Company Notes Digest 6.28.13

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

The Macro Outlook

KB Homes says that housing is still strong even with rising rates:

“The positive factors underpinning the current housing recovery remain fully in place and will continue to drive favorable market fundamentals…consumer confidence is far more important to home sales than interest rates are.” (KB Home)

Perversely, rising rates could actually stoke demand for housing:

“I think with all the noise that you’re reading in the media and the press and everything else on interest rates and what it’s doing, in my opinion, at least in the short term, I think it’s going to create more urgency; and buyers that want to get to the table and get to the closing table quicker” (KB Home)

The lower end consumer is still hurting:

“We also continue to face a soft economy, especially in our lower income communities, where our stores, on a comp basis, are performing on average below our stores in middle or higher income neighborhoods.” (Walgreen)

But there are some signs that consumers are trading up:

“What we’re actually seeing, which is an interesting dynamic in the data, is some customers moving away from opening price point, really deep discount products, at least in our category, and there’s a bit of a trade-up happening from that opening price point to private label and then up to brand.” (McCormick)

Inflation expectations are muted:

“prices are stable. Inflation is moderate, and we think will be quite manageable for us” (General Mills)

‘merica = #1, nuff said:

“I love the U.S. I love that market, and I love the U.S. for Accenture…the overall economic environment in the U.S. is better than in the rest of the world…U.S. companies are more than any other companies in the world early adopters of new technologies” (Accenture)

“The MVP for the quarter and the year really had to be North America.” (Nike)

Accenture sees weak business confidence:

“Consulting is more about building for the future, if you will, for clients. And building for the future is requiring confidence, confidence in the economic outlook, confidence in the business… The level of confidence is not at the level we expected. And there is an eroding economic conditions in some parts of the world…particularly in Europe and Brazil.” (Accenture)

And Europe is a really negative environment:

“The situation in Europe is not even slightly better. It’s probably slightly worse…the environment is moving from an economic standpoint to recession.” (Accenture)

Restaurant dining is slow in China–not necessarily because of the economy, but because of bird flu. Improvement seen in 4Q13:

“we had lower demand from quick service restaurant customers in…China, where certain quick service restaurants have reported high-double digit declines in same-store sales. These declines are a result of consumers in China who are avoiding poultry in their diet due to bird flu concerns…Based on our customers’ outlook, we expect the situation in China to improve in the fourth quarter of 2013.” (McCormick)

At least wages are growing somewhere:

“Well, as far as acceleration, yes, we have definitely seen some fairly significant increases in wage rates in a couple of countries. I think the one in Indonesia certainly was pretty well publicized.” (Nike)

Financials

Banks are still tighter than they could be:

“it is nowhere near more normal underwriting standards today…If the economy continues to expand like it is, I think you’ll see the banks loosen up.” (KB Home)

Consumer

Who would have thought that there’s room for innovation in shoes and cereal?:

“there has never been more opportunity to innovate than there is today…we need to edit against [an] incredible list of opportunities” (Nike)

“We have high levels of innovation planned across our portfolio…Innovation will be the key driver of this growth.” (General Mills–the word “innovation” appeared 29 times in the transcript)

Technology

A few companies specifically highlight interest in digital marketing (especially via Facebook):

“I mentioned the Digital Marketing as a fast-growing area is where we have been deploying our capital into acquisitions.” (Accenture)

“We’re connecting directly with consumers through digital marketing and social media. In the U.S., we increased site recipe searches for our Gourmet dinner party program 32%, increased Facebook fans by 25% and achieved a 47% increase in unique visitors to our mccormick.com website” (McCormick)

“when you’re carrying 4.5 million passengers…and 99% of them are coming back happy and telling their friends and getting on Facebook and Twitter and then telling people what a great time they’ve had. That is powerful” (Carnival)

Barnes and Noble is having to make a big strategy shift in e-readers:

