CARLISLE COMPANIES INC
10-Qs and 10-Ks
PROXIES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
| (Mark One) |
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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||||
FOR THE QUARTERLY PERIOD ENDED
June 30, 2022
or
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||
FOR THE TRANSITION PERIOD FROM _____ TO _____.
Commission file number
1-9278
www.carlisle.com
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices, including zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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☒ | No | ☐ | ||||||||
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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☒ | No | ☐ | ||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Yes | ☐ | No | ☐ | ||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes |
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No | ☒ | ||||||||
On July 21, 2022, there were
51,724,287
shares of the registrant's common stock, par value $1.00 per share, outstanding.
Carlisle Companies Incorporated
Table of Contents
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Page
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2
PART I—Financial Information
Item 1. Financial Statements
Carlisle Companies Incorporated
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
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| (in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Revenues | $ |
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$ |
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$ |
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$ |
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| Cost of goods sold |
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| Selling and administrative expenses |
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| Research and development expenses |
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| Other operating income, net |
(
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(
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(
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(
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| Operating income |
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| Interest expense, net |
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| Interest income |
(
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(
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(
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(
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| Other non-operating expense, net |
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| Income from continuing operations before income taxes |
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| Provision for income taxes |
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| Income from continuing operations |
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| Discontinued operations: | ||||||||||||||||||||||||||
| Income before income taxes |
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| (Benefit from) provision for income taxes |
(
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(
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| Income from discontinued operations |
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| Net income | $ |
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$ |
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$ |
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$ |
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| Basic earnings per share attributable to common shares: | ||||||||||||||||||||||||||
| Income from continuing operations | $ |
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$ |
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$ |
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$ |
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| Income from discontinued operations |
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| Basic earnings per share | $ |
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$ |
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$ |
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$ |
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| Diluted earnings per share attributable to common shares: | ||||||||||||||||||||||||||
| Income from continuing operations | $ |
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$ |
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$ |
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$ |
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| Income from discontinued operations |
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| Diluted earnings per share | $ |
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$ |
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$ |
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$ |
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| Average shares outstanding: | ||||||||||||||||||||||||||
| Basic |
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| Diluted |
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| Comprehensive income: | ||||||||||||||||||||||||||
| Net income | $ |
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$ |
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$ |
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$ |
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| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Foreign currency (losses) gains |
(
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(
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(
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Amortization of unrecognized net periodic benefit costs, net of tax
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| Other, net of tax |
(
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(
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(
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| Other comprehensive (loss) income |
(
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(
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(
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| Comprehensive income | $ |
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$ |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
3
Carlisle Companies Incorporated
Condensed Consolidated Balance Sheets (Unaudited)
| (in millions, except par values) |
June 30,
2022 |
December 31,
2021 |
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| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ |
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$ |
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Receivables, net of allowance for credit losses of $
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| Inventories, net |
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| Contract assets |
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| Prepaid expenses |
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| Other current assets |
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| Total current assets |
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| Property, plant, and equipment, net |
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| Goodwill, net |
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| Other intangible assets, net |
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| Other long-term assets |
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| Total assets | $ |
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$ |
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| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ |
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$ |
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| Current portion of debt |
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| Accrued and other current liabilities |
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| Contract liabilities |
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| Total current liabilities |
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| Long-term liabilities: | ||||||||||||||
| Long-term debt, less current portion |
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| Contract liabilities |
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| Other long-term liabilities |
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| Total long-term liabilities |
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| Stockholders' equity: | ||||||||||||||
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Preferred stock, $
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Common stock, $
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| Additional paid-in capital |
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Treasury shares, at cost (
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(
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(
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| Accumulated other comprehensive loss |
(
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(
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| Retained earnings |
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| Total stockholders' equity |
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| Total liabilities and equity | $ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
4
Carlisle Companies Incorporated
Condensed Consolidated Statements of Cash Flows (Unaudited)
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Six Months Ended
June 30, |
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(in millions)
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2022 | 2021 | ||||||||||||
| Operating activities: | ||||||||||||||
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Net income
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$ |
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$ |
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Reconciliation of net income to net cash provided by operating activities:
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Depreciation
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Amortization
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| Lease expense |
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Stock-based compensation
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| Deferred taxes |
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Other operating activities, net
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Changes in assets and liabilities, excluding effects of acquisitions:
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Receivables
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(
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(
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Inventories
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(
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(
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| Contract assets |
(
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Prepaid expenses and other assets
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Accounts payable
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| Accrued and other current liabilities |
(
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(
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Contract liabilities
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Other long-term liabilities
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(
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(
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Net cash provided by operating activities
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| Investing activities: | ||||||||||||||
| Proceeds from sale of discontinued operation, net of cash disposed |
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| Capital expenditures |
(
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(
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Acquisitions, net of cash acquired
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(
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| Investment in securities |
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(
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Other investing activities, net
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Net cash provided by (used in) investing activities
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(
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| Financing activities: | ||||||||||||||
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Repurchases of common stock
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(
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(
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Dividends paid
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(
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(
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Proceeds from exercise of stock options
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Withholding tax paid related to stock-based compensation
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(
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(
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| Other financing activities, net |
(
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(
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Net cash used in financing activities
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(
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(
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Effect of foreign currency exchange rate changes on cash and cash equivalents
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(
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(
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| Change in cash and cash equivalents |
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(
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| Less: change in cash and cash equivalents of discontinued operations |
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| Cash and cash equivalents at beginning of period |
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| Cash and cash equivalents at end of period | $ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
5
Carlisle Companies Incorporated
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
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Common Stock
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Additional Paid-In Capital
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Accumulated Other Comprehensive Income (Loss)
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Retained Earnings
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Shares in Treasury
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Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) |
Shares
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Amount
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Shares
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Cost
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| Balance as of March 31, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Net income | — | — | — | — |
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— | — |
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| Other comprehensive income, net of tax | — | — | — |
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— | — | — |
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Dividends - $
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— | — | — | — |
(
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— | — |
(
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| Repurchases of common stock |
(
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— | — | — | — |
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(
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(
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Issuances and deferrals, net for stock based compensation
(1)
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— |
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— | — |
(
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| Balance as of June 30, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Net income | — | — | — | — |
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— | — |
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| Other comprehensive loss, net of tax | — | — | — |
(
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— | — | — |
(
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Dividends - $
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— | — | — | — |
(
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— | — |
(
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| Repurchases of common stock |
(
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— | — | — | — |
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(
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(
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Issuances and deferrals, net for stock based compensation
(1)
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— |
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— | — |
(
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| Balance as of June 30, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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(1)
Issuances and deferrals, net for stock-based compensation reflects share activity related to option exercises, restricted and performance shares vested, and net issuances and deferrals associated with deferred compensation equity.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
6
Carlisle Companies Incorporated
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
|
Common Stock
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Additional
Paid-In Capital |
Accumulated Other Comprehensive Income (Loss)
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Retained Earnings
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Shares in Treasury
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Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||
| (in millions, except per share amounts) |
Shares
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Amount
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Shares
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Cost
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| Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Net income | — | — | — | — |
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— | — |
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Other comprehensive loss, net of tax
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— | — | — |
(
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— | — | — |
(
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Dividends - $
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— | — | — | — |
(
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— | — |
(
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| Repurchases of common stock |
(
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— | — | — | — |
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(
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(
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Issuances and deferrals, net for stock-based compensation
(1)
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— |
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— | — |
(
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| Balance as of June 30, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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| Net income | — | — | — | — |
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— | — |
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| Other comprehensive loss, net of tax | — | — | — |
(
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— | — | — |
(
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Dividends - $
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— | — | — | — |
(
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— | — |
(
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| Repurchases of common stock |
(
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— | — | — | — |
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(
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(
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Issuances and deferrals, net for stock-based compensation
(1)
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— |
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— | — |
(
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| Balance as of June 30, 2022 |
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$ |
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$ |
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$ |
(
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$ |
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$ |
(
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$ |
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(1)
Issuances and deferrals, net for stock-based compensation reflects share activity related to option exercises, restricted and performance shares vested, and net issuances and deferrals associated with deferred compensation equity.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)
7
Carlisle Companies Incorporated
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1—
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Carlisle Companies Incorporated (the "Company" or "Carlisle"). The accompanying unaudited Condensed Consolidated Financial Statements do not include all disclosures as required by accounting principles generally accepted in the United States of America ("United States" or "U.S."), and should be read in conjunction with the Company’s audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Annual Report on Form 10-K").
The accompanying unaudited Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S. and, of necessity, include some amounts that are based upon management estimates and judgments. The accompanying unaudited Condensed Consolidated Financial Statements include assets, liabilities, revenues and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation.
In the Company's opinion, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.
On February 10, 2022, the Company announced that it had realigned its construction materials businesses into
two
segments organized around its products and applications for the sustainable building envelope. The
two
segments are Carlisle Construction Materials and Carlisle Weatherproofing Technologies. No changes have been made to either of the Company’s other two segments – Carlisle Interconnect Technologies or Carlisle Fluid Technologies. The Company has reclassified certain prior periods' amounts to conform with the current presentation by reportable segment in Note 2—Segment Information, Note 6—Revenue Recognition and Note 8—Exit and Disposal Activities as a result of the Company's change in management structure. Additionally, the Company has reclassified certain prior periods' amounts to conform with the current period presentation of the revenues by geographic area tables in Note 6—Revenue Recognition to present Middle East revenues combined with Asia, as opposed to the previous presentation combined with Africa.
Note 2—
Segment Information
The Company reports its results of operations through the following
four
segments, each of which represents a reportable segment as follows:
Carlisle Construction Materials ("CCM")
—this segment produces a complete line of premium single-ply roofing products and warranted roof systems and accessories for the commercial building industry, including EPDM, TPO and PVC membrane, polyiso insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings.
Carlisle Weatherproofing Technologies ("CWT")
—this segment produces building envelope solutions that effectively drive energy efficiency and sustainability in commercial and residential applications. Products include high-performance waterproofing and moisture protection products, protective roofing underlayments, fully integrated liquid and sheet applied air/vapor barriers, sealants/primers and flashing systems, roof coatings and mastics, spray polyurethane foam and coating systems for a wide variety of thermal protection applications and other premium polyurethane products, block-molded expanded polystyrene insulation, engineered products for HVAC applications, and premium rubber products for a variety of industrial and surfacing applications.
Carlisle Interconnect Technologies ("CIT")
—this segment produces high-performance wire and cable, including optical fiber, for the commercial aerospace, military and defense electronics, medical device, industrial, and test and measurement markets. CIT's product portfolio also includes sensors, connectors, contacts, cable assemblies, complex harnesses, racks, trays, and installation kits, in addition to engineering and certification services. CIT also provides medical device products and solutions for several medical technology applications.
Carlisle Fluid Technologies ("CFT")
—this segment produces highly engineered liquid, powder, sealants and adhesives finishing equipment and integrated system solutions for spraying, pumping, mixing, metering and curing of a variety of coatings used in the automotive manufacture, general industrial, protective coating, wood, specialty and automotive refinishing markets.
