xfdfw BLOOMBERG-TV-81
<Show: BLOOMBERG TV>
<Date: November 4, 2009>
<Time: 17:20:00>
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<Tran: 110481cb.550>
<Type: SHOW>
<Head: Henry Schein CEO Stanley Bergman on Bloomberg>
<Sect: News; International>
<Byline: Pimm Fox>
<Guest: Stanley Bergman>
<High: Henry Schein, leading distributor of doctors, dentists, and
other health-care providers, now is looking to help revolutionize medical
recordkeeping. Stanley Bergman is the chairman and the CEO, and discusses
the company's goals for this new recordkeeping as well as the third quarter
earnings, which were released earlier today.>
<Spec: Health and Medicine; Business; Profiles; Stock Markets;
Computers and Technology>
HENRY SCHEIN CEO STANLEY BERGMAN ON BLOOMBERGNOVEMBER 4, 2009
SPEAKERS: STANLEY BERGMAN, CEO, HENRY SCHEIN INC.
PIMM FOX, BLOOMBERG NEWS ANCHOR
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
17:20
PIMM FOX, BLOOMBERG NEWS ANCHOR: Henry Schein, leading distributor of doctors, dentists, and other health-care providers, now is looking to help revolutionize medical recordkeeping. Stanley Bergman is the chairman and the CEO, and the company with third quarter earnings today.
We'll get to that, but first I want to thank you very much, Stanley, for coming in. Appreciate you always stopping by, especially on a busy day.
STANLEY BERGMAN, CEO, HENRY SCHEIN INC.: Thank you, Pimm.
FOX: Talk a little bit about this whole world of electronic recordkeeping. We'll get to the vaccines and the pet business and all that in a second, but electronic recordkeeping, is that really ever going to happen?
BERGMAN: It's definitely going to happen. It is important. Electronic medical records will reduce the cost of health care, errors will be reduced, the quality of health care will go up. We don't know exactly how long it will take, but it's going to happen in the next few years. And we are the exclusive distributor for the number one player in this field, Allscripts.
FOX: But talk a little bit about the efforts going on in Washington. Because in looking at all the health-care reform, it didn't seem as though medical electronic records was at the top of anybody's list and it had a lot to do with privacy, and that was sort of a backlash, right?
BERGMAN: Yes, all of that's true. The subsidy actually kicks in next year, and will be available to practitioners over the next three to four years. And we are actually quite optimistic that although it is very difficult to install an electronic medical record, imagine taking all that paperwork and getting it into the computer, but once that's behind the practitioner, the practitioner runs a far more effective practice, delivering far better clinical care. It's going to happen.
FOX: And the idea that you've got with this Allscripts -- more than an idea, this is a relationship -- is really to connect --what? -- the patient with the doctor with the actual, let's say, provider of the medication and indeed, of the actual health-care services.
BERGMAN: Yes, all the way to the prescription, the electronic prescription. But also from our point of view, what's important is to connect all the devices. We have a program called Connect Plus (ph) which will enable the manufacturers of all the diagnostic machines to connect their machines into the electronic medical record.
FOX: All right, let's connect some of the pieces of the business, because we know that the earnings came out today. What about the results? Let's talk about what's going on right now. Let's just start with dental, for example. A little bit soft because people are a little bit reluctant to spend on medical and dental equipment?
BERGMAN: Well, the consumable business, we think, is more or less stabilized. We were up over a -- over a hundred, about 130 basis points today in our numbers that we released for the quarter. And the sale of equipment is still down, but not as much down as it was last quarter. So we've seen, I think, more or less, the bottom over there.
FOX: What about medical group sales?
BERGMAN: Yes, that's where we had a bit of a challenge. We did not have enough flu vaccine this year because the government required the manufacturers to move production from the seasonal flu to the H1N1 flu, and therefore we had reduced availability.
FOX: Right, you had like almost 2 million doses, right, compared to last year.
BERGMAN: Yes, a significant amount. We're going to be down many --4 million doses compared to last year.
However, if you take that out, our medical business actually did quite well. We were up in terms of sales 9 percent, of which about a third of that, 3 percent, was attributable to H1N1-type products. But the core business was still up about six percent, so we're very happy with our medical results.
FOX: Were you happy with the international group? That actually grew.
BERGMAN: Yes, our international group has done well. It was up 17 percent this quarter. And actually, across the board in most of our international businesses, we did very, very well in terms of growth -- dental, medical, animal health -- and in particular, in all the large markets including Germany, the U.K., France.
FOX: What about the technology business? Technology and what you call value-added? I mean, I know it's one of the smaller parts of the business, but how is that performing as well?
BERGMAN: As you know, Pimm, it's a very, very profitable part of our business.
FOX: Good margins.
BERGMAN: It's only 2 percent of our sales, but about 13 percent of our operating income. And that's doing also very, very well, about up 7 percent.
But if you take a look at everything, you'll see that if you strip out the impact of the flu, the traditional flu vaccine, you'll see that our sales were up 7 percent and we were able to increase our operating margin 62 basis points with a net impact of earnings per share growth of 18 percent. If you adjust for some benefits that we accrued with respect to a very, very large advantage on the tax side in Europe and a couple...
FOX: And that was a one-time deal.
BERGMAN: Yes, but I think in all fairness, you have to take that out...
FOX: Right, take that out.
BERGMAN: ... and some other one-time items. But earnings per share was still up 18 percent and the cash flow is very good, well over $130 million.
FOX: Talk about foreign exchange and the effect that that has on the company's results.
BERGMAN: Well, that's a challenge. The dollar is, of course, deteriorating. And so, in respects of conversion of our profits, it's good. But overall, the deterioration of dollar is not a good thing.
FOX: and is that going to continue, do you think?
BERGMAN: Don't know. But in terms of the euro, it's almost at $1.50 or...
FOX: Makes it more expensive doing business overseas.
BERGMAN: Yes, you can see that in our expenses, of course. But again, it translates well in terms sales.
FOX: When you actually translate it back into U.S. dollars, the math works in your favor.
BERGMAN: Yes.
FOX: Talk a little bit about the guidance for the fiscal year 2009, because you kind of changed that a little bit and the street was looking for something like $3.23. You've got it to $3.14 to $3.16. We know what happened to the stock, I know you've got no control over it and it was not a pretty day in terms of the stock's performance, but tell us about what is going on in the future.
BERGMAN: Last -- if you take a look at our expectations to the balance of 2009, you will see that we're projecting for the full year to be up 8 percent. That's despite the fact that we're only going to be delivering about two-thirds or about 60 percent of the flu vaccine that we expected. And that's also based on guidance that we provided back in November of 2009. So we're well within the guidance and we're going to grow 8 percent.
Now, if you take that 8 percent on top of that, we're expecting to generate a further 8 percent to 13 percent increase in earnings per share in 2010.
FOX: All right, we'll we're going to have to have you on next quarter, if not sooner, to find out not nearly more about the electronic medical records business, but also having to do with the flu vaccine.
Thank you very much, Stan Bergman coming in from Henry Schein.
17:27
END OF TRANSCRIPT
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