DuPont 2Q17 Earnings Call Notes

Ed Breen

Expect this to be our last call as DuPont

It’s with strong momentum that we have what we anticipate to be our last earnings news release and investor call as DuPont. Of course, this is not an ending but a beginning as we approach the expected August closing of the merger with Dow to form DowDuPont. This past quarter, we completed nearly all the steps needed to close the merger without any significant new remedies. When the final steps are completed, we will announce our expected closing date. We remain confident that the transaction will close in August.

Nicholas C. Fanandakis – E.I. du Pont de Nemours & Co.

Strength in electronics and communications

Yeah, let me handle that, Chris. So as you go forward looking at Electronics & Communications, as you said, you’re absolutely right, there were some rather lower comps that we were against. So part of it is that. But we have seen good, strong consumer electronics, semiconductor, as well as PV in the quarter and as we’re going forward. When I look beyond the second quarter in the rest of the year, we do expect continued moderate strength in some of these key markets, primarily the three that we talk about, consumer electronics, semiconductors and PV.

Are forecasting growth rates to be down in PV

“We are though forecasting growth rates to be down in the PV side due to some of the reduced government subsidies around the grid capacity constraints in China.”

James C. Collins – E.I. du Pont de Nemours & Co.

CRISPR products

Thanks, Laurence. Yes, our CRISPR strategy, I would say, is something that is still emerging. We’ve clearly identified a few early targets. We talked about our waxy corn program. I think I had mentioned it a little bit at several of the Ag conferences. So it will be our first commercial product. We’d expect that by the end of the decade. We’re beginning to work on a few other diseases that we think CRISPR could help us control.

One of those is northern leaf blight. You know how important or how big an impact that disease can be. I think I saw a number last year, could have been as high as $1.6 billion in North America alone. So what that’ll allow us to do is leverage our existing germplasm, but look for background germplasm where that trait or that natural disease resistance already exists and then use the CRISPR tool, just like we would any other advanced breeding technology, to breed our background germplasm in with that protection.”

Brazil watching closely how things develop

“I would say that, as we think about the second half of this year, especially in Brazil, we’re cautious on that market, just as growers are. They’re clearly watching to see how this North American crop develops. We’re in a real critical stage right now, where temperature can have a big impact at pollination on yields. So I think we’re all waiting to see how that turns out. That will naturally affect commodity prices for corn and soybeans. And those are two big drivers as to how the next season will unfold as well. So, as I said, it’s a little early to call it, and we’re watching things pretty closely.”

Du Pont 3Q16 Earnings Call Notes

E.I. du Pont de Nemours & Co. (DD) Q3 2016 Results

Ed Breen

We’re deep in the merger process with the big regulators

“We’re very deep into the process with the four big regulators, the EU, Brazil, China, and the U.S. We’re deep into those conversations. So I think we’ve done a good job explaining our end markets and our businesses to the regulators. We’ve taken a lot of time educating them on that. There are rumors out there, which I’m not going to comment on, but I was sure there will be some remedies at the right time. And we are pre-working on that and very focused at Dow and DuPont on understanding that so we’re in a position to move really quickly when we need to. And, by the way, just this whole comment, just to put it in on perspective on the regulatory side, remember, we are first in line. I think even the EU Commissioner commented on that, that we review things in the order that we get those, in a recent statement. And I would also comment, just to put this in perspective, sometimes we lose sight, when you put Dow and DuPont Ag together, we’re going to be a strong number two in seed – not a number one, the number two – and in crop protection we’re putting the number four and number five player together to create a number three player. And our goal obviously through that is to have increased innovation and capability to improve our pipeline and speed up our products, both on the crop side and on the seed side, so – and we’re very confident we can do that. But I just want to kind of put that whole thing into a perspective.”

Looks like housing and auto are dropping off a bit

“I mean, it looks like all forecasts say that housing is dropping off – at least from a start standpoint – dropping off some in the three-month window or rolling window – July, August, September, looks like there was a decline of about 1.5%. So not significant, but it looks like there’s a little bit of a rollover off of kind of that 1.1 million to 1.2 million starts. So kind of flat to down a little. So you might see a little bit there.

And then on the auto side of the business, it looks like auto builds are going to be down in the couple percent range going into next year. So that’s a little bit of a drop from the 5% to 6% that we’ve kind of been running through the year. So you might see a little there. However, by the way, our demand still looks good for autos, specifically in China on the Performance Materials side of the business. But we are modeling a little bit of a downdraft in those couple end markets.”

