Miscellaneous Earnings Call Notes 2.11.16

Ingersoll-Rand Plc (IR) Michael W. Lamach on Q4 2015 Results

It was a year of volatility

“2015, it was a year that I can characterize best by one word and that word is volatility; volatility in energy markets, in foreign exchange rates, in industrial markets, in emerging markets and, of course, in the stock market.”

North American HVAC positive while global industrial markets weak

“North American Commercial HVAC and Residential HVAC as well as transport and Commercial HVAC markets in Europe are generally positive while global industrial markets remain weak. Transport markets in the Americas will be flat to down as lower trailer volumes will be largely offset by higher auxiliary power units, small truck refrigeration and other products.’

Douglas Emmett’s (DEI) CEO Jordan Kaplan on Q4 2015 Results

We are not seeing what’s going on in the stock market affect the underlying fundamentals of our operating properties

“That’s a great question and believe me, we are watching for it. But the answer is no. I mean, it’s funny if you turned off, if you didn’t turned off the stock market; and you go these are great days around here. I mean, other than watching what’s gone off the stock market in all areas tenant demand, tenant attitude deal flow, we have movement in the economics of leases, rental rates etcetera up, up and up all good. So you kind of see what’s going off the stock market and you wonder whether the stock market is vibrating to some different type of thing that’s going on out there, it’s just hard to know, but no we are not. What we are seeing in the stock market, we are not seeing in any of our underlying fundamentals of operating our properties.”

Our office space is leveraged to media not energy or banks or technology

“we’ve got a very, very diversified tenant base. And so, when you look at sectors that might be potentially backing up in the economy be it energy or banks or technology there is no overweight to anyone of those particular sectors within our market and thus far the media companies which is the tech has been fuelling our media companies the Hulu’s and Netflix etcetera that our production companies are very, very busy providing content and that flows through to the caterers and the accountants and the other people within our portfolio.”

Cisco Systems (CSCO) Charles H. Robbins on Q2 2016 Results

Starting in the third week of January, we saw people pause a bit

“what I will tell you is that after week 10 through those three weeks, we saw customers as they were trying to just digest what was going on, they just paused a bit. And you see customers say I want to just wait and see what’s going on. Let me take a look at this, we want to understand this a little better.

General Cable (BGC) Michael T. McDonnell on Q4 2015

Utility seems to be bouncing back

“The last three months we saw some pullback related, I think to end-of-year. I think a lot of fourth quarter was related to end-of-year tightening of the supply chain, reduction of inventories, and so forth but we’re pretty encouraged by what we’re seeing right now in utility sort of bouncing back a bit and getting back into line with where it had been in the last year maybe even a bit more in North America. ‘

Miscellaneous Earnings Call Notes 11.5.15

Colgate-Palmolive’s (CL) CEO Ian Cook on Q3 2015 Results

Have seen a decline in private label

“At the same time, we’ve seen a decline in private label shares in many of our categories indicating the consumers preference for branded products and respect of our equities.”

Anheuser-Busch InBev’s (BUD) CEO Carlos Brito on Q3 2015 Results

Big change in the Chinese economy towards consumption

“I think what’s happening in China at this point is that there is a big change from an economy that was all lead by exports and heavy investments in fixed assets, okay that generates a lot of blue-collar work or jobs to now an economy that’s much more service and domestic oriented economy. So more consumption, more consumer spending. So that of course, in the midst of this change, we see that in the Southeast, where some years ago there was lack of blue-collar workers and now there is too many of them. So there is a shift in there and I think that’s what the segments are showing us. But the segments that are more high priced are growing ahead of the ones that are lower price. And that’s exactly where we have most of our business and most of our brands position. So I think this change, while it may be bad for the industry, is not bad for us.”

PriceSmart’s (PSMT) CEO Jose Luis Laparte on Q4 2015 Results

We do have a soft economy in Columbia right now

“We do have a little bit of a soft economy right now, driven by the devaluation and other factors in the country. But we still are pretty optimistic about Columbia, and we haven’t reduced our efforts.”

