Brown and Brown 3Q17

Powell Brown – President and CEO

Still a lot of capital in insurance

In summary, there continues to be a lot of capital across the insurance market place. However the recent storms, fires and earthquakes may have implications on pricing in 2018. At the present time, we don’t have a clear view on the potential impact for next year. But there are a lot of discussions about rate increases for coastal properties. If there are proposed increases which we think there will be, the question really is will they stick. Certain markets are testing that philosophy right now.

Guardedly optimistic

Right now I hear and what everybody else is hearing out there about the market place and what people are speculating on. What people are speculating on and what the market will bear are two different things, until we start to see rate increases sticking. I am guardedly optimistic or just guarded in regards to what that would do to our organic growth…But if anybody is telling you they are getting ramped up for a hard market, I believe that’s a little premature.

Economy pretty good

And so I think the economy is pretty good. I think that we’re seeing our clients thinking about it in a manner where they are making investments in their businesses, so that’s a positive.

Reinsurance got pounded

I’m not a reinsurance broker so let met process this. Here’s what I understand and this is how I think this is going to play out. As you know retrocessional reinsurance is reinsurance for reinsurance companies. They got pounded in the storm, and a lot of that is in London, but it’s all over the world. So the retro market got pounded. So that’s going to have to react or try to recoup.

Then you have the reinsurance market, they got pounded. And the reinsurance market, as you know, one of the most damaging ones was actually Mariah. So it’s like keep hitting you when you’re down in that market. And so let’s just say that the rates are – they try to get significant rate in reinsurance. It really depends on the primary carrier and what they’re trying to do.

If everybody’s cat reinsurance program came up at the same time, then I think that there could be a higher potential for rate increases that could stick. Having said that, I know of several carriers which remain nameless who already have their property programs placed prior to the storm. So they’re going to operating from a positon of strength, not a position of weakness.

So, I think there’s a lot of moving parts that go in to it, and I know that there are some people out there that are frothing, because they think this is going to drive the market up. Like I said, I would rather create an expectation that we see flattening and we hear people talking about rate increases, but we’re not seeing any big rate increases sticking like, you might have heard, number one. And number two, really a lot of this change won’t happen until after the year. And the question is on some of these primary carriers, how quickly can the insurance carrier get the message from the head to the foot on what they want to do in executing a pricing strategy or increase.

So time will tell Mark and I wish I could be more definitive. But I do know that the restaurant market and the reinsurance took some severe losses and it will be interesting to see how they react and thus the primary season how they react as well. They will not pass through dollar-for-dollar or per percent increases in to the primary market, it just won’t happen.

Brown & Brown 1Q17 Earnings Call Notes

Powell Brown – President and Chief Executive Officer

Optimism has slowed, companies are more skeptical

“I am now on Slide 5. The first quarter was an interesting one, as we entered it with a lot of optimism about what the new administration might do to further improve the economy. As the quarter continued, some of this optimism has slowed and now companies are more cautious or skeptical about what shape some of the programs, including tax reform, infrastructure projects and ACA reform will take and when they might actually take effect, if at all. With that said, we did see the economy continue to expand across most communities in the past quarter. There are number of geographies that are doing well as evidenced by construction starts, while communities that are tied to oil and gas have leveled out”

Biggest topic has been ACA reform

“One of the biggest – or one of the bigger topics during the quarter was what the impacts would be if there was any reform of the Affordable Care Act. This was in addition to the continual topic of cost containment for healthcare plans. With the material increases to premium rates for most state exchanges or decreases in the number of providers or both, we did see customers continue to manage plan design. Creativity around plan options is at the forefront. We continue to believe that this uncertainty and need for creativity is a positive for Brown & Brown as it positions us well as a trusted advisor to bring alternative options to customers that best address the needs of their company and their employee base.”

If we don’t find opportunities then we’ll stockpile cash

“I have been asked that what happens if in fact acquisitions were very, very expensive going forward for a protracted period of time and if we evaluated our stock price and we thought the stock price was fully valued at the time. And the answer to the question is that we are going to stockpile cash on our balance sheet. And so if anybody wants to criticize somebody at Brown & Brown, you can criticize me. But we are not going – we do not have a whole burning in our pocket and I know you know that and we look very, very closely at our acquisitions and how we deploy that capital and we will continue to do so. It’s interesting, because as I alluded to in my prepared remarks, some of the acquisitions that we see out there, we know that the numbers don’t make sense, but we are a forever company and those companies are going to be flipped in 3 to 5 to 7 years and they don’t build cultures in that period of time. We have only been doing this for 77 years and we think we really have a strong culture and we will continue to maintain that. So, I anticipate that we will have opportunities to deploy our capital fine over the intermediate to longer term, but it’s very possible we could continue to stockpile cash on the balance sheet.”