James Collins

Still pretty challenging market in 2017 for farms. Favoring the soy market

“When we look at 2017, I think like others we’re predicting still a pretty challenging market as corn commodity prices continue to fall, and soybean’s a little bit unchanged. It’s favoring the soy market, and we are seeing some volatility in pricing in both of those.”

Du Pont 2Q16 Earnings Call Notes

E.I. du Pont de Nemours & Co. (DD) Edward D. Breen on Q2 2016 Results

Sales grew 1% volumes grew 2%

” I am pleased about the improvement in our sales trend, given the challenging environment in which we are operating. Sales rose 1%, excluding currency and portfolio changes, with Agriculture and Nutrition & Health leading the improvement. Ag did better than expected in a very challenging market, and N&H grew despite the currency pressure. Volumes grew in half of our businesses and volumes grew in total by 2%.”

Scientists are using technologies like CRISPR to produce new products

“Another product of increased productivity and efficiency is freeing up capital to invest in R&D and growth. This is another priority for us. I’ll give you a few examples. To meet growers’ needs better, we are introducing higher-performing products like Zorvec fungicide and Leptra corn hybrids. We’re increasing capacity in faster-growing areas like Tyvek building wrap and medical packaging. Our scientists today are utilizing the newest technologies like CRISPR-Cas gene editing to develop targeted applications to deliver enhanced solutions and greater choice for our customers. In fact, we introduced over 600 new products in the first half of 2016.”

We think we’re still on track to complete the merger

“I think it came out that there might be some remedies. We always went into this saying we would be ready on remedies, if that were needed. So, we’re hoping that that helps out the timeline. So, having said that, I’m not naive. This is a huge merger. Although we are going to split into three, but it is a huge merger and I’m sure it’s going to get a thorough review. But looking at the timeline, I still think we’re on a timeline by the end of the calendar year to accomplish this.”

+1% feels good when you were running -2%

“I sure hate to brag about a sales number that’s around zero, but – and I’m not. We always want to strive to do better. But just to give a little backdrop, the reason it feels better is we were plus 1% organically. For the whole company, we were plus 2% on a volume basis. And the quarters before that, four or five quarters before that, organically, we were kind of running a negative 2%. So, we’ve seen a shift of about 3%, which is not insignificant. So, that’s really, I think, the key change there.”

Probably get a slight lift in electronics in the second half

“d electronics also is one where we’re seeing, on the consumer electronic side, probably I think as everyone else has been reporting for the last three to four months, softness on that end of the market. And we think that picks up slightly in the second half. Originally, we are planning a bigger lift, but we’ve kind of dialed that back a little, thinking we’ll just see a slight lift as we go into the holiday season.”

Nicholas C. Fanandakis – Chief Financial Officer & Executive Vice President

Operating earnings up 14% on 1% revenue growth

“Operating earnings of $1.24 per share increased 14% versus prior year and grew 18% year-over-year when adjusted for currency. Continued strong execution on cost savings across all businesses, lower product costs and volume growth drove improvement in the quarter.”

James C. Collins – Executive Vice President-Agriculture

Agriculture markets continue to face challenges

“Agriculture markets continue to face challenges. As farmers endure tough economic conditions, seed and crop protection suppliers have elevated inventories and credit remains tight.”

Not seeing any bad debt rates above normal

“Credit is one area that we constantly take a look at. We feel like we’re not seeing any kind of bad debt rates that are above anything that we would normally see. But we’re constantly watching it. What’s really happening is because of the lack of credit out there, growers are delaying a lot of their purchase decisions. And you sort of see that in our guidance for the second hal”

DuPont 1Q16 Earnings Call Notes

DuPont’s (DD) CEO Ed Breen on Q1 2016 Results

Ag a source of strength

“Much of the quarter’s strength was due to Ag. Solid execution in Ag, our largest segment enabled a strong start to the North American corn season. I’m also very pleased with our results in this Safrinha season as we delivered strong volume growth. ”

Nicholas C. Fanandakis

Ag fundamentals have not changed

“In agriculture, the fundamentals have not changed since the outlook we provided in January. Net farm income is declining and season crop protection suppliers have abundant of inventory globally. Economists are currently forecasting lower global industrial production in key markets including the U.S., Central and Eastern Europe and China. China’s economic slowdown continues particularly with its industrial, real estate and financial sectors impacting the Asia-Pacific region.”

