Bed Bath and Beyond FY 2Q14 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

Core principles

“At the same time beneath all this, are our original core principles, take care of the customer and never be satisfied that you’re doing it well enough, because can always do it better.

Issuing debt, buying back stock

“I would like to take this opportunity to express how pleased we are to have completed initial offering of $1.5 billion of senior unsecured notes implemented at $250 million revolving credit agreement, received approval from our Board of Directors for an additional $2 billion share repurchase program, and entered into a $1.1 billion accelerated share repurchase agreement.

“Turning to the balance sheet, during the second-quarter we received $1.5 billion from the notes offering of which $1.1 billion was subsequently used to fund our accelerated share repurchase program, which commenced during the second-quarter, and is expected to be completed before the end of the calendar year.“

Comps +3.4%

“Second-quarter comparable sales increased by approximately 3.4% compared with an increase of 3.7% last year. This comparable sales increase is attributed to increases in both the average transaction amount and the number of transactions.“

Gross margins fell by 100bps due to promotions and shipping costs

“This decrease in the gross profit margin as a percentage of net sales in order of magnitude was primarily attributed to first, an increase in coupon expense resulting from an increase in redemptions and a slight increase in the average coupon amount, and second, an increase in net direct-to-customer shipping expense which was impacted by change in bedbathandbeyond.com’s free shipping threshold.

Growing its institutional business

“ we are growing our role in a complementary and highly fragmented institutional business with the potential to leverage our existing vendor base to provide products and services to institutional customers in hospitality, travel and other businesses.

They don’t do Q&A on the conference call, but take it off line

“As always we look forward to answering your questions and appreciate the opportunity to speak with you this evening. Ken, Franklin and I will be in our offices and we will ensure that all the calls we receive will be returned tonight. If you have questions, we encourage you to call and we will get back to you. As always, we appreciate your interest in Bed Bath & Beyond.

Caterpillar at Citi Industrials Conference 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

Railroads looking to add more locomotives

“. I think the railroads find themselves in a position, where a combination of much better business environment for them, and a bit of congestion here and there on some of their systems. I think they find themselves in a need for a bit more power, and so I think they may end up buying more or at least want more than we thought they were going to need.”

Oil and gas has become a more horsepower intensive business

“Oil and gas is one of those kind of businesses that I think over time has just become more horsepower intensive. So 20 years ago, whoever heard of horizontal drilling, or injecting gas into a well, to increase oil flow or fracking, it has just become a more horsepower intensive business to get the same amount of output and that has been good for us, and that will probably continue to be good

Not going to grow in a straight line

“Now I wouldn’t — you talked about a 6% CAGR, the interesting thing about businesses like this is they never go in a straight line. If you are going to get a 6% CAGR, it might be a couple of years of decline and a couple of years of big increase. They do tend to be cyclical businesses.

“there are so many factors that could play into it, but one thing is — you can probably count on, is there won’t be a straight line.

Currency movement shouldn’t have much effect on earnings

“I can’t give you — I guess the best rule of thumb that I could give you is it is probably not going to have too much impact. We are not an entirely U.S. based company, not even close. More than half our employment is outside the U.S. We have significant manufacturing operations spread around the world. So it always depends upon which currencies move in which directions and where we have factories, but by and large, I think over the last 10 years, you have heard us talk less and less and less about currency impact as we become more — I don’t know what the right word is, more diverse in our manufacturing operations around the world. So I doubt that you would hear us talk much about it.

Thoughts on autonomous mining

“I think not just autonomy, but sensors on machines, telematics, remote controlled machines, fully autonomous machines, all of that is very topical, and probably certainly away for the — some of it near term, some of it longer term future. So it’s a big technology focus for us, and a lot of the customers are interested in it. I mean, it can be everything from as simple as predictive maintenance on a machine, tracking a machine, shutting a machine off, knowing where a machine is, all the way up through control of the guidance and ultimately automation. So it is a big deal.