Brown and Brown 4Q16 Earnings Call Notes

Brown & Brown’s (BRO) CEO Powell Brown on Q4 2016 Results

cat property rates will remain under pressure in 2017

” Now that the 2016 hurricane season is behind us and insured losses were not material, we believe cat property rates will remain under pressure in 2017. Insureds continuing to evaluate the hurricane deductibles, flood coverage, and flood excess of the NFIP.”

When everything is overvalued we stockpile cash

“We have also been asked what happens if our stock price is fully valued and the acquisition marketplace continues to be fully priced or even goes up. And the answer to that is we stockpile cash on our balance sheet. So we constantly evaluate share repurchase as one of the investment options for the cash that we buildup. But as you know we don’t have a stated amount that we’re going to purchase on a quarterly basis, we’re going to look at it opportunistically just like acquisitions and we’re going to do it when we think it makes sense for the company.”

Conversations with clients haven’t changed dramatically post election

“I think the discussions with our client has not dramatically changed prior to the election versus postelection of our new President. And the reason I say that is the conversation typically is focused around managing cost. Obviously some people talk about bending the cost curve and all these other things. I just make it simple, I just basically say how do you manage your cost in a thoughtful manner over the next several years it’s not a one-year window. And so in doing that changes in ACA everybody is, doing a lot of speculating right now. Do we think there is going to be changes? Yes. Do we think it’s going to be totally repealed? I don’t know about that and that may be semantics in terms of how you define total repealed.”

Uncertainty creates opportunity to talk to clients

“, is it creates more uncertainty which actually creates an opportunity for us to talk with our clients about options and how they can think about it and attack it going forward particularly based on whatever is the outcome of the changes.”

Marketplace is fully priced and expectations of some sellers are unrealistic

“As it relates to tax rate, I think there is two parts to think about, yes, I do think you have corporate tax rate and then you have the potential for capital gains changes as well. And as we said earlier we believe that the marketplace is fully priced and so expectations of some sellers are unrealistic and with a tax cut either in one or both, I believe that those expectations would probably go up because the bankers will facilitate that. That said, at the end of the day, remember, Kai, we are focused on looking for acquisitions that fit culturally and make sense financially. And so therefore as you’ve heard we’ve only done $55 million of acquisition for the last two years and I would tell you that I’m comfortable with that because we didn’t find ones that fit culturally and made sense financially. We found a couple that fit culturally last year but financially would not have made sense and that’s not our plan. ”

Miscellaneous Earnings Call Notes 10.28.16

SunTrust Banks’ (STI) CEO Bill Rogers on Q3 2016 Results

Regulatory and compliance costs are not likely to abate

“But in terms of overall regulatory and compliance costs, if I look forward, John, I don’t think that in the short- to medium term I would think of regulatory costs in general abating or declining. I think we’re in an environment, where we would expect regulatory and compliance costs to be generally stable or increasing over time. And just the environment that we’re in, I don’t see realistically that anybody in the industry is going to see regulatory and compliance costs fall off.”

Potlatch Corporation’s (PCH) CEO Michael Covey on Q3 2016 Results

Eric Cremers

No rollover in land pricing

” Pricing remains firm. There is a lot of money on the sidelines looking to invest in the asset class. People have an expectation that prices will move higher over the next several years as we continue with this housing recovery that generally gets built into the models that are used to value timberland. And in a low interest rate environment high timberland prices are supported. So we’ve not seen a rollover in timberland pricing at all.”

Lumber prices well supported here. Moving from mid to upper 80s capacity utilization”

” As I think Jerry mentioned in his opening remarks, we might see a real slight rollover in lumber pricing in Q4, and that’s consistent with what the external pundits are forecasting maybe 1% or 2% rollover in pricing. You know generally speaking markets are well balanced, our order book is solid. As you know we sell forward our lumber production. So we’re out into the first or second week of November at this stage. And so we feel very good about where lumber markets are at, at this stage of the game. Just the general backdrop here, if you think about it, we’ve got demand, which has remained strong. Of course the housing market data, there is starts data is volatile from month-to-month. But generally we’re seeing starts increase, we’re seeing strong R&R repair in the model activity, and we’re seeing strong commercial and industrial activity as well. And with industry wide capacity utilization now moving up from the mid to the upper 80s and supply-chain inventories as Mike had mentioned remained very well, we think, lumber prices are well supported here.”

Brown & Brown’s (BRO) CEO Powell Brown on Q3 2016 Results

Hurricane Matthew will have little impact on rates

“We believe Hurricane Matthew will have limited impact on rates, if any. There will be more discussions around flood and wind deductibles, rate for cat property continued downward affecting retail, wholesale, and national programs, and that will continue into Q4 and into 2017.”

Honeywell International’s (HON) CEO Dave Cote on Q3 2016 Results

A favorable setup for 2017

” Darius and Tom will provide more details about 2017 during our annual outlook call in December, but we have a favorable setup. The fourth quarter momentum continues, our long cycle businesses are improving and our inflections start to kick in.”

