Carlisle Companies Incorporated (10-Q) — Q1 2021
Reporting period: Three months ended March 31, 2021. Carlisle is a diversified manufacturer of engineered products, reported through four segments: Construction Materials (CCM), Interconnect Technologies (CIT), Fluid Technologies (CFT), and Brake & Friction (CBF). Amounts below are in U.S. dollars; financial statements are unaudited.
Financial results
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $1,029.0 million | $1,030.2 million | Down 0.1% |
| Gross margin | $261.7 million; 25.4% | $278.4 million; 27.0% | Down $16.7 million; 1.6 percentage points |
| Operating income / margin | $89.5 million / 8.7% | $102.7 million / 10.0% | Down 12.9% |
| Net income | $52.2 million | $61.8 million | Down 15.5% |
| Diluted EPS | $0.97 | $1.09 | Down $0.12 |
| Operating cash flow | $67.6 million | $53.2 million | Up $14.4 million |
| Capital expenditures | $20.0 million | $22.8 million | Down $2.8 million |
| Adjusted EBITDA / margin | $148.2 million / 14.4% | $167.2 million / 16.2% | Down $19.0 million; 1.8 percentage points |
Management attributed lower operating income primarily to raw-material and wage inflation across segments and unfavorable CIT mix; COS savings and lower travel costs partly offset these pressures. The effective tax rate was 22.0%, versus 18.9% a year earlier. The 2020 comparison included an $8.8 million debt-extinguishment loss, while 2021 included $8.3 million of non-comparable items, as defined by the company.
Segment performance
| Segment | Revenue change | Operating result |
|---|---|---|
| CCM | Up 6.3% to $719.3 million | $121.3 million; margin 16.9%, up from 15.9% |
| CIT | Down 30.6% to $155.8 million | $10.7 million operating loss, versus $16.4 million income |
| CFT | Up 12.9% to $65.8 million | $4.3 million; margin 6.5%, up from 4.8% |
| CBF | Up 24.1% to $88.1 million | $6.1 million income, versus $3.8 million loss |
CCM benefited from U.S. commercial roofing demand. CIT remained pressured by the prolonged aerospace downturn and lower volumes. CFT gained from stronger general industrial demand, acquisitions and foreign exchange. CBF improved with stronger construction and agricultural equipment demand.
Balance sheet, cash flow and capital
- Cash and cash equivalents were $767.2 million at March 31, down from $902.2 million at December 31, 2020. The company reported $1.0 billion available on its revolving credit facility, with no borrowings outstanding.
- Long-term debt, including current portion, was $2,082.2 million. Net debt was approximately $1,315 million, calculated as debt less cash. The company reported compliance with debt covenants.
- Operating cash flow included a $54.0 million working-capital use. Cash used in financing was $172.8 million, primarily reflecting $150.0 million of share repurchases and $28.4 million of dividends. The company also invested $10.2 million in securities.
- Shareholders’ equity was $2,411.8 million, compared with $2,537.7 million at year-end. The company repurchased approximately 1.0 million shares and paid a quarterly dividend of $0.525 per share.
Outlook, commentary and risks
For 2021, management forecast low-double-digit revenue growth for CCM, CFT and the company overall; a mid-to-high-single-digit decline for CIT; and 30% growth for CBF. Management cited stronger roofing demand, improving markets and bookings, and an improving CIT backlog. It expected CIT to return to growth in the second half of 2021. These are forward-looking expectations, not guarantees.
Other 2021 estimates: corporate expenses of approximately $120 million; depreciation and amortization of approximately $225 million; capital expenditures of $150–$175 million; net interest expense of approximately $75 million; and a base tax rate of approximately 25%. Management stated that available cash, facility capacity and operating cash flow should be sufficient for business needs over at least the next 12 months.
Risks highlighted include ongoing COVID-19 effects on demand, supply chains and operations; aerospace-market weakness; raw-material inflation that may not be recovered through pricing; competition, cyclicality, execution and integration of acquisitions, foreign exchange, and litigation. The company expects approximately $10.1 million of remaining costs for the CIT Kent, Washington facility closure and relocation project. It also disclosed asbestos-related claims; management said the recorded accrual was not material, while noting insurance coverage limits and potential disputes. Other ordinary-course legal matters were not expected to have a material adverse effect.
Management announced plans for a new polyiso insulation facility in Sikeston, Missouri. The filing does not provide a clear quantified investment cost or completion date. Disclosure controls were reported effective, and no material changes in internal control or risk factors were reported for the quarter.
Important facts for investors to verify
- Whether CIT aerospace orders, backlog and volumes improve enough to support management’s second-half recovery expectation.
- Whether inflation, pricing and product mix continue to pressure gross and operating margins.
- Progress against segment and consolidated 2021 revenue outlook, including CBF’s 30% growth expectation.
- Cash generation and working-capital trends alongside planned capital expenditures, dividends and share repurchases.
- Remaining CIT restructuring costs, asbestos-related exposures and insurance recoverability, and execution details for the new CCM facility.