“we are adjusting our hardware and device strategy to de-risk the NOOK business plan. The company is…moving away from independently building our own tablets and intends to partner on future tablet programs with partners to design co-branded tablets with NOOK content…the tablet market, especially in the area we competed in which is sub-8-inch, got extremely competitive, and it was very capital-intensive to build our own tablet.” (Barnes and Noble)

Blackberry sounds a little defensive:

“how do we feel about Blackberry 10 and the launch, I think I said this in my script. We’re doing what we said we would do…we are performing…sometimes you guys look at, you know, where is this one product that kills everything else? I tell you, it’s not out there…This a marathon…we’re ready to run that marathon. And that’s what we’re doing. So I’m not looking at the short term…I love my board, but it’s the C levels in Blackberry that run the operations…We’re executing as we speak. And, you know, whatever’s being discussed in the board room, I probably wouldn’t discuss that on public earnings call…But I can tell you that we are in sync with our board. We all know what we’re up for here. We’re all together in this fight. And you know, we’re executing, and the last quarter has shown that we execute against what we say we would do in that very quarter. And that’s the only thing that matters at the moment to the board and to the executive management of Blackberry.” (Blackberry)

Healthcare

The pharmaceutical industry could double just if people stayed compliant with the regimen that their doctors prescribed:

“We think the pharmaceutical distribution businesses could close — could come close to doubling over the next decade as people become compliant to the pharmaceutical regimens that have been prescribed by their physicians” (McKesson)

It’s a really difficult environment to be a physician:

“[there’s] a lot of pressure on physicians. It’s not an easy place to be whether a 2-person practice or a 50-person practice. That is an environment where they need help” (McKesson)

The wave of generic drugs is on pause for a bit:

“we expect margins to be negatively impacted by a trough in the generic wave, expected to continue until the latter half of fiscal year 2014, when we expect to experience another peak in the wave, albeit smaller than the fiscal year ’13 peak.” (Walgreen)

Materials, Industrials, Energy

Room for growth in the steel industry in Latin America:

“the steel intensity of Latin America is less than half of the one in USA and Canada, one fifth of the one in China and one third of the one in the European community though that makes us an interesting opportunity for growth through the intensity of use of steel.” (Ternium)

Miscellaneous Nuggets of Wisdom

It takes consumers two to three years to forget a PR nightmare (probably a good proxy for memory of market panics too):

“our consultants have basically used an analogy of two other non-industry events…In terms of consumer perception, we’re tracking the same way…that the recovery will be gradual, and it will take 2 to 3 years for the Carnival brand to fully recover…[from] the incidents back in March.” (Carnival Cruises)

Relationships are built on consistent, high quality service. A strong relationship opens the door to opportunity:

“the quality and efficiency that we’re able to deliver to this customer allowed us to have a different conversation about we could become more of a business partner for them. So over the course of the greater-than-20-year relationship that we’ve had with this customer…we continue to innovate with them to again help them solve their business problems, and the key being here is we want to be a valuable business partner to our customers. Not just a distributor, but a valuable business partner.” (McKesson)

Take your destiny into your own hands:

“when we get the message right, when we get the innovation right, these brands respond…we’re not victims here. If we get the innovation right, we’ll do just fine. It’s on us” (General Mills)

Be aggressive, B-E Aggressive:

“we are on the offense, always” (Nike)

Charlie Denson, president of the Nike brand is retiring. Let’s all hope someday such nice things can be said about us by our colleagues:

“what I know about Charlie is that he is a brilliant and affable man, easy to respect and easy to like…Charlie is more than a colleague, He’s a friend, a mentor…he leaves some huge shoes to fill but luckily that’s the business we are in, filling shoes” (Nike)

Carnival 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“We announced today that our board member, Arnold Donald, will become CEO starting next month.”