Tom Szlosek/Dave Cote

A salesperson isn’t productive in his first year on the job

“A salesperson really isn’t productive enough in his first year on the job, so we have to ensure we have enough sales employees in place today to support tomorrow’s business… when you hire salespeople there’s training and familiarization that has to go on. So they’re not immediately productive. It’s the sort of thing that shows up in the future.”

Heidrick & Struggles International’s (HSII) CEO Tracy Wolstencroft on Q3 2016 Results

Rich Pehlke

Improvement in September/October

“we can’t really point to one thing because as we saw July and August kind of soft we really did worry a little bit about was it a sign of some kind of a cyclical trend or a movement but you know September bounced back pretty well and so – and as we talk to our folks and see what’s out there and see how October is progressing. You know there is nothing we can really point to that says that you know there is one – there is one driving factor. So whether or not it could have been client decision caused by things like Brexit et cetera certainly is certainly one of the factors that would have fallen into play but there isn’t any one thing that we can put to, and I don’t know if you want to leverage.”

Zions Bancorp. (ZION) Q3 2016 Results

Harris Simmons

It was a softer quarter for C&I loan demand than we would have hoped for

“I think that’s consistent with what we saw during the third quarter. The third quarter has generally been a softer quarter. You get kind of the summer vacations and everything else baked into it, but this was softer than I think we would have expected. And so we’ll see what happens through the remainder of the year. But it was a softer quarter in C&I than we would have hoped for.”

Brinker International (EAT) Q1 2017 Results Wyman T. Roberts – Brinker International, Inc.

Challenging times across casual dining

“Just as we said last quarter, these continue to be challenging times across casual dining. We’re already seeing some of the weaker players struggle with their viability in this choppy environment. ”

There are some examples of concepts that are shrinking

“We don’t have great metrics around capital spending in the category. But there are some examples of concepts that are shrinking. And in some numbers that are reasonable, we’re talking now in tens and hundreds. So that does make a difference. We’re also hearing from some competitors a dial back, which I think is again encouraging that people are starting to say, hey, listen let’s address the overcapacity and slow things down a little bit. And I heard something recently from a competitor that the expectation was that would also maybe take some of the steam off some of the real estate market, which has not really come back in our opinion kind of represented the softer overall economic situations out there. Still paying a pretty good premium in this environment we think for real estate. So all of those things I think bode well for getting the economics right and getting the supply and demand situation more in line”

United Technologies (UTX) Q3 2016 Results Gregory J. Hayes

China Otis sales down 10%

“We also continue to make good progress at Otis. Our China new equipment orders and units were up 2% in the third quarter and 3% year-to-date. This is in the face of an overall market, which is down more than 5%. I would remind you though, the pricing pressure remains intense, so despite unit orders being up, new equipment orders on a sales basis in China were actually down 10% in the quarter. A tough market right now, but we remain focused on increasing our installed base and converting those units into our service portfolio, which will deliver recurring revenue for decades to come.”

Have seen a slowdown in construction activity in UK

“In Europe, we have seen a slowdown in construction activity in the U.K., we think as a result of the Brexit vote, but the rest of Europe appears to be improving slowly, more than compensating for the slowdown in the U.K.”

Freeport-McMoRan (FCX) Q3 2016 Results
Richard C. Adkerson

It’s clear there’s going to be a need for copper

“Is just, unless you see the world really turning upside down economically, it’s clear that there is going to be a need for copper that’s going to require a significant price increase to justify the spending, and that’s why we feel very good about our long-term strategy.”]

C.H. Robinson Worldwide (CHRW) Q3 2016 Results Andrew Clarke

Carriers raised rates when Hanjin filed for bankruptcy

“Hanjin filed on August 31 and what happened shortly thereafter is the other carriers that remained in the Trans-Pacific eastbound lane began to raise rates. I think what happened then shortly thereafter was that they doubled them. They were up as high as $750 as I mentioned earlier, $750 to $900 a box. Now, we weren’t able to immediately pass those rate increases along to our customers. As I mentioned, our account managers are out there right now having those discussions with our customers to reflect the rates that are now in place in that trade lane. We would expect the impact to trickle into the fourth quarter, but not much beyond that.”

Applied Industrial Technologies (AIT) Q1 2017 Results
Neil A. Schrimsher

October a little softer than September

” I’d say on our sales per day trends – did include expected seasonal softness in July with improvements then in August and even stronger in September. Order trends for October, as expected, developing a little softer than September. However, we still have a handful of days to go. And I’d say year-over-year October is just kind of down low single-digits, which, again, is what we expected looking at the comparables. And, again, that’s got still a handful of days for us to positively impact it.”

Mark Eisele

Foreign exchange rate impact down to zero

” That’s exactly the expectation. If you look at foreign exchange rates, let’s say, for September and if those would stay relatively stable through December, when we look at our overall sales, we would expect to have a 0% impact of currency translation in the December quarter. Then if you keep going on through the rest of the fiscal year, you’d actually see a small positive impact probably in the March quarter and then more flattish in the June quarter. So, our view is, for the entire year, we may end up at virtually zero on FX. Obviously, it depends upon how the rates move from today forward, but that’s our perspective. We’re seeing some stability.”

