Carlisle Companies Incorporated — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Carlisle supplies building-envelope products and energy-efficient solutions through Carlisle Construction Materials (CCM) and Carlisle Weatherproofing Technologies (CWT), plus aerospace, medical, industrial and finishing products through Carlisle Interconnect Technologies (CIT) and Carlisle Fluid Technologies (CFT). Results are unaudited.
Financial performance
| Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 |
|---|---|---|---|---|
| Revenue | $1,846.9m | $1,177.8m | $3,343.2m | $2,118.7m |
| Operating income / margin | $410.6m / 22.2% | $133.8m / 11.4% | $687.9m / 20.6% | $218.5m / 10.3% |
| Income from continuing operations | $295.9m | $94.1m | $490.2m | $143.2m |
| Diluted continuing-operations EPS | $5.62 | $1.77 | $9.28 | $2.68 |
| Net income | $301.5m | $99.3m | $495.1m | $151.5m |
| Adjusted EBITDA / margin | $472.2m / 25.6% | $191.7m / 16.3% | $817.0m / 24.4% | $329.5m / 15.6% |
Q2 revenue rose 56.8%; management attributed the increase to Henry acquisition contributions (15.5 percentage points) and price/volume (42.2 points), partly offset by foreign exchange (-0.9 points). H1 revenue rose 57.8%, with acquisition, price/volume and exchange effects of 15.1%, 43.4% and -0.7%, respectively. Higher pricing, volume and favorable mix more than offset raw-material and wage inflation. Q2 gross margin was 34.2%, versus 26.1% a year earlier.
Q2 segment results: CCM revenue was $1,113.4m, operating income $358.9m and operating margin 32.2%; CWT $448.9m, $59.0m and 13.1%; CIT $212.6m, $7.9m and 3.7%; CFT $72.0m, $7.0m and 9.7%. CWT’s year-over-year growth included Henry; CIT returned to operating profit from a prior-year loss.
Cash flow, liquidity and debt
H1 operating cash flow was $223.5m, up from $171.5m, despite $415.8m of working-capital cash use (versus $103.9m in H1 2021), mainly from higher receivables and inventories. Investing activities provided $36.9m, including $132.0m in proceeds associated with the CBF divestiture, partly offset by $82.7m of capital expenditures and the MBTechnology acquisition. Financing used $229.9m, including $175.0m of share repurchases and $56.7m of dividends. Cash increased $28.8m to $353.2m.
At June 30, 2022, total debt was $2,929.9m, including $352.2m current debt; cash was $353.2m. The $350m 3.75% notes were due November 2022. The $1.0bn revolving facility was undrawn and fully available; Carlisle reported compliance with debt covenants. Management said liquidity and operating cash flow should meet anticipated requirements for at least 12 months and support repayment of notes at maturity.
Changes, outlook and risks
Henry, acquired in September 2021, materially increased CWT revenue; management said the acquisition continued to exceed expectations and deliver on its $30m synergy commitments. Carlisle acquired MBTechnology in February 2022 for $26.3m. The company received $125m of contingent CBF sale proceeds in February 2022; 2022 discontinued-operations income primarily reflects a gain on related real estate, so reported net income includes this non-core contribution.
Management’s 2022 outlook called for revenue growth of approximately 40% at CCM, 60% at CWT, 20% at CIT and 10% at CFT, with total Carlisle growth above 40%. Other stated expectations: corporate expenses of about $110m; depreciation and amortization of about $250m; capital expenditures of about $175m; net interest expense of about $90m; and a 24–25% base tax rate. Management described demand and backlogs as strong, remained optimistic for the rest of 2022, and reiterated progress toward its Vision 2025 goal of $15 EPS; these are forward-looking expectations, not guarantees.
Key risks cited include inflation and inability to recover raw-material costs through pricing, supply-chain and labor constraints, cyclical demand, foreign-exchange and interest-rate movements, competition, acquisition integration, cybersecurity, litigation and economic or geopolitical disruption, including the Russia-Ukraine conflict. Asbestos-related claims and insurance recovery remain contingencies; management said recorded liabilities were not material. Carlisle reported no material changes to risk factors or market-risk disclosures. Henry’s internal controls were still being integrated into Carlisle’s SOX compliance program.
Investor verification priorities
- Assess whether price increases and volume gains can continue to offset raw-material, freight and wage inflation, and whether the stated segment growth outlook remains achievable.
- Track working-capital absorption, particularly receivables and inventory, against operating cash generation.
- Confirm the November 2022 notes’ repayment or refinancing and monitor debt, facility availability and covenant compliance.
- Evaluate Henry’s integration, realized synergies and the effect of acquisition-driven growth on margins.
- Separate recurring continuing-operations performance from the CBF-related discontinued-operations gain and review the assumptions behind adjusted EBITDA.
- Monitor asbestos litigation, insurance coverage disputes, restructuring costs and completion of Henry’s controls integration.