SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO
SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 2010
OR
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
Commission file number 1-9278
CARLISLE
COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
|
|
31-1168055
|
(State or other jurisdiction of
|
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
|
13925 Ballantyne Corporate Place,
Suite 400, Charlotte, North Carolina 28277
|
|
(
704) 501-1100
|
(Address of principal executive office, including zip code)
|
|
(Telephone Number)
|
Indicate
by check mark whether registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
x
|
|
Accelerated filer
o
|
|
|
|
Non-accelerated filer
o
|
|
Smaller Reporting Company
o
|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
Shares of common stock outstanding at July 21, 2010: 60,979,072
Part I. Financial Information
Item 1.Financial Statements
Carlisle
Companies Incorporated
Unaudited Consolidated Statements of Earnings
|
|
Second Quarter
|
|
Six Months Ended
|
|
(Dollars
in millions, except per share amounts)
|
|
2010
|
|
2009*
|
|
2010
|
|
2009*
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
709.4
|
|
$
|
636.7
|
|
$
|
1,271.4
|
|
$
|
1,168.0
|
|
|
|
|
|
|
|
|
|
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
562.8
|
|
491.3
|
|
1,011.2
|
|
930.1
|
|
Selling and administrative expenses
|
|
76.5
|
|
74.4
|
|
148.8
|
|
143.5
|
|
Research and development expenses
|
|
6.5
|
|
4.0
|
|
11.0
|
|
8.3
|
|
Gain related to fire settlement
|
|
|
|
(24.5
|
)
|
|
|
(27.0
|
)
|
Other (income) expense, net
|
|
(0.6
|
)
|
6.6
|
|
(2.3
|
)
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income taxes
|
|
64.2
|
|
84.9
|
|
102.7
|
|
104.3
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
1.8
|
|
2.3
|
|
3.7
|
|
5.0
|
|
Income before income taxes
|
|
62.4
|
|
82.6
|
|
99.0
|
|
99.3
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
23.5
|
|
25.4
|
|
37.2
|
|
31.1
|
|
Income from continuing operations, net of tax
|
|
38.9
|
|
57.2
|
|
61.8
|
|
68.2
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
(0.6
|
)
|
(1.3
|
)
|
1.4
|
|
(9.2
|
)
|
Income tax expense (benefit)
|
|
(0.3
|
)
|
0.4
|
|
0.4
|
|
(3.1
|
)
|
Income (loss) from discontinued operations, net of
tax
|
|
(0.3
|
)
|
(1.7
|
)
|
1.0
|
|
(6.1
|
)
|
Net income
|
|
$
|
38.6
|
|
$
|
55.5
|
|
$
|
62.8
|
|
$
|
62.1
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to common
shares
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
0.63
|
|
$
|
0.93
|
|
$
|
1.00
|
|
$
|
1.11
|
|
Income (loss) from discontinued operations, net of
tax
|
|
|
|
(0.02
|
)
|
0.02
|
|
(0.10
|
)
|
Basic earnings per share
|
|
$
|
0.63
|
|
$
|
0.91
|
|
$
|
1.02
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to common
shares
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
$
|
0.62
|
|
$
|
0.93
|
|
$
|
0.99
|
|
$
|
1.11
|
|
Income (loss) from discontinued operations, net of
tax
|
|
|
|
(0.03
|
)
|
0.02
|
|
(0.10
|
)
|
Diluted earnings per share
|
|
$
|
0.62
|
|
$
|
0.90
|
|
$
|
1.01
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid per share
|
|
$
|
0.160
|
|
$
|
0.155
|
|
$
|
0.320
|
|
$
|
0.310
|
|
*
|
Amounts for the three and six months ended June 30,
2009 have been revised as discussed in Note 2 to the Unaudited Consolidated
Financial Statements.
|
See accompanying notes to these Unaudited
Consolidated Financial Statements
1
Carlisle Companies Incorporated
Consolidated Balance Sheets
|
|
June 30,
|
|
December 31,
|
|
(Dollars
in millions, except share and per share amounts)
|
|
2010
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
96.6
|
|
$
|
96.3
|
|
Receivables, less allowance of $9.3 in 2010 and
$7.9 in 2009
|
|
414.5
|
|
292.5
|
|
Inventories
|
|
363.2
|
|
345.8
|
|
Deferred income taxes
|
|
42.0
|
|
37.8
|
|
Prepaid expenses and other current assets
|
|
24.9
|
|
27.4
|
|
Total current assets
|
|
941.2
|
|
799.8
|
|
|
|
|
|
|
|
Property, plant and equipment,
net of accumulated depreciation of $544.1 in 2010 and $522.4 in 2009
|
|
474.9
|
|
482.6
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
Goodwill, net
|
|
449.8
|
|
462.2
|
|
Other intangible assets, net
|
|
156.8
|
|
162.9
|
|
Investments and advances to affiliates
|
|
0.3
|
|
0.3
|
|
Other long-term assets
|
|
4.8
|
|
4.4
|
|
Non-current assets held for sale
|
|
1.9
|
|
1.9
|
|
Total other assets
|
|
613.6
|
|
631.7
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
2,029.7
|
|
$
|
1,914.1
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
207.3
|
|
$
|
135.7
|
|
Accrued expenses
|
|
143.0
|
|
148.1
|
|
Deferred revenue
|
|
16.8
|
|
17.3
|
|
Total current liabilities
|
|
367.1
|
|
301.1
|
|
|
|
|
|
|
|
Long-term liabilities:
|
|
|
|
|
|
Long-term debt
|
|
156.2
|
|
156.1
|
|
Deferred revenue
|
|
115.1
|
|
113.2
|
|
Other long-term liabilities
|
|
121.5
|
|
125.1
|
|
Total long-term liabilities
|
|
392.8
|
|
394.4
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
Preferred stock, $1 par value per share.
Authorized and unissued 5,000,000 shares
|
|
|
|
|
|
Common stock, $1 par value per share. Authorized
100,000,000 shares; 78,661,248 shares issued; 60,978,972 outstanding in 2010
and 60,645,653 outstanding in 2009
|
|
78.7
|
|
78.7
|
|
Additional paid-in capital
|
|
86.0
|
|
73.9
|
|
Cost of shares of treasury - 17,682,276 shares in
2010 and 18,015,595 shares in 2009
|
|
(222.0
|
)
|
(223.6
|
)
|
Accumulated other comprehensive loss
|
|
(40.3
|
)
|
(34.7
|
)
|
Retained earnings
|
|
1,367.4
|
|
1,324.3
|
|
Total shareholders equity
|
|
1,269.8
|
|
1,218.6
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
|
|
$
|
2,029.7
|
|
$
|
1,914.1
|
|
See accompanying notes to Unaudited Consolidated Financial Statements
2
Carlisle
Companies Incorporated
Unaudited Consolidated Statements of Cash
Flows
For the Six Months ended June 30, 2010
and 2009
(Unaudited)
|
|
June 30,
|
|
(Dollars
in millions)
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
Net income
|
|
$
|
62.8
|
|
$
|
62.1
|
|
Reconciliation of net income to cash flows from
operating activities:
|
|
|
|
|
|
Depreciation
|
|
30.2
|
|
29.0
|
|
Amortization
|
|
6.1
|
|
5.3
|
|
Non-cash compensation
|
|
7.2
|
|
7.7
|
|
Earnings in equity investments
|
|
|
|
(0.2
|
)
|
Gain on sale of property and equipment, net
|
|
(3.6
|
)
|
(0.5
|
)
|
Loss on writedown of assets
|
|
|
|
10.5
|
|
Deferred taxes
|
|
(7.1
|
)
|
3.6
|
|
Change in tax benefits from stock-based
compensation
|
|
(1.5
|
)
|
0.3
|
|
Foreign exchange (gain) loss
|
|
(1.2
|
)
|
0.3
|
|
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
|
|
|
|
|
|
Current and long-term receivables
|
|
(123.5
|
)
|
6.5
|
|
Inventories
|
|
(24.0
|
)
|
129.5
|
|
Accounts payable and accrued expenses
|
|
70.7
|
|
(13.7
|
)
|
Income taxes
|
|
4.9
|
|
24.8
|
|
Long-term liabilities
|
|
(0.1
|
)
|
4.8
|
|
Other operating activities
|
|
(0.4
|
)
|
(1.0
|
)
|
Net cash provided by operating
activities
|
|
20.5
|
|
269.0
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Capital expenditures
|
|
(31.6
|
)
|
(20.1
|
)
|
Proceeds from sale of property and equipment
|
|
5.2
|
|
2.6
|
|
Proceeds from sale of business
|
|
20.3
|
|
|
|
Other investing activities
|
|
(0.2
|
)
|
0.5
|
|
Net cash used in investing
activities
|
|
(6.3
|
)
|
(17.0
|
)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Net change in short-term borrowings and revolving
credit lines
|
|
(0.1
|
)
|
(211.9
|
)
|
Dividends
|
|
(19.7
|
)
|
(19.0
|
)
|
Treasury shares and stock options, net
|
|
5.0
|
|
(0.2
|
)
|
Change in tax benefits from stock-based
compensation
|
|
1.5
|
|
(0.3
|
)
|
Net cash used in financing
activities
|
|
(13.3
|
)
|
(231.4
|
)
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash
|
|
(0.6
|
)
|
0.3
|
|
Change in cash and cash
equivalents
|
|
0.3
|
|
20.9
|
|
Cash and cash equivalents
|
|
|
|
|
|
Beginning of period
|
|
96.3
|
|
42.7
|
|
End of period
|
|
$
|
96.6
|
|
$
|
63.6
|
|
See accompanying notes to Unaudited
Consolidated Financial Statements
3
Notes
to the Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared by Carlisle Companies Incorporated (the Company or Carlisle) in
accordance and consistent with the accounting policies stated in the Companys
2009 Annual Report on Form 10-K and should be read in conjunction with the
consolidated financial statements in Part II, Item 8 of the Companys
2009 Annual Report on Form 10-K. The unaudited consolidated
financial statements are prepared in conformity with accounting principles
generally accepted in the United States and, of necessity, include some amounts
that are based upon management estimates and judgments. Actual
results could differ from current estimates. The unaudited
consolidated financial statements include assets, liabilities, revenues, and
expenses of all majority-owned subsidiaries. Intercompany
transactions and balances are eliminated in consolidation.
Note 2 Reclassifications and Revisions
Certain reclassifications and revisions have been made to prior period
information to conform to the current year presentation as follows:
·
The Consolidated Statements
of Earnings for the quarter and six-month period ended June 30, 2009 have been
revised to reflect the presentation of Earnings before interest and income
taxes (EBIT).
·
The
Consolidated Statements of Earnings for the three and six-month periods ended
June 30, 2009 have been revised to reflect the reclassification of the power
transmission product line from discontinued operations to continuing operations
and to reflect the classification of the Johnson Truck Bodies business as a
discontinued operation. See Note 9 for additional information regarding
discontinued operations.