Range Resources (RRC) Q3 2016 Results
Jeff Ventura

Supply and demand for gas could be more balanced into 2017

“On a macro level, there are signs that later this year and into 2017, supply and demand will be more balanced and pricing could improve. We expect natural gas production in the U.S. to continue declining for the remainder of the year. Based on available data, it appears 2016 will be the first time that natural gas production will decline on the year-over-year basis since 2005. This supply decline is happening while demand for natural gas is increasing, driven by Mexican exports, power generation and LNG exports. Looking towards 2017, the NYMEX Strip has moved above $3 and we think it can continue to climb. Based on where strip pricing is today, we believe that we can grow the combined company at 33% to 35% for 2017. This equates to an organic growth rate of 11% to 13% for 2017, coupled with the full year of the North Louisiana division versus roughly a quarter in 2016. Importantly, this preliminary plan for 2017 also results in strong growth for 2018, assuming a $3.25 per mcf and $60 per barrel, we are projecting that we should achieve organic growth for 2018 of approximately 20%

Brown and Brown 2Q16 Earnings Call Notes

Brown & Brown’s (BRO) CEO Powell Brown on Q2 2016 Results

We continue to see a tremendous amount of capital in the market and risk bearers want to put it to work

” we would characterize the second quarter as another quarter that is moderating upward, but inconsistency in the middle market does remain. These inconsistencies can be seen in certain geographies or industries or a combination of both. During the quarter, our customers continue with modest hiring and exposure units are increasing. As a general comment, we continue to see a tremendous amount of capital in the market and risk bearers want to put it to work with some being more aggressive than others either with their pricing or terms and conditions or both.”

Small employer healthcare costs have increased at 8-12%

“Similar to previous quarters management of healthcare cost remains front and center for our customers, as small employers are generally experiencing rate increases of 8% to 12% while larger employers are seeing rates, rates that are generally flat up slightly. While these rate increases in small employer groups do not have a direct impact on our revenues as many of those carriers have moved to a per employee, per month, compensation model it does drive planned design. Companies are focused on how to best manage health and pharmacy cost and have their employees proactively share in managing these costs.”

You see carriers do unusual things in an environment like this

” there is a lot of reasons why you lose business but most of the time it’s loss of relationship with the buyer both the economic buyer and/or the user buyer. Having said that there in a market like this where you can see carriers do some really squirrely things in terms of pricing sometimes you just see crazy things, they just — right they do pricing that just doesn’t make sense where they blow something out of the water and we don’t know how long that’s going to last or if its real or whatever the case may be but sometimes you lose a little bit of business like that.”

We’re seeing rates on hurricane coverage come down to head-scratching levels

“what I would tell you is we’re starting to see rates in the pre-Hurricane Andrew levels. That would be 1992 for those that may not remember the exact year. But remember you’ve had enormous and I wouldn’t — I don’t want to say Ryan that we’re surprised like all of a sudden we’re just surprised. That’s I think it has been we’ve continued to sort of scratch our head at the continued rate decrease or pressure. So it’s not like second quarter we woke up one day and said well we’re surprised wasn’t that kind of deal. It has been, if you look at it for the last three years and I’m just using Southeast Florida because I live here in Florida and know that areas well and you look at these very nice high rise condominiums and Dade, Broward, Palm Beach County and all of a sudden, the rates have come down let’s just say 20%, 20%, 25% those are big cuts.”

It’s tough to compare what could happen in a big loss event because Hurricane Andrew was a different time

” So let me back up I actually joined Brown & Brown in July of 1995. I worked for an insurance company then. And so I saw rates go up in admitted markets as much as were permissible by rate filings however here is what I would say remember in Hurricane Andrew it was much different because the modeling for insurance companies was not nearly as sophisticated, it was more like a map and there would be people in Kansas City riding hotels and in Miami Beach and the people in Florida with the same insurance company didn’t even know that they were riding the hotel in Miami Beach. So there was the aggregation of exposure units that was substantial which most insurance standard carriers realize that had it been a direct hit in Hurricane Andrew on Miami Beach that we might had some very significantly impaired insurance company because they didn’t realize how much they had.”

A Florida storm will create upward pressure on rate

“I think a better example would be to go to 2001 and 2002 and 2003. So you had a constricting in the property market. You had post 09/11 event, you had lots of other things and rates started going up and up and up and up. The amount that, I don’t think you can say, this is how much they are going up in the event of a loss because the loss, the size of the loss is going to be a significant impact. The number and the losses by individual carrier will impacted and it depends on if how opportunistic certain carriers will feel on the way in, if the market places bearing on making this up 25% increase and all of a sudden you have a capital provider which is not taken a bunch of losses and may be didn’t participate in that segment and says that this level we might do that. They might come in and right at 15% so there is not going to be a linear relationship. I can just tell you when you have a big event that goes into Florida which is not a question of if, it’s a question of when we have another storm hit Florida, there will be upward pressure on rate.”

