HCA 2Q17 Earnings Call Notes

R. Milton Johnson – HCA Healthcare, Inc.

Results slightly off from internal plan

“Although, we are on plan for the second quarter, it’s slightly off from our internal plan for adjusted EBITDA at midyear. Our results in the first half have been challenged by, one, softer managed and exchange volumes, and, two, our London market results have been negatively impacted by currency conversion rates and lower admissions from Middle East embassies and private insurance. ”

Seeing more opportunities for small tuck in acquisitions

“We’re seeing more opportunities in the marketplace now. I think as many health systems, again, went through the positive environment from 2015 and early 2016, and now we’re seeing some volume pressures. We’re looking, I think, to be part of the bigger system. And so we are encouraged by that. We think we have a lot to offer as far as opportunity for many of these systems. So it is opportunistic, but it is also consistent with our strategy. So, we’re pleased to see the pipeline more robust than it has been in recent years”

Bill Rutherford

Bad debts running a bit elevated

“So we know our bad debts are reading in terms of year-over-year a little elevated. And obviously, we talked about before, we think if you look at our total uncompensated care, which includes our bad debts, charity and uninsured, in any given quarter you are subject to some classification trends among these categories, but generally speaking, over time, our uncompensated care trends track with our uninsured volume trends. And as we mentioned, we’re seeing roughly a 4% to 5% growth in uninsured admissions, 4.9% in the second quarter.”

Samuel Hazen

Obstetrics volume down 2.5-3%

” I think one thing that’s really relevant here is obstetrics on the commercial side is roughly, I don’t know, 20% of overall commercial demand, give or take a few points. And with commercial obstetrics volume being down 2.5% to 3%, it weighs out to be 0.6%, so it explains half of our decline”

HCA Holdings 4Q16 Earnings Call Notes

HCA Holdings (HCA) R. Milton Johnson On Q4 2016 Results

Acquisition pipeline a little more robust than it has been

“I think with respect to opportunities for acquisitions in this environment, we do have a pipeline today, I’ll comment. I will comment that I think, I will also say as usual, its very difficult to know how some of the opportunities and discussions we’re having will actually turn out, but I will say that the pipeline today is little more robust than it has been in recent years and the transactions feel like they could be more realizeable and that’s just my kind of feel for the market right now.”

Beds and occupancy numbers

“It is an annual number. That’s on average, I mean, we have about 38,000 impatient beds that are operational, so the 400 or so that Milton counted, it’s a 1% increase in capacity and then our ER beds we have about 5,000 ER beds so if we’re adding 200 – 150 to 200 then next we’d get to the 4%. Its important to understand that our impatient bed occupancy for the company is at record highs, we’re operating over 70% in patient occupancy utilization on our operating beds. Our emergency room room that utilization is running almost 90% utilization.”

A lot of unknowns in ACA reform but we’re probably not going backwards to old uninsured levels

“I do believe when I think the management team here believe that there will be — if there is a retail there will be a replacement. What that replacement will look like and how many lives it’ll cover, it’s been a — we can’t, we don’t know. But I’ll say I don’t see it’s going back up to the 2024 sort of uninsured volume lies and percentage is population uninsured that we had in 2014”

Exchange business is important to us but only a little extra volume

” The exchange business is important to us, but it yet it only as about 2.5% of extra little volume. So we watched the market place very, very closely and to be able react to it when we see change coming. And this is one of the situations we are going to continue to do that. This next year we will be watching the market very closely as we get more clarity around how we think health policy changes if any in the next two, three years it will impact ACA”

Samuel Hazen

Significant movement around payers entering the provider space

“Well, there’s has been significant movement across our markets where payers entering the provider space. Optum and United have made a couple of strategic acquisitions, but they’re sprinkled from one market to the other and they don’t really have what I call it concentrated influence on any one particular market. Obviously, we see opportunities for us to work with the payers as they try to build out providers assistance because what we’re doing as an organization and we’re having discussions with the payers around using our network and our footprint in these areas to accommodate their objectives and we think there’s a lot of opportunities there for HCA and other payers to accomplish that.”

