truck Leasing. With new fuel-efficient trucks, better onboard safety systems, and a one-vendor approach to our fleet, we believe we will achieve targeted financial benefits in 2013.

In closing, it has been just about one year since I took over the Chief Operating Officer role, and I've been very pleased with the willingness of our teams in the field and the home office to embrace new ideas and new tactics to bring our services to our customers. Change is never easy, but I believe our teams have done a great job adapting to a rapidly evolving healthcare market. And for that, I want to thank them for their energy and enthusiasm.

Before I comment on our guidance for 2013, it is important to put our 2012 results into context. On a generally-accepted-accounting-principles basis, we reported consolidated 2012 net income per diluted share of $1.72, which corresponds to adjusted consolidated net income per diluted share of $1.85 when excluding acquisition-related and exit and realignment charges. Excluding the loss from the international segment of $0.07 per diluted share and the impact of the California-specific issues of $0.02 per diluted share has us at a 2012 domestic segment financial result of $1.94 per diluted share, basically the same as the prior year. With that in mind, let me reiterate the guidance we have provided for 2013. The Company is targeting revenue growth of 2% to 4% and adjusted net income per diluted share of $1.90 to $2 for the year, which excludes acquisition-related and exit and realignment costs.

Thank you, and I will now turn it over to Craig for his remarks.

Thank you, Jim.

With that insight into our financial results, I'll take a few minutes to talk about ongoing market conditions, the achievements that I see we made in 2012, and our European operations. Now, looking back over the last few years, and even in 2012, we recognize the healthcare market has been affected by, obviously, a slow economic recovery; an ongoing and continuing debate over healthcare reform; rapid consolidation in the hospital market; and the ongoing globalization of healthcare products, supply chains, and services. Throughout this period, we were focused on maintaining operational efficiency, while also, investing for the future, and 2012 was no exception. We can list a number of achievements including -- the Novation and Premier contract renewals, good control of domestic segment spending, solid asset management, meaningful realignments in our domestic network, the first stage of a three-year IT investment plan, progress with our sourcing venture in China, and our investment in a promising 3PL platform that gives us a leadership edge in Europe.

First, turning to our domestic business, as Jim said, 2012 revenue results reflected little change in utilization or inflation trends that we saw throughout the year. The contract renewals for Novation and Premier are now behind us, and the results are within our expectations. Renewal years can be very challenging. First, it can be tough to sell additional services to providers until the sign-up periods are completed. Also, the sign-up process can increase pressure on expenses, as our teams must travel more to meet with customers all around the country. But, I am pleased to report that our teams manage the sign-up process very well.

One of the bright spots in 2012 was continuing strength in asset management. Domestic DSOs reached record lows in the fourth quarter, and that is thanks to the hard work of our teams in the home office and in the field. Also, inventory turns were very solid for the year and very good for the quarter. And finally, we are very pleased that we were able to generate more than $200 million in operating cash flow. Now, this asset-management strength gives us the flexibility to invest in our businesses for future growth. One of those investments was the 2012 acquisition of Movianto. We remain enthusiastic about the potential for our pan-European platform; and as we've said, Movianto gives us a superior logistics network across Europe; the expertise of 1,800 teammates; more than 600 customer relationships; and obviously, network capacity to grow the business.

In looking at Movianto's results, obviously, I am not happy about the size of the operating loss. A primary driver for the loss was the cost of supporting underutilized capacity in the network. We have said all along that filling this capacity is our biggest challenge and our biggest opportunity with Movianto. Consequently, we are working hard to sell our services in Europe, while at the same time, achieving cost reductions and operational efficiencies. Brian Shotto, our 3PL leader, was in Europe last week for meetings with the Movianto team. As you may recall, we hired Brian to lead our domestic 3PL service once we had accomplished the startup phase. His leadership team acted quickly to achieve operational efficiencies and bring it to break-even.

We are now taking similar steps with Movianto. Under Brian's leadership, we have made a significant management change in Movianto, recruiting a new CEO for the business in Europe. Marie Groeneveld brings 29 years of logistics experience in Europe. We look forward to leveraging his know how and experience. Marie, who is from the Netherlands, worked with Brian in healthcare logistics at another company, and these two leaders share a history and a common vision for logistics. We remain convinced that there is growing demand for these services in healthcare. With the platform spending in the US and Europe, we believe we have the right solution for the market.

