HEICO FY 4Q15 Earnings Call Notes

Eric Mendelson

Airlines are focusing on cutting costs in aftermarket parts

“There has been a lot of talk in the marketplace about sort of the changing landscape of the aftermarket with airlines focusing on keeping less inventory and really driving down their cost, and I think that the OEM purchases have become really the purchases of last resort, airlines are trying to figure how can they buy the parts as PMA or surplus rather than spend the big prices and get them from the OEM.”

We were originally more of an engine supplier but as engine has become more competitive we’ve shifted to the non engine side

“we’ve had a larger emphasis over on the non-engine part of our business, HEICO started out originally as a supplier of one particular part for one particular engine that was made by one particular OEM and then we got into other parts for that engine and then other OEMs and then the airlines helped us to get into the component area so, a majority of our sales are for non-engine applications. I think everybody is aware that the engines have become more competitive, the OEMs have become very aggressive in that area. We continue to develop engine parts, we continue to do very well, airlines want to continue to procure those parts, they want us to develop other ones, but we’ve had a big diversification focus for the last 15 years on the non-engine side and now that represents a majority of our sales.”

Airlines are a lot more careful about the amounts of inventory that they’re holding

“with regard to buying behavior yes, a number of airlines have really started focusing on the amounts of inventory that they take in and are holding very little inventory currently. So when they place an order they need to make sure that they get the part because otherwise they don’t have it. They used to give buyers sort of more autonomy to purchase parts and now they have become very, very careful about spending money.”

Larry Mendelson

We are a preferred buyer compared to Private Equity

“No, I think that the right kind of company that we like to acquire does view us as the preferred acquirer because of the way we run the companies when we compete with a private equity firm that buys and sells buy the pound every three to five years, managements really find that very stressful. So when they have a say as some input we are always preferred buyer. When a seller who wants to have a liquidity event wants to protect his employees continue running the – very often continue in the position of presidency of his company, we are definitely the preferred buyer.”

Wesco 2016 Outlook Call

John Engel

Industrial end market should be down mid to high single digits next year

“Taking a look at our end-markets, we’ll start with the industrial end-market, which accounts for about 40% of our total sales. We expect this end-market to be down mid to high single-digits for the year reflecting continued weakness and tougher comps in the first half of the year. Economic data supports our expectation of near-term weakness. The Institute for Supply Management’s Manufacturing Index recently reached its lowest level since June 2009. Oil is in oversupply which will continue to dampen traditional energy production and investment expectations. A strengthening U.S. dollar and global economic challenges are also expected to continue to limit export growth.”

This is completely different than it was six years ago

“When you go back six years ago, the economic downturn was pervasive it’s unlike anything any of us who are in business have seen in our carrier. And quite frankly we didn’t know how far things would dropped and when and if where the bottom would settle out. And so I think what we are facing now is just is a mixed low growth environment with some areas that are experiencing some pockets of growth and other areas that are flattish and then there is some particular verticals that we’re seeing some pretty significant traction so our view is the markets are completely different now in terms of versus five to six years ago in that economic cycle.”

We’re assuming headwinds persist into 2016

“to put it into context and what I’d say is we’re assuming by and large that the headwinds we’re facing right now persist into 2016. That’s true in construction and it’s true across each of our end-markets.”

November a little better than October. December slightly stronger but not significantly different

“So October came in a little bit further down then where we were at the time of the call. November was still down but better than the month of October and December isn’t tracking, it is tracking a little bit stronger but not significantly different.”

Not expecting anything more than the typical December industrial shutdowns

“what we’re hearing I would characterize overall as being more typical to a standard December. With that said in certain verticals like mining and steel and oil and gas, but we have been facing challenges in some of those verticals with customers and their spend-down right. Some of those have adjusted schedules and such so we will see how the next couple of weeks play out but what we’ve said is at this point in time, we haven’t seen — it’s nothing — we are seeing any indications it’s like it was back five-six years ago the original question where we just have pervasive across the board shutdowns and we are going through that major contraction here.”

3M 2016 Outlook Call Notes

Nick Gangestad

Lowering 2015 outlook

“Before I address the 2016 outlook, let me provide a few comments as we close out 2015. Global end-market demand continues to be soft, as reflected in declining macroeconomic forecast, a trend that has had a notable impact on our industrial business, particularly in the United States. We are also seeing weaker than expected demand in the consumer electronics market which is impacting our electronics and energy business. Therefore today, we’re updating guidance for the full year. We expect organic local currency growth to be approximately 1% versus prior guidance of 1.5% to 2%. As a result, we forecast full year GAAP earnings to be approximately $7.55 per share versus a prior range of $7.60 to $7.65.”

Seeing particular weakness in industrial businesses in the US

“As I said earlier, it does reflect the reality globally of what we’re seeing. We’re seeing particular weakness in industrial related businesses in the United States, and we’re also seeing weaker than expected demand in consumer electronics. For the quarter, we’re estimating organic growth in electronics and energy to be down high single-digits and we’re estimating industrial and safety and graphics to be down low single-digits. Our health care and consumer businesses were continuing to see good performance, Andrew.”

October, November, December has all been consistent with low to negative growth

“Fourth quarter last year, we were seeing quite a bit of activity in what we consider building inventory in the channel. We’re clearly not seeing that occurring now. I’m not ready to declare that we’re seeing necessarily channel inventory contracting more but it’s clearly not building. As far as quarterly trending of what we’re seeing so far, Nigel, there is no particular trend we’re seeing. What we’ve seen in October and November and what we’re estimating for December, it’s all a very consistent movement of the low to negative growth that we’re seeing in — the negative growth we’re seeing in industrial in the fourth quarter.”


Inge Thulin

There is growth in China

“I was recently in China, and I would say there’s of course growth. You have to prioritize and execute the plan. And I don’t think, generally speaking, that — you talked about the step change, I don’t know if it’s a step change. This is the second biggest economy in the world; there’s growth, generally speaking, specifically to what I would call domestic businesses; and by definition, our penetration is low. So, we should grow there, no doubt about it.”