·
The segment
disclosures for the three and six-month periods ended June 30, 2009 in Note 15
have been revised to reflect the formation in the fourth quarter of 2009 of the
Engineered Transportation Solutions segment that combined the previous tire and
wheel, industrial brake and friction and the power transmission product lines;
the classification of the power transmission product line as a continuing
operation and its associated assets as held and used; the classification of the
Johnson Truck Bodies business as a discontinued operation; and the use of EBIT
as the measure of segment profitability.
Note 3 - New Accounting Pronouncements
New accounting standards adopted
There
were no accounting standards adopted in the first six months of 2010 and 2009.
New accounting standards issued but not yet adopted
There
are currently no accounting standards that have been issued, but not yet
adopted, that are expected to have a significant impact on the Companys
financial position, results of operations and cash flows upon adoption.
4
Note 4 - Fire Gain
On November 16, 2008, a fire occurred at the tire and wheel plant
in Bowdon, GA, and as a result the building and the majority of the machinery,
equipment, records and other assets were destroyed. In order to service
customers, partial operations were initiated at a facility in Heflin, AL, and
some production was transferred to other tire and wheel plants or outsourced to
third parties.
In the fourth quarter of 2008, while the Company was negotiating its
claim, a pretax loss was recorded representing the deductible of
$0.1 million. The net result of fire-related transactions in the first
quarter of 2009 was a $2.5 million pretax gain, which included a
$2.6 million pretax gain on the settlement of the inventory claim which
was the difference between $8.9 million, representing the loss on
inventory recorded in the fourth quarter of 2008 for which a receivable was
recorded at December 31, 2008, and $11.5 million of cash proceeds
received from the insurance carriers to settle the inventory claim in the first
quarter of 2009. Total payments of $13.5 million were received from the
insurance carriers in the first quarter of 2009.
The net result of fire-related transactions in the second quarter of
2009 was a $24.5 million pretax gain on the settlement of all other claims
and that amount was reported as Gain related to fire settlement. This gain was
the difference between the $41.0 million of cash proceeds received from
the insurance carriers in settlement of all outstanding claims and the
$11.2 million insurance claims receivable balance at March 31, 2009
included in Prepaid expenses and other current assets for a portion of the
expected insurance reimbursements plus $5.3 million, representing
fire-related cost in the second quarter of 2009.
From January 1, 2009 through June 30, 2009 cash proceeds of
$54.5 million were received from the insurance carriers. Losses and cost
incurred from November 16, 2008 through June 30, 2009 of
$27.6 million included $8.9 million of inventory; $5.7 million
of building, machinery, equipment and other assets; and $13.0 million of
fire-related cost. The $26.9 million pretax gain from November 16,
2008 through June 30, 2009 was the difference between cash proceeds of
$54.5 million and the losses of $27.6 million. On a quarterly basis,
a loss of $0.1 million was recorded in the fourth quarter of 2008, a gain
of $2.5 million was recorded in the first quarter of 2009, and a gain of
$24.5 million was recorded in the second quarter of 2009.
A minimal amount of fire-related scrap was sold in the third quarter of
2009. Since all insurance claims due to this fire were settled with the
carriers no additional insurance proceeds are anticipated.
Note 5 - Borrowings
At
June 30, 2010, the fair value of the Companys par value $150 million,
6.125% senior notes due 2016, using Level 2 inputs, is approximately $169
million. The fair value of the Companys senior notes is based on current
market interest rates and the Companys estimated credit spread available for
financings with similar terms and maturities.
Note 6 - Fair Value Measurements
Recurring Fair Value Measurements
The
fair value of the Companys assets and liabilities measured at fair value on a
recurring basis were as follows:
5
|
|
Balance at June
30,
|
|
Quoted Prices in
Active Markets
for Identical
Assets
|
|
Significant
Other
Observable
Inputs
|
|
Significant
Unobservable
Inputs
|
|
In millions
|
|
2010
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
96.6
|
|
$
|
96.6
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonrecurring Fair Value Measurements
For
the three and six-month periods ended June 30, 2010 there were no
nonrecurring fair value measurements.
For the three and six-month periods ended June 30, 2009, the
Company measured certain non-financial assets at fair value on a nonrecurring
basis. These measurements were based on
managements decision to consolidate certain manufacturing facilities within
the Engineered Transportation Solutions, Specialty Products and Interconnect
Technologies segments. Refer to Note 19 for further information regarding exit
and disposal activity.
Within
the tire and wheel product line of the Engineered Transportation Solutions
segment, property, plant and equipment relating to facilities in Carlisle, PA,
Heflin, AL and Buji, China with a carrying amount of $2.8 million were written
down to a fair value of zero, resulting in an impairment charge of $2.8
million, which was included in other (income) expense, net for the three and
six-month periods ended June 30, 2009.
This fair value measurement of the impaired assets was based on Level 3
inputs. The Level 3 inputs reflected
managements determination that impaired leasehold improvements assets could
not be transferred upon consolidation of operations into the new facility in
Jackson, TN. In addition, it was
managements determination that machinery and equipment subject to the
impairment charge was estimated to have zero net realizable value based on
current utility. Also, during the six
month period ended June 30, 2009, within the tire and wheel product line
of the Engineered Transportation Solutions segment, property, plant and
equipment with a carrying amount of $2.9 million were written down to a fair
value of zero, resulting in an impairment charge of $2.9 million, which was
included in other (income) expense, net. The fair value determination was based
upon Level 3 inputs reflecting managements determination of the net realizable
value of the assets. Such assets primarily reflected leasehold improvements in
its Buji, China operations that could not be transferred upon consolidation of
production into Meizhou, China.
Within
the Specialty Products segment, property, plant and equipment relating to the
closure of the facility in Brookville, PA with a carrying amount of $5.6
million were written down to a fair value of $1.8 million, resulting in an
impairment charge of $3.8 million, which was included in other (income)
expense, net for the three months ended June 30, 2009. A fair value measurement of $1.6 million for
land, building and leasehold improvements, which resulted in an impairment
charge of $3.3 million, was based on Level 2 inputs. The land and building were subsequently sold
in the first half of 2010 for $2.7 million resulting in a gain of $1.1
million. A fair value measurement of
$0.2 million for machinery and equipment, which resulted in a $0.5 million
impairment charge, was based on Level 3 inputs reflecting managements
determination of the net realizable value of the assets.
Within
the Interconnect Technologies segment, property consisting of leasehold
improvements with a carrying amount of $0.3 million was written down to a fair
value of zero, resulting in an impairment charge of $0.3 million which was
included in other operating expense for the three months ended June 30,
2009. The fair value measurement was
based upon Level 3 inputs which reflected managements determination that the
leasehold improvements in the Companys Kent, WA facility would not have
6
any
transferrable value upon consolidation of operating activities into another
Company facility in Tukwila, WA.
Note 7 Stock-Based Compensation
During
the three and six month period ended June 30, 2010 and 2009, the Company
expensed stock-based compensation awards under the 2004 Executive Incentive
Program and the 2005 Nonemployee Director Equity Plan. A detailed description
of the awards under these plans is included in the Companys Annual Report on Form 10-K
for the year ended December 31, 2009.
Stock-Based Compensation Expense
Compensation
expense recorded for all of the Companys share-based compensation plans during
the second quarter and first six months of 2010 and 2009 was as follows:
|
|
Second Quarter
|
|
First Six Months
|
|
(in
millions, except per share amounts)
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Pre-tax compensation expense
|
|
$
|
3.6
|
|
$
|
4.5
|
|
$
|
7.2
|
|
$
|
7.8
|
|
|
|
|
|
|
|
|
|
|
|
After-tax compensation expense
|
|
$
|
2.3
|
|
$
|
2.9
|
|
$
|
4.7
|
|
$
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
Impact on diluted EPS
|
|
$
|
0.04
|
|
$
|
0.05
|
|
$
|
0.08
|
|
$
|
0.08
|
|
Grants
In the first quarter of 2010 the Company awarded
590,020 stock options, 101,785 restricted stock awards and 101,785 performance
share awards with an aggregate fair value of approximately $14.3 million to be
expensed over the requisite service period for each award which generally
equals the stated vesting period.
The
grant date fair value of the 2010 stock options with a three-year graded
vesting condition was estimated under the Black-Scholes-Merton formula using
the following weighted-average assumptions:
Expected dividend yield
|
|
1.87
|
%
|
Expected life in years
|
|
5.75
|
|
Expected volatility
|
|
32.7
|
%
|
Risk-free interest rate
|
|
2.65
|
%
|
The
Company initially granted performance shares in the first quarter of 2010. The performance shares vest based on the
employee rendering three years of service to the Company, and the attainment of
a market condition over the performance period, which is based on the Companys
relative total shareholder return versus the S&P Midcap 400 Index® over a
pre-determined time period as determined by the Compensation Committee of the
Board of Directors. The grant date fair
value of the 2010 performance shares was estimated using a Monte-Carlo simulation
approach. Such approach entails the use
of assumptions regarding the future performance of the Companys stock and
those of the peer group of companies.
Those assumptions include expected volatility, risk-free interest rates,
correlation coefficients and dividend reinvestment. Dividends accrue on the performance shares
during the performance period and are to be paid in cash based upon the number
of awards ultimately earned.
There were no additional
grants of stock-based compensation awarded in the second quarter of 2010.
7
Note 8 Acquisitions
On October 1, 2009,
the Company acquired the remaining 51% interest in Japan Power Brake, Inc.
(JPB), a leading provider of high performance braking solutions for
off-highway equipment, primarily in the mining and construction industries in
Japan, for a purchase price of approximately $4.2 million. JPB is located
in Atsugi, Japan and is under the management direction of the Engineered
Transportation Solutions segment. The purchase price included an allocation of
$0.9 million to other intangible assets reflecting a non-compete agreement
with a useful life of 10 years. The remaining purchase price was allocated
to current assets; property, plant and equipment; and current liabilities.
On October 1, 2009,
the Company acquired 100% of the equity of Electronic Cable Specialists (ECS),
a leading provider of electrical and structural products and services for the
aviation, medical and industrial markets, for a purchase price of approximately
$42.4 million. The acquisition of ECS expands Carlisles product and
system reach into additional avionics applications and strengthens Carlisles
engineering and design capabilities. The acquisition will allow for the reduction
of expenses through consolidation of certain sales, general and administrative
functions and through in-house production of certain components which were
previously purchased by ECS from third parties. Carlisle also expects to
achieve increased sales from its existing customer base with the addition of
the engineering and design capabilities of ECS. ECS is located in Franklin, WI
and is under the management direction of the Interconnect Technologies segment.
The purchase price allocation resulted in current assets of $15.1 million;
property, plant and equipment of $1.9 million; goodwill of
$13.5 million; identified intangible assets of $14.5 million; and
non-interest bearing current liabilities of $2.6 million. Of the $14.5 million
of acquired intangible assets, $2.6 million was assigned to trade names
that are not subject to amortization, $4.5 million was assigned to
customer relationships with a determinable useful life of 17 years, and
the remaining $7.4 million was assigned to other intangible assets with a
weighted average useful life of 14.7 years. The goodwill from this
acquisition is deductible for tax purposes.