Miners have continued to produce but not been maintaining their machines, that’s going to change

“I think we have been in a situation over the past couple of years, it has not been very favorable to aftermarket, even though mine production has continued to be, actually in most cases, pretty good.
So I think, having seen a little bit of an increase in the first quarter and then another small increase in the second quarter, that could be a signal that that situation is starting to turn around“

Finance business is integral to our business model

“e do have big captive finance company, CAT Financial, that is integral to the business model. It’s a part of kind of being a full solution for the customer. It adds so many positive things to the business, and I think key to be successful in that business is having competitive finance.“

The bias for mining has got to be up

“let’s take mining for example; it is so beat up right now, it is so — I mean, our production in sales of equipment is well below the replacement level. So barring a nasty recession or a recession, its hard to imagine that kind of an economic environment that we are in right now, there is a lot of scope for it to go much lower. So I feel actually pretty good about that. When it’s bad enough, kind of the only way up, the only direction is up. So I wouldn’t get predictive of that. I mean, we really haven’t seen much yet that would indicate, that that’s going to turn around any time soon. But I would say, if you are looking over the next few years, the bias, definitely would have to be up.

Construction is a mixed bag

“Construction is a mixed bag. Generally speaking, I can’t think of anywhere in the world where construction is actually good. U.S. is below the prior peak. Yes it’s better than where it was last year, but that doesn’t mean that its good. “

CarMax FY 2Q15 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

Subprime auto lending has cooled off a little

“The Tier 3, as I said, it’s a combination of factors. We’re clearly seeing them continue to provide, I’ll say less attractive offers than they were a year ago, less compelling offers for the customer so therefore we’re seeing less conversion in that space. But as I mentioned, it’s a byproduct of their behavior plus what they’re seeing coming through the door, and we’ve seen some pickup in the behavior of our other partner lenders.”

Auto lenders changed their behavior in Q3

“we saw it happening at the very end of Q3. There was a notable shift in behavior. I think—you know, we have no reason to think behavior is changing from where it is today. We want those guys to run a profitable business that’s going to be sustainable and support our customers for the long run. They are going to test and make changes as appropriate for their portfolio, and we wish them all the best of luck in doing it.”

90% of customers have been getting financing

“90% of customers are getting approval from somebody in our kind of hemisphere of lending, and that number has been—you know, 90 has kind of been as high as it’s ever been for us, but it’s been stable there for a couple of years now.”

Average retail price of a car is 30k

“The only time we’ve ever seen significant drop-off in our average retail was during the recession, when we saw our average retail drop by over $2,000. Other than that, due to inflation and due to just continued increased costs of new cars, a new car now is over $30,000, it’s just not something that I think will go backwards.’

Ascena Retail Group FY 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 challenging specialty retail environment

“During the quarter, we saw the challenging specialty retail environment continue with soft traffic across all our brands. While we achieved our planned profitability for the quarter, sales were below our expectation, down roughly 1% to last year, with store comps down 4%, offset partially by continued positive ecommerce comp of 13%.”

shifting away from traditional promotional strategies to more targeted marketing

“From a marketing perspective, we’ve begun to see customer response shifting away from traditional promotional strategies like storewide percent off and regular bounce back programs. We’re testing more targeted marketing to specific customer segments aimed at growing share walks in cross category engagements. Examples of this include focused programs in our best ad denim and bra categories.

We’ll also focus on broadening our marketing investments to better reach both prospective and inactive customers, including more direct mail that goes to these groups and a significant digital marketing initiative and expanded the office.”

We don’t think the environment has improved

“When we think about the first quarter, as we mentioned, there are still some headwinds with traffic that we don’t see the environment has having markedly improved…at the end of the day, we are really subject to the winds of the consumer and not that I want to pull a lot of phasing in this consumer right now.”

We are not looking to reduce our store count

“I think there is a sense in the market, that, oh, everybody is cutting back stores, they only need half as many stores in the fleet that they have. And if you are a hard good guy, like some of the office guy, office supply superstores, I get it, because half of their business is being done online and it’s a commodity product. I mean, I guess, that, they don’t need these big stores, they don’t need this many.

