Carlisle Companies Reports Third Quarter Results
Carlisle Companies Incorporated (“Carlisle”, “we” or the “Company”) announced its third quarter 2020 financial results.
– CCM reported 22.0% operating margin despite a sales decline of approximately 8%
– CIT responded quickly to the downturn with restructuring and diversification efforts, which partially offset global aerospace market declines
– Reported EPS of $1.87 includes $0.08 of costs attributable to restructuring and COVID-19 items
– Carlisle repurchased 1.2 million shares for $150 million during the third quarter and increased its dividend 5%, the 44th consecutive year of increases
Comments from Chris Koch, Chairman, President and Chief Executive Officer
“As we enter the fourth quarter of 2020 and our 10th month of operating in this COVID-19 pandemic, I am grateful for the dedication and commitment of all Carlisle’s employees to our customers, our company, our communities and to each other. Our continued efforts to stay focused on serving our essential customers and protecting each other are actions of which we all should be proud, and ones we know will assure the future long-term growth and prosperity of Carlisle. There is no question that it is the Carlisle team’s hard work, dedication and perseverance that has sustained us through a challenging 2020, and it will be that same unyielding spirit that will help us deliver on Vision 2025.
Despite the many challenges facing Carlisle and the global economy in 2020, Vision 2025 remains very much intact. The Vision 2025 roadmap delivers $8 billion in revenues, 20% operating margin, and 15% return on invested capital (“ROIC”), all driving to $15 of earnings per share.
As a reminder, the foundational pillars of Vision 2025 include:
– Drive organic growth in excess of 5%.
– Utilize the Carlisle Operating System (“COS”) consistently to reduce costs 1-2% of sales, driving operating leverage.
– Build scale with synergistic acquisitions.
– Continue to invest in and develop exceptional talent.
– Deploy over $3 billion into capital expenditures, share repurchases and dividends.
While the COVID-19 pandemic has affected our near-term results, we are confident our proactive approach will allow us to accelerate through the recovery by: further improving the efficiency of our businesses through COS, continuing to make the investments necessary to deliver a world-class Carlisle Experience, and ensuring we maintain the discipline and rigor in our capital allocation process. Taken together, these actions will result in Carlisle achieving our Vision 2025 goal of $15 of earnings per share.
Third Quarter Results
Third quarter results were led again by CCM, which delivered a 5% year-over-year improvement in operating income despite an 8% decline in revenue. Notably, there was sequential improvement through the third quarter with September sales ending slightly positive year-over-year for the first time since the pandemic began. Recently announced price increases by the major CCM competitors and improving demand trends in the industry are positive signs as we move into the fourth quarter and 2021. These strong signals are coupled with significant long-term positive re-roofing projections, CCM’s consistent price leadership, efficiencies gained from COS and our ability to deliver world-class service through the Carlisle Experience. We continue to be extremely pleased with CCM’s ability to generate cash and deliver operating income in excess of 20% in our core commercial roofing business even during challenging times. When taken with the sequential improvements in the third quarter in sales, we are cautiously optimistic about the fourth quarter and early 2021.
At CIT, we continue to experience the effects of a record global decline in commercial aerospace production and the accompanying ripple effects through the supply chain. That said, we do see signs of an improving outlook. Some positive news includes: the European regulatory body has approved the 737Max-8 aircraft for a return to flying; Airbus announced in early October that it had delivered 57 aircraft in September, up from an April low of 14; Boeing has had very few cancellations in recent weeks and daily TSA screenings reached over one million passengers per day on October 18th, 2020 for the first time since March. With all these positives, and an expected approval of a vaccine in the coming months, we feel we are nearing the low point in our aerospace business and approaching a slow but meaningful recovery.
CIT’s Medical Technologies platform continued to be a positive in the third quarter driven by robust demand for COVID-19 related patient monitoring equipment, which was partially offset by the reduction in elective surgeries and hospital capital spending. We continue to seek opportunistic acquisition opportunities to complement our existing product suite, driving to an improved balance of market exposures at CIT.
CFT delivered positive sequential results despite being our most global business and the most exposed to the pandemic. Operating income improved 5% year-over-year driven by positive price realization, improved operational execution and new product introductions, including our recently launched market differentiated fluid handling system for spray foam in spite of a sales decline of 5%. We expect this positive trend of sequential growth to continue as we move through the fourth quarter. The team is executing and gaining traction on initiatives to deliver improved quality and delivery to enhance our customers’ experience. We are confident the multitude of actions we continue to drive will leverage nicely as we move into early 2021.
