Company Notes Digest 5.1.15

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

The Macro Outlook:

Mastercard’s data shows that consumers aren’t spending their savings from lower gas prices

“I think what is happening is that consumers are only using a small portion of their savings from gas to buy new goods and services. Rather, what they are doing is using those savings from gas to increase their personal savings rate ” —Mastercard

Ajay Banga, Mastercard’s CEO, thinks consumption will rebound though

“I don’t see this as a long-term issue, actually, not even a medium-term issue…I think we’re going to look at a somewhat different pattern of consumer spending over the next three to six months just because underlying consumer sentiment is positive.” —Mastercard

Steve Wynn would appear to disagree

“If you were to ask me…what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream. I don’t think Las Vegas is experiencing a great recovery. I think it’s still very patchy and I think that that’s probably our non-casino revenue in the first quarter was flat. I’d be thrilled if it was flat in the second quarter.” —Wynn (Casinos)

Wynn’s CFO said that summer trends are not picking up like they did last year

“We’re starting to see summer trends not pick up the same way they did in previous year. So we’re paying very close attention to the market. And what we’re getting as indicators as far as the summer business but it does not seem as strong at this point as it was last year.” —Wynn

Consumers may be cautious, but businesses seem to be hitting their strides

Companies are focused on expanding again

“We see notable shift in the composition of demand as corporates focus now on expanding activities rather than right-sizing their portfolios.” —Jones Lang LaSalle (Commercial Real Estate Broker)

UPS saw B2B growth stronger than B2C for the first time in a long time

“For the first time in a very, very long time, our B2B growth was actually a bit stronger than our B2C” —UPS

The construction market is strong in the US

“The construction market in the U.S. is continuing to strengthen and we are riding that wave.” —Graco (industrial equipment manufacturer)

However, there are also increasing signs of over-extension

Capital One sees auto loans starting to deteriorate

“In our auto business…Credit performance is gradually worsening in the industry and we see slightly higher losses on newer originations…we observed increasingly aggressive underwriting practices by some competitors, particularly in subprime. We are losing some contracts to competitors who are making more aggressive underwriting choices” —Capital One (Bank)

BB&T said that multifamily lending has become overheated

“we are being careful in multifamily. We think it is kind of peaking, and so we are being careful in underwriting and certainly in some markets we have really curtailed lending, because we think it is overheated.” —BB&T (Regional Bank)

Jones Lang LaSalle said that real estate investors are extending into tier 2 cities to try to squeeze extra return

“we’re seeing a lot of capital both domestic and particularly international trying to get into assets. And as we mentioned, the result is that investors are moving out along the risk curve somewhat into big cities, tier 2 cities, tier 2 properties, to find deals as well as a little extra return.” —Jones Lang LaSalle (CRE Broker)

The shadow banking system is popping up again to finance deals that regulated banks wont

“The big banks are feeling regulatory pressure on leverage transactions…that is why one of the reasons you’re seeing some of the big private equity firms put together credit, shadow banking credit opportunities” —Moelis and Co (Investment Bank)

Companies are scrambling to lock in office space before it becomes a tight market

“there’s a level of enhanced activity amongst the corporates to get space now while pricing is relatively attractive, space is available, and they’re not in a cycle where the landlords have control of the markets.” —Jones Lang LaSalle

Sellers have high expectations of price, but buyers are not willing or able to pay those values

“M&A activity is being driven by the seller, stock prices increased and sellers become confident that they can receive value for their company and M&A begins to pick up…Today, the seller’s expectations continue to be high, but we’re seeing a bit of mismatching terms of what buyers especially credit sensitive buyers are able and willing to pay.” —Moelis and Co  (Investment Bank)

If this isn’t a sign of consumer exuberance, then I don’t know what is:

“we’re having this call today on the eve of the upcoming Pacquiao fight and Mayweather fight. And this, in my 40-odd years in this town, this is a one-off. I have never seen madness and demand of this sort. This fight is probably going to break all records for pay-per-view. It certainly is breaking all records in what they’re getting for tickets. We have never charged more than $1,500 for a ringside seat in a fight and they’re going for $10,000, and then $7,500 for the medium range, and then $5,000 for the ones in the upper tier, an outrageous amount of money. Mayweather and Pacquiao are going to not only have to have a fight, but they’re probably going to have to do a chorus line or something to justify the cost of this.” —Wynn (Casinos)

International:

QE has helped business confidence in Europe

“European economic outlook has improved mildly overall since before QE, generally speaking I would say our sense is that confidence is improving at the decision maker level in Europe CEOs” —Lazard (Investment Bank)

US Steel is being squeezed by cheaper imports

“Excluding the energy sector, steel consumption in North America is generally good, but extremely high level of imports, many of which we believe are unfairly traded continue to negatively impact order rates for domestic steel producers.” —US Steel

The Chinese economy is still trying to get a sense of what direction Xi Jinping wants to take things

“The tentativeness of the government is a reflection of their own uncertainty, I believe, in many respects, as far as predicting where to go tomorrow or in the near future. There’s a new boss in China, Xi Jinping, and his agenda is something that everybody is adjusting to. He’s a very dynamic man. He enjoys enormous popularity among the people of China. And in China, the people matter. And so, everybody’s waiting and watching.” —Wynn (Casinos)

