Carlisle Companies Reports Second Quarter Diluted Earnings per Share of $1.36
Carlisle Companies Incorporated (“Carlisle”) announced its second quarter 2020 financial results.
– Despite an extremely challenging second quarter, Vision 2025 goals remain intact
– Reported EPS of $1.36 includes $0.25 of costs attributable to restructuring, M&A and COVID-19 related plant closures and absences
– CCM delivered 18.7% operating income margin overcoming an approximately 20% decline in sales
– Solid performance in CIT-Medical partially offset expected weakness in CIT-Aerospace business
– Balance sheet remains strong, with $738 million in cash and untapped revolver of $1 billion
Comments from Chris Koch, Chairman, President and Chief Executive Officer
“First and foremost, let me reflect how very proud I am of Carlisle’s global team and the perseverance and determination they have displayed throughout this ongoing pandemic. Carlisle’s employees have rallied around each other, our customers and our communities by supporting critical infrastructure, continuing to operate our factories and distribution centers all the while adhering to rigorous global health and safety guidelines, and remaining active and positive contributors to their local communities. Overall infections at Carlisle have remained low thanks to diligent adherence to safety guidelines across our operations. However, it saddens all of us at Carlisle as we reflect on the three members of the Carlisle family we lost this quarter to the virus: Maria Camacho, Roy Powell and Gilberto Chavarria Saquil. Their loss is a harsh reminder to us of the every day realities this pandemic has created. Our sincere condolences go out to their families as they deal with their grief.
Turning to our second quarter financial results, our performance was led by a resilient CCM. While the quarter began with April’s volumes down in excess of 30%, we saw strong recovery in shipments through May and June, and we continue to benefit from the overall resumption of construction activity in both the U.S. and Europe. CCM’s operating income margins of 18.7% during the quarter validate Carlisle’s position in the market, the importance of the Carlisle Experience and the efficiency with which our team at CCM is operating, especially in these difficult times. As has been publicly reported, many U.S. roofing industry participants reacted to COVID-19’s sharp impact on second quarter demand with destocking, significant cost cutting, and, in some cases, plant closures in an effort to conserve cash. Needless to say, these actions created a significant opportunity for CCM as we remained committed to supplying our contractor customers and distributors relying on higher production and inventory levels to ensure uninterrupted service. We believe the actions taken at CCM prior to and during the pandemic have solidified its place as the premium provider of Building Envelope solutions. Another notable positive was the performance of CCM’s new platforms in Architectural Metal and Polyurethane. Both of these new additions performed very well in the quarter. Lastly, we continue to be steadfast in our commitment to price discipline and now expect a net price/raw material year-over-year benefit at CCM of approximately $60 million in 2020.
At CIT, we, like many others, were taken aback by the record global decline in aerospace production and the accompanying ripple effects through the supply chain. The brutal reality is that this crisis has devastated many aerospace participants. Our ongoing actions to restructure and rightsize our manufacturing footprint over the past few years, combined with accelerated restructuring taken in 2020, have positioned us to maintain profitability even as demand in the aerospace industry reset materially in the second quarter. We are maintaining our core competencies while taking these necessary actions, adapting to the near-term demand decline. We do, however, see some positive signs in the aerospace markets. While passenger travel dropped over 90% in the first few weeks of the quarter, daily TSA screenings as a percent of the prior year ended the quarter down approximately 70%, demonstrating slow but tangible improvement, including a spike around the July 4th holiday in the U.S. Additionally, Boeing’s 737 MAX moved closer to FAA approval with the completion of certification flights on July 1. We remain a supplier-of-choice in the global aerospace market and will continue to invest in our assets, including seeking opportunistic M&A opportunities to ensure readiness to leverage stability and ultimate resumption of growth in the industry.
CIT’s Medical Technologies platform, on the other hand, grew revenue 15% organically year-over-year during the second quarter driven by increased demand for COVID-19 related patient monitoring equipment. Recently acquired Providien also continued to perform well. In addition, product rationalization actions taken in medical product lines in 2018 and 2019 have improved CIT-Medical’s margin profile, with continued COS efforts further enhancing profitability levels.