Opportunities for expense management

“From the supply and other expense standpoint no significant inflationary pressures that we see at this particular point in those categories that will create any unusual risk in our expense structure for 2016. So we feel pretty good about where the company is. From that standpoint we have a host of initiatives underneath our expense structure that are driving toward efficiencies and we continue to evolve those, they center around better labor management approaches with one HR platform, our performance improvement change which we’ve talked about in the past continue to find opportunity to enhance processes in our facilities and efficiencies and in our clinical agenda it’s continuing to identify opportunities to improve supply cost utilization, blood utilization, better patient length of stay and those kind of thing. So the combination of those are still a positive opportunity for HCA and one in which we believe we can execute on and mitigate some of these pressures.”

HCA 3Q16 Earnings Call Notes

HCA Holdings (HCA) Q3 2016 Results
Milton Johnson

Not seeing any change in wage inflation trends

“Well, let me just mention – this is Milton. I mean, we’re not seeing really any substantial change in our wage rate and wage inflation. I think as we’ve been saying over really the last few quarters, we have pockets of wage pressure from time to time. We’re always monitoring the marketplace. We make those adjustments. It’s in our run rate, and nothing in particular this quarter, Sam, that I see in the wage inflation that’s any different from recent trends.”

William B. Rutherford

Sam Hazen

Volume growth was not as high as planned because inpatient demand down and increased competition

“All in all, we had another good quarter of volume growth. However, the overall growth rate was not as high as we had planned. It is important to note that the third quarter last year was also a relatively strong volume quarter and presented a difficult comparison, with inpatient admits up 2.9% and adjusted admissions up 3.6%. We believe this deceleration in the growth rate was primarily attributable to the following two reasons. First, overall demand growth in inpatient services has moderated.”…”The second reason can be explained by growing competition in certain areas of our business. In particular, a growing supply of freestanding emergency rooms by independent companies and health systems in various Texas and Colorado markets has had impact on emergency room visits and some downstream admissions.”

Looking to build networks of emergency room, urgent care and hospitals to complement each other

“In some respects, we try to build an urgent care strategy around our emergency room strategy which is built around our hospital strategy. So it’s almost in concentric circles of facilities that create a fairly broad HCA network in these large markets, allowing our patients to enter the system in different forms or different fashions and also creating relatively favorable price points, if you will, for our payers where they can direct as they feel they need to direct but keep them in the HCA system. So it’s hard to give you a specific because we have to look at the individual markets, but those are some of the general approaches that we take.”

Cost per FTE actually at lowest y/y growth rate

“And I would add, Milton, that our cost per FTE, when we look at our SWB per FTE, which includes benefits, contract labor and wages as a whole was actually at its lowest point on a year-over-year growth rate in the third quarter. So we have seen moderation in contract labor. We have, as Milton said, made these adjustments ongoing to different markets in different situations as they’ve surfaced, and we’re at a pretty good point we believe with wages.”

Victor Campbell

Election will probably have some effect on Medicaid expansion

“Gary, I think most everyone would agree, if the Republicans gain control of the White House and what have you, there will be pressures and probably less opportunities for states to expand Medicaid. If the Democrats are in place there, I do believe that there will be consideration, hopefully. Maybe see some additional incentives, maybe a little more flexibility in bringing some states to bear. And you would hope that some of the states that haven’t expanded Medicaid will look at this as, ACA is not going away. There’s money there that can help our states and get people insured. So I’m not about to say every state goes, but I think you’ll start to see some – hopefully, you’ll start to see some movement.”

HCA 2Q16 Earnings Call Notes

HCA Holdings’ (HCA) CEO Milton Johnson on Q2 2016 Results

Health exchange admissions were a factor last year

“Sheryl, one thing I might just add and that is as we all know the health exchange admissions really grew last year, they get small piece of the company, but if you look at what they added to admission growth last year the second quarter verses this year, while we’re still so that’s also one factor to keep in mind when you start talking about last year.”