Brown and Brown 1Q16 Earnings Call Notes

Brown & Brown’s (BRO) Powell Brown on Q1 2016 Results

ACA reporting remains the forefront

“ACA Reporting and Compliance remains the forefront for many of our customers and a concern for many of them was the completion of the first major ACA reporting requirement, which occurred at the end of the first quarter.”

At some point there is going to be a wind event in Florida

“it’s been 11-years since we have had the last hurricane hit landfall in the State of Florida. I’m 48-years old and I can tell you, I remember every hurricane that has hit the State of Florida in my life time and it usually is every 10 to 14-years. That is not saying that we think there is going to be a hurricane this year, but at a point in the future, there will be a wind event in Florida and that will intern modify or change the marketplace.”

Valuations are high but M&A activity is not slowing

“From an M&A perspective, the activity in the industry is not slowing. While valuations remain high, we continue to look for company that fit culturally and make sense financially.”

Technology based insurance brokers may not understand the complexities of particular risks for larger customers

“what we found whether it would be in personal lines or in small commercial. There are certain complexities that come with risk particularly as you as an individual or as an business start to accumulate assets which they may not be familiar with the coverages that would be appropriate and so there is a possibility that they have what I call coverage is stripped down that maybe cheaper, cheaper, cheaper. But they maybe buying a Yugo as opposed to a Chevrolet or a Cadillac. And so and do they actually know the difference in the coverages and so I’m not aware of anything yet ”

Tech companies have done a good job of sizzle but not not in terms of executing on making money

“What we say so far though, so far is the technology companies that I’m aware of, they have done a good job of sizzle in terms of the marketing but I don’t think that they have done as well a job in the execution of the plan where they are able to make money over a period of time. “

Miscellaneous Earnings Call Notes

McDonald’s (MCD) CEO Steve Easterbrook on Q4 2015 Results

Our turnaround is starting to take hold

“I am confident in the actions we are taking and attraction is beginning to take hold. Most importantly, customers are noticing a difference. Our customer feedback systems are showing improvements in many important aspects of the customer visit, including food quality, order accuracy, speed and friendliness.”

Zions Bancorporation’s (ZION) CEO Harris Simmons on Q4 2015 Results

Paul Burdiss

Don’t expect credit deterioration in anything besides energy

Well I mean, I guess the short answer is until we see the non-energy economies start to really fray, but we’re not seeing that we — and I don’t think we’re going to venture a guess as to when the cycle really starts to et cetera, we’ll actually do that but I think suffice to say that at the moment we continue to see improvement and even in markets like, in a market like Texas the non-energy portfolio remains very healthy. We are looking at a lot of indicators in each of those portfolios to kind of watching for problems and so far it is not really showing up.”

Michael Morris

All domains continue to perform well and metrics are all solid

No, I can’t add anything to that, all domains consumer, retail, mortgage, small business, large commercial they all continue to perform well and metrics are all solid.

W.W. Grainger (GWW) Q3 2015 Results

Macroeconomic conditions are well understood

“The macroeconomic conditions faced by our industry in 2015 are well documented and largely understood.”

DuPont’s (DD) CEO Ed Breen on Q4 2015 Results

There is always cost saving

“Look, there is always cost savings. I mean I am a believer that they occur every year in a few percent range, as you keep streamlining your company, I would say. So, you are never done with it.”

Dow is already on IT systems that we were implementing

“we’re on a very fragmented IT system. One of the benefits it looks like we obviously get here with the Dow merger is Dow is on the IT platform that we were going through the global — actually latest revision of the SAP platform”

Fourth quarter was actually our best organic quarter of the year

“It’s interesting to note though that — and I don’t want to say there is a trend here, but our fourth quarter organic revenue was actually our best of the year. We had been running kind of minus 3% through the first nine months of the year and we are minus 1% in the fourth quarter. And if you kind of look at it around the geographies, it was kind of flat in Latin America, flat in North America, pretty flat in Asia and our one down market was Europe which was down about 2%. So, we’ll see how the trend goes here in the first half of the year but that was little bit encouraging that we saw that lift.”

Brown & Brown (BRO) Powell Brown on Q4 2015 Results

Small businesses still trying to understand ACA

“We define small employee benefits as employers with less than 100 employees. For this segment we are continue to see companies be very focused on managing their costs and trying to understand the implementation complexities of ACA, specifically how they manage costs via exchanges and/or private plan.”

