Notes to Consolidated Financial Statements
Note 1Summary of Accounting Policies
Nature of Business
Carlisle Companies Incorporated, its wholly-owned subsidiaries and their divisions or subsidiaries, referred to herein as the "Company" or "Carlisle," manufacture
and distribute a wide variety of products across a broad range of industries, including, among others, roofing, construction, trucking, foodservice, industrial equipment, lawn and garden and aircraft
manufacturing. The Company markets its products as a component supplier to original equipment manufacturers, distributors, as well as directly to end-users.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates, where the Company does not have control
but exercises significant influence, are accounted for under the equity method. Equity income related to such investments is recorded in Other income, net on the Company's Consolidated Statements of
Earnings and Comprehensive Income. All material intercompany transactions and accounts have been eliminated. The Company's fiscal year-end is December 31, however the Company's
European roofing joint venture ("Icopal"), which was sold in July 2007, reported on a one-month lag.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("United States" or "U.S.")
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Debt securities with a maturity of three months or less when acquired are cash equivalents. Cash and cash equivalents are stated at cost, which approximates
market value.
Revenue Recognition
Revenues are recognized when persuasive evidence of an arrangement exists, goods have been shipped (or services have been rendered), the customer takes ownership
and assumes risk of loss, collection is probable, and the sales price is fixed or determinable.
Provisions
for discounts and rebates to customers and other adjustments are provided for at the time of sale as a deduction to revenue.
Shipping and Handling Costs
The Company accounts for shipping and handling costs in accordance with Emerging Issues Task Force Issue 00-10, "Accounting for Shipping and Handling
Fees and Costs." Costs incurred to physically transfer product to customer locations are recorded as a component of cost of good sold. Charges passed on to customers are recorded into revenue.
Allowance for Doubtful Accounts
Carlisle performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness,
as determined by the review of their credit
41
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
information.
Allowances for doubtful accounts are estimated based on the evaluation of potential losses related to customer receivable balances. Estimates are developed by using standard quantitative
measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. Changes in economic conditions in specific
markets in which the Company operates could have an effect on reserve balances required.
Inventories
Inventories for continuing and discontinued operations are valued at the lower of cost or market. Cost of inventories includes raw materials, direct labor and
manufacturing overhead based on practical capacity. Effective January 1, 2007, the Company changed its method of accounting for those finished goods, work-in-progress
and raw material inventories previously on the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method, see Notes 2 and 4.
Deferred Revenue and Extended Product Warranty
The Company offers extended warranty contracts on sales of certain products; the most significant being those offered on its installed roofing systems within the
Construction Materials segment. The life of these warranties range from five to thirty years. All revenue for the sale of these contracts is deferred and amortized on a straight-line basis
over the life of the contracts. Current costs of services performed under these contracts are expensed as incurred. The Company also records a loss and a corresponding reserve if the total expected
costs of providing services under the contract exceed unearned revenues. The Company estimates total expected warranty costs using standard quantitative measures based on historical claims experience
and management judgment. See Note 17.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Costs allocated to property, plant and equipment of acquired companies are based on estimated fair market value
at the date of acquisition. Depreciation is principally computed on the straight-line basis over the estimated useful lives of the assets. Depreciation includes the amortization of capital
leases. Asset lives are 20 to 40 years for buildings, 5 to 15 years for machinery and equipment and 3 to 10 years for leasehold improvements.
In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company performs
impairment tests on its long-lived assets, excluding goodwill and other intangible assets, when circumstances indicate that their carrying amounts may not be recoverable. If required,
recoverability is tested by comparing the estimated future undiscounted cash flows of the asset or asset group to its carrying value. If the carrying value is not recoverable, the asset or asset group
is written down to market value.
Self Insurance Retention
The Company maintains self-retained liabilities for workers' compensation, medical and dental, general liability, property and product liability
claims up to applicable retention limits. The Company estimates these retention liabilities utilizing actuarial methods and loss development factors. The Company's historical loss experience is
considered in the calculation. The Company is insured for losses in excess of these limits. See Note 17.
42
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
Patents, Goodwill and Other Intangible Assets
The Company accounts for patents, goodwill and intangible assets in accordance with SFAS 142, Goodwill and Other Intangible Assets. Patents and other
intangible assets are recorded at cost. Intangible assets that are subject to amortization are amortized on a straight-line basis over their useful lives. Goodwill and intangible assets
with indefinite useful lives are not subject to amortization, but are tested at least annually for impairment. The Company principally uses discounted cash flow models in evaluating goodwill, but may
use other measures when appropriate. Costs allocated to patents and other intangible assets of acquired companies are based on estimated fair market value at the date of acquisition. See
Note 6Goodwill and Other Intangible Assets.
Pension and Other Post Retirement Benefits
The Company maintains defined benefit retirement plans for the majority of its employees. The annual net periodic expense and benefit obligations related to these
plans are determined on an actuarial basis. This determination requires assumptions to be made concerning the discount rate, long-term return on plan assets and increases to compensation
levels. These assumptions are reviewed periodically by management in consultation with its independent actuary. Changes in the assumptions to reflect actual experience can result in a change in the
net periodic expense and accrued benefit obligations. The defined benefit plans' assets consist primarily of publicly-listed common stocks and corporate bonds, and the market value of these assets is
determined under the fair value method. The Company uses a September 30 measurement date for valuation purposes. Deviations of actual results as compared to expected results are recognized over
a five-year period. The expected rate of return on plan assets was 8.5% for the 2007 valuation. While the Company believes 8.5% is a reasonable expectation based on the plan assets' mix of
fixed income and equity investments, significant differences in actual experience or significant changes in the assumptions used may materially affect the pension obligations and future expense. The
effects of a 0.25% increase or
decrease in the expected rate of return would change the Company's estimated 2008 pension expense by approximately $0.3 million. The assumed discount rate was 6.35% for the 2007 valuation. The
effects of a 0.25% increase or decrease in the assumed discount rate would change the Company's total pension benefit obligation by approximately $4.2 million. The Company has used an assumed
rate of compensation increase of 4.29% for the 2007 valuation. This rate is not expected to change in the foreseeable future and is slightly higher than the Company's actual rate of compensation
increase over the past few years.
The
Company also has a limited number of unfunded post-retirement benefit programs that provide certain retirees with medical and prescription drug coverage. The annual net
periodic expense and benefit obligations of these programs are also determined on an actuarial basis and are subject to assumptions on the discount rate and increases in compensation levels. The
Company uses a September 30 measurement date for valuation purposes. The discount rate used for the 2007 valuation was 6.35%. The effects of a 1% increase or decrease in assumed health care
cost trend rates would not be material. Like the defined benefit retirement plans, these plans' assumptions are reviewed periodically by management in consultation with its independent actuary.
Changes in the assumptions can result in a change in the net periodic expense and accrued benefit obligations.
Derivative Financial Instruments
The Company accounts for derivative financial instruments under SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which
requires that all derivatives be recorded
43
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
at
fair value on the balance sheet and establishes criteria for designation and effectiveness of derivative transactions for which hedge accounting is applied. If the derivative is designated as a
fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If a fair value hedge is terminated before
maturity, the adjusted carrying amount of the hedged asset or liability remains as a component of the carrying amount of that asset or liability until it is disposed. If the hedged item is an
interest-bearing financial instrument, the adjusted carrying amount is amortized into earnings over the remaining life of the instrument. If the derivative is designated as a cash flow hedge, the
effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings.
Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.
The
Company is subject to market risk from exposures to changes in interest rates due to its financing, investing and cash management activities. The Company uses treasury lock
contracts, interest rate swap agreements, or other derivative instruments, from time to time, to manage the interest rate risk of its floating and fixed rate debt portfolio. The Company, on a periodic
basis, assesses the initial and ongoing effectiveness of its hedging relationships.
The
Company's international operations are exposed to translation risk when the local currency financial statements are translated into U.S. Dollars. Carlisle monitors this risk, but at
December 31, 2007, had no contracts in place for hedging net investment risk.
Currency
valuation risk is considered minimal. At December 31, 2007 the Company had no material currency hedges in place. Less than 6% of the Company's 2007 revenues are in
currencies other than the U.S. Dollar.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences of the differences between financial statement carrying amounts of assets and
liabilities and their respective tax basis. These balances are measured using enacted tax rates expected to apply to taxable income in the years in which such temporary differences are expected to be
recovered or settled. If a portion or all of a deferred tax asset is not expected to be realized, a valuation allowance is recognized.
Employee Stock-based Compensation Arrangements
Stock Options
The Company adopted SFAS No. 123(R) as of January 1, 2006, using the modified prospective approach, and as such, accounts for awards of stock-based
compensation based on the fair-value method. Compensation expense for stock options granted is recognized using the accelerated method under SFAS 123(R).
Prior
to 2006, the Company accounted for awards of stock-based employee compensation based on the intrinsic value method under the Accounting Principles Board Opinion 25. As such, no
stock-based compensation was recorded in the determination of Net income, as options granted had an option price equal to the market price of the underlying stock on the grant date. The following
table illustrates the effect on Net income and Earnings per share ("EPS") had the Company applied the fair value method of
44
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
accounting
for stock-based employee compensation under SFAS 123, Accounting for Stock-Based Compensation.
In thousands (except per share data)
|
|
Year Ended
December 31, 2005
|
|
Net income, as reported
|
|
$
|
115,148
|
|
Less: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects
|
|
|
(3,491
|
)
|
|
|
|
|
Net income, proforma
|
|
$
|
111,657
|
|
|
|
|
|
Basic EPS (as reported)
|
|
$
|
1.87
|
|
|
|
|
|
Basic EPS (proforma)
|
|
$
|
1.82
|
|
|
|
|
|
Diluted EPS (as reported)
|
|
$
|
1.85
|
|
|
|
|
|
Diluted EPS (proforma)
|
|
$
|
1.80
|
|
|
|
|
|
The
pro forma effect includes only the vested portion of options granted in and after 1995. Compensation cost for the years ended December 31, 2007, 2006 and 2005, was estimated
using the Black-Scholes model, with the following assumptions:
|
|
Years Ended December 31
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Expected dividend yield
|
|
|
1.3
|
%
|
|
1.4
|
%
|
|
1.4
|
%
|
Expected life in years
|
|
|
5.59
|
|
|
5.65
|
|
|
7.00
|
|
Expected volatility
|
|
|
25.0
|
%
|
|
25.7
|
%
|
|
28.2
|
%
|
Risk-free interest rate
|
|
|
4.7% - 5.1
|
%
|
|
4.6% - 5.0
|
%
|
|
4.0
|
%
|
Weighted average fair value
|
|
$
|
23.55
|
|
$
|
19.27
|
|
$
|
20.72
|
|
The
expected life of options is based on the assumption that all outstanding options will be exercised at the midpoint of the valuation date and the option expiration date. The expected
volatility is based on historical volatility as well as implied volatility of the Company's publicly traded options. The risk free interest rate is based on rates of U.S. Treasury issues with a
remaining life equal to the expected life of the option. The expected dividend yield is based on the projected annual dividend payment per share, divided by the stock price at the date of grant.
Compensation expense is recognized over the vesting period based on the closing stock prices on the grant date of the restricted stock. As compensation expense is
recognized, Additional paid-in capital is increased in shareholders' equity. The restricted stock receives the same dividend as common shares outstanding.
Earnings Per Share
Basic earnings per share excludes the dilutive effects of potentially dilutive options, warrants and convertible securities. Diluted earnings per share reflects
the potential dilution that would occur if options,
45
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
warrants
or other convertible securities were exercised. Restricted shares are considered options for purposes of calculating earnings per share. Differences between basic and diluted earnings per
share of the Company are the effect of dilutive stock options and restricted shares. Stock options to purchase approximately 200,000 shares in 2007, 1,500 shares in 2006 and 9,000 shares in 2005 were
excluded from the calculation of potentially dilutive options as such options had exercise prices in excess of the average market value of the Company's common stock during these periods.
Foreign Currency Translation
The Company has determined that the local currency is the functional currency for the majority of its subsidiaries outside the United States. Assets and
liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during
the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of shareholders' equity in Accumulated other comprehensive income.
Gains and losses from foreign currency transactions and from the remeasurement of foreign entities where the functional currency is the U.S. Dollar are included in Other income, net.
Reclassifications and Restatements
Certain reclassifications have been made to 2006 and 2005 information to conform to the current year's presentation.
The
Consolidated Statements of Earnings and Comprehensive Income have been retrospectively adjusted to reflect the effects of discontinued operations and the change in accounting method
described in Note 2. In addition, the Consolidated Balance Sheets have been restated to show separately assets held for sale and the liabilities associated with those assets. Segment
information presented in Note 20 has also been restated from prior year's presentation to reflect discontinued operations and assets held for sale. See Note 18 for more detail regarding
discontinued operations.
