Larry Kurtz - Vice President of Investor Relations John H. Hammergren - Chairman, President, Chief ExecutiveOfficer Jeffrey C. Campbell - Chief Financial Officer, ExecutiveVice President

Lisa Gill - JPMorgan Glen Santangelo - Credit Suisse Tom Gallucci - Merrill Lynch Larry Marsh - Lehman Brothers Ricky Goldwasser - UBS Bret Jones - Leerink Swann & Company Steve Halper - Thomas Weisel Partners Eric Coldwell - Robert W. Baird & Co. John Patrick Walsh - Wachovia Securities Robert Willoughby - Banc of AmericaSecurities Barbara Ryan - Deutsche Bank

Good afternoon and welcome to McKesson Corporation Fiscal 2008Second Quarter Conference Call. All participants are in a listen-only mode(Operator Instructions). This conference is being recorded. If you have anyobjections, you may disconnect at this time. I would now like to introduce Mr. Larry Kurtz, Vice President,Investor Relations. Please go ahead, sir.

Thank you, Bridget. Good afternoon, and welcome to theMcKesson fiscal 2008 second quarter conference call for the financialcommunity. With me today are John Hammergren, McKesson's Chairman and CEO andJeff Campbell, our CFO. John will provide a business update and then introduce Jeff,who will review the financial results for quarter. After Jeff's comments we'llopen the call for your questions. We plan to end the call promptly after onehour at 6 pm Eastern Time. Before we begin, I caution listeners that during the courseof this call we will make forward-looking statements within the meaning of theFederal Securities laws. These forward-looking statements involve risks anduncertainties regarding the operations and future results of McKesson. In addition to the company's periodic current and annualreports filed with the Securities and Exchange Commission, please refer to thetext of our press release for a discussion of the risks associated with suchforward-looking statements. Thanks and here's John Hammergren.