Mexico is an increasingly attractive place to build manufacturing capacity

“Geographically, Mexico continues to be a very, very strong place to manufacturers. Demand in the U.S. has been relatively stable. Mexico as a manufacturing location continues to be more attractive.” —Flextronics (Consumer Electronics Manufacturer)

India is also picking up from a manufacturing standpoint

“one thing I would add is India. India as a manufacturing location and as a demand environment is probably picking up as much as anything, so that’s probably where we see the biggest place of growth.” —Flextronics

Financials:

The Fed may raise rates just to get the ball rolling

“I think the Fed is going to raise short-term rates in the June to September time frame in spite of all their rhetoric about the recent changes and so forth. The reason is because I think they believe they need to get started on moving off the zero-based level.” —BB&T (Regional Bank)

The world of banking is moving to a real-time system

“the really dramatic transformation that’s going to happen to banking is it’s going to become real-time, far beyond kind of real-time payments. And I think that – I think banks are so, in a way, ill-suited to drive to that destination, yet the world will drive us banks there…we’re going to need to think more like technology companies and maybe a little less like banks.” —Capital One (Bank)

Consumer:

Simon Property Group listed some hot retailers that you may not be following

“we are doing with a lot of international retailers that people haven’t — DAVIDsTEA has come down, we are growing UNIQLO, we are growing H&M, we are growing Sephora, and we are growing Altar’d State, which is a great retailer that has got a significant growth platform.” —Simon Property Group (Mall owner)

There is overcapacity in the auto industry

“I think everyone is familiar with this industry is aware that there is a fair amount of overcapacity among the OEs. Right, that is the reality. I think that’s something that the OEs need to ferret out, and figure out how they deal with it.” —Delphi (Auto Parts Supplier)

Local Chinese OEMs are moving up the quality curve, adding more content to their vehicles

“You’re absolutely right, the local OEs are starting to increase the quality and increase the content in their vehicle.” —Delphi (Auto Parts Supplier)

Amazon spent $1 B on video content just to get people into the store

“we spent approximately $1.3 billion on content…this video content that we’re spending is helping us customers who buy consumable from us, they will buy clothing from us, they will buy shoes from us, they will buy electronics, they will buy media items.” —Amazon

Technology:

Brand advertisers are getting more and more comfortable with YouTube

“over the last quarter, over the last couple of quarters, we’ve seen the real takeoff. The number [of advertisers] grew 45% in 2014. And all of the top 100 global brands have run TrueView ads over the past year.” —Google

Microsoft said that its cloud growth isn’t just a shift of existing customers

“There’s significant traction we have in terms of moving beyond just one-for-one shift of a workload that traditionally ran on our server to our Azure Cloud. In fact if anything the majority of what we are seeing is new. Even in Office 365 it’s not just one-for-one shift.” —Microsoft

The iPhone is still attracting new customers

“we continue to see a higher rate of switchers than we have seen in previous cycles, and so we’re extremely excited about that. We also continue to see a reasonable percentage of first time buyers, particularly in some of the emerging markets…Our current estimate is that about 20% of the active installed base has upgraded to a 6 or 6 plus.” —Apple (Consumer Electronics)

The iPad is being cannibalized by iPhone and Mac

“have we had cannibalization? The answer is yes. We’re clearly seeing cannibalization from iPhone and on the other side, from the Mac. And of course, as I’ve said before, we’ve never worried about that. It is what it is.” —Apple

John Legere vowed that T-Mobile will eventually have coverage that matches Verizon

“I can’t tell you the date but there will be a time when T-Mobile coverage will be superior or equal to Verizon then what. We’re faster. We’re bigger. We’re more focused on customers. So that day is coming. I can’t put it on the calendar but it’s coming. And that is why when you see this question on the auction they don’t want any part of that.” —T-Mobile

Twitter was proud to report that they have a demand issue, not a supply issue

“In terms of your broader question about, are we running into a supply issue? What I would say is this, the shortfall we had in revenue in the quarter was related to demand. We don’t have a supply issue today…we are not inventory constrained” —Twitter

Healthcare:

Healthcare utilization and medical cost trends have been more moderate than expected

“Medical cost trends remain moderate…as you know we anticipated that we would see a trend increase this year, utilization increase. We really did not see that, trend was very moderate in the first quarter” —Aetna (Health Insurance)

People buying health insurance on public exchanges tend to be younger and receive a federal subsidy

“The demographic profile of Aetna’s public exchange membership remains generally consistent with last year. While the average age of our membership has declined modestly, the vast majority remains in silver and bronze plans and nearly 90% of our members receive a subsidy from the federal government, consistent with national averages.” —Aetna (Health Insurance)

Materials, Industrials, Energy:

Energy firms continue to be amazed by the speed with which the industry has reacted to lower prices

“The rate of decline of active rigs, most acute across North America is breathtaking and unequaled in prior downturns.” —National Oilwell Varco (Oil Drilling Equipment Manufacturer)

Eventually supply and demand will balance out

“Eventually supply and demand curves will cross, and we will see oil prices signaling producers to get back to production growth. We just don’t know when.” —National Oilwell Varco

The oversupply situation isn’t extreme and shale wells can be taken off line very quickly

“individual shale wells decline exceedingly quickly, 8 to 10 times the rate of conventional resources. We know that the sharp and rapid decline in the addition of fresh and new producing wells of all kinds will result in diminished global oil production over time. We also know that the excess productive capacity around the world, the oversupply, is, thankfully, just a few percent, far less than my first downturn in the 1980’s.” —National Oilwell Varco

