Transcript: Nightly Business Report – March 7, 2017

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue
Herera.

Funded in part by —

(COMMERCIAL AD)

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  Vital signs.  Which
industries win and which lose under the new GOP healthcare plan.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Digging deep.  Why key players
in the multibillion-dollar equipment manufacturing industry are gambling on
a better future.

MATHISEN:  Women on Wall Street.  One of the world`s largest asset managers
wants more women in the boardroom and it is using the iconic bull on Wall
Street to get its point across.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday,
March 7th.

HERERA:  Good evening, everybody, and welcome.

Wall Street, Washington, and Main Street were all focused on health care
following the release of the House Republican plan to replace the
Affordable Care Act.  As we reported last night, insurers will still cover
people with pre-existing conditions and allow children to stay on their
parents plans until the age of the 26.

The big change?  Tax credits under the new plan are based on age and get
phased out with people with higher incomes.  In Obamacare, income and the
cost of your insurance determined your tax credit.

Bertha Coombs takes a look at the potential winners and losers.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  For many of the
ACA`s winners — older, low-income people — it would mean lower tax
credits, while Obamacare`s losers — higher-income people — would gain a
tax break for insurance, as well as see several taxes on high-income
earners to pay for Obamacare repeal.

TOM PRICE, SECRETARY OF HEALTH AND HUMAN SERVICES:  We need to equalize the
tax treatment for the purchase of coverage.  Those again in the employer-
sponsored market, they get a tax benefit for buying health coverage.  Those
folks that are out there in the individual and small group market, no tax
benefits, and that`s what this plan would do.

COOMBS:  Here`s how it would work in a high-cost market like Mobile,
Alabama — a 60-year-old earning $20,000 a year, now that`s $13,200 in
exchange subsidies, according to the Kaiser Family Foundation.  Earning
$40,000 gets you about $10,000 in subsidies.  At $60,000, nothing.

Under the GOP plan, $20,000 and $40,000 earners would only get $4,000 in
tax credits or 60 percent to 70 percent less.  Those earning up to $75,000
would now gained $4,000.  But insurers would also be allowed to charge 60-
year-olds five times higher rates than younger people, up from three times
under Obamacare.

ANDY SLAVITT, FORMER CENTERS FOR MEDICARE & MEDICAID EXECS. ADMIN:  What
happens when people can`t afford insurance is the only people that tend to
buy it are the sicker people, so this is not only going to cover fewer
people, but it`s actually not going to be good for the risk pool either.

COOMBS:  The GOP plan also repeals the ACA employer mandate to provide
coverage.  But for companies like RHA Help in North Carolina, it`s a mixed
bag because the so-called Cadillac Tax is not repealed, just postponed
until 2025.

MISTY GUINN, RHA DIR. OF WELLNESS & BENEFITS:  Within the benefits world,
the Cadillac Tax has been some sort of, kind of mythical creature that may
or may not happen.  I feel that we already made on strides to reduce kind
of value of our plans.

COOMBS:  And for now at RHA, they`re planning to offer more high-deductible
plans no matter what happens in Congress.

JACKIE SMITH, RHA BENEFITS ANALYST:  It hasn`t gotten any cheaper over the
past 14 years, OK?  The reality is it goes up.

COOMBS:  Until the Congressional Budget Office releases its report, there
are no official estimates on just how many people could lose coverage under
the GOP plan or how much it costs.

Bertha Coombs, NIGHTLY BUSINESS REPORT, New York.

(END VIDEOTAPE)

MATHISEN:  Let`s turn now to Chris Meekins for more on the potential
changes coming to the healthcare landscape and who might the winners and
losers be in the healthcare sector.

Mr. Meekins, welcome.  Good to have you with us.

Those stark numbers that Bertha just showed on the screen comparing the
subsidies under the Obama care plan versus the tax credits under the GOP
House plan suggests to me that fewer people are going to be buying health
insurance one way or another.  Is that going to hurt insurance companies?
And if so, which ones?

CHRIS MEEKINS, FBR HEALTH POLICY ANALYST:  Well, I think if you look at it,
the people over age 50, 50 to 65, you`re right.  There probably are going
to get less of a credit.  They`re going to be charged more.  It`s a
negative for them.

For those under age 40 actually, the tax credit for individuals may be
enough to cover the entire premium.  So these people`s premium will be paid
just by the tax credit.  As a result you could see people under age
entering the market and people over age 50 to 65, which tend to be higher
utilizers, exiting it.  As a result, insurers who are involved in the
individual markets and some of the world (ph), you know, United has a
little exposure, Aetna (NYSE:AET) has some exposure in that space, all of
them could be benefit because the risk pool is going to get better because
it gets young.