Thanks, Larry, and thanks everyone for joining us on ourcall today. McKesson continues to have positive momentum through the first halfof fiscal 2008. Inthe second quarter revenues were up 9% and earnings per diluted share fromcontinuing operations were up 24%. We're seeing the advantage of a broad cohesive offering thatprovides best in class quality with value-adding products and services soldinto a strong and loyal customer base in a dynamic sector of the economy. As a public dialogue about improving healthcare access andcost gross, healthcare services continues to be a great place to be andMcKesson is well positioned to deliver solutions for our customers and createvalue for our shareholders. Both our segments are achieving steady balanced revenuegrowth, which we can leverage into annual operating margin expansion. Ourstrong balance sheet, solid cash flow and diverse and flexible capital deploymentstrategy provide additional opportunities to grow EPS. I'm very pleased withthe progress we continue to make across the company. In Distribution Solutions our U.S. pharmaceutical distributionrevenues grew 9% in the quarter reflecting continued solid growth in both themarket and in our customer base. I'm especially pleased with our revenue growththis quarter, which reflects our attractive business model and our diversity ofcustomers including our strong position in mail order segments, which continuesto be one of the fastest growing parts of the market. Our Distribution Solutions operating profit margin expandedfour basis points over the last year. That is also an impressive performanceconsidering that the second quarter a year ago included the positive effects oflaunches of several major generic drugs, a $10 million dollar anti-trustsettlement and a $10 million dollar LIFO credit none of which recurred in thesecond quarter of this year. Our results this quarter reflect our continued greatrelationships with our pharmaceutical-manufacturing partners both branded andgeneric. Our teams continue to execute well to deliver benefits to both themanufacturers and our partners. Our agreements with branded manufacturers were a particularlyimportant driver of our strong profit growth this quarter. In additionreplacing a significant amount of generic product profit from the secondquarter of a year ago was a challenge this quarter. Our team that manages our product acquisitions and relationshipswith generic pharmaceutical manufacturers executed very well and exceeded theirgoals in the quarter. Our generic programs are delivering great value to ourcustomers and in return we are seeing increase participation and increasedcompliance. The number of pharmacies in our proprietary One Stop programincreased 13% to 10,500 from 9300 inthe second quarter a year ago, reflecting increased participation across a widerange of customers with particular progress in our base of regional chains andhospital group purchasing organizations. For example our new agreements with Kinney Drugs, which has90 stores in upstate New York and Vermont and Wegmans, which has 71 stores inthe Mid-Atlantic states now include supplying generics in addition to brandedpharmaceuticals. ShopKo, a Wisconsin based chain with 135 stores in 13 statesrecently closed its warehouse and now uses McKesson for both branded andgeneric deliveries to its pharmacies. We also signed a division of ShopKo called Pamida, which has126 pharmacies in the Midwest and Mid-South to a new contract that now includesgeneric supplies. We recently renewed our agreements with Costco and Target andthey continue to purchase their generics from McKesson. And I mentioned on our last call that the Broadlane HospitalGPO now also participates in generic plan for institutions as do several otherGPO’s. Our independent pharmacy customer base also continues toexpand. These pharmacies buy virtually 100% of their generic productrequirements from McKesson and equally important they are among our bestcustomers for the valuable higher margin products and services we provide toenable them to compete on a level playing field with much larger pharmacies. This expanding base of generics customers provides a strongfoundation for our future growth. We continue to expect that over the nextthree years the large number of scheduled patent expirations for major brandedpharmaceuticals represent a significant profit opportunity for the company. Of course to be able to provide the value-adding productsand services such as generics, first our customers must have confidence thatthey are receiving the best possible service. We are currently achieving thehighest service levels we have ever achieved, more than 95% of our orders arefilled on an unadjusted basis the first time while inventory write offs and baddebts are at historical lows. Contract and charge-back accuracy is at a historic high. Webelieve that we represent best in class operating performance in what isprobably the most efficient and safest supply chain in the world. Our customers appreciate this high level of quality. We werechosen Pharmacy Supplier of the Year and Overall Corporate Supplier of the Yearfor 2006 by CVS Caremark, the largest dispenser of prescription medicine in theUnited States and the nation's largest retail drug store chain, all for ourinventory management capabilities and our commitment to customer service. Our relationship with CVS actually began in 1996 with acontract to supply the CVS pharma-care mail order operation. We've been theexclusive distributor of pharmaceuticals to Caremark since 2001 and we've beensupplying CVS pharmacies since 2004 when they acquired the Eckerd Storesserviced by McKesson, and they chose to continue that relationship. Our relationship has since expanded when CVS acquired theSavon and Osco stores of Albertsons, which were previously McKesson customers.Subsequently we were awarded distribution contracts for a portion of CVSwarehouse business and later for the pharma-care specialty business. CVS Caremark is now our largest pharmaceutical distributioncustomer. They are also one of our largest customers for our RelayHealthintelligent network and claims processing services. As we look ahead to the longer-term growth potential for thedistribution segment McKesson is well represented in the North Americanpharmaceutical and medical surgery distribution markets. In the United Stateswe have a balanced portfolio of pharmaceutical distribution businesses with asignificant share of customers in national and regional retail drug chains,mass merchandisers and food and drug combos, mail order, long-term care,hospitals and independent pharmacies. We are also well positioned in the fastest growing sectorsof the medical surgical products market, physician offices, clinics, surgerycenters, long-term care and home healthcare. In Canadaour pharmaceutical distribution business is evenly balanced among the variousclasses of customers that are using distributors and we own 49% of the largestpharmaceutical distributor in Mexico. Looking at the market one additional area we targetedstrategically to expand our position in is specialty distribution. Sales ofspecialty drugs are increasing rapidly, especially oncology drugs. More than 200 oncology drugs are in development cross thepharmaceutical and biotechnology industry representing more than 50% of the newdrug pipeline. Between 2006 and 2010 sales of oncology drugs are forecasted byIMS Health to increase from $30 billion to $60 billion dollars. Our specialty business has been growing rapidly, but from asmall base and a sub-scale cost structure. By our recently announcedacquisition of OTN and combining that acquisition with our existing specialtybusiness, we now have an enhanced position in the fastest growing area of themarket with a more competitive footprint of services and a more competitivecost structure. OTN is one of the nation's largest distributors of specialtydrug products serving the need of more than 3500 oncologists, 1500rheumatologists and many other providers with annualized revenues ofapproximately $3 billion dollars. Because of its broad range of capabilities and position inthe market OTN was a coveted asset. We will experience some marginal dilutionas we restructure the combined business over the next 12 months, but we feel itcompletes our balanced market participation with a much stronger products andservice offering in this key area. Now turning to Technology Solutions, we had revenue growthof 36% in the quarter driven by 52% growth in our services revenues, much ofwhich was due to the acquisition of Per-Se Technologies. The integration ofPer-Se, which is going very well and the move of our payer business into TechnologySolutions this year reflect the portfolio approach we use to deliver sustainedgrowth and margin expansion in this segment. Our goal over the long-term is to leverage our uniquesoftware and services technologies, broad offering a large install base ofcustomers to deliver above market growth with more predictability and lessrisk. Before highlighting some of the individual accomplishmentsworth noting let me describe the focus of McKesson Technologies Solutions infour key areas to expand the market for healthcare information products andservices. McKesson provider technologies addresses the needs of hospital andphysician offices for clinical, financial, administrative and many othersolutions to improve the quality and cost of healthcare. RelayHealth provides connectivity solutions to providers,pharmacies, and payers to align patient care with financial flows, McKessonHealth Solutions provides commercial and government payers with software andservices designed to optimize their operations and health out comes forpatients, and our international group provides software and services to theEuropean healthcare market. In every case we are providing customized solutions thatcombine parts of our offerings within or across the four areas of MTS, and forthat matter across all of the businesses of McKesson. Now let me briefly review the major highlights within theMcKesson Technology Solutions portfolio. The McKesson provider technologies ourhospital customers are continuing to demand solutions to support clinical andpatient safety initiatives and connectivity including Horizon Medical Imaging,Horizon Cardiology and Horizon Expert Orders but as more and more hospitalsnear the completion of the re-engineering of their clinical work flows withsoftware and automation we already see them looking ahead to utilize the newdata gathering capabilities of these clinical solutions to improve theirperformance. We are seeing increasing demand for newer solutions such asHorizon Performance Manager, our analytics tool, which enables customers to usethe data captured in their systems to make improvements in clinical,organizational and financial performance. Now along the same lines our OR Benchmarks Collaborative hasaggregated data for more than 2.5 million surgical cases from 350 participatinghospitals cross the United States and Canada. This solution provides a web-baseddashboard that enables hospitals to measure and compare their operating roomperformance to that of similar facilities across all of North America. We are seeing continued demand among our physician customersfor solutions that integrate practice management through electronic healthrecords. We have a unique strategy to meet the demand in a way that responds tothe financial needs of physicians, which I will address shortly. Now turning to RelayHealth, we are seeing growth and demandfor solutions that leverage our overall customer relationships and connectivityassets. During the quarter RelayHealth signed a multi-year renewal of itsagreement with Wal-Mart stores to provide pharmacy network and value-addedservices reflecting quality and reliability of our offering for this importantcustomer. RelayHealth is also a key component of our new providerTechnology Solutions for physician offices called Practice Partner Complete,which is a hosted service offering designed to remove the hurdle of capitalinvestment by physicians, which is obviously one of the barriers to adoption toelectronic health records. It is our goal over the time to increase our servicesrevenue stream and this is a perfect opportunity. Practice Partner Completecombines our highly rated Practice Partner software and billing and accountsreceivable management services from provider technologies with RelayHealth'selectronic transaction processing. The attractiveness of Practice Partner Complete's businessmodel is enhanced by the strong reputation for quality and track record forsuccess of the component parts of the solution. The Practice Partner Suite,which integrates with practice management systems, received top rankings forthe fourth consecutive year from the AC Group. Now many of you know that we are already providing billingand collection services to approximately 17,000 U.S. physicians, that servicereceived the North Face Score Board Award for the fourth straight year. Thisannual award recognizes organizations that are rated only by the customer consistentlyexceed expectations in the areas of customer service and support. Health care is being transformed by several factors that aretogether shifting more of the payment responsibility to the patient andcreating the need to better manage a much larger number of high volume, lowvalue financial transactions. A partnership of JPMorgan Chase was announcedlast quarter. RelayHealth has also signed a strategic partnership with theBank of America who shares our commitment to delivering improved electronicpayment processing and healthcare. Both of these partners are well-respectedfinancial institutions and have a large footprint of healthcare customers. Through these relationships together with Relay’s healthproducts and services we plan to integrate the administrative clinical andfinancial healthcare transactions to streamline, maximize and accelerate bothpayor and consumer payment flows. McKesson is the only company capable of providing such anintegrated solution for healthcare. RelayHealth today processes more than $1trillion dollars in healthcare billing transactions annually on its intelligentnetwork. Earlier today we announced a RelayHealth’s new payor-directinitiative focused on providing the most comprehensive connectivity for payorsin the healthcare industry has now been launched. Our payor-direct initiativewill remove the intermediate steps that exist today between payors and theirprovider networks in the financial transactions process. We expect this initiative will reduce costs and improve cashflow for both providers and insurers and accelerate our growth. Because wedeliver more than traditional EDI, health plans will gain a competitiveadvantage by offering services that increase member and provider interactionand their satisfaction. Now turning to McKesson Health Solutions, the focus is alsoon measuring and improving operating performance and on cost management. Oursuite of claims performance products continues to sell very well and our diseasemanagement business continues to grow. In the second quarter McKesson Health Solutions renewed itsagreement with the Pennsylvania Department of Public Welfare to provide diseasemanagement and primary care case management programs to the states eligibleMedicaid children and adults who suffer with some of the most serious andcostly chronic diseases. McKesson health solutions also renewed its agreement withthe New Hampshire Department of Health and Human Services to provide diseasemanagement services to eligible New Hampshire Medicaid clients. Our program with New Hampshirerecently received the 2007 Outstanding Government Program, Disease ManagementLeadership award from the Disease Management Association of America. Whilepositive results cross the board including return on investment, reduction ofemergency department admissions and high levels of beneficiary satisfaction. Finally in our in international group we continue to makegreat progress with the implementation of our new payroll of human resourcesinformation system for the National Health Services at Englandand Wales.During the quarter we passed a milestone of 1 million employees receiving theirpaychecks through our system. We believe that our NHS Solution is the largestoutsourced payroll system in the world and we are on schedule to haveprofitability from this contract beginning in fiscal 2009. In summary we have great momentum across McKesson throughthe first two quarters of fiscal 2008. Both Distribution Solutions and TechnologySolutions are demonstrating their potential for value creation. Our strongbalance sheet and solid operating cash flow provides resources to further thecreation of addition shareholder value. Based on our results for our year-to-date and our momentumwe are raising our fiscal 2008 guidance range to $3.22 to $3.37 for earningsper diluted share for the continuing operations excluding adjustments to theSecurities Litigation Reserves and restructuring charges. I look forward toreporting to you on our results for the final two quarters. With that I turn the call over to Jeff and will return toaddress your questions when he finishes. Jeff?