8
A summary of segment information follows:
| Three Months Ended June 30, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
|
(in millions)
|
Revenues
|
Operating Income (Loss)
|
Revenues
|
Operating Income (Loss)
|
||||||||||||||||||||||
| Carlisle Construction Materials | $ |
|
$ |
|
$ |
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$ |
|
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| Carlisle Weatherproofing Technologies |
|
|
|
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| Carlisle Interconnect Technologies |
|
|
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(
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| Carlisle Fluid Technologies |
|
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| Segment total |
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|
Corporate, unallocated and eliminations
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
|
(in millions)
|
Revenues
|
Operating Income (Loss)
|
Revenues
|
Operating Income (Loss)
|
||||||||||||||||||||||
| Carlisle Construction Materials | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Carlisle Weatherproofing Technologies |
|
|
|
|
||||||||||||||||||||||
| Carlisle Interconnect Technologies |
|
|
|
(
|
||||||||||||||||||||||
| Carlisle Fluid Technologies |
|
|
|
|
||||||||||||||||||||||
| Segment total |
|
|
|
|
||||||||||||||||||||||
|
Corporate and unallocated
(1)
|
|
(
|
|
(
|
||||||||||||||||||||||
|
Total
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
(1)
Corporate operating loss includes other unallocated costs, primarily general corporate expenses.
Note 3—
Acquisitions
MBTechnology
On February 1, 2022, the Company acquired
100
% of the equity of MBTechnology (“MBTech”), for consideration of $
26.3
million, including $
1.6
million of cash acquired and post-closing adjustments, which were finalized in the second quarter of 2022. MBTech is a manufacturer of energy-efficient roofing and underlayment systems for residential and commercial applications.
In the three months ended June 30, 2022, and for the period from February 1, 2022 to June 30, 2022, the related product lines contributed revenues of $
4.1
million and $
6.1
million, respectively. The related product lines contributed operating income of $
0.1
million for the period from February 1, 2022 to June 30, 2022. The results of operations of MBTech are reported within the CWT segment.
Consideration of $
12.5
million has been allocated to goodwill,
none
of which is deductible for tax purposes. All of the goodwill was preliminarily assigned to the CCM reporting unit. Consideration of $
7.9
million has been allocated to customer relationships, with a useful life of
nine years
, $
3.4
million to plant, property and equipment, $
2.8
million to inventory, $
0.8
million to accounts receivable and $
0.5
million to accounts payable.
ASP Henry Holdings, Inc.
On September 1, 2021, the Company acquired ASP Henry Holdings, Inc. (“Henry”), a provider of building envelope systems for consideration of $
1,605.6
million, including $
34.3
million of cash acquired and post-closing adjustments, which were finalized in the fourth quarter of 2021. The Company funded the acquisition with borrowings from its Revolving Credit Facility (the "Facility") and cash on hand. The Company subsequently repaid the borrowings from the Facility with proceeds from its September 2021 public offering of $
300.0
million in aggregate principal amount of its
0.55
% senior notes due in September 2023 and $
550.0
million in aggregate principal amount of its
2.20
% senior notes due in March 2032 (refer to Note 12).
The Henry amounts included in the pro forma financial information below are based on Henry’s historical results and therefore may not be indicative of the actual results if Henry had been owned by the Company on January 1, 2020. The pro forma adjustments represent management’s best estimates based on information available at the time the pro forma information was prepared and may differ from the adjustments that may have been required had the
9
Company owned Henry on January 1, 2020. Accordingly, pro forma information should not be relied upon as being indicative of the historical results that would have been realized had the acquisition occurred as of January 1, 2020 or the results that may be achieved in the future.
The unaudited combined pro forma financial information presented below includes revenues and income from continuing operations, net of tax, of the Company as if the business combination had occurred on January 1, 2020, based on the purchases price allocation presented below:
| Unaudited Pro Forma | ||||||||||||||
| (in millions) |
Three Months Ended
June 30, 2021 |
Six Months Ended
June 30, 2021 |
||||||||||||
| Revenues | $ |
|
$ |
|
||||||||||
| Income from continuing operations |
|
|
||||||||||||
The pro forma financial information reflects adjustments to Henry's historical financial information to apply the Company's accounting policies and to reflect the additional depreciation and amortization related to the preliminary fair value adjustments of the acquired net assets of $
14.4
million in the three months ended June 30, 2021 and $
28.8
million in the six months ended June 30, 2021, together with the associated tax effects.
The following table summarizes the consideration transferred to acquire Henry and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values with the remainder allocated to goodwill. The fair values are preliminary and subject to change pending receipt of the final valuation for all acquired assets and liabilities.
| Preliminary Allocation | Measurement Period Adjustments | Preliminary Allocation | ||||||||||||||||||
| (in millions) | As of 9/1/2021 | As of 6/30/2022 | ||||||||||||||||||
| Total cash consideration transferred | $ |
|
$ |
(
|
$ |
|
||||||||||||||
| Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||||||||||||||||||
| Cash and cash equivalents |
|
— |
|
|||||||||||||||||
| Receivables, net |
|
— |
|
|||||||||||||||||
| Inventories |
|
(
|
|
|||||||||||||||||
| Prepaid expenses and other current assets |
|
|
|
|||||||||||||||||
| Property, plant and equipment |
|
|
|
|||||||||||||||||
| Intangible assets |
|
|
|
|||||||||||||||||
| Other long-term assets |
|
|
|
|||||||||||||||||
| Accounts payable |
(
|
|
(
|
|||||||||||||||||
| Accrued and other current liabilities |
(
|
(
|
(
|
|||||||||||||||||
| Short-term debt |
(
|
— |
(
|
|||||||||||||||||
| Contract liabilities |
(
|
— |
(
|
|||||||||||||||||
| Other long-term debt |
(
|
— |
(
|
|||||||||||||||||
| Other long-term liabilities |
(
|
(
|
(
|
|||||||||||||||||
| Deferred income taxes |
(
|
(
|
(
|
|||||||||||||||||
| Total identifiable net assets |
|
|
|
|||||||||||||||||
| Goodwill | $ |
|
$ |
(
|
$ |
|
||||||||||||||
The goodwill recognized in the acquisition of Henry is attributable to its significant supply chain efficiencies, other administrative opportunities and the strategic value of the business to Carlisle, in addition to opportunities for product line expansions. The Company acquired $
81.9
million of gross contractual accounts receivable, of which $
2.9
million was not expected to be collected at the date of acquisition. Goodwill of $
50.9
million is tax deductible in the United States. All of the goodwill was preliminarily assigned to the CCM reporting unit.
10
| (in millions) | Fair Value | Weighted Average Useful Life (in years) | ||||||||||||
| Customer relationships | $ |
|
|
|||||||||||
| Technologies |
|
|
||||||||||||
| Software |
|
|
||||||||||||
| Indefinite-lived trade name |
|
N/A | ||||||||||||
| Total | $ |
|
||||||||||||
Note 4—
Discontinued Operations
On August 2, 2021, the Company completed the sale of the equity interests and assets comprising the Carlisle Brake & Friction ("CBF") segment for gross proceeds of (i) $
250
million at closing, subject to certain adjustments, and (ii) the right to receive up to an additional $
125
million based on CBF's achievement of certain performance targets. On February 23, 2022, the Company received $
125
million in cash for the full amount of the contingent consideration. The sale of CBF is consistent with the Company's optimization strategy, as laid out in Vision 2025.
A summary of the results from discontinued operations included in the Condensed Consolidated Statements of Income and Comprehensive Income follows:
| (in millions) |
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||
| 2021 | 2021 | |||||||||||||
| Revenues | $ |
|
$ |
|
||||||||||
| Cost of goods sold |
|
|
||||||||||||
| Other operating expenses, net |
|
|
||||||||||||
| Operating income |
|
|
||||||||||||
| Other non-operating (income) expense, net |
(
|
|
||||||||||||
| Income from discontinued operations before income taxes and loss on sale |
|
|
||||||||||||
|
Pre-close transaction expenses
(1)
|
|
|
||||||||||||
| Income from discontinued operations before income taxes |
|
|
||||||||||||
| Provision for income taxes |
|
|
||||||||||||
| Income from discontinued operations | $ |
|
$ |
|
||||||||||
(1)
Includes legal fees and stock-compensation expense directly related to the sale incurred prior to the closing of the transaction.
Income from discontinued operations in the second quarter and the first six months of 2022 primarily reflects a gain on the sale of real estate associated with the 2021 sale of the equity interests and assets comprising the CBF segment.
A summary of cash flows from discontinued operations included in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, follows:
| (in millions) | 2022 | 2021 | ||||||||||||
| Net cash (used in) provided by operating activities | $ |
(
|
$ |
|
||||||||||
| Net cash provided by (used in) investing activities |
|
(
|
||||||||||||
|
Net cash (used in) provided by financing activities
(1)
|
(
|
|
||||||||||||
| Change in cash and cash equivalents from discontinued operations | $ |
|
$ |
|
||||||||||
Note 5—
Earnings Per Share
11
of earnings per share excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator.
The computation below of earnings per share includes the income attributable to the vested and deferred restricted shares and restricted stock units in the numerator and includes the dilutive impact of those underlying shares in the denominator.
Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and performance share awards are included in the calculation of diluted earnings per share considering those are contingently issuable. Neither is considered to be a participating security as they do not contain non-forfeitable dividend rights.
Income from continuing operations and share data used in the basic and diluted earnings per share computations using the two-class method follows:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||||||||
| (in millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
| Income from continuing operations | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||
|
Less: dividends declared
|
(
|
(
|
(
|
(
|
|||||||||||||||||||||||||
| Undistributed earnings |
|
|
|
|
|||||||||||||||||||||||||
|
Percent allocated to common stockholders
(1)
|
|
% |
|
% |
|
% |
|
% | |||||||||||||||||||||
| Undistributed earnings allocated to common stockholders |
|
|
|
|
|||||||||||||||||||||||||
|
Add: dividends declared to common shares, restricted share units and vested and deferred restricted and performance shares
|
|
|
|
|
|||||||||||||||||||||||||
|
Income from continuing operations attributable to common stockholders
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||
| Shares: | |||||||||||||||||||||||||||||
| Basic weighted-average shares outstanding |
|
|
|
|
|||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||
| Performance awards |
|
|
|
|
|||||||||||||||||||||||||
| Stock options |
|
|
|
|
|||||||||||||||||||||||||
|
Diluted weighted-average shares outstanding
|
|
|
|
|
|||||||||||||||||||||||||
|
Per share income from continuing operations attributable to common shares:
|
|||||||||||||||||||||||||||||
| Basic | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||
| Diluted | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||
|
(1)
|
Basic weighted-average shares outstanding
|
|
|
|
|
||||||||||||||||||||||||
|
Basic weighted-average shares outstanding and unvested restricted shares expected to vest
|
|
|
|
|
|||||||||||||||||||||||||
| Percent allocated to common stockholders |
|
% |
|
% |
|
% |
|
% | |||||||||||||||||||||
To calculate earnings per share for income from discontinued operations and for net income, the denominator for both basic and diluted earnings per share is the same as used in the above table.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Income from discontinued operations attributable to common stockholders for basic and diluted earnings per share | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Net income attributable to common stockholders for basic and diluted earnings per share |
|
|
|
|
||||||||||||||||||||||
|
Anti-dilutive stock options excluded from earnings per share calculation
(1)
|
|
|
|
|
||||||||||||||||||||||
(1)
Represents stock options excluded from the calculation of diluted earnings per share, as such options’ assumed proceeds upon exercise would result in the repurchase of more shares than the underlying award.