“My experiences in operating businesses and as a board member certainly gives me the appreciation that it will be very necessary for me to spend some time getting into much greater depth on the company’s operations, finance, marketing and strategy, but I am optimistic for an accelerated onboarding process and being able to make a contribution as CEO relatively quickly, thanks to having the advantage of some level of understanding of the company from my governance role in many years of close observation.”

“For the third quarter, on a fleet-wide basis at the present time, occupancies are slightly behind last year at slightly lower prices.”

“our advisers are saying that the recovery will be gradual, and it will take 2 to 3 years for the Carnival brand to fully recover.”

“consumer perception of the brand has significantly improved since the incidents back in March, and we expect this trend to continue once confidence builds back in the brand.”

“when you’re carrying 4.5 million passengers, most of them coming from the United States, meaning that upwards of 1 in 3 passengers that go on a cruise in the United States go on a Carnival Cruise, and 99% of them are coming back happy and telling their friends and getting on Facebook and Twitter and then telling people what a great time they’ve had. That is powerful, 90,000 folks every single week coming off those ships in the U.S. and talking about the great experience and right now, the great value they got as well.”

“our consultants have basically used an analogy of 2 other non- — Greg, non-industry events, and we’re tracking the same way. In terms of consumer perception, we’re tracking the same way, which was a significant fall off in brand perception and then a gradual recovery until it’s 3 years out. So their view is that while we’re a very different industry, it’s likely that we will follow the same pattern”

“as you know, there’s a difference between being on the board and being in operations.”

“we’re talking about a number of different brands all doing — making changes. And I’m talking about anticipating — increasing their spend in the marketing area. A lot of it is going to be focused on travel agents and travel agent co-op marketing, more trade advertising. A lot of it is social media and web-based marketing and is also for the consideration to going back and doing more TV. So it’s a variety of these things.”

“things seem to be — I think maybe it’s consumer confidence strengthening or positive things that are going on. And so we’re very encouraged by what we’re seeing in Europe right now.”

Ternium Analyst Day Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Latin America is one of the highest steel use growth rate in the world in the last five years especially in 2012 and 2013. Second, the steel intensity in Latin America give us the opportunity for growing. If we compare the steel intensity of Latin America is less than half of the one in USA and Canada, one fifth of the one in China and one third of the one in the European community though that makes us an interesting opportunity for growth through the intensity of use of steel.”

“at the end, the overcapacity factor is having an important impact in the global pricing system of the steel industry. But in my view, it has to reanalyze on a regional basis instead of on a global basis. And you can see here the steel overcapacity in the region where we operate Ternium is quite low”

“You know that Latin America now is consuming 70 million tons, 67 million tons of steel per year. USA and Canada are consuming together 110 million tons of steel per year. So, all together, we are in a region where it’s being consumed 180 million tons of steel out of 1.5 billion tons of total steel consumption worldwide.”

“80% of the steel of Latin America is being consumed mainly by three countries, 80%, Brazil, Mexico and Argentina. ”

“Latin America, as a whole, is importing 17.5 million tons of steel, the main importer being Mexico with a little bit less than half this amount 7.4 million tons per year. Imports representing 37% market share in Mexico. Then we have Brazil that is importing 3.6 million tons of steel that represent 14% of the apparent steel use of Brazil. Colombia is importing 50% of the apparent steel use; Peru, Chile, Argentina and others.”

“the EBITDA ratio of Ternium is 15%. Long per user in the U.S. is having to 11%. Flat-rolled per user in Mexico, one of our peers is having 9.4%. USA Minimill 8.6%, Global Player average 8.4%, USA Integrated flat-rolled mill is having 5.4%.

So looking backwards or looking this performance why we consider that we are outperforming our peers? Well, first, because we have a focus on high value added products. Second, because we do have a flexible production configuration that means that we have blast furnaces, we have guided reduction and we have the slabs rolling. We have a level of upstream and downstream integration that also outperformed the one of our competitors.

We have a very broad distribution network. And looking forward, we believe that we are working very hard in breaking through learning curve effects through innovation in order to continue gaining market share – gaining productivity, gaining competitiveness vis-à-vis our competitors.”