As we invest in our future, we are still creating long-term value for our Company and our shareholders. Last year, through dividends and share repurchases, we returned $71 million to shareholders. As for the dividend, I am very pleased to report that our Board of Directors has approved a first-quarter dividend payment of $0.24 per share. That's a 9% increase over the prior quarter's dividend. And this year, we are entering the third year of the $50 million share repurchase program. Our Board has also announced that our Chairman, Gil Minor, will be retiring after the shareholders' meeting in April. At that time, he will assume the title of Chairman Emeritus. I think I speak for his many friends, colleagues, and certainly, for the teammates in saying that Gil has been an inspiring leader and a great mentor to many of us throughout his long career. He is truly one of a kind.

Since this is our year-end call, I want to take a moment to thank our teammates in the US, Europe, and China. When I look back at what we achieved in 2012 in the face of so much change, I am truly proud of them. I want to thank all of our teammates for their efforts in 2012. Thank you, and we'd be glad to take your questions. Kevin?

(Operator Instructions)

Robert Willoughby, Bank of America.

Craig, was the management change at Movianto that you just mentioned -- was that anticipated ahead of the merger close? Then secondarily, have you offered any insight as to when the operating losses at Movianto -- when do you expect they turn to operating profits?

Let me comment on two things. One, I had the chance to meet Marrie back in October when I was there, and I will actually be back there the first week of March, and I'll be looking forward to working with him. We had been talking with Marrie for a period of time.

The second piece, Bob, is -- and I'll just make this very clear for all the questions. When you have a lot of capacity, I think your first option is to try to sell your way out of it. I think with bringing Marrie in, we are going to look at the total infrastructure of what we have in Movianto, the expenses that we have, and I think it's going to take a combination of both.

We also have, obviously, the TSA, or the transition services agreement, which is very high on my list, which is the services that we pay Celesio. If you remember, we had to do this with McKesson back in 2006. And if I remember correctly, we actually had a little blip of operating loss when we first took on McKesson. So, you really don't know what you have until you really start pulling things out.

I'm not trying to dodge your question, but obviously, SG&A and infrastructure and operating expense is very high on our profile. Brian just got back, so I'll be sitting down with him, today. We are going to move as quickly as we can.

I think the other piece we need to remember is, like any sales and service organization, there is always an opportunity around contract compliance, so we're taking a very hard look at the 600 contracts we have and making sure that all of the manufacturers are in compliance in terms of what we are doing for them.

Is it realistic to say that you'd at least exit the year on a profitable run rate, or just too early to tell given all those parts?

I think we're still committed to breakeven in 2013, so that's -- I think that would be -- that's a good goal for us. I think it was a good goal for OM HCL in 2012. And, I have a lot of confidence in Brian and Marrie that they're going to move as fast as they quickly can. They were together off and on for 29 years, so these guys are a pretty good team in terms of looking at the 3PL business.

And, on the California tax issue -- if you are able to get that $7 million benefit that you're after, can you -- any idea how that will flow through the P&L? Is that a lower tax rate for a quarter, or does that show up somewhere above the line?

Yes, Bob, this is Jim Bierman. I think right now the expectation is that it is than offset somewhere or -- it's reported somewhere within SG&A. Now, it may be in the other income category within SG&A. The notion behind it was the establishment of a sales office in one of the given areas of California that had tax incentives associated with it, so we've increased the SG&A expenses in setting up this office. You would think logic would somehow dictate that the incentive piece of it -- the tax incentive would be an offset to those increased expenses. Unfortunately, for a number of years, we have borne the brunt of the increased expense, and we haven't enjoyed the promised incentive that we were -- that California had presented to us.

You have no sense of timing on that, Jim? It's impossible to tell?

It's very difficult to tell, and my legal counsel keeps telling me to relax. It will come when it comes. But, it has been a major source of frustration for all of us.

Okay. Thank you.

Glen Santangelo, Credit Suisse.

Jeff Bailin in for Glen. Could you give us a little bit of a update on the trends with your domestic's 3PL business? What kind of trends you are seeing in terms of adding new business partners, and how the benefit of owning Movianto is helping out the domestic business?