HERERA:  And what about hospitals?  Because near-term, you know, obviously
a lot still needs to be discussed and it may change before the vote goes
through but how do you view the hospitals and the critical-care aspect of
this?

MEEKINS:  Sure.  So, in the House Republican plan, if it becomes law, they
removed the DISC cuts, the disproportionate share hospital cuts that were
part of the Affordable Care Act for non-expansion states in `18, and other
states in 2020.

Additionally, the Medicaid expansion population over the next three years
stays.  Additional states that haven`t expanded Medicaid like Florida, like
Texas, could expand. Additionally, they did get an additional $10 billion
for states in general to help with the safety net.  As a result, you can
see hospitals actually benefit over the next 18 months to two years in
revenue.

Now outside of that, when the Medicaid expansion starts to wean off and
start to move towards a per capita model, that would probably put pressure
on hospitals which would be negatively impact their bottom line.

MATHISEN:  And some of them went down today.  I know Tenet was one of the
ones who took a big hit in the marketplace today.

A couple of other industries that I know you follow, one would be
pharmaceutical and biotech.  This bill doesn`t have much pertaining to
that.  The president tweeted earlier today that he has a separate plan
coming that will reduce the prices of the drugs.

But does this act, this bill, have any effect that you can see on biotech
or pharma?

MEEKINS:  The bill does a couple things.  Number one, it repeals a tax on
branded pharmaceutical industry gets $30 billion over ten years.  That`s
bigger than the medical device tax that`s only about $20 billion over 10
years to refer to a ton of folks talk about.

Additionally, it doesn`t touch anything on drug pricing, which is really
the threat of potential policy action on drug pricing has been holding back
a handful of these stocks over the last 18 months from when presidential
candidate Hillary Clinton tweeted about it.

We feel really optimistic about where biotechs going to be based on the
fact that drug pricing policy actions are unlikely in `17.  We also believe
repatriation if that happens as part of tax reform.  You could really see a
lot of cash loan back into the U.S. and acquiring some of these biotech
guys.  It`s one of our most optimistic areas.

MATHISEN:  All right.  Chris, thank you very much.  We appreciate your
clarity tonight.  Chris Meekins with FBR.

MEEKINS:  Thanks.

HERERA:  As Ty just mentioned, drug stocks had a down day after President
Trump took to Twitter promising to cut the price of medicines he tweeted
that he`s working on a, quote, “new system where there will be competition
in the drug industry, pricing for the American people will come way down,”
end quote.

The president offered no specifics but it was enough to send shares of the
biotech ETF ticker symbol IBB down by more than one-and-a-half percent.

MATHISEN:  The president has also pledged to invest in infrastructure and
to renegotiate trade deals and that changes to either of those could ripple
through the massive construction equipment building industry.

Jane Wells report tonight from Las Vegas.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The equipment
manufacturing industry is a $160 billion business in the U.S., but it`s
been pretty lackluster.  Construction hasn`t been strong enough to require
a lot of new machinery, oil and gas have not been great, and down on the
farm — well, farmers say they`re not making any money.

But they`re gambling on a better future in Vegas.  At CONEXPO, the largest
gathering of large machines, held every three years, everyone`s talking
about an infrastructure bill.

DENNIS SLATER, ASSN. OF EQUIPMENT MANUFACTURERS PRESIDENT:  It could be a
trillion-dollar investment.  So, we`re looking at a year that could be a 5
percent increase.

SAM ALLEN, DEERE CEO:  The critical thing first is it`s got passed, and
then it`d have to be funded.  In the past, a lot of times, they have passed
but not funded it on a long-term basis.

WELLS:  But even if manufacturers tout ever smarter and more efficient
machines, they even have a 3D printed excavator here, all the whole for
potential infrastructure spending is being offset by concern over a border
tax and maybe a trade war.

SLATER:  Thirty-five percent of our business depends on foreign trade.  So,
that would just be catastrophic for this business.

ANN DUIGNAN, JPMORGAN ANALYST:  It would be devastating.  I mean, these are
large, global exporting companies that rely on the rest of the world for
their sales.

RICH GOLDSBURY, DOOSAN BOBCAT N.A. PRESIDENT:  For example, most of our
competitors, Caterpillar (NYSE:CAT), Deere, source their engines as we do
overseas.

WELLS:  Bobcat is owned by Korean-base Doosan, and North American president
Rich Goldsbury says his bosses are a little confused by Washington.