This isn’t the first cycle that most operators have been through

“Most of us in oil and gas industry have been through downturns many times before and have honed our skills at rapidly adjusting spending through the cycles.” —National Oilwell Varco

There still isn’t much sign of credit deterioration among energy companies

“We maintained close, regular communications with our energy-related customers. We told you in January, we had visited with more than 90% of our customers. Well, we visited them again in March and early April, and there were no surprises or material issues.” —Cullen Frost (Regional Bank)

Hedges may be hiding the need for restructuring

“I don’t think [restructuring] has even begun. Look it happened rapidly, the decline was rapid, there are many, many firms who hedge at least six months to a year out…if oil would have settle in and call it $50 a barrel for long period of time, I think you see substantially more restructuring than we have seen.” —Moelis and Co (Investment Bank)

We’ll have a better sense of credit quality in the coming quarters

“the hedges are still are an important factor. And I think you’re going to see the real — you’re going to see a lot more this summer, but certainly in the fall you will continue to see how you go through this adjustment period. That’s when we’ll know at the end.” —Cullen Frost (Regional Bank)

Cliffs’ CEO says that the big three iron ore producers are colluding to force down prices simply by threatening to increase supply

“Rio Tinto and BHP more Rio Tinto than BHP, they are playing the game of scaring everybody else, and some people are getting really scared, some others are not…I believe that what they are doing is on purpose and I believe that what they are doing is not right…it is a tactics that plays well for the future markets they are base on the IODEX and that is manipulation of an index. If it were the LIBOR, people would go to jail, but because it is IODEX, people do not go to jail…How long it will take for everyone to perceive the game, I do not know.” —Cliffs Natural Resources (Iron Ore)

He says that in reality the big three do not have enough money to carry out these expansions

“Another point to consider is that there is not enough CapEx for these guys to do what they are doing other than current cash flow generation. I really would like to see analysis on that, where is the money coming from for the massive deployment that’s necessary for BHP, Rio Tinto and Vale…The do not have that money, period, full stop…Long story short these big projects are not coming” —Cliffs Natural Resources

Projected copper surpluses have not materialized

“When you step back and look at where we are right now in 2015, the surpluses that had been projected for a number of past years are not developing as they were estimated. Projects have been delayed, production has been interrupted and the market has not moved into a large surplus position.” —Freeport McMoran (Copper Miner)

Miscellaneous Nuggets of Wisdom:

Jeff Bezos lists the keys to Amazon’s success:

“We’ll approach the job with our usual tools: customer obsession rather than competitor focus, heartfelt passion for invention, commitment to operational excellence, and a willingness to think long-term.” —Amazon

It’s not easy to build a business

“the number of people who had said they are going to go out and create new investment banks or boutiques and I do think there is a lot of great bankers but I think the ability to create a long-term cohesive culture around a system that can create clients, new clients around the globe…is a very different thing than being a great banker.” —Moelis and Co (Investment Bank)

Try to invest along side CEOs with significant skin in the game

“I have 28 years of my life and a significant percentage of my net worth invested in this company and I want to assure my fellow shareholders a smooth and successful transition of leadership for Cash America is a top priority for me and our Board.” —Cash America (Pawn Shops)

“Now I’m speaking on this call as the largest single recipient of such distributions…When there’s a dividend check in this company, the largest one goes to me. And so I say again, unapologetically as a shareholder and as a Chairman of the Board, we believe that you distribute the money that is free and clear cash flow after you’ve met all other obligations” —Wynn (Casinos)

Full transcripts can be found at www.seekingalpha.com

Cash America 1Q15 Earnings Call Notes

Pawn loan business was good but not as good as 2Q and 3Q of last year

“As my friends in the energy drilling and production business here in Texas will tell you that market dynamic of falling prices continued with a vengeance in Q1. On a year-over-year basis, average gasoline prices in the first quarter were down approximately 35% following a 13% year-over-year decline in the fourth quarter of last year. Regardless we found our pawn loan performance to be slightly stronger than we were expecting in the first quarter although certainly not as robust as we experienced in the second and third quarter of last year.”

CFPB proposals only impact 7% of the business

I’m sure most of you know in late March the CFPB issued a press release outlining a framework of proposals under consideration for rules governing short term and some long-term loan products, including payday, vehicle title loans, deposit advance products and certain high cost installment loans and open end loans. As the proposals currently stand this would include higher unsecured payday and installment loans and again we expect that business to only account for approximately 7% of our revenue in 2015.”

There’s an app for that

We will be implementing two important technology initiatives in Q2. The first item to be introduced earlier in the quarter will be the Cash America mobile app that was available on both the Apple and Google App Stores starting April 29th. With two-thirds of all adult Americans owning a smartphone we feel this is a terrific opportunity for us to tap into the mobility space, drive more foot traffic to our stores and interact with our customers using a medium they are comfortable and familiar with. In the beginning our mobile app will be very retail centric and will list most of the inventory available for sale at each of our locations. Customers can search inventory by both location and category, while being directed to a location using any map application on their device.”

New COO is strong candidate for new CEO

“It should be obvious to everyone that with Brent’s promotional [ph] presence today he has become a serious candidate for succeeding me as CEO, and whether it is Brent or someone else who ultimately gets the nod from our Board I have agreed to remain active for at least a year following my retirement as CEO to assist in mentoring the new CEO during a transition period.”