I think we touched on that a little bit at Investor Day. I'm not going to get probably into a monthly call-out scorecard on one business, but we had picked up four new customers -- that was in late November, really around the combination US-Europe approach to third-party logistics. Two of the customers, I know, were in the United States OM HCL business, and then, two were Movianto, and I might be, actually, missing one. I think it might be, actually, five, so three in Europe and two in the United States.

We also said in the opening remarks, and if you remember correctly at the end of 2011, we said we would be breakeven in the US business, which we currently are today. So, the piece of the 2012 was continuing to get that business stabilized, really starting to build a sales pipeline. We've got some new sales people in there. So far, I feel like everything that we felt we were going to do in that business in getting it set up and how that might help us in Europe has come to fruition, so far.

Great. Maybe just one more, if I can. As we are moving here early into 2013, and your expectations around utilization for the year -- have you noticed any changes, improvements, or issues relative to 2012, or is it continuing as it's been?

Sure. We looked at the fourth quarter very closely, and some of the megatrends that we've called out, for a number of quarters now, continue -- the big get bigger, in just a soundbite. So, we continue to see that, but when you call away that and look at the fundamentals, we are not seeing a dramatic change in utilization. So, as we think about 2013, the outlook that we shared, the comments that we made at our Investor Day at the end of November, remain consistent.

Okay. Thanks, guys.

Lisa Gill, JPMorgan.

It is actually Gavin Weiss in for Lisa. Just going back quickly to Movianto -- has something changed in the market since the acquisition? Can you talk about the business versus your expectations when you originally executed the transaction?

Gavin, I think it's more any time -- let's look at two dynamics of this business. One, again, it's a carve out, so a lot of times when you are dealing with a carve out, you don't know what you have until you really have everything. I don't think we were surprised, but we did have some more transaction costs, and then we did have the challenge around lower-than-expected operating results. I think we are really getting our arms around the business, we are getting our arms around the sales pipeline, and what's probably real and what's probably more positive thinking.

I think the second piece is any time you're dealing with capacity of 60%, as I had said I think in one of the early remarks, we are all salespeople. You try to get the sales pipeline going faster than normal. I think with bringing Marrie in, we have a realistic look at 32 facilities in Europe, and the potential of filling those; and then if we can, what do we do from as G&A standpoint to improve. So, it really hasn't changed.

I think the other piece is really looking at all the contracts and making sure that we get paid appropriately through the 600 manufacturers that we have. So, we have some work to do. We knew we were going to have some work. I think Marrie is going to do a good job for us -- a lot of experience. It's really -- just remember, at the end of December, we had only had that business for about three months. So, you've got to, through experience, pick up as fast as you can. I think we've got our arms much better around that business, now.

Okay. That's good to know. Then, in terms of the guidance range for 2013, can you maybe talk about what the factors would get you to the high end of the range, and what would drive to the low end of the range? I'm assuming, obviously, losses from Movianto would drive it down, but what could be upside here?

Gavin, this is Jim Bierman. I think, unfortunately, just to repeat your observation, the biggest driver we have to achieve upside or downside performance is how quickly Movianto can stabilize, reach breakeven, and then reach some degree of expected profitability, given the level of investment that we've made. So, I think everything else pales by comparison.

That being said, if you look at the domestic segment, I think a meaningful, sustainable uptick in utilization would certainly drive much to the bottom line or to operating earnings for the domestic business. We feel very good about the operational model that we have in place and the improvements we are making, and we believe we have general capacity for some additional throughput that, in a classic sense, should be a marginal contribution to the bottom line. I think those are the two largest drivers.

Obviously, the gross margin issue, domestically, is one that consistently needs to be worked on, and so does SG&A. But, that's a continual aspect of the business, and absent something very unusual happening, I don't see dramatic trend shifts in either of those two areas.

Okay. That's very helpful. Thank you very much.

Robert Jones, Goldman Sachs.

I was just trying to get a better sense of what the gross profit assumption is for the domestic business for 2013? Even directionally, I don't know if you guys are obviously willing to disclose with the assumption is specifically, but it would seem like we didn't see much improvement on that line into year end, so I was wondering if you could share a little bit on what the expectation is for gross profit margin expansion, or what the expectation is overall for 2013?

Yes, Robert I think -- let me try to answer that directionally because I don't think, at this point, and as we gave the outlook for 2013 at Investor Day that we are comfortable being more granular. But, I think I can definitely address, directionally, the thinking.