Clinical data warehouse is an area of opportunity in controlling costs

“Let me add one comment to that. I think it’s about other area of opportunity for HCA. Our clinical data warehouse, the number of our quality initiatives have sort of supply cost utilization, drug utilization, bad practice identification and so forth attached to it. As we engage our positions more than we’ve done in the past, they’re understanding of how it helps them, how it helps their facilities, how it helps their patients is another opportunity that I think we’re in the early stages of execution on our supply costs”

There’s a lot we can do with this data

” If you think about what’s happened over the last several years with electronic health records and investments that HCA and other providers have made in moving now to a digital medical record, it’s not like stealth one; now we have all this clinical information in a digital format, and what do we do with it? And there’s a lot we can do with it.”

We’re investing in data scientists to help us take advantage of this

“some things that we’re doing around acceptance care and really dropping mortality rates in our hospitals from sepsis and saving lives. It’s really happening; it’s happening today in our facilities. And so there’s examples like that. So it’s, again, we’re investing in not only in terms of the technical side of that but the human resource side of that with hiring very talented data scientists to help us take advantage of this. And then you think you move on from the structured data that we have to the unstructured data, and that’s a language processing and, where we can move the needle there is, again, something for the future that I’m very excited about.”

Samuel Hazen

Growth in visits through ER slowed

” growth in emergency rooms business in our hospital base units slowed as compared to the past few years. As a result downstream growth in inpatient admissions through the ER was not as strong as compared to recent quarters. We believe most of the softness can be explained by three factors. First, a slowing in demand growth to more normal rates, second new competition in several markets and third in a couple of our Florida we have experienced the change as how certain Medicare advantage payer classified the patients between inpatient admissions and observation status.”

Capacity constraints did not play a broad based role in softening

“I don’t think though in the second quarter, capacity constraints played a broad based role in the softening. There are pockets where we know that difficult day in and day out to manage the capacity challenge and that could in fact squeeze out few patients here or there but in total I don’t think that was a material impact in the quarter.”

William Rutherford

By recent standards wee see growth slowing

“by recent growth standards, we see it slowing. We went through over past 5 or 6 quarters that was exceptional and we saw demands in our markets growing and we suspect although as you know our market share data lacked about 6 months but we suspect we were going to see some flow in demand in many of our markets and that’s why we are seeing it show up in our numbers. That being said we still have a great outlook and a very optimistic outlook for the long term in our markets.”

HCA 1Q16 Earnings Call Notes

HCA Holdings (HCA) R. Milton Johnson on Q1 2016 Results

1.6% same facility admission growth

“We continue to experience solid growth in inpatient and outpatient volumes as well as surgical and emergency room visits. We believe these results speak the quality of our markets, and the execution of our strategic agenda. Same facility admissions increased 1.6% while same facility equivalent admissions increased 3.1%. Our growth drivers include capital improvements, programmatic developments within our service lines, end market access point development and strategic acquisitions.”

William B. Rutherford – Chief Financial Officer & Executive Vice President

Exchange admissions were 2.6% of total admissions

“Let me touch briefly on health reform. Health reform activity continued to grow in the quarter. In the first quarter, we saw approximately 12,500 same facility exchange admissions as compared to the 9,860 we saw in the first quarter of last year, or about a 27% increase. You may recall, we saw about 11,200 same facility exchange admissions in the fourth quarter of 2015, or 11% increase sequentially quarter-to-quarter. We believe this is largely due to the minimum enrollment (13:27)

For perspective, exchange admissions represent about 2.6% of total admissions for the company. We saw approximately 50,000 same facility exchange ER visits in the first quarter compared to the approximate 37,000 visits in the first quarter of 2015 and 38,000 visits in the fourth quarter of 2015. Overall, our exchange and reform activity is in line with our expectations.”

Samuel N. Hazen – Chief Operating Officer

Outpatient surgeries have grown

” our outpatient surgeries have grown very consistently over the same 12 quarters, 13 quarters, with a little bit of acceleration in this first quarter. And I can’t really point to why it accelerated in the first quarter as compared to the trend. But our efforts are broad-based. ”

ER and urgent care are filling a gap left by not enough primary care physicians

“I don’t know that the ER as a venue, if you will, is changing in any significant way. I do believe, though, that urgent care and emergency rooms over the past three years to five years, and I think this will be the case going forward, is still a substitute for the shortages of primary care physicians that exist in a lot of markets. And so you see urgent care, freestanding emergency rooms, and even hospital-based emergency rooms, providing the solution that patients are looking for when they can’t get into a physician clinic because of physician shortages, or because of payer dynamics.”

