Carlisle Companies Incorporated — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; comparisons are to the corresponding 2020 periods. Amounts are in U.S. dollars. CBF results are reported as discontinued operations; continuing operations comprise CCM, CIT and CFT.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $1,177.8 million | $965.4 million | $2,118.7 million | $1,924.6 million |
| Gross margin | $307.7 million; 26.1% | $270.1 million; 28.0% | $552.6 million; 26.1% | $539.5 million; 28.0% |
| Operating income / margin | $133.8 million; 11.4% | $114.5 million; 11.9% | $218.5 million; 10.3% | $221.7 million; 11.5% |
| Continuing-operations income | $94.1 million | $76.0 million | $143.2 million | $140.8 million |
| Net income | $99.3 million | $75.4 million | $151.5 million | $137.2 million |
| Diluted EPS, continuing operations | $1.77 | $1.37 | $2.68 | $2.52 |
| Operating cash flow | Not presented quarterly in the filing | $171.5 million | $226.3 million |
Q2 revenue grew 22.0%, reflecting higher volumes and price realization at CCM and CFT, plus favorable foreign exchange; lower CIT volumes partly offset growth. Operating income rose in Q2 but fell 1.4% for the first six months despite higher revenue. Management attributed margin pressure mainly to raw-material and wage inflation and unfavorable CIT mix. Q2 continuing-operations EPS also benefited from a lower tax rate and fewer average shares following repurchases.
Segment results in Q2: CCM revenue was $937.3 million and operating income $177.4 million (18.9% margin); CIT revenue was $168.9 million and operating loss $12.9 million; CFT revenue was $71.6 million and operating income $6.6 million. CIT remained pressured by the commercial aerospace downturn, while CFT returned to operating profitability.
Balance sheet, cash flow and capital
- At June 30, cash and equivalents were $713.3 million, versus $897.1 million at year-end 2020. Current assets were $2,512.5 million and current liabilities $761.7 million; these totals include CBF assets and liabilities held for sale.
- Debt totaled $2,081.6 million, including $1.2 million current; the revolving facility had no borrowings and $1.0 billion available. The company reported compliance with debt covenants.
- Six-month operating cash flow was $171.5 million, down from $226.3 million. Management cited working-capital use of $103.9 million, especially receivables growth with higher sales, partly offset by higher payables.
- Six-month investing cash use was $63.5 million, including $55.1 million of capital expenditures and $10.2 million invested in securities. Financing cash use was $284.5 million, including $265.6 million in share repurchases and $56.0 million in dividends.
Outlook, transactions and risks
- Management forecast 2021 revenue growth of high teens for CCM, a mid-to-high-single-digit decline for CIT, mid-teens growth for CFT and mid-teens growth for Carlisle overall. Other estimates: corporate expenses about $125 million, depreciation and amortization about $210 million, capital expenditures about $150 million, net interest expense about $75 million, and a base tax rate about 25%.
- Management said CCM was benefiting from strong U.S. re-roofing demand and was meeting unusually strong demand despite supply constraints. CIT was expected to improve sequentially and return to growth in the second half, based on improving orders and medical backlog. These are forward-looking expectations, not guarantees.
- The May 2021 agreement to sell CBF provides for $250 million cash at closing, subject to adjustments, plus up to $125 million based on performance targets. Closing was expected in Q3 2021. CBF generated $5.2 million of discontinued-operations income in Q2, including $4.7 million of pre-close transaction expenses.
- After quarter-end, Carlisle agreed to acquire Henry for $1.575 billion in cash, subject to customary conditions and expected to close in Q3 2021. The filing does not state the ultimate financing or closing outcome.
- Key disclosed risks include inflation that may not be recovered through pricing, supply constraints, COVID-19 impacts, cyclical and aerospace-market weakness, and execution and integration risks for acquisitions or dispositions. Carlisle also disclosed asbestos-related litigation; management said the accrued liability was not material, while noting insurance limitations and possible coverage disputes.
Important facts for investors to verify
- Whether CBF and Henry transactions closed as expected, their final cash proceeds or purchase funding, and any adjustments or contingent payments.
- Whether pricing and cost actions offset raw-material, labor and supply pressures, and how CCM demand and production capacity developed.
- Whether CIT orders, backlog and aerospace activity improved as management anticipated, and whether CFT growth and margins continued.
- Whether working-capital demands moderated and operating cash flow supported planned investment, dividends and repurchases.
- How share repurchases, the Henry acquisition and debt maturities affected liquidity, leverage and covenant headroom.