Now, just to level set, at Investor Day at the end of November -- and we shared our outlook for the year of 2013 for modeling purposes, we were thinking in terms of gross margin of 11.75% to 12.25%. And obviously, that's consolidated. So, there is an international component that has a heavier fee-for-service than domestic fees, and that disproportionately influences the gross margin, at least when you compare to the past. In the fourth quarter, we came in at 11.65%, so just outside the range; but again, the outlook was for the entire year and is definitely within a reasonable range.

If you deconstruct that, and look at the contribution of the international segment for, let's say, for the year because that gives us four months, a little more data points, we recognize revenue of $176 million. The component of the changing in gross margin, related to fee-for-service, represents about $74 million of that. So, about $100 million of the $176 million came through as a buy-sell kind of an arrangement, which as we've talked about, traditionally have lower margins than what we would see, here, in the United States. So, if you adjust for the additional data I just shared and back out, you get to where we are, domestically, for gross margin.

The directional guidance I would give is -- for the fourth quarter, our gross margin, domestically, was very much in line with what we had seen for the entire year. We view that as being positive, given some of the changes that were towards the back end of the year, specifically GPO sign ups and so on. So, all in all, the gross margin, domestically, held within reasonable range of our expectations, at least as those expectations were formed during the course of the year.

That's actually really helpful. Thanks, Jim.

Then, on the international side -- again, trying to understand Movianto more from the top line. Obviously, we don't have a ton of experience with this business, and it does seem like it's a little bit more seasonal than what were used to from you, domestically. Is the $127 million that we saw in this quarter -- I know it probably is plus or minus quarter to quarter, but is that a fair annual run rate to think of on a quarterly basis, or is this still something that's going to evolve as we move through 2013?

I think you will evolve as we move through 2013. Our colleagues, our new teammates over in Europe, continue to advise us, counsel us, that the business can be seasonal, and the fourth quarter is a higher run rate, so we take that advice seriously. And, we think we will have more, obviously, data points as we get to the next quarter, but that's how we see it, presently.

Great. Thanks so much.

Eric Coldwell, Robert W Baird.

Jim, first off, on the domestic fee-for-service business, in the first nine months of 2012, you gave us a sense on what the revenue trend was year over year. I'm curious if you could do the same for us for the fourth quarter, or perhaps for the full year?

Sure, for the full -- I can for the full year. I don't happen to have the fourth quarter broken out. Eric, for the full year, domestic fee-for-service revenue was fundamentally flat. It's a 200 basis -- I'm sorry, a $200,000 shift between one year and the other; but basically, think of it in terms of being flat.

And, the little bit of tick up that we -- increase that we saw in third-party logistics business was offset by the little bit of decrease that we saw in the consulting business. And, I think we've talked, consistently, over the course of the year that the consulting business has run into some sales challenges this last year, as the market has gotten more competitive, with very large consulting firms stepping down into a space that we enjoyed with very little competition, other than boutique consultants.

I know you mentioned that the domestic fee-for-service side has achieved breakeven/profitability. I wasn't clear if that was indicative of the fourth quarter or for the year, in total? I know you made, I think, a little over $1 million in the third quarter. Can you give us a sense on the fee-for-service operating profit in the fourth quarter?

Domestically?

Domestic, yes.

I'm not sure I have that broken out on a quarter basis. Craig made the comment that we achieved breakeven status in the third-party logistics business in 2012, I think that pretty much, I think, answers your question.

Okay. Then, in the past, you have also been kind enough to give us a deeper dive into the core US distribution business, the drivers of revenue, breaking out, of course, the one extra selling day this quarter. But, new business -- net new business, wins, losses, existing clients, and then maybe even volume and pricing. I think you have, in the past, given some fairly detailed analysis in terms of what the influences were to get to the top line in distribution. Could you do that, again, for us?

I think what I'd do is refer you to our filings with the -- on the Form 10-K with the Securities and Exchange Commission. We are working through -- because of the increased disclosure associated with the international and domestic segments, we're working through that actual disclosure, and that filing will be done shortly.

I think I can answer your question directionally. We, certainly, saw modest growth in what one might characterize as same-store sales or existing customers; and there was, for the year, again fundamentally, neutral impact of the net gain and losses of customers. But, I think the actual quantitative amounts, I would direct you to the 10-K filing, when that gets done.