There is a global slowdown in consumer electronics

“I think as Nick said, we see a slowdown, what I think is more of a global phenomenon in consumer electronics. And I think we all have seen some reports coming out lately that if you go the whole way from smartphones to tablets and TVs, there’s a small downturn in that in my view temporarily because we know that’s a cyclical business and they will come back again. ”

I don’t see anything to say that 2016 will be much much slower

“I will say that I don’t at this point in time see anything that is indicating for me that it will be much-much slower as we move into ‘16. So, I think what you see here is realistic based on the information that I have at hand at this point in time. I think that this change maybe as we indicated here is maybe on the consumer electronic part where you saw other indication coming out earlier this week or end of last week, where it looked like smartphones, tablets and even TVs in that space and I think also into semiconductor had slowed a little bit. But reality is those businesses go in a cycle and they will — they would turnaround again.”

Healthcare and consumer still growing

“You still see good growth in, generally speaking, in healthcare and consumer around the world. So, those domestic markets are growing well and we capitalize on that. So, health care is one of the highest growth rates for us going into next year with a highest margin that we say as well.”

The industrial slowdown is broad based

“I think it’s slowed and I will say — I will more categorize it maybe broad based versus saying there was one specific area that’s slowed more than the other. So, I think it was broad-based, generally speaking. And the industrial sector in United States has been going very well for quite some time. So, it’s — I would say, we’re slowing a little bit. So, it’s not a huge, someone falling off the cliff, it’s just that it’s slowing down a little bit. They’ve done very well in the big — one of the biggest sector in the United States economy. So, I think it’s broad-based.”

Joy Global FY 4Q15 Earnings Call Notes

Ted Doheny

2016 should be another rough year

“The mining industry in 2016 will be defined by strained cash flows, further austerity measures and asset consolidation. The net effect will be the third consecutive year of double-digit decline in capital spending.”

Have had positive developments in copper markets

“In recent months, we’ve seen some potential positive developments in refined copper market. Our original estimates expected refined copper markets to be in surplus until 2017. However, the production curtailments that have already been announced could ship to refine market to a deficit as early as next year, which could support improved pricing and drive project investment.”

Facing continued headwinds in coal

“One of the largest headwinds we continue to face is in U.S. coal markets. The combination of regulatory forces and a seemingly unlimited supply of abundant low-cost natural gas is transforming the U.S. electricity industry. Although coal will continue to play an important role, we now expect that coal burn in the electric power sector could decline nearly 100 million tons in 2015.”

Coal CapEx more likely to bottom in 2017

“we see U.S. coal, which we’ve been now following for three years. We see that in the next 12 to 18 months. The data we look at is what our customers’ CapEx has been out there and we saw that’s pointing down to bottoming at 2017 on public data. So we just have to be prepared for that to take another step down in ‘16.”

Restoration Hardware 3Q15 Earnings Call Notes

Areas affected by oil are pulling down top line sales

“So when we look at this the areas that are affected by oil…When you take just those three areas, when you take the Texas markets specifically, Houston, which is being impacted the most, when you take the Miami market, and you take the Canadian market which are all very important markets for us. In the first half of the year, they were pulling down total Company sales a little under 2 points.”

They were pulling down the company 2 points, now they’re pulling it down 4 points. It makes me think we should be calling Yellen to let her know what we’re seeing

“They were pulling the whole Company down a little under 2 points. In Q3, that accelerated to 4 points, and that’s meaningful, right? It’s not just meaningful to us, I’d say it’s meaningful to anybody who’s thinking about what the US economy ought to look like, and how we ought to think about it. It makes me think hey, should we be calling Yellen, and the department, and saying, let us tell you what we are seeing, because those things, from my point of view and I don’t mean to make anybody panic, but it’s important how we look at those.”

We have a bias for action

“we have a bias for action in this Company. We are not good spectators, but we are really good participators.”

It’s the most promotional environment we’ve seen

“But one of the things that’s happening is we track all the competitors’ promotions, and we know what everybody’s doing, just like you do. And we’ve noticed that there’s been an uptick in competitive emails year-over-year…when we look at the data internally, it is the most promotional environment we’ve seen, meaningfully so.”

Taking share is important

“Taking share is important. There’s a reason why Amazon launched Black Friday before everybody else in the world, right? There’s a reason why we launched the promotion we did last weekend. It was to take share. There’s consumers, there’s shoppers, and we’re going to try to take share.”

Every 4th quarter is a war

“From a tactical short-term view, right, is every fourth quarter a war? Absolutely. You have, in this business, can you not pay attention to all those little things, and you have got to be ready to fight the fights, and you have to be into the details, and if you want to win in Q4, you have got to be highly engaged, and you’ve got to be willing to improvise and to adapt.”

I don’t mean to make anyone too worried, but I’m trying to be transparent

“I don’t mean to make anybody too worried about this stuff, right? But sometimes maybe I tend to be overly transparent, because look, we’ve got shareholders and supporters on the phone, and I think it’s important to know how we’re playing the game.”

Building partnerships means having to sometimes tell difficult truths

“We can speak less about stuff and pretend like everything’s just always great. I don’t think – I don’t think that’s the right way to build partnerships. I think, we tell you when things are working, we tell you when things are not working, we tell you when we make changes, we tell you when the changes are working, we tell you when the changes are not working.”

Company Notes Digest 12.11.15

Each week we read dozens of transcripts from earnings calls and presentations as part of our 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.

This Week’s Post: Ground Control to Major Tom…Commencing countdown, Engines On…

The Fed may raise interest rates off of the zero bound for the first time in seven years next week. I know we’ve all got Fed fatigue, but this really is an important shift in policy.