Our stores are small. The Justice stores are like 9,000 to 4,000 feet, maurices stores are 5,000, et cetera, et cetera. So we are not looking to reduce our stores or reduce the number of stores, because apparel — fashion apparel is still about that touch and feel, and as we had omni-channel capabilities, they become fulfillment center, they become a pick-up center and we think that across all of our brands that there is going to be an ongoing need for the store base that we have in all of our brands”

3M at Citi Industrials Conference 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 vision of advancement

“Two and half years ago, 3M announced its new vision for what we are going to do as a company and you see that in front of you; 3M technology advancing every company, 3M product enhancing every home, 3M innovation improving every life.

Pretty lofty goal for a company like 3M and if you look at those verbs in our vision, advancing, enhancing, improving; that really captures the way 3M thinks about itself and the impact it can have on the world.

We do that through our technologies, taking those technologies, finding innovation and developing products that solve solutions for our customers. We do that in a corporate setting where we’re doing that for other companies, where the products and the tools and the supplies that companies use to make their companies better in our homes, the way you communicate by a posted note or tape to hold something in place or something to clean your home.

Ways to enhance the experiences in our home as well as lives. 3M has a healthcare business and a safety business about improving our lives and improving the health and quality of our lives. All of those part of our vision.”

Strength in technology, manufacturing, global capability

“The first is our technology, and almost any company can say, they have technology, part of what 3M sees in our technology and why we call the strength, is two aspects; first, how we share technology across the company, …The second strength that we see delivering the financial results that 3M has consistently been able to do is our manufacturing technology; that our manufacturing presence and capability, we’re able to share that across 3M’s markets and our businesses…Third fundamental strength, our global capability. 3M has built over many decades a geographic capability in over 70 countries that allows our business model to effectively take a strategy and deploy that globally, quicker than we think most of our competitors can.”

Expecting to buy back 20% of the company through 2017

“We announced a year ago that we expect from 2013 to 2017, that 3M will be buying back between $17 billion and $22 billion of our stock. ”

Don’t see any signs that the US is slowing right now

“We thought we’d have economic growth and that it would be a tailwind in helping us grow and throughout 2014 we’ve been seeing that and we really don’t see any warning signs of the U.S. slowing down right now.”

We were optimistic about Brazil, but growth just hasn’t materialized

“what we saw in Brazil in the second quarter led us to the conclusion that 8 to 11 is not a reasonable expectation for us to grow for the total year and we guided down that we expect now mid-single digit growth for 3M in Latin America. Brazil is the single biggest change in how we are seeing things there.”

China is a lot slower than it used to be but there are pockets of growth

“China, we don’t see the economy as a strong propellant for growth for 3M in China. Certainly not as strong as it has been several years ago…That said, we do have some pockets within 3M that are growing nicely in China. Industries such as healthcare where 3M competes or products or industries where we’re involved in personal safety or the air people breathe, the water that people drink, those are areas where we are seeing growth in China.”

A 10% move in the Euro is a 17-18c impact on earnings

“a 10% move in the euro is roughly a $0.17 to $0.18 annualized impact to 3M’s earnings per share when we take into account our ability or lack of ability to raise price to offset it and we look at our total exposure, approximately seven to eight of those cents are offset by hedging.

So, it’s 3M’s strategy to hedge approximately 50% of our economic exposure to those currencies…These numbers I’m quoting are after any natural hedging we have.”

inflation in the US is equal or greater to rest of the world

“we do see price growth in the U.S., equal to or greater than what we’re seeing for the globe and — but I would call it generally widespread where we’re able to see our price growth.”

not going to shift supply based on one month

“It’s not in our nature to shift from one month to another our source of supply, but when we see a sustained trend after a number of quarters, we do have the capability of moving manufacturing to a more advantageous location.”

Not seeing huge changes in labor cost trends

“what we’re seeing in the labor market and to be honest, we’re really not seeing that significant of a change in our labor cost trends around the world.’

It’s an expensive market for M&A

“The market is one where there is a lot of interest. It’s also a market I characterize as feeling somewhat expensive right now…We’re seeing both strategic and financial buyers as our primary — it’s a pretty even balanced time.”