28 years of my life and a significant percentage of my net worth invested in the company

“I have 28 years of my life and a significant percentage of my net worth invested in this company and I want to assure my fellow shareholders a smooth and successful transition of leadership for Cash America is a top priority for me and our Board.”

Not sure if tighter controls on payday lending will drive more pawn volume

“overtime in those studies that we’ve looked at we’ve seen a very little overlap between the pawn customer and the consumer loan customer, seems to be somewhat of a different customer profile. Now that said, as products and services exit the marketplace we feel we’re adequately positioned to take advantage of that on the pawn side.

So I tell you that what we’ve seen thus far may or may not be applicable, based on how that landscape change is going forward, especially with the potential CFPB rulemaking and the changes and if those products exit the market completely and there is less unsecured options for consumers to acclimate towards I would tell you there is a key opportunity for us to pick those customers up on the pawn side of the business.”

Delphi 1Q15 Earnings Call Notes

North America, Europe and China solid, weakness in Latin America

” Western European vehicle production appears to be gaining momentum, and vehicle production in North America and China remained solid, in line with our prior outlook.

The positive outlook for these regions is largely offsetting increased weakness in South America. Other macro factors are helping to counter a portion of the negative translation effect of the weaker euros.”

We bring technology and technology capabilities to the car

“We think at the end of the day what we bring to bear is technology and technology capabilities. And the more control, the more involvement in technology, the more value we add. The more integration of systems that we can do, the more value we add. So, our view is net-net that sort of trend would be a positive for suppliers like Delphi.”

Not too afraid of new entrants like goog or aapl

“Listen, you know, at the end of the day we think those of us who have been in the industry for a long time that have the capabilities, that understand the automobiles, that know how to integrate it, and do it at a quality level that the OEs need and require is very differentiated, and that is something the industry is going to continue to need.”

Chinese auto manufacturers are putting more content in their cars

No, listen, we came away from China as a management team very, very optimistic. And it’s really for two reasons. You know as a back drop to give you some background as you know we supplied both the global OEs there as well as the locals. A disproportionate amount of growth in that region has historically been with the global OEs on heavily content vehicles.

You’re absolutely right, the local OEs are starting to increase the quality and increase the content in their vehicle. And as a result appear to be strengthening. The positive for us is we have two things going on. On a relative basis you have strong vehicle production growth in the region. We have the benefit of serving both customer bases. The local OEs we actually do more systems work.

So dollar revenue and profitability tends to be greater when we serve those customers, which is beneficial. But what we are seeing is a significant ramp up in content per vehicle, and that’s what really explains the strong growth that we had in the first quarter, we were more than 10 points over market.”

There’s a fair amount of over capacity with OEMs

“I think everyone is familiar with this industry is aware that there is a fair amount of overcapacity among the OEs. Right, that is the reality. I think that’s something that the OEs need to ferret out, and figure out how they deal with it. ‘

Flextronics FY 4Q15 Earnings Call Notes

hardly pay taxes

“Our adjusted income tax rate for the quarter was 11.8% and our adjusted income tax rate was 10.1% for the year which ended up at the high end of our guided range of 8% to 10%.”

Still characterize economy as stable

“We would still characterize the economy as stable, except for INS where we have seen incremental softness in wireless, driven by reduced CapEx spending in the U.S., delayed CapEx spending in China and general softness in Europe. Overall, our revenue was slow in the March quarter and this will continue into the June quarter.”

Mexico continues to be a very strong place for manufacturers

“Geographically, Mexico continues to be a very, very strong place to manufacturers. Demand in the U.S. has been relatively stable. Mexico as a manufacturing location continues to be more attractive.”

India is picking up quite a bit

“one thing I would add is India. India as a manufacturing location and as a demand environment is probably picking up as much as anything, so that’s probably where we see the biggest place of growth. And maybe I’ll add one other thing, Sherri which is Brazil, because I didn’t mention Brazil. A lot slower than it was last year. So I’d say a little bit slower.”

Cliffs Natural Resources 1Q15 Earnings Call Notes

The big three majors cannot support their CapEx without allowing iron ore prices to increase

none of the three majors can continue to support their massive CapEx needs without allowing iron ore price to increase and if they still decide to keep iron ore prices artificially low as they had been doing so far, they are advertized massive capacity increases will not materialize due to insufficient cash flow generation.”

The problem for iron ore is that the big three companies continue to say that they are going to expand

“People talk a lot about the world being flooded with iron ore. That is a true statement that at this point, but the biggest problem for iron ore price at this point is not even the fact that the world is being flooded with iron ore. It is the fact that the market and the press and the investors are being flooded with that information about the expansion plan of three companies and these three companies are Rio Tinto, BHP and Vale.”

Iron ore companies are saying they’re going to add a huge amount of production

” we will have for example just to give you a good number, easy one to understand, you have Vale saying, we produced 310 million tons a year, but I am going to 460, so that is another 40 SKU on top of what they have right now.

You have currently Rio Tinto producing something like 250 million tons, but saying that they are going to produce 360. That is two Roy Hills on top of the existing production. You have Roy Hill producing nothing, because Roy Hill – they are just the landlord of Rio Tinto, but saying that starting September, we are going we are going to add 55 billion tons to the trade, so these news are the ones that are destroying the future view of iron ore sinter feed fines in the world, but we have to see this thing in the contest of how these things are being played.”