HCA 4Q15 Earnings Call Notes

HCA Holdings (HCA) R. Milton Johnson on Q4 2015 Results

big acquisitions are hard to find because most come from the non-profit sector

“Of course, we do a lot of in-market acquisitions. But as far as the big ones you’re speaking to, things like say Kansas City that happened in 2003, those opportunities are really hard to find. They’re going to come out of the not-for-profit sector. And typically, we may engage in conversation, but many times, these organizations decide ultimately not to sell.”

Samuel N. Hazen – Chief Operating Officer

Strong markets yield 2% growth just from population

“when you think about HCA’s growth strategy, and we’ve spoken to this numerous times, we think, first and foremost, we have incredible markets where we do business. And those markets are yielding, on a composite basis, across the company approximately 2% increase in demand growth just coming from population growth, as well as aging baby boomers, increasing employment and so forth.”

Don’t generate as many downstream referrals from urgent care as ER

“we do generate downstream referrals from our urgent care centers to both our physicians who are connected to HCA system as well as our emergency room and then on into the inpatient activity. The volume of downstream referrals is not nearly as large as our freestanding emergency room, which produce a larger downstream flow to our hospitals. But the components that we’re trying to build here between physician clinics, urgent care centers, freestanding emergency room and then hospital-based emergency room is all part of having a system-wide approach to creating convenience, ease of access, user-friendly solutions for our patients, and then building out the geographical footprint of the HCA network”

William B. Rutherford – Chief Financial Officer & Executive Vice President

We are seeing some exchange volume move to uninsured

“Well, first, put in perspective that our exchange volume is roughly 2% of the total company volume. So the exchange activity by itself is relatively small going forward on that. So, as we look at kind of the activity within the exchanges, we did mention in the third quarter we were seeing some previous exchange volume move to uninsured. It was 400 admissions for HCA in the third quarter. It was roughly the same in the fourth. That’s on 460,000 admissions for the company.”

Miscellaneous Earnings Call Notes 12.11.15

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

Steve Filton

Behavioral health business is more recession resistant

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

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

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


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

Tyson Tuttle

Low power for IoT requires innovation

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

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

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


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

Have seen increased traffic so far in Q3

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


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

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

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


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

Mark Chauvin

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

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

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

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

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

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


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

Tarek Robbiati — CFO

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

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


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

Mike Cavanagh–CFO

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

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


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

Our labor markets are tight

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

Upper income US remained strong

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

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


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

DIY auto spending has benefitted from lower gas prices

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


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

Hilton Romanski

Customers are looking for a hybrid cloud

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


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

Couldn’t be happier with how 2015 is shaping up

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


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

Christian Garcia — Interim CFO

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

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

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

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

Argentina had elections that could lead to positive economic reforms

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


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

Bill Rutherford, Chief Financial Officer

Seeing higher turnover of nurses as demand for nurses strong

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

See continued strong economies in the majority of our markets

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


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

Energy reserves at 3% of total energy related loans

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


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

CFO, Kathy Rogers

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

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

Not seeing any deterioration of credit outside of energy

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

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

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


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

Start of Q4 has been mixed

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


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

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

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

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


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

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

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

Gregg Kvochak

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


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

Issuance is down 30% year to date

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


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

Kevin Moriarty, CFO

Our product is service

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

We feel pretty good about the environment

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


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

We see dividend as highest priority

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

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

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

HCA 3Q15 Earnings Call Notes

Higher contract labor costs to fill vacancies and serve increased volume

“we carried more labor cost in the quarter compared to our plan. There are primarily two items that impacted our labor cost. We saw an increase in the use of contract labor during the quarter. Our contract labor expense was up $55 million or 36% as compared to the third quarter of 2014. We have seen growth throughout the year but it did accelerate during this quarter. This increased use of contract labor is used to fill in for staff vacancies that occur because of higher turnover rates and needs we have to serve the increased volume.”