Thank you, John, and good afternoon everyone. McKesson had astrong second quarter performance, especially in light of the challengingcomparisons we faced from the second quarter a year ago. Great execution isdriving our operating results and we are achieving good return from our capitaldeployment strategies to increase shareholder value. As always let me first begin by reviewing the consolidatedincome statement. Revenue for the quarter grew 9% to $24.5 billion, from $22.4billion dollars a year ago. Distribution Solutions revenues which, given theirsize, are always the primary driver for overall revenue growth, grew 9%. Andour Technology Solutions revenues grew 36%, benefiting from the acquisition ofPer-Se Technologies. Overall gross profit for the quarter was up 15% to $1.2billion dollars. While we had a nice increase in our Distribution Solutionsgross margin, the primary driver of the 15% consolidated increase in grossprofit versus our revenue growth of 9% was our higher Technology Solutionsgross profit driven by the Per-Se acquisition. Moving below the gross profit line our total operatingexpenses were up 14% to $827 million dollars for the quarter, excluding theimpact of adjustments to our Securities Litigation Reserves. The 14% expensegrowth in the quarter primarily reflects the growth rate of the business andthe impact of acquisition of Per-Se plus $12 million dollars of incremental FAS123R expenses versus a year ago. Our results this year do include a positive pre-taxadjustment to our Securities Litigation Reserves of $5 million dollars,reflecting the net impact of several settlements. Our fiscal 2007 resultsincluded a similar credit of $6 million dollars. One of this year's settlementsresulted in the dismissal of the Bear Stearns appeal of the McKesson settlementof the Federal Securities consolidated action. As a result of the elimination of this last condition to theMcKesson settlement our December quarter financial statements will reflect theremoval of $962 million dollars of restricted cash reported on the balancesheet along with the related liability. Operating income of $359 million dollarsin the quarter was 17% above last year, great leverage on our revenue growth of9%. Moving below operating income, our interest expense of $36million dollars was $14 million dollars greater than the prior year due to the$1 billion dollars in additional debt, which we used to finance a portion ofour Per-Se acquisition. Other income of $36 million dollars was little changedfrom a year ago. McKesson reported a tax rate of 31.2% in the quarter and ourexpected effective tax rate for the year is now 33%, a downward adjustment fromthe 34% to 35% range originally expected. The adjustment to 33% reflects thecompany's growing mix of foreign versus domestic income. The reported tax ratefor the quarter primarily reflects a two-quarter catch up to the new expectedannual rate. On a GAAP basis this quarter we had net income of $247million dollars, or $0.83 per diluted share, compared to $229 million dollars or$0.75 per diluted share a year ago. For the fiscal second quarter earnings perdiluted share of $0.83 included the positive impact of the $5 million dollars pretaxcredit to the Securities Litigation Reserves, or $0.01 per diluted share. Second quarter earnings per diluted share of $0.75 a yearago included an after tax loss from continued operations, excuse me, fromdiscontinued operations of $0.19 per diluted share, primarily from the sale ofMcKesson's acute care medical surgical business and favorable adjustments tothe Securities Litigation Reserves of $0.28 per diluted share primarily due toa credit to income tax expense resulting from an adjustment to a tax reserve. Our income from continuing operations in the quarterexcluding adjustments to Securities Litigation Reserves was $244 million dollarsor 22% above last year. In the quarter we had diluted earnings per share fromcontinuing operations excluding adjustments to Securities Litigation Reservesof $0.82, or 24% above last year's $0.66, clearly a very strong performance. To wrap up our consolidated results in the quarter, ourdiluted EPS calculation was based on 299 million weighted-average dilutedshares outstanding compared to 305 million in the prior year. The number ofshares used in this calculation declined due to the cumulative impact of ourshare repurchases. Let's now move on to our two operating segments. Indistribution solutions for the quarter we achieved solid revenue growth of 9%,driven primarily by the 9% growth in our U.S.pharmaceutical direct distribution and services revenues, which, as Johndiscussed, we are particularly pleased with. Our Canadian revenues increased 15% for the quarterincluding a favorable currency impact of 8% given the record strength of theCanadian dollar. We continue to see great overall performance in our Canadianbusiness. Medical surgical distribution revenues were up 11% for the quarter,primarily reflecting market growth. Our U.S. pharmaceutical sales mix for the quarter was 31%institutional, 23% retail change, 13% independents, and 33% warehouse, that breakdown a year ago was 29% institutional, 24% retail chains, 13% independence and34% warehouse. Gross profit of $848 million dollars was up 10% from $769million dollars in the second quarter a year ago. And as John mentioned gross profit in the second quarter ayear ago included the positive impacts of an anti-trust settlement of $10million and a LIFO credit of $10 million, excluding the $20 million dollar impactfrom prior year results, gross profit would have increased 13% showing niceleverage on our 9% revenue growth. The key drivers to this gross profit result in the quarterwere an improved mix of higher margin products and services including profitgrowth in our proprietary generics programs and the impact of our agreementswith branded pharmaceutical manufacturers, the compensation from which as we'vediscussed in the past can vary unpredictably from quarter-to-quarter. Our distribution solutions operating expenses were up 10%for the quarter to $491 million dollars. Operating expenses in the segment wereprimarily driven by revenue growth but were also impacted by higher expenses inour retail Pharmacy Systems automation business as a result of our Per-Seacquisition. Operating margin for the quarter was 154 basis pointscompared to 150 basis points in the prior year. Adjusting for the $10 million dollaranti-trust settlement and $10 million dollar LIFO credit in the prior year,operating margin increased 13 basis points. Now turning to technology solutions, revenues were up 36%for the quarter to $712 million dollars reflecting the impact of Per-Serevenues and continued growth and implementations of software and imagingsolutions for hospitals, clinics and physician offices. Service revenues whichnow account for 76% of total revenues in this segment were up 52% to $538million dollars. Software and software systems revenues, which now accountfor just 19% of revenue, were up 4% to $139 million dollars. Gross profitmargin in the segment of 46.8% with 180 basis points below last year was largelydue to our higher mix of service revenues. Technology solutions expensesincreased 31% in the quarter to $270 million dollars. Higher expenses were driven by Per-Se operating expenses,incremental FAS 123R expenses of $6 million dollars compared to the prior year,and continued investments in new product development. The quarter technologysolutions had total gross R&D spending of $91.4 million, an increase of 18%for from the prior year. Of this gross amount, we capitalized just 11% thisyear compared to 21% a year ago. The lower capitalization rate in the quarter was primarilydue to the write-off of some software related R&D in our McKesson Health Solutionsbusiness without which our operating profit and operating margin rate wouldhave been higher this quarter. Operating profit in Technology Solutions thisquarter was $66 million dollars, up 27% from $52 million dollars a year ago. Our operating margin was 9.27% compared to 9.9% in thesecond quarter a year ago. Now I'd remind you that there is some quarterlyvolatility in our operating profit in this segment due mostly to the timing ofrevenue recognition across the segment, but we are still focused on ourlong-term goal of an annual margin rate in the low to mid-teens. While we don'texpect to be in this range for fiscal year 2008 we will begin to approach asignificant improvement from the 9.2% rate for fiscal year 2007. Leaving our segment performance and turning briefly now tothe balance sheet, on the working capital side our receivables increased 14% to$6.8 billion dollars versus $6 billion dollars a year ago, our Day Sales Outstandingincreased by one day going from 21 to 22 days. Our inventories were $8.3billion dollars on September 30, a7% increase over last year, but below our sales increase of 9%. Our day sales and inventory of 32 was just one day lowerthan last year. Compared to a year ago payables were up 13% to $11.8 billiondollars. Our day sales and payables increased by two days going from 44 to 46days. Year-to-date, driven by these positive working capitalresults, we generated $1.3 billion dollars in operating cash flow. We actuallyhad a net reduction in working capital year-to-date and we are roughly flatversus a year ago despite our 9% revenue growth. This demonstrates the strong cash generating character ofour evolved pharmaceutical distribution model. That said, I would remind youthat there is seasonality in our use of working capital and we do tends to usecash in our third fiscal quarter. However, with the strong year to date results we arecertainly comfortable that we will exceed our previously announced annualexpectation of generating over $1 billion dollars of operating cash flow forthe fiscal year. Year-to-date capital spending was $83 million dollars, higherthan the $51 million dollars a year ago, primarily due to distribution centerupdates and higher technology infrastructure spending. Capitalized software expenditures were $78 million dollars,down from $86 million dollars a year ago. We ended the quarter with $2.5billion dollars in cash, up $564 million dollars from our fiscal year ends ofMarch, 2007. Consistent with our portfolio strategy for capital deployment year-to-datewe have repurchased $684 million dollars of shares, invested $51 million dollarsin acquisitions, paid $36 million dollars in dividends and made $161 million dollarsof internal investments. With the Board of Directors approving a new additional $1billion dollar share repurchase authorization, we now have $1.3 billion dollarsof share repurchase authorization outstanding. We ended the quarter with agross debt to capital ratio of 23.4%. After the quarter ended we completed our acquisition of OTNfor approximately $575 million dollars in cash, which will now be reflected inour third quarter financial statements. So overall based on our strongyear-to-date results we are raising our earnings guidance from continuingoperations now expect to earn between $3.22 and $3.37 per diluted share for thefiscal year ending March 31, 2008. Our new guidance is based in part on the continued beliefthat we will have a strong fourth quarter tempered by the fact that we will nowhave dilution from the results of OTN for two quarters. Our guidance does notinclude the impact of any securities litigation reserve adjustments, anypotential future acquisitions, divestitures, material restructurings orintegration related actions. We remain very positive on the health of our business andthe industry in general. We have great financial flexibility, which provides usa good opportunity to continue our capital deployment strategy to enhanceshareholder value. Thanks. And with that, I will turn the call over to theoperator for your questions.