GOLDSBURY:  So when I want to talk to some of our Korean executives, they
say, well, what can we do we build a wall?  Can we help build the wall?
And I go, isn`t quite that simple.

WELLS:  Deere CEO Sam Allen said he would tell President Trump yes on
cutting taxes and regulations, but be careful about trade.

ALLEN:  Retaliate against others but don`t put barriers up that then cause
them to retaliate against us.

WELLS:  You see, even the most of Deere sales are domestic, many of its
customers are farmers who export crops to China, Canada and Mexico.  And if
a trade war hurts farmers, it hurts Deere, and the feeling at this
convention, it could hurt everybody.

For NIGHTLY BUSINESS REPORT, Jane Wells, Las Vegas.

(END VIDEOTAPE)

HERERA:  On Wall Street, stocks saw their first back-to-back decline since
January.  Investors were not only analyzing the new healthcare blueprint
but also the prospects for tighter monetary policy.  The Dow Jones
Industrial Average fell 29 points to 20,924.  The NASDAQ was off 15 and the
S&P 500 dropped six.

Oil prices held steady today at $53 a barrel despite the expectation that
U.S. production could increase.

MATHISEN:  And that expectation for arise in production was partially
offset by comments from Saudi Arabia`s oil minister who said the
fundamentals of the crude market are actually improving.

Brian Sullivan spoke to him at CERAWeek, a major oil conference in Houston.

(BEGIN VIDEOTAPE)

BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:   The heaviest
hitters in the world of oil and gas are here in Houston, Texas, and the
heaviest hitter of all is the minister of energy for Saudi Arabia, also the
chairman of Saudi Aramco, Khalid al-Falih.

He spoke exclusively with CNBC, and the heaviest topic was about OPEC`s
production cut agreement, and I began by asking him whether he thought that
production cut deal would continue past the deadline in May.

KHALID AL-FALIH, SAUDI ARABIAN MINISTER OF ENERGY:  It`s premature to
discuss with only two months and one week into the agreement.  I think
performance has been good overall if you look at the numbers in total.
Compliance has been high, certainly among the OPEC countries and the non-
OPEC countries are getting up there.

SULLIVAN:  So, with some optimism that OPEC production deal will be
continued, we asked him if he thinks that the worst has been seen in oil.

AL-FALIH:  I think the fundamentals are coming back into line.  There are
inventory drawdowns.  I think demand is picking up healthy.  The global
economy is doing well and the investment flows have slowed down
significantly, which may be an overshoot, but certainly, they`re not going
to cause this glut to stay with us.

SULLIVAN:  So, there you have it.  Some optimism that may be the worst has
passed us in the oil world because OPEC will be able to do something it has
struggled to do in the past, which is maintained an agreement between
countries to cut production, but there is more optimism this year than
there was last year when oil was below 30 bucks a barrel at the same
conference.

For NIGHTLY BUSINESS REPORT, I am Brian Sullivan in Houston, Texas.

(END VIDEOTAPE)

HERERA:  Still ahead, an airline that no longer wants to fly under the
radar.

(BEGIN VIDEO CLIP)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT:   Hawaiian (NASDAQ:HA)
Airlines set to grow internationally.  Where is that growth going to?  I`m
Phil LeBeau in Honolulu.  That story coming up next.

(END VIDEO CLIP)

(MUSIC)

MATHISEN:  The years of watching airlines in the United States merge to
become bigger and even more profitable, Hawaiian (NASDAQ:HA) Airlines is
flying in a different direction, growing while remaining independent.  But
expanding from the islands of Hawaii to markets around the globe is a
challenge Phil LeBeau usually in Chicago sacrifices profoundly to take us
to the tarmac in Honolulu.

(BEGIN VIDEOTAPE)

LEBEAU:  Hawaiian (NASDAQ:HA) Airlines is the niche carrier trying to break
the mold and become more than just an airline dominating flights to and
around the islands of Hawaii.

MARK DUNKERLEY, HAWAIIAN AIRLINES PRES. & CEO:  We`re about four times
larger than we were, say, six to seven years ago, and that`s all been
organic growth.  And we`ve done that by growing principally the Asia with
our — included a new wide-body aircraft and employing more people here
locally in the community and bringing the aloha spirit around the Pacific
Rim.

LEBEAU:  Hawaiians passenger growth over the last decade has been
impressive, fueled in part by its continued dominance of short-haul flights
between the islands of Hawaii and upgrading its planes to attract more
travelers along the Pacific coast.