Increases in Pharmaceutical costs also impacted results

“The second area that impacted our results in the quarter is the continued increases in pharmaceutical costs. Our pharmacy cost in the third quarter of 2015 were up in total just under 13%. When we adjust for borrowing growth, we estimate the company had about $15 million higher pharmacy cost due to price increases for certain classes drugs. We have seen multiple price increases for a small number of drugs which primarily relate to single manufactured pharmaceuticals.”

Also saw increase in uninsured admissions

“And the third area is we saw an increase in our uninsured borrowings in the quarter. Recall, we saw this developing in the second quarter. In Q3 of this year, our uninsured admissions were up 13.6% as compared to Q3 of 2014 and uninsured adjusted admissions were up 8.8% over the prior yea’

Saw insureds convert to self paid due to non-payment of premiums

“We also saw an increase in the number of people previously registered as insured that were converted to self-pay in the quarter. For instance, we saw 480 patients who were previously registered as health exchange convert over to self-pay in the quarter. We believe this is likely due to non-payment of premiums”

Volume growth was solid in 3Q

“As mentioned earlier, volume growth was solid in the third quarter. We believe this performance continues to reflect growing demand for healthcare services in HCA markets and further gains in market share for the company. ”

Improving economy is having some effects on labor equation

“we do have an improving economy as we have indicated across most of HCA’s markets and we think that is having some effect on our overall labor equation. It’s pocketed in some markets and more significant in others, but nonetheless it is having some effects we believe and we have been indicating that as a potential issue. ”

Significant supply competition in some service lines

“The other issue is, within certain service lines we have seen significant competition in new supply. And that’s especially relevant in the emergency room where we have seen difficulties in recruiting emergency room nurses and having to use contract labor to service our emergency room”

Texas economy so strong even with oil

“Clearly the oil economy have had some impact on Houston in particular and then some sprinkled impact across other Texas markets. However, the Texas economy is so strong that there still reported job growth even in Houston and obviously in the other markets and we are seeing that in the demand that we are studying within the Texas markets.”

Miscellaneous Notes Week of 9.17

Stronger than expected turnout at Credit Suisse Basic Materials conference

John McNulty – Credit Suisse Analyst (From Dow Presentation Transcript)

“Okay. If you all take your seats we’ll get on with the presentation for today. Yesterday was a big day for us actually for what it’s worth, those keeping track, I mean, the rooms are certainly more full than we’ve seen them actually. We are – attendance was up about 45% for our first day, yesterday. So apologize if there are logistical issues, because it’s a bigger crowd than even we had expected, but it’s a nice problem to have.” –Credit Suisse (Investment Bank)

Sirius’ CEO was bullish on car sales

Jim Meyer – CEO Sirius XM

“I spend a lot of time with the senior executives in the automotive industry and all of them along with me are pretty confident that what the next six or 12 months looks like in auto sales. And we see them continuing strong.” –Sirius XM (Satellite Radio)

40% of millenials do not have a TV and 20% say they are considering cutting it

Lowell McAdam – Chairman and Chief Executive Officer

“40% of millennials do not and have never had a TV in their home and another 20% have said they have got it, but they don’t use it that much and they are considering cutting it.” –Verizon (Telecom)

Verizon doesn’t think Apple’s installment plan is a threat to them

Lowell McAdam – Chairman and Chief Executive Officer

“They love to have people stay on iPhones forever. And if I look at it from our perspective, from a cash flow perspective, it is – it’s a relatively positive, marginally positive I guess. So, it’s not a threat. It’s similar. I think about it the way I think about bring-your-own-device, which we have been doing for quite a while. Apple today is a very small piece of our distribution. So, it’s not going to shift the way we do business in anyway. And right now, it doesn’t look like a threat to us.” –Verizon (Telecom)

Fifth Third echoed that credit remains benign

Tayfun Tuzun – Chief Financial Officer

“We are operating at very low levels of charge-offs in historical terms and ongoing quarterly improvement every year in charge-offs will be difficult to achieve, but nevertheless credit should generally remained benign.” –Fifth Third (Bank)

You have to optimize your business to perform well over the course of a whole cycle

