Autozone FY 2Q17 Earnings Call Notes

William C. Rhodes

Weather and tax refunds were headwinds

“After Christmas, the weather was much more mild with minimal snow and ice in the Midwest, Northeast and Mid-Atlantic. During this period, our sales growth moderated. Then, as noted above, in the last three weeks when we began lapping the beginning of last year’s tax refund season, our same-store sales declined fairly significantly. Late last year, the IRS announced that, in an effort to combat fraudulent tax refund filings, they would be delaying the issuance of refunds associated with returns claiming the earned income tax credit. Unfortunately, the timing of refunds typically begins in the last two or three weeks of our second quarter, and this year most of the refunds were delayed until after our quarter concluded.”

Rising operating costs

“Thank you, Bill. This quarter, our sales and profitability performance were not up to our standard. Much of the challenge was macro in terms of delayed IRS refunds, but we have also incurred rising operating costs, which include our initiatives. At the end of the day, we have had a remarkable track record of success and we will continue to focus on optimizing both short and long-term performance.”

No border adjustment

“First, following the election, the border-adjustable tax has become a hot topic. As I’m sure many of you know, I was part of a contingent of Retail Industry Leaders Association CEOs who went to Washington, D.C. and met with President Trump, members of his administration, and various members of Congress to share our perspective on the potential harmful effects of this proposal. While we are concerned about the impact on retail business models, we are more concerned about the ramifications for hard working American families due to likely significant inflation that would ensue. Our key message is that we certainly support a pro-growth agenda, including corporate and individual tax reform, but we stress the importance of a thoughtful approach to tax reform to avoid any unintended consequences.”

Bill Giles

Macro driving trends

“Switching over to macro trends, during the quarter, nationally unleaded gas prices started out at $2.16 a gallon and ended the quarter at $2.31 a gallon, a slight increase. Last year, gas prices decreased per gallon during the second quarter starting out at $2.09 and ending at $1.72. While prices at the pump are higher today than they were last year at this time, we continue to feel the absolute price of $2.31 a gallon is not high enough amount to change the driving behavior of Americans as we continue to see miles driven increasing. We also recognize that the impact of miles driven on cars over seven years old, the current average, is much different than on newer cars in terms of wear and tear. Miles driven increased 1.6% in October, 4.2% in November, and 0.5% in December. And for all of 2016, miles driven were up 2.8%. The other statistic we highlight is the number of seven-year-old and older vehicles on the road, which continues to trend at our industry’s favor”

Autozone 4Q16 Earnings Call Notes

AutoZone’s (AZO) CEO Bill Rhodes on Q4 2016 Results

Believe international will be good for us

“While the domestic business dominates our sales mix and continues to be our primary focus, we believe we have great growth opportunities outside the U.S. for many years to come. I would expect the international mix of our business to only grow from here. In 2016, we expanded our online offerings in both our traditional and website as well as on AutoAnything.”

40 consecutive quarters of double digit EPS growth

“We are pleased to report our 40th consecutive quarter of double-digit EPS growth and for the year to report an EPS growth rate of 13%. We are also quite pleased with all we accomplished during 2016.”

Attention to detail and consistent execution are what matter

“We believe our steady, consistent strategy is correct. It is the attention to detail and consistent execution that will matter. Our belief is solid, consistent strategy combined with superior execution is a formula for success. Our charge remains to optimize our performance regardless of market condition and continue to ensure we are investing in the key initiatives that will drive our long-term performance. In the end, delivering strong EPS growth and ROIC each and every quarter is how we measure ourselves.”

I don’t think we’re a good indicator of the strength of the consumer

“I don’t think the health of the consumer is really that significant of a driver. If you turn back the clock to 2009, 2010 and 2011 when everybody was really struggling, we performed exceptionally well. So I don’t think we are a good barometer of the consumer and the consumer’s health”

Bill Giles

Gas prices rose 2c during the quarter

“Let me touch on domestic macro trends for a second. During the quarter, nationally unleaded gas prices started out at $2.22 a gallon and ended the quarter at $2.24 a gallon, a $0.02 increase. Now, last year gas prices decreased $0.18 per gallon during the fourth quarter, starting at $2.69 and ending at $2.51 a gallon. We continue to believe gas prices have a real impact on our customers’ ability to maintain their vehicles and as cost reductions help all Americans, we hope to continue to benefit from this increase in disposable income.”