Do expect rates to remain under pressure. A lot of activity in M&A but prices remain high

“We do expect rates in ’16 to remain under pressure and are watching the economy very closely for signs of further expansion or contraction. From an M&A perspective there’s a lot of activity out there. We’ve seen a number of announcements in 2015, maybe the most active year of acquisitions ever. We can tell you that prices remain high, some at levels that don’t make sense to us. However, we continue to look for partners that fit culturally and make sense financially”

AK Steel Holding’s (AKS) CEO Roger Newport on Q4 2015 Results

“the steel industry continues to face significant challenges as we enter 2016. These challenges include continued pressures in the global steel industry as the result of the massive oversupply steel primarily from China, that direct and indirectly impact others oversupply in all regions of the world and otherwise AK Steel is not a major player in the oil country tubular goods business, the significant downturn in that market is contributing to the excess capacity in those markets in which we do compete and to the overall steel market. As we have been stating for several quarters now, the steel market in the United States has been flooded with what we believe are unfairly traded imports. While the import levels have indeed began to decline for many of those countries where preliminary duties are being levied, we still face significant ongoing import pressures.”

Tupperware Brands (TUP) CEO Rick Goings on Q4 2015 Results

Turkey very weak

“Turkey, very disappointed. It was down 25% and much like France it’s been heavily impacted by externals, particularly the terrorist attacks, military activity, there is political instability which has just been almost bipolar from the President almost being voted out of office in June to getting a majority back again just over the last two months. So that’s we’ve seen weakened concurrency and there is a lot of change in consumer behavior in spending.”

I might be concerned if I were selling cars in China, but I think we’re ok

“Also I would say in China for all the news you really hear about that, I think if I was selling cars I might be concerned, but at the lower, we’re again a multi-local business, I think we’re in good shape there.”

It isn’t business as usual out there

“we don’t look at it as a crisis but isn’t business as usual out there”

Qualcomm’s (QCOM) CEO Steve Mollenkopf on Q1 2016 Results

Qualcomm talking about strong volumes

“QCT chipset shipments were near the high end of expectations, with low tier strength across OEMs particularly in China, offsetting some weakness in thin modem sales at a key customer. QTL revenues were higher than expectations on strong 3G/4G device volumes and ASPs and we continue to make progress in signing up Chinese licensees, although there is still more work to be done on that front.”

Lots of industries are looking to leverage mobile technology into their products

“At the Consumer Electronics Show earlier this month, it was clear that many industries are looking to leverage mobile technology into their products and businesses are looking to the leaders in communications and computer systems, such as Qualcomm, to make the world more connected and smarter. Our many announcements at the show reflect our progress extending Qualcomm technology into adjacent and new areas, including automotive, IoT and networking.”

PulteGroup’s (PHM) CEO Richard Dugas on Q4 2015 Results

The volatility does change the way management teams think about their businesses at the margin

“All that being said we are well aware of the volatility in the world today. From concerns of our global economic conditions to the swoon in oil prices, to gyrations in the stock market, the day-to-day swings can be violent. The reality is however that we can’t control any of these factors, what we can do is focus on running our business, consistent with the goals we have established and disciplines we’ve demonstrated. This means acquiring well-located communities that we believe can deliver high returns on investment. It also means hedging our bets by using more land options, where possible and focusing in on smaller, shorter duration projects, where we can get our capital back quickly. It also means, not over leveraging the balance sheet and keeping one hand on the lever to slow investment if housing demand begins to change. And finally, it means having the discipline to systematically give excess funds back to shareholders, rather than trying to force investments in the system. ”

Ford Motor’s (F) CEO Mark Fields on Q4 2015 Results

We are a mobility company

“Well to answer your question Joe when you look at where we’re heading we said we were transforming into an auto and a mobility company because it’s really important that we don’t lose sight of our core business as I mentioned on our remarks upfront.”

China is going from an industry led economy to one that’s consumer led

“In China obviously as we mentioned, when you look at the stock market volatility, that’s endemic of the country that’s moving from an investment and industry led economy to one that’s consumer led. And actually when you look at the components of GDP growth there, the services in the consumer portions of that are actually growing while some of the industry ones are coming down and we view that as a good sign.”

Marion Harris

Not seeing any uptick in delinquencies in the US

“Colin, this is Marion. No, we’re really not. I know there is a lot of discussion about this, but with the exception of the trend in longer term financing we’re not seeing any weakness in the consumer alone. In fact delinquencies which are a leading indicator were at an all time record low for us.”

Las Vegas Sands’ (LVS) CEO Sheldon Adelson on Q4 2015 Results

Adelson thinks we’ve seen stabilization in Macau

“We do see stabilization in gaming revenue trends. In the mass gaming segment, our non-rolling drop was down just 1% over the prior quarter, despite new competition that has predominately focused on the mass market. Our VIP rolling volumes were actually up 5% over the prior quarter outperforming the 2% sequential increase in the Macau market.”…”I thought we had either hit bottom in the mass market or we are bottoming out. Ever since I said I’ve been reading the issues, I’m been reading from analyst reports and from other Sands China reports that I get daily, other clippings that people are starting to believe that and some of the numbers put out and experienced through December and January indicate to me that that’s the case.”