Thank you, we will now begin the Question and Answersession. (Operator Instructions) Ourfirst question will be from Lisa Gill of JPMorgan. Your line is open. You maynow ask your question. Lisa Gill - JPMorgan: Great, thank you, and good afternoon. Jeff, just walkingback through some thoughts around the guidance that you just gave, obviouslyyou raised it by $0.07. In my estimate OTN will cost you maybe $0.03 to $0.04which would put overall raise from the initial guidance in my mind of $0.10 to$0.11 of which about $0.06 is coming from tax. So as I kind of step back andsay 4% to 5% of it is from operations and this quarter you beat consensus on anoperations side by about $0.06. How should I be thinking about the next couple of quarters?Is there something that I am missing here? And when we think about drugdistribution, is it the fact that the price increases came through in July andmaybe we won't see as much in January? I know you don't like to answerquestions about guidance but maybe if you can just help me to better understandthis.

No, Lisa in fact I think you have got the components fairlywell laid out. The way I would go through it relative to our initial guidanceis clearly we've had a strong first half performance, particularly in our U.S.pharmaceutical distribution business. And our view is that some portion of that strength is justtiming. So it's borrowing from what we thought would happen in the back halfand putting it into the front half and some portion of it is reflective of realcontinued strength that will show up in our year end results. You got a balance that against OTN, which we closed franklymore quickly than we had initially thought. So we'll now have about two fullquarters of dilution from OTN. And while there's lots of uncertainty there andour goal is to make the integration happen very quickly and get at thesynergies the dilution in our estimate for fiscal '08 is probably more in the,around $0.06 range. And this number is probably somewhat similar for '09.Certainly our goal is to beat that but that's what's in our thinking as we gothrough rest of the year. And then as you say you've got the tax good guy whichdoes add about $0.05. So it's the interplay of those effects that leads us tothe range that we've given you. Lisa Gill - JPMorgan: Okay. great. And then just as a follow up to that as we lookat drug distribution in general our anticipation would have been that U.S.would have come in lower than the 9% that you produced in the quarter. Can you just maybe talk about the impact of the Medicaredrug benefit or some other things that were positively impacting last year and whatwe are seeing, and what we should expect in the next couple of quarters, as wemove into the doughnut hole should we expect that the growth won't be as greatin the back half of the year?

Lisa, we see really good momentum in our pharmaceuticaldistribution business. We actually have a pretty positive outlook on our viewon the business and I think that the Medicare Part D uptake has been largely Ithink lapped by us although it's still a very good volume aspect in ourindustry. I don't know what effect the doughnut hole will have on usbut we remain optimistic that we’ll continue to grow at or above the marketlevels because of our mix of customers that we think are frankly growing nicelyand the second as we mentioned in this conversation today, we are increasingour position in our existing customers. We are taking on generic sales where they may have not purchasedgenerics from us in the past and we are taking warehousing business where theymay not have, they may have had their own warehouse in the past, I mentionedboth of those examples in my prepared comments. So I think we are optimisticabout the position we are in and the revenue growth outlook remains a positive. Lisa Gill - JPMorgan: Great, thanks, John and Jeff and congratulations on thecontinued strong execution by McKesson.

Thank you, Lisa.

Our next question is from Glen Santangelo of Credit Suisse.Your line is open you may ask a question. Glen Santangelo -Credit Suisse: Yes, John, I just had two quick follow up questions on theIT division. It kind of says in the press release that you guys have spent over$160 million dollars year-to-date investing in this business and capitalizedexpenditures and capitalized software. Is that maybe a little bit more than youthought you would have spent maybe six months ago and how should I think aboutthat level of investment spending as we move into the back half of the year?