Phillips 66’s (PSX) CEO Greg Garland on Q3 2015 Results

We see that the consumer side of China is doing very well

“we’re continuing to see good demand in Asia and across the system globally. So I think our view is demand is good. China is particular interest I think largely because of the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well.””

By 2017/18 we’d expect not to be in a $50 crude environment any longer

“I mean our view consistently remains by 2017 and 2018 that really sort itself out and we are probably not $50 crude environment but we are probably not $100 but somewhere $60, $70, $80 in that range.”

Greenlight Capital Re’ (GLRE) CEO Bart Hedges on Q3 2015 Results

-16.9% through October

“The Greenlight Re investment portfolio lost 14.2% in the third quarter, bringing the year-to-date return to minus 16.9%.”

Brought next exposure up slightly during market sell off in August

“We reduced our gross exposure by 30 points in the quarter. Our net exposure increased slightly from 21% to 26% as we covered several shorts during the market sell-off in August. We continue to hold macro positions including gold, short Asian currencies and short French sovereign bonds. Overall, it’s been a challenging environment. We’re optimistic that we should get some recovery from our beaten down long portfolio.”

The Sherwin-Williams Company’s (SHW) CEO Chris Connor on Q3 2015 Results

Volume demand lagged initial expectations in virtually ever market we serve

“Volume demand lagged our initial expectations for the quarter in virtually every market we serve, but we remain focused on delivering positive results regardless of the demand environment.”

Continue to see deteriorating demand outside of NA

“We continue to see deteriorating demand for our product outside of North America.”

Banco Santander-Chile (BSAC) Q3 2015 Results

Economy has done better than most regional peers

“Segment [ph] in the corporate sectors continue to contract, but given the diversity of Chile’s economy and the fact that the average GDP growth of Chile’s main trading partners is relatively high, the economy has done better than other regional peers.”

No deterioration in asset quality

“In terms of evolution of asset quality, we think that the aligned trends are generally positive, especially in the consumer side, in the mortgage side and in the mid-size market. We haven’t seen any deterioration. ”

CBS (CBS) Leslie Moonves on Q3 2015 Results

Advertising is coming back in a big way

“advertising is coming back in a big way at CBS. Underlying network advertising was up 8% in the third quarter with strong growth in primetime, double-digit growth in sports and daytime and huge growth in late night, which was up 42%.’

The dire predictions of cord-cutting are overblown

“I think we’re all seeing that the dire predictions of cord-cutting are overblown, but the good news for CBS is, no matter where distribution goes, no matter how or where you want your content, we are in a perfect position. ”

There can never be too much content

“we are a content company, we believe the world can have more content, we don’t believe the guy who says oh, there’s too much content. There never can be too much content and we want more of it.”

Activision Blizzard (ATVI) Robert A. Kotick on Q3 2015 Results

Comparing King to Blizzard

“When we merged with Blizzard Entertainment, we found the right partner with extraordinary leadership. And when others dismissed the sustainability of Blizzard’s incredible capacity for innovation, we were certain patience would be rewarded. And it has. We see a lot of the same characteristics today in King. We think now is the right time to enter mobile gaming in a meaningful way. ”

Third Point Reinsurance’s (TPRE) CEO John Berger on Q3 2015 Results

Third Point owns Argentine debt

“Sovereign credit was up 3.1% on average exposure during the quarter, due to strength in Argentinean government debt the largest position in our credit portfolio. We’re looking forward to the run off Argentinean presidential election next month and we’ll be pleased with the victory from either candidate.’

Michael Kors Holdings (KORS) John D. Idol on Q2 2016 Results

Warm weather bad for seasonal items. Watch business still under pressure

“We saw accelerated growth in footwear, although the warm weather tempered boot sales in the quarter. The watch business continues to remain under pressure in retail and wholesale. ‘

Trend has been towards smaller handbags

” the idea that people are not buying handbags, I do not believe is a correct concept. They happen to be the fashion trend of smaller bags, so if we were selling x percent of $350, $400 and $500 handbags at this time last year we were selling less of those because we were selling a lot more in particular across bodies and large wallets. And that is what the consumer in particular the millennial is viewing as a fashion trend.’