The
Company effected a two-for-one split of its $1 par value common stock, whereby one additional share of the Company's stock was issued on March 19, 2007
for each share of common stock held by the shareholders of record as of the close of business on March 7, 2007 (the "stock split"). Accordingly, all references to the number of shares and per
share data, except shares authorized, for all periods presented have been adjusted to reflect this stock split.
New Accounting Pronouncements Adopted
On December 31, 2006, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158
("SFAS 158"), Employers' Accounting for Defined Benefit and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS 158 requires plan sponsors
of defined benefit pension and other postretirement benefit plans (collectively, "postretirement benefit plans") to recognize the funded status of their postretirement plan assets and benefit
obligations as of the date of the fiscal year-end statement of financial position, and provide additional disclosures. The effect of adopting the disclosure provisions of SFAS 158
on the Company's financial condition has been included in the accompanying consolidated financial statements. The Company has determined the impact of the change in measurement date from
September 30 to December 31 for post-retirement benefit plans to be a decrease in retained earnings of approximately $1.1 million in 2008. See Note 14 for
further discussion of the effect of adopting SFAS 158 on the Company's consolidated financial statements.
46
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
In
January 2007, the Company adopted SFAS No. 155 ("SFAS 155"), Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statement No. 133 and 140.
SFAS 155 permits hybrid financial instruments that have embedded derivatives to be valued as a whole, eliminating the need to bifurcate the derivative from its host, as previously required
under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedge Accounting ("SFAS 133"). SFAS 155 also amends SFAS 133 by
establishing a requirement to evaluate interests in securitized financial assets to determine whether they are free standing derivatives or whether they contain embedded derivatives that require
bifurcation. SFAS 155 is effective for all hybrid financial instruments acquired or issued by the Company on or after January 1, 2007. Adoption of this standard had no material effect on
the Company's statement of earnings or financial position.
In
January 2007, the Company adopted Financial Interpretation No. 48 ("FIN 48"). This interpretation clarifies the accounting and financial statement reporting for
uncertainty in income taxes recognized by prescribing a recognition threshold and measurement attribute for a tax position taken or expected to be taken in a tax return. The cumulative effect of the
change in principle of accounting for uncertain tax positions was a charge to retained earnings of $2.1 million. Refer to Note 15 for more information on the adoption of this
interpretation.
In
January 2007, the Company adopted Staff Accounting Bulletin No. 108 ("SAB 108"). SAB 108 expresses the staff's views regarding the process of quantifying
financial statement misstatements. Based on SAB 108, prior year misstatements should be considered in quantifying misstatements in current year financial statements. SAB 108 provides
approaches to be used to quantify any misstatements. Adoption of this standard had no material effect on the Company's statement of earnings or financial position.
New Accounting Standards
In September 2006, the FASB issued SFAS No. 157 ("SFAS 157"), Fair Value Measurements. SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. FASB Staff Position (FSP) No. FAS 157-2 defers the
effective date of SFAS 157 by one year for certain types of nonfinancial assets and nonfinancial liabilities, to fiscal years beginning after November 15, 2008. The Company is currently
evaluating the requirements of this standard and has not yet determined the impact on the consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of
FASB Statement No. 115." This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The fair value option established by this
Statement permits all entities to choose to measure eligible items at fair value at specified election dates and report unrealized gains and losses on items for which the fair value option has been
elected in earnings (loss) at each subsequent reporting date. It will be effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating the requirements of
this standard and has not yet determined the impact on the consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 141(R),
Business Combinations
and SFAS No. 160,
Accounting and Reporting of Noncontrolling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
. These new standards will
significantly change the accounting for and reporting of business combination transactions and noncontrolling (minority) interests in consolidated financial statements. SFAS Nos. 141(R) and 160
are required to be adopted simultaneously and are effective for the first annual
47
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 1Summary of Accounting Policies (Continued)
reporting
period beginning on or after December 15, 2008. Thus, the Company is required to adopt these standards on January 1, 2009. Earlier adoption is prohibited. The Company is
currently evaluating the impact of adopting SFAS Nos. 141(R) and 160 on the consolidated financial statements.
Note 2Change in Accounting Method
Prior to January 1, 2007, inventories were valued using both the LIFO and the FIFO methods. Effective January 1, 2007, the Company changed its
method of accounting for those finished goods, work-in-progress and raw material inventories previously on the LIFO method to the FIFO method. The Company believes the change
is preferable as the FIFO method better reflects the current value of inventory on the Consolidated Balance Sheets and provides better matching of revenue and expense in the Consolidated Statements of
Earnings and Comprehensive Income. Moreover, the change also conforms all of the Company's raw materials, work-in-process and finished goods inventories to a single costing
method (FIFO).
The
Company applied this change in method of inventory costing by retrospectively adjusting the prior years' financial statements. The effect of the change on previously reported
consolidated operating results for the quarters ended March 31, June 30, September 30, and December 31, 2006, was to increase (decrease) income from continuing operations
and net income by $0.4 million ($0.01 per diluted share), $1.1 million ($0.02 per diluted share), $1.7 million ($0.03 per diluted share), and $(1.8) million ($0.03 loss per
diluted share), respectively. The impact on the consolidated statement of earnings for the years ended December 31, 2006 and 2005, was to increase income from continuing operations and net
income by $1.4 million ($0.02 per diluted share) and $8.8 million ($0.14 per diluted share), respectively. There was no effect on discontinued operations. Per share amounts include the
effect of the two-for-one stock split.
The
effect on the consolidated balance sheet at December 31, 2006 was as follows:
In thousands
|
|
Increase
(decrease)
|
|
Inventories
|
|
$
|
40,246
|
|
Deferred income tax asset
|
|
|
(10,977
|
)
|
Accrued expenses
|
|
|
4,156
|
|
Retained earnings
|
|
|
25,113
|
|
Had
the Company not changed its policy for accounting for inventory, pre-tax income would have been reduced by $4.0 million ($2.5 million loss
after-tax, or $0.04 per diluted share) for the year ended December 31, 2007. By quarter, pre-tax income would have increased (decreased) by $1.9 million
($1.2 million after-tax, or $0.02 per diluted share), $(2.4) million ($1.5 million loss after-tax, or $0.02 per diluted share), $(0.8) million
($0.5 million loss after-tax, or $0.01 per diluted share) and $(2.6) million ($1.7 loss after tax or $0.03 per diluted share), for the quarters ended March 31,
June 30, September 30 and December 31, 2007, respectively.
Note 3Receivables Facility
The Company maintains an agreement (the "Receivables Facility") with a financial institution whereby it sells on a continuous basis an undivided interest in
certain eligible trade accounts receivable. Pursuant to the Receivables Facility, the Company formed a wholly-owned, special purpose, bankruptcy-remote subsidiary ("SPV"). The financial position and
results of operations of the SPV are consolidated with the Company. The SPV was formed for the sole purpose of buying and selling receivables generated
48
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 3Receivables Facility (Continued)
by
the Company. Under the Receivables Facility, the Company, irrevocably and without recourse, transfers all applicable trade accounts receivables to the SPV. The SPV, in turn, has sold and, subject
to certain conditions, may from time to time sell an undivided interest in these receivables and is permitted to receive advances of up to $150.0 million from the conduit administered by an
independent financial institution for the sale of such an undivided interest.
Prior
to the third quarter of 2007, the Company accounted for the SPV's sale of undivided interests in the SPV's receivables to the conduit as sales under SFAS No. 140
("SFAS 140", Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. However, as a result of the Company effectively terminating the existing accounts
receivable securitization facility ("the old securitization facility") and subsequently executing a new agreement ("the new securitization facility") during the third quarter of 2007, the amount
outstanding under the new securitization facility at December 31, 2007 of $15.0 million is included in Receivables in the Company's Consolidated Balance Sheet. The related borrowings are
reflected as Short-term debt, including current maturities. Refer to Note 8.
At
December 31, 2007, under the new securitization facility, all receivables serviced by the SPV totaling $268.6 million, including the $15.0 million outstanding,
are included in Receivables in the Company's Consolidated Balance Sheet at their relative fair value. At December 31, 2006, the outstanding balance of receivables serviced by the SPV was
$242.3 million and the SPV had not sold any undivided interest to the conduit under the old securitization agreement. As a result, the Company's retained interest in the SPV's receivables
amounted to $242.3 million at December 31, 2006 and was included in Receivables in the Company's Consolidated Balance Sheet at its relative fair value. At December 31, 2005, the
outstanding balance of receivables serviced by the SPV was $228.8 million and the SPV sold $137.9 million of undivided interest to the conduit under the old securitization agreement
which was accounted for as sales under SFAS 140. The amount of the Company's retained interest in the SPV's receivables which was included in Receivables in the Company's Consolidated Balance
Sheet at its
relative fair value at December 31, 2005 totaled $91.1 million. The retained interest is subordinate to, and provides credit enhancement for, the conduit's ownership interest in the
SPV's receivables, and is available to the conduit to pay any fees or expenses due to the conduit, and to absorb all credit losses incurred on any of the SPV's receivables.
The
interest rate paid to the conduit on amounts outstanding under the Receivables Facility is equal to the conduit's pooled commercial paper rate, which was 5.34% and 5.35% at
December 31, 2007 and December 31, 2006, respectively. For the first eight months of 2007, the Company's loss on the sales of receivables under the old securitization facility is
reported in Other income, net and amounted to $3.5 million. The loss on the sales of receivables under the old securitization facility included in Other income, net for both 2006 and 2005
totaled $4.3 million. The expense related to the new securitization facility totaled $1.0 million in 2007 and is included in Interest expense, net.
Note 4Inventories
Carlisle is a diversified manufacturing entity comprised of multiple domestic and international companies that operate as distinct businesses manufacturing
different products. Although both the LIFO and FIFO methods were previously used to value inventory, effective January 1, 2007, the Company changed its accounting policy for those inventories
previously valued using LIFO, to FIFO. Refer to Note 2 for more information.
49
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 4Inventories (Continued)
The
components of inventories at December 31 are as follows:
In thousands
|
|
2007
|
|
2006*
|
|
FIFO (approximates current costs):
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
311,331
|
|
$
|
295,473
|
|
Work-in-process
|
|
|
30,457
|
|
|
28,491
|
|
Raw materials
|
|
|
149,783
|
|
|
124,487
|
|
Reserves and variancesnet
|
|
|
2,203
|
|
|
4,221
|
|
|
|
|
|
|
|
|
|
|
493,774
|
|
|
452,672
|
|
Inventories associated with assets held for sale
|
|
|
(1,500
|
)
|
|
(2,668
|
)
|
|
|
|
|
|
|
Inventories
|
|
$
|
492,274
|
|
$
|
450,004
|
|
|
|
|
|
|
|
-
*
-
2006
amounts have been reclassified to reflect the change in accounting for inventory, see Note 2, and assets held for sale of discontinued operations, see Notes 1 and 18.
Note 5Property, Plant and Equipment
The components of property, plant and equipment at December 31 are as follows:
In thousands
|
|
2007
|
|
2006*
|
|
Land
|
|
$
|
30,014
|
|
$
|
12,868
|
|
Buildings and leasehold improvements
|
|
|
292,880
|
|
|
260,585
|
|
Machinery and equipment
|
|
|
707,753
|
|
|
652,880
|
|
Projects in progress
|
|
|
45,205
|
|
|
32,614
|
|
|
|
|
|
|
|
|
|
|
1,075,852
|
|
|
958,947
|
|
Accumulated depreciation
|
|
|
(535,715
|
)
|
|
(496,640
|
)
|
Property, plant and equipment, net, associated with assets held for sale
|
|
|
(2,500
|
)
|
|
(3,827
|
)
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
537,637
|
|
$
|
458,480
|
|
|
|
|
|
|
|
-
*
-
2006
amounts have been reclassified to reflect assets held for sale of discontinued operations, see Notes 1 and 18.
During
2007 and 2006, the Company capitalized interest in the amount of $1.7 million and $1.6 million, respectively.
