C.R. Bard Earnings Call Nuggets: Emerging Markets and Determining Divisions

C.R. Bard, Inc. (NYSE:BCR) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Emerging Markets

Michael Matson – Mizuho Securities: I guess this is a lot of information to absorb here. I guess my first question would just be with regard to the emerging markets, what areas are you most focused in terms of investing in which countries, which products, et cetera, and where do you think you can take that as a percentage of your raw sales by say to 2015 time frame?

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Timothy M. Ring – Chairman and CEO: Well the emerging markets for us fundamentally would exclude everything except U.S., Europe, Japan, Canada and Australia is pretty much what we throw in there. Our focus has been China. We have talked a lot about that. We have made a lot of investment in Brazil and a few other countries in Latin America. Eastern European markets are starting to – we are investing more there. The other Asian markets we are investing heavily there. So we have been doing well there. We are kind of doubling down there. When you look at the execution aspect of it we have done a very good job. It’s really a fairly fundamental business model in the sense that you get the products registered. You get – you hire employees, very good employees which is critical in that part of the world, retention is key and then training both the employees and then the clinical community on the technology. So it’s really that fundamental and we are very focused on that with 7% of total revenue growth as of the end of fourth quarter. We mentioned the increase in heads which is more than 50% from where we are so kind of that summarizes that at the top line.

Michael Matson – Mizuho Securities: Then with regard to the R&D expansion and the new product entry, how far astray from the current markets that you are in are you willing to go and would it be possible that we’d see you add a fifth business segment or would it really just be more incremental to the existing segments that you are already in.

John A. DeFord, Ph.D. – SVP, Science, Technology and Clinical Affairs: Michael, John DeFord here. Look, we don’t rule anything out, obviously getting into an entirely new segment with say, a new leg to the stool would probably require more than just internal R&D to be effective with our strategic intent of product leadership. That said, we think we’ve got some really exciting technologies that we can leverage and also some very near adjacencies and some that are where we have some degree of leverage or synergy that we could go after. So we think that these are very executable kind of areas that aren’t cannibalizing our existing products and give us a new footprint and a broader footprint within our existing businesses.

Michael Matson – Mizuho Securities: Then my question is just around the clinical trials, I think you said that you are going to go from 53 clinical trials this year to 90 in 2013. So I guess I’m just wondering kind of what the breakdown there is between trials that are being done more for a marketing purposes and then trials that are being done for regulatory reasons to get a product on basically market somewhere.

John A. DeFord, Ph.D. – SVP, Science, Technology and Clinical Affairs: So I would characterize these and what I said was, we started 2012 with 53, over the course of the year, we added. So it’s not like we are going from 53 and suddenly flipping a switch and having 90. We’ve been building that up over the course of the year. I’d say that we’ve got about 40% of our studies are for either new indications or regulatory approvals, and then we have certainly a significant number of our studies, and that’s sort of 50%, 60% range that are providing additional marketing data and economic data that we think is important. So I think that will be a reasonable way to break this out.

Determining Divisions

Joanne Wuensch – BMO Capital Markets: I’m still absorbing all this information, but let me just sort of get big picture in here. When you laid all of this out and clearly you had more than enough time to think about how to spend your money, how did you think about each one of the divisions, the vascular versus urology versus surgical and oncology?

Timothy M. Ring – Chairman and CEO: I’ll take that. We started with growth. We wanted to grow the business at a faster rate than we are today, so we looked really where the best opportunities are and when you look at for example the SG&A shift that we’ve alluded to you a couple of times during the presentation. We’re transitioning to faster growing market segments geographically, and we’re going to do the same product wise, so that was really the primary factor that we used, along with other things like sustainability of the growth, we don’t want something that spikes for year and it’s not sustainable over time. So, we factored that in as well, but growth and faster growth was really the primary thing that we looked at.

John A. DeFord, Ph.D. – SVP, Science, Technology and Clinical Affairs: Joanne, just to add another note to that. As Tim said, we didn’t try to a portion to each division a certain number, we looked at all the opportunities and as Chris said there were over a 100 of them that we looked at and selected what we thought were the best ones that were executable and within our capabilities that we could bring to the bear as quickly as possible.

Christopher S. Holland – SVP and CFO: With a focus on returns, so obviously the ROI is an important factor as well.

Joanne Wuensch – BMO Capital Markets: Then my follow-up is and also I missed it somewhere in here; in terms of redeployment of capital, I do hear you say things like changing your dividend policy. I did hear you say you weren’t going to do an ASR, but I’m not sure what exactly your plans are for share repurchases?

Christopher S. Holland – SVP and CFO: Yeah. So with respect to the Gore bolus, what we’ve said is that we would return in short order, not through an ASR, but in short order through the open market, half of the after tax proceeds of the bolus once we receive it, which we have currently said we are assuming is in Q3 of 2013. At this point, we would plan on retaining the other half of the after-tax bolus proceeds to invest in strategic opportunities, acquisitions, and/or additional buybacks depending on our acquisition opportunities. The ordinary course level of repurchase activity, you would anticipate us to continue to plan on doing, but always subject to the first priority of our free cash flow being investments that grow the business including acquisitions.

Joanne Wuensch – BMO Capital Markets: Dividends?

Christopher S. Holland – SVP and CFO: No change at this point.