James C. Collins

A little early to talk about market share in corn. 30% planted but seeing volume increases

“It’s still early in the season to talk about full-year, we still have a lot to go and when I think about corn share now again, a little early to call share. Agree with you, no doubt we’re seeing volume increases in North America consistent with that USDA report on the 94 essentially million acres. We’re seeing volume growth based on our new technology and our teams are going to stay really focused. But like I said, it’s way too early to talk about seed share. As of today, we’re about 30% planted in North America. That is elevated. Normally we would be about 16% for this time of the year and again you saw some of that volume increase flow through in our first quarter, but we will see how things shake out around share for the full-year.”

If the weather is perfect and we get the 94m acres planted that are expected, it would continue to put pressure on prices

“Historically tough, planted acres doesn’t always equate to yield, we could still see some issues to summer especially during pollination where we know we can really take the top off of yield on any of those crops. So kind of like you, we’re in a wait and see mode, if the weather is perfect and we get 94 million acres, you are right we’ll continue to see commodity prices at that low end of – I would say what I’m calling the new normal range of that 320 to 420 kind of operating range. And that will continue to put stress on that farm income and keep farmers really focused on how do they get the most productivity off of everyone of their acres.”

Miscellaneous Notes 4.14.16

Source: Amazon 2015 Annual Report

Amazon (AMZN) CEO Jeff Bezos says their success due in part to both luck and their differentiated culture

“This year, Amazon became the fastest company ever to reach $100 billion in annual sales. Luck plays an outsized role in every endeavor, and I can assure you we’ve had a bountiful supply. But beyond that, there is a connection between these two businesses. Under the surface, the two are not so different after all. They share a distinctive organizational culture that cares deeply about and acts with conviction on a small number of principles. I’m talking about customer obsession rather than competitor obsession, eagerness to invent and pioneer, willingness to fail, the patience to think long-term, and the taking of professional pride in operational excellence.”

Amazon (AMZN) CEO Jeff Bezos says cultures take years to reinforce

“A word about corporate cultures: for better or for worse, they are enduring, stable, hard to change. They can be a source of advantage or disadvantage. You can write down your corporate culture, but when you do so, you’re discovering it, uncovering it – not creating it. It is created slowly over time by the people and by events – by the stories of past success and failure that become a deep part of the company lore. If it’s a distinctive culture, it will fit certain people like a custom-made glove. The reason cultures are so stable in time is because people self-select. Someone energized by competitive zeal may select and be happy in one culture, while someone who loves to pioneer and invent may choose another. The world, thankfully, is full of many high-performing, highly distinctive corporate cultures. We never claim that our approach is the right one – just that it’s ours – and over the last two decades, we’ve collected a large group of like-minded people. Folks who find our approach energizing and meaningful.”

Amazon culture embraces failure

“One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments.”

Amazon getting into the finance business

“We also created the Amazon Lending program to help sellers grow. Since the program launched, we’ve provided aggregate funding of over $1.5 billion to micro, small and medium businesses across the U.S., U.K. and Japan through short-term loans, with a total outstanding loan balance of about $400 million. Click-to-cash access to capital helps these small enterprises grow, benefits customers with greater selection, and benefits Amazon since our marketplace revenue grows along with the sellers’ sales. We hope to expand Amazon Lending and are now working on ways to partner with banks so they can use their expertise to take and manage the bulk of the credit risk.”

Source: New York Times Interview

Dupont (DD) Former CEO Ellen Kulman

“The world is a more competitive place, it is getting more competitive not less competitive. So what that means is that you have to be really clear about what you’re doing,where you’re going, and how you’re going to get there.”

Source: CSX 2015 Annual Report

CSX CEO Michael Ward emphasized cost reduction in his annual report, much like many of the other Fortune 500 CEO’s

“Over the past decade, CSX has consistently delivered significant gains in productivity, even during the tough years of the most recent recession. 2015 was no different, with efficiency initiatives and cost reductions driving more than $180 million in productivity despite declines in some of the most profitable markets. The initiatives behind those savings are designed to create sustainable changes such as improving fuel efficiency and increasing the use of technology automation. What’s more, CSX delivered a total cost reduction of nearly $375 million, which includes savings from right- sizing resources to match demand. We have demonstrated repeatedly that we can aggressively manage costs in what is often considered a high fixed-cost business.”

Doesn’t expect coal markets to recover anytime soon

“The baseline coal market, which generated $3.7 billion in revenue in 2011, declined to $2.3 billion in 2015, and will continue to decline in 2016 and beyond. While this market remains important, it has given way to more consumer-oriented markets that demand premium, and ever more cost-effective, service. In an era in which the $1.4 billion in coal revenue declines over the past five years will continue to accelerate, the status quo is no longer an option.”