CBF delivered significantly improved sales results sequentially, down 9% in the third quarter compared to down over 30% in the second quarter of 2020. Market conditions are stabilizing but the unfortunate reality is that demand for global off-highway vehicles is still weak. Another contributing factor to CBF’s results is, similar to CIT, its exposure to a decimated aerospace industry into which it supplies high margin metallic and carbon aircraft braking products. 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 as its markets recover post-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 well to accelerate through the recovery. In addition to funding Vision 2025, we remain focused on maintaining our financial and strategic flexibility which gives us the ability to continue to simultaneously fund organic growth, increase our dividend consistently, seek synergistic acquisitions, primarily within the construction products and medical technologies space, and opportunistically repurchase shares. Some specific points that highlight Carlisle’s strong financial position:
– As of September 30, 2020, we had cash-on-hand of $719.0million and $1.0 billion of undrawn availability on our credit facility, amounting to net debt to capital of approximately 36%.
– We increased our dividend 5% on August 6th, our 44th consecutive year of increases, and paid $28.5 million to shareholders on September 1st.
– We repurchased 1.2 million shares in the third quarter for $150 million, increasing our total repurchases to $1.5 billion since the beginning of Vision 2025, well in excess of our original goal of $1 billion for the duration of the plan.
– We also continue to work an active M&A pipeline and are focused on investing in our highest returning businesses to drive value creation for shareholders.
We enter the fourth quarter of 2020 confident in our ability to accelerate though this recovery and deliver on Vision 2025. Needless to say, the uncertainties remaining around the pandemic, including the length and severity of the economic downturn, continued tension with China, and volatility surrounding upcoming elections in the United States, likely, will result in a choppy path to ultimate recovery, and we are unable to predict the full impact 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.”
Third Quarter 2020
Revenue of $1.13 billion decreased 12.0% from $1.28 billion in the third quarter of 2019. Organic revenue declined 14.3% (organic revenue defined as revenue excluding acquired revenues within the last 12 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 positive 0.4% impact on revenues.
Operating income of $155.7 million decreased 18.5% from the third quarter of 2019. Operating income performance was driven primarily by volume declines, wage inflation and higher restructuring costs, partially offset by raw material savings, lower SG&A and contributions from COS.
Third Quarter 2020 Segment Highlights
Carlisle Construction Materials (“CCM”)
– Revenues of $823.5 million, down 7.8% (-8.1% organic) year-over-year, were impacted by volume declines.
– Operating income was $181.3 million, up 4.8% year-over-year. Operating margin of 22.0%, a 260 basis point improvement, was driven by favorable raw material pricing, savings from COS and lower SG&A, partially offset by volume declines, price and wage inflation.
– Items affecting comparability were costs of $1.3 million versus $0.8 million in the third quarter of 2019.
Carlisle Interconnect Technologies (“CIT”)
– Revenues of $168.5 million, down 30.3% (-39.1% organic) year-over-year were negatively impacted by a significant decline in orders from Aerospace customers, partially offset by acquisitions.
– Operating loss was $3.7 million. Operating margin of -2.2%, was affected by lower volumes, higher restructuring costs, and wage and raw material inflation, partially offset by savings from COS and lower SG&A.
– Items affecting comparability were costs of $4.5 million versus $2.5 million in the third quarter of 2019.
Carlisle Fluid Technologies (“CFT”)
– Revenues of $65.0 million, down 5.1% (-10.8% organic) year-over-year, reflected volume declines, particularly in the transportation and automotive refinish markets, partially offset by acquisitions and price.
– Operating income was $4.4 million, up 4.8% year over year. Operating margin of 6.8%, a 70 basis point improvement, reflected impacts from price, savings from COS and lower SG&A, partially offset by lower volumes and wage and raw material inflation.
– Items affecting comparability were costs of $0.1 million versus $1.0 million in the third quarter of 2019.
Carlisle Brake & Friction (“CBF”)
– Revenues of $69.7 million, down 9.1% (-10.8% organic) year-over-year, reflected headwinds in off-highway vehicle end markets.
– Operating income was $0.9 million. Operating margin of 1.3%, a 610 basis point decline, was driven by lower volumes and wage inflation, partially offset by savings from COS.
– Items affecting comparability were costs of $0.4 million versus $0.5 million in the third quarter of 2019.
Free cash flow (defined as cash provided by operating activities less capital expenditures, and comprised of continuing and discontinued operations) was $367.5 million for the nine months ended September, 30 2020, a decrease of $65.4 million versus the prior year. Our priorities for the use of cash are to invest in growth and performance improvement opportunities for our existing businesses through capital expenditures, pursue strategic acquisitions that meet return criteria, pay dividends and return value to shareholders through share repurchases.
During the three months ended September 30, 2020, we redeployed our free cash flow towards $149.9 million in share repurchases and $28.5 million in dividends paid. As of September 30, 2020, we had $719.0 million of cash and $1.0 billion of availability under our revolving credit facility.
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 – firstname.lastname@example.org – (480) 781-5135
Source: Carlisle Companies Incorporated