50
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 6Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as follows:
In thousands
|
|
Industrial
Components
|
|
Construction
Materials
|
|
General
Industry
|
|
Specialty
Products
|
|
Total
|
|
Balance at January 1, 2006
|
|
$
|
155,244
|
|
$
|
32,112
|
|
$
|
79,544
|
|
$
|
56,688
|
|
$
|
323,588
|
|
Goodwill acquired during year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments
|
|
|
|
|
|
|
|
|
|
|
|
(14,930
|
)
|
|
(14,930
|
)
|
Currency translation
|
|
|
1
|
|
|
672
|
|
|
|
|
|
376
|
|
|
1,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
155,245
|
|
$
|
32,784
|
|
$
|
79,544
|
|
$
|
42,134
|
|
$
|
309,707
|
|
Goodwill acquired during year
|
|
|
|
|
|
52,749
|
|
|
1,521
|
|
|
|
|
|
54,270
|
|
Currency translation
|
|
|
373
|
|
|
794
|
|
|
|
|
|
248
|
|
|
1,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
155,618
|
|
$
|
86,327
|
|
$
|
81,065
|
|
$
|
42,382
|
|
$
|
365,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company's other intangible assets as of December 31, 2007, are as follows:
In thousands
|
|
Acquired
Cost
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
Assets subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
10,423
|
|
$
|
(8,345
|
)
|
$
|
2,078
|
|
Software licenses
|
|
|
1,800
|
|
|
(1,629
|
)
|
|
171
|
|
Customer relationships
|
|
|
27,180
|
|
|
(6,407
|
)
|
|
20,773
|
|
Other
|
|
|
4,380
|
|
|
(2,874
|
)
|
|
1,506
|
Assets not subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
4,000
|
|
|
|
|
|
4,000
|
|
Trade names
|
|
|
10,174
|
|
|
|
|
|
10,174
|
|
|
|
|
|
|
|
Patents and other intangible assets, net
|
|
$
|
57,957
|
|
$
|
(19,255
|
)
|
$
|
38,702
|
|
|
|
|
|
|
|
The
Company's other intangible assets as of December 31, 2006, are as follows:
In thousands
|
|
Acquired
Cost
|
|
Accumulated
Amortization
|
|
Net Book
Value
|
Assets subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
$
|
9,900
|
|
$
|
(8,054
|
)
|
$
|
1,846
|
|
Software licenses
|
|
|
1,800
|
|
|
(1,371
|
)
|
|
429
|
|
Customer relationships
|
|
|
14,712
|
|
|
(3,055
|
)
|
|
11,657
|
|
Other
|
|
|
11,925
|
|
|
(10,518
|
)
|
|
1,407
|
Assets not subject to amortization
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
|
4,000
|
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
Patents and other intangible assets, net
|
|
$
|
42,337
|
|
$
|
(22,998
|
)
|
$
|
19,339
|
|
|
|
|
|
|
|
Estimated
amortization expense over the next five years is as follows: $4.6 million in 2008, $4.4 million in 2009, $4.2 million in 2010, $3.4 million in 2011
and $2.1 million in 2012.
51
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 7Investments and Advances to Unconsolidated Affiliates
Investments and advances to unconsolidated affiliates are as follows:
In thousands
|
|
Ownership
|
|
2007
|
|
2006
|
|
Joint Venture interest in Icopal A/S
|
|
25
|
%
|
$
|
|
|
$
|
81,971
|
|
Notes Receivable from Icopal A/S
|
|
|
|
|
|
|
|
15,041
|
|
|
|
|
|
|
|
|
|
|
Investment in Icopal A/S
|
|
|
|
|
|
|
|
97,012
|
|
|
Other investments
|
|
28-49
|
%
|
|
3,849
|
|
|
4,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,849
|
|
|
101,087
|
|
Investments associated with assets held for sale
|
|
|
|
|
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
Investments and advances to affiliates
|
|
|
|
$
|
3,849
|
|
$
|
100,687
|
|
|
|
|
|
|
|
|
|
In
2006, the investment in Icopal A/S consisted of a 25% joint venture interest reported in the Construction Materials segment and notes receivable reported in Corporate. On
July 31, 2007, the Company sold its interest in Icopal for $114.8 million. The resulting pre-tax gain recognized on the sale was $49.1 million ($47.0 million
recognized in Other income, net and $2.1 million recognized as interest income), or $29.9 million after-tax ($0.48 per diluted share).
The
Company has exposure to exchange rate movement relative to its investment in foreign operations. Fluctuations in foreign currencies result in an unrealized gain or loss recorded as
an adjustment to the investment and as a component of Accumulated other comprehensive income or loss.
Continuing
and discontinued operations combined unaudited summarized financial information for the Company's unconsolidated affiliates is as follows:
In thousands
|
|
2007
|
|
2006
|
Income Statement Information
|
|
|
|
|
|
|
|
Net sales*
|
|
$
|
837,395
|
|
$
|
1,108,917
|
|
Earnings before income taxes*
|
|
|
14,640
|
|
|
39,495
|
|
Net income*
|
|
|
9,505
|
|
|
25,401
|
|
|
|
|
|
Balance Sheet Information
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
11,477
|
|
$
|
472,362
|
|
Non-current assets
|
|
|
7,026
|
|
|
722,821
|
|
Current liabilities
|
|
|
4,919
|
|
|
532,935
|
|
Non-current liabilities
|
|
|
531
|
|
|
317,932
|
|
Equity
|
|
|
13,054
|
|
|
344,316
|
-
*
-
Includes
2007 Icopal net sales, EBIT and net income through the date of sale of $820.2 million, $12.4 million and $7.9 million, respectively.
52
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 8Borrowings
Borrowings under short-term credit lines and long-term debt include:
In thousands
|
|
2007
|
|
2006
|
|
6.70% senior notes due 2008
|
|
$
|
100,000
|
|
$
|
100,000
|
|
7.25% senior notes due 2007
|
|
|
|
|
|
149,934
|
|
6.125% senior notes due 2016, net of unamortized discount of ($970) and ($1,083) respectively
|
|
|
149,030
|
|
|
148,917
|
|
Accounts receivable securitization facility
|
|
|
15,000
|
|
|
|
|
Revolving credit lines
|
|
|
20,000
|
|
|
|
|
Industrial development and revenue bonds through 2018
|
|
|
20,035
|
|
|
20,035
|
|
Other, including capital lease obligations
|
|
|
6,865
|
|
|
7,448
|
|
Short-term credit lines
|
|
|
10,450
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
321,380
|
|
$
|
426,334
|
|
Less short-term debt, including current maturities and industrial revenue and development bonds
|
|
|
(58,571
|
)
|
|
(151,676
|
)
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
262,809
|
|
$
|
274,658
|
|
|
|
|
|
|
|
On
August 18, 2006, the Company issued $150 million in ten-year notes at an interest rate of 6.125% in anticipation of the Company's 7.25% $150 million
notes maturing January 15, 2007. The net proceeds of the August 2006 notes were used in the interim period to repay all amounts outstanding under the Company's uncommitted line of credit, to
reduce the trade accounts receivable sold under the Company's receivables facility and for general corporate purposes. The $150 million notes were included in Short-term debt at
December 31, 2006. On January 15, 2007, the Company redeemed the 7.25% $150.0 million notes. The notes were repaid with cash on hand as well as funds from the Company's
uncommitted credit facilities.
During
the third quarter of 2007, the Company effectively terminated the existing accounts receivable securitization facility and subsequently executed a new agreement. As a result, at
December 31, 2007 the securitization is treated as a borrowing for accounting purposes and the related debt of $15.0 million is reflected in Short-term debt, including
current maturities. At December 31, 2007, $135.0 million was available under the Company's $150.0 million accounts receivable securitization facility. The average interest rate on
the new accounts receivable securitization facility was 5.83%.
Certain
bonds payable held by the Company at December 31, 2007 mature on May 15, 2008. The Company, however, intends to refinance those bonds payable upon maturity or
utilize its existing revolving credit facility until such refinancing is secured, thereby deferring the effective maturity of those bonds payable beyond a twelve-month period immediately following
December 31, 2007. Because of the Company's intent and ability to defer the effective maturity beyond a twelve-month period, these bonds payable are included in Long-term debt at
December 31, 2007.
On
July 12, 2007, the Company replaced its $300.0 million revolving credit facility with a five-year $400.0 million revolving credit facility (the "2007
Facility") in order to increase the facility size, extend tenor, reduce pricing and improve certain other provisions. At December 31, 2007 the Company had $376.5 million available under
this facility. The 2007 Facility provides for grid-based interest pricing based
53
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 8Borrowings (Continued)
on
the credit rating of the Company's senior unsecured bank or other unsecured senior debt and the Company's utilization of the 2007 Facility. The average interest rate on the 2007 Facility was 5.71%.
The
Company also maintains a $55.0 million uncommitted line of credit of which $44.6 million was available as of December 31, 2007. The average interest rate on the
uncommitted line was 5.65%.
At
December 31, 2007, letters of credit amounting to $46.6 million were outstanding primarily to provide security under insurance arrangements and certain borrowings.
Under
the Company's various debt and credit facilities, the Company is required to meet various restrictive covenants and limitations, including certain net worth, cash flow ratios and
limits on outstanding debt balances held by certain subsidiaries. The Company was in compliance with all covenants and limitations in 2007 and 2006.
The
industrial development and revenue bonds are collateralized by letters of credit, Company guarantees and/or by the facilities and equipment acquired through the proceeds of the
related bond issuances. The weighted average interest rates on the revenue bonds for 2007 and 2006 were 4.54% and 4.32%, respectively. The Company estimates the fair value of its industrial
development and revenue bonds approximates their carrying value.
Other
borrowings for 2007 and 2006 include capital lease obligations of $6.3 million and $5.7 million, respectively for the funding of production facility expansions.
Interest rates on these borrowings ranged from 6.39% to 13.28% in 2007.
Cash
payments for interest were $26.2 million in 2007, $20.6 million in 2006, and $21.5 million in 2005. Interest expense, net is shown net of interest income of
$11.5 million in 2007, $3.5 million in 2006, and $1.5 million in 2005.
The
aggregate amount of short-term and long-term debt maturing in each of the next five years is approximately $158.6 million in 2008, $0 in 2009, 2010,
2011, and 2012, and $163.8 million thereafter.
The
fair value of the Company's senior notes is based on current year yield rates plus the Company's estimated credit spread available for financings with similar terms and maturities.
As of December 31, 2007, the fair value of the Company's 6.70% senior notes is approximately $100.2 million. The fair value of the Company's 6.125% senior notes is approximately
$151.5 million at December 31, 2007.
Note 9Derivative Financial Instruments
The Company is exposed to the impact of changes in interest rates and market values of its debt instruments, changes in raw material prices and foreign currency
fluctuations. Management of interest rate exposure includes consideration of the use of treasury lock contracts and interest rate swaps to reduce the volatility of cash flows, the impact on earnings,
and to lower its cost of capital.
On
November 14, 2006, the Company entered into treasury lock contracts with a notional amount of $100.0 million to hedge the cash flow variability on forecasted debt
interest payments associated with changes in interest rates. These contracts have been designated as cash flow hedges and were deemed effective at the origination date and as of December 31,
2007. The valuation of these contracts resulted in a liability of $4.1 million as of December 31, 2007.
54
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements
Note 9Derivative Financial Instruments (Continued)
On June 15, 2005, the Company entered into treasury lock contracts with a notional amount of $150.0 million to hedge the cash flow variability on
forecasted debt interest payments associated with changes in interest rates. These contracts were designated as cash flow hedges and were deemed effective at the origination date. On August 15,
2006, the Company terminated the treasury lock contracts resulting in a gain of $5.6 million ($3.5 million, net of tax), which will be amortized to reduce interest expense until August
2016, the term of the interest payments related to the $150.0 million in notes issued on August 18, 2006. At December 31, 2007, the Company had a remaining unamortized gain of
$4.9 million ($3.0 million, net of tax) which is reflected in Accumulated other comprehensive income
on the Company's Consolidated Balance Sheets. Approximately $0.6 million ($0.4 million, net of tax) is expected to be amortized to reduce Interest expense, net in 2008.
On
May 15, 2007, the Company executed forward exchange contracts with a total notional amount of $95.0 million to hedge the Company's foreign currency exposure of its net
investment in its European roofing joint venture ("Icopal") denominated in Danish Kroner. These contracts were designated as economic hedges of a net investment and were deemed effective at the
origination date. Upon the sale of Icopal on July 31, 2007, these hedges were redesignated as non-hedging derivatives and any change in the value of the derivatives is reflected in
Other income, net. On September 28, 2007, the Company executed forward exchange contracts with a notional amount of $95.0 million to offset the remeasurement of the
short-term investment created by the sale of Icopal which was denominated in Danish Kroner. These contracts were designated as non-hedging derivatives. These contracts were
terminated on December 14, 2007. The termination of the aforementioned forward exchange contracts resulted in the recognition of $6.8 million of losses reflected in Other income, net,
which were partially offset by a $5.7 million foreign exchange gain related to the cash generated by the sale of Icopal denominated in Danish Kroner.
Note 10Acquisitions
On May 1, 2007, the Company acquired 100% of the equity of Insulfoam LLC ("Insulfoam") from Premier Industries, Inc., a privately held
company, headquartered in Tacoma, Washington, for approximately $167.0 million. An additional working capital payment of $1.3 million was made in February 2008. Insulfoam is a leading
manufacturer of block molded expanded polystyrene products used primarily as insulation in building and other construction applications. Insulfoam is under the management direction of the construction
materials business, which is included in the Construction Materials segment.
During
the third quarter 2007, the Company established a liability, as an adjustment to the cost of the acquisition, of $3.1 million for exit costs and employee termination costs
related to the shut-down of Insulfoam's Columbus location. At December 31, 2007, there were $0.5 million of payments and $1.6 million of charges against the liability.