Blackberry FY 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Revenue for the first quarter of fiscal 2014 was $3.1 billion, up 15% from the fourth quarter, and up approximately 9% from one year ago.”

“We shipped 6.8 million smartphones in the first quarter, compared to 6 million in the fourth quarter, which represented a 13% increase. Approximately 40% of these devices were Blackberry 10 devices”

“Europe, Middle East, Africa, our largest region, represented 43% of revenue in Q1, and was up 9%. North America represented 25% of revenue, and was up 30%. Asia-Pacific represented 17% of revenue, and grew 35%, and Latin America represented 15% of our revenue, but was down 6% due to service revenues in Venezuela”

“For the second question of how do we feel about Blackberry 10 and the launch, I think I said this in my script. We’re doing what we said we would do, right? We are launching BES 10, Q10, Q5, more to come. We’re in the middle of it, right?

So it’s really too early to say. We’re building a portfolio right now. Against what my expectation was in Q1, we are performing, and from that perspective, I’m confident in the future of Blackberry 10.

But there’s lots of work to do, there’s lots of new products to be built, there are lots of new products to be launched. There’s lots of marketing campaigns to be generated. So it’s going to be ongoing effort. It’s not automatic.

I know sometimes you guys look at, you know, where is this one product that kills everything else? I tell you, it’s not out there. It is a very competitive market, it has several players. And you’ve got to be on your tippy toes all the time to perform, and that’s what we’re doing.

But we’re not ignoring competition either. And what we have done with Blackberry 10 is build a fantastic, differentiated user experience that users now latch onto. And that doesn’t happen from one week to the other. It doesn’t happen from one month to the other. And it actually doesn’t happen from one quarter to the other.

This a marathon, right? And we are ready, with the financials that we have under our belt, and we’re ready to run that marathon. And that’s what we’re doing. So I’m not looking at the short term. It’s important for me how the BB10 penetrates. It’s important for me how the BES 10 penetrates, and it’s important how is the BBM cross-platform coming along.”

“I love my board, but it’s the C levels in Blackberry that run the operations. And you know, we’re absolutely bang-on with what we wanted to do with the product. We’re executing as we speak. And, you know, whatever’s being discussed in the board room, I probably wouldn’t discuss that on public earnings call.

But I can tell you that we are in sync with our board. We all know what we’re up for here. We’re all together in this fight. And you know, we’re executing, and the last quarter has shown that we execute against what we say we would do in that very quarter. And that’s the only thing that matters at the moment to the board and to the executive management of Blackberry.”

Nike FY 4Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“For fiscal year 2013, we grew in every geography except Greater China, and across all of our key categories.”

“The MVP for the quarter and the year really had to be North America.”

“At Nike when profits grow faster than revenue and revenue grows faster than inventory, we call that the financial Triple Crown.”

“Our job is to build strong consumer connections and to increase market capacity to fuel long-term growth. Delivering innovative product, creating differentiation in the marketplace and improving profitability and productivity at retail, are the keys to our long term success in the China marketplace.”

“at Nike, we have a list of 11 guiding principles we call our maxims. The maxims define our approach to the business as we strive to reach Nike’s full potential. I think there are three maxims that characterize our FY’13 performance…The first is, Nike is a company. More specifically, Nike is a growth company made up of a broad portfolio of businesses…The second maxim states, we are on the offense, always…Today’s final maxim is a personal favorite of mine, master the fundamentals.”

“Well, as far as acceleration, yes, we have definitely seen some fairly significant increases in wage rates in a couple of countries. I think the one in Indonesia certainly was pretty well publicized.”

“there has never been more opportunity to innovate than there is today. And, with that comps, it’s not just more. It’s better. So, we need to edit against that incredible list of opportunities and make sure that we are investing in things that we think we can leverage for the greatest success to fuel growth, improve performance, sustainability, et cetera.”

