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CARLISLE COMPANIES INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

10/26/2021 | 03:04pm EST
Carlisle Companies Incorporated ("Carlisle", the "Company", "we", "us" or "our")
is a leading supplier of innovative building envelope products and
energy-efficient solutions for customers creating sustainable buildings of the
future. Through its Carlisle Construction Materials ("CCM") business and family
of leading brands, Carlisle delivers innovative, labor-reducing and
environmentally responsible products and solutions to customers across the
planet through the Carlisle Experience. Over the life of a building, Carlisle's
products help drive lower greenhouse gas emissions, improve energy savings for
building owners and operators, and increase a building's resiliency to the
elements. Driven by our strategic plan, Vision 2025, Carlisle is committed to
generating superior shareholder returns and maintaining a balanced capital
deployment approach, including investments in our businesses, strategic
acquisitions, share repurchases and continued dividend increases. Carlisle also
is a leading provider of products to the aerospace, medical technologies and
general industrial markets through its Carlisle Interconnect Technologies
("CIT") and Carlisle Fluid Technologies ("CFT") business segments. Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") is designed to provide a reader of our financial statements with a
narrative from the perspective of Company management. All references to "Notes"
refer to our Notes to Condensed Consolidated Financial Statements in Item 1 of
this Quarterly Report on Form 10-Q.
Executive Overview
As we exited the third quarter, the impact of the COVID-19 pandemic appears to
be past its summer and early autumn peak. This trend, combined with improvements
in our supply chain and positive movement towards a resumption of passenger air
travel approaching pre-pandemic levels, is driving increased optimism about our
ability to deliver continued strong results. We have also seen strong demand in
our building products markets. Along with steadily growing backlog across all
three of Carlisle's segments, we are increasingly positive entering the fourth
quarter and 2022. Nonetheless, within the third quarter of 2021, our teams faced
a very challenging operating environment given difficult supply chain and labor
conditions, as well as the impact of Hurricane Ida. Despite these challenges, we
believe Carlisle's employees again displayed their resilience in delivering
record results, all the while doing so with strict adherence to the same health
and safety protocols and precautions that have been in place throughout the
pandemic, extending Carlisle's excellent safety record.
Vision 2025 continues to provide clarity of mission and a consistent direction
for our entire organization. We have stayed the course and maintain confidence
in our ability to execute on our strategies, despite the challenges throughout
the COVID-19 pandemic. Vision 2025 focuses our continuous improvement culture on
providing our customers with innovative products of the best quality at the
right place, at the right time. Ensuring the highest level of communication,
transparency and service is embodied in what we call the Carlisle Experience,
which we are committed to delivering to all our channel partners.
As introduced in Vision 2025, we committed to a leaner, more focused portfolio
and a pivot towards investing in our highest-returning businesses, particularly
CCM. This commitment was further evidenced in the third quarter by our
divestiture of Carlisle Brake & Friction ("CBF"), which CCM's outstanding
performance affirmed that our conviction is correct. CCM's best-in-class team
delivered record third quarter revenues in an extremely difficult operating
environment. Our increasing focus on building products is exemplified by our
recent acquisition of ASP Henry Holdings, Inc. ("Henry"), which delivered
excellent results in its first month with Carlisle, and where integration thus
far has been smooth.
While we're pleased with CCM's performance, CIT and CFT both contributed to our
results and exhibited continued progress. As we expected, CIT returned to growth
in the third quarter. CIT's commercial aerospace backlog has consistently grown
in 2021, and has now surpassed second quarter of 2020 levels, a significant
milestone. Coupling this with the improving backlog in our medical technologies
business, we expect recovery to continue at CIT, with solid leverage on this
growth over the coming quarters and years. Driven by accelerating industrial
capital expenditures as companies expand capacity in response to supply
constraints, CFT delivered strong revenue growth, despite the many documented
supply chain issues challenging the automotive industry.
We remain balanced in our approach to capital deployment. We increased our
dividend for the 45th consecutive year, returning $84.2 million during the first
nine months in the form of dividends. While closing on the acquisition of Henry,
the largest acquisition in Carlisle's history, we also repurchased $290.6
million of shares during the first nine months. Finally, we had a successful
debt issuance of $850 million of senior notes at a weighted average rate of
1.6%, which lowered Carlisle's cost of debt and extended its weighted-average
With all of our businesses trending positively, and leveraging the clarity of
mission that Vision 2025 provides us, Carlisle is well positioned for continued
acceleration through the recovery and beyond.
Summary of Financial Results
                                                                        Three Months Ended                     Nine Months Ended
                                                                           September 30,                         September 30,
(in millions, except per share amounts)                               2021               2020               2021               2020
Revenues                                                          $ 1,315.6          $ 1,057.0          $ 3,434.3          $ 2,981.6
Operating income                                                  $   166.5

$ 154.8 $ 385.0 $ 376.5 Operating margin percentage

                                            12.7  %            14.6  %            11.2  %            12.6  %
Income from continuing operations                                 $   113.0 

$ 102.7 $ 256.2 $ 243.5 Income (loss) from discontinued operations

                        $    29.1 

$ (0.4) $ 37.4 $ (4.0) Diluted earnings per share attributable to common shares: Income from continuing operations

                                 $    2.12 

$ 1.88 $ 4.80 $ 4.38 Income (loss) from discontinued operations

                        $    0.55          $   (0.01)         $    0.70          $   (0.07)

Non-comparable items(1)                                           $    27.1          $     5.7          $    44.0          $    33.1

(1)Non-comparable items include items that, by their nature, tend to obscure the
Company's core operating results due to potential variability across periods
based on the timing, frequency and magnitude of such items. Refer to Non-GAAP
Financial Measures in this MD&A for a detailed reconciliation of these items.
Revenues increased in the third quarter and first nine months of 2021 primarily
reflecting higher volumes and price realization in our CCM and CFT segments,
contributions from the acquisition of Henry in the CCM segment and favorable
foreign currency impacts, partially offset by lower volumes in our CIT segment
in the nine-month period, which has been impacted by the prolonged aerospace
The decrease in operating margin percentage in the third quarter and first nine
months of 2021 primarily reflected raw material and wage inflation across all
segments. The decrease in operating income was partially offset by price
realization, higher volumes and savings from the Carlisle Operating System
Diluted earnings per share from continuing operations increased primarily due to
improved operating income performance ($0.16 per share in the third quarter of
2021 and $0.12 per share in the first nine months of 2021), a lower effective
tax rate ($0.03 per share in the third quarter of 2021 and $0.15 per share in
the first nine months of 2021), and reduced average shares outstanding ($0.06
per share in the third quarter of 2021 and $0.19 per share in the first nine
months of 2021) resulting from purchases under our share repurchase program.
We generated $283.9 million in operating cash flow in the first nine months of
2021, and utilized cash on hand and cash provided by operations to return
capital to shareholders through dividends and share repurchases, and to fund
capital expenditures.
Consolidated Results of Operations

© Edgar Online, source Glimpses

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