55
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 10Acquisitions (Continued)
The
following table summarizes the initial allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the date of the acquisition of
Insulfoam:
In thousands
|
|
Purchase Price
Allocation
|
Trade receivables, net
|
|
$
|
24,533
|
Inventories
|
|
|
31,481
|
Prepaid expenses and other current assets
|
|
|
2,333
|
Property, plant and equipment, net
|
|
|
44,670
|
Intangibles
|
|
|
21,734
|
Goodwill
|
|
|
52,749
|
|
|
|
|
Total assets acquired
|
|
|
177,500
|
Current liabilities
|
|
|
10,245
|
Other long-term liabilities
|
|
|
240
|
|
|
|
|
Total liabilities assumed
|
|
|
10,485
|
|
|
|
Net assets acquired
|
|
$
|
167,015
|
|
|
|
Of
the $21.7 million of acquired intangible assets, $10.2 million was assigned to the trade name that is not subject to amortization, while the remaining acquired
intangibles of $11.5 million were allocated primarily to customer related intangibles, which are being amortized over the assets' determinable useful life of 10 years. The goodwill from
this acquisition is deductible for tax purposes.
The
following unaudited pro forma consolidated financial information has been prepared as if the acquisition of Insulfoam had taken place at the beginning of each fiscal year presented.
The following unaudited pro forma information is not necessarily indicative of the results of operations in future periods or results that would have been achieved had the acquisition taken place at
the beginning of the periods presented.
|
|
Twelve Months Ended
December 31,
|
In thousands, except per share data
|
|
2007
|
|
2006
|
|
2005
|
Net sales
|
|
$
|
2,933,178
|
|
$
|
2,772,861
|
|
$
|
2,394,813
|
Earnings before interest and income taxes
|
|
|
331,778
|
|
|
299,798
|
|
|
242,668
|
Income from continuing operations
|
|
|
214,568
|
|
|
192,759
|
|
|
154,388
|
Net income
|
|
|
217,184
|
|
|
231,041
|
|
|
126,095
|
Earnings per sharediluted
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
3.43
|
|
$
|
3.10
|
|
$
|
2.48
|
Net income
|
|
$
|
3.47
|
|
$
|
3.71
|
|
$
|
2.03
|
On
February 2, 2007, the Company acquired 100% of the equity of Meixian Tengfei Tyre Co., Ltd., a tire manufacturer, located in Guandong, China, for consideration of
approximately $19.6 million. Operating results for this operation since the acquisition date are included in the Industrial Components segment. Although the Company is continuing to evaluate
the purchase price allocation, the purchase price has been allocated to Property, plant and equipment, net, as it approximates the fair value of the assets purchased.
56
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 10Acquisitions (Continued)
On
January 29, 2007, the Company purchased the assets of Dongguan Qiaotou Yichang Wire and Cable Assembly Factory, located in Guangdong, China, specializing in complex cable
assemblies and wire harnesses for medical and industrial applications, for consideration of $3.1 million and contingent additional payments of up to $4.0 million based on the acquired
company's future earnings. Operating results for this operation since the acquisition date are included in the General Industry segment. The purchase price allocation resulted in goodwill of
approximately $1.5 million and identified intangible assets of $1.0 million with a weighted-average life of 5.7 years. Identified intangible assets consist primarily of customer
relationships valued at $0.7 million, with a weighted-average life of 4 years, and other agreements valued at $0.3 million with a weighted-average life of 9 years. The
goodwill from this acquisition is not deductible for tax purposes
On
October 7, 2005, the Company acquired the off-highway brake assets of ArvinMeritor, Inc. for approximately $39.0 million. Operating results for this
operation since the acquisition date are included in the Specialty Products segment. The acquisition includes manufacturing assets and inventory from the ArvinMeritor facilities in York, SC;
Lexington, KY and Cwmbran, South Wales, U.K, which have been subsequently transferred to the Company's off-highway braking systems and specialty friction operations. The acquisition
resulted in goodwill of approximately $14.3 million and identified intangible assets of $13.0 million with a weighted-average life of 6.6 years. Identified intangible assets
consist primarily of customer relationships valued at $12.1 million, with a weighted-average life of 6.5 years, and patents valued at $0.9 million with a weighted-average life of
7.3 years. The goodwill from this acquisition is deductible for tax purposes.
In
July 2005, the Company acquired the heavy-duty brake lining and brake shoe assets of Zhejiang Kete ("Kete") located in Hangzhou, China, for approximately
$34.2 million, resulting in goodwill of $26.5 million and identified intangible assets of $2.5 million, with a weighted-average life of 5.1 years. Identified intangible
assets consist primarily of customer relationships and distribution agreements valued at $1.5 million with a weighted-average life of 5 years, formulas valued at $0.7 million with
a weighted-average life of 5.2 years, and other intangible assets valued at $0.3 million with a weighted-average life of 5 years. Operating results for this operation since the
acquisition date are included in the Specialty Products segment. The goodwill from this acquisition is deductible for tax purposes.
Note 11Shareholders' Equity
The Company has a Shareholders' Rights Agreement that is designed to protect shareholder investment values. A dividend distribution of one Preferred Stock
Purchase Right (the "Rights") for each outstanding share of the Company's common stock was declared, payable to shareholders of record on March 3, 1989. The Rights are attached to the issued
and outstanding shares of the Company's common stock and will become exercisable under certain circumstances, including the acquisition of 25% of the Company's common stock, or 40% of the voting
power, in which case all rights holders except the acquirer may purchase the Company's common stock at a 50% discount.
If
the Company is acquired in a merger or other business combination, and the Rights have not been redeemed, rights holders may purchase the acquirer's shares at a 50% discount. On
May 26, 2006, the Company amended the Shareholders' Rights Agreement to, among other things, extend the term of the Rights until May 25, 2016.
57
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 11Shareholders' Equity (Continued)
Common
shareholders of record on May 30, 1986 are entitled to five votes per share. Common stock acquired subsequent to that date entitles the holder to one vote per share until
held four years, after which time the holder is entitled to five votes per share.
Note 12Employee and Non-Employee Stock Options & Incentive Plans
The Company maintains an Executive Incentive Program (the "Program") for executives and certain other employees of the Company and its operating divisions and
subsidiaries. On April 20, 2004, the Program was amended by shareholder approval to allow for awards of stock options, restricted stock, stock appreciation rights, performance shares and units
or other awards based on Company stock. Shares issued under these plans are issued from Treasury. At December 31, 2007, 3,235,780 shares were available for grant under this plan; all of which
were available for the issuance of restricted and performance shares. The Company also maintains a restricted stock and stock option plan for its non-employee directors. At
December 31, 2007, 140,000 and 356,000 shares were available for grant under these plans, respectively. With the exception of certain awards issued December 1, 1999 (the "December 1999
Grant") and certain awards for which vesting was accelerated on September 7, 2005, options issued under both these plans vest one-third upon grant, one-third on the
first anniversary of grant and the remaining one-third on the second anniversary of grant. Vesting for the December 1999 Grant was as follows: 10% on March 1, 2001; 30% on
March 1, 2002; 60% on March 1, 2003; and 100% on March 1, 2004. All options, including the December 1999 Grant, have a maximum term life of 10 years.
Compensation
expense related to the adoption of SFAS 123(R) and stock options granted was $9.0 million before tax, or $6.0 million after tax ($0.10 per share, basic
and diluted) for the year ended December 31, 2007. For the year ended December 31, 2006, compensation expense related to the adoption of SFAS 123(R) and stock options granted was
$3.5 million before tax, or $2.4 million after tax ($0.04 per share, basic and diluted). The 2007 compensation expense amount include an award of 200,000 options granted to executive
management in June 2007, and additional expense related to the modification of vesting and termination provisions of certain stock option awards. Under SFAS 123(R), excess income tax benefits
related to share-based compensation expense that must be recognized directly in equity are considered financing rather than operating cash flow activities. The amount of financing cash flows for these
benefits was $5.4 million and $3.7 million for the years ended December 31, 2007 and 2006, respectively. There was no stock-based compensation expense related to stock options in
2005 because the intrinsic value method was used in accordance with APB 25 to account for stock-based awards. Unrecognized compensation cost related to stock options of $2.1 million at
December 31, 2007 is to be recognized over a weighted average period of 1.0 years.
On
September 7, 2005, the Compensation Committee of the Company's Board of Directors approved the immediate vesting of 115,533 options originally granted on February 2,
2005 and May 4, 2005. At the time of the vesting, the market value of the Company stock was less than the exercise price of the options.
Restricted
shares awarded under the Program are generally released to the recipient after a period of three years; however, 100,000 shares awarded to executive management in June 2007
vest ratably over five years. At December 31, 2007, under the Company's restricted stock plan, 329,150 non-vested shares were outstanding. The number and weighted average
grant-date fair value of restricted shares issued in each of the last three years was as follows: in 2007, 182,680 shares were issued at a weighted average fair value of $44.90; in 2006,
95,440 shares were issued at a weighted average fair value of $34.80; and in 2005, 99,650 shares were issued at a weighted average fair value of $32.19. Compensation expense related to restricted
58
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 12Employee and Non-Employee Stock Options & Incentive Plans (Continued)
stock
awards of $4.6 million, $3.3 million and $2.1 million were recognized for the years ended December 31, 2007, 2006 and 2005, respectively. Unrecognized compensation
cost related to restricted stock awards of $7.1 million at December 31, 2007 is to be recognized over a weighted average period of 3.1 years.
Stock
option activity under the Company's employee and non-employee stock-based plans was as follows:
|
|
Number of
Shares
|
|
Weighted Average
Exercise Price
|
Outstanding at December 31, 2004
|
|
2,080,904
|
|
$
|
21.42
|
Options granted
|
|
496,600
|
|
|
32.21
|
Options exercised
|
|
(275,944
|
)
|
|
18.27
|
Options cancelled
|
|
(4,466
|
)
|
|
28.54
|
|
|
|
|
|
Outstanding at December 31, 2005
|
|
2,297,094
|
|
$
|
24.12
|
Options granted
|
|
379,000
|
|
|
34.50
|
Options exercised
|
|
(700,338
|
)
|
|
20.33
|
Options cancelled
|
|
(10,666
|
)
|
|
27.70
|
|
|
|
|
|
Outstanding at December 31, 2006
|
|
1,965,090
|
|
$
|
27.43
|
Options granted
|
|
713,000
|
|
|
43.29
|
Options exercised
|
|
(616,822
|
)
|
|
23.22
|
Options cancelled
|
|
(6,000
|
)
|
|
33.21
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
2,055,268
|
|
$
|
34.18
|
|
|
|
|
|
The
total intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $13.8 million, $13.6 million and $4.5 million,
respectively. The weighted average contractual term of options outstanding at December 31, 2007 and 2006 was 7.54 years and 6.25 years, respectively.
At
December 31, 2007, 2006 and 2005, 1,458,936, 1,667,758 and 2,075,294 options were exercisable, with a weighted average exercise price of $31.18, $26.25 and $23.48,
respectively. The weighted average contractual term of options exercisable at December 31, 2007 was 6.89 years.
The
fair value of shares vested during 2007 and 2006 was $4.7 million and $1.8 million, respectively. The aggregate intrinsic value of options outstanding and exercisable
at December 31, 2007 and 2006 was $12.4 million and $24.6 million, respectively.