But as Hawaiian (NASDAQ:HA) targets expansion to the eastern U.S. or in
huge Asian markets like Beijing, analysts are skeptical it can avoid
turbulence that comes with having a smaller balance sheet.

SCOTT HAMILTON, LEEHAM COMPANY:  Cash is clearly king we have an aggressive
expansion plan.  If you have a thin balance sheet, if you have a thin cash
level, if you have only an OK cash flow, things can go wrong very quickly.

LEBEAU:  Hawaiian`s growth comes at a time when many of its competitors
have merged to become larger and stronger, which raises the question: can
Hawaiian (NASDAQ:HA) stay independent and become a truly international
airline?

DUNKERLEY:  We think we can continue to grow.  I think what`s important for
our business is that we run the best possible airline that we possibly can
as an independent airline.

LEBEAU:  Growing beyond the South Pacific with global ambitions to spread
the Hawaiian (NASDAQ:HA) brand.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Honolulu, Hawaii.

(END VIDEOTAPE)

HERERA:  Dick`s Sporting Goods (NYSE:DKS) issues a disappointing outlook
and that`s where we begin tonight`s “Market Focus”.

The athletic apparel retailer posted quarterly profit and revenue that top
expectations, citing strength in e-commerce and same-store sales.  But the
company followed with weaker-than-expected guidance for the current
quarter, adding that it plans to open additional stores this year while
cutting 20 percent of its lower volume vendors.  Sales were off more than
eight percent to $48.08.

The S&P 500 will get a new edition.  Next Monday, satellite TV provider
Dish Network will be added to the index, replacing Linear Technology
(NASDAQ:LLTC), which is being bought by semiconductor company Analog
Devices (NYSE:ADI).  Dish share rose 4 percent to $64 even.

MATHISEN:  Well, Hewlett-Packard (NYSE:HPQ) Enterprise will buy the flash
memory technology company Nimble Storage for more than a billion.  The deal
is expected to provide HPE with a larger array of storage offerings for its
Enterprise customers.  Hewlett-Packard (NYSE:HPQ) shares off one percent at
$22.82.  Nimble Storage really nimble today, surging 46 percent, yes you
heard me right, to $12.58.

H&R Block (NYSE:HRB) said a lower number of tax filings at the IRS cause
the company`s revenue to drop.  The company also reported a wider loss, but
the results were better than Wall Street`s expectations.  Shares up more
than 8 percent in after-hours trading, but they ended the regular day down
a fraction at $20.84.

HERERA:  State Street (NYSE:STT) Global Advisors is making a new push for
more companies to add more females on their corporate board.  The fun giant
install the bronze statue of a defiant young girl leaning towards Wall
Street iconic charging bronze bull as part of its push for more women
directors.  The company says it would start voting against boards if a
company failed to take steps to increase the number of members on its board
who are women.

State Street (NYSE:STT) Global Advisors deputy chief investment officer
Lori Heinel joins us now to talk more about her company`s push.  And we
should note that State Street (NYSE:STT) has three board members who are
female on their board of director.

Welcome.  It`s a pleasure to have you with us tonight, Lori.

LORI HEINEL, STATE STREET GLOBAL ADVISORS:  Yes, thanks for having this
evening.

HERERA:  Now, you carry a lot of clout.  You`re one of the largest asset
managers globally that there is and you`re going to give companies time to
make these changes, but you`re also going to be watching them very closely.

HEINEL:  We are as a steward as you say of $2.5 trillion, we believe it`s
our duty to improve the outcomes for shareholders.  And one of the ways
that we do that is by engaging aggressively with boards and company
management around those issues that we think will ultimately drive
performance.  And diversity is one of those issues.

MATHISEN:  So, let`s delve a little deeper there.  This isn`t just because
you like girls.  It`s because studies have indicated that companies that a
— are more diverse in terms of representation of women and others perform
better.

HEINEL:  That`s right.  There have been numerous studies, one in particular
by MSCI (NYSE:MSCI) in 2015, that found that companies with more diversity
in their senior leadership actually outperform those without that diversity
by more than 36 percent.

We`ve also seen studies that suggest that these companies take fewer risks
in the sense that they don`t have as many sort of headline news items that
that would bother them from governance perspective.  So, we think that it`s
both a return enhancement opportunity but also a risk management
opportunity.

HERERA:  You`ve been on Wall Street for a long time.  I`ve covered Wall
Street for a long time.  Are you surprised that there hasn`t been more
diversity in the boardroom?  That`s the first question.  And two, what do
you think the reaction is going to be when these letters go out to these
companies?