Goldman held a financial services industry conference this week, so we got to hear from a lot of management teams who will be most affected by the change. Everyone expects the Fed to move, but will be watching the commentary closely for indication of future increases. The consensus seems to be that future increases will be slow. Banks should benefit from the increase, but it’s anyone’s guess how the rest of the economy will react.

Also this week: What are high yield spreads saying about credit quality in non-energy sectors? AT&T and Verizon confirm that handset sales are weak this quarter, and energy companies continue to search for a bottom.

The Macro Outlook:

We’re all watching and waiting for liftoff next week

“I mean, we are going to be obviously watching it very carefully as you all will.” —JP Morgan CFO Marianne Lake (Bank)

You probably have Fed fatigue, but this really is important

“look, I think, if I’m realistic in 2016, the single big thing that is going to drive earnings growth is going to be the rate environment.”–JP Morgan CFO Marianne Lake (Bank)

People are expecting this increase, but will be listening for how the Fed frames future expectations

“from a what happens after the day after, I think a lot of that’s going to again depend upon Fed commentary. So are we going to see a rate increase next week and then what’s the prospect? How do they think – how do we think that they are going to handle rate increases into the future?” —Citigroup CFO John Gerspach (Bank)

Most people assume that the Fed will move slowly

“future increases I would assume will not be too robust, because that would slow the economy too much which I don’t is the Fed’s objective.’ —Blackstone CEO Steve Schwarzman (Asset Management)

US Bank is expecting two more interest rate increases within the next year

“As we think about the interest environment, we are projecting in our plan, a potential for two interest rate hikes next year, and then December 1 of this year; so a total of three if you look out over the course of the next 12 months.” —US Bank CFO Kathy Rogers (Bank)

Banks will benefit from higher interest rates, but Richard Davis wants to be careful what he wishes for

“I’m not one who everyday wakes up wondering and hoping for rates to go up because… while…higher interest rates will help net interest income and margins…the bigger question really is what also comes along with that territory…origination sometimes slows down because the pricing feels higher and consumers themselves haven’t internalized the rising rate.” —Capital One CEO Richard Davis (Bank)

The economy is currently slowing even without higher rates

“the U.S. slowing a little bit, not tragically so and we have interest rates going up in the currency, looks like it will be going up for while and that sort of impacts U.S. economy a bit, It’s harder to export. So those types of companies aren’t doing as well and it also hurts the general stock market, because to the extent that you have earnings being translated from outside the United States that slows down growth rate, because the translation” —Blackstone CEO Steve Schwarzman (Asset Management)

But the consumer is actually fairly healthy

“I think we have a fairly healthy consumer right now. The context of — certainly through the lens of a bank and a huge credit card company I think the striking thing about the consumer is just how responsible the consumer has been, how low credit losses have been, I mean, the losses and the industry losses in credit card are just extraordinary low.” —Capital One CEO Richard Davis (Bank)

They aren’t spending heavily though. Part of it could be a confidence issue.

“one of the things that I think has been a bit surprising is the big reduction in the price of the pump, in other words, it’s almost like a tax cut for consumers, has not yet been spent. Some of it’s been spent, but more of it’s been saved or used to pay down debt in the small business area and I think part of that’s confidence.” —Wells Fargo CEO John Stumpf (Bank)

Another part could be that prosperity remains bifurcated

“The economy overall continues to slowly improve, and customers continue to feel more optimistic, but the bifurcation in the economy remains. Some customers are willing to spend more while others are worried about their job or next paychecks are more focused on saving.” Kroger CEO Rodney McMullen (Grocery)

Lower income consumers have seen cost of living rise faster than wages

“Our consumer is always under pressure. I mean, she lives that way…She is facing a lot of headwinds especially in rents. I mean, rents are up tremendously over the past few years. Our core consumer — our core, core consumer nearly 50% of her take home pay is going to rent today versus just a few short years ago 37%. So you can see the headwind that she’s gotten and quite frankly not a lot of wage growth for her.” —Dollar General CEO Todd Vasos (Retail)

Upper income consumers have it a little easier

“I would say right now I think the domestic, the U.S. economy on the domestic side is very strong, the upper income portion of that remained strong” —Vail Resorts CEO Robert Katz (Ski Resort)

Industries that benefit from low interest rates are showing the most strength

Tech related housing markets have not slowed down at all

“if tech was to slow, I think we have the land in the right locations and we will be fine. I don’t see that happening. We have continued through this week to see tremendous demand and have significant pricing power and I’m very comfortable with how we positioned Northern Cal.” —Toll Brothers CEO Doug Yearly (Homebuilder)

Commercial Real Estate construction is booming

“We believe the construction end market continue to be solid. In particular, non-residential demand continues to be strong in our priority districts. We continue to see cranes across the skyline in most of our major markets” —HD Supply CEO Joe DeAngelo (Industrial Distributor)

If rates rise, home buyers would probably have to purchase smaller homes though

“I think it’s reasonable to assume that as interest rates increase they might select a slightly smaller model than the largest model, which are very popular right now.” —Hovnanian Enterprises CEO Ara Hovananian (Homebuilder)

Higher interest rates would also change the math on Commercial Real Estate deals

“You look at some of the cap rates on real estate, you scratch your head, you look at threes and fours and you don’t know how they make the numbers work.” —Wells Fargo CEO John Stumpf (Bank)

On the other hand, other factors may be more important to asset prices than interest rates

“Well 25 over the last 26 times in history when interest rates went up the value of houses went up…And that’s the way it works. Why? Because you have inflation or you have people making more money with the economy growing and that tends to push up the value of houses.” —Blackstone CEO Steve Schwarzman (Asset Management)

Financials:

High yield bond spreads have widened significantly. What does that mean for broader credit markets?

