3rd Quarter 2018 Earnings Conference Call October 23, 2018 - - PowerPoint PPT Presentation

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3rd quarter 2018 earnings conference call
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3rd Quarter 2018 Earnings Conference Call October 23, 2018 - - PowerPoint PPT Presentation

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3rd Quarter 2018 Earnings Conference Call October 23, 2018 Forward-looking statements During this presentation, we make certain forward-looking statements concerning plans and expectations for Carlisle Companies Incorporated. We caution you

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3rd Quarter 2018 Earnings Conference Call

October 23, 2018

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Forward-looking statements

During this presentation, we make certain forward-looking statements concerning plans and expectations for Carlisle Companies

  • Incorporated. We caution you that actual events or results may differ materially from our plans and expectations. See our Form

10-K for 2017 filed with the Securities and Exchange Commission, these slides and the remarks in the conference call and webcast, the third quarter of 2018 financial results 8-K and release, and our Form 10-Q to be filed for the third quarter of 2018 for risks and uncertainties which could cause actual results to differ materially from current expectations.

Non-GAAP financial measures

Certain ratios related to our Revolving Credit Facility of Earnings before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Free Cash Flow, Net Debt, Net Debt to EBITDA ratio, and Net Debt to Capital Ratio are not measures of liquidity or financial condition under US GAAP. Our Revolving Credit Facility allows us to exclude non-cash impairment charges in the computation of EBITDA. See slide 17 and the appendix to this presentation for a reconciliation of these measures to the most directly comparable GAAP measures. Throughout this presentation each non-GAAP measure is denoted with an *.

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  • Exceeded organic revenue growth target of 5% YTD
  • Returned approximately $365M to shareholders

through share repurchases and dividends YTD

  • $295M of share repurchases
  • $70M of dividends
  • Executed on CFT margin improvement initiatives

driving to ~13% operating margin, excluding gain from sale of a facility in Mexico

  • Realized COS savings of 1.5% YTD, in line with our

targeted 1-2%

  • Made small but meaningful acquisition in MedTech

and are working a robust pipeline of opportunities

Executing on Vision 2025 Plan

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2018 Q3 Highlights

Financial Summary

(in millions, except per share amounts)

Q3 '18 Q3 '17 Δ

Revenues

$1,181.4 $1,002.4 +17.9%

Operating income

$140.0 $134.8 +3.9%

Income from continuing operations, net of tax

$96.9 $79.1 +22.5%

Diluted EPS from continuing

  • perations

$1.59 $1.26 +26.2%

Items affecting comparability

$0.09 $0.24

  • 62.5%
  • Record Q3 revenue up 17.9%
  • 5.5% organic revenue growth
  • Strong organic growth at CIT and CBF
  • 11.7% acquisition growth
  • 26.2% increase in EPS from Continuing

Operations

  • Operating income increased 3.9%
  • Higher volume, price realization, and

savings from COS,

  • Freight, labor-related, executive

retirement costs offsets

Solid Organic Sales Despite Record Setting Rainfall Impacting CCM

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2018 Q3 Revenue Bridge

Q3 '17 Organic Revenue Recognition Acquisitions FX Q3 '18

+5.5% +11.7% Organic Revenue by Segment

Construction Materials +3.2% Interconnect Technologies +9.8% Fluid Technologies +2.8% Brake & Friction +14.9%

$1,181.4

(in millions)

$1,002.4

+0.6% +0.1%

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2018 Q3 Operating Margin Bridge

Q3 '17 Price/Volume COS Acquisitions Raw Materials/ Other Operating Costs Restructuring/ Rationalization Costs Q3 '18

+13.4%

+1.3% +1.4%

  • 1.4%
  • 3.5%

+0.7%

+11.9%

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2018 Q3 EPS Bridge

Q3 '17 Volume Tax Items COS Share Repurchase Price Raw Material, Freight & Labor Related Costs Interest Expense Product Mix Other Q3 '18

$1.26

+$0.15 +$0.14 +$0.15

  • $0.22
  • $0.06

$1.59

+$0.30 +$0.06

  • $0.07
  • $0.12
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Carlisle Construction Materials

  • Q3 Notable Commercial Items:
  • Wet weather in Texas and Eastern United States limited days on the roof
  • Metal roofing up 32%
  • 44% growth in new product sales
  • Operating Income:
  • Higher volume, price and COS savings
  • More than offset by rising raw material, freight, and executive retirement costs
  • Accella synergies on track
  • Lingering effects of MDI increases remain

Three Months Ended September 30, Acquisition Effect Price / Volume Effect Exchange Rate Effect (in millions) 2018 2017 Change $ Change % Revenues

$ 776.8 $ 640.2 $ 136.6 21.3 % 18.2% 3.2% (0.1)%

Operating income

$ 120.9 $ 124.4 $ (3.5) (2.8)%

Operating margin percentage

15.6% 19.4%

  • 380bps

Items affecting comparability

$ 1.0 $ 2.8

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Carlisle Interconnect Technologies

  • Q3 Notable Commercial Items:
  • Aerospace driving growth
  • Satellite connectivity sales continue on track in 2018
  • MedTech and Test & Measurement pipeline strong
  • Revenue Recognition contributed $6.3M of sales, or 3%
  • Operating Income:
  • Higher volume, lower facility rationalization and restructuring costs, and COS
  • Unfavorable mix and labor-related costs
  • Revenue Recognition contributed $1.4M of operating income