Note 13Other Comprehensive Income (Loss)
The change in Accumulated other comprehensive income (loss) has no impact on Net income but is reflected in the Consolidated Balance Sheets through adjustments to
Shareholders' equity. Other comprehensive income (loss) is derived from adjustments to reflect the minimum post-retirement benefit
59
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 13Other Comprehensive Income (Loss) (Continued)
liability,
foreign currency translation adjustments, and unrealized gains (losses) on hedging activities. The components of Other comprehensive income (loss) are as follows:
In thousands
|
|
Pre-Tax
Amount
|
|
Tax Expense
(Benefit)
|
|
After-Tax
Amount
|
|
Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability
|
|
$
|
(5,284
|
)
|
$
|
(2,370
|
)
|
$
|
(2,914
|
)
|
|
Foreign currency translation
|
|
|
(2,834
|
)
|
|
1,082
|
|
|
(3,916
|
)
|
|
Loss on hedging activities
|
|
|
(719
|
)
|
|
(232
|
)
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
$
|
(8,837
|
)
|
$
|
(1,520
|
)
|
$
|
(7,317
|
)
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability
|
|
$
|
(2,348
|
)
|
$
|
(882
|
)
|
$
|
(1,466
|
)
|
|
Foreign currency translation
|
|
|
9,417
|
|
|
2,715
|
|
|
6,702
|
|
|
Income on hedging activities
|
|
|
5,607
|
|
|
2,242
|
|
|
3,365
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
12,676
|
|
$
|
4,075
|
|
$
|
8,601
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Accrued post-retirement benefit liability
|
|
$
|
12,355
|
|
$
|
4,646
|
|
$
|
7,709
|
|
|
Foreign currency translation
|
|
|
(11,088
|
)
|
|
(6,843
|
)
|
|
(4,245
|
)
|
|
Loss on hedging activities
|
|
|
(4,027
|
)
|
|
(1,687
|
)
|
|
(2,340
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
$
|
(2,760
|
)
|
$
|
(3,884
|
)
|
$
|
1,124
|
|
|
|
|
|
|
|
|
|
The
accumulated balances for each classification of comprehensive income (loss) are as follows:
In thousands
|
|
Foreign
Currency
Items
|
|
Minimum
Pension
Liability
|
|
Accrued
Post-Retirement
Benefit
Liability
|
|
Cash Flow
Hedges
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Balance at December 31, 2005
|
|
$
|
15,867
|
|
$
|
(12,501
|
)
|
$
|
|
|
$
|
(551
|
)
|
$
|
2,815
|
|
Net current period change
|
|
|
6,702
|
|
|
(1,466
|
)
|
|
|
|
|
3,365
|
|
|
8,601
|
|
Adoption of SFAS 158
|
|
|
|
|
|
13,967
|
|
|
(16,932
|
)
|
|
|
|
|
(2,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
|
22,569
|
|
|
|
|
|
(16,932
|
)
|
|
2,814
|
|
|
8,451
|
|
Net current period change
|
|
|
10,609
|
|
|
|
|
|
6,181
|
|
|
(2,999
|
)
|
|
13,791
|
|
Reclassification adjustment for realized (gains) losses included in net income
|
|
|
(14,854
|
)
|
|
|
|
|
1,528
|
|
|
659
|
|
|
(12,667
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
18,324
|
|
$
|
|
|
$
|
(9,223
|
)
|
$
|
474
|
|
$
|
9,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans
The Company maintains defined benefit retirement plans for the majority of its employees. Benefits are based primarily on years of service and earnings of the
employee. On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. SFAS 158 requires the Company to recognize the funded status of its
defined benefit pension and post-retirement medical benefit plans in the Consolidated Statements of Earnings and Comprehensive Income, with a corresponding adjustment to Accumulated other
comprehensive income, net of tax. The adjustment to Accumulated other comprehensive income at adoption represented the net unrecognized actuarial losses, unrecognized prior service costs, and
unrecognized transition obligation remaining from the initial adoption of SFAS 87, all of which were previously netted against the plan's funded status in the
Company's Consolidated Balance Sheets pursuant to the provisions of SFAS 87. Beginning in 2007, these amounts are being recognized as net periodic pension costs pursuant to the Company's
accounting policy for amortizing such amounts. Also beginning in 2007, actuarial gains and losses that arise and are not recognized as net periodic pension costs in the same period are recognized as a
component of Other comprehensive income. These amounts will be subsequently recognized as a component of net periodic pension costs on the same basis as the amounts recognized in Accumulated other
comprehensive income prior to the adoption of SFAS 158.
The
adoption of SFAS 158 had no effect on the Company's Consolidated Statements of Earnings for the years ended December 31, 2006, or for any period presented, and will not
affect the Company's operating results in future periods. Had the Company not been required to adopt SFAS 158 at December 31, 2006, it would have recognized an additional minimum
liability pursuant to the provisions of SFAS 87.
Included
in Accumulated other comprehensive income at December 31, 2007, are the following amounts that have not yet been recognized in net periodic pension costs: unrecognized
prior service credit of $0.2 million ($0.1 million, net of tax) and unrecognized actuarial losses of $13.9 million ($8.7 million, net of tax). The prior service credit and
actuarial loss included in Accumulated other comprehensive income and expected to be recognized in net periodic pension costs during the fiscal year ended December 31, 2008, are
$0.1 million ($0.1 million net of tax), and $0.6 million ($0.4 million net of tax), respectively.
61
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans (Continued)
The
reconciliation of the beginning and ending balances of the projected pension benefit obligation, the fair value of the plan assets and the ending accumulated benefit obligation are
as follows:
In thousands
|
|
2007
|
|
2006
|
|
Funded status
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
171,241
|
|
$
|
174,067
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
5,090
|
|
|
5,615
|
|
|
|
|
Interest cost
|
|
|
9,566
|
|
|
9,478
|
|
|
|
|
Actuarial gain
|
|
|
(2,436
|
)
|
|
(1,455
|
)
|
|
|
|
Amendment / obligations acquired
|
|
|
|
|
|
148
|
|
|
|
|
Curtailment gain
|
|
|
|
|
|
(1,159
|
)
|
|
|
|
Benefits paid
|
|
|
(19,555
|
)
|
|
(15,453
|
)
|
|
|
|
|
|
|
|
|
End of year
|
|
|
163,906
|
|
|
171,241
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
131,112
|
|
|
129,914
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
18,593
|
|
|
5,777
|
|
|
|
|
Company contributions
|
|
|
35,395
|
|
|
10,874
|
|
|
|
|
Benefits paid
|
|
|
(19,555
|
)
|
|
(15,453
|
)
|
|
|
|
|
|
|
|
|
End of year
|
|
|
165,545
|
|
|
131,112
|
|
|
|
|
|
|
|
Funded status end of year
|
|
$
|
1,639
|
|
$
|
(40,129
|
)
|
|
|
|
|
|
|
Accumulated benefit obligation at end of year
|
|
$
|
159,533
|
|
$
|
167,980
|
|
|
|
|
|
|
|
The
plans' weighted-average asset allocation at December 31, 2007 and 2006 by asset category are as follows:
|
|
2007
|
|
2006
|
|
U.S. equity securities
|
|
44
|
%
|
47
|
%
|
International equity securities
|
|
15
|
%
|
15
|
%
|
Fixed-income securities
|
|
37
|
%
|
33
|
%
|
Other
|
|
4
|
%
|
4
|
%
|
Cash
|
|
0
|
%
|
1
|
%
|
|
|
|
|
|
|
Plan assets at end of year
|
|
100
|
%
|
100
|
%
|
|
|
|
|
|
|
The
Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a
prudent level of risk. Periodically the Company will modify the target asset allocation to enhance total return. The established target allocation is 60% equity securities, 35% fixed income securities
and 5% alternative investments. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio
contains a diversified blend of equity and fixed-income investments. Equity investments are diversified across U.S. and international stocks, as well as
62
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans (Continued)
growth,
value, and large and small capitalizations. Investment risk is measured and monitored on an ongoing basis through investment portfolio reviews, annual liability measures and asset/liability
studies.
The
Company's disclosures for its defined benefit retirement plan are determined based on a September 30 measurement date. A reconciliation of the funded status of the plan based
on this
measurement date and the asset (liability) recorded on the Company's balance sheet at December 31, 2007 and 2006 is set forth below:
In thousands
|
|
2007
|
|
2006
|
|
Funded status
|
|
$
|
1,639
|
|
$
|
(40,129
|
)
|
Fourth quarter contributions
|
|
|
80
|
|
|
2,923
|
|
|
|
|
|
|
|
Asset (liability) at end of year
|
|
$
|
1,719
|
|
$
|
(37,206
|
)
|
|
|
|
|
|
|
The
net asset (liability) consists of the following amounts recorded on the Company's balance sheet at December 31, 2007 and 2006:
In thousands
|
|
2007
|
|
2006
|
|
Noncurrent assets
|
|
$
|
14,365
|
|
$
|
|
|
Current liabilities
|
|
|
(1,416
|
)
|
|
(546
|
)
|
Noncurrent liabilities
|
|
|
(11,230
|
)
|
|
(36,660
|
)
|
|
|
|
|
|
|
Asset (liability) at end of year
|
|
$
|
1,719
|
|
$
|
(37,206
|
)
|
|
|
|
|
|
|
The
Company is not expecting to make any minimum contributions to the pension plans in 2008, as the plans were fully funded at December 31, 2007.
Components
of net periodic benefit cost for the years ended December 31 are as follows:
In thousands
|
|
2007
|
|
2006
|
|
2005
|
|
Service cost
|
|
$
|
5,090
|
|
$
|
5,615
|
|
$
|
6,343
|
|
Interest cost
|
|
|
9,566
|
|
|
9,478
|
|
|
9,494
|
|
Expected return on plan assets
|
|
|
(10,170
|
)
|
|
(9,857
|
)
|
|
(10,298
|
)
|
Curtailment gain
|
|
|
|
|
|
(603
|
)
|
|
(930
|
)
|
Amortization of unrecognized net loss
|
|
|
1,486
|
|
|
1,531
|
|
|
420
|
|
Amortization of unrecognized prior service cost
|
|
|
(101
|
)
|
|
(189
|
)
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
5,871
|
|
$
|
5,975
|
|
$
|
4,812
|
|
|
|
|
|
|
|
|
|
The
curtailment income of $0.6 million in 2006 was due to the Company's sale of the systems and equipment businesses. The 2005 curtailment gain of $0.9 million was due to
the Company's sale of its automotive components business which affected a portion of the Core Plan, and the Canton and Crestline plans in full.
63
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans (Continued)
Assumptions
for benefit obligations at December 31 are as follows:
|
|
2007
|
|
2006
|
|
Discount rate
|
|
6.35
|
%
|
5.85
|
%
|
Rate of compensation increase
|
|
4.29
|
%
|
4.29
|
%
|
Expected long-term return on plan assets
|
|
8.50
|
%
|
8.50
|
%
|
The
Company bases its discount rate assumptions on a yield curve which provides better matching of the expected future retirement plan cash flows with projected yields.
Assumptions
for net periodic benefit cost for the years ended December 31 are outlined below:
|
|
2007
|
|
2006
|
|
2005
|
|
Discount rate
|
|
5.85
|
%
|
5.65
|
%
|
6.00
|
%
|
Rate of compensation increase
|
|
4.29
|
%
|
3.50
|
%
|
3.50
|
%
|
Expected long-term return on plan assets
|
|
8.50
|
%
|
8.50
|
%
|
8.50
|
%
|
The
Company considers several factors in determining the long-term rate of return for plan assets. Current market factors such as inflation and interest rates are evaluated
and consideration is given to the diversification and rebalancing of the portfolio. The Company also looks to peer data and historical returns for reasonability and appropriateness.
The
2007 and 2006 pension plan disclosures were determined using a September 30 measurement date. The change in the minimum liability included in other comprehensive income
(loss), before taxes, for 2006 and 2005 was $(2.3) million and $(5.3) million, respectively.
Additionally,
the Company maintains retirement savings plans covering a significant portion of its employees. Expenses for these plans were approximately $7.2 million in 2007,
$8.6 million in 2006 and $8.7 million in 2005. The Company also sponsors an employee stock ownership plan ("ESOP") as part of one of its existing savings plans. Costs for the ESOP are
included in the previously stated expenses. The ESOP is available to eligible domestic employees and includes a match in the Company's common stock of contributions made by plan participants to the
savings plan up to a maximum of 4.00% of a participant's eligible compensation. Participants are not allowed to direct their contributions to the
savings plan to an investment in the Company's common stock. A breakdown of shares held by the ESOP at December 31 is as follows:
|
|
2007
|
|
2006
|
|
2005
|
Shares held by the ESOP
|
|
2,582,991
|
|
2,763,968
|
|
3,032,646
|
The
Company also has a limited number of unfunded post-retirement benefit programs. Carlisle's liability for post-retirement medical benefits is limited to a
maximum obligation; therefore, the Company's liability is not materially affected by an assumed health care cost trend rate.
Included
in Accumulated other comprehensive income at December 31, 2007, are the following amounts that have not yet been recognized in net periodic retiree medical costs:
unrecognized transition obligation of $0.2 million ($0.1 million, net of tax), unrecognized prior service cost of $0.2 million ($0.1 million, net of tax) and unrecognized
actuarial losses of $0.7 million ($0.5 million, net of tax).