12
Note 6—
Revenue Recognition
The Company receives payment at the inception of the contract for separately priced extended service warranties, and revenue is deferred and recognized on a straight-line basis over the life of the contracts. Remaining performance obligations for extended service warranties represent the transaction price for the remaining stand-ready obligation to perform warranty services.
A summary of estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2022, follows:
|
(in millions)
|
Remainder of 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | |||||||||||||||||||||||||||||||||||||
| Extended service warranties | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||||||||||
The Company has applied the practical expedient to not disclose information about remaining performance obligations that have original expected durations of one year or less.
Contract Balances
Contract liabilities relate to payments received in advance of performance under a contract, primarily related to extended service warranties in the CCM and CWT segments, systems contracts in the CFT segment and highly customized product contracts in the CIT segment. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.
A summary of the change in contract liabilities for the six months ended June 30, follows:
|
(in millions)
|
2022 | 2021 | ||||||||||||
| Balance as of January 1 | $ |
|
$ |
|
||||||||||
| Revenue recognized |
(
|
(
|
||||||||||||
| Revenue deferred |
|
|
||||||||||||
|
Balance as of June 30
|
$ |
|
$ |
|
||||||||||
Contract assets relate to the Company's right to payment for performance completed to date under a contract, primarily related to highly customized product contracts within the CIT and CFT segments. Accounts receivable are recorded when the right to payment becomes unconditional, which generally occurs over twelve months or less.
A summary of the change in contract assets for the six months ended June 30, follows:
|
(in millions)
|
2022 | 2021 | ||||||||||||
| Balance as of January 1 | $ |
|
$ |
|
||||||||||
|
Balance as of June 30
|
|
|
||||||||||||
| Change in contract assets | $ |
|
$ |
(
|
||||||||||
13
Revenues by End-Market
A summary of revenues disaggregated by major end-market industries and reconciliation of disaggregated revenue by segment follows:
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| General construction | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Aerospace |
|
|
|
|
|
|||||||||||||||||||||||||||
| Medical |
|
|
|
|
|
|||||||||||||||||||||||||||
| Transportation |
|
|
|
|
|
|||||||||||||||||||||||||||
| Heavy equipment |
|
|
|
|
|
|||||||||||||||||||||||||||
| General industrial and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
|
General construction
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
Aerospace
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Medical
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Transportation |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Heavy equipment
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
General industrial and other
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Total revenues
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| General construction | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Aerospace |
|
|
|
|
|
|||||||||||||||||||||||||||
| Medical |
|
|
|
|
|
|||||||||||||||||||||||||||
| Transportation |
|
|
|
|
|
|||||||||||||||||||||||||||
| Heavy equipment |
|
|
|
|
|
|||||||||||||||||||||||||||
| General industrial and other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
|
General construction
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
|
Aerospace
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Medical |
|
|
|
|
|
|||||||||||||||||||||||||||
|
Transportation
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Heavy equipment
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
General industrial and other
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Total revenues
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
14
Revenues by Geographic Area
A summary of revenues based on the country to which the product was delivered and reconciliation of disaggregated revenue by segment follows:
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| United States | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| International: | ||||||||||||||||||||||||||||||||
| Europe |
|
|
|
|
|
|||||||||||||||||||||||||||
| North America (excluding U.S.) |
|
|
|
|
|
|||||||||||||||||||||||||||
| Asia and Middle East |
|
|
|
|
|
|||||||||||||||||||||||||||
| Africa |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total international |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| United States | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| International: | ||||||||||||||||||||||||||||||||
| Europe |
|
|
|
|
|
|||||||||||||||||||||||||||
| North America (excluding U.S.) |
|
|
|
|
|
|||||||||||||||||||||||||||
| Asia and Middle East |
|
|
|
|
|
|||||||||||||||||||||||||||
| Africa |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total international |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| United States | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| International: | ||||||||||||||||||||||||||||||||
| Europe |
|
|
|
|
|
|||||||||||||||||||||||||||
| North America (excluding U.S.) |
|
|
|
|
|
|||||||||||||||||||||||||||
| Asia and Middle East |
|
|
|
|
|
|||||||||||||||||||||||||||
| Africa |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total international |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Total | |||||||||||||||||||||||||||
| United States | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
| International: | ||||||||||||||||||||||||||||||||
| Europe |
|
|
|
|
|
|||||||||||||||||||||||||||
| North America (excluding U.S.) |
|
|
|
|
|
|||||||||||||||||||||||||||
| Asia and Middle East |
|
|
|
|
|
|||||||||||||||||||||||||||
| Africa |
|
|
|
|
|
|||||||||||||||||||||||||||
| Other |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total international |
|
|
|
|
|
|||||||||||||||||||||||||||
| Total revenues | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||||||
15
Note 7—
Stock-Based Compensation
Stock-based compensation cost by award type follows:
| (in millions) |
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Stock option awards | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Restricted stock awards |
|
|
|
|
||||||||||||||||||||||
| Performance share awards |
|
|
|
|
||||||||||||||||||||||
| Stock appreciation rights |
|
|
|
|
||||||||||||||||||||||
| Total stock-based compensation cost incurred |
|
|
|
|
||||||||||||||||||||||
| Capitalized cost during the period |
|
(
|
|
(
|
||||||||||||||||||||||
| Amortization of capitalized cost during the period |
|
|
|
|
||||||||||||||||||||||
|
Total stock-based compensation expense
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
Note 8—
Exit and Disposal and Other Restructuring Activities
The Company has undertaken operational restructuring and other cost reduction actions to streamline processes and manage costs throughout various departments. These actions resulted in exit, disposal and employee termination benefit costs, primarily resulting from planned reductions in workforce, facility consolidation and relocation, and lease termination costs. The primary actions are discussed below by operating segment.
CIT
During the third quarter of 2021, the Company initiated plans to exit its manufacturing operations in Carlsbad, California, and relocate the majority of those operations to its existing facilities in North America. The project is estimated to take a remaining
to
nine months
to complete. During the three and six months ended June 30, 2022, exit and disposal costs totaled $
0.4
million and $
1.2
million, respectively, primarily for employee termination benefit costs and accelerated depreciation. Total exit and disposal costs are expected to approximate $
4.8
million, with approximately $
2.0
million costs remaining to be incurred, primarily in 2022.
In the fourth quarter of 2021, the Company completed its project to relocate its manufacturing operations in Kent, Washington, as a result of market declines resulting from the COVID-19 pandemic for cumulative exit and disposal costs of $
14.2
million. During the three and six months ended June 30, 2021, exit and disposal costs totaled $
4.5
million and $
5.1
million, respectively, primarily for employee termination benefit costs.
Consolidated Summary
The Company's exit and disposal costs by activity follows:
|
(in millions)
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Accelerated depreciation and impairments | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Employee severance and benefit arrangements |
|
|
|
|
||||||||||||||||||||||
| Facility cleanup costs |
|
|
|
(
|
||||||||||||||||||||||
| Lease termination costs |
|
|
|
|
||||||||||||||||||||||
| Relocation costs |
|
|
|
|
||||||||||||||||||||||
| Other restructuring costs |
|
|
|
|
||||||||||||||||||||||
| Total exit and disposal costs | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
The Company's exit and disposal costs by segment follows:
|
(in millions)
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Carlisle Interconnect Technologies | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Carlisle Weatherproofing Technologies |
|
|
|
|
||||||||||||||||||||||
| Carlisle Fluid Technologies |
|
|
|
|
||||||||||||||||||||||
| Total exit and disposal costs | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
16
The Company's exit and disposal costs by financial statement line item follows:
|
(in millions)
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Cost of goods sold | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Selling and administrative expenses |
|
|
|
|
||||||||||||||||||||||
| Research and development expenses |
|
|
|
|
||||||||||||||||||||||
| Total exit and disposal costs | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
The Company's change in exit and disposal activities liability follows:
|
(in millions)
|
Total
|
|||||||
| Balance as of December 31, 2021 | $ |
|
||||||
| Charges |
|
|||||||
| Settlements |
(
|
|||||||
|
Balance as of June 30, 2022
|
$ |
|
||||||
The liability of $
1.5
million primarily relates to employee severance and benefit arrangements and is included in accrued and other current liabilities.
Note 9—
Income Taxes
The effective income tax rate on continuing operations for the six months ended June 30, 2022, was
23.5
%. The year-to-date provision for income taxes included taxes on earnings at an anticipated rate of
23.8
% and a tax impact of $
1.7
million related to discrete activity.
The effective income tax rate on continuing operations for the six months ended June 30, 2021, was
18.8
%.
Note 10—
Inventories, net
| (in millions) |
June 30,
2022 |
December 31,
2021 |
||||||||||||
| Raw materials | $ |
|
$ |
|
||||||||||
| Work-in-process |
|
|
||||||||||||
| Finished goods |
|
|
||||||||||||
| Reserves |
(
|
(
|
||||||||||||
| Inventories, net | $ |
|
$ |
|
||||||||||
Note 11—
Accrued and Other Current Liabilities
| (in millions) |
June 30,
2022 |
December 31,
2021 |
||||||||||||
| Compensation and benefits | $ |
|
$ |
|
||||||||||
| Customer incentives |
|
|
||||||||||||
| Standard product warranties |
|
|
||||||||||||
| Income and other accrued taxes |
|
|
||||||||||||
| Other accrued liabilities |
|
|
||||||||||||
| Accrued and other current liabilities | $ |
|
$ |
|
||||||||||
Standard Product Warranties
The Company offers various standard warranty programs on its products, primarily for certain installed roofing systems, high-performance cables and assemblies and fluid technologies. The Company’s liability for such warranty
17
programs is included in accrued and other current liabilities.