“with the high-yield or junk bond market, I think that – clearly those spreads have blown out. I think it was mispriced going in. I mean, I think there is probably a realization that we need to price this properly. I don’t know if that’s a precursor to being concerned about what’s in a loan portfolio.” —Wells Fargo CEO John Stumpf (Bank)

JP Morgan’s CFO says that for now the deterioration is contained to energy

“we don’t see it as being a broader indication of credit deterioration…the stresses that we are experiencing, they are reasonably tightly contained within energy sector.” —JP Morgan CFO Marianne Lake (Bank)

Other banks agreed that energy deterioration is not impacting other parts of their commercial loan portfolios

“we don’t see any real knock-on effects yet from the energy, on other aspects of our C&I book. And certainly from a consumer point of view, right now what we are looking at is very steady credit performance.” —Citigroup CFO John Gerspach (Bank)

“the simple answer is no. We’re really not. Outside of energy, it’s really relatively benign, no significant change.” —US Bank CFO Kathy Rogers (Bank)

However, Toronto Dominion said it is seeing early signs of credit deterioration in consumer loans in energy impacted provinces

“We are beginning to see signs of deterioration in the oil impacted provinces consumer credit portfolios, which again are well within our earlier expectations…in the non-prime auto segment primarily and then in the card segment…in many respects we look at that as an early indicator because that would be the customer that maybe would be more challenged than the typical customer.” —Toronto Dominion CRO Mark Chauvin (Bank)

The housing market in Houston has slowed down too

“In terms of Texas, Houston is slower, no question about it.” —Toll Brothers CEO Doug Yearly (Homebuilder)

Consumer:

Retail sales may have picked back up towards the end of November

“the first couple of weeks of November weren’t terribly exciting and then it got more exciting. And middle of November and late November, it was quite a bit stronger than the first part of November.” —Costco CFO Richard Galanti (Retail)

Times have changed since Christmas 2000 for e-commerce

“everyone went online to shop in 2000 and the selection was probably better, the pricing was probably better, but they couldn’t deliver the product on time, the wrong product showed up, it showed up after Christmas, returns were challenging, the product was broken. And ultimately, the value proposition didn’t deliver. And in 2001, the number of people that shopped online went down.” Twitter CFO Anthony Noto (Social Media)

The organic food industry has gone mainstream

“Throughout the 90s and up until 2014, our industry was a niche. There is no doubt that today we are mainstream.” —UNFI CEO Steve Spinner (Organic Food Distributor)

Even pets are adopting a healthier lifestyle

“If you go down the dog food aisle, the growth in the dog food aisle is in grain-free and natural kind of dog food, so even our pets are jumping onto the bandwagon of leading a healthier lifestyle. Everybody is laughing at me in the room by the way.” —Kroger CFO J. Michael Schlotman (Grocery)

As a result, competition is intensifying and pressuring margins

“we’ve seen an increase in competition across every retail channel and corresponding competition within wholesale distribution and supply chain…our margin certainly isn’t going to go up as we renegotiate these contracts” —UNFI CEO Steve Spinner (Organic Food Distributor)

Technology:

Costco saw consumer electronics sales turn a corner

“I think if you’d ask me what surprised me in the last month versus the last couple of months, electronic has finally turned and that’s I think a function of people coming in, pricing keeps coming down.” —Costco CFO Richard Galanti (Retail)

But Verizon and AT&T confirmed that phone sales are weak this quarter

“I think last year was a much more dynamic year, plus on top of that you had a new iPhone configuration and new format which drove a lot of volume…you are seeing a less volume year than you did a year ago…but I anticipated that.” —Verizon CFO Fran Shammo (Telecom)

“obviously our upgrade cycles on smartphones is way down this year. People aren’t upgrading like they have in the past…upgrades are not happening as quickly as they were” —AT&T CEO Randall Stephenson (Telecom)

Big enterprises seem to be favoring a hybrid cloud

“what we’re hearing from customers fundamentally is that they want to see the benefits and the economics of public cloud in their private cloud environment. So that would suggest to us that ultimately there is a hybrid cloud solution out there for enterprises” —Cisco CSO Hilton Romanski (Networking Equipment)

The cloud and mobility go hand in hand

“60% of the new applications are actually being built out on the cloud and if you look at that data, the majority of that will be in mobile applications, because mobile is now becoming a really key part of that business process.” —IBM SVP Robert LeBlanc (Enterprise Technology)

In the virtual world, there is still something to be said for getting a team together in an office

“I think that creating connectivity of people and clients in an environment of collaboration is incredibly important and although we live in a virtual world, I fundamentally believe that the people need, to the extent possible, need to be housed in the same location.” Korn-Ferry CEO Gary Burnison (Executive Search)

Everyone wants to learn from Facebook’s culture

“a lot of my conversations today with marketers are to help them understand the Facebook culture and how that could adapt the companies that have been around for 100 plus years. That’s the first thing that’s on every company — every big company’s mind” —Facebook VP Carolyn Everson (Social Media)

Healthcare:

Healthcare spending growth may slow next year as comps get difficult

“U.S. has been stronger than I can remember for a long time and that is not only the medtech sort of companies but also hospitals. Now as we going to sort of calendar year ’16, there will be some anniversarying that is happening and also some of the hospitals have reported slightly sort of lower growth rates…I do not know to what extent the procedure growth will continue at the same rate of growth. I do not think it will slowdown, per se, but the growth rate might well slowdown.” —Medtronic CEO Omar Ishrak (Medical Device)

Materials, Industrials, Energy:

Oil producers have been very effective at continuing to lower the cost of production

“the break-even perhaps used to be $90 to $100 probably. The marginal cost of supply was $90 to $100, now it’s probably $75 to $80. For EOG we would be tickled to death for $60, $65 price. I think we’d be able to generate really strong rate of returns and grow the company at very healthy level at $60 or $65 price environment.” —EOG EVP Billy Helms (Oil E&P)

As a result, oil drilling activity has not slowed down as much as expected

“North America does look like it’s going to be marginally better than what we said in the third quarter call” —Halliburton CFO Christian Garcia (Oil Service)