Source: Schwab 2015 Annual Report

Schwab (SCHW) CEO Walt Bettinger tries to be as candid as possible in his annual letter to shareholders about the state of the business

“Each year it is an honor to sit down and craft a letter to share my thoughts on Schwab with you, our valued stockholders. I strive to write this letter with a minimum of jargon, corporate speak and trendy business buzzwords. It isn’t written to compete with the latest bestseller on business strategy or how to be a better leader in changing times; it is written with the goal of simply discussing the current state of our company and the future we face together. The litmus test for this letter is: “Does it read as if I were corresponding with a business partner who has been out of touch for the past year?” As always, my hope is that you will share with me your feedback on whether this goal has been achieved.”

Schwab (SCHW) CEO Walt Bettinger said humans will continue to seek a human relationship in some form when seeking investment or financial advice

“One of the most over-hyped aspects of investing in the past year is the concept of “robo-advice.” A “robo-advisor” offers a user-friendly website and mobile experience where an investor can answer a few questions, have a complete investment portfolio built, and receive ongoing management with rebalancing and, in some cases, tax-loss harvesting. Now, I say over-hyped because the press has speculated that growth in “robo-advice” could jeopardize the desire for investors to want an in-person relationship–a suggestion that we see as folly. That said, there are real benefits to the concept of automated investment advice if it is combined with the availability of live professionals by phone, chat or in person.”

Schwab (SCHW) CEO Walt Bettinger says they are disrupting themselves in order to create a better client experience

“Today, despite what you might hear in the press about “Silicon Valley disruptors” and “fintech,” Schwab remains the consummate challenger in the investment industry. Each day we ask ourselves a question consistent with our “Through Clients’ Eyes” strategy: “How can we use our deep knowledge of investing to help our clients be better investors, to deliver services to clients at a lower cost, and to ultimately help them achieve better outcomes and take ownership of their financial futures?”

Federal Reserve’s low interest rate policy is hurting their business results

“Punishing. There is no other way to describe the financial impact on our company from the unprecedented experiments taken by the Federal Reserve since 2008. While the Fed experimented with zero interest rates and printing money under the guise of a fancy term–quantitative easing–savers suffered, responsible people who had avoided large debt suffered, and our company suffered as well. In 2008, when client assets at Schwab were slightly in excess of $1 trillion, we generated revenue of just over $5 billion. In 2015, when client assets were in excess of $2.5 trillion, we generated revenue of just over $6 billion. Put more succinctly, during that period total client assets grew by about 120% while revenues grew just 24%. Punishing. And you can attribute virtually this entire scenario to the interest rate policies of the Fed.”

Schwab (SCHW) CFO Joe Martinetto said they are assuming one Federal Reserve rate hike this year for their internal budgeting

“With that crucial first Fed rate move behind us, the path forward could be a bit brighter. As we finalized our annual planning at the beginning of 2016, the forward rate curve implied that, despite some global market jitters, the U.S. economy was strong enough to support expectations for at least one more Fed move in 2016, and we developed our baseline scenario with that in mind. Our baseline scenario also includes relatively flat long-term rates and a 6.5% improvement in the S&P 500 Index relative to year-end 2015, as well as a potential decline in revenue trades as average portfolio turnover continues to slow.”

Source: October 2015 Stanford Interview–&index=8

Alphabet (GOOGL) Chairman Eric Schmidt

“The ideal business is the Microsoft business. A monopoly software business with hardware competitors who are competing for good treatment by you in a global and growing industry. Let’s use Uber as an example. Uber spends an awful lot of time saying that the drivers don’t work for them and they don’t own the cars. There’s a reason and it’s not legal or liability reasons. It’s because if you think of them as a software infrastructure company that helps assemble this thing, they have very different economics. In that sense, it’s the modern version of a franchisee. Why do people own McDonald’s franchises rather than McDonald’s owning them? Well, it’s because McDonald’s couldn’t get the capital to own them all themselves.”

Source: November 2015 Stanford Interview–

Netflix (NFLX) CEO Reed Hastings says you can never know anything for sure

“Maintaining a reservoir of doubt is extremely important.
“We often do an exercise, every year or so, what would be different at Netflix if you were CEO? It’s a way for me to gather all the different strategies. Would you change the pricing? Would we be in the ad business? And I really try to think through all the different methods, We call it farming for dissent. You can never be confident of anything, you always have to be curious. Yet you have to be executing really firmly. Simultaneously, knowing there is no certainty yet working really hard to know what you think.”