The change in standard product warranty liabilities for the six months ended June 30, follows:
|
(in millions)
|
2022 | 2021 | ||||||||||||
| Balance as of January 1 | $ |
|
$ |
|
||||||||||
| Provision |
|
|
||||||||||||
| Claims |
(
|
(
|
||||||||||||
| Foreign exchange |
(
|
(
|
||||||||||||
| Balance as of June 30 | $ |
|
$ |
|
||||||||||
Note 12—
Long-term Debt
|
(in millions)
|
Fair Value
(1)
|
|||||||||||||||||||||||||
|
June 30,
2022 |
December 31,
2021 |
June 30,
2022 |
December 31,
2021 |
|||||||||||||||||||||||
|
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||||
| Unamortized discount, debt issuance costs and other |
(
|
(
|
||||||||||||||||||||||||
| Total long term-debt |
|
|
||||||||||||||||||||||||
| Less: current portion of debt |
|
|
||||||||||||||||||||||||
| Long term-debt, less current portion | $ |
|
$ |
|
||||||||||||||||||||||
(1)
The fair value is estimated based on current yield rates plus the Company’s estimated credit spread available for financings with similar terms and maturities. Based on these inputs, the debt instruments are classified as Level 2 in the fair value hierarchy.
Revolving Credit Facility
During the six months ended June 30, 2022, there were
no
borrowings or repayments under the Facility. As of June 30, 2022 and December 31, 2021, the Facility had
no
outstanding balance and $
1.0
billion available for use.
Covenants and Limitations
Under the Company’s debt and credit facilities, the Company is required to meet various covenants and limitations, including limitations on certain leverage ratios, interest coverage and limits on outstanding debt balances held by certain subsidiaries. The Company was in compliance with all financial covenants and limitations as of June 30, 2022 and December 31, 2021.
Letters of Credit and Guarantee
During the normal course of business, the Company enters into commitments in the form of letters of credit and bank guarantees to provide its own financial and performance assurance to third parties. The Company has not issued any guarantees on behalf of any third parties. As of June 30, 2022 and December 31, 2021, the Company had $
18.1
million and $
18.9
million in letters of credit and bank guarantees outstanding, respectively. The Company has multiple arrangements to obtain letters of credit, which include an agreement with unspecified availability and separate agreements for up to $
110.0
million in letters of credit, of which $
91.9
million was available for use as of June 30, 2022.
Note 13—
Employee Benefit Plans
Defined Benefit Plans
The Company recognizes net periodic benefit cost based on the actuarial analysis performed at the previous year end, adjusted if certain significant events occur during the year.
18
The components of net periodic benefit cost follows:
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||||||||||||
|
(in millions)
|
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Service cost | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Interest cost |
|
|
|
|
||||||||||||||||||||||
| Expected return on plan assets |
(
|
(
|
(
|
(
|
||||||||||||||||||||||
|
Amortization of unrecognized loss
(1)
|
|
|
|
|
||||||||||||||||||||||
| Settlement expense |
|
|
|
|
||||||||||||||||||||||
| Net periodic benefit cost | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
The components of net periodic benefit cost, other than the service cost component, are included in other non-operating expense, net.
Note 14—
Financial Instruments
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to hedge a portion of its foreign currency exchange rate exposure to forecasted foreign currency denominated cash flows. These instruments are not held for speculative or trading purposes.
A summary of the Company's designated and non-designated hedges follows:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||
|
(in millions)
|
Fair Value
(1)
|
Notional Value
|
Fair Value
(1)
|
Notional Value
|
||||||||||||||||||||||
| Designated hedges | $ |
|
$ |
|
$ |
|
$ |
|
||||||||||||||||||
| Non-designated hedges |
(
|
|
|
|
||||||||||||||||||||||
(1)
The fair value of foreign currency forward contracts is included in other current assets. The fair value was estimated using observable market inputs such as forward and spot prices of the underlying exchange rate pair. Based on these inputs, derivative assets and liabilities are classified as Level 2 in the fair value hierarchy.
Designated Hedges
For instruments that are designated and qualify as cash flow hedges, the Company had foreign currency forward contracts with maturities less than
one year
. The changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) and recognized in the same line item as the impact of the hedged item, revenues or cost of sales, when the underlying forecasted transaction impacts earnings. The change in accumulated other comprehensive loss related to foreign currency cash flow hedges was immaterial for the three and six months ended June 30, 2022 and 2021. Gains and losses on the contracts representing hedge components excluded from the assessment of hedge effectiveness are recognized in the same line item as the hedged item, revenues or cost of sales, currently.
Non-Designated Hedges
For instruments that are not designated as a cash flow hedge, the Company had foreign exchange contracts with maturities less than
one year
. The unrealized gains and losses resulting from these contracts were immaterial for the three and six months ended June 30, 2022 and 2021, and are recognized in other non-operating expense, net and partially offset corresponding foreign exchange gains and losses on these balances.
Rabbi Trust
The Company has established a Rabbi Trust to provide for a degree of financial security to cover its obligations under its deferred compensation plan. Contributions to the Rabbi Trust by the Company are made at the discretion of management and generally are made in cash and invested in money-market funds. The Company consolidates the Rabbi Trust and therefore includes the investments in its Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, the Company had $
5.0
million and $
5.7
million of cash, respectively, and $
7.4
million and $
8.1
million of short-term investments, respectively. The short-term investments are classified as
19
trading securities and are measured at fair value using quoted market prices in active markets (i.e., Level 1 measurements) with changes in fair value recorded in net income and the associated cash flows presented as operating cash flows.
Investment Securities
In accordance with its investment policy, the Company invests its excess cash from time-to-time in investment grade bonds and other securities to achieve higher yields. As of June 30, 2022 and December 31, 2021, the Company had $
19.7
million and $
30.3
million of investment grade bonds, respectively. The investment grade bonds are classified as available-for-sale and measured at fair value using quoted market prices in active markets (i.e., Level 1 measurements) with changes in fair value recorded in accumulated comprehensive income (loss), until realized, and the associated cash flows presented as investing cash flows.
Other Financial Instruments
Other financial instruments include cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and long-term debt. The carrying value for cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 12 for the fair value of long-term debt).
Note 15—
Commitments and Contingencies
Litigation
Over the years, the Company has been named as a defendant, along with numerous other defendants, in lawsuits in various courts in which plaintiffs have alleged injury due to exposure to asbestos-containing friction products produced and sold predominantly by the Company’s discontinued Motion Control business between the late-1940s and the mid-1980s. The Company has been subject to liabilities for indemnity and defense costs associated with these lawsuits.
The Company has recorded a liability for estimated indemnity costs associated with pending and future asbestos claims. As of June 30, 2022, the Company believes that its accrual for these costs is not material to the Company's financial position, results of operations, or operating cash flows.
The Company recognizes expenses for defense costs associated with asbestos claims during the periods in which they are incurred. Refer to the 2021 Annual Report on Form 10-K for the Company's accounting policy related to litigation defense costs.
The Company currently maintains insurance coverage with respect to asbestos-related claims and associated defense costs. The Company records the insurance coverage as a long-term receivable in an amount it reasonably estimates is probable of recovery for pending and future asbestos-related indemnity claims. Since the Company’s insurance policies contain various coverage exclusions, limits of coverage and self-insured retentions and may be subject to insurance coverage disputes, the Company may recognize expenses for indemnity and defense costs in particular periods if and when it becomes probable that such costs will not be covered by insurance.
Henry has also been named as a defendant, along with numerous other defendants, in lawsuits in various courts in which plaintiffs have alleged injury due to exposure to asbestos-containing roofing products produced and sold by Henry and certain of its subsidiaries. Henry is subject to liabilities for indemnity and defense costs associated with these lawsuits. As of June 30, 2022, the Company believes such liabilities are not material to the Company’s financial position, results of operations, or operating cash flows. Henry currently maintains insurance coverage and is the beneficiary of other arrangements which provide coverage with respect to certain asbestos-related claims and associated defense costs. Such insurance policies contain various coverage exclusions, limits of coverage and self-insured retentions and may be subject to insurance coverage disputes.
The Company is also involved in various other legal actions and proceedings arising in the ordinary course of business. In the opinion of management, the ultimate outcomes of such actions and proceedings, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or operating cash flows.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Carlisle Companies Incorporated (“Carlisle”, the “Company”, “we”, “us” or “our”) is a leading supplier of innovative building envelope products and energy-efficient solutions for customers creating sustainable buildings of the future. Through our Carlisle Construction Materials ("CCM") and Carlisle Weatherproofing Technologies ("CWT") businesses and family of leading brands, Carlisle delivers innovative, labor-reducing and environmentally responsible products and solutions to customers across the world through the Carlisle Experience. Over the life of a building, Carlisle’s products help drive lower greenhouse gas emissions, improve energy savings for building owners and operators, and increase a building’s resiliency to the elements. Driven by our strategic plan, Vision 2025, Carlisle is committed to generating superior stockholder returns and maintaining a balanced capital deployment approach, including investments in our businesses, strategic acquisitions, share repurchases and continued dividend increases. Carlisle also is a leading provider of products to the aerospace, medical technologies and general industrial markets through its Carlisle Interconnect Technologies ("CIT") and Carlisle Fluid Technologies ("CFT") business segments.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of Company management. All references to "Notes" refer to our Notes to Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.
Executive Overview
Carlisle continued our outstanding performance this quarter, especially as we operate in this highly challenging and uncertain environment. Despite these challenges, the Carlisle team continues to live our culture of perseverance, continuous improvement and unwavering focus on delivering results.
As we move past the mid-point of 2022 and reflect on our Vision 2025 strategic plan that we launched in 2018, we are encouraged by our second quarter results. We believe these results clearly demonstrate Carlisle is exceeding expectations and is on pace to achieve much of what we set out to accomplish in Vision 2025, including our goal to deliver $15 of earnings per share.
Achievements in the second quarter included:
•
Our pivot to a more concentrated building products platform continued with the first full quarter of performance for our new CCM and CWT divisions. Both teams experienced a second quarter marked by strong demand, robust backlogs and solid execution;
•
A further reinforcement of our differentiated approach to pricing that reflects the value of the Carlisle Experience, and the benefits of our products that contribute to the energy efficiency of buildings;
•
A continued and disciplined approach to capital allocation, including acquisitions, highlighted by ASP Henry Holdings, Inc. ("Henry"), which continues to exceed expectations and deliver on our synergy commitments of $30 million;
•
Investing in our businesses to expand capacity, drive innovation, and develop world-class capabilities, including:
◦
Ongoing construction of our state-of-the-art polyiso insulation facility built to LEED specifications in Sikeston, Missouri, which is on track to be operational in the second quarter of 2023; and
◦
Launching of our 6
th
TPO line in Carlisle, Pennsylvania, which, in September, will introduce to the market an industry-first 16-foot-wide TPO membrane, and is expected to result in significant labor savings, improved installation quality and less packaging waste for our installers;
•
A continued commitment to the introduction of new products, which accounted for over $100 million of revenues in the second quarter;
In the first six months of 2022, we returned $56.7 million in the form of dividends, continuing our 45 year trend of continuous and annually increasing dividends, and repurchased $175.0 million of shares, adding to our cumulative share repurchases since 2017 of nearly $2 billion.
