Carlisle Companies Incorporated — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are to Q1 2021 unless otherwise noted. Amounts are in U.S. dollars and millions, except per-share data.
Business context and results
Carlisle supplies building-envelope and energy-efficiency products through Carlisle Construction Materials (CCM) and Carlisle Weatherproofing Technologies (CWT), alongside aerospace, medical, industrial and fluid-technology businesses. The company reorganized its construction-materials businesses into CCM and CWT during the quarter; prior-period segment information was reclassified.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $1,496.3 | $940.9 |
| Operating income / margin | $277.3 / 18.5% | $84.7 / 9.0% |
| Continuing-operations income | $194.3 | $49.1 |
| Net income | $193.6 | $52.2 |
| Diluted EPS from continuing operations | $3.67 | $0.91 |
| Adjusted EBITDA / margin | $344.8 / 23.0% | $137.8 / 14.6% |
Revenue rose 59.0%, reflecting price realization and higher volumes across segments, Henry acquisition contributions, and a 0.5% adverse foreign-exchange effect. Gross margin increased to 32.8% from 26.0%. Management attributed improved margins primarily to pricing, volume and Carlisle Operating System savings, partly offset by raw-material and wage inflation. Adjusted EBITDA is a non-GAAP measure and may not be comparable with similarly titled measures at other companies.
Segments and material changes
- CCM: Revenue $881.1, up 58.4%; operating income $261.1, up from $110.7. Results reflected pricing, stronger U.S. commercial roofing demand, volume and product mix.
- CWT: Revenue $359.1, up 120.4%, including Henry acquisition effects; operating income $37.5 versus $10.6. Pricing, volume and Henry contributed, partly offset by inflation and acquired-intangible amortization.
- CIT: Revenue $185.0, up 18.7%; operating loss narrowed to $2.5 from $10.7. Management cited improving aerospace volumes, pricing and cost savings, with wage inflation and unfavorable mix as offsets.
- CFT: Revenue $71.1, up 8.1%; operating income $4.8 versus $4.3. Adjusted EBITDA margin declined to 14.8% from 15.5%, amid inflation and unfavorable mix.
Henry, acquired in September 2021, contributed to CWT growth; management said integration and synergy delivery were exceeding expectations. Carlisle acquired MBTechnology in February 2022 for $26.3, including acquired cash. Its results contributed $2.0 of revenue and $0.1 of operating income through March 31.
Cash flow, balance sheet and liquidity
- Operating cash flow was $44.3, down from $67.6, including a $229.9 working-capital use versus $54.0 in Q1 2021. Higher receivables and inventory were the main factors.
- Investing cash flow was positive $81.2, including $125.0 received as contingent consideration from the sale of Carlisle Brake & Friction (CBF); capital expenditures were $31.1 and MBTechnology acquisition cash outflow was $24.7.
- Financing cash outflow was $158.8, including $125.0 of share repurchases and $28.7 of dividends. Cash declined to $291.7 from $324.4 at year-end 2021.
- At March 31, total debt was $2,928.8, including $352.1 current and $2,576.7 long-term. The $1.0 billion revolving facility had no borrowings and was fully available. The company reported compliance with debt covenants.
- Total current assets were $2,228.8 and current liabilities $1,188.6. Receivables were $1,002.6 and inventory $728.9. Management said available cash, facility capacity and operating cash flow should cover anticipated requirements for at least 12 months.
Outlook, risks and contingencies
Management forecast 2022 revenue growth of approximately 30% for CCM, 55%–60% for CWT, low double digits for CIT, approximately 10% for CFT, and over 30% company-wide. Other 2022 expectations: corporate expenses of approximately $120; depreciation and amortization of approximately $250; capital expenditures of approximately $175; net interest expense of approximately $90; and a base tax rate of approximately 24%–25%.
Management cited strong reroofing and new-construction demand, demand for energy-efficient products, growing CIT aerospace and medical backlogs, and ongoing price realization. It also expected raw-material and wage inflation to persist through 2022, while noting continuing supply-chain and labor constraints. Carlisle reported minimal direct exposure to Russia and Ukraine but was monitoring broader effects, especially on commodities and Europe. Risks identified include inflation and pricing recovery, supply chains and labor, COVID-19 impacts, competition, acquisitions and integration, cybersecurity, foreign exchange, litigation, and geopolitical and economic conditions.
CBF was sold in August 2021; Carlisle received the full $125 contingent consideration in February 2022. Q1 2022 discontinued-operations loss of $0.7 primarily reflected CBF-sale transaction expenses. The filing also describes asbestos-related claims involving the discontinued Motion Control business and Henry; management considered related liabilities not material, while noting insurance limits, exclusions and possible coverage disputes. Other ordinary-course legal matters were not expected by management to have a material adverse effect.
Investor verification points
- Assess whether pricing and volume can continue to offset raw-material, wage and freight inflation, and whether stated revenue-growth outlook is achieved.
- Track working-capital needs and cash conversion: Q1 operating cash flow fell despite sharply higher earnings.
- Verify Henry integration, synergy realization and the effect of acquired amortization on CWT profitability.
- Monitor CIT recovery, the Carlsbad relocation and restructuring costs; approximately $3.0 of project costs remained expected at quarter-end per MD&A.
- Review debt maturities, refinancing needs and liquidity, including the $352.1 current debt portion and the company’s planned capital returns.
- Follow asbestos-related claims and insurance recoverability, as well as inflation, supply-chain, labor and geopolitical exposures.