Miles driven is up 3.3% this year

“Miles driven increased 2% in May and 3.2% in June and we don’t have July or August data yet. But year-to-date through June, miles driven were up 3.3% and ahead of last year’s increase at this time. The other statistic we highlight is the number of seven year and older vehicles on the road, which continues to trend in our industry’s favor.”

Inflation has been down slightly year over year

“In regards to inflation, it has been down slightly year-over-year. Currently we feel costs will be predictable and manageable. We will remain cognizant of future developments regarding inflation and we will make the appropriate adjustments should they arise.”

Autozone FY 3Q16 Earnings Call Notes

AutoZone’s (AZO) CEO Bill Rhodes on Q3 2016 Results

On the surface it looks like sales started strong and moderated but it really was actually consistent

” Our same-store weekly sales performance was quite volatile during the quarter. We started the quarter very strong, but recall that last year’s third quarter started very weak due to a shift in tax refund timing. Additionally, we had a few weeks of poor sales when the weather was materially colder and wetter than last year. On the surface, it appears that the quarter started strong and then moderated. But when you assess it on a two-year basis, sales trends were generally consistent throughout the quarter.”

Performance in weather hit areas worse than other markets

“On a regional basis, our performance in the Midwestern, Mid-Atlantic and Northeastern states were substantially below other markets, especially in late March, all the way through the end of the quarter, where temperatures were much cooler and it was much wetter than usual.”

Miles driven is biggest tailwind

“The biggest sales tailwind at the moment, in our opinion, remains the increased miles driven across the country. While volatility with weather has been the greatest headwind, increasing miles driven leads to more failure and maintenance related demand and benefits both our DIY and DIFM businesses. But unusually cool weather leads to limited sales.”

They are calling for a hot summer and if that comes it should help

“To your question about should you straight-line the two year comp, our premise at this point in time, as you know we don’t give guidance. But we think the weather was a pretty significant headwind in this quarter. They are calling for a hot summer. We haven’t seen it yet. It’s starting to heat up around here a little bit, and hopefully it does in the Northeast. But we think if that comes to fruition we could have a pretty strong fourth quarter.”

Bill Giles

Gas prices increased during the quarter

” during the quarter nationally unleaded gas prices started out at $1.72 a gallon and ended the quarter at $2.22 a gallon, a $0.50 increase. Last year gas prices increased $0.42 per gallon during the third quarter, starting at $2.27 and ending at $2.69 a gallon.”

Miles driven increased in Jan and Feb

“current average, is much different than on newer cars in terms of wear and tear. Miles driven increased in both January and February. We don’t have March or April data yet. The other statistic we highlight is the number of seven-year and older vehicles on the road, which continues to trend in our industry’s favor.”

Corporate Annual Reports And CEO Interviews 3.24.16

Source: John Deere Annual Report

John Deere (DE) CEO Sam Allen said the farm equipment recession of the last few years has been the worst in nearly a century

“In relation to the farm economy’s robust years earlier in the decade, the current downturn has been quite dramatic. Since peaking in 2013, industry sales of large agricultural equipment in the United States have fallen more than 60 percent. Deere’s total equipment sales have declined more than 25 percent from their high. Last year’s sales decline was the company’s largest in percentage terms since the 1930’s.”

Source: Richemont (owner of luxury jewelry brands such as Cartier, Van Cleef & Arpels) CEO Youtube Interview=

Richemont CEO Johann Rupert said the true price of capital is obscured in today’s economic environment

“We have a lot more competition, especially from ridiculously mispriced capital. When people misprice something, it is abused. In England, water is free, it rains all the time yet there is a drought. Now, if you misprice capital, people will abuse it and will regret it, unfortunately in our business as well.”

Richemont CEO Johann Rupert stated you should always be improving your business whether we are in an economic expansion or economic recession

“Never waste a good recession. Never waste an opportunity to fine tune your business.