Our organic growth ties most closely to industrial production

“We still do see our organic growth tie correlated closely to industrial production. That’s our single biggest external metric that we correlate to.”

Autozone FY 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

Q4 was so-so

“This quarter’s sales results can be summed up in one word: Inconsistent. While May was quite strong and June was decent, July was not a strong. August improved, but results were still quite inconsistent from one week to the next week. We attribute much of this volatility to both unique weather and the belief that the low-end consumer continues to struggle. We’re happy to have run both positive retail and commercial comp sales for the quarter, but expected to stronger sales performance in Q4 than we delivered.”

failure related categories did well but maintenance below expectations

“While our failure related merchandise categories continued to perform well, our maintenance related categories were below our expectations. We attribute much of this category’s under performance to unseasonably mild weather in July and August.”

Traffic down ticket up

“in regards to traffic versus ticket in the DIY business, traffic was negative while ticket was up. The decline in traffic was primarily attributable to the slowdown of our maintenance product sales. After growing lower than our historical norms over the last year average, our average ticket growth accelerated in Q4.”

Winter comps are approaching

” many investors have asked us about our expectations for 2015 relative to the more difficult comparisons our industry will have in the upcoming winter months. For us, our second quarter and third quarter results are more difficult comparisons. However, we’re optimistic we can grow in all our upcoming quarters”

Some retailers can afford to take more inventory risk than others

” we’re fortunate to be operating in an industry where there’s very low obsolescence on inventory and there’s very low financing cost at the moment, so we think that this is a very good risk-reward strategy to be taking and it’s an important one for us to continue to gain market share with our customers.”

Choppiness and regional divergences driven by weather

“As far as what was driving the trajectory, you could very easily see it in the weather and the weather-related categories. So things like AC chemicals, AC and heating, cooling systems, all of those categories were weak for the entire quarter and particularly weak in July and in certain select weeks in August. So to us it was very much, when the weather cooperated, our sales were strong; when it didn’t, they didn’t.”

E-commerce isn’t quite as significant in auto parts as other industries

“I think on the e-commerce side, when we look at the industry broad-based, we think that there’s some opportunity for our online sales, although it isn’t a significant penetration like it is in other industries. We recognize that a lot of people are coming for information relative it to be a content of the product or repair information, et cetera. So we think that it’s an integrated approach overall and that’s how we’re approaching it.”

Company Notes Digest 9.19.14

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

The Macro Outlook

One more Fed meeting until the end of QE

“If incoming information broadly supports the Committee’s expectation of ongoing improvement in the labor market and inflation moving back over time toward its longer-run objective, the Committee will end this program at our next meeting.” ($FED)

The focus turns to when rates will rise:

“considerable time” is more an economic forecast than a calendar forecast

“I know “considerable time” sounds like it’s a calendar concept, but it is highly conditional and it’s linked to the Committee’s assessment of the economy.” ($FED)

Yellen’s language seems to suggest that she might be starting to think rates have been low for long enough

“Well, you know, we stayed low for a very long time. We have been at zero for a very long time and below the levels that some common policy rules would now be suggesting, given the level of unemployment and inflation. So the recovery has been very slow. We’ve also been doing unconventional policies, of course, buying assets. And in the general sense, I think we have been lower for longer than–if you complete that sentence–then many standard policy rules would suggest. So in a sense, that is a policy that we have had.” ($FED)

There are at least two governors applying pressure to the FOMC to normalize policy

“Presidents Plosser and Fisher have been quite clear in all of their speeches recently in stating that they think the time has come to begin normalizing policy. I think they perhaps have some concerns that if we don’t begin to do so soon that inflation will pick up above levels we–that they would consider it desirable, or that they have some financial stability concerns. But the committee adapted today’s statement by an overwhelming majority, and I don’t consider the level of dissent to be surprising or very abnormal.’ ($FED)

The FOMC is going to have to think about what’s the best pace to raise rates

“I don’t think by any means measured pace and the very predictable pace of 25 basis points per meeting explains why we had a financial crisis, but it may have diminished volatility and been a small contributing factor, and the Committee will have to think about how to do this.’ ($FED)