They don’t do company acquisitions

“In 17 years, we’ve never done an acquisition. People have tried to acquire us, but it never worked.”

Source: McCormick 2015 Annual Report

McCormick (MKC) CEO Alan Wilson said they are accelerating their shift to digital advertising

“Across all of our markets, we increased brand marketing support by 6% in 2015. Increasingly, we are shifting toward digital marketing, which comprised 38% of our advertising, up from 11% in 2011. Digital marketing creates a direct connection to consumers, including Millennials, who view the McCormick brand positively. As an example, our site has become a top 50 most visited food/lifestyle site.”

Source: Morningstar 2015 Annual Report

Morningstar (MORN) CEO Joe Mansueto says the company benefits from key tailwinds

“We benefit from some important industrywide trends, such as outsourced investment management, the convergence of the advisor and workplace/retirement spaces, the shift to passive investing and strategic- beta strategies, and growing market acceptance of new credit-ratings entrants.

Morningstar (MORN) CEO Joe Mansueto says asset management clients remain cautious about spending

“Low interest rates and the industrywide shift to passive investment manage- ment continued to put pressure on spending for many of our asset management clients.”

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.”

JS Earnings Call Notes 10.27.2015 – Roper, Comcast, IAC, Dupont, Waste Management, WR Berkley

Roper (ROP) CEO Brian Jellison said it may not look like it from the outside but under the surface, the company is moving very quickly

“if you look at the income statement, we are sort of laughing, because it’s the old story about the ducks on the pond and they are moving along nicely, but underneath, these are moving wildly.”

Roper (ROP) CEO Brian Jellison reminded investors of the company’s emphasis on cash flow

“The compounding of cash flow, if there is any theme around here, it would be that. We are in base, a compounder.”

Seeing strength in nuclear test business after several years of lackluster revenue in the segment

We had strong growth in our nuclear test business on improving market conditions. There is a good deal of activity that’s emerging, both in China and Korea based opportunity in the Middle East, and startups again in Japan for their nuclear activity. So that’s going to be a material improvement for us in the fourth quarter, and into 2016.“   

Roper (ROP) CEO Brian Jellison is excited about their acquisition of a software company called Aderant

Aderant has a really end-to-end platform of mission critical software, that primarily goes to law firms now, but could be expanded to other professional services organizations.  It has 3,000 of the world’s largest law firms and professional services organizations, and they really do a full suite of activity, all the way from time capturing and billing to docketing.  If you look at our acquisition criteria on the right, you will see it has got an excellent management team. In fact, we are retaining everyone.  Over 95% customer retention, strong cash flow characteristics, asset life, well once again, negative working capital, so people pay us in advance for work that we are going to eventually perform.”

Roper (ROP) CEO Brian Jellison said they are seeing heavy competition from Private Equity firms for deal flow 

There has been a lot of stuff for sale, but there is always a lot of stuff in the pipeline.  People are going to start to worry about their exit multiples versus what their entrance multiples order. So I think everybody is wondering about what their exit time ought to be, if it should be moved up. But boy, the guys that we work with and talk to all the time, I mean, they are still deploying capital like crazy.  So you see them making big bets with very high trailing multiples at least, for what they hope will be able to grow into.”





Comcast (CMCSA) CEO Brian Roberts said the movie segment of the media conglomerate had an excellent quarter  

At film, the third quarter was remarkable in many ways and continued the terrific run we’ve had this year. Minions and Jurassic world sustained our box office streak into the third quarter.  On August 5, we surpassed the prior record for the highest grossing year ever for a movie studio in worldwide box office. And this is the first time any studio has had three films crossed the $1 billion mark and theatrical receipts in the same year.”

Comcast (CMCSA) CFO Michael Cavanagh said the company is experimenting with cable & internet packages at different price points

A final comment on video, we are responding to different customer preferences, segmenting the market effectively with a variety of video packages and offers, like our Internet Plus offering to appeal to customers that might otherwise choose to purchase only broadband from us. Providing the right introduction to our products allows us to better retain our customers and potentially migrate them to higher end packages over time, improving our customer lifetime value.”