On September 18,
2009, the Company acquired the assets of Jerrik, Inc. (Jerrik), a
recognized leader in the design and manufacture of highly engineered military
and aerospace filtered connectors, for approximately $33 million. The
acquisition expands the Companys range of products serving the defense and
aerospace markets. The acquisition will allow for reduction of expenses through
consolidation of certain sales, general and administrative functions and
through in-house production of certain components, which were previously
purchased by Jerrik from third parties. Jerrik is located in Tempe, AZ and is
under the management direction of the Interconnect Technologies segment. The
purchase price allocation resulted in current assets of $7.9 million;
property, plant and equipment of $1.8 million; goodwill of
$13.7 million; identified intangible assets of $10.8 million; and
current liabilities of $1.2 million. Of the $10.8 million of acquired
intangible assets, $0.2 million was assigned to trade names with
determinable useful life of 2 years, $7.1 million was assigned to
customer relationships with a determinable useful life of 18 years, and the
remaining $3.5 million was assigned to other intangible assets with a
weighted average useful life of 18.1 years. The goodwill from this
acquisition is deductible for tax purposes.
Note 9 Discontinued Operations and Assets Held for Sale
On
February 2, 2010, as part of its commitment to concentrate on its core
businesses, the Company sold all of the interest in its refrigerated truck
bodies business for $20.3 million, which approximated book value. The final purchase price is subject to a
working capital adjustment and certain indemnifications made to the buyer,
which could affect the purchase price in subsequent periods. The Company does not believe any such
adjustments will result in a material change to the purchase price.
8
In
the second quarter of 2008, the Company announced its decision to pursue
disposition of its on-highway friction and brake shoe business. During the first quarter of 2009, the Company
made the decision to exit, rather than sell, the on-highway friction and brake
shoe business and dispose of the assets as part of a planned dissolution.
In
the second quarter of 2007, the Company announced plans to exit the custom
thermoset products molding operation (thermoset molding operation). The
disposition of the thermoset molding operation was completed in 2008.
Total assets held for sale were as follows:
|
|
June 30,
|
|
December 31,
|
|
In millions
|
|
2010
|
|
2009
|
|
Assets held for sale:
|
|
|
|
|
|
On-highway friction and brake shoe business
|
|
$
|
0.3
|
|
$
|
0.3
|
|
Thermoset molding operation
|
|
1.6
|
|
1.6
|
|
Total assets held for sale
|
|
$
|
1.9
|
|
$
|
1.9
|
|
The remaining assets as of December 31, 2009 and June 30,
2010 represent land and building formerly occupied by the on-highway friction
and brake shoe, and thermoset molding operations.
Net sales and income (loss) before income taxes from discontinued
operations were as follows:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
Refrigerated truck bodies business
|
|
$
|
|
|
$
|
11.8
|
|
$
|
4.6
|
|
$
|
23.5
|
|
On-highway friction and brake shoe business
|
|
|
|
7.2
|
|
|
|
17.1
|
|
Net sales from discontinued operations
|
|
$
|
|
|
$
|
19.0
|
|
$
|
4.6
|
|
$
|
40.6
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations:
|
|
|
|
|
|
|
|
|
|
Refrigerated truck bodies business
|
|
$
|
(0.2
|
)
|
$
|
0.9
|
|
$
|
0.1
|
|
$
|
2.0
|
|
On-highway friction and brake shoe business
|
|
(0.3
|
)
|
(2.1
|
)
|
1.6
|
|
(11.8
|
)
|
Thermoset molding operation
|
|
|
|
|
|
|
|
(0.1
|
)
|
Automotive components
|
|
|
|
|
|
(0.1
|
)
|
(0.1
|
)
|
Systems and equipment
|
|
(0.1
|
)
|
(0.1
|
)
|
(0.2
|
)
|
0.8
|
|
Income (loss) before income taxes from
discontinued operations
|
|
$
|
(0.6
|
)
|
$
|
(1.3
|
)
|
$
|
1.4
|
|
$
|
(9.2
|
)
|
Results
of the on-highway friction and brake shoe business for the six months ended June 30,
2010 included a $2.1 million pretax gain on the sale of property.
Results
for the six months ended June 30, 2009 included $6.0 million of pre-tax
expenses related to the planned dissolution of the on-highway friction and
brake shoe business, including an inventory write-down of $3.4 million,
property, plant and equipment impairment costs of $0.8 million and severance
costs of $1.8 million.
9
Note 10 Inventories
The Company is a diversified manufacturer comprised
of multiple domestic and foreign operations manufacturing different
products. The First-in, First-out (FIFO)
method is used to value inventories.
The components of inventories as of June 30,
2010 and December 31, 2009 were as follows:
|
|
June 30,
|
|
December 31,
|
|
In millions
|
|
2010
|
|
2009
|
|
Finished goods
|
|
$
|
213.8
|
|
$
|
205.9
|
|
Work-in-process
|
|
31.3
|
|
29.3
|
|
Raw materials
|
|
123.4
|
|
120.5
|
|
Reserves and variances - net
|
|
(5.3
|
)
|
(9.9
|
)
|
Inventories
|
|
$
|
363.2
|
|
$
|
345.8
|
|
Note 11 Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill as of
June 30, 2010 were as follows:
|
|
Construction
|
|
Engineered
|
|
Interconnect
|
|
FoodService
|
|
Specialty
|
|
Disc.
|
|
|
|
In millions
|
|
Materials
|
|
Trans. Solutions
|
|
Technologies
|
|
Products
|
|
Products
|
|
Ops
|
|
Total
|
|
Balance at January 1, 2010 *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
86.7
|
|
$
|
170.5
|
|
$
|
188.9
|
|
$
|
60.4
|
|
$
|
20.4
|
|
$
|
38.2
|
|
$
|
565.1
|
|
Accumulated impairment losses
|
|
|
|
(55.5
|
)
|
|
|
|
|
(20.4
|
)
|
(27.0
|
)
|
(102.9
|
)
|
|
|
86.7
|
|
115.0
|
|
188.9
|
|
60.4
|
|
|
|
11.2
|
|
462.2
|
|
Goodwill written off related to sale of Business
Unit
|
|
|
|
|
|
|
|
|
|
|
|
(11.2
|
)
|
(11.2
|
)
|
Currency translation
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
|
|
(1.2
|
)
|
Goodwill
|
|
85.5
|
|
170.5
|
|
188.9
|
|
60.4
|
|
20.4
|
|
27.0
|
|
552.7
|
|
Accumulated impairment losses
|
|
|
|
(55.5
|
)
|
|
|
|
|
(20.4
|
)
|
(27.0
|
)
|
(102.9
|
)
|
Balance at June 30, 2010
|
|
$
|
85.5
|
|
$
|
115.0
|
|
$
|
188.9
|
|
$
|
60.4
|
|
$
|
|
|
$
|
|
|
$
|
449.8
|
|
* January 1, 2010 figures have been restated to
reflect the reclassification of the refrigerated truck bodies business to
discontinued operations.
The Companys other intangible assets at June 30, 2010 were as
follows:
|
|
Acquired
|
|
Accumulated
|
|
Net Book
|
|
In millions
|
|
Cost
|
|
Amortization
|
|
Value
|
|
Assets subject to amortization:
|
|
|
|
|
|
|
|
Patents
|
|
$
|
9.0
|
|
$
|
(7.8
|
)
|
$
|
1.2
|
|
Customer Relationships
|
|
147.3
|
|
(28.0
|
)
|
119.3
|
|
Other
|
|
20.3
|
|
(4.9
|
)
|
15.4
|
|
Assets not subject to amortization:
|
|
|
|
|
|
|
|
Trade names
|
|
20.9
|
|
|
|
20.9
|
|
Other intangible assets, net
|
|
$
|
197.5
|
|
$
|
(40.7
|
)
|
$
|
156.8
|
|
Estimated
amortization expense for the remainder of 2010 and the next four years is as
follows: $6.1 million remaining in 2010, $11.6 million in 2011, $10.4 million
in 2012, $9.4 million in 2013 and $9.1 million in 2014.
The net book value of the Companys Other intangible assets by
reportable segment are as follows:
10
|
|
June 30,
|
|
December 31,
|
|
In millions
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
Construction Materials
|
|
$
|
17.0
|
|
$
|
17.5
|
|
Engineered Transportation Solutions
|
|
5.5
|
|
6.7
|
|
Interconnect Technologies
|
|
91.8
|
|
94.7
|
|
FoodService Products
|
|
42.5
|
|
44.0
|
|
Total
|
|
$
|
156.8
|
|
$
|
162.9
|
|
Note 12 Retirement Plans and Other Post-retirement Benefits
Components of net periodic benefit cost were as
follows:
|
|
Pension and Other Post-retirement Benefits
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Service costs - benefits earned during the quarter
|
|
$
|
1.3
|
|
$
|
1.2
|
|
$
|
2.7
|
|
$
|
2.5
|
|
Interest cost on benefits earned in prior years
|
|
2.4
|
|
2.6
|
|
4.8
|
|
5.3
|
|
Expected return on plan assets
|
|
(3.2
|
)
|
(3.0
|
)
|
(6.4
|
)
|
(6.1
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
Unrecognized net actuarial loss
|
|
0.7
|
|
0.2
|
|
1.3
|
|
0.5
|
|
Prior service costs
|
|
|
|
|
|
0.1
|
|
|
|
Net periodic benefit costs
|
|
$
|
1.2
|
|
$
|
1.0
|
|
$
|
2.5
|
|
$
|
2.2
|
|
The Company made contributions of $2.0 million to
the pension plans during the quarter ended June 30, 2010. The Company expects to contribute
approximately $4.0 million to the pension plans in 2010.
The Company maintains defined contribution plans to
which it has contributed $4.9 million during the six months ended June 30,
2010. Full year contributions are expected to approximate $9.8 million.
Note 13 Other Long-Term Liabilities
The components of other long-term liabilities were
as follows:
|
|
June 30,
|
|
December 31,
|
|
In millions
|
|
2010
|
|
2009
|
|
Deferred taxes and other tax liabilities
|
|
$
|
101.1
|
|
$
|
103.2
|
|
Pension and other post-retirement obligations
|
|
15.9
|
|
16.8
|
|
Long-term warranty obligations
|
|
1.0
|
|
1.4
|
|
Other
|
|
3.5
|
|
3.7
|
|
Other long-term liabilities
|
|
$
|
121.5
|
|
$
|
125.1
|
|
11
Note 14 Commitments and Contingencies
Extended Product Warranties
The
Company offers various warranty programs on its installed roofing systems,
braking products, aerospace cables and assemblies, truck trailers and
foodservice equipment. The change in the Companys aggregate product warranty
liabilities were as follows:
|
|
June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
Beginning reserve
|
|
$
|
7.3
|
|
$
|
7.2
|
|
Liabilities disposed of by sale
|
|
(0.6
|
)
|
|
|
Current year provision
|
|
4.7
|
|
5.9
|
|
Current year claims
|
|
(5.5
|
)
|
(5.3
|
)
|
Ending reserve
|
|
$
|
5.9
|
|
$
|
7.8
|
|
The
amount of extended product warranty revenues recognized was $4.0 million and
$3.9 million for the second quarter of 2010 and 2009, respectively and $7.8
million and $7.7 million for the first six months of 2010 and 2009,
respectively.