Meanwhile in the real economy…

FedEx almost gives an unqualified positive view of the world economy

“The global economy has improved, although it certainly remains a multi-speed world. The US is leading the way and emerging markets are picking up. We expect global growth of 2.6% in calendar 2014 and 3.1% for calendar 2015…With private sector demand accelerating and fiscal austerity winding down, our expectation for real GDP growth is to average around 3% for the remainder of this year and next.” ($FDX)

Seasonal hires will stick around this year

“We expect more than 50,000 seasonal positions to be added for the upcoming peak across the FedEx operating companies. This includes package handler, helpers, drivers and other support positions. Based upon our growth expectations and network expansion, the majority of those seasonal workers will have the opportunity to continue working for us after the holiday season.” ($FDX)

The housing acceleration just hasn’t materialized though

“This recovery has been a decidedly different experience as the slope of recovery has been shallow and the expected acceleration has not materialized.’ ($LEN)

Financials

There are three barriers keeping first time home buyers out of the market

“there are really three barriers to the first-time buyer coming back. First, it’s the down payment. Then it’s the very stiff underwriting and the bank overlays relative to accessing mortgage credit. And then finally the process itself has become fairly invasive, at least as far as people see the process and feel the process…So the process is almost designed to scare people away” ($LEN)

As rents rise, more people want to buy though

“We stay very close to the customer in the field, we see who is coming in, we see what their commentary is. Remember that the rental market has accelerated in terms of its monthly payment requirement, it’s cost of living and that’s really driving people to say, I want to buy a home, I’d like to fix my cost, I’d like to find access to the mortgage market.’ ($LEN)

And they find a way to make it happen

“over time the market adjust to those barriers. People start saving, more down payment. They find a way; they get help from family. They start focusing on credit statistics…People become ignited to get their credit credentials buffed and polished and ready for underwriting. They take a deep breath and they prepare themselves to go through the mortgage process.” ($LEN)

Large home builders have been able to take share from small ones

“I think there is a reality right now and that is the credit landscape is tight. It’s not just tight for the purchaser looking to gain access to the mortgage market but it’s also been very tight for smaller builders and for traditional land developers to get back in the market and to do the things that they do. So I think the larger, well-capitalized builders with access to the land market in a more comprehensive way have been able to pick up market share and that is something that seems like it’s continuing going forward.’ ($LEN)

Consumer

Retailers are starting to try to fight back against the promotional environment

“when things got tough last fall, we joined the pack and started promoting differently and more heavily than we had in recent years…With the benefit of hindsight, I wish we had not followed the pack and stuck with what works for us. Our beautiful unique and fashion right products are well priced, we do not need across-the-board discounts.” ($PIR)

Promotions don’t drive enough incremental sales to justify the lost margin

“We’ve tried this approach for over three quarters now and we’ve proved once more that for Pier 1 Imports coupons do not generate incremental merchandise margin dollars, neither do coupons do anything for our brand.’ ($PIR)

Brick and mortar plays an evolving role in omnichannel retailing

“our stores are becoming sales and customer experience centers.” ($PIR)

Multichannel customers are a retailers’ best customers

“what we know is that in terms of the spend our most profitable customers are our multichannel customers.” ($PIR)

Can industrial food companies buy and maintain an organic grass roots brand?

People trust Annie’s

“Consumers know and trust Annie’s purpose-driven culture and authentic brand.” ($GIS)

But then General Mills is going to rework its supply chain

“There are numerous margin expansion opportunities for — with Annie’s, everything, can from the sourcing and how ingredients are brought in to the logistics and how we reach customers, all of the other internal supply chain, HMM things.” ($GIS)

Technology

The end of an era at Oracle as Larry Ellison moves to the chairman role

“As you’ve seen in the last few minutes we announced that Larry was elected Executive Chairman and appointed Chief Technology Officer; Mark and I have been appointed CEO. Other than Mark and I reporting to the Board of Directors of which Larry will be Executive Chairman instead of to Larry directly no other reporting relationships will change at the company.’ ($ORCL)