As you might expect in an era of emphasis on the digital age, broadband internet customer acquisition was strong

“The strong momentum in our high-speed data business continued. Revenue increased 10.2% during the quarter, making it again the leading contributor to overall cable revenue growth, driven by impressive growth in our customer base, as well as rate adjustments, and an increasing number of customers taking higher-speed services. We added a combined 320,000 data customers during the quarter with 73% of our customers now receiving speeds of 50 megabits per second or greater.”

Their venture capital arm has made investments in next generation content platforms

As we talked about the millennials, we talk also about NBC and investments in Vox and BuzzFeed and the ability to now hopefully have advertising that can take some of our content and their content and bring it to advertisers.”





IAC (IACI) CEO Joey Levin said ad blockers aren’t affecting the companies advertising business as much as many had feared

“On mobile it has been negligible. I think, we would see less than 1%-type impact. On desktop, we see an impact maybe measuring something in the teens, not accelerating, but the probably somewhere in the teens impact.  I think, we under indexed towards relative to the general internet on ad blocking. I think partially, because we drive lot of traffic through advertising. By definition if we acquire the user through an app, then they are going to see an ad when they get to our site, also because just our demographic is less likely to be adopting ad blockers.  The industry has to pay a lot of attention to and the solution is going to be adjustments in ads, better ads.”

And their video site, Vimeo, continues to gain subscribers

On Vimeo, the business today is substantially weighted toward subscription, but VOD business is growing much faster and growing very nicely. It is still small, but it is growing very nicely. If I look at many years, I see VOD being a, whether it is transactional VOD or subscription VOD, I see VOD being a huge portion of that business if we are doing things right over time. It is just a massive market and I think given our structure we ought to be able to take a piece of that.”

With the upcoming IPO of subsidiary, CEO Joey Levin explained the company’s stance on spinning off companies

Most companies, when they have a business like, and or businesses like we have had in the past which are leaders and their categories and doing very well, they hold on to those businesses. Our philosophy is when you get those businesses and when they reach that level of scale and when they have that sort of independence that we give them their own currency and set them up on their own and because we think that generally best for shareholders.”







New Dupont (DD) CEO Ed Breen, who broke up Tyco last decade, comes to Dupont with a mindset to improve the company’s focus and returns while potentially reducing capital expenditures

“I think we can have a better rigor around our return metrics across all of our products and platforms and programs that we’re working on. So we’re clearly on instituting that. So I don’t just highlight that to R&D. I think that’s across the board on how we spend on CapEx and certainly R&D is a big piece of that, but it’s across the board. I think more rigor around R&D is needed. Having said that, R&D is one of the great strength this company, but more rigor around that and that process I think could be very helpful for us and we’re starting to put some more of that in place.”

And he’s predicting consolidation in the sector

“Having said that, I’m not naive about what’s going on in the ag space right now. I do think at some point there’s consolidation here that will occur. You saw some other announcements just this week from others. And so we need to be very cognizant of that.  I am personally talking to the CEOs of some of the other companies. Something will give here on the ag side and I would say just looking at it consolidation should happen.”

New Dupont (DD) CEO Ed Breen cited some key characteristics as to what sets the company apart

here are so many great things here and I told the employees that were really working off a very solid foundation. First of all I’ve been in many companies and the one thing I can say is the employees are really dedicated. As I said in my prepared comments, they want to win. So there is a great spirit here and a great drive and you can’t make up for that.  Obviously this is a great science and R&D company and a lot of great things come through that. And this company is also very focused on its customers with an extensive global sales force that really is very impressive. So that’s a great foundation to have. The areas where I think there’s improvement needed are more operational. At this point time anyway especially with the environment we’re in, I think there’s a nice opportunity on the cost side.”

And he wants to make the company significantly more competitive and agile by reducing costs

also think from a CapEx standpoint we’ve been spending around $1.5 billion a year. I think that number is too high. We’ve pretty much zeroed in on what our numbers going to be for 2016.  that gets back to a rigor around returns on invested capital and what programs really makes sense which ones are marginal. And we’re going to do a lot that have great returns with them. And I’d say the other area where there’s improvement needed is working capital.”





Waste Management (WM) CEO David Steiner likened the switching dynamics in the waste disposal industry to the cable industry

And so, I always liken it to the cable companies. We all get a flyer every week that offers us lower price for cable. There’s probably a lot of people that accept that and say, let’s take it every time we can get it. But 90% of the folks say, you know what, the cost of changing out is too high, so I’ll accept the fact that this price might be a little bit higher, but I’ll accept it because the pain of switching is too high, until the cable starts going out or the satellite dish starts going out. And then all of a sudden, that price offer looks pretty attractive.”