CEO: “last week we announced strategic management changes for our organization. Chief among them is the decision by Charlie Denson to move on from his role with Nike. Yes, he leaves some huge shoes to fill but luckily that’s the business we are in, filling shoes…what I know about Charlie is that he is a brilliant and affable man, easy to respect and easy to like, obsessed with sports and the athlete and he has incredible passion for the brand and that’s all a great combination…Charlie is more than a colleague, He’s a friend, a mentor”

CFO: “As CFO of Nike, I could not have had a better partner. Charlie understands how all of the dimensions and aspects of our business fit together and he knows how to work the levers. And, while he claims he is not an expert on financial management, he has the most important skill of all. He knows how to create value for our shareholders and has done so year-after-year. That’s a great legacy, but probably not the most important one. I think Charlie’s greatest legacy will be the people he’s developed and inspired over the years and I count myself among them.”

Accenture 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“In Management Consulting, the macro environment continues to be challenging and volatile. Our clients held back on spending more than we expected, particularly in Europe and Brazil, and the environment is more competitive.”

“we do see growth in demand for transformational projects in operations, CRM and risk management”

“Technology consulting bookings reflected demand for infrastructure consulting projects that span data centers, networks and workplaces, as well as IT strategy projects.”

“System integration bookings, on the one hand, reflected rising demand for industry-specific Software solutions, where emerging technologies such as Mobility, Analytics and cloud are part of the mix. On the other hand, the bookings also reflected lower demand and a more competitive environment for ERP systems work.”

“The decrease in ERP work was most pronounced in some European countries, as clients are slowing down their investments in add-on work to existing solutions and generally starting fewer large programs right now.”

“Turning to outsourcing. New bookings were well above our expectations. Technology outsourcing bookings were strong, as our clients continue to seek solutions for driving operational efficiencies and flexible cost-effective sourcing.”

“Marketing is one of the key functions that digital is having a huge impact on. Chief Marketing Officers are increasingly looking for integrated solutions that bring together strategy, technology and analytics, add scale to get more value out of their investments.”

“the overall environment has not been progressing probably the way we all expected, including our clients, when you look at our Q3. The situation in Europe is not even slightly better. It’s probably slightly worse. Even if we do not have a Greece event, if you will, the environment is moving from an economic standpoint to recession. And so the mood with our clients over there is still to be thoughtful and to be very mindful about the way they invest. And when clients are thoughtful and mindful, they tend to wait a little bit more and to think further on when and how much they’re going to invest. It’s particularly true when it’s about smaller projects, as we mentioned, but indeed, this is what I would characterize as the softness, particularly true in Europe and in Europe, in South Europe, to be even more specific. And it’s definitely true that — to be honest, not something we anticipated at that level in Brazil, situation has changed recently.”

“Consulting, it’s all about launching projects, programs…So it’s slightly different from the mindset on outsourcing, which most of the time is more driven through cost optimization. Consulting is more about building for the future, if you will, for clients. And building for the future is requiring confidence, confidence in the economic outlook, confidence in the business… The level of confidence is not at the level we expected. And there is an eroding economic conditions in some parts of the world.”

“I mentioned the Digital Marketing as a fast-growing area is where we have been deploying our capital into acquisitions.”

“I love the U.S. I love that market, and I love the U.S. for Accenture…the overall economic environment in the U.S. is better than in the rest of the world.”

“U.S. companies are more than any other companies in the world early adopters of new technologies”

KB Home 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“let me address the recent concerns many have raised regarding the recent uptick in mortgage rates and its potential impact on housing. In my view, there is no question that housing dynamics are significantly better than they were a year ago. At the same time, in my view, we are still in the early innings of a recovery that is continuing to accelerate. The positive factors underpinning the current housing recovery remain fully in place and will continue to drive favorable market fundamentals.