Vision 2025 continues to provide the Carlisle team with the clarity to navigate a complex and rapidly evolving environment, a culture of continuous improvement, and a drive to employ and develop the best talent, all the while ensuring our teams know who we are and what we are trying to achieve. Our outlook remains optimistic for the rest of 2022 and the long term.
21
Summary of Financial Results
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||||||||||||
|
(in millions, except per share amounts)
|
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Revenues | $ | 1,846.9 | $ | 1,177.8 | $ | 3,343.2 | $ | 2,118.7 | ||||||||||||||||||
| Operating income | $ | 410.6 | $ | 133.8 | $ | 687.9 | $ | 218.5 | ||||||||||||||||||
| Operating margin | 22.2 | % | 11.4 | % | 20.6 | % | 10.3 | % | ||||||||||||||||||
| Income from continuing operations | $ | 295.9 | $ | 94.1 | $ | 490.2 | $ | 143.2 | ||||||||||||||||||
| Income from discontinued operations | $ | 5.6 | $ | 5.2 | $ | 4.9 | $ | 8.3 | ||||||||||||||||||
| Diluted earnings per share attributable to common shares: | ||||||||||||||||||||||||||
| Income from continuing operations | $ | 5.62 | $ | 1.77 | $ | 9.28 | $ | 2.68 | ||||||||||||||||||
| Income from discontinued operations | $ | 0.11 | $ | 0.10 | $ | 0.09 | $ | 0.16 | ||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 472.2 | $ | 191.7 | $ | 817.0 | $ | 329.5 | ||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
25.6 | % | 16.3 | % | 24.4 | % | 15.6 | % | ||||||||||||||||||
(1)
Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of these items.
Revenues increased in the second quarter and the first six months of 2022 primarily reflecting positive pricing and higher volumes in all segments and contributions from the acquisition of Henry in the CWT segment, partially offset by unfavorable foreign currency impacts.
The increase in operating margin percentage in the second quarter and the first six months of 2022 primarily reflected positive pricing, higher volumes and favorable product mix, partially offset by raw material and wage inflation across all segments.
Diluted earnings per share from continuing operations increased primarily reflecting improved operating income performance ($3.93 per share in the second quarter of 2022 and $6.64 per share in the first six months of 2022) and reduced average shares outstanding ($0.06 per share in the second quarter of 2022 and $0.11 per share in the first six months of 2022) resulting from purchases under our share repurchase program, partially offset by a higher effective tax rate ($0.08 per share in the second quarter of 2022 and $0.10 per share in the first six months of 2022) and higher interest expense ($0.05 per share in the second quarter of 2022 and $0.09 per share in the first six months of 2022).
We generated $223.5 million in operating cash flow in the first six months of 2022 and utilized cash on hand and cash provided by operations to return capital to stockholders through dividends and share repurchases, and to fund capital expenditures.
Consolidated Results of Operations
Revenues
| (in millions) | 2022 | 2021 | Change | % |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
|||||||||||||||||||||||||||||||||||||
|
Three months ended June 30
|
$ | 1,846.9 | $ | 1,177.8 | $ | 669.1 | 56.8 | % | 15.5 | % | 42.2 | % | (0.9) | % | ||||||||||||||||||||||||||||||
|
Six months ended June 30
|
$ | 3,343.2 | $ | 2,118.7 | $ | 1,224.5 | 57.8 | % | 15.1 | % | 43.4 | % | (0.7) | % | ||||||||||||||||||||||||||||||
Revenues increased in the second quarter and the first six months of 2022 primarily reflecting positive pricing and higher sales volumes across all segments and contributions from the acquisition of Henry in the CWT segment, partially offset by unfavorable foreign currency impacts.
22
Gross Margin
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Gross margin | $ | 632.0 | $ | 307.7 | $ | 324.3 | 105.4 | % | $ | 1,122.9 | $ | 552.6 | $ | 570.3 | 103.2 | % | ||||||||||||||||||||||||||||||||||
| Gross margin percentage | 34.2 | % | 26.1 | % | 33.6 | % | 26.1 | % | ||||||||||||||||||||||||||||||||||||||||||
| Depreciation and amortization | $ | 25.4 | $ | 24.1 | $ | 52.4 | $ | 48.7 | ||||||||||||||||||||||||||||||||||||||||||
Gross margin percentage (gross margin expressed as a percentage of revenues) increased in the second quarter and the first six months of 2022, driven by positive pricing and higher volumes, partially offset by raw material and wage inflation. Also included in cost of goods sold were exit and disposal costs totaling $1.0 million and $2.9 million for the second quarter and the first six months of 2022, respectively, primarily at CIT attributable to our restructuring initiatives, compared with $3.6 million and $4.4 million for the second quarter and the first six months of 2021, respectively. Refer to Note 8 for further information on exit and disposal activities.
Selling and Administrative Expenses
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Selling and administrative expenses | $ | 210.6 | $ | 161.3 | $ | 49.3 | 30.6 | % | $ | 413.6 | $ | 312.1 | $ | 101.5 | 32.5 | % | ||||||||||||||||||||||||||||||||||
|
As a percentage of revenues
|
11.4 | % | 13.7 | % | 12.4 | % | 14.7 | % | ||||||||||||||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
$ | 36.3 | $ | 25.0 | $ | 73.6 | $ | 49.2 | ||||||||||||||||||||||||||||||||||||||||||
The increase in selling and administrative expenses in the second quarter and the first six months of 2022 primarily reflected incremental costs in the CWT segment from the addition of Henry, higher incentive compensation costs and wage inflation. Also included in selling and administrative expenses were exit and disposal costs totaling $0.1 million and $0.4 million for the second quarter and the first six months of 2022, respectively, primarily at CIT attributable to our restructuring initiatives, compared with $2.8 million and $3.4 million for the second quarter and the first six months of 2021, respectively. Refer to Note 8 for further information on exit and disposal activities.
Research and Development Expenses
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Research and development expenses | $ | 12.6 | $ | 13.8 | $ | (1.2) | (8.7) | % | $ | 24.9 | $ | 24.2 | $ | 0.7 | 2.9 | % | ||||||||||||||||||||||||||||||||||
|
As a percentage of revenues
|
0.7 | % | 1.2 | % | 0.7 | % | 1.1 | % | ||||||||||||||||||||||||||||||||||||||||||
|
Depreciation and amortization
|
$ | 0.8 | $ | 0.4 | $ | 1.2 | $ | 0.9 | ||||||||||||||||||||||||||||||||||||||||||
Research and development expenses were lower in the second quarter of 2022, primarily reflecting lower new product development expenses at our CIT segment. Research and development expenses were higher in the first six months of 2022, primarily reflecting higher new product development expenses at our CWT segment.
Other Operating Income, net
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Other operating income, net | $ | (1.8) | $ | (1.2) | $ | (0.6) | 50.0 | % | $ | (3.5) | $ | (2.2) | $ | (1.3) | 59.1 | % | ||||||||||||||||||||||||||||||||||
Other operating income, net in the 2022 periods primarily reflected rebates ($1.2 million in the second-quarter and $2.2 million in the first six months) and royalty income ($0.5 million in the second quarter and $0.9 million in the first six months).
Other operating income, net in the 2021 periods primarily reflected rebates ($0.8 million in the second-quarter and $1.7 million in the first six months) and royalty income ($0.4 million in the second quarter and $0.7 million in the first six months), partially offset by an insurance settlement of $0.5 million in both the second quarter and first six months at CCM.
23
Operating Income
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
|
Operating income
|
$ | 410.6 | $ | 133.8 | $ | 276.8 | 206.9 | % | $ | 687.9 | $ | 218.5 | $ | 469.4 | 214.8 | % | ||||||||||||||||||||||||||||||||||
|
Operating margin percentage
|
22.2 | % | 11.4 | % | 20.6 | % | 10.3 | % | ||||||||||||||||||||||||||||||||||||||||||
Refer to
Segment Results of Operations
within this MD&A for further information related to segment operating income results.
Interest Expense, net
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | $ | 22.4 | $ | 19.2 | $ | 3.2 | 16.7 | % | $ | 45.0 | $ | 38.4 | $ | 6.6 | 17.2 | % | ||||||||||||||||||||||||||||||||||
Interest expense, net of capitalized interest, increased in the second quarter and the first six months of 2022 primarily reflecting higher long-term debt balances associated with our public offering of $550.0 million of 2.20% unsecured senior notes and $300.0 million of 0.55% unsecured senior notes completed in September 2021. Refer to Note 12 for further information on our long-term debt.
Interest Income
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | (0.6) | $ | (0.4) | $ | (0.2) | 50.0 | % | $ | (0.8) | $ | (0.9) | $ | 0.1 | (11.1) | % | ||||||||||||||||||||||||||||||||||
Interest income increased during the second quarter of 2022 primarily reflecting higher yields.
Other Non-operating Expense, net
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Other non-operating expense, net | $ | 2.5 | $ | 1.1 | $ | 1.4 | NM | $ | 2.6 | $ | 4.7 | $ | (2.1) | NM | ||||||||||||||||||||||||||||||||||||
Other non-operating expense, net, in the second quarter and the first six months of 2022 primarily reflected unrealized losses on Rabbi Trust investments and changes in foreign currencies against the U.S. Dollar.
Other non-operating expense, net in the first six months of 2021 primarily reflected the release of a portion of the indemnification asset related to the Petersen Aluminum Corporation ("Petersen") acquisition resulting from escrow expirations and changes in foreign currencies against the U.S. Dollar.
Income Taxes
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 90.4 | $ | 19.8 | $ | 70.6 | 356.6 | % | $ | 150.9 | $ | 33.1 | $ | 117.8 | 355.9 | % | ||||||||||||||||||||||||||||||||||
|
Effective tax rate
|
23.4 | % | 17.4 | % | 23.5 | % | 18.8 | % | ||||||||||||||||||||||||||||||||||||||||||
The effective income tax rate on continuing operations for the first six months of 2022 was 23.5%. The year-to-date provision for income taxes included taxes on earnings at an anticipated rate of 23.8% and a tax impact of $1.7 million related to discrete activity.
The effective income tax rate on continuing operations for the first six months of 2021 was 18.8%.
24
Income from Discontinued Operations
|
(in millions)
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
2022 | 2021 | Change | % | |||||||||||||||||||||||||||||||||||||||||||
| Income from discontinued operations before income taxes | $ | 4.8 | $ | 6.3 | $ | (1.5) | NM | $ | 4.1 | $ | 10.8 | $ | (6.7) | NM | ||||||||||||||||||||||||||||||||||||
|
(Benefit from) provision for income taxes
|
(0.8) | 1.1 | (0.8) | 2.5 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income from discontinued operations | $ | 5.6 | $ | 5.2 | $ | 4.9 | $ | 8.3 | ||||||||||||||||||||||||||||||||||||||||||
Income from discontinued operations in the second quarter and the first six months of 2022 primarily reflects a gain on the sale of real estate associated with the 2021 sale of the equity interests and assets comprising the Carlisle Brake & Friction ("CBF") segment. Income from discontinued operations in the second quarter and the first six months of 2021 reflects the operating results from the CBF segment, partially offset by pre-closing transaction expenses.