ETS U.S. Customs Matter
The
Company received written correspondence from the U. S. Immigration and Customs
Enforcement Office of Investigations (ICE) dated March 11, 2010 indicating
that it initiated an investigation relating to the classification of certain
rubber tires imported by its tire and wheel operation within the Engineered
Transportation Solutions segment since 2004.
The Company has responded to ICEs inquiry and continues to fully
cooperate with ICE in responding to requests for additional information. The Company has been separately working with
U. S. Customs and Border Protection on this matter since late 2009 to properly
classify its products.
At
this time, the Company cannot predict or determine the outcome of this matter
or reasonably estimate the amount of additional duties and/or civil or criminal
fines or penalties, if any, owed as a result of this investigation. In the opinion of management, the ultimate
outcome of such actions will not have a material adverse effect on the
consolidated financial position of the Company, but may have a material impact
on the Companys results of operations and cash flows for a particular period.
Note 15 - Segment Information
The Company manages and reports its results under the following
segments:
·
Construction Materials:
the construction
materials business;
·
Engineered Transportation Solutions:
the tire and wheel, industrial brake and
friction, and power transmission belt product lines;
·
Interconnect Technologies:
the interconnect technologies business;
·
Foodservice Products:
the foodservice
products business; and
·
Specialty Products:
the specialty trailer business
12
Sales,
EBIT, and assets of continuing operations by reportable segment are included in
the following summary:
Second Quarter
|
|
2010
|
|
2009 (2)
|
|
In millions
|
|
Sales(1)
|
|
EBIT
|
|
Sales(1)
|
|
EBIT
|
|
Construction Materials
|
|
$
|
345.8
|
|
$
|
51.3
|
|
$
|
314.4
|
|
$
|
50.7
|
|
Engineered Transportation Solutions
|
|
218.2
|
|
9.2
|
|
197.8
|
|
39.0
|
|
Interconnect Technologies
|
|
62.4
|
|
6.0
|
|
39.1
|
|
2.7
|
|
FoodService Products
|
|
61.3
|
|
6.3
|
|
64.0
|
|
5.9
|
|
Specialty Products
|
|
21.7
|
|
0.2
|
|
21.4
|
|
(3.3
|
)
|
Total Segments
|
|
709.4
|
|
73.0
|
|
636.7
|
|
95.0
|
|
Corporate
|
|
|
|
(8.8
|
)
|
|
|
(10.1
|
)
|
Total
|
|
$
|
709.4
|
|
$
|
64.2
|
|
$
|
636.7
|
|
$
|
84.9
|
|
First Six Months
|
|
2010
|
|
2009 (2)
|
|
In millions
|
|
Sales(1)
|
|
EBIT
|
|
Assets
|
|
Sales(1)
|
|
EBIT
|
|
Assets
|
|
Construction Materials
|
|
$
|
562.3
|
|
$
|
70.6
|
|
$
|
657.9
|
|
$
|
522.1
|
|
$
|
56.1
|
|
$
|
656.8
|
|
Engineered Transportation Solutions
|
|
430.4
|
|
22.8
|
|
606.9
|
|
401.8
|
|
55.2
|
|
569.7
|
|
Interconnect Technologies
|
|
124.2
|
|
13.8
|
|
396.2
|
|
83.0
|
|
6.8
|
|
312.6
|
|
FoodService Products
|
|
118.0
|
|
12.7
|
|
212.0
|
|
122.7
|
|
10.0
|
|
226.1
|
|
Specialty Products
|
|
36.5
|
|
|
|
39.0
|
|
38.4
|
|
(6.0
|
)
|
43.6
|
|
Total Segments
|
|
1,271.4
|
|
119.9
|
|
1,912.0
|
|
1,168.0
|
|
122.1
|
|
1,808.8
|
|
Corporate
|
|
|
|
(17.2
|
)
|
115.8
|
|
|
|
(17.8
|
)
|
92.9
|
|
Total
|
|
$
|
1,271.4
|
|
$
|
102.7
|
|
$
|
2,027.8
|
|
$
|
1,168.0
|
|
$
|
104.3
|
|
$
|
1,901.7
|
|
(1) Excludes intersegment sales
(2) Prior year information has been revised as
discussed in Note 2 to the Unaudited Consolidated Financial Statements
A reconciliation of assets reported above to total assets as presented
on the Companys Consolidated Balance Sheets is as follows:
|
|
June 30,
|
|
|
|
2010
|
|
Assets per table above
|
|
$
|
2,027.8
|
|
Assets held for sale of discontinued operations
|
|
1.9
|
|
Total Assets per Consolidated Balance Sheet
|
|
$
|
2,029.7
|
|
Note 16 - Income Taxes
The effective income tax rate on continuing
operations for the six months ended June 30, 2010 was 37.6% compared to an
effective income tax rate of 31.3% for the six months ended June 30, 2009. The variation in the effective income tax
rate during the six months is attributable to an increase in the tax rate
imposed on offshore earnings and sunset of favorable US tax provisions.
13
Note 17 - Earnings Per Share
The following reflects the Income from continuing
operations and share data used in the basic and diluted earnings per share
computations using the two-class method:
|
|
Second Quarter
|
|
Six Months
|
|
In millions, except share and per share amounts
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations
|
|
$
|
38.9
|
|
$
|
57.2
|
|
$
|
61.8
|
|
$
|
68.2
|
|
Less: dividends declared -
common stock outstanding, unvested restricted shares and restricted share
units
|
|
(9.9
|
)
|
(9.5
|
)
|
(19.7
|
)
|
(19.0
|
)
|
Undistributed earnings
|
|
29.0
|
|
47.7
|
|
42.1
|
|
49.2
|
|
Percent allocated to
common shareholders (1)
|
|
98.9
|
%
|
98.9
|
%
|
98.9
|
%
|
98.9
|
%
|
|
|
28.7
|
|
47.2
|
|
41.6
|
|
48.7
|
|
Add: dividends declared -
common stock
|
|
9.8
|
|
9.4
|
|
19.5
|
|
18.8
|
|
Numerator for basic and
diluted EPS
|
|
$
|
38.5
|
|
$
|
56.6
|
|
$
|
61.1
|
|
$
|
67.5
|
|
|
|
|
|
|
|
|
|
|
|
Denominator (in
thousands):
|
|
|
|
|
|
|
|
|
|
Denominator for basic EPS:
weighted-average common shares outstanding
|
|
60,832
|
|
60,584
|
|
60,811
|
|
60,576
|
|
Effect of dilutive
securities:
|
|
|
|
|
|
|
|
|
|
Performance awards
|
|
102
|
|
|
|
102
|
|
|
|
Stock options
|
|
752
|
|
342
|
|
765
|
|
440
|
|
Denominator for diluted
EPS: adjusted weighted average common shares outstanding and assumed
conversion
|
|
61,686
|
|
60,926
|
|
61,678
|
|
61,016
|
|
|
|
|
|
|
|
|
|
|
|
Per share income from continuing operations:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.63
|
|
$
|
0.93
|
|
$
|
1.00
|
|
$
|
1.11
|
|
Diluted
|
|
$
|
0.62
|
|
$
|
0.93
|
|
$
|
0.99
|
|
$
|
1.11
|
|
(1)
Basic
weighted-average common shares outstanding
|
|
60,832
|
|
60,584
|
|
60,811
|
|
60,576
|
|
Basic weighted-average common shares outstanding, unvested
restricted shares expected to vest and restricted share units
|
|
61,511
|
|
61,264
|
|
61,495
|
|
61,256
|
|
Percent allocated to common shareholders
|
|
98.9
|
%
|
98.9
|
%
|
98.9
|
%
|
98.9
|
%
|
To calculate earnings per share for the Income (loss) from
discontinued operations and for Net income, the denominator for both basic and
diluted earnings per share is the same as used in the above table. The Income (loss) from discontinued
operations and Net income were as follows:
|
|
Second Quarter
|
|
Six Months
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
attributable to common shareholders for basic and diluted earnings per share
|
|
$
|
(0.3
|
)
|
$
|
(1.7
|
)
|
$
|
1.0
|
|
$
|
(6.1
|
)
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common shareholders for
basic and diluted earnings per share
|
|
$
|
38.2
|
|
$
|
54.9
|
|
$
|
62.1
|
|
$
|
61.4
|
|
14
Note 18 - Comprehensive Income
Total comprehensive income
consisted of the following:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
38.6
|
|
$
|
55.5
|
|
$
|
62.8
|
|
$
|
62.1
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
Foreign currency translation, net of tax
|
|
(3.9
|
)
|
6.2
|
|
(6.2
|
)
|
4.5
|
|
Accrued post-retirement benefit liability, net of
tax
|
|
0.3
|
|
0.2
|
|
0.7
|
|
0.3
|
|
Loss on hedging activities, net of tax
|
|
|
|
(0.1
|
)
|
(0.1
|
)
|
(0.2
|
)
|
Other comprehensive (loss) income
|
|
(3.6
|
)
|
6.3
|
|
(5.6
|
)
|
4.6
|
|
Comprehensive income
|
|
$
|
35.0
|
|
$
|
61.8
|
|
$
|
57.2
|
|
$
|
66.7
|
|
Loss on hedging activities, net of tax included in Other comprehensive
(loss) income for the three and six months ended June 30, 2010 represented the
amortization of a $5.6 million ($3.5 million, net of tax) gain in Accumulated
other comprehensive loss resulting from the termination of treasury lock
contracts on August 15, 2006. At June
30, 2010, the Company had a remaining unamortized gain of $3.5 million ($2.2
million, net of tax) which is reflected in Accumulated other comprehensive loss
on the Companys Consolidated Balance Sheets. Approximately $0.3 million ($0.2
million, net of tax) is expected to be amortized to reduce Interest expense,
net during the remainder of 2010.