They are trying to scare everyone else

“Rio Tinto and BHP more Rio Tinto than BHP, they are playing the game of scaring everybody else, and some people are getting really scared, some others are not. Some others are acting. I put myself in Cliffs, in the side of the one that take these things as face value that’s it is what it is, so this important marketing is doomed, is cursed a place not to be in. I can’t wait to get out of Australia. That is the bottom-line, because I already shutdown completely in Canada and soon as soon as I get to the end of life of mine in Australia, I am out of here.”

They don’t have the money for these projects

“Another point to consider is that there is not enough CapEx for these guys to do what they are doing other than current cash flow generation. I really would like to see analysis on that, where is the money coming from for the massive deployment that’s necessary for BHP, Rio Tinto and Vale.

Serra Sul, the S11D project alone, we are talking of something like $20 billion. The do not have that money, period, full stop. They are scrambling to make [ph] right now at Vale. I am a Brazilian guy as you know. I know what’s going on there, a lot more than they believe, so they can talk a good gain, but the reality is completely different.”

These big projects are not coming

“Long story short these big projects are not coming”

I have no idea how long it will take for people to realize what’s going on

“How long it will take for everyone to perceive the game, I do not know. I am in the business of clarifying that as much as I can, because it is affecting me. I could care less about that, but it is affecting Cliffs. We are having to reduce our footprint in Australia, because of that. I know that the Western Australian government is not happy with the way they are handling their natural resources over there, so there is a lot going on and a lot can change between now and then in next year for example.”

This company has a good management team, the board was just messed up

My biggest surprise when I got to Cliffs is that this company has a very, very strong management team. It is amazing how badly the board was handling this company. This has been fixed. It was fixed nine months ago since then we have been working hard and we will continue to work.”

Oh, Nathan, one more thing…about your model…

“Nathan, before you go, just a reminder, you have an EBITDA target for Cliffs Natural Resource for the year of $170 million. In Q1 alone and Q1 is the frozen quarter, is the quarter that we are not shipping, because you can walk between here and your home country in Canada, you know that.”

“Even with this difficulties, we are able to generate $94 million reasonable in Q1, so now based on your EBITDA target, I am $76 million away from reaching your EBITDA target and I have three quarters to do it just a reminder.”

Oh ya, and look at your price target too…

“Take a look at your price target as well, because you went from 10 to 1, baked into your report the assumption that Cliffs Natural Resource by now would be would be bankrupt, so you were wrong. I am not bankrupt, I am not heading to bankruptcy. Your assumptions are all wrong and the outcome has been bad so far.”

I believe that what the big three are doing is on purpose

“I believe that what they are doing is on purpose and I believe that what they are doing is not right and I believe that they are generating a lot of unemployment in Australia and that should have serious consequence for the years to come.”

If this were LIBOR these people would be going to jail

“It is tactics of scaring everyone else, it is a tactics that plays well for the future markets they are base on the IODEX and that is manipulation of an index. If it were the LIBOR, people would go to jail, but because it is IODEX, people do not go to jail, but shareholders that realize what is going on they may take action and that is what I am talking about, so when are they going to be rational, when they get scared when are they going to get scared, I do not know.”

Board members are a lot more responsible than CEOs

“They are basically terrorizing the market with the prospect of CapEx that at the end of the day will not be deployed. Do you know why they will not be deployed, because board members are a lot more responsible than CEOs, they are not bullish, they have fiduciary duties and they are responsible for what actions they take, if they do, they will responsible.”

Wynn 1Q15 Earnings Call Notes

Our hopes for improvement in Macau have proven incorrect

“I think the trends in Macau were beginning to be very visible in the fourth quarter, but our hopes for an improvement in the Chinese New Year turned out to be incorrect. And the repositioning of the market and the degradation of the volumes in VIP, have continued even into April. Most of my remarks now are going to include what we’ve seen in the first four months, not just the first three months, because the trends that were clear in January, February and March have continued into April and as we look at the whole year in Las Vegas and Macau, certain simple truths emerge.”

It’s no secret that there’s been a change in attitude in mainland China

“It is no secret that there’s been a change in mainland China in attitudes towards a number of things that have impacted Macau. ”

Guest experience is everything

“Guest experience is what creates a better tomorrow and allows us to continue in business, eventually raise our prices to offset the rising cost of business. People that have a good experience tell their friends and they come back again and again. Guest experience is the beginning, the middle and the end of the story.”

Guest experience is determined by our employees

“guest experience is determined by our employees, the people that actually touch our guests and create that experience. So our attention goes from our balance sheet and our financial condition to maintain flexibility, but also it goes immediately to keeping our workforce stabilized, happy, and proud to be here.”

I’m hurt more than anybody by a lack of dividend

Now I’m speaking on this call as the largest single recipient of such distributions. There is a few institutions that, if you take T. Rowe Price, own more shares collectively, at least for the moment, but they’re in individual pockets. When there’s a dividend check in this company, the largest one goes to me. And so I say again, unapologetically as a shareholder and as a Chairman of the Board, we believe that you distribute the money that is free and clear cash flow after you’ve met all other obligations, and the Board of Directors should consider that principle every time they meet each quarter, as we did this time.”

We don’t plan on dividending borrowed money

“Steve put it perfectly that we don’t plan on dividending out borrowed money.”

Summer business in Vegas does not look like it’s picking up like it has in past years

” for April and May, we have a strong base and stable base of convention as well as leisure mix. Summer’s going to be interesting. We’re starting to see summer trends not pick up the same way they did in previous year. So we’re paying very close attention to the market. And what we’re getting as indicators as far as the summer business but it does not seem as strong at this point as it was last year.”