Source: Schlumberger Annual Report

Schlumberger (SLB) CEO Paal Kibsgaard remains constructive on both the supply and demand of the oil markets ultimately coming into equilibrium in the medium term

“We remain constructive in our view of the market outlook in the medium term and continue to believe that the underlying balance of supply and demand will tighten. This will be driven by growth in demand, weakening supply as the massive E&P investment cuts take effect, and the size of the annual supply replacement challenge. In continuing to accelerate the benefits of our transformation program across both our Technologies and GeoMarket regions in 2016, we believe that we will emerge as a stronger company once the price of oil and the market conditions in our industry improve.”

Source: Autozone Annual Report

Autozone (AZO) CEO William Rhodes said the company is prioritizing their E-commerce auto parts websites in order to get their products to consumers quicker

“We are expanding our fast-growing internet offerings. Utilizing our, and websites, we believe we are well positioned to serve our customers however they elect to interact with us. In 2016, we will continue our focus on both expanding our online product offerings and improving the shopping experience. While this business is growing at a faster pace than our “brick and mortar” business, it remains small in absolute terms. However, over time, as mobile shopping intensifies, it will only expand. We have to stay out in front in this sector of our industry. Our customers expect us to offer this shopping convenience and additional avenues for trustworthy advice to maintain, enhance or repair their vehicle.”

Source: Leucadia Annual Report

Leucadia (LUK) CEO Richard Handler said his company is undervalued and prepared to weather the stormy economic environment

“As we write, there is continuing volatility in the fixed income and equity trading markets, as well as in energy prices. Scratches and dents seem inevitable and we won’t dare make predictions for the rest of the year, but based on the actions we have taken to date, our businesses are prepared to weather the storm, and several are doing quite well. We are both aligned long-term investors in Leucadia stock and will continue to work our hardest to deliver good results in the coming years. There remains significant long-term upside in the value of Leucadia, which exists in the intrinsic value of our businesses and is not fully reflected in our current dismal stock price. We will discuss all of our businesses later in this letter.”

Source: Bank of New York Mellon Annual Report

Bank of New York Mellon (BK) CEO Gerald Hassell reiterated the company’s new mission statement

“We play an important role in the financial marketplace and describe ourselves as the Investments Company for the World. Our mission is to help people realize their full potential by leveraging our distinctive expertise to power investment success. In doing so, we seek to improve the lives of countless people globally – a goal that motivates us to be the very best at what we do.”

Bank of New York Mellon (BK) CEO Gerald Hassell said the company remains the dominant vendor for central banks and pension funds

“Our clients include three-quarters of the Fortune 500, central banks that hold approximately 90 percent of all capital and more than two-thirds of the top 1,000 pension funds.”

Source: Moody’s Annual Reports

Moody’s (MCO) CEO Ray McDaniel said the company is benefiting from several tailwinds in the financial markets

“We manage through cyclical conditions, while focusing on and investing around the deeper pull of structural market evolution: phenomena such as the disintermediation of credit, the demand for enhanced risk management techniques, the need to curate increasingly vast quantities of financial information and data and the development of emerging economies. These are powerful dynamics and they reveal an open road beyond the rubbernecking that often surrounds day-to-day market sentiment.”

Moody’s (MCO) CEO Ray McDaniel noted a choppy economic environment is creating uncertain buying patterns across their customer base
“Financial markets continue to be buffeted by volatility stemming from, among other things, uncertain global economic conditions, diverging monetary policies and geopolitical events. These dynamics (and their inter-relationship) create cross-currents and choppiness that unsettle market participants. This in turn impacts both the short- and long-term outlook for Moody’s.”

He elaborated that markets getting harder to interpret

“Markets are becoming more complex, not less, and are moving more quickly and featuring more choices. The need for products and services that illuminate and enhance the understanding of risk is essential to market confidence, and that confidence is essential to the sound management and efficient movement of global capital. Moody’s focus and opportunity involves filling the gaps that complexity, volume and information inefficiencies create.”

Source: Potash Annual Report

Potash (POT) CEO Jochen Tilk said increased global demand for protein will benefit his agricultural nutrient focused company

“By 2050, the world’s population is expected to grow by another 2.3 billion, reaching 9.7 billion. At the same time, diets are improving in many regions. These facts add up to greater demand for food, which will require increased crop production even as the amount of arable land per person is declining. With the world counting on increased yields from farmers, fertilizers will continue to be essential in keeping soils healthy. The role of fertilizers cannot be overestimated: they are responsible for half of all crop yields and without them, we believe the world would be incapable of feeding itself. ”

Source: Wells Fargo Annual Report

Wells Fargo (WFC) CEO John Stumpf said the company is still a relationship oriented business

“The most powerful expression of our heritage isn’t in documents or artifacts or even our stagecoach. It is in any of the millions of relationships we have formed over generations with customers, team members, communities, and shareholders. Relationships define Wells Fargo. Earning lifelong relationships, one customer at a time, is fundamental to achieving our vision.”