Segment Results of Operations
Carlisle Construction Materials
This segment produces a complete line of premium energy-efficient single-ply roofing products and warranted roof systems and accessories for the commercial building industry, including EPDM, TPO and PVC membrane, polyiso insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings.
|
(in millions)
|
Three Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change |
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 1,113.4 | $ | 722.8 | $ | 390.6 | 54.0 | % | — | % | 54.9 | % | (0.9) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 358.9 | $ | 155.0 | $ | 203.9 | 131.5 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
32.2 | % | 21.4 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 371.3 | $ | 168.3 | $ | 203.0 | 120.6 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
33.3 | % | 23.3 | % | ||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Six Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 1,994.5 | $ | 1,279.2 | $ | 715.3 | 55.9 | % | — | % | 56.6 | % | (0.7) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 620.0 | $ | 265.7 | $ | 354.3 | 133.3 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
31.1 | % | 20.8 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 646.6 | $ | 292.2 | $ | 354.4 | 121.3 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
32.4 | % | 22.8 | % | ||||||||||||||||||||||||||||||||||||||||
(1)
Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of these items.
CCM’s revenue increased in the second quarter and the first six months of 2022 primarily reflecting positive pricing across all product lines and the strength of U.S. commercial roofing demand.
CCM’s operating margin and adjusted EBITDA margin increase in the second quarter and the first six months of 2022 primarily reflected positive pricing, higher volumes, favorable product mix, and savings from Carlisle Operating System ("COS"), partially offset by raw material, freight and wage inflation.
25
Carlisle Weatherproofing Technologies
This segment produces building envelope solutions that effectively drive energy efficiency and sustainability in commercial and residential applications. Products include high-performance waterproofing and moisture protection products, protective roofing underlayments, fully integrated liquid and sheet applied air/vapor barriers, sealants/primers and flashing systems, roof coatings and mastics, spray polyurethane foam and coating systems for a wide variety of thermal protection applications and other premium polyurethane products, block-molded expanded polystyrene insulation, engineered products for HVAC applications, and premium rubber products for a variety of industrial and surfacing applications.
|
(in millions)
|
Three Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 448.9 | $ | 214.5 | $ | 234.4 | 109.3 | % | 85.3 | % | 24.4 | % | (0.4) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 59.0 | $ | 22.4 | $ | 36.6 | 163.4 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
13.1 | % | 10.4 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 83.5 | $ | 32.9 | $ | 50.6 | 153.8 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
18.6 | % | 15.3 | % | ||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Six Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 |
Change
|
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 808.0 | $ | 377.4 | $ | 430.6 | 114.1 | % | 85.0 | % | 29.4 | % | (0.3) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 96.5 | $ | 33.0 | $ | 63.5 | 192.4 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
11.9 | % | 8.7 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 146.6 | $ | 53.8 | $ | 92.8 | 172.5 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
18.1 | % | 14.3 | % | ||||||||||||||||||||||||||||||||||||||||
(1)
Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of these items.
CWT’s revenue increased in the second quarter and the first six months of 2022 primarily reflecting contributions from the Henry acquisition, positive pricing and strength across all our product lines.
CWT’s operating margin and adjusted EBITDA margin increase in the second quarter and the first six months of 2022 primarily reflected positive pricing, contributions from the Henry acquisition, higher volumes, favorable product mix and savings from COS, partially offset by raw material, freight and wage inflation.
Carlisle Interconnect Technologies
This segment produces high-performance wire and cable, including optical fiber, for the commercial aerospace, military and defense electronics, medical device, industrial, and test and measurement markets. CIT's product portfolio also includes sensors, connectors, contacts, cable assemblies, complex harnesses, racks, trays, and installation kits, in addition to engineering and certification services. CIT also provides medical device products and solutions for several medical technology applications.
26
During the third quarter of 2021, we announced the closure of our manufacturing operations in Carlsbad, California, and the relocation of those operations to our existing facilities in North America. The project is estimated to take a remaining six to nine months to complete. Total projected costs are expected to approximate $5.8 million, with approximately $2.6 million costs remaining to be incurred.
|
(in millions)
|
Three Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change |
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 212.6 | $ | 168.9 | $ | 43.7 | 25.9 | % | — | % | 26.1 | % | (0.2) | % | ||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | 7.9 | $ | (12.9) | $ | 20.8 | NM | |||||||||||||||||||||||||||||||||||||
|
Operating margin
|
3.7 | % | (7.6) | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 27.0 | $ | 13.5 | $ | 13.5 | 100.0 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
12.7 | % | 8.0 | % | ||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Six Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change |
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 397.6 | $ | 324.7 | $ | 72.9 | 22.5 | % | — | % | 22.5 | % | — | % | ||||||||||||||||||||||||||||||
|
Operating income (loss)
|
$ | 5.4 | $ | (23.6) | $ | 29.0 | NM | |||||||||||||||||||||||||||||||||||||
|
Operating margin
|
1.4 | % | (7.3) | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 45.4 | $ | 24.5 | $ | 20.9 | 85.3 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
11.4 | % | 7.5 | % | ||||||||||||||||||||||||||||||||||||||||
(1)
Adjusted EBITDA and adjusted EBITDA margin is intended to provide investors and others with information about Carlisle's and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of these items.
CIT’s revenue increased in the second quarter and the first six months of 2022 primarily reflected continued strengthening of aerospace and medical end markets.
CIT’s operating margin and adjusted EBITDA margin increase in the second quarter and the first six months of 2022 primarily reflected higher volumes, positive pricing, and savings from COS, partially offset by raw material and wage inflation, unfavorable product mix and higher operating expenses.
Carlisle Fluid Technologies
This segment produces highly engineered liquid, powder, sealants and adhesives finishing equipment and integrated system solutions for spraying, pumping, mixing, metering and curing of a variety of coatings used in the automotive manufacture, general industrial, protective coating, wood, specialty and automotive refinishing markets.
|
(in millions)
|
Three Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change |
%
|
|||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 72.0 | $ | 71.6 | $ | 0.4 | 0.6 | % | — | % | 5.5 | % | (4.9) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 7.0 | $ | 6.6 | $ | 0.4 | 6.1 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
9.7 | % | 9.2 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 12.2 | $ | 11.4 | $ | 0.8 | 7.0 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
16.9 | % | 15.9 | % | ||||||||||||||||||||||||||||||||||||||||
|
(in millions)
|
Six Months Ended June 30, |
Acquisition Effect
|
Price / Volume Effect
|
Exchange Rate Effect
|
||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | % | |||||||||||||||||||||||||||||||||||||||||
|
Revenues
|
$ | 143.1 | $ | 137.4 | $ | 5.7 | 4.1 | % | — | % | 7.5 | % | (3.4) | % | ||||||||||||||||||||||||||||||
|
Operating income
|
$ | 11.8 | $ | 10.9 | $ | 0.9 | 8.3 | % | ||||||||||||||||||||||||||||||||||||
|
Operating margin
|
8.2 | % | 7.9 | % | ||||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA
(1)
|
$ | 22.7 | $ | 21.6 | $ | 1.1 | 5.1 | % | ||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA margin
(1)
|
15.9 | % | 15.7 | % | ||||||||||||||||||||||||||||||||||||||||
(1)
Adjusted EBITDA and adjusted EBITDA margin is intended to provide investors and others with information about Carlisle's and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. Refer to Non-GAAP Financial Measures in this MD&A for more information about, and a detailed reconciliation of these items.
27
CFT’s revenue increase in the second quarter and the first six months of 2022 primarily reflected positive pricing, partially offset by unfavorable changes in foreign currency rates.
CFT’s operating margin and adjusted EBITDA margin increase in the second quarter and the first six months of 2022 primarily reflected positive pricing and savings from COS, partially offset by raw material and wage inflation.
Liquidity and Capital Resources
A summary of our cash and cash equivalents by region follows:
|
(in millions)
|
June 30,
2022 |
December 31,
2021 |
||||||||||||
| Europe | $ | 65.1 | $ | 12.3 | ||||||||||
| North America (excluding U.S.) | 36.3 | 40.8 | ||||||||||||
| China | 24.1 | 17.8 | ||||||||||||
| Asia Pacific (excluding China) | 35.5 | 12.9 | ||||||||||||
|
International cash and cash equivalents
|
161.0 | 83.8 | ||||||||||||
| U.S. cash and cash equivalents | 192.2 | 240.6 | ||||||||||||
| Total cash and cash equivalents | $ | 353.2 | $ | 324.4 | ||||||||||
We maintain liquidity sources primarily consisting of cash and cash equivalents as well as availability under the Company's Fourth Amended and Restated Credit Agreement (as amended, the "Facility"). In the near term, cash on hand is our primary source of liquidity. The increase in cash and cash equivalents compared to December 31, 2021, is primarily related to cash generated from operations and the receipt of the $125 million earn out payment from the sale of CBF, partially offset by share repurchases, capital expenditures and payment of dividends to stockholders.
In certain countries, primarily China, our cash is subject to local laws and regulations that require government approval for conversion of such cash to U.S. Dollars, as well as for transfer of such cash, both temporarily and permanently outside of that jurisdiction. In addition, upon permanent transfer of cash outside of certain jurisdictions, primarily in Canada and China, we may be subject to withholding taxes, and as such we have accrued $7.9 million in anticipation of those taxes as of June 30, 2022.
We believe we have sufficient cash on hand, availability under the Facility and operating cash flows to meet our anticipated business requirements for at least the next 12 months. At the discretion of management, the Company may use available cash on capital expenditures, dividends, common stock repurchases, acquisitions and strategic investments.
We also anticipate we will have sufficient cash on hand, availability under the Facility and operating cash flows to meet our anticipated long-term business requirements and to pay outstanding principal balances of our existing notes by the respective maturity dates. Another potential source of liquidity is access to public capital markets, subject to market conditions. We may access the capital markets for a variety of reasons, including to repay the outstanding balances of our outstanding debt and fund acquisitions. Refer to Note 12.
Sources and Uses of Cash and Cash Equivalents
|
Six Months Ended
June 30, |
||||||||||||||
|
(in millions)
|
2022 | 2021 | ||||||||||||
| Net cash provided by operating activities | $ | 223.5 | $ | 171.5 | ||||||||||
| Net cash provided by (used in) investing activities | 36.9 | (63.5) | ||||||||||||
| Net cash used in financing activities | (229.9) | (284.5) | ||||||||||||
| Effect of foreign currency exchange rate changes on cash | (1.7) | (0.3) | ||||||||||||
| Change in cash and cash equivalents | $ | 28.8 | $ | (176.8) | ||||||||||
Operating Activities
We generated operating cash flows of $223.5 million for the first six months of 2022 (including working capital uses of $415.8 million), compared with $171.5 million for the first six months of 2021 (including working capital uses of $103.9 million). Higher operating cash flows for the first six months of 2022 primarily reflected higher net income, partially offset by higher working capital uses related to an increase in receivables from higher sales and an
28
increase in inventory from rising raw material costs and increased volume, partially offset by higher payables due to rising raw material costs.