Three Months Ended September 30, Acquisition Effect Price / Volume Effect1 Exchange Rate Effect (in millions) 2018 2017 Change $ Change % Revenues

$ 240.2 $ 210.8 $ 29.4 13.9% 0.3% 12.8% 0.8%

Operating income

$ 29.3 $ 25.9 $ 3.4 13.1%

Operating margin percentage

12.2% 12.3%

  • 10bps

Items affecting comparability

$ 2.5 $ 4.2

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Carlisle Fluid Technologies

  • Q3 Notable Commercial Items:
  • General Industrial market up double digits
  • Partially offset by weakness in Transportation and Automotive Refinish markets
  • Standard product sales up driven by Asia Pacific
  • Pricing gains of 1.6%
  • Operating Income:
  • Excellent operating income performance
  • Efficiencies gained from our multiple facility rationalization efforts, progress on

vertical integration, and COS

  • Gain from sale of facility in Mexico

Three Months Ended September 30, Acquisition Effect Price / Volume Effect Exchange Rate Effect (in millions) 2018 2017 Change $ Change % Revenues

$ 72.4 $ 70.9 $ 1.5 2.1% —% 2.8% (0.7)%

Operating income

$ 11.6 $ 0.1 $ 11.5 NM

Operating margin percentage

16.0% 0.1% NM

Items affecting comparability

$ (2.0) $ 8.1

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Carlisle Brake & Friction

  • Q3 Notable Commercial Items:
  • Construction revenue up 15%, Mining up 32%, Ag up 5%
  • Pricing up 4.2%
  • European sales up 8%
  • Operating Income:
  • Footprint consolidation drove Operating Loss as expected
  • Volume, price, and COS positive drivers
  • Footprint consolidation on-track to be completed by year end

Three Months Ended September 30, Acquisition Effect Price / Volume Effect Exchange Rate Effect (in millions) 2018 2017 Change $ Change % Revenues

$ 92.0 $ 80.5 $ 11.5 14.3 % —% 14.9% (0.6)%

Operating income

$ (1.1) $ 1.3 $ (2.4) (184.6)%

Operating margin percentage

(1.2)% 1.6%

  • 280bps

Items affecting comparability

$ 4.8 $ 1.0

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Restructuring, Facility Rationalization, Acquisition/Divestiture Related Items

($ in millions)

Q3 2018 Q4 2018 Forecast FY 2018 Forecast

CCM $1.0 ~$0-1 ~$0-1 CIT $2.5 ~$2-3 ~$9-10 CFT $(2.0) ~$0-1 ~$0-1 CBF $4.8 ~$10-12 ~$21-23 CORP $0.8 ~$1-2 ~$3-4 TOTAL OI Pre-Tax $7.1 ~$14-18 ~$33-37

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Focused on Capital Structure Optimization

  • Cash on hand of $780.5M as of 9/30/18
  • $1B available under revolver
  • $70M capital returned YTD to shareholders

in quarterly dividends

  • Repurchased $295.4M of shares YTD
  • 4.4M shares remaining under

authorization

  • Net debt to cap ratio of 23%*
  • Net debt to EBITDA of 0.8x*
  • EBITDA to interest of 16.4x*

Debt Maturity Schedule

2020 2022 2024 2027

Senior Note $250M 5.125% Senior Note $400M 3.5% Senior Note $600M 3.75% Senior Note $350M 3.75%

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Cash Flow

Operating Cash Flow Capital Expenditures Free Cash Flow * $175 $125 $75 $25

  • $25
  • $75

(in millions) Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18

Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Operating Cash Flow

$164.9 $159.1 $33.2 $(36.0) $105.4

Capital Expenditures

$(39.7) $(54.1) $(42.5) $(24.4) $(29.2)

Free Cash Flow *

$125.2 $105.0 $(9.3) $(60.4) $76.2

The decrease in free cash flow was due to the timing of cash taxes paid related to the sale of Carlisle FoodService Products and increased working capital to support revenue growth.

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2018 Outlook

  • Total revenue growth from continuing
  • perations high-teens

–CCM: up low twenty percent –CIT: up double-digits –CFT: up mid-single digits –CBF: up mid-teens

  • Corporate expense ~$75-80M
  • Depreciation & amortization ~$190M
  • Capital expenditures ~$120-130M
  • Free cash flow conversion ~100%**
  • Net interest expense ~$55-60M
  • Tax rate ~22-24%
  • Restructuring, facility rationalization,

acquisition/divestiture related items ~$33-37M

**Excluding effect of sale of Carlisle FoodService Products

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Appendix

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Reconciliation of GAAP to Non-GAAP Measures

Leverage Ratios under Credit Agreement

(in millions except for ratios) LTM 9/30/2018 Net income $ 638 Income tax expense (continuing and discontinued) 100 Interest expense 62 Depreciation and amortization 192 Non-cash stock based compensation expense 19 EBITDA per revolving credit agreement $ 1,010 Short-term debt including current maturities $ Long-term debt principal 1,600 Total debt $ 1,600 Less: Cash in excess of $151 766 Debt per revolving credit agreement $ 834 Net debt to EBITDA 0.8x EBITDA to interest 16.4

1 If the outstanding balance on the revolving credit facility is $0, cash in excess of

$15 million is deducted from debt. $0 outstanding on 9/30/2018

Net Debt to Capital Ratio

(in millions except for ratios) Capital Total debt $ 1,600 Net debt $ 819 Less: cash $ 781 Total shareholders' equity $ 2,706 Net debt $ 819 Total capital (net of cash) $ 3,525 Net debt to capital 23%