Steel Dynamics (STLD) Mark D. Millett on Q4 2015 Results

I think there’s positive momentum

“Well, I think there’s positive momentum, generally. I’m sure Dick can speak to some of it, but the inventory overhang, there’s continued destocking there and it’s becoming balanced. It’s still relatively high, particularly in hot band. But in coated products, in coated sheet, I think it’s getting into a good position. And you speak to a seasonal uptick. I think we’re seeing that as well.”

Theres tightness forming in cold roll sheet

“On cold roll sheet and coated, I sense a tightness forming in that arena. I think it’s a combination of – the automotive arena is strong. So, the integrated mills got a relatively good order book. Construction continues to come back. There’s some destocking going on. And we have some relief from the trade cases and erosion of import levels.”

United States Steel’s (X) CEO Mario Longhi on Q4 2015 Results

Automotive continues to be a good market, appliance and construction markets should also grow

“Now I would like to give a brief summary of what we are seeing in our markets and our guidance for 2016. The automotive market continues to be a very good market for us and we expect it to remain strong throughout the year. We also expect growth in demand in the appliance and construction markets compared with last year. Industrial equipment market is mixed with a slight improvement in demand for construction equipment, steady demand in the railcar markets and weakness in mining equipment. In the energy markets, low oil prices and rig counts remain a significant headwind. At this time, we do not see any catalysts other than increase in oil prices that would drive significant improvement in tubular demand and pricing with impacts to both our tubular and flat-rolled segments. We continue to expect slight growth in the automotive, appliance and construction markets in Europe as compared to last year but tin mill products may be facing increasing challenges from imports.”

Brown and Brown 3Q15 Earnings Call Notes

Overall market conditions improving, but questions on outlook due to news about companies cutting costs. We’ve seen some slight impact.

“we continue to see the overall market conditions improve in certain areas of the country, which is good. However, there are some questions regarding potential outlook due to the recent news about companies reducing their workforces and cutting costs. We’ve seen some slight impact already and will continue to monitor our customer base closely.”

Lack of hurricane drives rates down

“2015 appears to be another year without a major hurricane hitting the United States. This lack of weather events along with excess capital in the market continues to drive rates down.”

Low interest rates also putting pressure on insurance rates

“We do expect rates to remain under pressure due to historically low weather events and low interest rates. We feel the realignment of our Retail Division strategically positions us for incremental profitable organic growth in future quarters.’

When you hire someone right out of college, you are teaching them about life

“let’s make sure we’re clear on that. Everybody’s development is different. When you hire somebody right out of college, you are teaching them not only insurance, but about life. And so it takes several years for them to get into the production mode, but they’re being very successful in adding value to our team and learning the business in other ways, but they may not be a producer right away.”

Different people have different trajectories of success

“It’s not as easy as saying, we hire somebody and one year later you have X. It’s not that easy. And I know you’d like that, there’d be more like manufacturing, but it’s not like that. You hire a new person and some people are successful more quickly, some people, it takes a little longer for them to launch in their career. But we can tell you that we’re looking for a certain type of person and that person, when we find them has a high probability of success in our system over a long period time, if they continue to do all the desired outputs and actions that make us a producer successful.”

Brown and Brown 2Q15 Earnings Call Notes

Seeing a soft market for insurance prices

“we, like the entire industry, continued to experience headwinds related to the rate declines. The downward pressure on rates continued to be driven by good overall loss experience, minimal weather related events and a significant amount of excess capital in the market chasing returns. We expect this trend to continue unless there is a material change in one or all of these factors.”

See slow but inconsistent hiring in middle market

“We continue to see slow economic improvement in some markets and certain areas in the country, but this is not consistent. We see exposure of unit growth in certain regions, but don’t see consistent hiring across the board in the middle market. We believe this is partially driven by a lack of qualified – possibly of lack of qualified candidates, but more specifically the implications of ACA adoption that many employers are facing.”

Declining property rates, higher auto, flat professional liability

“”We continue to see declining rates for our coastal properties and also seeing admitted property rates trending flat, down 5% in some cases. However, we are seeing commercial auto rates generally trending up, but it really depends on the specific loss experience, and professional liability rates are flat to up 5%.”

Employers are all over the map relative to ACA implementation

“relative to ACA, is I believe that many small employers are all over the board in terms of their preparation, some are behind and being – getting ready for next year, some are on their way and some are already there.’

Public exchanges will probably see rate increases because of unfavorable loss experiences

“a number of those exchanges are experiencing rate increases and they will continue to experience rate increases, we believe, because of the unfavorable loss experience many of them have had over the last year due to the number of people in those pools.”

Private exchange is an option for smaller businesses

” I would reiterate that the private exchange is an option, not the option. And so we believe that it is, one, a technology play; two, a coverage play; three, a compliance play. And you wrap all that up and that is appealing to some smaller businesses.”