All of us are now being impacted in parts of Texas because of oil prices

“all of us are now being impacted in parts of Texas because of oil prices there, that’s a little bit less tourist, but some of it’s related to the Mexicans shopping cross-border with the peso to the dollar.”

Time Warner (TWX) Jeff L. Bewkes on Q3 2015 Results

Programming is the most significant area of investment for the company

“Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond.’

Stratasys (SSYS) David Reis on Q3 2015 Results

Excess capacity created by extraordinary expansion in 2014

“We also believe the situation has been worsened by the negative impact of excess capacity that followed the two-year period of extraordinary industry expansion that ended in 2014. Reflecting the low visibility of the current market environment, expected orders did not materialize as expected at the end of the quarter.’

Focused on adjusting the cost structure of the company to fit customer demand

“what I can tell is that we are taking very seriously the change in the business volume that we see in front of us and we are dealing with adjusting the cost structure of the company, the entire cost structure of the company not only MakerBot, to fit through what we see today in the market in terms of customer demand.”

Douglas Emmett’s (DEI) CEO Jordan Kaplan on Q3 2015 Results

Seems like occupancy is being driven by much stronger tenants

“I would say that, what’s driving — what’s going on here right now is a much stronger and wider base than what was driving the run up in ’04, ’05, ’06 and ’07. It’s way more comfortable, a way better percentage of kind of expenses for the tenants. The tenants are very — we’re seeing strong balance sheet and good credit. We’re seeing a good diversity of industries. You’re not seeing like a heavy lean on, I remember before, it was the mortgage — these mortgage guys were taking huge chunks of space”

“the strength in this market, all seems really healthy going to just literally more functional space for our tenants, as opposed to some of the tenants before that were literally just space grabbing and whether it be a big dotcom guy that didn’t exist a year ago and all of a sudden now needs 50,000 feet, 100,000 feet. What’s going on now seems a lot more comfortable and it’s backed by much stronger, more established tenants.”

Annaly Capital Management’s (NLY) CEO Kevin Keyes on Q3 2015 Results

Continued improvement in CRE fundamentals in the US

“The third quarter saw continued improved in U.S. commercial real estate fundamentals with healthy demand across all property types. Vacancy rates across all asset types declined compared to last quarter, with office and industrial continuing a trend of 22 consecutive quarters of positive demand.”

While the pace of CRE asset sales has slowed, we don’t see this as a weakening trend

“While the pace of sales has more recently begun to slow down 10% in September, we don’t see this as a weakening trend, as large take-private transactions continue to be announced with private equity taking advantage of the discount between listed markets and asset values.”

CMBS spreads have moved wider, but cap rates have not yet moved higher

“Spreads, however, have a continued widening that started this summer, with AAAs now at about 120 basis points, 32 basis points wider than at the beginning of the year and 34 basis points wider than this time last year. In addition, BBBs are almost 200 basis points wider than this time last year. While, this type of rate expansion is significant, we have not yet seen cap rates move higher. ”

Dougals Emmett 4Q14 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.

Highest leased since recession

“At year end, our office assets were 92.5% leased, our highest since the recession. Occupancy at the properties we own throughout the fourth quarter increased 93 basis points to 90.6%.”

2014 was the warmest year on record in LA

“2014 was the warmest year on record in Los Angeles County. Degree days a key measure of cooling requirements were up an incredible 141% at the measuring station in Santa Monica and up 69% at the measuring station at LAX.’

Optimism in SoCal

“We continue to see growth in our Los Angeles markets with optimism over the Southern California economy and real estate markets driven by improving employment numbers and strong demand from our regions diverse industries.”

Silicon beach

“Most of you have seen the headlines about the impact of the convergence of the technology, media and advertising industries in Silicon Beach and about Los Angeles emerging as the world’s leading producer of digital content.”

Eye popping sales prices bring sellers to market

“I would say that look 2014 was better than 2013. And there were some transactions that had some pretty eye-popping dollars per square foot. And that always brings up more sellers who want to take advantage of that market. And so I would say that our pipeline, I’m pretty optimistic of things in the pipeline that we’re looking at and at things that will be coming out later this year.”