HEINEL:  So, personally, I`m very surprised.  I`ve been in this business
for more years that I`d like to share.  But the bottom line is these are
issues that we`ve been talking about for a long time and I think the
challenges that we need to tackle some of the root causes — so, some of
the issues around advocacy and sponsorship and really holding leaders
accountable.

And what`s really critical is that there`s a real business case here if the
bottom line is that investors will be better served because there will be
diversity of thought in the boardroom and ultimately in senior management
as well, that`s a better outcome for investors.  And I think people haven`t
really responded to that business case the way that they need to.

MATHISEN:  Thirty seconds, Lori.  What will you do if a company that you
approach doesn`t comply with your request?

HEINEL:  Yes.

MATHISEN:  What is your hammer?

HEINEL:  Yes.  Well, so, first and foremost, we want those companies to
hear us and to make those tangible steps to broaden the diversity on their
boards.  But in the end, if we weren`t able to get the satisfaction they`re
moving that direction, then we will vote against those committees and make
our voice well known.

HERERA:  But we will be keeping track.  Thank you, Lori, for joining us
tonight.

HEINEL:  Thank you.

HERERA:  Lori Heinel with the State Street (NYSE:STT) Global Advisors.

MATHISEN:  And coming up, high tech take out.  Why the fast food industry
is getting caught up in the digital craze.

(MUSIC)

HERERA:  Ordering fast food on your phone seems like a simple enough idea.
It`s worked well for some companies as they try and gain back the business
of millennials among others.

Recently, McDonalds started to try it out.  But is it too little too late?

Susan Li has more.

(BEGIN VIDEOTAPE)

SUSAN LI, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Burgers, pizzas, burritos
and coffee, the battle for your fast food dollars is going high-tech.  The
world`s largest restaurant company, McDonalds, is joining the digital
craze, offering mobile order and pay to 20,000 restaurants this year and
testing as deliveries.

McDonald`s joins Starbucks (NASDAQ:SBUX), Dominoes, Panera, Taco Bell and
others catering to the changing habits of consumers.

STEVE EASTERBROOK, MCDONALD`S PRESIDENT & CEO:  Businesses have to work
harder around the experience to entice customers because technology is
making easier for people to stay at home.  If you want to see a movie, you
can put on Netflix (NASDAQ:NFLX) supposed to go to a movie theater, for
example.

And so, we need people out and about, that`s where we prosper in and around
our restaurant.

LI:  According to the NPD Group, digital food ordering grew 18 percent last
year and now accounts for almost two billion foodservice visits, and it`s
all about dinner accounted for half of digital orders.  Deals and
promotions also play an important part, with consumers twice as likely to
order a deal when there`s a coupon special or discount offered.

Dominoes and Panera were early adopters of mobile ordering which is
increased their business and help their stock surged, according to
analysts.

DAVID PALMER, RBC CAPITAL:  Pizza guys have a head start and they should be
able to add to their food types that that work along with the pizza.  But
also Mexican works well.  There`s no reason why Chipotle for instance can`t
benefit from digital and delivery down the road.

Panera`s Food obviously travels well.  They will continue to benefit.

LI:  So, is McDonald`s (NYSE:MCD) too late for the game?

EASTERBROOK:  We have put a fully integrated plan together.  So, it isn`t
just the consumer-facing technology getting a mobile app that`s more
engaging and useful, but actually things all the way through to the kitchen
and the operation.

LI:  But that`s not to say that there are challenges.  Going mobile makes
it easier to order but it also needs more orders to fill.  Starbucks
(NASDAQ:SBUX) central (INAUDIBLE) experience problems with some of their
outlets.  Level orders overwhelmed the kitchen staff, resulting in long
lines and frustrated customers, something that McDonald`s (NYSE:MCD)
doesn`t want to repeat.

I`m Susan Li for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

HERERA:  And on that note, that does it for NIGHTLY BUSINESS REPORT
tonight.  I`m Sue Herera.

We want to remind you, this is the time of year your public television
station seeks your support.

MATHISEN:  And we`re grateful for it.  I`m Tyler Mathisen.  Thanks for your
support.  Have a great evening, everybody.  We`ll see you back here
tomorrow night.

END

Nightly Business Report transcripts and video are available on-line post
broadcast at http://nbr.com. The program is transcribed by CQRC
Transcriptions, LLC. Updates may be posted at a later date. The views of
our guests and commentators are their own and do not necessarily represent
the views of Nightly Business Report, or CNBC, Inc. Information presented
on Nightly Business Report is not and should not be considered as
investment advice. (c) 2017 CNBC, Inc.

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