And they put computers on each of their trucks which will help improve efficiency and route optimization

“over the last few years, we put on-board computers in all of these trucks. And I would tell you, we’re only kind of at halftime with respect to using the onboard computer to its fullest capability. For example, we can route our trucks dynamically. But that doesn’t do any good unless the driver follows the route that the computer generates, and we’re only following that route – if you think about best-in-class, a FedEx or a UPS probably follows the route 95% or 97% of the time. We’re kind of about 80% of the time. So, while that may seem like, pretty good, and it is okay, that last 15 to 20 percentage points is worth a lot of money.”

Waste Management (WM) CEO David Steiner said they are open to an energy waste deal if the prices is right even though they aren’t currently actively looking for a deal in the space 

On the energy services side, I’d tell you that if we were to do a deal in energy services, we’d do an opportunistic deal. We are not actively looking to go out and expand our footprint dramatically in the energy services businesses like we have been in the past. But if we can find some deals that are opportunistic and at the right price, we certainly think that long-term, energy services is going to be a good line of business. It’s not going to be a good line of business for the next year or two. So we’ve got to see something on the long-term horizon at an opportunistic price, if we’re going to invest in energy services.”

They have had to give price concessions to some of their customers in the energy space

Yeah. I mean they’ve come back to us over the last, probably 12 months, and asked for the price concessions. In some cases we’ve made some price concessions, in some cases we haven’t. It’s as much of as anything a function of where our assets are relative to the drilling that’s taking place. But certainly there has been some real pressure in that business, and that’s why our revenue will be down probably 30% for the year.”





Incoming W.R. Berkley CEO (WRB) Robert Berkley described where they are finding attractive places to deploy capital and places they are staying away from 

“As far as the domestic insurance market goes, as we’ve said over the past couple of quarters, workers’ compensation, general liability and many of the professional lines remain very attractive and we think are sensible places to be deploying additional capital. On the other hand, aviation, much of the marine market, cat-exposed property as well as offshore energy are product lines that we are increasingly concerned about and do not see a lot of rational behavior in those parts of the market.”
And they’re finding more competition in their international markets 
“Moving onto the international market, it is a bit more competitive; no different that it’s been in the past few quarters. One of the things that we’ve seen over the past few years has been many organizations have been looking to increase their footprints in some of the international markets that we have been operating in have become more and more crowded.  And the international insurance markets tend to be a bit more dependent on the reinsurance markets and that is due to the fact that much of the international market uses much larger limits on a day to day basis than we typically see in the middle and small commercial market in this country.”
The reinsurance market is extremely competitive 
“On the topic of reinsurance, certainly again a topic we’ve discussed with you all in the past, the marketplace remains exceptionally competitive. Having said that, it would seem as though the pace of competition seems to be not moving or increasing as quickly as it has over the past several quarters. I don’t think that we’ve necessarily touched bottom, but it would seem as though we continue to get closer as again the pace of erosion is slowing.  we do believe that capacity is becoming more and more commodity with every passing day and ultimately it boils down to the expertise that you can bring from a value perspective to your clients and focusing on clients that actually do value expertise and don’t just deal with commodity.”
Lower interest rates on their bonds hurt their investment income
“Turning to investment income, our investment income was $133 million this quarter, compared with $179 million in the third quarter of 2014. Earnings from our core portfolio including arbitrage trading declined 8% to $110 million, due primarily to lower reinvestment rates available for maturing bonds. The average bond yield for the first nine months of 2015 was 3.3%, down 0.2% from 3.5% in 2014.”
They don’t focus on GAAP accounting results but rather risk adjusted returns 
“These are especially interesting times. We really do focus on risk adjusted return. It means, we do some things that some of our competitors don’t do. We don’t focus truly on accounting results, because we’re focused on creating shareholder value more than reported earnings per se. That means, we start businesses instead of buying them, because that’s a better economic return; it’s not a better accounting statement return.”


Du pont 3Q15 Earnings Call Notes

E I du Pont de Nemours’ (DD) CEO Ed Breen on Q3 2015 Results

Agriculture remains challenging especially in Brazil

“In Agriculture near-term conditions remain challenging. Demand for seed and crop protection products primarily in Brazil further weakened in the quarter impacted by macroeconomic and competitive pressures. In Brazil where the planting season is in progress tighter grower profits and credits are causing growers to be more cautious in their spending.”