There is substantial pent-up demand driven by population growth, job growth, an increase in household formation and record affordability. At the same time, in most areas of the country, there is a shortage of supply and monthly mortgage payments for a typical home are lower than rent; further reinforcing the appeal of homeownership. Despite the recent rise in rates, affordability is still at extraordinary levels, and demand is significantly outpacing supply in every market we serve. Anecdotally, we are hearing from the sales floor that the uptick in rates has actually created an increased sense of urgency, as buyers don’t want to miss out on this incredible opportunity.

Having said all of this, if you get past the pure economics of interest rates and payments, I have always maintained that consumer confidence is far more important to home sales than interest rates are. The desire to live in the American dream is strong, and if a consumer feels good about their personal situation, they will always work through any obstacles and find a way to become a homeowner. With job growth accelerating and consumer confidence hitting a 5-year high last month, I expect the housing recovery will continue with solid advance, especially in the attractive submarkets that we serve.”

“I think with all the noise that you’re reading in the media and the press and everything else on interest rates and what it’s doing, in my opinion, at least in the short term, I think it’s going to create more urgency; and buyers that want to get to the table and get to the closing table quicker. ”

“I’d say, that it is nowhere near more normal underwriting standards today…If the economy continues to expand like it is, I think you’ll see the banks loosen up. And if sort of rates go up a little bit but underwriting loosens up a bit, I think you’ll see similar demand, if not more.”

McCormick 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“we had lower demand from quick service restaurant customers in several geographic areas. The most notable was China, where certain quick service restaurants have reported high-double digit declines in same-store sales. These declines are a result of consumers in China who are avoiding poultry in their diet due to bird flu concerns”

“We’re connecting directly with consumers through digital marketing and social media. In the U.S., we increased site recipe searches for our Gourmet dinner party program 32%, increased Facebook fans by 25% and achieved a 47% increase in unique visitors to our mccormick.com website”

“Based on our customers’ outlook, we expect the situation in China to improve in the fourth quarter of 2013.”

[analyst comment] “if I maybe restate, what you’re saying is, is that while maybe the macro for QSR is good, it just didn’t turn out to be good in the places that you needed to be good in?”

[analyst comment] “There have been 2 problems with McCormick from the — I guess, from Wall Street’s perspective. One is we have no visibility on your raw material basket, which, I think, Ken asked about. And then Industrial, you don’t really have, at the end of the day, a lot of control over the business.”

“What we’re actually seeing, which is an interesting dynamic in the data, is some customers moving away from opening price point, really deep discount products, at least in our category, and there’s a bit of a trade-up happening from that opening price point to private label and then up to brand.”

US Equities Masking a Tough Year for Investors

At the end of the first quarter I noted that US Equities were really the only asset class doing well.  That trend has not only continued through the second quarter, it’s actually become more severe.

Judging by Morningstar’s asset class indices, there aren’t any other asset classes that come close to the performance of US equities year to date.  In fact, in the second quarter, US equities were the only asset class that were positive.  Fixed income, international equities, emerging market equities and commodities were all negative in the second quarter–some segments by a lot.  And painfully, assets that were supposed to be safe are down the most.  Long term Treasuries are down 7% year to date and Gold is now down 28%!

As I mentioned last quarter, this is going to make things particularly difficult for financial advisors who usually systematically diversify by asset class.  Most clients have been reading headlines that stocks are hitting all time highs and may have a difficult time understanding why they’re not keeping pace–especially if they were put into the wrong “safe” asset classes.

**Shameless plug**: 2013 should help drive home the point that there’s no such thing as passive investing. Two different advisors will make two different investment decisions with your money.  Risk is not static, and so it’s important to have your savings managed by a skilled investor who understands securities markets and spends the majority of his/her time researching investments.