Source: Mark Fields Business Insider Interview

Ford (F) CEO Mark Fields said cars on the road today are lasting longer than ever, suppressing demand for their products

“We have worked very hard at quality over the last number of years, and our quality is in the top echelons of the industry. So part of it is vehicles are lasting longer. When I was growing up, when you saw a 20-year-old car it was like, Oh my gosh — that thing’s on its last legs. Now you see a 20-year-old vehicle and in many cases it looks pretty good. So part of it is that, but the other part is when we went through the downturn, clearly there were a lot of deferrals of people replacing vehicles.”

Ford (F) CEO Mark Fields noted that economic volatility and currency wars are making the automobile manufacturing business a more competitive landscape

“For us the main policy is making sure that currency is not used as a weapon, if you will, to manipulate the cost of products, whether they’re imported or exported. We can compete with anybody around the world. We can’t compete with central banks.”

Autozone FY 2Q16 Earnings Call Notes

AutoZone’s (AZO) CEO Bill Rhodes on Q2 2016 Results

Did not see material change in business trends despite warmer weather

“While winter temperatures were milder this year than last, we did not see a material change in business trends from one month to the next overall. Yes, certain cold-weather categories, those that have larger sales during these months were below last year’s numbers while others balanced out our performance. And yes, as you would expect, our performance in the Midwest and Northeast were below other markets but they were in line with our expectations considering the weather patterns.”

Late tax refunds have an impact

“Probably the biggest unknown for us this quarter was when would income tax refunds begin to be remitted to consumers by the IRS. By quarter end, total refunds were generally comparable to remittances last year but they were issued very very late in our quarter. ”

Got to develop a new type of fastball

“I would say one big thing is a lot of our AutoZoners, myself included, grew up on the retail side of the business, we didn’t grow on the wholesale side of the business. And so to use a baseball analogy, our fastball is retail. Well, we’ve got to develop a fastball that’s also commercial and so we’re really focused on getting everybody in the organization taking our whole one team notion to the next level, and that includes getting our district managers and our store managers along with the sales team even more focused on growing the commercial business.”

Clearly low gas prices are good for us

“Clearly the economic cycle that we’re with lower gas prices which are leading to really really high miles driven is very favorable for us. Those same impacts, those same indicators should impact the commercial business but we believe at this stage in our commercial business development it’s much more on us and our development of that business than it is on economic matter of factors.”

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.”

Miscellaneous Earnings Call Notes 9.24.15

So many different factors affecting gross margins


“There are so many different factors affecting our gross margins as we have been talking — it’s like 20, 25 different factors affecting the gross margin. And we don’t want to elaborate and go into each of these. We give you some major factors behind it those four, five macro factors that we have been talking about. But otherwise, we don’t want to elaborate what the gross margin is built up. And we understand that you’re keen to know but we respect we don’t want to give it away to our competitors. We don’t have any patterns. So we really want to speak that and have that information for us, only for us. Sorry.”

Children’s book market surpassed adult market for the first time ever

Scholastic CEO

“According to a study released this June by the Association of American Publishers, the children’s books segment exhibited the strongest growth among any segment in the trade category in 2014. The study also showed that the size of the children and young adult market surpassed the adult market for the first time, with children’s and YA selling at 843 million units to 746 million units for adults; although, adult books usually fetch a higher price per unit. This data supports the trends that we’re seeing ourselves in our engagements with schools and families; our belief that the strong market dynamics and focus on independent reading will continue to support company-wide growth.”

Book publisher monetizing NYC real estate

Scholastic CFO

“While the Company has no immediate need for cash, we understand that there’s substantial investor interest in our plans to monetize our real estate holdings in New York City. The Soho real estate market is vibrant and interest in our property from real estate investors, retail partners and traditional commercial mortgage lenders remain high. We expect to announce a plan by our second quarter earnings call in December. We’re beginning construction on the new retail site this November.”