Okay, that's fair. Then, last question is more of a clarification. I know you mentioned the -- with international Movianto, you made a comment about the fourth quarter having some seasonality. I assume you meant seasonality to the upside, a strong quarter, so that $127 million revenue performance -- are you signaling that we should be looking for something a little below that as we kick off the first quarter?

Yes, I think that's sort of the guidance that we've been given from our folks in Europe is to think along those terms, yes.

That's great. Thanks, I'll drop off there.

(Operator Instructions)

David Larsen, Leerink Swan.

As far as revenue guidance goes, for the domestic segment for 2013, are you expecting fairly flat revenue, and the increase, overall, is really Movianto?

David, good question. And let me, again, level set everyone. The guidance that we have given for revenue growth on a consolidated basis is between 2% and 4%. We have the benefit of Movianto being reported, within our results, for four months out of 2012. So, by virtue of the fact that we have eight additional months where there has been no Movianto, we will get a pick up. And, as you think about that, and run the math, you fall between the 2% and 4%. The domestic component is a relatively modest growth when you look at it from that perspective.

Okay. Then, do you have any initial thoughts on domestic growth for 2014? If we have 35 million people gaining access to health insurance, would you expect volumes to improve in 2014? Without getting too specific, I know, can you just give some general comments there on your thoughts? Thanks.

Sure, I think we have stopped short of giving longer-range outlooks than just the next 12 months. But that being said, I think we go back to the November Investor Day and some of our comments at other investor conferences -- we do think that the bolus of new patients into the system that's being talked about would be a net benefit for our sales and for utilization. So, it's debatable, right now, what that impact may be. We've all seen and heard numbers in the $30-million range to [60 million] of additional patients in the system, and it's not clear how they will access the system. But all in all, we think as these -- if these types of numbers materialize, that the knock-on benefit to us will be positive, absolutely.

Okay. Can you give a sense as to how much the transition services ran as far as costs go? I'm trying to get a size -- there was a $4 million or $5 million operating loss in the international segment -- any idea for how much the transition services piece cost?

I don't have that broken out separately. We will consider that for our 10-K filing. But, I don't have it here at my fingertips, sorry.

Okay. Then, my last one -- as far as Novation, Premier, and MedAssets go, what percentage of total revenue do those three items contribute? Thanks.

Novation, Premier, and MedAssets -- I think you have to throw HPG in, and it's about 80%, 85%. I don't think it's dramatically different than the disclosure we had in the last 10-K as to what the amount is, but it's upwards of 80%.

Is MedAssets the only one that's still outstanding, and --?

HPG -- so, in the 2013 contracts that are up for renewal will be the Broadlane/MedAssets, and then HPG.

Okay. Then, did you convert any large IDNs on to your platform this quarter? I think you had three last quarter.

Trying to think, did we -- nothing that was -- that I can think of --

I don't think we actually break it out by quarter, but let me maybe -- I think we had a couple of them that were probably in the process of smaller ones, but still pretty big that we are bringing on.

I do, based on your question, I was hoping somebody would ask me about consolidation, today, so I was going to wax philosophically on that. I do think we're going to have some opportunities -- I was at a non customer yesterday, spent all day there. And, I do believe that the investments that we're making in our strategy are going to be the right strategy for these larger systems around consolidation of physicians that are owned and managed, transportation logistics, warehousing standardization, all the things that I talked about yesterday -- this system was very interested in.

And, I do think we are still going to continue to have opportunities with these larger systems with the investments we have made around technology, around consulting resources, our warehousing -- our different warehousing capabilities for these larger customers, I do think we are going to continue to have opportunities with these larger systems as we go forward. So, I do -- we had a couple of them, but I wouldn't say that they are in the magnitude of, probably, what you're thinking about that we brought on, maybe 18 months ago, but they are fairly significant customers and nice wins for us.

Great. Thanks, Craig and Jim, appreciate it.

I'm not showing any further questions at this time. I'd like to turn the conference back over to Mr. Smith for closing remarks.

All right, Kevin, thank you.

Thank you for everybody listening in today. We had a very busy 2012. We really got a lot accomplished. We've got a lot that we're looking forward to accomplishing in 2013, and we have several conferences coming up over the next several months that Jim and I would love to have a conversation with you.

Thank you for your interest, and thank you for your participation today, and we'll see you soon.

Ladies and gentlemen, this does conclude today's conference call. You may now disconnect, and have a wonderful day.