Hawaii has a workforce shortage

“you can’t almost go to Hawaii and read the local paper and not hear about their need for workforce housing or about the legislature or the city or the county, trying to put programs for workforce housing. Now, you know what, they are not super wealthy and therefore, their programs need to get funded for them to be effective and a lot of times they have problem funding the programs. But they want it to happen.”

The whole market is seeing strong leasing

” I can tell you that I think it’s a variety of industries. There are tenants coming into the market. So it’s not just trading actually market and overall the market lease rates in Warner center are going up. And if you really — I mean I hate to even say this, but if you look at the market overall, it’s better leased than our particular portfolio and it’s the only market where our portfolio is underperforming the overall market lease rate.'”

Buying back stock takes away from reinvesting in the business

“we are a lot more confident in the underlying value of the buildings than to say the stock is going up, down, or all around and becoming a trader in our stock. I will say this to give you an opportunity to do it, during the recession we were one of only four REITs that bought back our stock, okay. So we are not unwilling to do it.

But I also want to buy buildings. Buying back our stock takes away — uses cash and takes away the opportunity to buy buildings.”

Douglas Emmett 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

office rentals still strong

“Fundamentals in our markets continue to improve with higher rents in our office and multifamily portfolios. During the quarter, we signed more than 800,000 square feet of office leases. We increased our leased percentage by 60 basis points to 92.5%, our highest since 2008.”

Paid $350 /sqft for building in Bev Hills

“On the acquisition front, after quarter end we purchased Carthay Campus for $75.3 million in an off-market transaction. Carthay Campus is a 216,000 square foot office building, adjacent to our properties in East Beverly Hills.”

100% occupancy in west LA means rents are going higher faster

“I don’t think it’s sustainable in a multi-tenant building to stay at 100%. I do think when you see that happening it’s a good sign that rents are going to move at a quicker clip than they have been leading up to those numbers.”

You give the sell side the numbers it wants and all of a sudden you’re playing a game that isn’t meaningful

“Well, I will tell you that, that’s a good question. And I certainly have asked myself that plenty this year. It’s a number that, quite frankly, you guys have asked for. And so we started giving you some time ago. And it’s very hard to take something away once we’ve been giving it to you. If you actually look back over the last few years, we have guided to that number and missed it on the high side by as much as 200 basis points many times. But of course, when you miss it on the high side nobody cares and when you miss it on the low side it’s become a very large area of focus.

Either side, I’m not sure it matters a whole lot. I have not – never spent the time, you guys put together your models and however you put them together they are numbers that are meaningful to you. And we’ve tried to give you all the numbers you feel are meaningful. We don’t go to you guys and say, you’re wrong that’s not meaningful this is meaningfully, you’re wrong, because it’s not worthwhile argument. You’re not going to like hearing that from me, and you’ll say, I know my business and our business is to try and do our best to give you the information that you ask for.

On previous calls I have certainly said I don’t feel this is the most key number in terms of determining the economic health of the portfolio or the Company. But people wanted it, so we’ve done our best to give it to you.’

Good example of how they think about some of the parameters of a deal

“why I like that deal is we own a couple of big buildings right there. I mean, like you could almost throw a baseball to where this is. And we are really full and we see the kind of tenant demand that our system is generating. And so, when that – he brought that, I’m like well, this is great because we’re going to nail this vacancy and I’m feeling very good about where we’ll go with that building over the next quarter or so.”

They’re trying to build a tower on Wilshire west of the 405

“any sane person would assign a very low probability to building a tower on the West side, probably the first tower to be build on the West side in 30 years, or 40 years maybe you can yes, probably 40 years. But being very optimistic real estate guy, of course, I expect to get it done, I mean I wouldn’t be doing all this work if I didn’t want to get it done, but I think any reasonable person say would call this a long shot, I mean this is swinging for the fences, which is something we don’t normally do as a company, but the opportunity is so special and unique and exists for us. And so I felt like we had to invest the capital and take a shot at it, which is what we’re doing.”