Investing Activities
Cash provided by investing activities of $36.9 million for the first six months of 2022 primarily reflected the proceeds of the contingent consideration from the earn out payment and sale of real estate associated with the 2021 sale of CBF of $132.0 million and proceeds from investment in securities of $10.3 million, partially offset by capital expenditures of $82.7 million and the acquisition of MBTechnology for $24.7 million. Cash used in investing activities of $63.5 million for the first six months of 2021 primarily reflected capital expenditures of $55.1 million and investment in securities of $10.2 million.
Financing Activities
Cash used in financing activities of $229.9 million in the first six months of 2022 primarily reflected share repurchases of $175.0 million and cash dividend payments of $56.7 million, reflecting the increased quarterly dividend of $0.54 per share. Cash used in financing activities of $284.5 million during the first six months of 2021 primarily reflected share repurchases of $265.6 million and dividend payments of $56.0 million.
Debt Instruments
Senior Notes
We have unsecured senior notes outstanding of $350.0 million due November 15, 2022 (at a stated interest rate of 3.75%). We anticipate using cash on hand, availability under the Facility and operating cash flows as potential sources to repay these notes upon maturity.
Revolving Credit Facility
During the first six months of 2022 and 2021, we had no borrowings or repayments under the Facility. As of June 30, 2022 and December 31, 2021, the Facility had no outstanding balance and $1.0 billion available for use.
Debt Covenants
We are required to meet various covenants and limitations under our senior notes and Facility, including certain leverage ratios, interest coverage ratios and limits on outstanding debt balances held by certain subsidiaries. We were in compliance with all covenants and limitations as of June 30, 2022 and December 31, 2021.
Refer to Note 12 for further information on our debt instruments.
29
Non-GAAP Financial Measures
EBIT, Adjusted EBIT, Adjusted EBITDA and Adjusted EBITDA Margin
Earnings before interest and taxes ("EBIT"), adjusted EBIT, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA margin are intended to provide investors and others with information about the Company's and its segments' performance without the effect of items that, by their nature, tend to obscure core operating results due to potential variability across periods based on the timing, frequency and magnitude of such items. As a result, management believes that these measures enhance the ability of investors to analyze trends in the Company’s business and evaluate the Company’s performance relative to similarly-situated companies. This information differs from net income, operating income, and operating margin determined in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. The Company's and its segments' EBIT, adjusted EBIT, adjusted EBITDA and adjusted EBITDA margin follows. These non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||
| Net income (GAAP) | $ | 301.5 | $ | 99.3 | $ | 495.1 | $ | 151.5 | ||||||||||||||||||
| Less: income from discontinued operations (GAAP) | 5.6 | 5.2 | 4.9 | 8.3 | ||||||||||||||||||||||
| Income from continuing operations (GAAP) | 295.9 | 94.1 | 490.2 | 143.2 | ||||||||||||||||||||||
| Provision for income taxes | 90.4 | 19.8 | 150.9 | 33.1 | ||||||||||||||||||||||
| Interest expense, net | 22.4 | 19.2 | 45.0 | 38.4 | ||||||||||||||||||||||
| Interest income | (0.6) | (0.4) | (0.8) | (0.9) | ||||||||||||||||||||||
| EBIT | 408.1 | 132.7 | 685.3 | 213.8 | ||||||||||||||||||||||
| Exit and disposal, and facility rationalization costs | 0.7 | 7.5 | 2.8 | 10.6 | ||||||||||||||||||||||
| Inventory step-up amortization and transaction costs | 0.8 | 1.3 | 0.8 | 2.2 | ||||||||||||||||||||||
| Impairment charges | — | — | 0.2 | — | ||||||||||||||||||||||
| Losses from acquisitions and disposals | 0.1 | 0.1 | 0.4 | 3.5 | ||||||||||||||||||||||
| Losses from insurance | — | 0.5 | 0.3 | 0.5 | ||||||||||||||||||||||
| Losses from litigation | — | 0.1 | — | 0.1 | ||||||||||||||||||||||
| Total non-comparable items | 1.6 | 9.5 | 4.5 | 16.9 | ||||||||||||||||||||||
| Adjusted EBIT | 409.7 | 142.2 | 689.8 | 230.7 | ||||||||||||||||||||||
| Depreciation | 24.0 | 20.3 | 48.0 | 40.6 | ||||||||||||||||||||||
| Amortization | 38.5 | 29.2 | 79.2 | 58.2 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 472.2 | $ | 191.7 | $ | 817.0 | $ | 329.5 | ||||||||||||||||||
| Divided by: | ||||||||||||||||||||||||||
| Total revenues | $ | 1,846.9 | $ | 1,177.8 | $ | 3,343.2 | $ | 2,118.7 | ||||||||||||||||||
| Adjusted EBITDA margin | 25.6 | % | 16.3 | % | 24.4 | % | 15.6 | % | ||||||||||||||||||
30
| Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Corporate and unallocated | |||||||||||||||||||||||||||
| Operating income (loss) (GAAP) | $ | 358.9 | $ | 59.0 | $ | 7.9 | $ | 7.0 | $ | (22.2) | ||||||||||||||||||||||
|
Non-operating expense (income)
(1)
|
0.9 | 0.1 | (0.3) | — | 1.8 | |||||||||||||||||||||||||||
| EBIT | 358.0 | 58.9 | 8.2 | 7.0 | (24.0) | |||||||||||||||||||||||||||
| Exit and disposal, and facility rationalization costs | — | — | 0.7 | — | — | |||||||||||||||||||||||||||
| Inventory step-up amortization and transaction costs | — | 0.1 | — | — | 0.7 | |||||||||||||||||||||||||||
| (Gains) losses from acquisitions and disposals | (0.1) | — | 0.2 | — | — | |||||||||||||||||||||||||||
| (Gains) losses from litigation | — | — | (0.1) | — | 0.1 | |||||||||||||||||||||||||||
| Total non-comparable items | (0.1) | 0.1 | 0.8 | — | 0.8 | |||||||||||||||||||||||||||
| Adjusted EBIT | 357.9 | 59.0 | 9.0 | 7.0 | (23.2) | |||||||||||||||||||||||||||
| Depreciation | 9.3 | 6.4 | 6.1 | 1.4 | 0.8 | |||||||||||||||||||||||||||
| Amortization | 4.1 | 18.1 | 11.9 | 3.8 | 0.6 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 371.3 | $ | 83.5 | $ | 27.0 | $ | 12.2 | $ | (21.8) | ||||||||||||||||||||||
| Divided by: | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,113.4 | $ | 448.9 | $ | 212.6 | $ | 72.0 | $ | — | ||||||||||||||||||||||
| Adjusted EBITDA margin | 33.3 | % | 18.6 | % | 12.7 | % | 16.9 | % | NM | |||||||||||||||||||||||
(1)
Includes other non-operating (income) expense, which may be presented in separate line items on the Condensed Consolidated Statements of Income and Comprehensive Income.
| Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Corporate and unallocated | |||||||||||||||||||||||||||
| Operating income (loss) (GAAP) | $ | 155.0 | $ | 22.4 | $ | (12.9) | $ | 6.6 | $ | (37.3) | ||||||||||||||||||||||
|
Non-operating expense (income)
(1)
|
— | 0.1 | — | 1.1 | (0.1) | |||||||||||||||||||||||||||
| EBIT | 155.0 | 22.3 | (12.9) | 5.5 | (37.2) | |||||||||||||||||||||||||||
| Exit and disposal, and facility rationalization costs | — | — | 7.7 | (0.2) | — | |||||||||||||||||||||||||||
|
Inventory step-up amortization and transaction costs
|
— | — | — | — | 1.3 | |||||||||||||||||||||||||||
| (Gains) losses from acquisitions and disposals | (0.1) | — | — | 0.2 | — | |||||||||||||||||||||||||||
| Losses from insurance | 0.3 | 0.2 | — | — | — | |||||||||||||||||||||||||||
| Losses from litigation | — | — | — | — | 0.1 | |||||||||||||||||||||||||||
| Total non-comparable items | 0.2 | 0.2 | 7.7 | — | 1.4 | |||||||||||||||||||||||||||
| Adjusted EBIT | 155.2 | 22.5 | (5.2) | 5.5 | (35.8) | |||||||||||||||||||||||||||
| Depreciation | 9.1 | 2.9 | 6.0 | 1.4 | 0.9 | |||||||||||||||||||||||||||
| Amortization | 4.0 | 7.5 | 12.7 | 4.5 | 0.5 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 168.3 | $ | 32.9 | $ | 13.5 | $ | 11.4 | $ | (34.4) | ||||||||||||||||||||||
| Divided by: | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 722.8 | $ | 214.5 | $ | 168.9 | $ | 71.6 | $ | — | ||||||||||||||||||||||
| Adjusted EBITDA margin | 23.3 | % | 15.3 | % | 8.0 | % | 15.9 | % | NM | |||||||||||||||||||||||
(1)
Includes other non-operating (income) expense, which may be presented in separate line items on the Condensed Consolidated Statements of Income and Comprehensive Income.