Interim CEO focused on cost structure, working capital and capital spending

“Since I took on the role of interim chair and CEO on October 16, we have been taking a hard look at our cost structure our working capital performance and our capital spending. While it is too early in our process to share a specific plan and metrics, we see opportunities for further improvement in all three areas”

We’re in a low to no growth environment, but not a disaster by any means

“look, things have clearly softened up, just look at every industrial company that’s reported this quarter. Having said that, I don’t think things are in any draconian situation. I think it’s just a low growth to no growth environment across some of the industrial spaces, that’s fine. We can operate well in that environment if we do the right things at our end that we need to do and when things pick up that’s great everybody. But, no, I don’t see a disaster out there by any means. But I think we’re in a kind of zero growth environment when you put all the pieces together and that’s fine.”

There needs to be some consolidation in the ag space

“I’m not naive about what’s going on in the ag space right now. I do think at some point there’s consolidation here that will occur. You saw some other announcements just this week from others.”

Taking a cautious view on ag in 2016

“I think the way I’d say that is were certainly taking a cautious view of 2016. We’re not expecting a big market recovery overnight. So — but we’ll talk more about the 2016 outlook and we get ready to talk about the 2016 plan.”

“everyone’s talking to everyone” in the ag industry about consolidation

“but you’ve seen all the activity in the last six months and one of the other ag players just this week saying they are looking at what they would do with their ag business and I’d also say one of them said everyone’s talking to everyone. That’s a true statement and we’re also — I am personally talking to the CEOs of some of the other companies. Something will give here on the ag side and I would say just looking at it consolidation should happen. ”

We’re in the bottom of the down cycle or hopefully close to it

“we’re in the bottom of the down cycle right now or hopefully close to it. So clearly there’s a big opportunity there. And everyone’s seen that.”

Drop off in PV solar in China

“when you look at electronics communications, consumer electronics was actually a strength in the quarter as was our Kevlar film business and the PV. Where the drop-off occurred was in the Solamet paste, also in the PV industry and largely service in AP, specifically China region. That’s where the greatest year-over-year decline occurred within the business.”

Dupont 1Q15 Earnings Call Notes

6% headwind from currency

“Consolidated net sales were $9.2 billion, a decline of 9% versus the prior year with six percentage points of that decline due to currency as the dollar continue to strengthen against most of our currencies particularly the Euro, Brazilian Real, and the Japanese Yen. ”

Higher currency headwind than initially expected

“we now expect an $0.80 per share headwind from currency for the full year 2015 based on last weeks rate assumptions. Increased from the $0.60 per share headwind previously communicated in our fourth quarter 2014 earnings call. We are working aggressively to mitigate the stronger currency headwinds by accelerating cost savings from the operational redesign and other corporate in business actions.”

2015 is a transformational year for Dupont

“2015 is a pivotal year for DuPont to the upcoming separation of Chemours as the most significant and visible step in our ongoing transformation to a higher growth, higher value company.

The vision of our strategy is reflected in 19% compound annual growth rate of adjusted operating earnings from 2008 to 2014. From our post-spin business, that comprised the next generation DuPont. This new portfolio will continue to build momentum as we leverage our leading positions in three strategic focused areas where we have robust opportunities and strong well established competitive advantages where our science and engineering capabilities can deliver the greatest value for our shareholders.”

Dupont 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

A science company

“In 2015 DuPont will continue its transformation as a dynamic science company driven by innovation, executions and global reach.

stronger dollar will be a substantial headwind

“the U.S. dollar continues to strengthen against most currencies and will be a substantial headwind for us in 2015

Agriculture fundamentals are challenging

“In agriculture the fundamentals are challenging. Farmer net income has declined and we anticipate lower corn planted area as farmers favor soybeans over corn.

Hard to say how much corn acres will be down

“Yes so as we look at ‘15 clearly we’re expecting corn acres that the soybean corn price still favors soybean, so we’re expecting corn acres to be down, but it’s very difficult to size and those final decisions are being made by growers closer and closer to the season. So it’s hard to size the shift, but we do expect the decline in corn acres and a slight increase in soybeans

No impact to solar from lower energy prices

“We haven’t heard that yet and I think first of all solar is still pretty small, so having growth rates of 20% still can occur. They’re also being put in the places where it is from a grid parity standpoint in places like China where they are just a — and they have come out to say that by 2030 they’re going to be capping CO2 emissions and some of that start to come from an increase in their renewable energy sources, and solar is a big part of that as they’re the largest producer of solar modules. So we don’t see that, a short-term blip in oil is taking the PV industry office long-term kind of projection.