What’s the second quarter going to look like in Vegas? Weak.

“If you were to ask me, since we’re making forward-looking statements, what will the second quarter look like in Las Vegas? Weak. Do you hear me? Weak. So I’m trying to lower expectations here. This notion of a big recovery is a complete dream. I don’t think Las Vegas is experiencing a great recovery. I think it’s still very patchy and I think that that’s probably our non-casino revenue in the first quarter was flat. I’d be thrilled if it was flat in the second quarter.”

We would be thrilled if non-casino revenue was flat

” can you hear that? Here’s two of us saying we’d be thrilled if non-casino revenue was flat in the second quarter as it was in the first. My guess is that that’s going be a struggle.”

The general economic recover in the US has been grossly overstated

“secondly or thirdly, the recovery in America is a jobless recovery in real terms. And inflation in America in real terms is an enormous number. So I think that the general economic recovery in the United States has been grossly overstated. ”

I have never seen anything like we’re going to see with this Pacquiao fight

“we’re having this call today on the eve of the upcoming Pacquiao fight and Mayweather fight. And this, in my 40-odd years in this town, this is a one-off. I have never seen madness and demand of this sort. This fight is probably going to break all records for pay-per-view. It certainly is breaking all records in what they’re getting for tickets. We have never charged more than $1,500 for a ringside seat in a fight and they’re going for $10,000, and then $7,500 for the medium range, and then $5,000 for the ones in the upper tier, an outrageous amount of money. Mayweather and Pacquiao are going to not only have to have a fight, but they’re probably going to have to do a chorus line or something to justify the cost of this.

But our room rates are at $1,300, $1,400, $1,500 for typical rooms, and you can’t get a room in this town. I’ve never seen anything like it even with Hagler fought Leonard, Ali, nothing like this.”

The tentativeness in China is a reflection of the uncertainty with respect to Xi

“The tentativeness of the government is a reflection of their own uncertainty, I believe, in many respects, as far as predicting where to go tomorrow or in the near future. There’s a new boss in China, Xi Jinping, and his agenda is something that everybody is adjusting to. He’s a very dynamic man. He enjoys enormous popularity among the people of China. And in China, the people matter. And so, everybody’s waiting and watching.”

Cullen Frost 1Q15 Earnings Call Notes

Solid ROA, ROE

For the first quarter of 2015, return on average assets and average common equity were 1.02% and 10.34%, respectively, compared to 1% and 9.97% reported in the first quarter of 2014.”

Consistent loan demand despite energy prices

“Turning to loan demand. We continue to see good consistent growth, despite uncertainty in the market from declining energy prices. First quarter 2015 average loans were $11.1 billion, up 15.6% from the $9.6 billion reported for the first quarter of last year.’

No surprises or material issues with energy customers

“So we entered this time of lower oil prices and slower job growth in Texas with strong credit quality. We maintained close, regular communications with our energy-related customers. We told you in January, we had visited with more than 90% of our customers. Well, we visited them again in March and early April, and there were no surprises or material issues.”

Increased allowance

“We continue to have good ongoing communications with these customers. We have increased our allowance for loan losses slightly to deal with the economic uncertainty surrounding lower oil prices. As we go through the adjustment period, we will be able to address loans rationally through our normal course of business.”

Industry has adjusted very quickly

“After observing May contracts of crude oil future prices, report suggest that oil is trying to hit bottom. We have talked with our customers and have seen how quickly the industry has adjusted to market conditions.”

Mixed economic year in Texas

“2015 looks to be a year of mixed economic growth in Texas. Models indicate we could lose about 140,000 jobs in the energy sector. In March, the number of jobs in Texas declined for the first time in more than two years, and it is expected to take until the fourth quarter for oil supply and demand to come into balance.”

There’s a lot of liquidity in Texas from wealth generated in recent years

“Finally, there is a lot of liquidity in Texas from wealth generated in recent years, particularly in areas hardest hit by the energy job losses. For example, Midland Texas, in the heart of the Permian Basin has the highest per capita income in the nation. ”

Construction is very strong in Texas

“construction is very strong. There is just a lot going on in Texas. It is, if you look at office, offices are still, the statistic show that there is opportunity. Occupancy rates are under the line where you would see a need. So I don’t think there is overbuild. And certainly the Gulf Coast, which I mentioned in the petrochemical plants up and down, LNG plants, these things are all — LNG plants, you don’t build one for less than $10 billion and it’s over a number of years. So there is a lot happening.”

The hedges are still helping. You’ll see more adjustment in the summer and fall

the hedges are still are an important factor. And I think you’re going to see the real — you’re going to see a lot more this summer, but certainly in the fall you will continue to see how you go through this adjustment period. That’s when we’ll know at the end.”

New production costs have fallen much lower

“But the new production costs are much lower.

I’ve read a number of articles on cost improvement, and you’re seeing in some sectors that cost — I always think of cost of about $8 million cost of well by the time you drill it, frac it and complete it. You’re seeing some examples of that coming down to $4.5 million or $5 million. And so I don’t think we can underestimate the mother of invention of what technology we saw, what technology did to fracking, and we will continue to see improvements in cost.”