Capital budgets will fall again next year though

“We’re announcing a 2016 capital budget of $7.7 billion that’s $2.5 billion lower than 2015 capital guidance and more than $9 billion lower versus 2014.” —ConocoPhillips’ CEO Ryan Lance (Oil & Gas)

It’s tough to say where prices will settle

“I had a funny conversation with…the head of one of the largest companies in the world in the energy business. I asked him what he thought about energy prices, he said “well we plan for somewhere between $20 and $120…I know it’s going to be some more in that range” and I said well that’s very precise.” —Blackstone CEO Steve Schwarzman (Asset Management)

It’s still not easy to find great acquisition targets

“You’re right we started off the year thinking okay in this down cycle we might seen an opportunity for a corporate acquisition. And we’re not really used to the company to doing that, but we’re hoping at the opportunities. And we looked at the lot of different things, but we never really saw anything that would compete with our portfolio here that we’ve shown.” —EOG EVP Billy Helms (Oil E&P)

Miscellaneous Nuggets of Wisdom:

Find good partners

“We go in there saying we really like this business, but we want to be makes sure we do it on the right terms; that is starting with looking for partners…choosing those that are motivated for the right reason…I have found that that motivation drives just about everything about how partnership works and really affects the attractiveness. We are very focused on going to the right players who really and to work with them to build deep customer relationships.” —Capital One CEO Richard Fairbank (Bank)

Play to win

“I didn’t play for any attention. I played for the hardware. I wanted to know that I beat everyone in this field, and I wanted them to know that they got their butt kicked.” —Tiger Woods TIME magazine interview

Full transcripts can be found at www.seekingalpha.com

Miscellaneous Earnings Call Notes 12.11.15

Universal Health Services (UHS) Presents at Bank of America Merrill Lynch 2015 Leveraged Finance Brokers Conference

Steve Filton

Behavioral health business is more recession resistant

“if you’re seeking — and you’re seeking acute care treatment, you need a hip implant or you need some sort of ENT surgery et cetera, you may think about the economics of that; you may choose to postpone that because you don’t want to come out of pocket for a co-pay or deductable or because you don’t want to be out of work frankly during a tough economic climate. But if you try to commit suicide or you overdose on drugs and alcohol, you are not going to be in a position to decide whether you should or shouldn’t be admitted to the hospital. That decision is really being made generally by somebody else who is effectively economically insensitive to what your economics of the situation or concerns might be. So, I think that’s another reason why the behavioral business has generally proved to be more, I’ll call it, recession resistant.”

Optimum occupancy in behavioral care is in the low to mid 70s

“occupancy rates and our behavioral facility peaks in the mid 80s, right around 84% in about 2005-2006. What we started to do at that point because we have a view probably the ideal occupancy rate in this business is somewhere in the low to mid 70s. And so, when we were at 85% in about 10 years ago, we’re turning away a lot of patients at that point because obviously if we’re averaging 85%, it means that there’s a lot of days when we’re at 90 and 95 and even a 100% occupancy. It also means that because of some of the constraints that we have, we have put male and female patients; we don’t put adults and children together, we don’t certain diagnoses together. So, as a consequence, it’s difficult for facilities to really run at something close to full occupancy.”


Silicon Laboratories Presents at Credit Suisse Technology, Media & Telecom Conference

Tyson Tuttle

Low power for IoT requires innovation

“if you look at the energy efficiency that’s required. If you’re handset only has 10% battery life left, and I know that when mind says 10% battery life, I’m like looking for a charger. But if you imagine that amount of power needs to power an IoT device for five years. So that’s essentially the amount of energy that’s in the little coin cell and they want that device to sense the environment. Let’s say every few minutes it needs to communicate that when something happens. This type of energy consumption requires a lot of innovation. And if so this is what we are focused on doing.”

From a macro perspective, wireless markets suffering but infrastructure business doing well

“I think a lot of people that we are selling into wireless were suffering, especially in China, we were not exposed to that at least on our infrastructure business, we had a little bit of exposure on the microcontroller side and some of the optical modules that did hold back our growth in IoT in the second half. But on infrastructure we see that it’s pretty solid globally. And this is more of a reflection of core network in data center roll outs.”


Barnes & Noble’s (BKS) CEO Ronald Boire on Q2 2016 Results

Have seen increased traffic so far in Q3

“the challenges were greater than anticipated and reduced traffic as well as conversion. During the second quarter, we implemented a significant number of website fixes to increase traffic, improve the overall user experience and stabilize the site. So far during Q3, we have seen increased traffic and have stabilized the site for the holiday season. We plan to implement additional improvements after the holiday season to further upgrade the overall user experience.”


The Cooper Companies’ (COO) CEO Bob Weiss on Q4 2015 Results

Had a bumpy ride from mid September through the end of November

“August was a good month and things dropped off in October a lot, particularly in the U.S. and some of the problems we ran into in Europe exacerbated the most. We thought we’re in pretty good shape in early September, found out we weren’t in as good shape as we thought by mid-September and had a bumpy ride with our integration if you will in Europe, from mid September until pretty much the end of November. Having said that, we had what we call a very respectable November”


Toronto-Dominion Bank’s (TD) CEO Bharat Masrani On Q4 2015 Results

Mark Chauvin

Are starting to see stress in consumer credit portfolios in energy-impacted provinces, but within expectations

“Next, with respect to our oil and gas exposure, we were not surprised by the level of impaired loan formations this quarter. Ongoing analysis indicates that the oil and gas nonretail credit portfolio continues to perform within expectations, given the current level in near-term outlook for commodity prices in this sector. We are beginning to see signs of deterioration in the oil impacted provinces consumer credit portfolios, which again are well within our earlier expectations. Based on ongoing stress tests conducted against the credit portfolios, I remain comfortable that the potential impact of low energy prices on the bank’s credit losses remains well within the range of a 5% to 10% increase over 2015 levels.”

