Carlisle Companies Incorporated — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023, compared with the same periods in 2022. Carlisle reports continuing operations through Carlisle Construction Materials (CCM), Carlisle Weatherproofing Technologies (CWT), and Carlisle Interconnect Technologies (CIT). Carlisle Fluid Technologies (CFT) is presented as a discontinued operation following a pending sale agreement.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $1,525.9 million | $1,774.9 million | $2,632.0 million | $3,200.1 million |
| Operating income | $327.6 million | $403.6 million | $458.2 million | $676.2 million |
| Operating margin | 21.5% | 22.7% | 17.4% | 21.1% |
| Continuing-operations income | $241.5 million | $290.8 million | $333.3 million | $481.2 million |
| Diluted EPS, continuing operations | $4.71 | $5.52 | $6.47 | $9.11 |
| Adjusted EBITDA and margin | $385.4 million; 25.3% | $460.2 million; 25.9% | $583.7 million; 22.2% | $794.4 million; 24.8% |
| Operating cash flow | Not separately reported | Not separately reported | $370.7 million | $223.5 million |
Consolidated revenue declined 14.0% in Q2 and 17.8% for the first half, primarily due to lower construction sales as distributors destocked inventory; weather and higher interest rates prolonged the pressure. Q2 gross margin improved to 34.7% from 34.1%, while first-half gross margin declined to 32.2% from 33.4%. Net income was $194.6 million in Q2 and $296.3 million for the first half; discontinued operations reduced those totals by $46.9 million and $37.0 million, respectively.
- CCM: Q2 revenue fell 14.9% to $947.5 million; operating margin declined to 29.6% from 32.2%, mainly due to lower volumes and higher per-unit costs.
- CWT: Q2 revenue fell 19.9% to $359.5 million, but operating margin rose to 16.6% from 13.1%; adjusted EBITDA margin expanded to 22.5% from 18.6%, supported by efficiencies, restructuring, and synergies.
- CIT: Q2 revenue increased 3.0% to $218.9 million, led by aerospace; operating margin rose to 9.0% from 3.7%, with restructuring savings contributing to improved profitability.
Cash, debt, and capital allocation
At June 30, 2023, cash and equivalents were $379.3 million, versus $388.7 million at year-end 2022. Debt totaled $2,584.2 million, including $302.0 million current and $2,282.2 million long-term. The $1.0 billion revolving credit facility had no borrowings and was fully available; Carlisle reported compliance with debt covenants. Six-month operating cash flow rose $147.2 million year over year, principally because working-capital cash uses were lower. Capital expenditures were $70.1 million. Carlisle repurchased $250.0 million of shares and paid $77.2 million in dividends during the first half.
Outlook, material items, and risks
- Management forecast 2023 revenue declines versus 2022: low teens for CCM, low teens for CWT, and low double digits for Carlisle overall; CIT was expected to grow mid-single digits.
- Other 2023 expectations: corporate expenses of $115–$120 million; depreciation and amortization of about $230 million; capital expenditures of $175–$200 million; net interest expense of about $60 million; and a base tax rate of 23%–24%.
- On June 14, Carlisle agreed to sell CFT to an affiliate of Lone Star Funds for $520 million at closing, subject to adjustments and customary conditions, including regulatory clearances. Closing was expected in Q3 2023. CFT generated a $24.8 million goodwill impairment and a $50.8 million loss on classification as held for sale in Q2.
- Management cited strong non-residential construction demand, contractor backlogs, and aerospace demand, while noting channel destocking. Watch items include higher interest rates, potential economic slowdown, weather disruptions, labor constraints, residential-market weakness, and medical-market sales.
- Carlisle said it intended to provide details of its Vision 2030 strategy by year-end. It also cited ongoing CIT facility relocations and restructuring; costs and timing may vary from estimates.
- The filing identifies broader risks including competition, raw-material costs, regulation, acquisitions and dispositions, cybersecurity, litigation, foreign exchange, and economic and geopolitical conditions. Management reported no material change to previously disclosed risk factors and no material change in market-risk disclosures.
Important facts for investors to verify
- Whether the CFT sale closed as expected, its final proceeds and adjustments, and any further separation or disposal effects.
- Whether distributor destocking, weather delays, and residential weakness eased as assumed in the 2023 revenue outlook.
- Progress against segment revenue and margin expectations, particularly CCM performance and CIT aerospace growth.
- Cash conversion and working-capital trends, planned capital spending, and the pace of share repurchases and dividends.
- Debt maturities, facility availability, covenant compliance, and any restructuring or litigation developments.