Obviously benefit of strong dollar is lower costs elsewhere

Scholastic CEO

” We have a major effort within the Company to do global sourcing of our print product. Obviously, the positive side of the strong U.S. dollar is the lower costs elsewhere. So we’re shifting our printing to lower cost areas, particularly looking at India and other areas in Asia.”

Dry bulk fleet growing at 0-1% could balance supply/demand

Seanergy CEO

” a very high demolition rate is further reflecting ship supply. More specially, in 2015, the Capesize scrapping activity has exceeded 2013 and 2014 combined, which is almost 13 million deadweight tons year-to-date. The substantial reduction of the order book as well as the accelerated scrapping activity has finally led to negative fleet growth year-to-date in 2015. It is, therefore, expected that the net dry bulk fleet growth will be approximately zero to 1% in 2015, after growing only 4.4% in 2014. This is a record low as compared to the historical 10-year compounded fleet growth of 9% and more importantly, a historical seaborne trade growth on a compounded basis of 5.6% from 2004 until 2014. Based on these factors we believe that in the next three years, the market will likely lead to tonnage shortfall and a tightening utilization environment. As a result, we expect an upward trend in saturates and asset values.”

All about execution

Autozone CEO

“To execute at a high level, we have to consistently adhere to living the pledge. We cannot and will not take our eye of off execution. While we study the external environment and react where appropriate, we must stay committed to executing day-in and day-out on our game plan. Success will be achieved with an attention to detail and exceptional execution.”

Haven’t seen weakness in China, US on track

Steelcase: Jim Keane – President, Chief Executive Officer

“So far, we have seen no signs of weakness in our Chinese order patterns from our pipeline. The US market is on track to meet our initial growth expectations for the year because of both traditional drivers of demand and the continuing need for companies to update their spaces.”

Manufacturing listed as strong sector, Info tech listed as weak

Steelcase: Dave Sylvester – Chief Financial Officer, Senior Vice President

“Across vertical markets in the Americas, order growth rates were highest in the manufacturing, financial services, and healthcare sectors, while order declines were most significant in the state and local government and energy sectors. Information technology, federal government and insurance also declined, but by modest percentages.”

JS Earnings Call & Investor Presentation Notes 9.22.2015 – AZO, JPM, GIS

Autozone (AZO) William Rhodes said the company continues to focus on the “do-it-yourself” auto retail segment while also growing it’s commercial garage business

DIY remains our number one priority. Our DIY business continues to grow, remains the largest portion of our sales, and continues to generate tremendous returns.  We also see significant opportunities for new store growth and improved productivity in our existing stores. As our commercial business continues to grow and is intertwined with our retail business, we’ve continued to identify opportunities to optimize our inventory placement and distribution strategy in order to respond to the ever increasing challenge of parts proliferation in the industry.”

Despite robust sales and profitability growth over the last decade, he said the company can still improve and often missing out on sales opportunities due to inventory being out of stock

To this day, it surprises me how often we’ve to say sorry, we don’t have that available. Even with our new part additions too many customers leave our stores without their needs being met. In this spirit to help the customer we continue to make significant systems enhancements and to capture data about our customer shopping patterns across all of our platforms.”

And the company continues to benefit from the tailwind of increased mileage by drivers

As new vehicle sales are reaching all-time highs and gas prices on average are down year-over-year, vehicle miles driven continue to increase.  This trend is encouraging.  We continue to believe that lower gas prices have a real impact on our customers’ ability to maintain their vehicles, and cost reductions help all Americans, we hope to continue to benefit from this increase in disposable income.”

And the company’s management team restated their “return on capital” mindset as opposed to “grow sales at all costs” mindset

We should also highlight another strong performance in return on invested capital, as we were able to finish fiscal 2015 at 31.2%. We are very pleased with this metric and is one of the best in all of hardline retail.  Our primary focus has been and continues to be that we ensured every incremental dollar of capital that we deployed in this business provides an acceptable return, well in excess of our cost of capital. It is important to reinforce that we will always maintain our diligence regarding capital stewardship as the capital we invest is our investor’s capital.”