Note 19 - Exit and Disposal Activities
The following table represents the effect of exit and disposal
activities related to continuing operations on the Companys Consolidated
Statements of Earnings for the three and six months ended June 30, for 2010 and
2009, respectively:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Cost of goods sold
|
|
$
|
3.3
|
|
$
|
2.2
|
|
$
|
6.1
|
|
$
|
2.5
|
|
Selling and administrative expenses
|
|
0.6
|
|
0.7
|
|
0.6
|
|
1.2
|
|
Research and development expenses
|
|
0.1
|
|
|
|
0.2
|
|
|
|
Other operating expense
|
|
|
|
6.9
|
|
|
|
9.8
|
|
Total exit and disposal costs
|
|
$
|
4.0
|
|
$
|
9.8
|
|
$
|
6.9
|
|
$
|
13.5
|
|
Exit and disposal activities by type of charge were as follows:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Termination benefits
|
|
$
|
1.3
|
|
$
|
1.2
|
|
$
|
3.2
|
|
$
|
1.4
|
|
Contract termination costs
|
|
|
|
0.6
|
|
|
|
1.0
|
|
Fixed asset impairment
|
|
|
|
6.9
|
|
|
|
9.8
|
|
Other associated costs
|
|
2.7
|
|
1.1
|
|
3.7
|
|
1.3
|
|
Total exit and disposal costs
|
|
$
|
4.0
|
|
$
|
9.8
|
|
$
|
6.9
|
|
$
|
13.5
|
|
15
Exit and disposal accrual activities for the six months ended June 30,
2010 were as follows:
In millions
|
|
Severance Costs
|
|
Contract
Termination
Costs
|
|
Other Associated
Costs
|
|
Total
|
|
Balance at December 31, 2009
|
|
$
|
3.5
|
|
$
|
0.2
|
|
$
|
2.2
|
|
$
|
5.9
|
|
2010 charges to expense and adjustments
|
|
3.2
|
|
|
|
3.7
|
|
6.9
|
|
2010 usage
|
|
(1.7
|
)
|
(0.2
|
)
|
(4.6
|
)
|
(6.5
|
)
|
Balance at June 30, 2010
|
|
$
|
5.0
|
|
$
|
|
|
$
|
1.3
|
|
$
|
6.3
|
|
Exit and disposal activities by segment were as follows:
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Total by segment
|
|
|
|
|
|
|
|
|
|
Engineered Transportation Solutions
|
|
$
|
3.6
|
|
$
|
4.7
|
|
$
|
5.9
|
|
$
|
8.4
|
|
Interconnect Technologies
|
|
0.4
|
|
0.8
|
|
1.0
|
|
0.8
|
|
Specialty Products
|
|
|
|
3.8
|
|
|
|
3.8
|
|
Total segment costs
|
|
4.0
|
|
9.3
|
|
6.9
|
|
13.0
|
|
Corporate
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Total exit and disposal costs
|
|
$
|
4.0
|
|
$
|
9.8
|
|
$
|
6.9
|
|
$
|
13.5
|
|
Engineered Transportation Solutions
During the first six
months of 2010, the Company had two consolidation projects underway within the
Engineered Transportation Solutions segment in its continuing efforts to reduce
costs and streamline its operations.
Descriptions of these projects are set forth below:
·
In the third quarter of 2009, the Company announced plans to
consolidate its tire manufacturing operations in Heflin, AL, Carlisle, PA, and
portions of Buji, China into a new facility in Jackson, TN purchased in the
third quarter of 2009. The consolidation of the tire manufacturing operations
into Jackson, TN is expected to be substantially completed by the end of 2010.
·
In the fourth quarter of 2009, the Company announced plans to close
its friction product manufacturing facility in Logansport, IN and to
consolidate operations into its locations in Hangzhou, China and Bloomington,
IN. This consolidation is expected to be
completed by the end of 2010.
The Company expects the total cost of these consolidation projects will
be approximately $26.9 million, of which $14.4 million has been incurred
through June 30, 2010, and $12.5 million is expected to be incurred in the
remainder of 2010. The Company recorded $5.9 million of expense during the
first six months of 2010 primarily consisting of employee termination costs and
other relocation costs. Amounts expected to be incurred in the remainder of
2010 primarily relate to employee termination and other costs associated with
the relocation of employees and equipment.
Included in Accrued expenses at June 30, 2010 was $5.9 million
related to unpaid severance, moving and relocation and other costs for the
above projects as well as other consolidation projects completed in 2009.
During the three and six months ended June 30, 2009, the Company
recorded $4.7 million and $8.4 million in exit and disposal costs,
respectively, including $2.8 million in fixed asset impairment charges during
the second quarter of 2009 related to the Jackson consolidation and a total of
$5.7
16
million in fixed asset impairment charges for plant restructurings in
the six months ended June 30, 2009.
Interconnect Technologies
In the fourth quarter of
2009, in efforts to reduce costs and streamline operations, the Company
announced that it would consolidate its Vancouver, WA facility into its
facilities in Long Beach, CA, Tukwila, WA, and Dongguan, China and close its
Vancouver facility. This consolidation is expected to be completed by the third
quarter of 2010.
The Company expects the total cost of this consolidation project will
be approximately $4.4 million, of which $4.1 million has been incurred through June 30,
2010, and $0.3 million is expected to be incurred in the remainder of 2010. The
Company recorded $1.0 million of expense during the first six months of 2010
primarily consisting of employee termination costs and other relocation costs.
Amounts expected to be incurred in the remainder of 2010 relate primarily to
employee termination, lease termination and other costs associated with the
relocation of employees and equipment.
As
of June 30, 2010, a $0.4 million liability exists for unpaid exit and
disposal costs related to the consolidation of the Vancouver, WA facility.
Specialty Products
In the second quarter of
2009, the Company announced plans to consolidate its Brookville, PA facility
into the operations located in Mitchell, SD and West Fargo, ND, and recorded
$3.8 million in fixed asset impairment charges.
Included in these charges was the land and building which was sold in
the first half of 2010 for a gain of $1.1 million. Refer to note 6 for more detail on the impairment
charges.
17
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Executive Overview
Carlisle Companies Incorporated (Carlisle, the Company, we or our)
is a diversified manufacturing company focused on achieving profitable growth
internally through new product development and product line extensions, and
externally through acquisitions that complement the Companys existing
technologies, products and market channels.
Carlisle manages its businesses under the following segments:
·
Construction Materials:
the construction
materials business;
·
Engineered Transportation Solutions:
the engineered
transportation solutions business, combining the tire and wheel product
line, the off-highway braking product line and the power transmission belt
product line;
·
Interconnect Technologies:
the interconnect
technologies business;
·
FoodService Products:
the foodservice
products business; and
·
Specialty Products:
the specialty
trailer business.
While
Carlisle has offshore manufacturing operations, the markets served by the
Company are primarily in North America. Management focuses on maintaining a
strong and flexible balance sheet, year-over-year improvement in sales,
earnings before interest and income taxes (EBIT), globalization, generating
strong cash flow from operations, and decreasing working capital as a
percentage of sales. Resources are
allocated among the operating companies based on managements assessment of
their ability to obtain leadership positions and competitive advantages in the
markets they serve.
During 2008, the Company began the implementation of the Carlisle
Operating System, a manufacturing structure and strategy deployment system
based on lean enterprise and six sigma principles. The purpose of the Carlisle Operating System
is to eliminate waste in all production and business processes, improve
manufacturing efficiencies to increase productivity, and to increase EBIT margins
and improve cash conversion.
For a more in-depth discussion of the results discussed in this Executive
Overview, please refer to the discussion on Financial Reporting Segments
presented later in Managements Discussion and Analysis.
Net
sales increased 11% in the second quarter of 2010, and 8.9% in the first half
of 2010 as compared to the same periods in 2009. Excluding the impact of acquisitions and
foreign exchange, net sales grew 8.6% in the second quarter of 2010 and 5.6% in
the first half of 2010 as compared to the same periods in 2009. Organic growth was primarily driven by
increased sales volumes across all segments with the exception of the
Foodservice Products segment. Partially
offsetting volume growth during these periods was a decline in selling prices,
primarily occurring within the Construction Materials segment.
EBIT
of $64.2 million was 24% lower in the second quarter of this year as compared
to EBIT of $84.9 million in the second quarter of last year, which included a
$24.5 million gain resulting from a fire insurance recovery. Offsetting the positive impact on EBIT in
the second quarter of higher sales volumes, lower plant and corporate
restructuring costs, and reduced operating costs attributed to efficiencies
gained through the implementation of COS, were higher raw material costs and
lower selling prices which, although relatively level from the first quarter of
2010, declined in comparison to the prior year period.
18
EBIT
for the six months ended June 30, 2010 of $102.7 million was lower than
EBIT of $104.3 million for the six months ended June 30, 2009 primarily as
a result of the aforementioned fire insurance gain, which was $27.0 million in
the first half of 2009. This and the
negative impact of higher raw material costs and lower selling prices were
significantly offset by increased sales volumes, lower plant and corporate
restructuring costs, and lower operating costs attributed to the implementation
of COS.
Many
of Carlisles segments have experienced increased demand in the first half of
this year. The Company expects moderate
sales growth for the remainder of the year; however uncertainty regarding higher
raw material costs, economic recovery and credit availability remains, which could
place negative pressure on EBIT in future periods.
The
Companys effective tax rate for continuing operations was significantly higher
in the three and six months ended June 30, 2010 as compared to those
periods in 2009, primarily as a result of higher tax requirements for certain
of its operations in China.
Sales and Earnings
Consolidated
Results of Continuing and Discontinued Operations
Net
sales
of $709.4 million for the three months ended June 30, 2010
represented an 11% increase from net sales of $636.7 million during the three
months ended June 30, 2009.
Acquisitions in the Interconnect Technologies and Engineered
Transportation Solutions segments contributed $15.7 million of additional sales
in the current quarter as compared to the three months ended June 30,
2009. Organic sales increased by 8.6%
from the second quarter of the prior year, reflecting growth primarily in the
Construction Materials, Engineered Transportation Solutions and Interconnect
Technologies segments, offset by a decline in the Foodservice Products
segment. Among all segments, a 10.8%
increase due to higher sales volumes resulting from higher demand was partially
offset by a 1.9% decrease due to lower selling price which occurred primarily
in the Construction Materials segment.
Net
sales of $1.27 billion for the six months ended June 30, 2010, increased
8.9% from net sales of $1.17 billion in the six months ended June 30,
2009. Acquisitions in the Interconnect
Technologies and Engineered Transportation Solutions segments contributed $31.9
million of additional sales in the first six months of the current year as
compared to the same period of 2009. For
the first six months of the year, organic sales increased by 5.6% from the
prior year period, reflecting sales growth in the Construction Materials,
Engineered Transportation Solutions and Interconnect Technologies segments,
offset by declines in the Foodservice Products and Specialty Products
segments. Among all segments, an 8.9%
increase due to higher sales volumes resulting from higher demand was partially
offset by a 3.2% decrease in selling prices which occurred in all segments with
the exception of Interconnect Technologies.
Cost of goods sold
of $562.8 million for the
quarter ended June 30, 2010 increased $71.5 million, or 15% from $491.3
million in the second quarter of 2009, on an increase in net sales of 11%. The increase in cost of goods sold as
compared to the second quarter of 2009 was primarily attributable to costs of
goods sold from acquisitions of $11.1 million, increased manufacturing costs
resulting from organic sales growth of 8.6% as well as increased pricing for
raw materials, offset by efficiencies obtained through the Carlisle Operating
System.
Cost of goods sold of $1.01 billion for the six months ended June 30,
2010, increased $81.1 million, or 8.7%, as compared to cost of goods sold of
$930.1 million during the prior year period, on increased sales of 8.9%. The increase in cost of goods sold was
primarily attributable to costs of goods sold from acquisitions of $23.0
million, increased manufacturing costs resulting from organic sales growth of
5.6% as
19
well as increased pricing for raw materials, offset by efficiencies obtained
through the Carlisle Operating System.
