Carlisle Companies Incorporated — 2023 Form 10-K
Business context and reporting period. Reports the fiscal year ended December 31, 2023, with comparisons to 2022. Carlisle manufactures building-envelope products through Carlisle Construction Materials (CCM) and Carlisle Weatherproofing Technologies (CWT). The filing presents discontinued operations separately, including Carlisle Fluid Technologies (CFT) and Carlisle Interconnect Technologies (CIT).
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $4,586.9 million | $5,449.4 million | Down 15.8% |
| Gross margin | 35.6% | 34.2% | Up 1.4 percentage points |
| Operating income / margin | $982.8 million / 21.4% | $1,204.8 million / 22.1% | Income down 18.4% |
| Continuing-operations income | $718.9 million | $858.0 million | Down 16.2% |
| Diluted EPS, continuing operations | $14.22 | $16.30 | Down 12.8% |
| Net income, including discontinued operations | $767.4 million | $924.0 million | Down 16.9% |
| Adjusted EBITDA margin | 25.1% | 25.5% | Down 0.4 percentage points |
| Operating cash flow | $1,201.3 million | $1,000.9 million | Up $200.4 million |
- Segment results: CCM revenue fell 16.3% to $3,253.4 million; operating margin declined to 28.1% from 30.2%. CWT revenue fell 14.7% to $1,333.5 million, while operating income rose to $187.9 million from $128.6 million and operating margin improved to 14.1% from 8.2%.
- Drivers: Management attributed lower sales primarily to project delays and uncertainty amid higher interest rates, distributor and contractor destocking, and weaker construction markets. Gross margin improved through operating efficiencies, targeted restructuring, sourcing and Henry acquisition synergies; lower CCM volumes pressured segment margins.
- Cash flow and investment: Operating cash flow was $1,201.3 million, including a $107.6 million working-capital source; inventory reductions were a key contributor. Capital expenditures were $142.2 million. Investing cash flow included $510.6 million of net proceeds from the CFT sale.
- Liquidity and debt: Cash and equivalents were $576.7 million, versus $364.8 million a year earlier. Debt carrying value was $2,289.4 million, including $402.7 million current debt; the $400 million 3.50% notes mature in December 2024. The company had no year-end revolver borrowings and $1.0 billion available under its facility, and reported compliance with debt covenants.
- Capital returns: Carlisle repurchased approximately 3.5 million shares for $900 million and paid $160.3 million in dividends during 2023. It reported a 47th consecutive annual dividend increase.
Material changes, outlook and risks
- Revenue decreased $862.5 million year over year, reflecting lower non-residential and residential construction sales and the exit from a non-core business. Revenue from continuing operations was almost entirely U.S.-based: 90% in 2023.
- CFT was sold on October 2, 2023, for stated proceeds of $520 million, subject to adjustments. The transaction contributed to discontinued-operations results, which included a $61.8 million after-tax loss on sale and a $24.8 million goodwill impairment. Carlisle signed an agreement on January 30, 2024 to sell CIT to Amphenol for a transaction value of $2.025 billion, subject to adjustments and customary closing conditions; closing was expected by the end of Q2 2024.
- Management’s 2024 revenue outlook was approximately 5% growth overall: CCM approximately 6% and CWT approximately 4%. Cited factors included channel restocking tailwinds, contractor backlogs and re-roofing demand; CWT outlook also cited strong residential demand, partly offset by new non-residential market headwinds. Planned 2024 capital expenditures were approximately $160–$180 million.
- Management said the 2023 inventory destocking had ended and described a positive, achievable growth outlook, while noting that backlog is not a reliable intermediate-term revenue indicator for either segment. It plans to raise capital spending and R&D investment and continue opportunistic share repurchases and disciplined acquisitions.
- Key risks include construction-market cyclicality and interest-rate sensitivity, pricing competition, raw-material volatility (raw materials and inbound freight were about 67% of cost of goods sold), concentration in two customers that together generated 31.7% of 2023 consolidated revenue, international and currency exposure, acquisition integration, environmental and climate commitments, litigation and cybersecurity. Management reported no material cybersecurity impact to date.
- CCM Europe goodwill had fair value less than 10% above carrying value in the 2023 impairment test; the Henry indefinite-lived trade name also had fair value less than 10% above carrying value. Adverse changes in forecasts, discount rates or market conditions could trigger impairment. The Henry trade-name valuation was identified as a critical audit matter.
Important facts for investors to verify
- Whether the projected 2024 revenue growth materializes, especially as construction demand, contractor backlogs and channel inventory normalize.
- Completion, final proceeds and adjustments for the pending CIT sale, including the use of proceeds and resulting capital allocation.
- Repayment or refinancing plans for the $400 million notes due December 2024 and the company’s liquidity after planned investment, dividends and repurchases.
- Whether CWT’s margin improvements persist and CCM recovers margins as volumes improve.
- Developments in customer concentration, raw-material costs, the CCM Europe goodwill and Henry trade-name valuations, and other material contingencies.
Audit: Deloitte & Touche issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting as of December 31, 2023.