UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2020

Commission file number 1-9278

 

www.carlisle.com 

CARLISLE COMPANIES INCORPORATED

(Exact name of registrant as specified in its charter) 

Delaware	31-1168055
(State of incorporation)	(I.R.S. Employer Identification No.)

(480) 781-5000

(Telephone)

16430 North Scottsdale Road, Suite 400, Scottsdale, Arizona 85254

(Address of principal executive office, including zip 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
Common stock	CSL	New York Stock Exchange
Preferred stock purchase rights	n/a	New York Stock Exchange

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. 

Yes ☒ 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). 

Yes ☒ 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.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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 ☐ No ☒

On April 16, 2020, there were 54,912,883 shares of the registrant's common stock outstanding, par value $1.00 per share.

Carlisle Companies Incorporated

Table of Contents

	Page
PART I
Item 1. Financial Statements	3
Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)	3
Condensed Consolidated Balance Sheets (Unaudited)	4
Condensed Consolidated Statement of Cash Flows (Unaudited)	5
Condensed Statement of Shareholders' Equity (Unaudited)	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosure about Market Risk	31
Item 4. Controls and Procedures	31
PART II
Item 1. Legal Proceedings	31
Item 1A. Risk Factors	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3. Defaults Upon Senior Securities	32
Item 4. Mine Safety Disclosures	32
Item 5. Other Information	32
Item 6. Exhibits	33
Signature	34

2

PART I

Item 1. Financial Statements

Carlisle Companies Incorporated

Condensed Consolidated Statements of Income and Comprehensive Income (Unaudited)

	Three Months Ended March 31,
(in millions, except per share amounts)	2020		2019
Revenues	$	1,030.2	$	1,071.9
Cost of goods sold	751.8		783.3
Selling and administrative expenses	161.9		164.2
Research and development expenses	14.4		14.4
Other operating income, net	(0.6)		(4.7)
Operating income	102.7		114.7
Interest expense, net	18.9		16.3
Loss on extinguishment of debt	8.8		—
Interest income	(0.7)		(2.6)
Other non-operating income, net	(0.5)		(0.4)
Income from continuing operations before income taxes	76.2		101.4
Provision for income taxes	14.4		24.0
Income from continuing operations	61.8		77.4
Discontinued operations:
Income before income taxes	—		—
Benefit from income taxes	—		(2.0)
Income from discontinued operations	—		2.0
Net income	$	61.8	$	79.4
Basic earnings per share attributable to common shares:
Income from continuing operations	$	1.10	$	1.34
Income from discontinued operations	—		0.03
Basic earnings per share	$	1.10	$	1.37
Diluted earnings per share attributable to common shares:
Income from continuing operations	$	1.09	$	1.33
Income from discontinued operations	—		0.03
Diluted earnings per share	$	1.09	$	1.36
Average shares outstanding:
Basic	55.8		57.5
Diluted	56.5		57.9
Comprehensive income:
Net income	$	61.8	$	79.4
Other comprehensive (loss) income:
Foreign currency (losses) gains	(28.3)		3.9
Amortization of unrecognized net periodic benefit costs, net of tax	1.0		0.7
Other, net of tax	(18.2)		1.6
Other comprehensive (loss) income	(45.5)		6.2
Comprehensive income	$	16.3	$	85.6

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

3

Carlisle Companies Incorporated

Condensed Consolidated Balance Sheets (Unaudited)

(in millions, except per share amounts)	March 31, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,187.7	$	351.2
Receivables, net of allowance for credit losses of $7.9 million and $6.6 million, respectively	686.6		682.5
Inventories, net	560.6		510.6
Contract assets	103.6		100.5
Prepaid expenses	23.3		30.5
Other current assets	46.8		76.7
Total current assets	2,608.6		1,752.0
Property, plant, and equipment, net	771.2		783.5
Goodwill, net	1,706.6		1,716.3
Other intangible assets, net	1,106.5		1,140.6
Other long-term assets	104.7		103.6
Total assets	$	6,297.6	$	5,496.0
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	336.6	$	327.3
Accrued and other current liabilities	234.7		294.5
Contract liabilities	30.5		27.0
Current portion of debt	0.9		250.2
Total current liabilities	602.7		899.0
Long-term liabilities:
Long-term debt, less current portion	2,576.4		1,341.4
Contract liabilities	223.7		220.4
Other long-term liabilities	376.3		392.4
Total long-term liabilities	3,176.4		1,954.2
Shareholders' equity:
Preferred stock, $1 par value per share (5.0 shares authorized and unissued)	—		—
Common stock, $1 par value per share (200.0 shares authorized; 54.9 and 55.7 shares outstanding, respectively)	78.7		78.7
Additional paid-in capital	418.7		413.7
Deferred compensation equity	3.4		2.9
Treasury shares, at cost (23.5 and 22.7 shares, respectively)	(1,567.5)		(1,449.7)
Accumulated other comprehensive loss	(169.6)		(124.1)
Retained earnings	3,754.8		3,721.3
Total shareholders' equity	2,518.5		2,642.8
Total liabilities and equity	$	6,297.6	$	5,496.0