The good news is that he’ll still be on the conference call

“you’re going to have to wait a little while longer before you get me off the call. I apologize to everyone for that.” ($ORCL)

The cloud is just about providing more services to customers

“we are going to be doing more for our customers than we did before. So before we use to sell them software and they would have to provide their own datacenters and their own machines and their own labor and their own network to run all of that. And now we are going to put a lot of that in our datacenter, we are going to buy the machines, we are going to provide both the skilled labor, whether you are buying the infrastructure-as-a-service, we will be maintaining the operating system and the virtual machine for you along with the hardware and storage, processing and storage.’ ($ORCL)

Technology companies are changing the way they ship new products, staging the inventory more gradually to cut shipping costs

“Over the last couple of years, there has been a change in the strategy regarding product launches…More of these companies are electing to build time into their product launch planning to allow them to take advantage of more traditional freight networks” ($FDX)

Healthcare

Rite Aid is getting squeezed by a challenging reimbursement rate environment

“I would say the reimbursement rate environment seems a little tougher in the back half than we expected…I think it’s a competitive marketplace out there. I think there are some probably dynamics at work in the PBM marketplace as well as in federal and state governments that are also playing in to some of the activity that we see from a reimbursement rate perspective” ($RAD)

They seem to be hoping that a deal with McKesson is the answer to these problems

“The thing with McKesson was really a timing issue in terms of just getting the thing implemented. And it’s important to understand that it was a massive transition for our company. I mean we put in a huge amount of effort and so did McKesson to get this thing done in the timeframe that we did. Really, I believe strategically we are headed in the right direction here. I mean I think our combined purchasing power is going to help us get the lowest cost over time.” ($RAD)

Miscellaneous Nuggets of Wisdom

If you acquire a good business, let the people who are running it continue to do their thing

“we learned a tremendous amount from these various natural and organic companies that we’ve acquired over the years. We’ve been very good. I think about leaving them alone. Let them do that thing. We will retain Annie’s headquarters in Berkeley. These are very talented people.” (GIS)

Stock price goes up, dividend yield goes down

“We understand our dividend yield is sub par. Part of that is because of the outstanding stock performance.” ($FDX)

Sales are vanity, profits are sanity

“when I first started in retail, they used to teach us on day one that sales were vanity and profits a sanity, and although that is a simplistic view of the world, there is an element of truth to it” ($PIR)

Full transcripts can be found at www.seekingalpha.com

Rite Aid FY 2Q15 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

Medicaid expansion states driving growth

“Our total comparable store sales increased by 4.1% in the quarter driven by a 3.7% increase in comparable scripts. Higher utilization in Medicaid expansion states drove this increase as well as the result of our pharmacy initiatives.’

Guiding pharmacy GM lower along with profitability

“we expect pharmacy gross margin in the second half of fiscal ’15 to be lower than previous estimates based upon current estimates for reimbursement rates and anticipated lower profitability due to a delay in the introduction of a generic equivalent to Nexium and due to higher cost for generic drugs that recently lost their exclusivity. Therefore, we have lowered our guidance for adjusted EBITDA, net income and net income per diluted share.”

Reimbursement rate environment tougher than we thought

“I would say the reimbursement rate environment seems a little tougher in the back half than we expected. And I’m sure as you know John, the reimbursement rate view evolves all the time. You know both have plans and our negotiation and we have migrations inside the plans and a number of different things going on all the time related to reimbursement rates. So that’s a view we are constantly updating and looking at. And based on what we can see at this time, the back half looks a little tougher than we initially expected even as of June.”

Distribute 40b of drugs per year

“keep in mind that we dispense at the AWP level about $40 billion worth of drugs a year. So even a modest few basis points in reimbursement rate change in our view can have impact on earnings. ”

It’s a competitive marketplace

” I think it’s a competitive marketplace out there. I think there are some probably dynamics at work in the PBM marketplace as well as in federal and state governments that are also playing in to some of the activity that we see from a reimbursement rate perspective. Those are probably the broader trends I can point at.”