Seeing a gradual increase in delinquency rates over last 4-5 months in oil impacted provinces

“we have been watching it very closely, especially the impacted provinces, which would be Alberta, Saskatchewan and Newfoundland. And what we are seeing in two categories, being the indirect auto but the non-prime segment primarily and then in the card segment, we have seen a gradual increase in delinquency rates over the last four or five months.”

Customers affected are early indicator, the type of customer that would be more challenged than the typical customer

“So in many respects we look at that as an early indicator because that would be the customer that maybe would be more challenged than the typical customer. Now, I would stress that these two categories are less than 1% of our total book and that we expected to see losses of this level.”


Sprint’s (S) Management Presents at Bank of America Merrill Lynch Leveraged Finance Brokers Conference

Tarek Robbiati — CFO

Wireless data is much cheaper in some other markets than the US

” I think the – look at the U.S. wireless market, it’s the biggest one in the world by value. And the reason why it is the biggest one in the world by value is because we have 300 million people and you have a very, very high ARPU…when you really look at some of their – the size of their bills, it’s quite extraordinary. I mean you compare this with Hong Kong which is a market that I am very familiar with. In Hong Kong you can get very, very decent data packages on 4G networks for less than $5 postpaid, which is quite extraordinary.”


Comcast’s (CMCSA) Management Presents at UBS Global Media and Communications Conference

Mike Cavanagh–CFO

No new comments on wireless plans. We believe the cheapest way to transmit data is to get it to the hardwire as soon as possible

“we have no news on this topic today. What we have decided is that it’s certainly worth at this point triggering the MVNOs that we can work on exploring what kind of offering we could bring and go deeper to learn and experiment. That’s the state of play on the MVNO. And that sits in the context of having been big believers in WiFi. So, you have seen us invest in and continue to invest in the WiFi as an extension of the value of the broadband pipe, which is still the kind of best and cheapest way to transmit data we believe is to get it to the hardwire as soon as possible. So, with the progress we have made on our WiFi product and broadband, we think it makes complete sense to be exploring on – what possibilities the MVNO offering has to add value to our customer relationships. That’s as much as we know. There is no – it will take time to draw any conclusions from what we are now going through.”


Vail Resorts’ (MTN) CEO Robert Katz on Q1 2016 Results

Our labor markets are tight

“think ensuring that we have enough, ensuring that we are providing the right employee experience, attracting enough of the right labor, retaining labor and then a part of that is obviously being able to have housing for everyone that works here, I think it is probably our number one concern right now in terms of ensuring that we can continue to drive success. And so, I mean that’s led us over the last couple of years to continue to invest to make sure that we can do that. I’d say where we feel right now is that our markets are tight. We think it is a challenge.’

Upper income US remained strong

“Colorado in particular is the strong market, continues to be a strong market given the economy here, Utah, the Bay Area and California so that obviously is the big help right there but then I would say we are seeing pretty broad based strength from all of our major destinations across the United States, I would say even places like Los Angeles, like Seattle which are not typically our strongest markets in terms of size, we’re seeing real strength there too”…

“I would say right now I think the domestic, the U.S. economy on the domestic side is very strong, the upper income portion of that remained strong ‘


AutoZone’s (AZO) CEO Bill Rhodes on Q1 2016 Results

DIY auto spending has benefitted from lower gas prices

“I think clearly we are seeing some industry strength currently. I think a part of that has to do with what’s going on with gas prices. And while gas prices initially went down, you didn’t see the initial correlation with miles driven increasing. But in more recent months, starting really strong in this summer, and continuing through September, the latest date that we have available, it’s showing nice strength. Over long periods of time we’ve seen that has a nice correlation with our DIY industry growth.”


Cisco Systems (CSCO) Presents at Barclays Global Technology Brokers Conference

Hilton Romanski

Customers are looking for a hybrid cloud

“what we’re hearing from customers fundamentally is that they want to see the benefits and the economics of public cloud in their private cloud environment. So that would suggest to us that ultimately there is a hybrid cloud solution out there for enterprises where some of those benefits across multiple types of workloads across their own environments that are private as well as those that are being hosted in a public cloud is going to co-exist.”


Dave & Buster’s (PLAY) CEO Steve King on Q3 2015 Results

Couldn’t be happier with how 2015 is shaping up

“we couldn’t be happier in terms of how 2015 is shaping up, while we’ve achieved so far as we look forward to a strong finish in the fourth quarter.”


Halliburton’s (HAL) Management Presents at Wells Fargo 2015 Energy Symposium Brokers Conference

Christian Garcia — Interim CFO

North America looks like it could be marginally better than expected, but international looks marginally worse

“North America does look like it’s going to be marginally better than what we said in the third quarter call and international looks like it’s marginally worse and in total, we’re in line with our expectations as we left the third quarter.”

2016 is clearly going to be another down year but we don’t know the magnitude yet

“2016 is still opaque. E&P the E&Ps have not announced their budgets, but clearly it’s going to be another down year. The question is the magnitude of the decline.”

Argentina had elections that could lead to positive economic reforms

“Argentina just had elections and we think that new president elect will usher in a new era of economic reforms achieved among that would be probably a potential depreciation of their over valid currency which will in the short term provide some little need to some dislocations but I think in the long term would be actually help that economy boot that economy and would invite for investors.'”


HCA’s Management Presents at Opperheimer 26th Annual Healthcare Broker Conference

Bill Rutherford, Chief Financial Officer

Seeing higher turnover of nurses as demand for nurses strong

“We think you know we are seeing higher turnover of recently than we’ve historically had. And we think there is a lot of other supply in the marketplace and demand for nurses. We’ve got a host of efforts around recruiting. We talked about on our call our efforts to hire nurse graduates and putting them in orientation and onboarding them a little bit differently so that they have — the retention is longer for those new nurses.”