“If there is one lesson that we as managers have learned during the crisis it’s the importance of relentless focus on through the cycle performance. Business models created for the present part of the business cycle that are not grounded in long-term fundamental value creation will outperform for a period of time, but will not increase the value for shareholders who have longer time horizons, as they are now sustainable.” –Fifth Third (Bank)

Sustainability is the key focus

“I wish I could tell you that it is possible to tailor our strategy in a very timely manner to every turn of the business cycle, but it is not. Therefore sustainability has to be the key focus. Our top goal is to perform well throughout the full cycle.” –Fifth Third (Bank)

Necessity has been the mother of invention in driving more efficiency in the oil industry

Bob Gwin – Executive Vice President-Finance and Chief Financial Officer

“necessity being the mother of invention that, I think, is largely true across industry. Very proud of our folks driving efficiencies, working very hard to drive down costs, increase in our oil production everything operationally has gotten better. Now that obviously for a macro perspective, continues to put pressure on commodity prices as we see the resiliency of U.S. production. But our view is that we’re going to see that – we’re starting to see it roll over a bit and that – in this era of prices with this double dip and without a real strong outlook on the underlying commodity, we see that the need to continue to focus on cost and the need to continue to focus on driving returns” –Anadarko (E&P)

The focus is on returns, not growth

“The focus right now is not on growth, it’s on returns. We don’t look at growth as being a deliverable that’s going to be valued by the market or by our shareholders, rather growth will be – the growth rate will come out of the capital allocation work that we do” –Anadarko (E&P)

HCA thinks of itself as the preferred healthcare provider in the markets they operate

Bill Rutherford – Chief Financial Officer

“we want to be the preferred healthcare provider in the markets that we operate and we create what we think is a high value integrated delivery system. It’s anchored by our hospital network, supported by outpatient centers, ambulatory surgery centers, we have 120 surgery centers, outpatient imaging, physician clinics, we employ close to 4,000 physicians in our marketplace, freestanding EDs and urgent cares. So, we deploy access points in the marketplace. So, there are multiple ways patients can access the HCA network in multiple service dynamics. And then we develop deep service line capability generally organized around patient conditions in cardiology, in women’s services things or orthopedics, oncology, neurosciences, emergency room and we developed deep service line capability.” –HCA (Hospitals)

We may get more medicaid expansion post 2016 when it’s not so politically charged

“I don’t see much movement until post-2016 election, once we have someone else as President and the office maybe Medicaid expansion becomes something that’s more state-driven rather than considered Obama Care.” –HCA (Hospitals)

An exchange enrollee is worth much more than medicaid

“the one thing you do have to remember as Bill pointed out, our significant benefits have come through the insurance exchange. I mean if you just look at the pricing differential on what you get on an exchange enrollee versus a Medicaid enrollee it’s three times on an exchange. So remember if we get one exchange to three Medicaid, we benefit substantially more.” –HCA (Hospitals)

Union Pacific is optimistic that ex-energy volumes look not too bad

Rob Knight – CFO

“And as we look at the macro, it actually sort of — I think it speaks to what we’re seeing at the macro level, clearly the energy related activities are a drag on our volumes right now. But the rest of our business volumes are ever so slightly and we’re very cautious, we’re not getting exuberant here, but are on the positive side of the volume trends. We’re watching very carefully, things like our intermodal business. Our intermodal is roughly half international, half domestic. If you look at our third quarter numbers, our international is down about 7%, our domestics flattish, and what we’re seeing in our international space and our intermodal world is a cautiousness, as people are cautious not to build inventories too high.”

“We think the peak season that we would normally experience is a couple of weeks still in front of us, so we would hope to see some improvement in that space, if that holds. While we don’t think it’s going to be a rocket ship kind of peak. We do expect it’s going to build, but there is clearly some cautiousness in the space with people not wanting to overbuild inventories and I guess [indiscernible] away we would feel about the macro economy cautious, steady as she goes, things are positive when you separate all the energy challenges we have.” –Union Pacific (Railroad)

Twitter is full steam ahead under Jack Dorsey

Anthony Noto – Chief Financial Officer

” we’re focused on what we control which is executing on the business, we haven’t missed a step since the transition to Jack, we’ve been full steam ahead.” –Twitter (Social Media)

HCA 2Q15 Earnings Call Notes

Health reform activity strong, about 40% of admissions were uninsured prior to ACA

“So let me touch briefly on healthcare reform. Health reform activity was strong for the quarter. In the second quarter, we saw approximately 11,600 same-facility exchange admissions as compared to the 5,600 we saw in the second quarter of last year. You recall we saw about 9,800 exchange admissions in the first quarter for an 18% increase quarter-to-quarter. And we believe this is largely due to the continuing new enrollment.