64
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans (Continued)
The
reconciliation of the beginning and ending balances of the projected post-retirement benefit obligation, the fair value of the plan assets and the accumulated benefit
obligation are as follows:
In thousands
|
|
2007
|
|
2006
|
|
Funded status
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
2,621
|
|
$
|
12,598
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
1
|
|
|
2
|
|
|
|
|
Interest cost
|
|
|
148
|
|
|
483
|
|
|
|
|
Plan amendments
|
|
|
206
|
|
|
|
|
|
|
|
Participant contributions
|
|
|
19
|
|
|
926
|
|
|
|
|
Curtailment gain
|
|
|
|
|
|
(8,906
|
)
|
|
|
|
Actuarial loss
|
|
|
(188
|
)
|
|
(367
|
)
|
|
|
|
Benefits paid
|
|
|
(214
|
)
|
|
(2,115
|
)
|
|
|
|
|
|
|
|
|
End of year
|
|
|
2,593
|
|
|
2,621
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status end of year
|
|
$
|
(2,593
|
)
|
$
|
(2,621
|
)
|
|
|
|
|
|
|
Accumulated benefit obligation at end of year
|
|
$
|
2,593
|
|
$
|
2,621
|
|
|
|
|
|
|
|
The
Company's 2007 and 2006 disclosures for its post-retirement medical benefit programs are determined based on a September 30 measurement date. A reconciliation of
the funded status of the plan based on this measurement date and the liability recorded on the Company's balance sheet at December 31, 2007 and 2006 is set forth below:
In thousands
|
|
2007
|
|
2006
|
|
Funded status
|
|
$
|
(2,593
|
)
|
$
|
(2,621
|
)
|
Fourth quarter contributions
|
|
|
50
|
|
|
275
|
|
|
|
|
|
|
|
Liability at end of year
|
|
$
|
(2,543
|
)
|
$
|
(2,346
|
)
|
|
|
|
|
|
|
The
net liability consists of the following amounts recorded on the Company's balance sheet at December 31, 2007 and 2006:
In thousands
|
|
2007
|
|
2006
|
|
Current liabilities
|
|
$
|
(231
|
)
|
$
|
(219
|
)
|
Noncurrent liabilities
|
|
|
(2,312
|
)
|
|
(2,127
|
)
|
|
|
|
|
|
|
Liability at end of year
|
|
$
|
(2,543
|
)
|
$
|
(2,346
|
)
|
|
|
|
|
|
|
Company
contributions in 2008 are estimated to be consistent with contributions made in 2007.
65
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 14Retirement Plans (Continued)
The
Company's post-retirement medical benefit obligations were determined using an assumed discount rate of 6.35% and 5.85% at December 31, 2007 and 2006,
respectively. The Company bases its discount rate assumptions on a yield curve which provides better matching of the expected future retirement plan cash flows with projected yields. The effects of a
1% increase or decrease in assumed health care cost trend rates would not be material.
Components
of net periodic post-retirement benefit costs for the years ended December 31 are as follows:
In thousands
|
|
2007
|
|
2006
|
|
2005
|
Service cost
|
|
$
|
1
|
|
$
|
1
|
|
$
|
3
|
Interest cost
|
|
|
154
|
|
|
483
|
|
|
680
|
Curtailment gain
|
|
|
|
|
|
(5,722
|
)
|
|
|
Amortization of unrecognized loss
|
|
|
95
|
|
|
193
|
|
|
147
|
Amortization of unrecognized net obligation
|
|
|
48
|
|
|
220
|
|
|
220
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
298
|
|
$
|
(4,825
|
)
|
$
|
1,050
|
|
|
|
|
|
|
|
The
curtailment gain of $5.7 million in 2006 was due to the elimination of the subsidized post-retirement medical coverage for Carlisle Power Transmission Product's
participants effective June 1, 2006.
The
Company's post-retirement medical benefit cost for 2007, 2006 and 2005 was determined using an assumed discount rate of 5.85%, 5.65% and 6.00%, respectively.
The
following is a summary of estimated future benefits to be paid for the Company's defined benefit pension plan and post-retirement medical plan at December 31,
2007. Benefit payments are estimated based on the same assumptions used in the valuation of the projected benefit obligation:
Year
|
|
Defined Benefit
Retirement Plan
|
|
Post-Retirement
Medical Plan
|
2008
|
|
$
|
20,649
|
|
$
|
231
|
2009
|
|
$
|
12,982
|
|
$
|
231
|
2010
|
|
$
|
12,712
|
|
$
|
241
|
2011
|
|
$
|
13,441
|
|
$
|
240
|
2012
|
|
$
|
13,391
|
|
$
|
230
|
2013 - 2017
|
|
$
|
72,830
|
|
$
|
934
|
66
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 15Income Taxes
The
provision for income taxes from continuing operations is as follows:
In thousands
|
|
2007
|
|
2006
|
|
2005
|
|
Current expense
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
81,141
|
|
$
|
56,013
|
|
$
|
58,883
|
|
|
State, local and other
|
|
|
11,010
|
|
|
6,761
|
|
|
6,684
|
|
|
|
|
|
|
|
|
|
|
|
|
92,151
|
|
|
62,774
|
|
|
65,567
|
|
|
|
|
|
|
|
|
|
Deferred expense (income)
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
14,633
|
|
|
15,191
|
|
|
(3,688
|
)
|
|
State, local and other
|
|
|
(463
|
)
|
|
977
|
|
|
4,396
|
|
|
|
|
|
|
|
|
|
|
|
|
14,170
|
|
|
16,168
|
|
|
708
|
|
|
|
|
|
|
|
|
|
Total provision
|
|
$
|
106,321
|
|
$
|
78,942
|
|
$
|
66,275
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets (liabilities) are comprised of the following at December 31:
In thousands
|
|
2007
|
|
2006
|
|
Extended warranty
|
|
$
|
20,994
|
|
$
|
22,132
|
|
Doubtful receivables
|
|
|
5,601
|
|
|
3,798
|
|
Employee benefits
|
|
|
12,625
|
|
|
16,656
|
|
Foreign loss carryforwards
|
|
|
2,335
|
|
|
2,686
|
|
|
Less: valuation allowance
|
|
|
(1,254
|
)
|
|
(2,686
|
)
|
Deferred State Tax Attributes
|
|
|
7,530
|
|
|
|
|
Other, net
|
|
|
2,595
|
|
|
625
|
|
|
|
|
|
|
|
Gross deferred assets
|
|
|
50,426
|
|
|
43,211
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(41,491
|
)
|
|
(46,569
|
)
|
Amortization
|
|
|
(36,959
|
)
|
|
(29,620
|
)
|
Inventory reserves
|
|
|
(5,861
|
)
|
|
(6,094
|
)
|
Unrepatriated Foreign Earnings
|
|
|
(19,630
|
)
|
|
|
|
|
|
|
|
|
|
Gross deferred liabilities
|
|
|
(103,941
|
)
|
|
(82,283
|
)
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(53,515
|
)
|
$
|
(39,072
|
)
|
|
|
|
|
|
|
In
assessing whether deferred tax assets are realizable, the Company considers if it is more likely than not that they will be realized. Realization of deferred tax assets is dependant
upon the generation of future taxable income during the periods in which those temporary differences become deductible. At December 31, 2007, it was determined that certain carryforward tax
attributes may not be fully realized. Accordingly, a valuation allowance was provided to reduce the related deferred tax assets. Based on historical levels of taxable income and projections of future
taxable income over the periods in which deferred tax assets are deductible, the Company believes it is more likely than not the benefits of remaining deductible differences will be realized.
67
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 15Income Taxes (Continued)
A
reconciliation of taxes from continuing operations computed at the statutory rate to the tax provision is as follows:
In thousands
|
|
2007
|
|
2006
|
|
2005
|
|
Federal income taxes at statutory rate on income from continuing operations
|
|
$
|
111,769
|
|
$
|
90,207
|
|
$
|
73,400
|
|
Benefit for export sales
|
|
|
|
|
|
(1,077
|
)
|
|
(1,036
|
)
|
Benefit for manufacturing deduction
|
|
|
(4,890
|
)
|
|
(1,799
|
)
|
|
(1,604
|
)
|
State and local taxes, net of federal income tax benefit
|
|
|
4,327
|
|
|
4,521
|
|
|
3,633
|
|
Rate difference on foreign earnings
|
|
|
(3,233
|
)
|
|
(6,255
|
)
|
|
(4,906
|
)
|
Effect of tax law changes
|
|
|
(91
|
)
|
|
(4,333
|
)
|
|
|
|
Tax credits
|
|
|
(2,404
|
)
|
|
(2,829
|
)
|
|
|
|
Settlement of IRS audit
|
|
|
|
|
|
|
|
|
(3,000
|
)
|
Other, net
|
|
|
843
|
|
|
507
|
|
|
(212
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
106,321
|
|
$
|
78,942
|
|
$
|
66,275
|
|
|
|
|
|
|
|
|
|
Effective income tax rate on continuing operations
|
|
|
33.3
|
%
|
|
30.6
|
%
|
|
31.1
|
%
|
Cash
payments for income taxes, net of refunds, were $62.7 million, $87.7 million and $33.4 million in 2007, 2006 and 2005, respectively.
The
Company's income before tax from U.S. and non-U.S. operations amounted to $242.1 million and $80.7 million, respectively, for the year ended
December 31, 2007, $256.8 million and $41.6 million for 2006 and $147.4 million and $26.6 million for 2005. The Company has not provided U.S. tax on cumulative
undistributed earnings of non-U.S. subsidiaries where such earnings are considered indefinitely reinvested. Generally, the Company has provided U.S. tax on cumulative undistributed
earnings of non-consolidated foreign subsidiaries, where such earnings are not considered indefinitely reinvested. In 2007, due to a re-organization, Carlisle took control of a
foreign subsidiary with approximately $75.5 million in earnings and has provided deferred tax on that portion of the earnings that may be repatriated. Below is a chart of unrepatriated earnings
for the most current three years.
In millions
|
|
2007
|
|
2006
|
|
2005
|
Indefinitely reinvested
|
|
$
|
115.1
|
|
$
|
73.2
|
|
$
|
55.4
|
Not indefinitely reinvested
|
|
|
56.9
|
|
|
23.6
|
|
|
17.8
|
|
|
|
|
|
|
|
Total
|
|
$
|
172.0
|
|
$
|
96.8
|
|
$
|
73.2
|
|
|
|
|
|
|
|
As
of December 31, 2007, the Company had foreign operating loss carryforwards in the United Kingdom and in Denmark. No net deferred tax has been provided with respect to these
losses.
The
Company's braking business has a tax holiday in China that will expire in 2008. The impact of the tax holiday decreased income taxes by $0.5 million. The benefit of the tax
holiday on net income per diluted share was approximately $0.01 in 2007.
The
Company adopted the principles of FIN 48, effective January 1, 2007. As a result of the implementation of FIN 48, the Company recorded the cumulative effect of
the change in principle of accounting for uncertain tax positions as a charge to retained earnings of $2.1 million. The total amount of
68
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 15Income Taxes (Continued)
unrecognized
tax benefit as of December 31, 2007 was $13.0 million ($18.1 million less a benefit of $5.1 million). The Company classifies and reports interest and penalties
associated with uncertain tax positions as income tax expense on the Consolidated Statements of Earnings and Comprehensive Income, and as other tax liabilities on the Consolidated Balance Sheets. The
total amount of interest and penalties accrued at December 31, 2007 was $3.1 million. The decrease in the 2007 accrual resulted in a $0.2 million reduction of the amount expensed
for interest and penalties for the year ended December 31, 2007. The entire balance accrued for uncertain tax positions at December 31, 2007, if recognized, would affect the Company's
effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
In thousands
|
|
|
|
Balance at January 1, 2007
|
|
$
|
21,587
|
|
Additions based on tax positions related to current year
|
|
|
2,755
|
|
Reductions for tax positions of prior years
|
|
|
(2,165
|
)
|
Statute of limitations
|
|
|
(2,116
|
)
|
Settlements
|
|
|
(1,979
|
)
|
|
|
|
|
Balance at December 31, 2007
|
|
$
|
18,082
|
|
|
|
|
|
Carlisle
is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. Carlisle has concluded all U.S federal income tax examinations for years
through 2006. Carlisle is currently working with the IRS to complete its compliance assurance audit for tax year 2007. Matters still being discussed include the pricing of tangible products from a
non-U.S. subsidiary, the available foreign tax credits and the section 199 deduction. It is expected these matters will be resolved before the 2007 return is completed and filed.
Substantially all material state and
foreign tax matters have been concluded for tax years through 2002. Within the next twelve months state and foreign audits may conclude and affect the amount of unrecognized tax benefits. The amount
of the change in unrecognized tax benefits that may result from audits within the next twelve months is not known.
Note 16Other Long-Term Liabilities
The components of other long-term liabilities are as follows:
In thousands
|
|
December 31,
2007
|
|
December 31,
2006
|
Deferred taxes and other tax liabilities under FIN 48*
|
|
$
|
103,804
|
|
$
|
64,872
|
Pension and other post-retirement obligations
|
|
|
11,981
|
|
|
37,427
|
Long-term warranty obligations
|
|
|
3,111
|
|
|
2,754
|
Other
|
|
|
6,262
|
|
|
6,580
|
|
|
|
|
|
Other long-term liabilities
|
|
$
|
125,158
|
|
$
|
111,633
|
|
|
|
|
|
-
*
-
The
adoption of FIN 48 resulted in the reclassification of certain tax liabilities.
69
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 17Commitments and Contingencies
For its continuing and discontinued operations, the Company is obligated under various noncancelable operating leases for certain facilities and equipment. Rent
expense was $18.3 million, $16.8 million and $16.7 million in 2007, 2006 and 2005, respectively. Future minimum payments under its various noncancelable operating leases in each
of the next five years are approximately $17.5 million in 2008, $12.3 million in 2009, $9.7 million in 2010, $7.0 million in 2011, $5.2 million in 2012 and
$4.5 million thereafter.