31
| Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Corporate and unallocated | |||||||||||||||||||||||||||
| Operating income (loss) (GAAP) | $ | 620.0 | $ | 96.5 | $ | 5.4 | $ | 11.8 | $ | (45.8) | ||||||||||||||||||||||
|
Non-operating expense (income)
(1)
|
0.9 | 0.2 | (0.8) | 0.1 | 2.2 | |||||||||||||||||||||||||||
| EBIT | 619.1 | 96.3 | 6.2 | 11.7 | (48.0) | |||||||||||||||||||||||||||
| Exit and disposal, and facility rationalization costs | — | 0.1 | 2.7 | — | — | |||||||||||||||||||||||||||
| Inventory step-up amortization and transaction costs | — | — | — | — | 0.8 | |||||||||||||||||||||||||||
| Impairment charges | — | 0.2 | — | — | — | |||||||||||||||||||||||||||
| (Gains) losses from acquisitions and disposals | (0.1) | — | 0.4 | 0.1 | — | |||||||||||||||||||||||||||
| Losses from insurance | — | 0.3 | — | — | — | |||||||||||||||||||||||||||
| (Gains) losses from litigation | — | — | (0.1) | — | 0.1 | |||||||||||||||||||||||||||
| Total non-comparable items | (0.1) | 0.6 | 3.0 | 0.1 | 0.9 | |||||||||||||||||||||||||||
| Adjusted EBIT | 619.0 | 96.9 | 9.2 | 11.8 | (47.1) | |||||||||||||||||||||||||||
| Depreciation | 18.5 | 12.7 | 12.2 | 2.9 | 1.7 | |||||||||||||||||||||||||||
| Amortization | 9.1 | 37.0 | 24.0 | 8.0 | 1.1 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 646.6 | $ | 146.6 | $ | 45.4 | $ | 22.7 | $ | (44.3) | ||||||||||||||||||||||
| Divided by: | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,994.5 | $ | 808.0 | $ | 397.6 | $ | 143.1 | $ | — | ||||||||||||||||||||||
| Adjusted EBITDA margin | 32.4 | % | 18.1 | % | 11.4 | % | 15.9 | % | NM | |||||||||||||||||||||||
(1)
Includes other non-operating expense (income), which may be presented in separate line items on the Condensed Consolidated Statements of Income and Comprehensive Income.
| Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||
| (in millions) | CCM | CWT | CIT | CFT | Corporate and unallocated | |||||||||||||||||||||||||||
| Operating income (loss) (GAAP) | $ | 265.7 | $ | 33.0 | $ | (23.6) | $ | 10.9 | $ | (67.5) | ||||||||||||||||||||||
|
Non-operating expense
(1)
|
2.3 | — | — | 1.5 | 0.9 | |||||||||||||||||||||||||||
| EBIT | 263.4 | 33.0 | (23.6) | 9.4 | (68.4) | |||||||||||||||||||||||||||
| Exit and disposal, and facility rationalization costs | — | — | 10.2 | 0.4 | — | |||||||||||||||||||||||||||
| Inventory step-up amortization and transaction costs | — | — | — | 0.1 | 2.1 | |||||||||||||||||||||||||||
| Losses from acquisitions and disposals | 2.2 | — | 0.3 | 0.2 | 0.8 | |||||||||||||||||||||||||||
| Losses from insurance | 0.3 | 0.2 | — | — | — | |||||||||||||||||||||||||||
| Losses from litigation | — | — | — | — | 0.1 | |||||||||||||||||||||||||||
| Total non-comparable items | 2.5 | 0.2 | 10.5 | 0.7 | 3.0 | |||||||||||||||||||||||||||
| Adjusted EBIT | 265.9 | 33.2 | (13.1) | 10.1 | (65.4) | |||||||||||||||||||||||||||
| Depreciation | 18.3 | 5.6 | 12.3 | 2.6 | 1.8 | |||||||||||||||||||||||||||
| Amortization | 8.0 | 15.0 | 25.3 | 8.9 | 1.0 | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 292.2 | $ | 53.8 | $ | 24.5 | $ | 21.6 | $ | (62.6) | ||||||||||||||||||||||
| Divided by: | ||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,279.2 | $ | 377.4 | $ | 324.7 | $ | 137.4 | $ | — | ||||||||||||||||||||||
| Adjusted EBITDA margin | 22.8 | % | 14.3 | % | 7.5 | % | 15.7 | % | NM | |||||||||||||||||||||||
(1)
Includes other non-operating expense (income), which may be presented in separate line items on the Condensed Consolidated Statements of Income and Comprehensive Income.
32
Outlook
Our expectations for segment and total revenues for 2022, compared to 2021 follow:
|
2022 Revenue
|
Primary Drivers | |||||||||||||
| Carlisle Construction Materials | ~40% growth |
•
Proactive pricing measures gaining traction
•
Strong re-roofing demand
•
Increasing demand for energy-efficient building products
|
||||||||||||
| Carlisle Weatherproofing Technologies | ~60% growth |
•
Henry acquisition
•
Strong demand in all product lines
|
||||||||||||
| Carlisle Interconnect Technologies | ~20% growth |
•
Growing commercial aerospace and medical backlogs
|
||||||||||||
| Carlisle Fluid Technologies | ~10% growth |
•
Focus on new product introductions and price discipline
•
Markets strengthening
|
||||||||||||
| Total Carlisle | Over 40% growth | |||||||||||||
For the year 2022, we expect:
•
Corporate expenses of approximately $110 million;
•
Depreciation and amortization expense of approximately $250 million;
•
Capital expenditures of approximately $175 million;
•
Interest expense, net of interest income, of approximately $90 million; and
•
Base tax rate of approximately 24-25%.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the potential or expected impacts of the global COVID-19 pandemic. Forward-looking statements generally use words such as "expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," "plans," "intends," "forecast," and similar expressions, and reflect our expectations concerning the future. Such statements are made based on known events and circumstances at the time of publication and, as such, are subject in the future to unforeseen risks and uncertainties. It is possible that our future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as: risks from the global COVID-19 pandemic, including, for example, expectations regarding the impact of the COVID-19 pandemic on our businesses, including on customer demand, supply chains and distribution systems, production, our ability to maintain appropriate labor levels, our ability to ship products to our customers, our future results, or our full-year financial outlook; increasing price and product/service competition by foreign and domestic competitors, including new entrants; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost-effective basis; our mix of products/services; increases in raw material costs that cannot be recovered in product pricing; domestic and foreign governmental and public policy changes including environmental and industry regulations; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the identification of strategic acquisition targets and our successful completion of any transaction and integration of our strategic acquisitions; our successful completion of strategic dispositions; the cyclical nature of our businesses; the impact of information technology, cybersecurity or data security breaches at our businesses or third parties; and the outcome of pending and future litigation and governmental proceedings; and the other factors discussed in the reports we file with or furnish to the Securities and Exchange Commission from time to time. In addition, such statements could be affected by general industry and market conditions and growth rates, the condition of the financial and credit markets and general domestic and international economic conditions, including inflation and interest rate and currency exchange rate fluctuations. Further, any conflict in the international arena, including the Russian invasion of Ukraine, may adversely affect general market conditions and our future performance. Any forward-looking statement speaks only as of the date on which that statement is made, and we undertake no duty to update any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which that statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
33
Item 3. Quantitative and Qualitative Disclosure about Market Risk
There have been no material changes in the Company’s market risk for the six months ended June 30, 2022. For additional information, refer to "PART II—Item 7A. Quantitative and Qualitative Disclosures About Market Risk" of the Company’s 2021 Annual Report on Form 10-K.
Item 4. Controls and Procedures
a.
Evaluation of disclosure controls and procedures
. Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation and as of June 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.
b.
Changes in internal controls
. During third quarter of 2021, the Company completed its acquisition of ASP Henry Holdings, Inc. (“Henry”). This acquisition is material to the Company's results of operations, financial position and cash flows. Refer to Note 3 for additional information regarding the Henry acquisition.
The Company is currently in the process of integrating Henry, including internal controls and procedures and extending its Sarbanes-Oxley Act Section 404 compliance program to include Henry. The Company anticipates a successful integration of Henry's operations and internal controls and procedures and will continue to evaluate its internal control over financial reporting as the Company executes integration activities. The Company's assessment of the effectiveness of controls and procedures for the year ended December 31, 2022, will include Henry.
During the first the first six months of months of 2022, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II—Other Information
Item 1. Legal Proceedings
The Company is a party to certain lawsuits in the ordinary course of business. Information about legal proceedings is included in Note 15.
Item 1A. Risk Factors
There have been no material changes in the Company's risk factors disclosed in "PART I—Item 1A. Risk Factors" in our 2021 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the repurchase of common stock during the three months ended June 30, 2022:
| (in millions, except per share amounts) |
Total Number of Shares Purchased
(1)
|
Average Price Paid Per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
(2)
|
||||||||||||||||||||||
| April | 0.2 | $ | 245.64 | 0.2 | 4.3 | |||||||||||||||||||||
| May | — | — | — | 4.3 | ||||||||||||||||||||||
| June | — | — | — | 4.3 | ||||||||||||||||||||||
| Total | 0.2 | 0.2 | ||||||||||||||||||||||||
(1)
The Company may also reacquire shares outside of the repurchase program from time to time in connection with the forfeiture of shares in satisfaction of tax withholding obligations from the vesting of share-based compensation. During the three months ended June 30, 2022, there less than 0.1 million shares reacquired in transactions outside of the share repurchase program.
(2)
Represents the remaining total number of shares that can be repurchased under the Company’s share repurchase program. On February 2, 2021, the Company's Board of Directors approved a 5 million share increase in the Company's share repurchase program. The share repurchase program has no expiration date, does not obligate the Company to purchase any specified amount of shares and remains subject to the discretion of the Board of Directors.
34
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
|
Exhibit
Number
|
Filed with this Form 10-Q
|
Incorporated by Reference
|
||||||||||||||||||||||||
|
Exhibit Title
|
Form
|
Date Filed
|
||||||||||||||||||||||||
| Amended and Restated Certificate of Incorporation of Carlisle Companies Incorporated. | 8-K | 5/5/2022 | ||||||||||||||||||||||||
| Amended and Restated Bylaws of Carlisle Companies Incorporated. | 8-K | 5/5/2022 | ||||||||||||||||||||||||
| Carlisle Companies Incorporated Incentive Compensation Program, as amended and restated effective January 1, 2022. | 8-K | 5/2/2022 | ||||||||||||||||||||||||
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
|
X | |||||||||||||||||||||||||
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
|
X | |||||||||||||||||||||||||
|
Section 1350 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
X | |||||||||||||||||||||||||
|
101.INS
|
Inline XBRL Instance. | X | ||||||||||||||||||||||||
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema. | X | ||||||||||||||||||||||||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation. | X | ||||||||||||||||||||||||
|
101.LAB
|
Inline XBRL Taxonomy Extension Labels. | X | ||||||||||||||||||||||||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation. | X | ||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition. | X | ||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | X | ||||||||||||||||||||||||
| * | Management contract or compensation plan or arrangement in which directors or executive officers are eligible to participate. | ||||
35
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CARLISLE COMPANIES INCORPORATED | |||||||||||
| Date: | July 28, 2022 | By: | /s/ Kevin P. Zdimal | ||||||||
| Kevin P. Zdimal | |||||||||||
| Vice President and Chief Financial Officer | |||||||||||
36
TABLE OF CONTENTS
Part I Financial InformationprintItem 1. Financial StatementsprintNote 1 Basis Of PresentationprintNote 2 Segment InformationprintNote 3 AcquisitionsprintNote 4 Discontinued OperationsprintNote 5 Earnings Per ShareprintNote 6 Revenue RecognitionprintNote 7 Stock-based CompensationprintNote 8 Exit and Disposal and Other Restructuring ActivitiesprintNote 9 Income TaxesprintNote 10 Inventories, NetprintNote 11 Accrued and Other Current LiabilitiesprintNote 12 Long-term DebtprintNote 13 Employee Benefit PlansprintNote 14 Financial InstrumentsprintNote 15 Commitments and ContingenciesprintItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 3. Quantitative and Qualitative Disclosure About Market RiskprintItem 4. Controls and ProceduresprintPart II Other InformationprintItem 1. Legal ProceedingsprintItem 1A. Risk FactorsprintItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsprintItem 3. Defaults Upon Senior SecuritiesprintItem 4. Mine Safety DisclosuresprintItem 5. Other InformationprintItem 6. Exhibitsprint