I don’t really like this response to the question of whether reserves will continue to increase

“Well, first of all, anybody that can predict the future and know everything is going to happen is going to be wrong. Remember what I have said, the provision was increased because of the formula, and it relates to classifications and all the other stuff. So it’s just consistent with that.”

US Steel 1Q15 Earnings Call Notes

Faced extremely difficult conditions in Q1

“We faced extremely difficult conditions in the first quarter with high levels of imports and supply chain inventories and rapidly falling spot prices and rig count significantly impacting volumes at both our flat rolled and tubular segments. The continuing strengthening of the U.S. dollar, particularly in relation to the euro helped to keep import pressure high in North America and negatively impacted our European segment results.”

Flat rolled impacted by foreign steel, unfairly traded

“Our flat-rolled segment results continue to be adversely impacted by the mass of steel imports that accelerate during the first quarter many of which we believe are unfairly traded.”

Tubular segment decreased significantly

our tubular segment decreased significantly compared to fourth quarter, primarily due to lower shipments. Shipments were adversely impacted by reduced drilling activity caused by low coal prices and a significant amount of tubular import volumes. Inefficiencies from reduced operating levels at all of our tubular facilities also negatively affected first quarter results.”

The Carnegie way

” our Carnegie way transformation process. The Carnegie way is focused on value creation through a disciplined and structured improvement process with the objective being to earn an economic profit throughout the business cycle and deliver above market returns to our stockholders.

Aggressive actions to address extremely challenging conditions

“We’ve taken aggressive and decisive actions to address the extremely challenging conditions we are currently facing in North America. ”

“We have reduced our operating grades at all of our facilities in North America and will continue to make the adjustments necessary to serve our customers in the most cost effective manner without sacrificing quality, delivery and service that our customers rely on”

We have had to lay off employees in response to imports

“Our order rates have been significantly impacted by high levels of imports into the North American market that have continued unabated, resulting in operating levels that have caused us to lay off a significant number of our employees and will likely result in the number of lay-offs increasing going forward. We are attacking every aspect of our cost structure and exercising every opportunity that we have to eliminate, reduce and defer costs. We have many cost levers that we can pull in response to a downturn in market conditions and we are pulling them as quickly and as hard as we can.’

Demand in most markets is strong

“The automotive market continues to be a very good market for us and we expect it to remain strong throughout the year. We expect to see continued growth in construction, including increased demand for construction equipment.”

Order rates should start to improve in 2Q

“Recent service center data, particularly flat rolled inventory levels and materials and order levels suggest that order rates should start to improve during the second quarter.”

Steel consumption is pretty good, we’re just getting pressured by imports

“Excluding the energy sector, steel consumption in North America is generally good, but extremely high level of imports, many of which we believe are unfairly traded continue to negatively impact order rates for domestic steel producers.”

Recovery will be late in the year at best

“rig counts continue to decline and the high levels of import tons that continues to arrive suggest that a recovery in domestic order rates will be difficult until late in the year at best. ”

Order intake is picking up and pricing is inflecting

“We are beginning to see an order intake pick-up and there seems to be inflection as far the pricing is concerned.”

Moelis and Company 1Q15 Earnings Call Notes

Steadily improving cycle

“As I have articulated since our IPO, we believe it’s going to be a long and steadily improving cycle. I think this is evident based on our conversation with clients and when you look at the data.”

Global M&A up 14% this year

“The dollar volume of global announced M&A transactions over $100 million is up 14% over the first quarter of 2014.”

Volume is up for big deals though while smaller deals are flat

“But as we have discussed, we believe the number of transactions is more indicative of revenue potential and this number is up only 3% from the prior year period. But that’s not the whole picture, when you look more closely at the day the different trends emerge for large cap and mid cap activity, while the number of transactions of over $5 billion almost doubles versus the first quarter of last year, the number of deals between $100 million and $5 billion was basically flat.’

Deals are taking longer to get to the finish line

“So while the M&A market is improving, some of the headline deals are suggesting a more pronounced rebound than what we’re seeing in broader markets. And to be candid we were surprised by this trend as relative to last year does feel like deals are taking longer to get to the finish line, particularly with regards to credit sensitive M&A.”

M&A is being driven by the seller. Now we’re seeing a mismatch of what buyers are willing and able to pay

“Last earnings call I think I spoke about M&A activity being driven by the seller, stock prices increased and sellers become confident that they can receive value for their company and M&A begins to pick up.

This was the dynamic last year, which led to an acceleration of activity and high valuations achieved for sellers. Today, the seller’s expectations continue to be high, but we’re seeing a bit of mismatching terms of what buyers especially credit sensitive buyers are able and willing to pay.

Banks aren’t as willing to make leveraged loans for the purchases either

And by being able to pay one of the key ingredients is financing packages. The big banks are feeling regulatory pressure on leverage transactions, which means financing packages and buyer’s ability to pay on credit sensitive deals are being impacted.”

Many buyers are tapping the shadow banking system which are charging more money

‘by willing to pay, we mean buyers are generally being more disciplined as they face either lower levels of leverage when they evaluate opportunities or higher interest cost as many of them are now tapping the shadow of banking system in the unregulated sectors, which are charging more money.”

We are staying prepared to help restructure balance sheets when the cycle comes back

“I believe we have the leading restructuring franchise globally and it includes about 12% of our managing director population. We’re going to keep the team in place for when the cycle comes back. I’m pretty convinced that it isn’t a question of if, but when, given the tremendous amount of debt issued in recent years.