At
December 31, 2007, letters of credit amounting to $46.6 million were outstanding, primarily to provide security under insurance arrangements and certain borrowings.
The
Company has financial guarantee lines in place for certain of its operations in Asia and Europe to facilitate working capital needs, customer performance and payment and warranty
obligations. At December 31, 2007, the Company had issued guarantees of $2.9 million, of which $1.4 million represents amounts recorded in current liabilities or Other
long-term liabilities. The fair value of these guarantees is estimated to equal the amount of the guarantees at December 31, 2007, due to their short-term nature.
During
2005, the Company sold certain assets and liabilities of its discontinued automotive components business which was part of a series of sales. Certain leases guaranteed by the
Company expire in 2009 and 2011 and have total minimum lease payments of $1.7 million as of December 31, 2007. The Company believes that the current lessee will fulfill all obligations
required by those lease agreements.
The
Company offers various warranty programs on its installed roofing systems, braking products, truck trailers, and refrigerated truck bodies. The change in the Company's aggregate
product warranty liabilities for the period ended December 31 is as follows:
In thousands
|
|
2007
|
|
2006
|
|
Beginning reserve
|
|
$
|
6,940
|
|
$
|
7,939
|
|
|
Current year provision
|
|
|
11,902
|
|
|
11,071
|
|
|
Current year claims
|
|
|
(11,293
|
)
|
|
(12,070
|
)
|
|
|
|
|
|
|
Ending reserve
|
|
$
|
7,549
|
|
$
|
6,940
|
|
|
|
|
|
|
|
The
amount of extended product warranty revenues recognized was $15.2 million for the year ended December 31, 2007, $14.5 million for the year ended
December 31, 2006 and $14.2 million for the year ended December 31, 2005.
The
Company has entered into long-term purchase agreements effective January 1, 2007 and expiring December 31, 2010 for certain key raw materials. Commitments
are variable based on changes in commodity price indices. Based on prices at December 31, 2007, commitments under these agreements total approximately $470.8 million.
The
Company maintains self retained liabilities for workers' compensation, medical, general liability and property claims up to applicable retention limits. Retention limits are between
$0.5 million and $1.0 million per occurrence for general liability, $0.5 million per occurrence for workers' compensation, $0.1 million per occurrence for property and up
to $0.5 million for medical claims. The Company is insured for losses in excess of these limits.
The
Company may be involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, the ultimate outcome of such actions will
not have a material
70
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 17Commitments and Contingencies (Continued)
adverse
effect on the consolidated financial position of the Company, but may have a material impact on the Company's results of operations for a particular period. As a result of the favorable
resolution of certain legal actions and insurance proceeds, the Company recognized gains, net of legal fees, of $8.8 million during the year ended December 31, 2007 and
$8.2 million during the year ended December 31, 2006 that were included in Other income, net. In addition, the Company recognized in Other income, net, a charge of $2.5 million
relating to an arbitration proceeding concerning the termination of a supply agreement for the year ended December 31, 2006.
At
December 31, 2007, approximately 4% of the Company's employees were covered by collective bargaining agreements. Collective bargaining agreements that will expire in 2008 cover
less than 1% of the Company's employees. It is uncertain at this time whether agreements will be reached without interruption of production, and the terms of the agreements ultimately reached could
result in higher wage and benefit costs.
Note 18Discontinued Operations and Assets Held for Sale
In the second quarter of 2007, as part of its commitment to concentrate on its core businesses, the Company announced plans to exit the custom thermoset products
molding operation ("thermoset molding operation") of the Specialty Products segment. In September 2006, the Company announced plans to exit the giftware business of the foodservice products business.
The sale of the thermoset molding operation is expected to be completed by the second quarter of 2008, and the disposition of the giftware business was completed in 2007. In November of 2005 the
Company announced plans to
sell the systems and equipment businesses. The assets of these operations have met the criteria for, and have been classified as "held for sale" in accordance with SFAS 144, "Accounting for the
Impairment and Disposal of Long-Lived Assets." In addition, results of operations for these businesses, and any gains or losses recognized from their sale, are reported as "discontinued
operations" in accordance with SFAS 144.
Total
assets held for sale at December 31 are as follows:
In thousands
|
|
December 31,
2007
|
|
December 31,
2006
|
Assets held for sale:
|
|
|
|
|
|
|
|
Thermoset molding operation
|
|
$
|
5,731
|
|
$
|
8,408
|
|
Giftware business of foodservice products
|
|
|
|
|
|
1,296
|
|
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
5,731
|
|
$
|
9,704
|
|
|
|
|
|
71
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 18Discontinued Operations and Assets Held for Sale (Continued)
The
major classes of assets and liabilities held for sale included in the Company's Consolidated Balance Sheets are as follows:
In thousands
|
|
December 31,
2007
|
|
December 31,
2006
|
Assets held for sale:
|
|
|
|
|
|
|
|
Receivables
|
|
$
|
1,620
|
|
$
|
2,442
|
|
Inventories
|
|
|
1,500
|
|
|
2,668
|
|
Prepaid expenses and other current assets
|
|
|
111
|
|
|
367
|
|
|
|
|
|
|
|
Total current assets held for sale
|
|
|
3,231
|
|
|
5,477
|
|
Property, plant and equipment, net
|
|
|
2,500
|
|
|
3,827
|
|
Investments and advances to affiliates
|
|
|
|
|
|
400
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
5,731
|
|
$
|
9,704
|
|
|
|
|
|
Liabilities associated with assets held for sale:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
158
|
|
$
|
696
|
|
Accrued expenses
|
|
|
170
|
|
|
216
|
|
|
|
|
|
Total liabilities associated with assets held for sale
|
|
$
|
328
|
|
$
|
912
|
|
|
|
|
|
Net
sales and income (loss) before income taxes from discontinued operations were as follows:
In thousands
|
|
December 31,
2007
|
|
December 31,
2006
|
|
December 31,
2005
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
Automotive components
|
|
$
|
|
|
$
|
370
|
|
$
|
122,433
|
|
|
Pottery business of foodservice products
|
|
|
|
|
|
|
|
|
245
|
|
|
Systems and equipment
|
|
|
926
|
|
|
173,566
|
|
|
218,249
|
|
|
Thermoset molding operation
|
|
|
10,841
|
|
|
13,100
|
|
|
13,061
|
|
|
Giftware business of foodservice products
|
|
|
859
|
|
|
2,344
|
|
|
2,645
|
|
|
|
|
|
|
|
|
|
Net sales for discontinued operations
|
|
$
|
12,626
|
|
$
|
189,380
|
|
$
|
356,633
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
Plastic components operation of tire and wheel business
|
|
$
|
|
|
$
|
|
|
$
|
(414
|
)
|
|
Automotive components
|
|
|
(1,434
|
)
|
|
(4,278
|
)
|
|
(46,242
|
)
|
|
Pottery business of foodservice products
|
|
|
|
|
|
|
|
|
(1,481
|
)
|
|
Systems and equipment
|
|
|
6,897
|
|
|
49,474
|
|
|
12,808
|
|
|
Thermoset molding operation
|
|
|
(1,649
|
)
|
|
(197
|
)
|
|
234
|
|
|
Giftware business of foodservice products
|
|
|
(368
|
)
|
|
(4,380
|
)
|
|
(615
|
)
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
$
|
3,446
|
|
$
|
40,619
|
|
$
|
(35,710
|
)
|
|
|
|
|
|
|
|
|
72
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 18Discontinued Operations and Assets Held for Sale (Continued)
In
2006, the Company completed the sale of the systems and equipment businesses. A pre-tax gain of $41.3 million was recognized in 2006, with further
pre-tax gains of $5.8 million recognized in 2007.
In
2005, the Company completed the sales of the plastic components operations of the tire and wheel business and the pottery operations of the foodservice business, resulting in losses
of less than $0.1 million and $1.1 million, respectively.
The
Company sold substantially all of the assets of the engineered products business in 2005, which resulted in a loss of $29.2 million before taxes. Not included in these
transactions were a small manufacturing facility and certain accounts receivable, which included amounts due from Delphi Corporation which filed for bankruptcy protection under chapter 11 of
the U.S. Bankruptcy Code on October 8, 2005. Also included in 2005 results were charges of $7.2 million related to the reserve of receivables primarily associated with the commenced
Delphi bankruptcy filing, as well as reserves against losses associated with the sale of the remaining assets.
Note 19Fair Value of Financial Instruments
The Company estimates that the carrying amounts of its cash and cash equivalents, receivables, short-term debt and accounts payable approximate fair
value due to their short maturity. See Note 8 regarding the fair market value of the Company's senior notes.
Note 20Segment Information
In 2007, the Company managed its businesses under three operating groups, Construction Materials, Industrial Components and Diversified Components, represented by
the five financial reporting segments set forth below. The Diversified Components group is represented by the Specialty Products segment, the Transportation Products segment and the General Industry
segment. The accounting policies of the segments are the same as those described in the summary of accounting policies. The chief operating decision maker evaluates segment performance by earnings
before interest and income taxes. The Company's operations are reported in the following segments:
Construction Materials
the principal products of this segment are rubber (EPDM) and thermoplastic polyolefin (TPO) roofing
membranes used predominantly on non-residential low-sloped roofs, related roofing accessories, including flashings, fasteners, sealing tapes, coatings and waterproofing and
insulation products. The markets served include new construction, re-roofing and maintenance of low-sloped roofs, water containment, HVAC sealants, and coatings and
waterproofing.
Industrial Components
the principal products of this segment are bias-ply, non-automotive rubber
tires, stamped and roll-formed wheels, industrial transmission belts and accessories. Primary markets
include lawn and gardenconsumers, lawn and gardencommercial, golf car, home appliance, power equipment, trailer, all terrain vehicle, power sports/recreational vehicles,
agriculture, and the related aftermarkets.
73
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 20Segment Information (Continued)
Specialty Products
the principal products of this segment are heavy-duty friction blocks, disc linings, braking
systems parts, brake shoe remanufacturing and relining for on-highway Class 6, 7 and 8 trucks, braking systems for on-highway and industrial equipment, specialty
friction products, and brake actuation systems for on-highway towed vehicles for manufacturers of heavy-duty trucks, trailers, brakes and axles, heavy-duty
equipment and truck dealers and replacement part and aftermarket distributors.
Transportation Products
the principal products of this segment are open-deck construction trailers, dump trailers
for the material hauling, specialized trailers for large-capacity multi-unit trailers and over-the-road commercial trailers for heavy equipment and truck dealers
and commercial haulers.
General Industry (All Other)
the principal products of this group include: (i) commercial and institutional foodservice
permanentware, table coverings, cookware, catering equipment, fiberglass and composite material trays and dishes, industrial brooms, brushes, mops and rotary brushes for commercial and
non-commercial foodservice operators and sanitary maintenance professionals, (ii) high-performance wire, cable, connectors and cable assemblies, including RF/microwave
connectors and cable assemblies primarily for the aerospace, business aircraft, defense electronics, test and measurement equipment and wireless infrastructure equipment industries, and
(iii) insulated temperature/climate-controlled truck bodies for customers in warehouse-to-retail store delivery and home food delivery.
Corporate
includes general corporate expenses. Corporate assets consist primarily of cash and cash equivalents, facilities,
deferred taxes and other invested assets.