See continued strong economies in the majority of our markets

“We see continued strong economies in the majority of our markets and I think that provides really fundamental momentum for the company and those trends don’t appear quickly, nor do they disappear quickly. So, we are optimistic that our market trends, we are seeing has some durability to it in the future.”


Comerica’s (CMA) CEO Ralph Babb on Goldman Sachs U.S. Financial Services Brokers Conference

Energy reserves at 3% of total energy related loans

“if prices remain low for longer, we expect to see continued negative credit migration and losses to emerge yet we believe they will be manageable. We have increased our reserves for energy loans in each of the past four quarters, as a result of an increase in criticized loans and sustained low energy prices. Because investors have been particularly interested in the size of our energy reserve allocation note that at the end of the third quarter, we had reserves amounting to more than 3% of our total energy and energy related loans.”


U.S. Bancorp (USB) Presents at Goldman Sachs US Financial Services Brokers Conference

CFO, Kathy Rogers

Planning for three interest rate increases in the next 12 months including next week

“as we look out into 2016, I do think that we are seeing an economic environment that is somewhat similar to what we saw this year, may be slightly improved. As we think about the interest environment, we are projecting in our plan, a potential for two interest rate hikes next year, and then December 1 of this year; so a total of three if you look out over the course of the next 12 months.”

Not seeing any deterioration of credit outside of energy

“the simple answer is no. We’re really not. Outside of energy, it’s really relatively benign, no significant change.”

We’ve probably gotten to a point where reserves will start building again (but not necessarily because of credit deterioration)

“I think one of the things that you’re going to see is that we are getting to that point in the cycle where many banks, including ourselves, have enjoyed a nice outcome of reserve releases. And I do think we’re coming to the end of the cycle. And I think that you’ll start to see reserves starting to build as we move out into later quarters.”


Lululemon Athletica’s (LULU) Laurent Potdevin on Q3 2015 Results

Start of Q4 has been mixed

“In line with macroeconomic trends, the start of Q4 has been mixed. We saw lower traffic in the final weeks of Q3 and into the first couple of weeks of Q4, with steady improvement in Thanksgiving. Given the current environment, we’re taking a conservative stance with revenue in Q4, while taking the necessary actions to manage inventory and control expenses.”


Moody (MCO) Barclays Global Technology, Media and Telecommunications Conference

Mark Almeida, who is the Head of the Moody’s Analytics Business

November was a good month from an issuance standpoint and December has gotten off to a strong start as well

“November was a good month from an issuance standpoint, and December has gotten off to a pretty good start as well. So I think things have firmed up a bit, since some of the weakness that we saw in the summer time.”


Korn-Ferry’s (KFY) CEO Gary Burnison on Q2 2016 Results

Even in a digital world, it still pays to have people housed in the same location

“I think that creating connectivity of people and clients in an environment of collaboration is incredibly important and although we live in a virtual world, I fundamentally believe that the people need, to the extent possible, need to be housed in the same location.”

Gregg Kvochak

“global demand for our Executive Recruitment services remained strong in the second quarter.”


McGraw-Hill Companies’ (MHFI) CEO Doug Peterson Presents at Goldman Sachs U.S. Financial Services Conference

Issuance is down 30% year to date

“we’ve seen a choppier market, issuance is down during the quarter and year to date overall issuance is down globally about 28% and in the quarter its down again over 30%, 35%, 37%, depending on which element of the markets that you look at. So we’ve seen some volatility in the ratings business.”


Avnet (AVT) Presents at Raymond James Technology & Communications Investors Brokers Conference

Kevin Moriarty, CFO

Our product is service

“Avnet’s product is, our product is service, has been and always will be. Models change the way we get compensated for that service. We need to continue to be nimble and agile to be able to move with that”

We feel pretty good about the environment

“I would characterize the current lead times as stable, short. We haven’t really seen any significant changes in push outs, cancelation rates. So we feel pretty good. EM, we continue to experience growth within our European business. I would characterize the Americas as sluggish overall on the component side.”


ConocoPhillips’s (COP) CEO Ryan Lance on 2016 Capital Budget and Operating Plan

We see dividend as highest priority

“Despite the tough market, our dividend remains the highest priority use of our cash. We view the dividend level as a long-term decision. And we’ve been in the current low price cycle for relatively short period of time”

Capital budget down ~25% from last year, -54% from 2014

“We’re announcing a 2016 capital budget of $7.7 billion that’s $2.5 billion lower than 2015 capital guidance and more than $9 billion lower versus 2014. In setting our budget, we’re flexing capital down appropriately for the price environment without losing opportunities or sacrificing the safety or integrity of our operations.”

Costco FY 1Q16 Earnings Call Notes

Costco Wholesale (COST) Q1 2016 Results – Earnings Call Transcript

Mr. Richard Galanti, CFO

Late November was quite a bit stronger than early November

“it’s October when we said one month does not make a trend. And then the first couple of weeks of November weren’t terribly exciting and then it got more exciting. And middle of November and late November, it was quite a bit stronger than the first part of November.'”

Electronics has turned, fresh foods has been great

“I think if you’d ask me what surprised me in the last month versus the last couple of months, electronic has finally turned and that’s I think a function of people coming in, pricing keeps coming down. I think our fresh foods has been great.”

Consumer spending is back to the old cadence, but…

“Yes, but that doesn’t mean anything for tomorrow.”

Lower prices are helping with TVs as is 4k

“I think the technology, the 4K is helping, but the prices are coming down as well. I was there across the street yesterday and you’ve got smaller flat screens with great quality less than $200. You got bigger TVs less than $1,000. You got as well the giant HD 4K whatever under $3,000 and under $2,000, depending on the size and some of the new technology. So I think all those things are helping us a little bit on that category.”

We’re in our competitors’ stores each week and we assume they’re in ours

“we are our own toughest competitor and I mean that, in our industry, notably Sams and to little extent BJs, but certainly many locations where we compete head to head. We’re in their locations literally every week and I would assume they are in our locations every week. And we feel good about the competitive posture there.”