And if you look back on the last cycle, I don’t think in 2006 or early 2007, it was apparent how hard the cycle would hit in 2008 and 2009. So I don’t think they will give you a lot of warning, but we want to be ready for it.”

We’re seeing companies created by PE and credit hedge funds step into provide credit on leveraged transactions where regulated banks pulled back

“I mean a lot of these companies that are being created by the private equity firms and the credit hedge funds are stepping into provide it. The interesting point is, it’s more expensive. Those prices are different on interest rates and terms and that ultimately does affect a buyer’s willingness to step up to the level of price that was expecting us.”

PE firms are putting together credit vehicles because there is a real need for it right now

“that is why one of the reasons you’re seeing some of the big private equity firms put together credit, shadow banking credit opportunities and the opportunities have such growth orientation because there is a real need it for right now.”

It’s much harder to start a boutique firm than to just be a great banker

“the number of people who had said they are going to go out and create new investment banks or boutiques and I do think there is a lot of great bankers but I think the ability to create a long-term cohesive culture around a system that can create clients, new clients around the globe like we talked about earlier in the presentation is a very different thing than having a great banker, can’t be a great banker.”

Some foreign issuers have US debt that hasn’t been hedged properly which is all of a sudden a much larger obligation over night

“it is interesting there are places around the world that are have debt in U.S. dollar denomination, you talked about rate and currency and that might be that where that has happened remember that sort of results in a 30%, 40%, 50% increase in obligation just on currency and if you haven’t hedged it correctly, there could be some restructuring around that.”

The oil restructuring cycle hasn’t even started yet

“I think it haven’t even began. I don’t think it has even began. Look it happened rapidly, the decline was rapid, there are many, many firms who hedge at least six months to a year out, not unusual at all to not even the feeling yet, the cash flow, the real cash flow decline of the oil price.

And the first thing people do is you do anything to avoid default, you will sell your quality assets, you will sell your – first you sell your non-essential, then you will try to sell some assets even if it’s quality to keep current on your interest rates.

So look I don’t think it’s even really gotten started, I mean it started I know there are a few firms out there, but if oil would have settle in and call it $50 a barrel for long period of time, I think you see substantially more restructuring than we have seen.”

Waste Management 1Q15 Earnings Call Notes

Wont overpay for assets

“On the acquisition front, we continue to have discussion with sellers, but we’ll remain disciplined and not overpay for assets. If we cannot identify core businesses to acquire at reasonable prices, we’ll buy the business that we know the best, ours, by doing a share buyback. Even if we do identify acquisition targets at reasonable prices, we will still purchase at least enough shares to offset dilution and we’ll begin buying those shares in the second quarter.”

Apparently we generate more trash in the summer

“As we move through the second quarter and see the seasonal upturn, we expect to see continued improvement in our volumes. Combined with our focus on cost and pricing, this should lead to continued growth in earnings and free cash flow.”

Improving volumes in profitable lines

“seeing improving volumes in our most profitable lines of business. We’re seeing declining volumes in our less profitable lines of business like recycling and residential.”

Residential is competitive

” I think residential has always been a very competitive line of business. Look, those are big contracts, big slugs of revenue, and generally, you’ve got a lot of different bidders. So, there’s always been aggressive players on the residential side. Frankly, I would say that we’re seeing a little bit of more stability on the residential side, as folks that have taken those low-margin contracts from us over the last few years start to realize they can’t make a lot of money on them.”

CPI affects pricing

“I don’t think that we’ll see a significant change in CPI. But when we look at our pricing programs, we try to look at them holistically, and if CPI is lower, then we just have to get those dollars from somewhere else. And so if we get a bump from CPI, that would be great. But if we don’t get that bump, we’re just going to have to pull those dollars from somewhere else, and that’s what we’ve been doing the last few years, and that’s what we’ll do this year.”

Weak commodity prices impact recycle volumes

“as we’ve talked a lot about this morning, the negative revenue impact of recycle commodity prices and recycle volumes. And that was a negative $70 million”

Customers need to realize that we need to get paid for recycling

“I think that’s what customers need to realize is that we’re not the only ones rationalizing assets. The industry is rationalizing assets. And unless we can work out a way where recycling is profitable over the long term, there’s not going to be recycling. And customers certainly don’t want to live with that. So, we just need to make sure that the customers understand that if they want glass recycled, we need to get paid for it. We actually lose or we lost in the quarter $6 million by recycling glass. Long term that cannot be sustainable for Waste Management. So, we need to work with the customers to get them to understand the mix issues, to understand the commodity markets so that we can make a long term viable business out of recycling.”

We’ll live up to the contract, but we’re not going to be there when it ends

Most of these contracts are long-term contracts and – look, it’s a long-term contract; we signed the contract. We will live up to the contract. But what they need to realize is we’ll live up to that contract, but we’re not going to be there when the contract ends, and nobody’s going to be there when the contract ends.”

There’s one business that we know best and that’s ours

“As we’ve got into deeper discussions with sellers, we found out that some of them had bigger timing issues than we thought and some of them have higher pricing expectations than we thought.

And so – look, that doesn’t mean that we ultimately won’t buy those businesses, but it might mean that it’s going to take us longer to buy those businesses, and if that’s the case, then we do need to be out in the market buying back our stock because, look, as I said, that’s the business we know the best. We’re never going to pay a multiple higher than our own multiple because there’s one business we know real well and that’s ours.”