74
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 20Segment Information (Continued)
Geographic Area Information
sales are attributable to the United States and to all foreign countries based on the country to
which the product was sold. Sales by region for the years ended December 31 are as follows (in thousands):
Region
|
|
2007
|
|
2006
|
|
2005
|
United States
|
|
$
|
2,569,390
|
|
$
|
2,302,868
|
|
$
|
1,996,400
|
International:
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
146,115
|
|
|
133,135
|
|
|
103,425
|
|
Europe
|
|
|
91,288
|
|
|
71,682
|
|
|
49,535
|
|
Asia
|
|
|
22,910
|
|
|
15,397
|
|
|
14,492
|
|
Mexico & Latin America
|
|
|
21,711
|
|
|
16,193
|
|
|
11,466
|
|
Middle East
|
|
|
13,896
|
|
|
10,450
|
|
|
8,460
|
|
Australia
|
|
|
5,121
|
|
|
4,912
|
|
|
5,027
|
|
Africa
|
|
|
4,488
|
|
|
3,665
|
|
|
4,169
|
|
Caribbean and other
|
|
|
1,464
|
|
|
1,108
|
|
|
930
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
2,876,383
|
|
$
|
2,559,410
|
|
$
|
2,193,904
|
|
|
|
|
|
|
|
Long-lived
assets, comprised of net property, plant and equipment, goodwill and other intangible assets, investments and other long-term assets, located in the
United States and foreign countries are as follows (in thousands):
Country
|
|
2007
|
|
2006*
|
Long-lived assets held and used:
|
|
|
|
|
|
|
|
United States
|
|
$
|
769,580
|
|
$
|
665,366
|
|
China
|
|
|
162,791
|
|
|
102,890
|
|
United Kingdom
|
|
|
13,792
|
|
|
14,536
|
|
Netherlands
|
|
|
9,254
|
|
|
24,134
|
|
Canada
|
|
|
6,327
|
|
|
5,840
|
|
Mexico
|
|
|
1,358
|
|
|
498
|
|
Denmark**
|
|
|
|
|
|
82,013
|
|
All Other
|
|
|
|
|
|
72
|
|
|
|
|
|
Total held and used
|
|
$
|
963,102
|
|
$
|
895,349
|
Long-lived assets held for sale:
|
|
|
|
|
|
|
|
United States
|
|
|
2,500
|
|
|
4,227
|
|
|
|
|
|
Total held for sale
|
|
|
2,500
|
|
|
4,227
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
965,602
|
|
$
|
899,576
|
|
|
|
|
|
-
*
-
Prior
year presentation revised to reflect assets held for sale of discontinued operations
-
**
-
2006
includes investment in the Company's European roofing joint venture
75
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 20Segment Information (Continued)
Financial
information for operations by reportable business segment is included in the following summary:
Segment Financial Data
In thousands
|
|
Sales(1)
|
|
EBIT
|
|
Assets
|
|
Depreciation
and
Amortization
|
|
Capital
Spending
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Materials(3)(4)
|
|
$
|
1,365,403
|
|
$
|
240,577
|
|
$
|
693,392
|
|
$
|
21,496
|
|
$
|
28,868
|
|
Industrial Components
|
|
|
799,908
|
|
|
58,892
|
|
|
636,407
|
|
|
21,856
|
|
|
22,150
|
|
Specialty Products
|
|
|
181,396
|
|
|
5,108
|
|
|
192,505
|
|
|
8,808
|
|
|
7,335
|
|
Transportation Products
|
|
|
189,828
|
|
|
28,283
|
|
|
66,587
|
|
|
2,234
|
|
|
13,358
|
|
General Industry
|
|
|
339,848
|
|
|
38,196
|
|
|
266,104
|
|
|
9,426
|
|
|
10,178
|
|
Corporate(4)
|
|
|
|
|
|
(41,670
|
)
|
|
128,068
|
|
|
1,725
|
|
|
621
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,876,383
|
|
$
|
329,386
|
|
$
|
1,983,063
|
|
$
|
65,545
|
|
$
|
82,510
|
|
|
|
|
|
|
|
|
|
|
|
2006(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Materials(3)
|
|
$
|
1,111,184
|
|
$
|
175,870
|
|
$
|
595,982
|
|
$
|
16,062
|
|
$
|
46,519
|
|
Industrial Components
|
|
|
764,506
|
|
|
59,876
|
|
|
603,228
|
|
|
22,325
|
|
|
15,516
|
|
Specialty Products
|
|
|
174,478
|
|
|
9,697
|
|
|
189,671
|
|
|
8,269
|
|
|
9,697
|
|
Transportation Products
|
|
|
183,006
|
|
|
30,876
|
|
|
56,907
|
|
|
1,841
|
|
|
5,088
|
|
General Industry
|
|
|
326,236
|
|
|
30,189
|
|
|
255,716
|
|
|
8,740
|
|
|
13,552
|
|
Corporate
|
|
|
|
|
|
(28,460
|
)
|
|
195,878
|
|
|
1,385
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,559,410
|
|
$
|
278,048
|
|
$
|
1,897,382
|
|
$
|
58,622
|
|
$
|
90,388
|
|
|
|
|
|
|
|
|
|
|
|
2005(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Materials(3)
|
|
$
|
865,652
|
|
$
|
136,721
|
|
$
|
406,567
|
|
$
|
14,078
|
|
$
|
61,683
|
|
Industrial Components
|
|
|
747,859
|
|
|
61,824
|
|
|
536,864
|
|
|
21,874
|
|
|
15,449
|
|
Specialty Products
|
|
|
138,899
|
|
|
17,515
|
|
|
165,879
|
|
|
4,602
|
|
|
1,757
|
|
Transportation Products
|
|
|
154,474
|
|
|
21,294
|
|
|
50,435
|
|
|
1,791
|
|
|
2,609
|
|
General Industry
|
|
|
287,020
|
|
|
17,646
|
|
|
233,527
|
|
|
8,948
|
|
|
12,633
|
|
Corporate
|
|
|
|
|
|
(29,381
|
)
|
|
74,793
|
|
|
1,062
|
|
|
6,847
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,193,904
|
|
$
|
225,619
|
|
$
|
1,468,065
|
|
$
|
52,355
|
|
$
|
100,978
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Excludes
intersegment sales
(2)
2006
and 2005 figures have been revised to reflect the change in accounting for inventory and discontinued operations.
(3)
Construction
Materials EBIT includes equity earnings from Icopal of $2.0 million, $6.0 million and $2.5 million in 2007, 2006 and 2005, respectively.
(4)
Construction
Materials 2007 EBIT includes $48.5 million gain recognized on the sale of Icopal, offset by a $1.5 million loss related to the sale of Icopal and included
in 2007 Corporate EBIT (net EBIT effect of $47.0 million in 2007).
76
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 20Segment Information (Continued)
A
reconciliation of assets reported above to total assets as presented on the Company's Consolidated Balance Sheets is as follows:
|
|
2007
|
|
2006
|
Assets per table above
|
|
$
|
1,983,063
|
|
$
|
1,897,382
|
Assets held for sale of discontinued operations (Note 18)
|
|
|
5,731
|
|
|
9,704
|
|
|
|
|
|
Total Assets per Consolidated Balance Sheets
|
|
$
|
1,988,794
|
|
$
|
1,907,086
|
|
|
|
|
|
A
reconciliation of depreciation and amortization and capital spending reported above to the amounts presented on the Consolidated Statement of Cash Flows is as follows:
|
|
2007
|
|
2006
|
|
2005
|
Depreciation and amortization per table above
|
|
$
|
65,545
|
|
$
|
58,622
|
|
$
|
52,355
|
Depreciation and amortization of discontinued operations
|
|
|
329
|
|
|
1,214
|
|
|
3,967
|
|
|
|
|
|
|
|
Total depreciation and amortization
|
|
$
|
65,874
|
|
$
|
59,836
|
|
$
|
56,322
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
Capital spending per table above
|
|
$
|
82,510
|
|
$
|
90,388
|
|
$
|
100,978
|
Capital spending of discontinued operations
|
|
|
|
|
|
5,091
|
|
|
7,264
|
|
|
|
|
|
|
|
Total capital spending
|
|
$
|
82,510
|
|
$
|
95,479
|
|
$
|
108,242
|
|
|
|
|
|
|
|
77
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 21Quarterly Financial Data
(Unaudited) In thousands except per share data)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Year
|
2007(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
628,898
|
|
$
|
793,860
|
|
$
|
778,091
|
|
$
|
675,534
|
|
$
|
2,876,383
|
Gross margin
|
|
$
|
124,489
|
|
$
|
164,640
|
|
$
|
161,376
|
|
$
|
132,748
|
|
$
|
583,253
|
Operating expenses
|
|
$
|
71,157
|
|
$
|
84,682
|
|
$
|
24,990
|
|
$
|
73,038
|
|
$
|
253,867
|
Income from continuing operations, net of tax(2)
|
|
$
|
33,754
|
|
$
|
55,677
|
|
$
|
82,641
|
|
$
|
40,949
|
|
$
|
213,021
|
Basic earnings per share from continuing operations
|
|
$
|
0.55
|
|
$
|
0.90
|
|
$
|
1.33
|
|
$
|
0.67
|
|
$
|
3.46
|
Diluted earnings per share from continuing operations
|
|
$
|
0.54
|
|
$
|
0.89
|
|
$
|
1.31
|
|
$
|
0.66
|
|
$
|
3.40
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
3,081
|
|
$
|
(2,289
|
)
|
$
|
(169
|
)
|
$
|
1,993
|
|
$
|
2,616
|
Basic earnings (loss) per share from discontinued operations
|
|
$
|
0.05
|
|
$
|
(0.04
|
)
|
$
|
(0.00
|
)
|
$
|
0.03
|
|
$
|
0.04
|
Diluted earnings (loss) per share from discontinued operations
|
|
$
|
0.05
|
|
$
|
(0.04
|
)
|
$
|
(0.00
|
)
|
$
|
0.03
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
Net income(2)
|
|
$
|
36,835
|
|
$
|
53,388
|
|
$
|
82,472
|
|
$
|
42,942
|
|
$
|
215,637
|
Basic earnings per share
|
|
$
|
0.60
|
|
$
|
0.86
|
|
$
|
1.33
|
|
$
|
0.70
|
|
$
|
3.50
|
Diluted earnings per share
|
|
$
|
0.59
|
|
$
|
0.85
|
|
$
|
1.31
|
|
$
|
0.69
|
|
$
|
3.44
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
|
|
$
|
0.135
|
|
$
|
0.135
|
|
$
|
0.145
|
|
$
|
0.145
|
|
$
|
0.560
|
Stock price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
47.21
|
|
$
|
47.83
|
|
$
|
51.54
|
|
$
|
49.23
|
|
|
|
|
Low
|
|
$
|
38.90
|
|
$
|
40.88
|
|
$
|
44.61
|
|
$
|
36.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
617,337
|
|
$
|
688,111
|
|
$
|
645,261
|
|
$
|
608,701
|
|
$
|
2,559,410
|
Gross margin
|
|
$
|
127,496
|
|
$
|
148,486
|
|
$
|
131,744
|
|
$
|
116,415
|
|
$
|
524,141
|
Operating expenses
|
|
$
|
64,040
|
|
$
|
61,912
|
|
$
|
59,619
|
|
$
|
60,522
|
|
$
|
246,093
|
Income from continuing operations, net of tax
|
|
$
|
39,623
|
|
$
|
56,128
|
|
$
|
45,017
|
|
$
|
38,025
|
|
$
|
178,793
|
Basic earnings per share from continuing operations
|
|
$
|
0.65
|
|
$
|
0.92
|
|
$
|
0.73
|
|
$
|
0.62
|
|
$
|
2.92
|
Diluted earnings per share from continuing operations
|
|
$
|
0.64
|
|
$
|
0.90
|
|
$
|
0.72
|
|
$
|
0.61
|
|
$
|
2.87
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations, net of tax
|
|
$
|
1,974
|
|
$
|
983
|
|
$
|
(4,783
|
)
|
$
|
40,108
|
|
$
|
38,282
|
Basic earnings (loss) per share from discontinued operations
|
|
$
|
0.03
|
|
$
|
0.01
|
|
$
|
(0.07
|
)
|
$
|
0.65
|
|
$
|
0.62
|
Diluted earnings (loss) per share from discontinued operations
|
|
$
|
0.03
|
|
$
|
0.02
|
|
$
|
(0.07
|
)
|
$
|
0.64
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
41,597
|
|
$
|
57,111
|
|
$
|
40,234
|
|
$
|
78,133
|
|
$
|
217,075
|
Basic earnings per share
|
|
$
|
0.68
|
|
$
|
0.93
|
|
$
|
0.66
|
|
$
|
1.27
|
|
$
|
3.54
|
Diluted earnings per share
|
|
$
|
0.67
|
|
$
|
0.92
|
|
$
|
0.65
|
|
$
|
1.25
|
|
$
|
3.49
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
|
|
$
|
0.125
|
|
$
|
0.125
|
|
$
|
0.135
|
|
$
|
0.135
|
|
$
|
0.520
|
Stock price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$
|
41.28
|
|
$
|
44.50
|
|
$
|
42.75
|
|
$
|
45.18
|
|
|
|
|
Low
|
|
$
|
33.80
|
|
$
|
37.79
|
|
$
|
36.66
|
|
$
|
39.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: The sum of the quarterly per share amounts may not agree to the respective annual amounts due to rounding.
-
(1)
-
Quarterly
financial data for the 1st quarter 2007 and prior has been revised to reflect discontinued operations. 2006 data has been revised to reflect the change in accounting
for inventory. All share and per share data has been revised to reflect the two-for-one stock split.
-
(2)
-
2007
Income from continuing operations, net of tax and Net income include $29.4 million of after-tax gain related to the sale of Icopal in the third quarter, and an
additional gain of $0.5 million in the fourth quarter, for a total 2007 gain of $29.9 million.
78
Carlisle Companies Incorporated
Notes to Consolidated Financial Statements (Continued)
Note 22Subsequent Events
On January 25, 2008, the Company acquired 100% of the equity of Dinex International, Inc. ("Dinex"), a leading supplier of foodservice products to
the healthcare and other institutional industries, for $95.0 million. Dinex has facilities in Glastonbury, CT and Batavia, IL, and will be under the management direction of the foodservice
business, which is included in the General Industry segment.
79