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

4

Carlisle Companies Incorporated

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
(in millions)	2020		2019
Operating activities:
Net income	$	61.8	$	79.4
Reconciliation of net income to net cash provided by operating activities:
Depreciation	24.6		21.3
Amortization	32.2		27.8
Lease expense	7.4		6.4
Stock-based compensation	12.7		6.8
Loss on extinguishment of debt	8.8		—
Deferred taxes	(2.3)		(0.5)
Other operating activities, net	6.0		8.1
Changes in assets and liabilities, excluding effects of acquisitions:
Receivables	(8.3)		(49.7)
Inventories	(64.9)		(18.6)
Contract assets	(3.3)		(13.4)
Prepaid expenses and other assets	32.5		19.6
Accounts payable	6.9		53.4
Accrued and other current liabilities	(58.9)		(31.0)
Contract liabilities	6.9		2.8
Other long-term liabilities	(8.9)		(2.6)
Net cash provided by operating activities	53.2		109.8
Investing activities:
Capital expenditures	(22.8)		(23.3)
Acquisitions, net of cash acquired	(2.4)		(202.0)
Other investing activities, net	0.9		0.9
Net cash used in investing activities	(24.3)		(224.4)
Financing activities:
Proceeds from notes	740.7		—
Repayment of notes	(258.5)		—
Borrowings from revolving credit facility	500.0		—
Financing costs	(24.2)		—
Repurchases of common stock	(120.6)		(157.1)
Dividends paid	(28.3)		(23.3)
Proceeds from exercise of stock options	10.5		10.6
Withholding tax paid related to stock-based compensation	(6.4)		(3.3)
Other financing activities, net	(0.2)		—
Net cash provided by (used in) financing activities	813.0		(173.1)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(5.4)		0.7
Change in cash and cash equivalents	836.5		(287.0)
Cash and cash equivalents at beginning of period	351.2		803.6
Cash and cash equivalents at end of period	$	1,187.7	$	516.6

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

5

Carlisle Companies Incorporated

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

	Common Stock			Additional Paid-In Capital		Deferred Compensation Equity		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Shares in Treasury			Total Shareholders' Equity
(in millions, except per share amounts)	Shares	Amount										Shares	Cost
Balance as of December 31, 2018	57.9	$	78.7	$	383.8	$	8.0	$	(122.1)	$	3,351.4	20.5	$	(1,102.4)	$	2,597.4
Net income	—	—		—		—		—		79.4		—	—		79.4
Other comprehensive income, net of tax	—	—		—		—		6.2		—		—	—		6.2
Cash dividends - $0.40 per share	—	—		—		—		—		(23.3)		—	—		(23.3)
Repurchases of common stock	(1.3)	—		—		—		—		—		1.3	(149.9)		(149.9)
Issuances and deferrals, net for stock based compensation(1)	0.2	—		6.3		(0.2)		—		—		(0.2)	8.8		14.9
Balance as of March 31, 2019	56.8	$	78.7	$	390.1	$	7.8	$	(115.9)	$	3,407.5	21.6	$	(1,243.5)	$	2,524.7
Balance as of December 31, 2019	55.7	$	78.7	$	413.7	$	2.9	$	(124.1)	$	3,721.3	22.7	$	(1,449.7)	$	2,642.8
Net income	—	—		—		—		—		61.8		—	—		61.8
Other comprehensive loss, net of tax	—	—		—		—		(45.5)		—		—	—		(45.5)
Cash dividends - $0.50 per share	—	—		—		—		—		(28.3)		—	—		(28.3)
Repurchases of common stock	(1.0)	—		—		—		—		—		1.0	(125.3)		(125.3)
Issuances and deferrals, net for stock based compensation(1)	0.2	—		5.0		0.5		—		—		(0.2)	7.5		13.0
Balance as of March 31, 2020	54.9	$	78.7	$	418.7	$	3.4	$	(169.6)	$	3,754.8	23.5	$	(1,567.5)	$	2,518.5

⁽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

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 Annual Report on Form 10-K for the year ended December 31, 2019.

