"Everything You Ever Wanted to Know About Earnings" - Making the Call
Thursday, April 19, 2007SUSIE GHARIB: Schering-Plough reported strong first quarter profits today and NIGHTLY BUSINESS REPORT had a front row seat when the pharmaceutical giant presented its numbers to investors on its conference call. Tonight as we continue our series "Everything You Ever Wanted to Know About Earnings," we focus on the earnings conference call. Here's Suzanne Pratt with an exclusive look at Schering's call.
FRED HASSAN, CEO, SCHERING-PLOUGH: Good morning everyone. Thank you for joining us. You will have seen our press release. We are again pleased with our performance this quarter, just like we've been for the past 10 quarters.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: At 7 o'clock this morning, Schering-Plough CEO Fred Hassan hosted a ritual of American capitalism, the quarterly earnings conference call. The call began about an hour after Schering released its first quarter profits and posted them on the company website. Hassan was supported by Chief Financial Officer Bob Bertolini and investor relations head Alex Kelly. Kelly first apologized for the early hour, explaining Schering tries to report on the same day as Merck.
ALEX KELLY, VP, INVESTOR RELATIONS, SCHERING-PLOUGH: We like to announce our Zetia/Vytorin sales figures on the same day as our partner. And, as a result we got squeezed into a bit of box this quarter.
PRATT: Not only did the call give Wall Street analysts an opportunity to grill Schering about its business, but it also allowed the company to give color to its earnings report. While management read prepared text, Kelly prepared for analysts questions. Q&A is the only unscripted portion of the hour-long call. It was also the only part we were not permitted to record. Hassan said today's Q&A was notable for detailed questions about research and development.
HASSAN: I try not to do is to let too much detail overshadow the overall direction of the call. And, in a way balancing that is very important. It's just really all about balance. In this instance I thought it was appropriate to have a more in depth conversation on the R&D.
PRATT: BMO Capital markets analyst Bert Hazlett, who participated in Schering's call, said the tone was positive. But, he wished there was more information.
ROBERT HAZLETT, PHARMACEUTICAL ANALYST, BMO CAPITAL MARKETS: We'd like to see a little bit more of the pipeline, what's working and what's not, so we can gauge the future maybe a little bit more, with a little bit more precision going forward.
MILLER: Releasing earnings to the public is not a simple task. More than 100 people at Schering are involved in the process and the company's investor relations department starts preparing for the call more than a month in advance. Yesterday, company management held a rehearsal designed to ensure the main event went smoothly.
HASSAN: Communication as you know is a very important part of management. It's really a duty. And, we want to use this window to get the right information to our stakeholders.
MILLER: Kelly says a trial run gives management a chance to meet and to review their scripts.
KELLY: That way we make sure that there's consistency between the remarks, but also make sure that there's not too much overlap. And, it's a really good opportunity for everybody to get aligned on the key messages for the conference call.
MILLER: Earnings calls have been open to the public since 2000 when the Securities and Exchange Commission passed regulation fair disclosure known as Reg F-D. Real-time Internet broadcasting has made the calls available to all investors, allowing anyone to listen in. Many Wall Street pros consider the forum far more than a marketing tool. Money manager Manny Weintraub says investors, big and small, should take the time to listen to earnings calls.
MANNY WEINTRAUB, PRESIDENT, INTEGRE ADVISORS: If you own a company you really should invest four hours a year, not very much time really, in listening to the earnings call and understanding what's going on.
PRATT: As for Schering, its stock rose today. But, that gain was more likely the result of solid profit growth than a well-run earnings call. Still, Hassan says delivering a good message helps.
HASSAN: We had a very good quarter and our mission was to make sure that people understand that this is a journey and that this is a scorecard. It's a point in time when we measure ourselves, but that this is a much longer journey. In that regard, we did accomplish that in the call.
PRATT: Schering's CEO says he encourages a spirit of transparency at the company, part of the reason why he allowed us to attend the earnings conference call. Openness he says inspires trust. Suzanne Pratt, NIGHTLY BUSINESS REPORT, Kenilworth, New Jersey.