JP Morgan (JPM) CEO Jamie Dimon is taking the long view on his economic outlook for China

“Our view of China is in 20 years it will be a large developed nation probably housing 20% to 25% of the global Fortune 2000 or something and that’s where we are keeping our eye on. We know that between here and then, they are going to have some serious bumps in the roads in a couple of ditches and maybe even a rough like we had in 2008 or 2009. And I think they are very bright, the reason for that though is, they have a lot of lot of issues they got to deal with and they are very open about these issues.”

JP Morgan (JPM) CEO Jamie Dimon said it doesn’t matter when the Fed raises interest rates

“It’s a lot of chatter about nothing. I don’t want to add to that chatter. Let the Fed decide when they want to raise rates and wherever I go I ask businesses, consumers, small business, large business, will it affect you if rates go 25 basis points? I haven’t found anyone who says, Oh my god. By the way, if someone says oh my god, I’m in trouble.”

He went on to say the bank’s returns have come down but they expect them to go up in the long run 

I mean, when you look at a business, if you add just one checking account and in the old days the NPV of that was 25% or so, the IRR is 25% and you do it today and the IRR is 12% or 8%. Would you not open that account? Of course, we open the account because that will change over time and as spreads go up. So we’re looking at – we’re keeping our eye on the long haul here and not the short one.”

JP Morgan (JPM) CEO Jamie Dimon said the bank has no acquisition plans 

We are not the acquisition business right now unless it was kind of a small fit in something. And obviously we can’t do a bank here and I don’t think we are going to try a bank overseas right now. There is no reason for JPMorgan in getting a fight with regulators around the world what we’re trying to do and distract us from our mission at hand. I believe we’ll grow organically for a long time.  We are legally not permitted to buy banks in the United States.”

And he explained to what degree the bank will become more profitable in a higher interest rate environment

So we make a disclosure in our 10-K that if rates go up 100 basis points, we will make little over $2 billion more. More of that’s in the short and long end, but obviously how they go up really matters and how fast they grow up really matters, but in general rates going up, all things being equal will do better. “   





General Mills (GIS) CFO Donal Mulligan said the company has implemented many cost savings initiatives in hopes of reducing expenses

“In addition we are making good progress on our incremental cost savings initiatives, including Project Catalyst, Project Century, Project Compass and the changes to our administrative policies and practices. Taken together these initiatives remain on track to deliver between $285 million and $310 million in annual savings this fiscal year and more than $400 million in fiscal ‘17.”

General Mills (GIS) CFO Donal Mulligan stated that the company is using the Proctor & Gamble focus strategy of prioritizing its most profitable and popular brands

We are prioritizing what we call our Power 450 SKUs. These are our 450 best turning national items. In fact they turn at a rate that is nearly four times faster than the other items in our portfolio. These products represent three-quarters of our U.S. Retail volume, but less than 20% of our SKUs. More importantly we have on average less than 350 of these 450 items on the shelf. That’s almost a 25% distribution gap and a significant growth opportunity for our largest and most profitable brands.”

General Mills (GIS) Senior VP Shawn O’Grady said E-commerce is one of the fastest growing sales channels for the company’s products

On the e-commerce front, in the U.S. food sales that are going through online are between 1% and 2%. Now that’s changing pretty quickly, meaning moving from 1% to 2%. If you said what does it look like out four or five years ahead, all the projections I’ve seen are in the 5% to 6% range. So it’s going to be a high growth area. Obviously Amazon is leading some of the thought there, is investing a great deal to make sure that they and utilizing their stores to make sure they are competitive. And that really is causing all the players in the marketplace to one of the actives in the e-commerce space.  We have only to look at other markets where we do business like the UK and France where, for some of our categories our online sales are approaching 10%. So it’s pretty clear that we’re going to move in that direction very rapidly in the U.S. and this is an area that we’re investing in at General Mills to develop our capability.”

Autozone 1Q15 Earnings Call Notes

Failure categories outpaced discretionary ones

“Regarding merchandise categories, our failure categories continued to do well, outpacing both maintenance and discretionary categories. This was opposite of last quarter and a little unique considering we were hoping the lower gas prices at the pump, coupled with the spring season, would lead to accelerating growth. Our belief is that the late winter storms in the first few weeks of the quarter coupled with accelerated tax refunds led to a later start to the spring maintenance season.”