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. During the first quarter of 2020, the Company revised the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flows to reclassify contract assets from receivables, net to a separately disclosed line item. During the third quarter of 2019, the Company revised the Condensed Consolidated Statements of Income to reclassify interest income from interest expense, net to a separately disclosed line item. The Company has reclassified certain prior period amounts to conform to the current period presentation.

Note 2—New Accounting Pronouncements 

New Accounting Standards Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) ("ASU 2016-13") which adds to accounting principles generally accepted in the U.S. an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes, as an allowance, its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses.

The Company adopted ASU 2016-13 and all related amendments effective January 1, 2020, using the modified retrospective method, which allows for a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is effective. Periods prior to the adoption date that are presented for comparative purposes are not adjusted. The adoption of this standard did not require an implementation adjustment and did not materially impact the Company's consolidated net income or cash flows.

Changes in the Company's allowance for credit losses by segment follows:

(in millions)	CCM		CIT		CFT		CBF		Corporate		Total
Balance as of January 1, 2020	$	2.2	$	1.6	$	1.1	$	1.2	$	0.5	$	6.6
Current period provision	0.7		0.3		0.1		0.3		—		1.4
Amounts written off	(0.1)		—		—		—		—		(0.1)
Balance as of March 31, 2020	$	2.8	$	1.9	$	1.2	$	1.5	$	0.5	$	7.9

Receivables are stated at amortized cost net of allowance for credit losses. The Company performs ongoing evaluations of its customers’ current creditworthiness, as determined by the review of their credit information to determine if events have occurred subsequent to the recognition of revenue and the related receivable that provides evidence that such receivable will be realized in an amount less than that recognized at the time of sale. Estimates of credit losses are based on historical losses, current economic conditions, geographic considerations, and in some cases, evaluating specific customer accounts for risk of loss.

7

Note 3—Segment Information 

The Company has organized its operations into four segments, based on the products it sells, as follows:

Carlisle Construction Materials ("CCM")—the principal products of this segment are rubber (EPDM), thermoplastic polyolefin (TPO) and polyvinyl chloride (PVC) roofing membranes used predominantly on non-residential low-sloped roofs, related roofing accessories, including flashings, fasteners, sealing tapes and coatings and waterproofing products. In addition, CCM offers a broad range of specialty polyurethane products and solutions across a broad array of markets and applications, and metal panel roofing primarily for residential and commercial markets. CCM also manufactures and distributes energy-efficient rigid foam insulation panels for substantially all roofing applications. The markets served primarily include new construction, re-roofing and maintenance of low-sloped roofs, water containment, HVAC sealants and coatings and waterproofing.

Carlisle Interconnect Technologies ("CIT")—the principal products of this segment are high-performance wire, cable, connectors, contacts and cable assemblies for the transfer of power and data primarily for the aerospace, defense electronics, test and measurement equipment and select industrial markets, and highly engineered products and services to the medical device market. 

Carlisle Fluid Technologies ("CFT")—the principal products of this segment are industrial liquid and powder finishing equipment and integrated system solutions for spraying, pumping, mixing, metering and curing of a variety of coatings used in the transportation, general industrial, protective coating, wood, specialty and auto refinishing markets. 

Carlisle Brake & Friction ("CBF")—the principal products of this segment include high-performance brakes and friction material and clutch and transmission friction material for the construction, agriculture, mining, on-highway, aerospace and motor sports markets.

A summary of segment information follows:

	Three Months Ended March 31,
	2020				2019
(in millions)	Revenues		Operating Income (Loss)		Revenues		Operating Income (Loss)
Carlisle Construction Materials	$	676.4	$	107.7	$	671.1	$	92.9
Carlisle Interconnect Technologies	224.5		16.4		246.4		30.6
Carlisle Fluid Technologies	58.3		2.8		63.1		6.4
Carlisle Brake & Friction	71.0		(3.8)		91.3		6.5
Segment total	1,030.2		123.1		1,071.9		136.4
Corporate and unallocated(1)	—		(20.4)		—		(21.7)
Total	$	1,030.2	$	102.7	$	1,071.9	$	114.7

⁽¹⁾Corporate operating loss includes other unallocated costs, primarily general corporate expenses.