Capital One at Goldman Sachs Conference Notes

Capital One Financial (COF) Presents at Goldman Sachs US Financial Services Brokers Conference

Rich Fairbank — CEO

We have a fairly health consumer right now. Been very responsible

“I think we have a fairly healthy consumer right now. The context of — certainly through the lens of a bank and a huge credit card company I think the striking thing about the consumer is just how responsible the consumer has been, how low credit losses have been, I mean, the losses and the industry losses in credit card are just extraordinary low. ”

Consumer is coming out of a period of tremendous conservatism

“I think we see a consumer coming out of a period of tremendous conservatism after the great recession, stepping out just a little bit. But I think we’re in a good place with respect to consumer.”

The only way to compete at the top of the market is with sustained strategy of investment. Years if not decades

“to compete at the top of the market going after heavy spenders is — there is only one way to do that and that’s with a sustained strategy of investment to make it happen. It just doesn’t work to go in and out. It doesn’t work to try to come up with just, well, here is the cool product, let’s try to do that. And so, if you look at people that have really succeeded here I mean American Express is of course the gold standard here and also JPMorgan Chase has had a lot of success in this business. In each case, we’re talking about years, if not decades, of steady investments in building a brand, doing what it takes to create the quality products, and building the customer base.”

In the private label card business it’s extremely important that you find good partners

“We go in there saying we really like this business, but we want to be makes sure we do it on the right terms; that is starting with looking for partners that are themselves very strong companies. There are lot of companies out there in the world of retailing for example that are as you know really struggling in the digital revolution and everything else, so really picking the strong partners. Secondly, choosing those that are motivated for the right reason with respect to what this partnership is about. There is a huge continuum between whether the partner is trying to use the private-label relationship as a way to build deep customer relationships or as the means of making money. And I have found that that motivation drives just about everything about how partnership works and really affects the attractiveness. We are very focused on going to the right players who really and to work with them to build deep customer relationships.”

I’m not waking up everyday hoping for rates to go up

“I’m not one who everyday wakes up wondering and hoping for rates to go up because I think that while we are asset sensitive like most other banks and the math of higher interest rates will help net interest income and margins. But the bigger question really is what also comes along with that territory. And we do know that when rates go up consumers on variable rate products will have higher debt cost and it is typically something I found when rates go up, origination sometimes is that slows down origination a little bit because the pricing feels higher and consumers themselves haven’t internalized the rising rate. ”

We have tried to build specialties in commercial lending

“We had tried to identify the best specialties in commercial and then go build the specialty as a parallel to how we built the specialty call it the credit card business or our auto business. So, in that context, we like the energy business very much.’

Blackstone at Goldman Sachs Conference Notes

Blackstone Group (BX) Presents at Goldman Sachs US Financial Services Brokers Conference

Steve A. Schwarzman

US is slowing a bit but not tragically so

“the way we see things is the U.S. slowing a little bit, not tragically so and we have interest rates going up in the currency, looks like it will be going up for while and that sort of impacts U.S. economy a bit, It’s harder to export. So those types of companies aren’t doing as well and it also hurts the general stock market, because to the extent that you have earnings being translated from outside the United States that slows down growth rate, because the translation. But the U.S. is moving ahead on a pretty orderly basis and all probably have set increase in December and future increases I would assume will not be too robust, because that would slow the economy too much which I don’t is the Fed’s objective.”

We exist to buy things and add value

“The reason why we exist is to buy assets and do something do them rather than watch them and that’s what is called adding value, and if we’re good at it, we will end up with super performance and for our major product we earn about double the stock market over the 30 years. ”

We know oil prices are going to be somewhere in the range of $20-$120

“I had a funny conversation with ahead of to give this person some protection. The head of one of the largest companies in the world in the energy business and any business and I asked him what he thought about energy prices, he said “well we plan for somewhere between $20 and $120” and he said “I know it’s going to be some more in that range” and I said well that’s very precise.”

Over the last 26 times that rates went up the value of houses went up too because of inflation

“Well 25 over the last 26 times in history when interest rates went up the value of houses went up almost nobody. You have got a smart group here, yes, a third of you thought that but two thirds of you didn’t. And that’ the way it works. Why? Because you have inflation or you have people making more money with the economy growing and that tends to push up the value of houses. So that’s like the standard concern, oh, interest rates are going up, your real estate assets must be collapsed.”

We’re not guessing. When we buy an asset we have access to inside information

“it’s not like a trading business we are guessing. When we buy an asset, we have access to inside information. We study this stuff, we get consultants and we can accelerate the growth of these businesses and we can put some leverage on top of it which amplifies that a bit but it’s basically the improvement over business.”

People usually fool themselves that they want to buy value. They really want something that’s going up

“People more or less only fool themselves that they want to buy value. Basically they just want to buy something that’s going up and because they are looking for physiological comfort of things going up, things at bottoms people hardly ever buy”

This is an art form

“So I think somehow I must be a tragically bad communicator and somebody thinks this is some little business that somehow gets lucky. I mean we have 800,000 people just working in our private equity area. This is an art form, this is a business and people will see it as such when maybe we get somebody better than me explaining it, but it’s really a wonderful, wonderful business and it’s growing at quite a rapid rate and customers can’t get their money back as a rule because these long-term commitments. So it’s infinitely better than any kind of mutual fund complex or anything like that.”

Investment analysts are behaving in the exact opposite way of capital allocators here

“what’s fascinating to me is that people like yourselves who are looking at our stock are behaving just the opposite as the people who give us these monster amounts of money where we’re penetrating every asset class. ”

At some point people who don’t own this will wake up and say what was I thinking

“at some point in the next ex-years people will wake up and say, what was I thinking, what was I thinking and the smart people like you, who own it, you will be heroes and the other people will say, “yes, yes, yes I know I should have bought it.” So that’s demand.”