Well, I think that we, other than a relatively small write-downof some software in our McKesson Health Solutions business that Jeff mentionedin the call I think that our spend is pretty much on line with what we expectedit to be. Maybe what's the difference here is we are combining all ofthis into one segment now called MTS and the second thing is we've got Per-Sein there. So the inflation in the numbers is probably driven by theconsolidation of the sectors and the acquisition of Per-Se rather than a hugeramp in R&D spending. Glen Santangelo -Credit Suisse: And then kind of as a follow up to that, Jeff, maybe if youcould talk about the magnitude of the write-off this quarter in the softwareside?

Well, I think, Glen, the way I would probably think about itif you go back to the numbers that I cited in my remarks, we spent grossR&D dollars of about $91 million dollars this quarter. That itself was up18% from the prior year. A part of that is the acquisition of Per-Se and part of itis the combination of the payor business, McKesson Health Solutions and MTS andpart of it is just continued step-up in spending. This year we only capitalized11% of that total whereas in prior years you'd see, in prior quarters you'd seeus running in the 20% to 25% range. So the simple math tells you that's aboutan $8 to $10 million dollar switch. Glen Santangelo -Credit Suisse: Okay. And then just my last question, Jeff, in terms of theguidance you were suggesting that we'll see the margin sort of gravitate not somuch in fiscal '08 but move more in fiscal '09, was that the point you weretrying to make?

You're talking about the Technology Solutions? Glen Santangelo -Credit Suisse: Yes, exactly.

So the point I'm trying to make there is that we continue tohave our long-term goal of low to mid-teens. And that's an annual numberbecause of the quarterly volatility in that margin. While we don't expect toget into that range for fiscal '08 we'll make tremendous progress and we'llbegin to get closer, pretty darn close to the range when you look at the wholeyear calendar '08. We haven't given guidance yet beyond '08 but certainly asJohn really focused in his remarks, our goal in all of our businesses is tocontinually get operating leverage. Glen Santangelo -Credit Suisse: Okay. Thanks for the comments.

Thank you.

Next question.

And your next question is from Tom Gallucci of MerrillLynch. Your line is open. Tom Gallucci -Merrill Lynch: Good evening, thanks. First, John, I just wanted to makesure when you talked about Kinney and Wegmans and a few of the others there wasthe implication that you hadn't done generics for those regional chains in thepast and now you have, now you have the contract to do that?

That's correct. Tom Gallucci -Merrill Lynch: Okay. Can you maybe just to generalize a little bit butwhat's sort of the trigger in this time frame to move that many, decent sizecustomers over on to your generics program?

Well, as we've talked about in the past we've been heavilyfocused on moving up the food chain from a generic perspective, in other wordsgetting more and more customers buying from our programs. And it's acombination of our ability to package the programs and position them properlyin the customers eyes, a combination of our ability to source the productcompetitively and make sure they've got great pricing and probably lastly tothe highlight to our customers the efficiencies they gain by basically doingaway from their own sourcing for generics, the man power associated with itplus the logistics associated with managing their own buy. It's not inconsequential to have to buy the stuff directly,manage it through their own warehousing cycles, get it out to their stores ontime, and deal with the service requirements on a store level. Most of ourlarge retail customers are heavily focused on managing the front end of theirstores and are increasingly saying to us, why don't you help us with thepharmacy operations in a holistic way. The supply chain to the pharmacy, the transaction processingin the pharmacy, the systems in the pharmacy, the automation in the pharmacyand McKesson really stands in a great position to completely envelop basicallya total solution for the pharmacy operations to improve their financialperformance and the quality of their output to their customers. So I think, its multiple things coming together at once andwe expect the momentum in generics to continue. But once again I highlightedthese are existing customers of McKesson's that are expanding their footprintwith us. Tom Gallucci -Merrill Lynch: Okay. And then just finally on the branded side, youstressed a few different times the importance of some of the arrangements withmanufacturers. Can you just give us a little bit more color in terms of whathappened this quarter that seemed to have some of that money kick in? Was itjust price increases? Was there performance metrics that you sort of get paidoff on? Just give us a bit more detail on what's going on there? Thanks.

As you know, these agreements are each individuallyconstructed and developed at the manufacturers. Clearly volume is a componentof our performance with good revenue growth, everything else also is impactedfrom a performance perspective. And the agreements are structured in such a fashion in manycases so we get the benefit of performing against the obligations and theopportunities under those agreements and I think there's some variabilityaround performance from a manufacturer perspective. So we continue to believe that we execute very well. Wedeveloped agreements with our customers that provide a mutual benefit for bothof us to win together as we perform. And it pays off in the end. Now clearlyprice increases also are a component of the value that you see this quarter.

Thank you. Does that conclude your question? Tom Gallucci -Merrill Lynch: Yes, thank you.

Thank you, next question is from Larry Marsh of LehmanBrothers. Your line is open. Larry Marsh - LehmanBrothers: Thanks and good afternoon everybody. I just had one broadquestion and then maybe a specific follow up. John maybe you could just remindus, there's been some commentary the last couple of months that a slow down inscript growth in the drug industry has proceeded at a negative impact on thedrug wholesalers, which I wouldn't necessarily agree with. Obviously your results this quarter would show both top linegrowth and good margin trends. Could you comment about that and how we shouldthink about changes in industry volume as relates to your business?

It's a good question, Larry. Clearly I received some of thesame questions during the quarter because of some discussions that had takenplace with various participants in the industry not the least of which was Ithink was IMS who had published data around script growth. We frankly don't look at the weekly, monthly and quarterlydata as much as we look at sort of the annual trends in the forecast. And Ithink any, as you might guess anybody's forecast is always wrong, it's aquestion of which side of it they are wrong on. I believe that the industry is poised for continued solidgrowth. There's nothing from a demographic or from a public policy perspectivethat should put the breaks on the opportunities for us to continue to grow froma revenue perspective, as an industry. And furthermore, I think if we’re able to capitalize asdistributors on the opportunity to bring more and more of that business thatsits outside of our channel through the wholesaling business we stand in verygood position to continue to grow in a nice balanced and profitable way. So I frankly, wedon't sit down and have large group meetings over script volumes every quarteror week when we see them. We believe that the trends over the long haulcontinue to be very positive. Larry Marsh - LehmanBrothers: Okay. Thanks and just a clarification of some of thecomments you made within the call about your being announced as the CVSCaremark Supplier of the Year. Congratulations. I guess the question I have,obviously your biggest customer as you acknowledged, you haven't disclosed howbig particularly but are there any opportunities to expand the relationshipwith this longstanding set of customers now under the CVS Caremark umbrella andis there any opportunity to try to extend the relationship before you hit thedeadline of June of '09 or is that probably outside your control or set instone?