Note 4—Acquisitions 

Providien, LLC

On November 20, 2019, the Company completed its acquisition of Providien, LLC ("Providien"), for consideration of $331.3 million, including $3.4 million of cash acquired and post-closing adjustments, which were finalized in the first quarter of 2020. Providien is a leading provider of comprehensive manufacturing solutions for global medical device original equipment manufacturers, including thermoforming, medical device contract manufacturing, precision machining and metals, and medical injection molding.

The following table summarizes the consideration transferred to acquire Providien 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 ("ASC") 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed

8

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 studies.

	Preliminary Allocation		Measurement Period Adjustments		Preliminary Allocation
(in millions)	As of 11/20/2019				As of 3/31/2020
Total cash consideration transferred	$	332.1	$	(0.8)	$	331.3
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	3.4		—		3.4
Receivables, net	38.9		—		38.9
Inventories, net	2.7		—		2.7
Prepaid expenses and other current assets	2.3		—		2.3
Property, plant and equipment	12.9		—		12.9
Definite-lived intangible assets	135.4		(2.7)		132.7
Other long-term assets	7.1		(0.3)		6.8
Accounts payable	(6.0)		—		(6.0)
Income tax payable	(0.7)		—		(0.7)
Accrued and other current liabilities	(7.0)		—		(7.0)
Other long-term liabilities	(8.1)		0.5		(7.6)
Deferred income taxes	(27.1)		6.9		(20.2)
Total identifiable net assets	153.8		4.4		158.2
Goodwill	$	178.3	$	(5.2)	$	173.1

The preliminary goodwill recognized in the acquisition of Providien reflects market participant synergies attributable to significant raw material purchase synergies with CIT, other administrative synergies, the value of the assembled workforce to Carlisle and opportunities for product line expansions. The Company acquired $38.9 million of gross contractual accounts receivable, of which less than $0.1 million was not expected to be collected at the date of acquisition. All of the goodwill has been preliminarily assigned to the CIT reporting unit, which aligns with the CIT reportable segment. Of the goodwill, $67.3 million is preliminarily deductible for tax purposes. The $132.7 million preliminary value allocated to definite-lived intangible assets consists of $108.7 million of customer relationships with a useful life between 13 to 37 years, various acquired technologies of $19.5 million with a useful life of six to 11 years and trade names of $4.4 million with a useful life of two to five years. The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $20.2 million.

Petersen Aluminum Corporation

On January 11, 2019, the Company acquired 100% of the equity of Petersen Aluminum Corporation ("Petersen"), for consideration of $207.2 million, including $5.2 million of cash acquired and post-closing adjustments, which were finalized in the first quarter of 2019. Petersen is a manufacturer and distributor of architectural metal roof panels, steel and aluminum flat sheets and coils, wall panels, perimeter roof edge systems and related accessories for commercial, residential, institutional, industrial and agricultural markets.

Petersen contributed revenues of $35.5 million and an operating loss of less than $0.1 million for the period from January 11, 2019, to March 31, 2019. The results of operations of the acquired business are reported as part of the CCM segment.

The following table summarizes the consideration transferred to acquire Petersen and the 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 ASC 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.

9

	Preliminary Allocation		Measurement Period  Adjustments		Final Allocation
(in millions)	As of 1/11/2019				As of 12/31/2019
Total cash consideration transferred	$	207.2	$	—	$	207.2
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	5.2		—		5.2
Receivables, net	11.5		—		11.5
Inventories, net	39.5		(0.3)		39.2
Prepaid expenses and other current assets	2.1		—		2.1
Property, plant and equipment	17.8		—		17.8
Definite-lived intangible assets	109.3		0.8		110.1
Other long-term assets	9.5		—		9.5
Accounts payable	(5.9)		—		(5.9)
Income tax payable	1.7		—		1.7
Accrued and other current liabilities	(8.7)		—		(8.7)
Other long-term liabilities	(12.4)		(0.1)		(12.5)
Deferred income taxes	(25.4)		(0.2)		(25.6)
Total identifiable net assets	144.2		0.2		144.4
Goodwill	$	63.0	$	(0.2)	$	62.8

The goodwill recognized in the acquisition of Petersen reflects market participant synergies attributable to significant raw material purchase synergies with CCM, other administrative synergies and the assembled workforce to Carlisle, in addition to opportunities for product line expansions. The Company acquired $11.6 million of gross contractual accounts receivable, of which $0.1 million was not expected to be collected at the date of acquisition. All of the goodwill has been assigned to the CCM reporting unit, which aligns with the CCM reportable segment, and none of the goodwill is deductible for tax purposes. The $110.1 million value allocated to definite-lived intangible assets consists of $79.7 million of customer relationships with a useful life of