The reimbursement needs to go to patient value

“the value that we create through what we do today is not by having the absolute lowest cost on the pill that we purchase. I mean, honestly, average generic drug cost that we sell is maybe $25-$27, something like that. And, so how much money are we going to save on a $25 or $30 prescription. That’s not really the question at the end of the day. The question is, is the patient compliant? Are they getting the counseling the need? Did they understand what they need to do to improve their health and stay out of emergency rooms and doctors offices.

So, again, we are talking philosophically here. I do not have the specific answer, how this migration is going to occur. But I think over time, there is only so many dollars we are going to be able to squeeze out of the drug spends, particularly on the generic side. And so, it’s really going to come down to then what differentiates you in the marketplace. If not, then you can fill that script for $24 versus $25. It’s what did you do to help a patient. So at some point, I think the model migrates to something more where maybe there is a reimbursement for the service that you are providing to the patient versus trying to make gross margin on the script. Is that going to happen tomorrow, it’s not. But I think if we look over the longer-term, that’s really probably the model that our industry needs to begin the migration to over some period of time.”

Mckesson deal is a big deal

“The thing with McKesson was really a timing issue in terms of just getting the thing implemented. And it’s important to understand that it was a massive transition for our company. I mean we put in a huge amount of effort and so did McKesson to get this thing done in the timeframe that we did. Really, I believe strategically we are headed in the right direction here. I mean I think our combined purchasing power is going to help us get the lowest cost over time. ”

maybe some green shoots of growth from exchange insureds?

“On a much, much, much smaller basis there is a, starting to be a developing trend there. As we talked about before there are some plans, Mark, where they are fairly specific to exchange based healthcare. It doesn’t cover all the exchanges but there is a few that are pretty focused on the exchanges and even those are starting — they are not material yet in total number but those are actually growing pretty rapidly right now too. “

Oracle FY 1Q15 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

Larry Ellison transitions to chairman

“As you’ve seen in the last few minutes we announced that Larry was elected Executive Chairman and appointed Chief Technology Officer; Mark and I have been appointed CEO. Other than Mark and I reporting to the Board of Directors of which Larry will be Executive Chairman instead of to Larry directly no other reporting relationships will change at the company.”

Our goal is to beat salesforce in the cloud

“we’re focused on two things, becoming number one in the cloud. That means growing our cloud business rapidly. So you’re seeing an acceleration in our growth rate. We are forecasting that we grow our cloud, our SaaS and PaaS cloud business this coming quarter between 40% and 45%. So not only are we getting bigger in the cloud, our growth rate is going up. That’s usually the opposite of what happens. So we are focused on becoming number one in the cloud being bigger than Salesforce in the cloud. And to do that we got to increase our growth rates and that’s exactly what we’re doing.

Now while we’re doing that, we have one other key focus to continue to deliver record levels of cash flow and that’s exactly what we’re doing. So we’re getting bigger in the cloud, our growth rate is increasing in the cloud. Our cash flow is getting better we think it was a great Q1 and it’s going to get even better in terms of our growth rates in the cloud.”

Larry is staying on the call

“ou’re going to have to wait a little while longer before you get me off the call. I apologize to everyone for that.”

There wont be significant changes to the organization with the management changes

“Yeah, and Karl I just want to make sure we are very, very clear. There will actually be no changes, no significant changes right, just want to clarify, no changes whatsoever.”

The cloud just means doing more for our customers

“he way I look at is we are going to be doing more for our customers, exactly what Safra said earlier, we are going to be doing more for our customers than we did before. So before we use to sell them software and they would have to provide their own datacenters and their own machines and their own labor and their own network to run all of that.

And now we are going to put a lot of that in our datacenter, we are going to buy the machines, we are going to provide both the skilled labor, whether you are buying the infrastructure-as-a-service, we will be maintaining the operating system and the virtual machine for you along with the hardware and storage, processing and storage.”

Lennar FY 3Q14 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

Housing recovery has not accelerated

“Generally speaking, the market has continued a slow and steady recovery that is markedly different from past down cycle recoveries. History would suggest a more vertical recovery especially given the severity of the economic decline. This recovery has been a decidedly different experience as the slope of recovery has been shallow and the expected acceleration has not materialized.”