You've been working with us for a long time, Larry. You knowwe never talk about what our customers are likely to do. We are privileged tohave the opportunity to service them and we try to earn our position in ourclient’s base every day and feel strongly that the decision is ultimately intheir hands in terms of who they do business with. I guess the purpose of the discussion today was really tohighlight because some of you had questions about our relationship with CVS. Ithink people believe that we were in a very small position at CVS and what Iwas trying to highlight is that we have a very significant position at thecombined CVS Caremark and that had we perform very well for them. And those awards were not just for the pharmacy. Those were awardsin particularly one of them as Supplier of the Year was not just a pharmacy award;it was for their entire business beating out the OTC and the front shop kindsof participants as well. So I just want to point out that we are recognized by CVSand their management team for the high quality that we deliver and we clearlyhave other points of value that we are bringing in there today like ourRelayHealth transaction processing capabilities and in the past we talked withCVS and Caremark about our automation capabilities and other kinds of servicesand we continue to hope to work with them to continue to service their needs aswe go forward. Larry Marsh - LehmanBrothers: Okay. And this is all a clarification I guess for Jeff,you're communicating it looks like as you said $0.06 of dilution from OTN andmaybe that's a couple cents more than what you had thought when you first madethe announcement back in early October. Is there any way to give us any clarification as to whatsome of your assumptions are around tangibles and length of amortization nowthat it's closed?

Well, the short answer, Larry, is no, because I don't knowwhat the intangibles number is yet. Obviously that builds an assumption intothat $0.06. Feeling this change since we announced the acquisition is we wereable to close it remarkably fast and so we had not initially expected to havemuch more than one quarter of results in '08 and now we are going to havepretty much two full quarters in fiscal '08. I was a little hesitant to give that $0.06 number justbecause we haven't, we won't even know what that intangible number is going tobe for a little while for sure. But that's really the assumption that's builtinto the number that we've shared with you today. Larry Marsh - LehmanBrothers: Are you assuming any sort of closings consolidation in thator is that again too soon to tell?

Clearly we have two overlapping businesses where we intendto move very aggressively to create value and put together the strength of thetwo companies. That is liable to drive some one-time kind of costs, which arenot included necessarily in the guidance. This is the guidance is really meantto be for continuing ops and excluding one time sort of stuff. Larry Marsh - LehmanBrothers: Okay. All right, I will stop there. Thanks.

Thank you.

Thank you. Our next question is from Ricky Goldwasser ofUBS. You may ask your question. Ricky Goldwasser -UBS: Thank you. A few follow up questions. Jeff, just to clarifyon the question of what it looks like the outlook for the next couple ofquarters, when we think about December quarter from a sequential perspective,should we assume the differences is one obviously OTN which seems to be about$0.03 diluted to the quarter and the other moving part that is impact afterbeing a decision intact from branded inflation?

Well, I will make a couple points. We of course don'tprovide quarterly guidance. We focused on annual guidance because that's theway we run the business and our ability to predict quarter-to-quarter numbersis imperfect because of the nature of the way our agreements work in ourpharmaceutical distribution business because in our software and servicesbusinesses. Our view is we want to develop and maintain long-termcustomer relationships and we don't want to get into the game of having toclose business on the last day of the quarter to make a number. Now all that said, our March quarter has historically byquite a stretch been the company's strongest quarter and that's due to both theway most of our agreements work in the pharmaceutical distribution business andfrankly the way sort of these sales structure and compensation programs are setin most of our software and services businesses. All of those things build towards a very strong Marchquarter and we’d expect that same sort of back weighting today if you take whatwe've earned year-to-date, combine that with our annual guidance and thenpretty heavily back-end weighted for that March quarter in-line with historicalpatterns. Ricky Goldwasser -UBS: And the growth we see with your proprietary generic programin the quarter given that it sounds like you have new customers or at leastcustomers that are adding this program, that impact, that growth we shouldcontinue to see on a year-over-year basis and should be pretty similarsequentially?

Sure. But that doesn't impact necessarily the quarterlyprogression and clearly that's one of the strengths built into the guidancewe've given you. Ricky Goldwasser -UBS: Okay. And then just to clarify I think you mentioned, Imight have missed it, were there any one time benefits or offsets that arefactored into the 1.54% of operating margins for drug distribution?

No. Ricky Goldwasser -UBS: Okay. Thank you.

Thank you, Ricky.

Thank you. Our next question is from Bret Jones of LeerinkSwann. Your line is open you may ask your question. Bret Jones - LeerinkSwann: Hi, good evening, it's Bret Jones for George Hill. I waskind of looking at the Technology Solutions revenue, the top line there lookeda little bit weaker than what we were expecting. I was wondering if you guys could comment maybe on the packbusiness we heard a lot of the hardware in pack vendors consistently say theyare feeling impact from the DRA and it’s even spilling over into the in-patientside and I was wondering if you guys were seeing a similar trend.

We are pleased with the progress we are making in ourtechnology business and as Jeff mentioned it's difficult to predict everyquarter what's going to close and how it's going to roll into revenues or intoearnings in that business, but we think we are very well-positioned and as alsoJeff noted we are making great progress as our strategy has been directing usto move more and more of our focus on the services side of the business andless dependent on the quarterly flow of contracts for software. That said, as you know we have one of the strongest packsproducts in the marketplace and we've now expanded that offering to includecardiology packs. The packs market clearly has been penetrated over the years,but we believe there is still more buying going on and there also is areplacement cycle under way and the cardiology cycle I think is just beginning,so we are optimistic. The growth rates have come down but the business is stillgrowing. Bret Jones - LeerinkSwann: All right, great. I was wondering is there, can you breakout the organic growth of Technology Solutions ex Per-Se.

That's almost impossible for us to do, Brett, given thatbusiness inside of Per-Se or the businesses of Per-Se are now dismantled andinside of our various businesses inside of McKesson. I, clearly the Per-Se acquisition had an impact on servicesand other businesses where it was significantly larger than our current assets.But in many of the software areas where we combined surgery software or wecombined other services it would be almost impossible for us to go back andreconstruct the same historic kind of growth. Bret Jones - LeerinkSwann: All right, fair enough. Thank you very much.

Thank you. Our next question is from Steve Halper of ThomasWeisel Partners. Your line is open you may ask your question. Steve Halper - ThomasWeisel Partners: Hi, could you provide a framework for us in terms of whatyou're thinking about the long-term operating margin for the DistributionSolutions you had previously before the pieces moved around talked about arange of 150 to 200 basis points. Is that still where you would like to be?

Clearly our goal hasn't changed or we probably would havesaid something about it. I think we continue to make progress against ourexpectations and we made progress again this quarter by four basis points andif you did it on an on apples-for-apples the growth in basis points it was morelike 13. So, I think that's great progress actually from an operatingmargin expansion on the base of business that we have. One of the clearchallenges we have in margin expansion is the faster growth of our lower margincustomers and the fact that we have to focus on that as an offset to the continuedincrease and uptake of generics and more profitable products. So, I think our guidance will remain unchanged on thatfactor and we feel like we are making progress. Steve Halper - ThomasWeisel Partners: Okay. And then just on the Per-Se pharmacy softwarebusiness, is that a Distribution Solutions or is that, is that in TechnologySolutions?