INvesting in people rather than acquisitions with acquisition prices up

“There are a lot of acquirers out there, some of whom are paying what we might consider ridiculous prices in certain transactions. We are considering making investments in people, where there isn’t any so-called acquisition, but bringing those capabilities and talents on to our team that is a short-term margin hit until the revenue comes with them. And so, you are correct in saying that there will continue to be an ongoing expense. But I can assure you that there are components to these investments, which are opportunistic and we will continue to explore those when we’re in an environment, where acquisition pricing is up and we want to get more talent on our team in certain areas to serve our client base.”

Private equity has been a big buyer of insurance agencies

“I would say that the biggest participant in this is private equity. And so, Ken, if you go back to 2006, as an example, 29% of all transactions announced were done by financial institutions, banks. And only 4% were done by private equity firms. In there, you have a big group of the public buyers and you have some private buyers. But in 2013 and 2014, private equity was 44% and 43% of the announced transactions. And in that same period, banks were only 8% and 5% of the transactions, while the publicly-traded brokers, the percentage in the 20%s which has remained fairly confident over the entire period of time.”

“So we’re starting to see private equity buy private equity, which I think is many times an indication of a frothy environment. And so – but there are other publicly-traded firms that you know that are announcing transactions and there are some private firms, but it’s predominantly private equity. We are always talking to people out there always. And as I’ve said before, how and when or why and when they sell is different and unique to each one.”

“We would tell you and quite honestly, the reason that we did not make that comment at this time is because the pricing continues to be very competitive. It’s not that there aren’t a number of transactions out there. There are actually a lot of transactions and there’s a lot of activity because of the speculation of these high or higher multiples. But we are going to continue to stick to our knitting, which is we are trying to execute better every day. We want to sell more accounts and we want to retain the existing clients that we have. We want to work really closely with our carrier partners, which enable us to have additional success, investing in our teammates all along the way and driving long-term shareholder returns for our stockholders.”

People buy emotionally and justify intellectually

“I’ve had several people asked me that some people may be saying, they’re paying 7 times. And I say is that 7 times revenue, is that 7 times a pro forma of 2018 earnings, is it 7 times of what? So, I don’t think it’s so much the multiple number it is, what is – what are the earnings that they’re calculating and that’s where I think sometimes there is a divergence in that discussion.

So it’s very interesting, it sometimes is challenging, sometimes comical, but we keep going and different people are going to make – typically people buy emotionally and justify it intellectually, so they will go where they think that they will be best served unless the number is so unusual and if nobody else can get to it.””

At some point the PEs need to exit

“when we look at this space, lot of the really high multiples are – appears to be the really high multiples being paid by the private equity side, as Powell mentioned. There – their strategy is there is an exit to it, right, that means there is a liquidity event at some point in the future”

Brown and Brown 4Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Seeing construction depending on the region

“I would tell you that we see pockets of it regionally, but as a general rule we’re starting to see more construction starts. So let me give you an example, you might think as an example Phoenix, which was an area that slowed down a lot it started growing or seemingly growing more rapidly last year early in the year and the prior year and I would tell you that Phoenix it maybe got a little ahead of itself, meaning the metro area, so they are not seeing as much growth as maybe you might have seen right out of the blocks that doesn’t mean that is not growth, but that’s an example. If you come to South Florida there are so many cranes in the sky in Miami it’s kind of unbelievable. So depending on the city and what they are building in certain areas Josh we’re seeing more rental housing apartments being built than single-family homes, those are just some broad statements.

Three ways to use cash

“What I would say is this, we are thinking about how we best invest in our business and we can return or invest in that business one of three ways as you know. We can hire new teammates of which we are doing constantly and consistently. Number two, we can go out and acquire businesses which we are doing and we had the highest year of total annualized revenue acquired last year. And then three, we are returning to shareholders either in the form of dividend increases or through share repurchases.

A little bit of color on the acquisition process

“As you know we don’t budget acquisitions and so we are always out talking to the agency community about the possibility of joining the team at Brown & Brown and as you know the average agency owner today is 57 years old, doesn’t have a necessarily clear succession plan, doesn’t necessarily want to retire, but they actually would like to take some chips off the table. So if they fit culturally with us and we can come up with a financial terms and conditions that make sense for both parties we want to do it. And so I would tell you that we’re always talking to people in terms of when and why people sell those are different across the board. We would say that pricing continues to, I would say be on the higher end of the range and on certain instances we have seen acquisitions trade up in areas that financially we would not go to. And so we have a financial discipline that we employ when we evaluate acquisitions.

People are not hiring quite as much

“ would say that you have hit on an interesting point which is we’re not seeing that many people hire lots of new employees as a general statement. So to your question, we’re seeing more people doing more with the same amount of employees or very cautiously adding new employees.

A lot of businesses are having to think about how ACA impacts them this year

“I think that in the last year and probably in the future in this coming year there has been a lot of transitions as ACA impacts different employer groups in terms of size. And so some of the smaller firms are thinking about their options, I am not saying that they are mandated to go an exchange but an exchange could be a private exchange like the private exchange that we use