Gross margin
(net sales less cost of goods sold expressed as a
percent of net sales) decreased from 22.8% in the second quarter of 2009 to
20.7% in the second quarter of 2010. The
gross margin reduction resulted from selling price decreases primarily in the
Construction Materials segment and increased raw material costs, primarily in
the Construction Materials and Engineered Transportation Solutions
segments. Offsetting these impacts were
efficiency gains from the Carlisle Operating System. Gross margin improved slightly from 20.4% in
the six months ended 2009 to 20.5% in the six months ended 2010.
Selling and administrative expenses
of $76.5 million for the
quarter ended June 30, 2010 were $2.1 million higher than $74.4 million
for the quarter ended June 30, 2009, a 2.8% increase on higher net sales
of 11.4%. Selling and administrative
expenses in the second quarter of 2010 included $2.8 million of expenses from
acquisitions in the Interconnect Technologies and Engineered Transportation
Solutions segments. Selling and
administrative expenses in the second quarter of 2009 included $1.7 million of
corporate restructuring charges. Selling related expenses increased due to
higher sales volume; however, as a percent of net sales, selling and
administrative expenses decreased from 11.7% in the second quarter of 2009 to
11% in the second quarter of 2010.
Selling and administrative expenses of $148.8 million for the six
months ended June 30, 2010, were $5.3 million higher than the $143.5
million in the six months ended June 30, 2009, a 3.7% increase on higher
net sales of 8.9%. Selling and
administrative expenses in the second quarter of 2010 included $6.2 million of
expenses from acquisitions in the Interconnect Technologies and Engineered
Transportation Solutions segments. As
noted above, results in the prior year period included $1.7 million of
corporate restructuring charges. Selling
related expenses increased due to higher sales volume; however, as a percent of
net sales, selling and administrative expenses decreased from 12.3% in the
first six months of 2009 to 11.7% in the first six months of 2010.
Gain related to fire settlement
of $24.5 million and $27.0
million for the three and six months ended June 30, 2009, respectively,
reflects insurance recoveries on inventory less associated losses resulting
from a fire which destroyed the Companys tire manufacturing facility in
Bowden, GA in November of 2008.
Other income, net
of $0.6 million for the quarter ended June 30,
2010 compared to other expense, net of $6.6 million for the quarter ended June 30,
2009. Results for 2009 include $6.9
million in asset impairment charges related to plant restructurings primarily
in the Engineered Transportation Solutions and Specialty Products segments.
Other income, net of $2.3 for the six months ended June 30, 2010
includes a $1.1 million pre-tax gain in the Specialty Products segment on the
sale of its plant in Brookville, PA, which was closed in 2009, and net foreign
exchange gains. Other expense, net of
$8.8 million in the first six months of 2009 included $9.8 million in asset
impairment charges related to plant restructurings in the Engineered
Transportation Solutions and Specialty Products segments.
EBIT
in the second
quarter of 2010 was $64.2 million, a 24% decline as compared to EBIT of $84.9
million for the second quarter of 2009.
The reduction of EBIT was primarily the result of a gain of $24.5
million from a fire insurance recovery in the second quarter of 2009. EBIT in the second quarter of 2010 was
negatively impacted by higher raw materials costs and lower selling prices
which, although relatively level from the first quarter of 2010, declined in
comparison to the prior year period.
Partially offsetting these impacts were higher sales volumes, reduction
in operating costs attributable to efficiencies gained through the Carlisle
Operating System and a year-over-year decrease in plant and corporate
restructuring charges
20
from
$11.0 million in the three months ended June 30, 2009 to $4.0 million in
the three months ended June 30, 2010.
EBIT
for the six months ended June 30, 2010 of $102.7 million compared to EBIT
of $104.3 million for the six months ended June 30, 2009. The reduction of EBIT was primarily the
result of a gain of $27.0 million from a fire insurance recovery which occurred
in the first half of 2009. EBIT was also
negatively impacted in 2010 by higher raw materials costs and selling prices
that were lower than the prior year, primarily during the first quarter of
2010. Significantly offsetting these
impacts were higher sales volumes, improvements in operating costs attributable
to efficiencies gained through the Carlisle Operating System and a year-over-year
decrease in plant and corporate restructuring charges from $14.7 million in the
first half of 2009 to $6.9 million in the first half of 2010.
Interest expense, net
was $1.8 million for the
quarter ended June 30, 2010, compared to interest expense, net of $2.3
million for the quarter ended June 30, 2009. Interest expense, net for the six months
ended June 30, 2010, was $3.7 million compared to $5.0 million in the
prior year period. The reduction in
interest expense for both the three and six months ended June 30, 2010
reflected lower outstanding debt levels in comparison to the respective prior
year periods.
Income
tax expense
was $23.5 million for the quarter ended June 30,
2010, compared to income tax expense of $25.4 million for the quarter ended June 30,
2009, reflecting an effective tax rate of 37.7% in the second quarter of 2010
versus an effective rate of 30.8% for the second quarter of 2009. For the six months ended June 30, income
tax expense of $37.2 million and $31.1 million for 2010 and 2009, respectively,
reflected an effective tax rate of 37.6% in 2010 and an effective rate of 31.3%
in 2009. The Companys effective tax
rate varies from the statutory rate within the United States of 35% due
primarily to the deduction attributable to U.S. production activities, state
tax requirements, earnings in foreign jurisdictions taxed at rates different
from the statutory U.S. federal rate, and tax credits. During 2010, the Company has been subject to higher
tax requirements for certain of its operations in China.
Income
from continuing operations, net of tax
was $38.9 million, or $0.62
per diluted share, for the three months ended June 30, 2010, down 32%
compared to income from continuing operations, net of tax of $57.2 million, or
$0.93 per diluted share for the same period in 2009. Results for the prior year quarter included
an after-tax gain of $15.2 million, or $0.25 per diluted share, related to
insurance recoveries. Second quarter of
2010 results included after-tax expense of $2.4 million, or $0.04 per diluted
share in plant restructuring charges, versus 2009 after-tax expense of $8.3
million, or $0.14 per diluted share, related to asset impairment and
restructuring charges.
Income
from continuing operations, net of tax was $61.8 million, or $0.99 per diluted
share, for the six months ended June 30, 2010, compared to income from
continuing operations, net of tax of $68.2 million, or $1.11 per diluted share
for the same period in 2009. Prior year
results included an after-tax gain of $16.8 million, or $0.27 per diluted
share, related to insurance recoveries.
Results for the first half of 2010 included after-tax expense of $4.4
million, or $0.07 per diluted share in plant restructuring charges, versus 2009
after-tax expense of $11.9 million, or $0.19 per diluted share, related to
asset impairment and restructuring charges.
Loss from discontinued operations, net of tax,
for the three
months ended June 30, 2010 was $0.3 million, which compared to a loss from
discontinued operations, net of tax, of $1.7 million, or $0.03 per diluted
share, for the same period in 2009. The
loss from discontinued operations for the second quarter of 2009 includes
expenses connected with the exit of the Motion Control business, which was
announced in April of 2009.
21
Income from discontinued operations, net of tax, for the six months
ended June 30, 2010, was $1.0 million, or $0.02 per diluted share, which
compared to a loss from discontinued operations, net of tax, of $6.1 million,
or $0.10 per diluted share for the same period in 2009. During the first quarter of 2010, the Company
recognized an after-tax gain of $1.3 million on the sale of real estate from
its former on-highway friction and brake shoe business. In the first quarter of 2010, the Company
also sold its interest in the refrigerated truck bodies business for
approximately book value. The loss from
discontinued operations for the first six months of 2009 includes after-tax
severance, asset write-down and impairment charges of $3.7 million related to
the exit of the Motion Control business.
Net income
of $38.6 million, or $0.62 per diluted share, for
the quarter ended June 30, 2010 compared to net income of $55.5 million,
or $0.90 per diluted share, for the quarter ended June 30, 2009. Net income of $62.8 million, or $1.01 per
diluted share, for the six months ended June 30, 2010 compared to net
income of $62.1 million, or $1.01 per diluted share, for the six months ended June 30,
2009.
Acquisitions
On October 1, 2009, the Company acquired the
remaining 51% interest in Japan Power Brake, Inc. (JPB), a leading
provider of high performance braking solutions for off-highway equipment,
primarily in the mining and construction industries in Japan for a purchase
price of approximately $4.2 million. JPB is located in Atsugi, Japan and is
under the management direction of the Engineered Transportation Solutions
segment.
On October 1, 2009, the Company acquired 100%
of the equity of Electronic Cable Specialists (ECS), a leading provider of
electrical and structural products and services for the aviation, medical and
industrial markets, for a purchase price of approximately $42.4 million. ECS is
located in Franklin, WI and is under the management direction of the
Interconnect Technologies segment.
On September 18, 2009, the Company acquired the
assets of Jerrik, Inc. (Jerrik), a recognized leader in the design and
manufacture of highly engineered military and aerospace filtered connectors,
for a purchase price of approximately $33 million. Jerrik is located in Tempe, AZ and is under
the management direction of the Interconnect Technologies segment.
22
Financial Reporting Segments
The
following table summarizes segment net sales and EBIT. The amounts for each segment should be
referred to in conjunction with the applicable discussion below.