Tax refunds come earlier this year

“I should say one last thing regarding the income tax refund discussion I mentioned earlier. From a report issued by the Treasury Department, the amount of refund dollars were just about identical with last year’s totals. However, it was the pronounced shift to initiating refunds two weeks earlier this year that was new. We believe this was the large reason for the start of our quarter being a little weaker and we believe our last quarter sales represented more normalized levels.”

Gas prices still a lot lower than last year

“Declining prices at the pump have benefited our customers, especially those most financially stressed (17:57). The lower end customer benefits the most from lower gas prices relative to income. This trend is encouraging, but we understand this is just one of many factors that impact our business. While gas prices have increased more recently, prices are still around $1 a gallon below last year.”

One step ahead of the next guy

“As our competition continues to innovate, we understand our ability to both maintain and gain market share will require us to have great-looking stores, higher in-stock levels, and most importantly, more knowledgeable AutoZoners to help customers than even what is available today

Miles driven has increased

“We also recognized that the impact of miles driven on cars over 10 years old, the current average is much different than on newer cars in terms of wear and tear. Miles driven increased 4.9% in January and 2.8% in February. We don’t have March or April data yet.”

Almost 9 straight years of double digit eps growth

“35th consecutive quarter of double-digit EPS growth, growing this quarter at a rate of 13.1%. ‘

Take time and be methodical when making big decisions

“this is a big decision, and we at AutoZone are pretty methodical in how we make decisions. This isn’t about next year or year after, this is about the long-term and so we want to make sure we get it right. So we’re going to take enough time to get it right.”

Weather wasn’t normal

“I would just say in those first few weeks, Matt, weather is always seasonal in the spring time. But we were – it was the third quarter here. We’re sitting with six inches of snow in Memphis, Tennessee. That’s not normal.”

Parts proliferation has created new challenges for inventory management

“this whole industry is chasing parts coverage, parts availability and the ability to say yes, because our customers need it. As parts proliferation continues, it’s become a greater and greater challenge and frankly, it’s on the forefront of one of the ways we compete against each other.’

Deal with that with a hub store

“There is a lot of diminishing returns on putting inventory into locations. Why don’t we put 50,000 SKUs into the local store? Well, because we can’t afford to. That’s why we have a hub store that will aggregate the demand of 30 stores or 40 stores. ”

Autozone FY 2Q15 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Happy with comps

“Due to last year’s very strong Q2 sales, up 4.3% on a same-store basis, the comparisons for this past quarter were challenging. We were quite pleased with our performance throughout the second quarter, especially in light of the difficult comparisons. And we ended the quarter with domestic same-store sales of 3.6%. This represents more than 200 basis points improvement on a two-year rolling same-store basis from last quarter.”

Lower gas prices helping economically challenged consumer

“our maintenance-related categories performed quite well in the quarter. Our belief is the Improvement and Maintenance category sales was driven by more conducive weather patterns, improved merchandise assortments due to the products we have added over the last year, and lower gas prices, which we believe is relieving some pressure, particularly on our most economically challenged customers.”

Overall trajectory of business was consistently positive

“The overall trajectory of our business was quite consistent throughout most of the quarter. That consistency was across all regions of the country. We believe we benefited from macro tailwinds, our work on inventory availability and on solid execution.”

Return on capital focus

“our primary focus has been and continues to be that we ensure every incremental dollar of capital that we deploy in this business provides an acceptable return, well in excess of our cost of capital. It is important to reinforce that we will always maintain our diligence regarding capital stewardship as the capital we invest is our investors’ capital.”

Gas prices have a real impact on our customers

‘We continue to believe gas prices have a real impact on our customers’ abilities to maintain their vehicles, and as cost reductions help all Americans, we hope to benefit from some increase in disposable income.”

Sales of 1.7m per box

” For the trailing four quarters, total sales per AutoZone store were $1.753 million. This statistic continues to set the pace for the rest of the industry.”

Hasn’t really been inflation

“We have not been the beneficiary of inflation over the last, almost at this point I’d say 18 plus months, maybe pushing 24 months, and it doesn’t appear as though there’s a lot of inflation in the horizon either. There’s a couple of categories here and there that have some inflation, but for the most part, we’ve been generating these sales out of a no inflation kind of environment. So it really is the strength of the customer, the strength of our offering that was really driving that.”