Before this downturn 1m housing starts would have been considered a housing depression

“Before this downturn, anything below 1 million housing starts in a year was considered almost a housing depression. This recovery is just now getting us back to that level of starts. We’re still adding to a deficit in production given the housing needs of the country and that in our opinion limits the downside for the recovery going forward.”

Labor and materials cost $49/sqft

“Year-over-year, labor and material costs are up 8.5% to around $49 per square foot. This represents a mild slowing of the pace of cost increases as last quarter, cost were up more than 9% over the year.”

Sales are up and down but definitely on an upward trend

“I’d just say, Michael, I think that what we’ve been seeing is that the market is tending to move a little bit around; a little bit up, a little bit down. You get that sense on a weekly basis and on a monthly basis. But the trend line is decidedly upward and as I’ve said – I probably said it three times in my remarks, it’s a gentle upward slope and you’ve got upward and downward movement around that kind of direction. And I think that’s what we’re seeing basically in our sales as we go through the months and through the weeks.’

I hold the competition in high regard

“I think you know well that I hold the competitive landscape in very high regard and I think that everybody’s – the large well capitalized builders, the strategies of the competitive field are all strong and viable and somewhat differentiated.”

We did a good job acquiring land and we’re hands on

“Our strategy, which we’re quite pleased with, is very focused on a combination of good strategic land purchases and really hands-on community by community management. So as you know we got out ahead of the market in terms of land acquisition. We bought great strategic communities in really well located positions and we’ve been able to really leverage the harvesting of those communities, continue to leverage the community positions that we have. But I think that maybe the equally important component of this is our management structure and management team is very focused on a community by community basis of managing every day and the balance between volume, margin, SG&A spend, all of the components that drive and add to the decision making about pricing and incentives and everything else.”

First time home buyer at sun $175k price point

“We really view that first-time buyer as a sub 175, sub $200,000 price point. ..So we’ve been putting these positions together over the last year to really target that buyer. It’s a little bit tougher to get under 175, much, much tougher because of the land cost to get under 150, but we do view that as a very viable piece of the business. ”

the barriers are high for the first time buyer right now

” It’s still very difficult for that market to get reignited until we start to see a little bit more movement in terms of access to the mortgage market remembering that there are really three barriers to the first-time buyer coming back. First, it’s the down payment. Then it’s the very stiff underwriting and the bank overlays relative to accessing mortgage credit. And then finally the process itself has become fairly invasive, at least as far as people see the process and feel the process…So the process is almost designed to scare people away”

People are getting their credit ready to buy

“There has been some loosening of the credit underwriting at the margin, but it hasn’t been as significant as some has been reported. We stay very close to the customer in the field, we see who is coming in, we see what their commentary is. Remember that the rental market has accelerated in terms of its monthly payment requirement, it’s cost of living and that’s really driving people to say, I want to buy a home, I’d like to fix my cost, I’d like to find access to the mortgage market. So we’re watching what happens as they come in and staying very close to the purchaser in the field. Now with that said, the barriers are high and over time the market adjust to those barriers. People start saving, more down payment. They find a way; they get help from family. They start focusing on credit statistics as rental rates go up and they become more volatile because each year there is a re-pricing. People become ignited to get their credit credentials buffed and polished and ready for underwriting. They take a deep breath and they prepare themselves to go through the mortgage process. So you have two things kind of going in opposite directions. People are becoming more prepared and the mortgage market is opening up at the margins. And the only thing that we can really do is stay very close to the purchaser in the field, see what they’re seeing, feeling and finding as they try to access the new home market and use that as a guide post for really diving in and participating.”

Larger guys are picking up share

“I think there is a reality right now and that is the credit landscape is tight. It’s not just tight for the purchaser looking to gain access to the mortgage market but it’s also been very tight for smaller builders and for traditional land developers to get back in the market and to do the things that they do. So I think the larger, well-capitalized builders with access to the land market in a more comprehensive way have been able to pick up market share and that is something that seems like it’s continuing going forward.”