|
|
|
|
|
|
Increase
|
|
|
|
Increase
|
|
In millions,
|
|
Second Quarter
|
|
(Decrease)
|
|
Six Months
|
|
(Decrease)
|
|
except percentages
|
|
2010
|
|
2009
|
|
Amount
|
|
Percent
|
|
2010
|
|
2009
|
|
Amount
|
|
Percent
|
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Materials
|
|
$
|
345.8
|
|
$
|
314.4
|
|
$
|
31.4
|
|
10
|
%
|
$
|
562.3
|
|
$
|
522.1
|
|
$
|
40.2
|
|
8
|
%
|
Engineered Transportation Solutions
|
|
218.2
|
|
197.8
|
|
20.4
|
|
10
|
%
|
430.4
|
|
401.8
|
|
28.6
|
|
7
|
%
|
Interconnect Technologies
|
|
62.4
|
|
39.1
|
|
23.3
|
|
60
|
%
|
124.2
|
|
83.0
|
|
41.2
|
|
50
|
%
|
FoodService Products
|
|
61.3
|
|
64.0
|
|
(2.7
|
)
|
-4
|
%
|
118.0
|
|
122.7
|
|
(4.7
|
)
|
-4
|
%
|
Specialty Products
|
|
21.7
|
|
21.4
|
|
0.3
|
|
1
|
%
|
36.5
|
|
38.4
|
|
(1.9
|
)
|
-5
|
%
|
|
|
$
|
709.4
|
|
$
|
636.7
|
|
$
|
72.7
|
|
11
|
%
|
$
|
1,271.4
|
|
$
|
1,168.0
|
|
$
|
103.4
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Before Interest and
Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Materials
|
|
$
|
51.3
|
|
$
|
50.7
|
|
$
|
0.6
|
|
1
|
%
|
$
|
70.6
|
|
$
|
56.1
|
|
$
|
14.5
|
|
26
|
%
|
Engineered Transportation Solutions
|
|
9.2
|
|
39.0
|
|
(29.8
|
)
|
-76
|
%
|
22.8
|
|
55.2
|
|
(32.4
|
)
|
-59
|
%
|
Interconnect Technologies
|
|
6.0
|
|
2.7
|
|
3.3
|
|
122
|
%
|
13.8
|
|
6.8
|
|
7.0
|
|
103
|
%
|
FoodService Products
|
|
6.3
|
|
5.9
|
|
0.4
|
|
7
|
%
|
12.7
|
|
10.0
|
|
2.7
|
|
27
|
%
|
Specialty Products
|
|
0.2
|
|
(3.3
|
)
|
3.5
|
|
106
|
%
|
|
|
(6.0
|
)
|
6.0
|
|
100
|
%
|
Total Segment EBIT
|
|
73.0
|
|
95.0
|
|
(22.0
|
)
|
-23
|
%
|
119.9
|
|
122.1
|
|
(2.2
|
)
|
-2
|
%
|
Corporate
|
|
(8.8
|
)
|
(10.1
|
)
|
1.3
|
|
13
|
%
|
(17.2
|
)
|
(17.8
|
)
|
0.6
|
|
3
|
%
|
Total
|
|
$
|
64.2
|
|
$
|
84.9
|
|
$
|
(20.7
|
)
|
-24
|
%
|
$
|
102.7
|
|
$
|
104.3
|
|
$
|
(1.6
|
)
|
-2
|
%
|
Construction Materials
Net
sales in the Construction Materials segment during the second quarter of 2010
increased 10% to $345.8 million from $314.4 million during the same period of
the prior year. Primarily driven by higher demand for in the commercial
reroofing business, the improvement in sales was due primarily to a 14%
increase in sales volumes across all product lines with the exception of the
Insulfoam product line which reflected continued lower demand for new
residential construction. Selling prices
for the Companys product lines during the second quarter of 2010, though
fairly level with the first quarter of 2010, were 4.4% lower in comparison to
the prior year.
Net
sales of $522.1 million for the first six months of 2009 increased by 7.7% to
$562.3 million for the first six months of 2010, reflecting a 13% increase in
sales volumes partially offset by a 5.6% reduction in selling prices.
Segment
EBIT during the second quarter of 2010 was $51.3 million compared to $50.7
million in the second quarter of 2009.
EBIT margins (EBIT expressed as percentage of net sales) decreased from
16.1% in 2009 to 14.8% in the current year. The reduction was attributable to a
4.4% decrease in selling prices as well as higher raw material costs as
compared to the second quarter of 2009. Partially offsetting these items were
higher sales volume, improved overhead absorption from increased production and
efficiency gains from the Carlisle Operating System.
Segment
EBIT during the first six months of 2010 increased by 26% to $70.6 million from
$56.1 million in the comparative prior year period. EBIT margins increased from 10.7% in 2009
to 12.6% in the current year. The increase was attributable to higher sales
volume, improved overhead absorption resulting from higher production levels
and efficiency gains from the Carlisle Operating System, partially offset by a
5.6% decrease in selling prices as compared to the first half of 2009. Lower raw material costs experienced
23
during
the first quarter of 2010 were offset by higher raw material costs experienced
in the second quarter of 2010.
Net
sales and EBIT are generally higher for this segment in the second and third
quarters of the year due to increased construction activity during these
periods. The Company has seen continued improvement in demand in the reroofing
market, but continues to face many uncertainties in the remainder of the year,
including those regarding the economic recovery and the continued lack of
financing for new construction, which could impede improvement in demand. Raw material costs remain at levels higher
than the prior year and there is continued uncertainty in the raw material
environment. Furthermore, attempts to
recover additional raw material costs through price increases or surcharges may
be subject to significant price competition.
Engineered
Transportation Solutions
Net
sales in the Engineered Transportation Solutions segment during the second
quarter of 2010 of $218.2 million increased by 10% from net sales of $197.8
million in the second quarter of 2009.
Sales from the acquisition of Japan Power Brake contributed $2.1 million
to net sales in the second quarter of 2010. Organic sales increases reflected a
7.1% increase in sales volumes and a 1.4% increase in selling prices, which
were raised during the first quarter of 2010 in response to higher raw material
pricing. The growth in organic sales
reflected sales increases of 53% and 24% in its heavy duty brake and friction,
and power transmission product lines, respectively. With respect to the tire product line, growth
in the outdoor power equipment market was offset by declines in agriculture,
construction and power sports markets.
These markets experienced lower demand from original equipment
manufacturers offset by replacement channel growth.
Net
sales of $401.8 million for the first six months of 2009 increased by 7.1% to
$430.4 million for the first six months of 2010. Sales from Japan Power Brake contributed $3.6
million to net sales in the first half of 2010.
Organic sales increases reflected a 6.0% increase in sales volumes,
partially offset by a 1.1% decrease in selling prices. The growth in organic
sales reflected sales increases of 21% and 18% in its heavy duty brake and
friction, and power transmission product lines, respectively.
Segment
EBIT during the second quarter of 2010 declined to $9.2 million from income of
$39.0 million in the second quarter of 2009.
EBIT margin was 4.2% in the second quarter of 2010, as compared to 19.7%
in the second quarter of 2009. The
reduction in EBIT in 2010 was primarily due to a gain of $24.5 million from a
fire insurance recovery which occurred in 2009 as well as higher raw material
costs experienced in 2010, partially offset by higher sales volumes. During the second quarter of 2010, the
Company experienced significant increases on some of its key raw materials, in
particular natural rubber, synthetic rubber and hot rolled steel sheet. In
addition, the Company has been addressing issues with production inefficiencies
related to the consolidation of its Buji and Meizhou, China tire plants, which
were consolidated in 2009. Restructuring expenses in the second quarter of 2010
of $3.6 million compared to asset impairment and restructuring expenses of $4.7
million in 2009.
Segment
EBIT during the first six months of 2010 was $22.8 million as compared to $55.2
million in the comparative prior year period.
EBIT margins declined from 13.7% in 2009 to 5.3% in the current year.
The reduction in EBIT during the first six months of 2010 was primarily due to
a gain of $27.0 million from a fire insurance recovery which occurred in 2009.
In addition, increases in raw material costs experienced in the second quarter
of 2010 more than offset lower raw material costs that occurred during the
first quarter of 2010. Restructuring
expenses for the six months ended June 30, 2010 of $5.9 million compared
to asset impairment and restructuring expenses of $8.4 million in the prior
year period.
24
During the first six months of 2010, the Company had two consolidation
projects underway within the Engineered Transportation Solutions segment in its
continuing efforts to reduce costs and streamline its operations. Descriptions of these projects are set forth
below:
·
In the third quarter of 2009, the Company announced plans to
consolidate its tire manufacturing operations in Heflin, AL, Carlisle, PA, and
portions of Buji, China into a new facility in Jackson, TN purchased in the
third quarter of 2009. The consolidation of the tire manufacturing operations
into Jackson, TN is expected to be substantially completed by the end of 2010.
·
In the fourth quarter of 2009, the Company announced plans to close
its friction product manufacturing facility in Logansport, IN and to
consolidate operations into its locations in Hangzhou, China and Bloomington,
IN. This consolidation is expected to be
completed by the end of 2010.
The
Company expects the total cost of these consolidation projects will be
approximately $26.9 million, of which $14.4 million has been incurred through
June 30, 2010, and $12.5 million is expected to be incurred in the remainder of
2010. The Company recorded $5.9 million of expense during the first six months
of 2010 primarily consisting of employee termination costs and other relocation
costs. Amounts expected to be incurred in the remainder of 2010 primarily
relate to employee termination and other costs associated with the relocation
of employees and equipment.
Cost
savings related to these consolidations, primarily resulting from the reduction
of operating costs, are expected to approximate $20 million per year by
2012. An estimated $2 million is
expected to be realized in 2010, and an additional $9 million is estimated to
be realized in 2011.
Net
sales and EBIT are generally higher in the first half of the year due to peak
sales volumes in the outdoor power equipment market. Raw material costs remain at levels higher
than the prior year and there is continued uncertainty in the raw material
environment. Furthermore, the outcome of
attempts to recover additional raw material costs through price increases or
surcharges is unknown.
The
current restructuring activities to consolidate tire manufacturing facilities
into a start-up manufacturing facility in Jackson, TN could cause additional
disruptions to customers and employee dissatisfaction. The Company could also
be negatively impacted by cost and availability of shipping channels and the
amount of time required to ship product manufactured in China.
In
addition, the Company could be negatively impacted by the U.S Customs Matter
described in Note 14 of the Notes to the Unaudited Consolidated Financial
Statements in Item 1.
Interconnect Technologies
Net
sales in the Interconnect Technologies segment during the second quarter of
2010 increased 60% to $62.4 million from $39.1 million in the second quarter of
2009. The acquisitions of Jerrik and ECS
contributed $13.6 million, or 35%, in net sales in the current quarter. Organic sales increased by 25% in the three
months ended June 30, 2010, primarily on 32% sales growth of products sold in
the aerospace market, much of this growth related to increased sales from the
Boeing 787 program. Net sales for the
first six months of 2010 increased by 50%, from $83.0 million during the prior
year, to $124.2 million. The
acquisitions of Jerrik and ECS contributed $28.3 million, or 34%, to net sales
during this period and organic sales increased by 16%, primarily driven by 24%
growth in the aerospace market. Sales in
the test and measurement market, which had declined by 25% in the first quarter
of 2010, were relatively flat during the second quarter of 2010 in comparison
to the prior year period.
25
Segment
EBIT during the second quarter of 2010 increased 122% to $6.0 million from $2.7
million in the second quarter of 2009. EBIT margins increased from 6.9% in the
second quarter of 2009 to 9.6% in the second quarter of 2010. The improvement
in EBIT margin was primarily due to higher sales volume and efficiencies gained
through the Carlisle Operating System.
For the first six months of 2010, segment EBIT increased by 103% from
$6.8 million in 2009 to $13.8 million in 2010.
EBIT margins increased from 8.2% in 2009 to 11.1% in 2010. Consistent with the second quarter results,
EBIT for the first six months of the year increased due to contributions from
acquisitions, higher sales volume and efficiencies gained from the Carlisle
Operating System.
In
the fourth quarter of 2009, in efforts to reduce costs and streamline
operations, the Company announced that it would consolidate its Vancouver, WA
facility into its facilities in Long Beach, CA, Tukwila, WA, and Dongguan,
China and close its Vancouver facility. This consolidation is expected to be
completed by the end of the third quarter of 2010.
The
Company expects the total cost of this consolidation project will be
approximately $4.4 million, of which $4.1 million has been incurred through
June 30, 2010, and $0.3 million is expected to be incurred in the remainder of
2010. The Company recorded $1.0 million of expense during the first six months
of 2010 primarily consisting of employee termination costs and other relocation
costs. Amounts expected to be incurred in the remainder of 2010 relate
primarily to employee termination, lease termination and other costs associated
with the relocation of employees and equipment.