Yes, Steve, the relatively small retail pharmacy softwarebusiness is the one piece of Per-Se that is in Distribution Solutions. So it'ssmall enough so for simplicity we pointed out to people they can just model itas putting all of Per-Se into Technology Solutions. When I called it out today because when you look at just theoperating expense line in Distributions Solutions and the changeyear-over-year, no, it's a small piece that the retail Pharmacy Systemsbusiness is enough to add a couple of points to that expense growth rate. Steve Halper - ThomasWeisel Partners: And how is that business doing? I'm assuming you have a lotmore muscle and clout into the retail pharmacy customer base, whereas yourPer-Se didn't have that area of expertise. So, how are you doing with selling that software piece intoyour pharma-customers?

I think we are making very good progress. It hasn't impactedour operating profit in the pharmaceutical distribution segment yet. So, the150 to 154 was driven really by the distribution businesses performance. That said, we continue to invest heavily in the Pharmacy Systemsbusiness and we now have roughly 25% of the retail market, I believe, on astore basis running on our software behind the counter to operate thesepharmacies. So, we think of it as a significant opportunity for us tocontinue to grow our footprint. There's a significant opportunity for us to usethe cross-selling that exists between our distribution sales force and ourtechnology sales force to bring a more complete solution to our customer baseand to effect the performance of our customers, which is really our number onegoal here is to make McKesson customers the most profitable customers in thebusiness. Steve Halper - ThomasWeisel Partners: Thanks.

And to answer the question on performance, those assets areperforming well. We had a little bit of an issue, Steve, in our mail ordersoftware business, which is a real small sub-part of the systems businessesthat we acquired and we've been investing heavily in that. That's part of the expense drag you've seen in the lastcouple of quarters has been our manpower behind that mail order softwareproduct.

Thank you. Next question is from Eric Coldwell, Robert W.Baird. Your line is open. Eric Coldwell -Robert W. Baird: Thanks very much. I want to follow up a little bit onSteve’s last question with, John, your comments that Pharmacy Systems now hasin the neighborhood of 25% of the market, I'm hoping you can help us get abetter sense of what that market opportunity is today, perhaps size the marketfor us to help put that in perspective and then as follow on just trying to geta sense of retail Pharmacy Systems overall operating profit contribution? You’ve talked in the last couple of quarters about somemargin pressure there given the investment the recent comments here on themail-order piece. Where is that division in terms of operating profitabilitytoday within Distribution Solutions?

Eric I got that the question on the pharmacy software and Ican address that, what was the second part of the question on margin pressure? Eric Coldwell -Robert W. Baird: Well, in the last couple of quarters you’ve highlighted thatyour Distribution Solutions margin might have been even a little bit better ifit weren't for the OPEX within Pharmacy Systems. So, I'm just trying to get a sense, is Pharmacy Systemsprofitable today? There's a wide range of market competitors profitability inthat space, anywhere from negative 20% EBIT to plus 15% EBIT. I'm trying to geta sense of where you stand in the market and how big that market really is?

I think the market unto itself would probably not have beensomething that McKesson would have been attracted to as a stand alone businessopportunity, selling pharmacy software into retail pharmacy. As a part of McKesson we think it's another strategic assetthat helps round out our portfolio and certainly rounds out our conversationwith our customers. So, on a per revenue per transaction basis that we get outof selling Pharmacy Systems software I'd have to tell you that it's reallyimmaterial to us. In terms of the strategy it's more material because we canhave this larger scale discussion with our customers. As to the reason whysomething that is somewhat immaterial to us financially suddenly is material on an expense perspective enough forus to talk about it really is an investment, tens of millions, not hundreds ofmillions, in making these products world class. And we think its really incumbent upon us if we want alongstanding high performance relationship with our retail customers to deliversoftware that fits their needs and maybe even that software investment won'tget a great, terrific short-term return, but the overall relationship with thecustomer will and that's why we are investing in it. We are probably spending more on the mail order softwareproduct than we would have otherwise if we weren't already in the mail orderbusiness in a big way from a distribution perspective. So that should give you sortof a sense about it. Eric Coldwell -Robert W. Baird: You've given a lot of great granularity on the call todayand we appreciate that. I'm trying to against a sense if you see that totalretail pharmacy system market, is it $0.5 billion in the U.S., is it a $1billion dollar opportunity in the U.S.? You did comment that you don't see it as a great stand alonebusiness, but I'm trying to get a sense on where you are in that market today.

If it was a $.5 billion dollar software opportunity we wouldbe pretty excited about it. I don't think it's quite that big. I mean clearlysoftware businesses carry a larger margin and you can't compare those revenues… Eric Coldwell -Robert W. Baird: Right.

Distribution revenues, but I think you should thinking of itas a strategic asset for us that augments our overall retail pharmacy valueoffering as opposed to something that will move the needle for the corporationor even for the distribution segment. In terms of Pharmacy Systems revenue or Pharmacy Systemsprofit, as a part of the overall relationship, is it important? Absolutely, isit something that we'll call out in a special page and say that drove of ournumbers? I highly doubt it. The opportunity is pretty well understood by us and it'spretty bounded and I know there are other players in the market that are prettysmall in this segment but I think the reason why we are attracted to it isbecause we are scaled in the systems business already and we are also scaled inpharmacy distribution and we have a footprint with these customers that'simportant in a more all encompassing way. Eric Coldwell -Robert W. Baird: That's fantastic, a quick follow-up. You in the past havegiven some of the growth rates on your proprietary generics program andobviously you announced some nice wins this quarter and my assumption is it’sgrowing quite nicely. Can you give us the growth rate of the proprietarygenerics program this period?

I talked about the growth and the number of stores that are nowusing the product. Revenues in the business this particular quarter are littlebit softer than we typically expect because we had a comparison to last yearwhere you had Plavix, Zocor, and Zoloft. Eric Coldwell - RobertW. Baird: Right.

Which were an inflating factor in generics, but revenuesgrew nicely in this quarter in generics. So, I think all-in-all we are pleasedwith the results, but to this issue of momentum in the generics we knew wewould have a couple of quarters here where the momentum in generics was goingto be little bit softer by comparison to prior year and that's what we beentalking about even before beginning this year. Eric Coldwell -Robert W. Baird: Okay. Good job on the results.

Thank you.

Thank you. Our next question is from John Patrick Walsh ofWachovia Securities. Your line is open. John Patrick Walsh -Wachovia Securities: Good afternoon, thank you, guys. You answered my operationalquestions. A question on the balance sheet, now that you have the restrictionlisted on the cash would your thoughts be to redeploy that cash kind of right away? And I think longer term I would be curious to where you would like to keepthe cash balance. Obviously it's been at a pretty high level here for a while.Should we look to that trending back somewhere towards $1.5 billion somethingin that ballpark?