We saw approximately 44,700 same-facility exchange ER visits in the second quarter compared to 19,400 in the second quarter of 2014 and 36,900 in the first quarter of 2015. We have history on about 45% of our second quarter HIX volume. And based on our look back at previous coverage, we still estimate about 40% of these admissions were uninsured prior to health reform.”

We are seeing some acceleration in drug costs which are pressuring margins

“And then the third point is we are seeing some acceleration in drug costs, which have been in the press, it’s been in the political arena and so forth. We’re feeling that in our pharmaceutical cost trends somewhat and that puts some pressure on our margins in the second quarter.”

Medicaid expansion trends are beginning to normalize

“the slowing of uninsured declines is, we believe, largely attributable to the fact we didn’t really have any new states other than Indiana expand Medicaid. So these year-over-year trends are beginning to normalize and sunset on us. And by the way, it’s pretty much in line with our expectations and what we’re seeing in other areas of our volume.”

Do think there will be continued tailwinds from ACA

“I think next year’s performance will largely be attributable to the enrollment that we might see. We do think there’s some kind of key points of the law that may incentivize people to find enrollment. And so I do think there will continue to be some tailwinds in reform, at least for next year. Not so sure longer term we’ll have the visibility into that”

There are still penalties that will be enforced on individuals and employers

“I think you’ll see more material – that the penalty tax will materially increase next year for those who choose not to seek health insurance coverage. And that may drive more enrollment. And then you’re going to see employers with as few as 50 employees having to provide health insurance to their employees to avoid a penalty at the employer level. So there’s still some implementation pieces of reform that we’ve yet to see and so I want to reinforce that out into the market and not react too much to this second quarter because of the comp situation that we had last year.”

Inpatient surgeries are higher margin?

“I will say a number of our service line initiatives that are intended to drive more acuity, more complexity and round out the offerings within our market, will be centered on certain service lines that have a lot of inpatient surgeries. For example, trauma, cardiovascular, oncology, just to name a few, have a very significant inpatient surgical component which is a very high-margin service line for the company and a very significant service line with respect to rounding out the depth of our service line offerings.”

Priorities of Capex

“inpatient capacity, outpatient capacity, technology that’s needed for our nurses and physicians and then new facilities are really where we’re spending our money, which makes sense. That’s what we are when it comes to an organic growth-oriented company. So that’s where the capital expenditures are going.”

Over the last 9 years, increased EBITDA by $3B on roughly the same assets

“when you think about the company going private in 2006, we had $4.5 billion roughly of EBITDA and, again, basically the same assets today, nine years later. And if we hit our guidance near the top end of the range of $7.85 billion, you can see the solid growth in earnings through that time.”

We think the economy is a stronger driver of performance than ACA

“what we see and what we understand is a very significant improvement in overall macroeconomic factors within each of our markets. It’s hard for me to process that the exchange running, around 2% of our total business, versus the commercial, running around 28% to 30% of our total, that the exchange is driving the overall performance. It’s not big enough yet.”

We’ll be fine if insurers consolidate, but how does this affect smaller providers

“In most of our markets either we’re number one or number two in share in most of our markets, puts us in a good position to be relevant to all the payers going forward…my concern more over the longer term is how does this consolidation or possible consolidation affect smaller providers or systems in markets that may only operate in one or two markets.’

It could be a catalyst to allow for more consolidation among providers

“the question I would have is could this consolidation be a catalyst for further provider consolidation. And that’s yet to be known. We’ll see how that plays out. But it could be a catalyst to give us more opportunity for consolidation in the provider space.”