At CFT, results each month improved throughout the second quarter and we continue our steady progress on the initiatives laid out in Vision 2025. Unfortunately, volume declines of over 30% weighed heavily on operating income results. Despite this, we remain committed to this platform and continue to add product breadth by investing in new products such as our market differentiated fluid handling system for spray foam launched in the second quarter. CFT also continues its focus on upgrading the customer experience through quality and delivery improvements across the globe. We are beginning to see positive signs in CFT’s end markets, particularly in Asia, and are cautiously optimistic for an improved second half of 2020. Coupling this with our ongoing actions, we are confident the business will leverage nicely going forward.
The pandemic crisis extended the pressure CBF was already experiencing in the global off-highway vehicle markets, offsetting the significant actions taken the past few years in this business, including the Tulsa to Medina plant consolidation and obtaining three coveted FAA Parts Manufacturer Approvals (“PMAs”) for aircraft carbon brakes. Given the actions taken over the past several years, its strong market position, and traction on new technology introductions, we expect CBF to favorably leverage any improvements in volume and await recovery from the pandemic.
From a core financial position, Carlisle’s disciplined and conservative approach to the balance sheet and capital deployment, coupled with our strong cash flow, position the company to weather the current environment. In addition to funding Vision 2025, we remain very focused on maintaining our financial and strategic flexibility to be able to best leverage future opportunities. Some specific points that highlight Carlisle’s strong financial position:
– As of June 30, 2020, we had cash-on-hand of $738 million and undrawn $1 billion on our credit facility, amounting to net debt to capital of approximately 35%
– We expect to generate free cash flow conversion in excess of 125% in 2020.
– We paid our second quarter dividend totaling $28 million on June 1st, and anticipate increasing our dividend in September for the 44th consecutive year.
– We were opportunistic in capital deployment, repurchasing 556,000 shares in the second quarter consistent with our ongoing share repurchase philosophy. We also continue to work an active M&A pipeline and are investing in our businesses across the globe.
We enter the second half of 2020 cautiously optimistic and with confidence in our ability to deliver longer-term on Vision 2025. Needless to say, the COVID-19 pandemic continues to negatively impact our operations. The uncertainties remaining around the pandemic, including the length and severity of the economic downturn and continued tension with China, likely will result in a choppy path to ultimate recovery, and we are unable to predict the full extent or duration of these events on Carlisle at this time. However, given our strong balance sheet and cash flow generating capabilities, we are well prepared to navigate the future while maintaining our disciplined and opportunistic capital deployment strategy. Once again, I want to thank all Carlisle employees for diligently following safety guidelines. Carlisle has succeeded for over 100 years, often persevering through difficult conditions because of the commitment of our employees both past and present.”
Second Quarter 2020
Revenue of $1.02 billion decreased 22.1% from $1.31 billion in the second quarter of 2019. Organic revenue declined 23.8% (organic revenue defined as revenue excluding acquired revenues within the last twelve months and the impact of changes in foreign exchange rates versus the U.S. Dollar). Acquired revenues contributed a total of 1.9% in the quarter. Changes in foreign exchange rates had a negative 0.2% impact on revenues.
Operating income of $113.4 million decreased 45.3% from the second quarter of 2019. Operating income performance was driven primarily by volume declines, partially offset by raw material savings, lower SG&A and contributions from COS.
For the full third quarter results, click here.
About Carlisle Companies Incorporated
Carlisle Companies Incorporated is a diversified, global portfolio of niche brands and businesses that manufactures highly engineered products and solutions for its customers. Driven by our strategic plan, Vision 2025, Carlisle is committed to generating superior shareholder returns by combining an entrepreneurial management style under a center-led framework with a balanced approach to capital deployment, all with a culture of responsible stewardship and continuous improvement as embodied in the Carlisle Operating System. Carlisle’s markets include: commercial roofing, specialty polyurethane, architectural metal, aerospace, medical technologies, defense, transportation, industrial, protective coating, auto refinishing, agriculture, and construction. Carlisle’s worldwide team of employees generated $4.8 billion in revenues in 2019. Learn more about Carlisle at www.carlisle.com.
Jim Giannakouros – Vice President of Investor Relations & FP&A – email@example.com – (480) 781-5135
Source: Carlisle Companies Incorporated