Morningstar Index First Half Performance

McKesson Analyst Day Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“pharmaceuticals are usually the first place to go from a patient care perspective. But if you don’t look under the covers, you don’t realize how much untouched opportunity still exist in this business. We think the pharmaceutical distribution businesses could close — could come close to doubling over the next decade as people become compliant to the pharmaceutical regimens that have been prescribed by their physicians and stay compliant through their entire care process”

“in the U.S. pharmaceutical industry. And really, over the next several years, we’re seeing growth rates in the 2% to 4% range, which is slightly ahead of what they’ve been over the last couple of years…demographics are going to continue to drive growth in the U.S. pharmaceutical marketplace. Aging population, more people in the system…Specialty products…given the high nature of the price of those drugs…that helps to fuel the growth. And certainly, we expect the drug pipeline to continue to show moderate improvement here.”

factors that are impacting the growth…the continued brand-to-generic conversions…puts pressure on the revenue line for us. But certainly, generics are a big contributor to our overall profitability…And I think in general, just the overall cost containment in the marketplace will continue to put some pressure on the growth.”

“the timing of generic launches is not an exact science by any means.”

“the core of our business is distribution and supply chain excellence.”

“Another example would be in the retail national account arena and a large regional chain up in the Northeast, where, as Paul said, we started really with just the core distribution business in the day-to-day pick, pack and ship. And really, the quality and efficiency that we’re able to deliver to this customer allowed us to have a different conversation about we could become more of a business partner for them. So over the course of the greater-than-20-year relationship that we’ve had with this customer, we’ve put our pharmacy information system into their operation. We’ve helped them build a Central Fill operation, and we continue to innovate with them to again help them solve their business problems, and the key being here is we want to be a valuable business partner to our customers. Not just a distributor, but a valuable business partner.”

“we bring great value to the manufacturers, certainly as well as to the end customer. And from a manufacturer standpoint, it’s really about reach and scale.”

“we just recently opened up a new 600,000-square-foot distribution center…the core of this is a hub-and-spoke strategy around distribution, and we believe that this is something that really differentiates us not only for the manufacturer, but certainly for our end customer. It allows the manufacturer to be much more efficient in terms of managing their supply chain, and we believe that it allows us to have industry-leading service levels and inventory availability.”

“Specialty Health, is that group of businesses that we have which helps specialist…physicians…those would be oncologists…rheumatologists…urologists…any physician practicing in the community setting that really is a specialist organization.”

“we continue to see growth in other specialties as some of the injectable and biologic drugs transcend pharmaoncology into some of these other spaces.”

“Physicians today have reimbursement pressures. They have pressures on where are my referring physicians going, where is my patient flow coming from. They have to deal with IT infrastructure and the requirements of Meaningful Use. They have to deal with all the other regulatory requirements that are around them to do with HIPAA, Meaningful Use, ICD-10. They have to deal with the payers that want them to move from a fee-for-service environment into a value-based environment. And then they have to deal with the relationship that they have with the rest of the health system in their local geography.

All of those things are putting a lot of pressure on physicians. It’s not an easy place to be if you’re a — whether a 2-person practice or a 50-person practice. That is an environment where they need help.”

“because we have this depth of knowledge on the physician, because we’re so deeply embedded in the practices, we can come back to the payers and be able to provide them again with insight into what’s happening in the cost of cancer care that they can’t get anywhere else. ”

“our Technology Solutions business. I believe we have the most comprehensive set of services and we cover the broadest array of customers in the industry if you look at our footprint, such as hospitals and health systems, payers, physicians, manufacturers, retail pharmacies and consumers. And I think this is a real distinctive advantage for our company because if you look at the competitive landscape, most of our competitors actually focus on one customer segment. Perhaps the largest of our competitors may focus on 2 customer segments. We clearly have the broadest customer footprint. ”

“I think we’ve been very aware of the need to have global scale…Clearly, if someone is able to garner a competitive advantage from a sourcing perspective, it will be our responsibility to try to match that advantage and to find unique and creative ways to level the playing field.”

“We do function as a family”

“The world is clearly moving at some rate from fee-for-service to fee for value.”