I think, let me make three comments, on the specificreference I made to the $962 million dollars in restricted cash, thatdisappears off our balance sheet and goes right into the hands of the plaintiffand ultimately the individual claimants in the class action relating back toHBOC. So that money is not available for our shareholders. Ourtarget cash balance longer term in the $1 billion to $1.5 billion range. Wecontinue to have a target capital structure of a gross debt to cap ratio in the30% to 40% range versus our current 23%. Clearly those two groups of specifics tell you we still havemore balance sheet strength to use to create value and we continue to befocused as a management team on making sure that we use that potential and getinto our target capital structure and into more of a normalized cash balancerange in the coming quarters. John Patrick Walsh -Wachovia Securities: Great, and just one more question kind of a 20,000-footquestion. Obviously we're having here apolitical year and you have having all kinds of proposals on the healthcarefront in terms of the uninsured and obviously if Democrats take office you areprobably going to have more scrutiny on the pharmaceutical companies, just kindof your sense right now in terms of how you look at the government potentiallygetting more involved in the business and how that might impact you and theoverall outlook on the industry?

Well, I'm pretty excited about the fact that the healthcareseems to be the number one debate item on the political circuit, setting asideclearly the war on terror. We’re excited about how we are positioned in thedebate. And clearly healthcare IT remains one of the fundamental tools thatwill be used by either party to control cost and to improve quality. Clearly our financial transactions business will fare verywell in an environment where you have the individual taking on moreresponsibility. And frankly, I think the pharmaceutical industry should besomewhat out of harms way in this new environment. If you look at what's happened to them from a genericperspective the industry has been completely recast and changed and I can'tthink of any politician, maybe I shouldn't say that, I can't think it would bea very good argument to say that the pharmaceutical companies are doing greatthings from a financial perspective on the backs of our taxpayers. So, I'm hopeful as we go through the cycle that the debatewill be on the right things and that's how to reengineer healthcare and ifthat's where it remains today frankly McKesson is well positioned for thatdebate. John Patrick Walsh -Wachovia Securities: Thank you.

Thank you. Our next question will be from Robert Willoughbyof Banc of America. Your line is open. Robert Willoughby -Banc of America Securities: Thanks. John or Jeff can you speak to the payor-directinitiative that you just announced today? With payors and providers maintaininginterface what is actually incremental there? I'm not sure I understand thatdevelopment there, because I thought you maintained a lot of these interfacesalready.

We do have a large business there and roughly 60% or 70% ofthe volume that we manage already goes on a direct basis between us, betweenthe providers through us and on to the payors. We provide a value-add in thosetransactions because of the way the information is presented to both sides andthat's why we have a roll as an intermediary. First, a subset of our customer base, there were actuallyother business partners involved in those transactions and what we are announcingtoday is that those other business partners will no longer be necessary in thechannel and we will be able to eliminate the inefficiencies that are present asa result of their presence in those transaction channels. So, I think it's particularly good news for our customersboth the providers and the payors to smooth line the transactions. Clearlythere's a incremental business opportunity for us here today, but I think ourannouncement today was really focused on making sure that our customers understoodthat we are out there trying to make it easier for them. Robert Willoughby -Banc of America Securities: And what is example of an intermediary whose being removed,is it just another claims processor of some sort that's being dis-intermediated?

Right, other claims processors, some that are automated andsome that do paper based claims processing that work on these transactions; ourgoal is to be close to 95% or better of these transactions running only throughMcKesson's RelayHealth network point-to-point. Robert Willoughby -Banc of America Securities: And just to step up how do I think about that? That isremoving a handful of these guys that are out there, it should ultimately bemore profitable for you? I mean what's the, how do I think about the economicsfor you in that development?

Well, clearly it should be more profitable for us and italso should save people like Aetna money that don't have to pay others to bepart of the transaction. So, I think it should be a win for us and certainly awin for our customers. Clearly the people that may be on the losing end of that arepeople that are no longer necessary in the channel. Robert Willoughby -Banc of America Securities: And you are viewing that as maybe 30% or 40% of thetransactions might have gone through some of these other intermediaries?

Probably more in the 20% to 25% range and there's still abunch of manual transactions that we are in the process of automating. Robert Willoughby -Banc of America Securities: Okay. That's great. Thank you.

Thank you, our next question is from Barbara Ryan ofDeutsche Bank. Your line is open you may ask you question. Barbara Ryan -Deutsche Bank: Good afternoon, thanks for taking my question, just a coupleof bookkeeping things. I don't know whether you mentioned what the OneStopgenerics program was up in the quarter?

Our OneStop performance, not only did we sign new customers,but we continue to grow the profitability of that program in the quarter so, weare pleased with our results. We had a very difficult compare, though. Barbara Ryan -Deutsche Bank: Right.

So, I want to point that out. And I think there were several,several positive things in the quarter our revenue momentum was strong. Ourperformances in our branded contracts were very strong and our performance ingenerics was stronger than we anticipated given that we had this difficult lapwe had to accomplish. So, we are very pleased with how we ended up. Barbara Ryan -Deutsche Bank: And then so you are not going to give us an exactpercentage, John, for the generics program in the quarter?

No, I'm not but I think it was it's moderately up bycomparison to the prior years. Barbara Ryan -Deutsche Bank: Conversions have a really tough comparison, I understand.I'm just wondering if you can update us on the Health Mart program and what thenumbers there are for stores, keeping track of that.

Yes, Health Mart continued to make progress and I think weprobably picked up another 100, 150 stores in the quarter. That momentum isgoing to begin to slow as we penetrate those customers that are most suited forthe program. We clearly still, so the total is in the 1800 to thereabouts kindof range. We still have several thousand stores on Value Rite and thenas I mentioned we have over 10,000 people buying, stores that are buying ourgenerics, select generics programs. And people like Costco that might be on ourgenerics program are probably not going to re-brand their pharmacies HealthMart. So there are multiple points of value that we get out of thegenerics program including Health Mart franchises and others. Barbara Ryan -Deutsche Bank: Thanks a lot. I appreciate it.

Well, thank you Barbara, I really appreciate and I think weare out of time, operator. We've run a little bit over because I know we hadsome people that wanted some questions. I want to thank all of you that were onthe call today. I think we are a off to a very solid start to the first twoquarters of the year. We remain extremely excited about our unique offerings acrosshealthcare and our ability to turn that into value for our customers andobviously value for our shareholders. We are well positioned, as with finish this year and we’relooking forward to continued strong performance. Now, I will hand the call offto Larry to talk about upcoming events for the financial community.

Thanks and we’ve got a few to cover so bear with me. I knowwe’ve gone a little over here but we wanted to do address as many of thosequestions as we could. On November 6, we'll be at the CIBC Healthcare Conferencein New York City, on November 14, we will present at the CSFB Healthcare Conferencein Phoenix, on November 27, we will present at the Merrill Lynch HealthcareServices Conference at their offices in New York City; on December 3, we willhost our traditional booth side briefing at the ASHP mid-year meeting in LasVegas. A number of you asked me about this because you didn't seethe announcement. We are not having a briefing at the annual RSNA show as wedid the past two years in Chicago.We are going to include a discussion of our medical imaging business a littlelonger discussion of it in our annual HIMS briefing. That will be February 25th in Orlando. That will come upagain on our next call. On January 7th we will be at the JPMorgan Healthcare Conferenceup the street from us here in San Francisco. And we plan to release and holdour call for our fiscal 2008 third quarter results in late January. So, thanksfor your patience. We didn't wreck your Halloween this year. Have a greatevening and have a great Halloween tomorrow, thanks and take care.