Cost
savings related to these consolidations, primarily resulting from the reduction
of operating costs, are expected to approximate $3.2 million per year, of which
an estimated $1.9 million will be realized in 2010.
With the acquisitions of
Jerrik and ECS, ramp-up of the Boeing 787 program and growth prospects of the
markets served by this segment, the long-term outlook for this segment remains
favorable. The Company has also seen recent improvement in demand for its test
and measurement product line. However, potential cancelations in new airplane
manufacturing schedules and the impact of potential defense budget cuts could
negatively impact future growth opportunities. In addition, the Company may
face challenges as it continues integration efforts with Jerrik and ECS to
provide a vertically integrated platform to its customers.
FoodService Products
Net
sales of $61.3 million for the three months ended June 30, 2010 compared to net
sales of $64.0 million in 2009. The
decline in sales was primarily due to lower sales volumes on reduced demand in
the foodservice product line. This decline
was offset by 9% growth in international sales as the Company expands its
distribution network in overseas markets.
Net sales for the first six months of 2010 of $118.0 million reflected a
3.8% decline from net sales of $122.7 million during the prior year
period. Year to date sales declines in
the healthcare market primarily occurred during the first quarter of 2010,
which was impacted by lower rethermalization equipment sales. Sales in the healthcare market showed
improvement from the first quarter to the second quarter of 2010.
Notwithstanding
lower sales volume, segment EBIT during the second quarter of 2010 of $6.3
million increased from prior year EBIT of $5.9 million. As a percent of sales,
EBIT margins in the second quarter of 2010 increased to 10.3% from 9.2% in the
second quarter of 2009. The improvement in margins was due primarily to
efficiency gains from the Carlisle Operating System. Segment EBIT for the six
months ended June 30, 2010 of $12.7 million reflected a 27% improvement over EBIT
of $10.0 million for the prior year, on lower sales volume. EBIT margins increased from 8.1% during the
first six months of 2009 to 10.8% during the first six months of 2010. The improvement in margins was primarily due
to efficiency gains
26
from
the Carlisle Operating System. Lower raw material costs experienced during the
first quarter of 2010 were offset by higher raw material costs experienced in
the second quarter of 2010.
The foodservice products
business is generally not subject to seasonal demand. The outlook for the
foodservice industry within the United States continues to show slightly
negative or limited growth for the remainder of 2010 and is highly dependent on
overall employment.
Specialty Products
Net
sales in the second quarter of 2010 of $21.7 million compared to net sales of
$21.4 million in the second quarter of 2009.
Sales volume improved on increased demand within the specialized and
material hauling trailer market, offset by lower selling prices as compared to
the second quarter of the prior year.
For the six months ended June 30, 2010, net sales declined 4.9% to $36.5
million from $38.4 million during the prior year period, reflecting an overall
reduction in demand and competitive pricing pressures.
Segment
EBIT during the second quarter of 2010 of $0.2 million compared to a loss of
$3.3 million in the second quarter of 2009.
During the second quarter of 2009, the Company incurred asset impairment
charges of $3.8 million related to the decision to exit its Brookville, PA
facility, which was closed in 2009. Breakeven EBIT performance for the six
months ended June 30, 2010 compared to a loss of $6.0 million in the prior year
period. In addition to the
aforementioned asset impairment charge during 2009, the reduction in EBIT loss
from 2009 was primarily attributable to cost reduction efforts in 2010 in
response to lower sales volume and a $1.1 million pre-tax gain on the sale of
the Brookville, PA plant which occurred during the first quarter of 2010.
Recent
trends indicate demand may be beginning to recover within the end markets
served by this industry and the Company has seen strengthening backlog;
however, lack of credit availability and existing trailer surplus could continue
to negatively impact customer spending.
The
specialty trailer business is generally not subject to seasonal demand.
Corporate expense
Corporate
expense of $8.8 million for the second quarter of 2010 compared with $10.1
million for the second quarter of 2009.
During the second quarter of 2009, the Company recorded management
restructuring charges of $1.7 million.
As a percent of net sales, corporate expenses were 1.2% in the second
quarter of 2010, which compared to 1.6% in the second quarter of 2009.
For
the six months ended June 30, 2010, corporate expenses were $17.2 million, as
compared to expenses of $17.8 million for the first six months of 2009. As a percent of net sales, corporate expenses
were 1.4%
during
2010, which compared to 1.5% during the prior year period in 2009.
27
Liquidity and Capital Resources
Sources and Uses of Cash
|
|
Six Months Ended June 30,
|
|
In millions
|
|
2010
|
|
2009
|
|
Net cash provided by operating activities
|
|
$
|
20.5
|
|
$
|
269.0
|
|
Net cash used in investing activities
|
|
(6.3
|
)
|
(17.0
|
)
|
Net cash used in financing activities
|
|
(13.3
|
)
|
(231.4
|
)
|
Effect of exchange rate changes on cash
|
|
(0.6
|
)
|
0.3
|
|
Change in cash and cash equivalents
|
|
$
|
0.3
|
|
$
|
20.9
|
|
Net
cash provided by operating activities was $20.5 million for the six months
ended June 30, 2010, compared to net cash provided by operating activities of
$269.0 million for the six months ended June 30, 2009. Cash used for working
capital and other assets and liabilities was $72.0 million for the six months
ended June 30, 2010, which compared to cash provided of $151.9 million for the
six months ended June 30, 2009. The
increase in cash used for working capital was primarily due to increases in
accounts receivable and inventories which reflected increased sales. Cash flow
provided by operating activities for the first six months of 2009 included
$54.5 million from the proceeds relating to the insurance recovery from the
fire at the Bowdon, Georgia facility.
Cash
used for investing activities was $6.3 million for the six months ended June
30, 2010, compared to cash used of $17.0 million for the first six months of
2009. Capital expenditures were $31.6 million in the first six months of 2010
compared to capital expenditures of $20.1 million in the first six months of
2009. Proceeds from the sale of the refrigerated truck bodies business on
February 2, 2010 were $20.3 million.
In
the second quarter of 2009, activities commenced on the consolidation of three
tire manufacturing operations into a new facility in Jackson, TN. Total cash
expenditures associated with this project are expected to approximate $65
million, of which $46 million relate to the purchase of the facility and
investment in equipment. The remainder will be used to cover relocation and
severance costs. Through June 30, 2010, approximately $28 million of cash had
been used.
Cash
used by financing activities of $13.3 million for the six months ended June 30,
2010 primarily reflects the payment of dividends. Cash used by financing
activities of $231.4 million for the six months ended June 30, 2009 included a
reduction in borrowings under the revolving credit facility and securitization
facility and the payment of dividends.
Debt
Instruments, Guarantees and Covenants
At
June 30, 2010 the Company had $469 million available under its $500 million
revolving credit facility. The revolving credit facility provides for
grid-based interest pricing based on the credit rating of the Companys senior
unsecured bank debt or other unsecured senior debt and the Companys
utilization of the facility. The facility requires the Company 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 2010 and 2009.
The
Company also maintains a $55 million uncommitted line of credit, all of which
was available at June 30, 2010.
28
New Accounting Pronouncements
There
are currently no accounting standards that have been issued that will have a
significant impact on the Companys financial position, results of operations
and cash flows upon adoption.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements are made based on known
events and circumstances at the time of publication, and as such, are subject
in the future to unforeseen risks and uncertainties. It is possible that the
Companys future performance may differ materially from current expectations
expressed in these forward-looking statements, due to a variety of factors such
as: increasing price and product/service competition by foreign and domestic
competitors, including new entrants; technological developments and changes;
the ability to continue to introduce competitive new products and services on a
timely, cost-effective basis; the Companys mix of products/services; increases
in raw material costs which cannot be recovered in product pricing; domestic
and foreign governmental and public policy changes including environmental
regulations; threats associated with and efforts to combat terrorism;
protection and validity of patent and other intellectual property rights; the
successful identification and integration of the Companys strategic
acquisitions; the cyclical nature of the Companys businesses; and the outcome
of pending and future litigation and governmental proceedings. In addition,
such statements could be affected by general industry and market conditions and
growth rates, and general domestic and international economic conditions
including interest rate and currency exchange rate fluctuations. Further, any
conflict in the international arena may adversely affect the general market
conditions and the Companys future performance. The Company undertakes no duty
to update forward-looking statements.
Item 3. Quantitative and Qualitative Disclosure
about Market Risk
There
have been no material changes in the Companys market risk for the period ended
June 30, 2010. For additional information, refer to Item 7A of the Companys
2009 Annual Report on Form 10-K.
Item 4. Controls and Procedures
(a) Under the supervision and with the participation of the Companys
management, including the Companys chief executive officer and chief financial
officer, the Company carried out an evaluation of the effectiveness of the
design and operation of the Companys disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation and as of June
30, 2010, the chief executive officer and chief financial officer concluded
that the Companys disclosure controls and procedures are effective.
(b)
There were no changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.
29
PART II. OTHER INFORMATION
Item 1.
Legal
Proceedings
ETS U.S. Customs Matter
The
Company received written correspondence from the U. S. Immigration and Customs
Enforcement Office of Investigations (ICE) dated March 11, 2010 indicating
that it initiated an investigation relating to the classification of certain
rubber tires imported by its tire and wheel operation within the Engineered
Transportation Solutions segment since 2004.
The Company has responded to ICEs inquiry and continues to fully
cooperate with ICE in responding to requests for additional information. The Company has been separately working with
U. S. Customs and Border Protection on this matter since late 2009 to properly
classify its products.
At
this time, the Company cannot predict or determine the outcome of this matter
or reasonably estimate the amount of additional duties and/or civil or criminal
fines or penalties, if any, owed as a result of this investigation. In the opinion of management, the ultimate
outcome of such actions will not have a material adverse effect on the
consolidated financial position of the Company, but may have a material impact
on the Companys results of operations for a particular period.
Item 6.
Exhibits
(12)
Ratio of
Earnings to Fixed Charges
(31.1)
Rule
13a-14(a)/15d-14(a) Certifications
(31.2)
Rule
13a-14(a)/15d-14(a) Certifications
(32)
Section 1350
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(101)
Interactive Data
File*
* In accordance with
Rule 406T of Regulation S-T promulgated by the Securities and Exchange
Commission, Exhibit 101 is deemed not filed or part of a registration
statement or prospectus for purposes of sections 11 or 12 of the Securities Act
of 1933, is deemed not filed for purposes of section 18 of the Securities
Exchange Act of 1934, and otherwise is not subject to liability under these
sections.
30
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
|
Carlisle
Companies Incorporated
|
|
|
|
|
July
27, 2010
|
|
|
By:
|
/s/
Steven J. Ford
|
|
Name:
Steven J. Ford
|
|
Title:
Vice President and Chief Financial Officer
|
31
Carlisle Companies (NYSE:CSL)
Historical Stock Chart
From May 2024 to Jun 2024
Carlisle Companies (NYSE:CSL)
Historical Stock Chart
From Jun 2023 to Jun 2024