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

or

 

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

www.carlisle.com

(Exact name of registrant as specified in its charter)

(Address of principal executive offices, including zip code)

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $1 par value

CSL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

On April 21, 2023, there were 50,967,646 shares of the registrant's common stock, par value $1.00 per share, outstanding.

(1)Issuances and deferrals, net for stock-based compensation, reflects share activity related to option exercises, restricted and performance shares vested, and net issuances and deferrals associated with deferred compensation equity.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared by Carlisle Companies Incorporated (the "Company" or "Carlisle"). The accompanying unaudited Condensed Consolidated Financial Statements do not include all disclosures as required by accounting principles generally accepted in the United States of America ("United States" or "U.S."), and should be read in conjunction with the Company’s audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Annual Report on Form 10-K").

The accompanying unaudited Condensed Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S. and, of necessity, include some amounts that are based upon management estimates and judgments. The accompanying unaudited Condensed Consolidated Financial Statements include assets, liabilities, revenues and expenses of all majority-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation.

In the Company's opinion, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting solely of adjustments of a normal, recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented.

The Company reports its results of operations through the following four segments, each of which represents a reportable segment as follows:

Carlisle Construction Materials ("CCM")—this segment produces a complete line of premium single-ply roofing products and warranted roof systems and accessories for the commercial building industry, including ethylene propylene diene monomer ("EPDM"), thermoplastic polyolefin ("TPO") and polyvinyl chloride ("PVC") membrane, polyisocyanurate ("polyiso") insulation, and engineered metal roofing and wall panel systems for commercial and residential buildings.

Carlisle Weatherproofing Technologies ("CWT")—this segment produces building envelope solutions that effectively drive energy efficiency and sustainability in commercial and residential applications. Products include high-performance waterproofing and moisture protection products, protective roofing underlayments, fully integrated liquid and sheet applied air/vapor barriers, sealants/primers and flashing systems, roof coatings and mastics, spray polyurethane foam and coating systems for a wide variety of thermal protection applications and other premium polyurethane products, block-molded expanded polystyrene insulation, and engineered products for HVAC applications.

Carlisle Interconnect Technologies ("CIT")—this segment produces high-performance wire and cable, including optical fiber, for the commercial aerospace, military and defense electronics, medical device, industrial, and test and measurement markets. CIT's product portfolio also includes sensors, connectors, contacts, cable assemblies, complex harnesses, racks, trays, and installation kits, in addition to engineering and certification services. CIT also provides medical device products and solutions for several medical technology applications.

Carlisle Fluid Technologies ("CFT")—this segment produces highly engineered liquid, powder, sealants and adhesives finishing equipment and integrated system solutions for spraying, pumping, mixing, metering and curing of a variety of coatings used in the automotive manufacture, general industrial, protective coating, wood, specialty and automotive refinishing markets.

A summary of segment information follows:

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

On February 1, 2022, the Company acquired 100% of the equity of MBTechnology (“MBTech”), for consideration of $26.3 million, including $1.6 million of cash acquired and post-closing adjustments, which were finalized in the second quarter of 2022. MBTech is a manufacturer of energy-efficient roofing and underlayment systems for residential and commercial applications.

For the period from February 1, 2022 to March 31, 2022, the related product lines contributed revenues of $2.0 million and operating income of $0.1 million. The results of operations of MBTech are reported within the CWT segment.

Consideration of $12.5 million has been allocated to goodwill, none of which is deductible for tax purposes. All of the goodwill was preliminarily assigned to the CCM reporting unit, which was divided into four reporting units in 2022 with goodwill allocated to the new reporting units based on their relative fair values. Consideration of $7.9 million has been allocated to customer relationships, with a useful life of nine years, $3.4 million to plant, property and equipment, $2.8 million to inventory, $0.8 million to accounts receivable and $0.5 million to accounts payable.

On August 2, 2021, the Company completed the sale of the equity interests and assets comprising its former Carlisle Brake & Friction ("CBF") segment for gross proceeds of (i) $250 million at closing, subject to certain adjustments, and (ii) the right to receive up to an additional $125 million based on CBF's achievement of certain performance targets. On February 23, 2022, the Company received $125 million in cash for the full amount of the contingent consideration. The sale of CBF is consistent with the Company's optimization strategy, as laid out in Vision 2025.

A summary of cash flows from discontinued operations included in the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 follows:

(1)Represents repayments to the Carlisle cash pool for return of capital upon sale.

The Company’s restricted shares contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. The computation below of earnings per share excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator.

The computation below of earnings per share includes the income attributable to the vested and deferred restricted shares and restricted stock units in the numerator and includes the dilutive impact of those underlying shares in the denominator.

Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and performance share awards are included in the calculation of diluted earnings per share considering those are contingently issuable. Neither is considered to be a participating security as they do not contain non-forfeitable dividend rights.

Income from continuing operations and share data used in the basic and diluted earnings per share computations using the two-class method follows:

To calculate earnings per share for 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.

(1)Represents stock options excluded from the calculation of diluted earnings per share, as such options’ assumed proceeds upon exercise would result in the repurchase of more shares than the underlying award.

The Company receives payment at the inception of the contract for separately priced extended service warranties, and revenue is deferred and recognized on a straight-line basis over the life of the contracts. Remaining performance obligations for extended service warranties represent the transaction price for the remaining stand-ready obligation to perform warranty services.

A summary of estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2023, follows:

The Company has applied the practical expedient to not disclose information about remaining performance obligations that have original expected durations of one year or less.

Contract liabilities relate to payments received in advance of performance under a contract, primarily related to extended service warranties in the CCM and CWT segments, systems contracts in the CFT segment and highly customized product contracts in the CIT segment. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract. A summary of the change in contract liabilities for the three months ended March 31, follows:

Contract assets relate to the Company's right to payment for performance completed to date under a contract, primarily related to highly customized product contracts within the CIT and CFT segments. Accounts receivable are recorded when the right to payment becomes unconditional, which generally occurs over twelve months or less. A summary of the change in contract assets for the three months ended March 31, follows:

A summary of revenues disaggregated by major end-market industries and reconciliation of disaggregated revenue by segment follows:

A summary of revenues based on the country to which the product was delivered and reconciliation of disaggregated revenue by segment follows:

Stock-based compensation cost by award type follows:

The Company has undertaken operational restructuring and other cost reduction actions to streamline processes and manage costs throughout various departments. These actions resulted in exit, disposal and employee termination benefit costs, primarily resulting from planned reductions in workforce, facility consolidation and relocation, and lease termination costs. The primary actions are discussed below by operating segment.

During the first quarter of 2023, the Company initiated plans to exit its manufacturing operations in Lugano, Switzerland, and relocate the majority of those operations to its existing facilities in North America. The project is estimated to take fifteen to eighteen months to complete. During the three months ended March 31, 2023, exit and disposal costs totaled $0.5 million, primarily for employee termination benefit costs. Total exit and disposal costs are expected to approximate $7.0 million, with approximately $6.5 million costs remaining to be incurred, primarily in 2023.

The Company has substantially completed its plan to exit its manufacturing operations in Carlsbad, California, and relocate the majority of those operations to its existing facilities in North America for cumulative exit and disposal costs of $5.6 million. During the three months ended March 31, 2023, project costs totaled $1.1 million, primarily for relocation expenses and employee termination benefit costs.

The Company's exit and disposal costs by activity follows:

The Company's exit and disposal costs by segment follows:

The Company's exit and disposal costs by financial statement line item follows:

The Company's change in exit and disposal activities liability follows:

The liability of $0.9 million as of March 31, 2023, primarily relates to employee severance and benefit arrangements and is included in accrued and other current liabilities.

The effective income tax rate on continuing operations for the three months ended March 31, 2023, was 22.2%. The year-to-date provision for income taxes included taxes on earnings at an anticipated rate of 23.4% and a tax impact of $1.5 million of discrete activity primarily related to excess tax benefits from employee stock compensation.

The effective income tax rate on continuing operations for the three months ended March 31, 2022, was 23.7%.

The Company offers various standard warranty programs on its products, primarily for certain installed roofing systems, high-performance cables and assemblies and fluid technologies. The Company’s liability for such warranty programs is included in accrued and other current liabilities. The change in standard product warranty liabilities for the three months ended March 31, follows:

(1)The fair value is estimated based on current yield rates plus the Company’s estimated credit spread available for financings with similar terms and maturities. Based on these inputs, the debt instruments are classified as Level 2 in the fair value hierarchy.

During the three months ended March 31, 2023, there were no borrowings or repayments under the Company's Fourth Amended and Restated Credit Agreement (the "Facility"). As of March 31, 2023 and December 31, 2022, the Facility had no outstanding balance and $1.0 billion available for use.

Under the Company’s debt and credit facilities, the Company is required to meet various covenants and limitations, including limitations on certain leverage ratios, interest coverage and limits on outstanding debt balances held by certain subsidiaries. The Company was in compliance with all financial covenants and limitations as of March 31, 2023 and December 31, 2022.

During the normal course of business, the Company enters into commitments in the form of letters of credit and bank guarantees to provide its own financial and performance assurance to third parties. The Company has not issued any guarantees on behalf of any third parties. As of March 31, 2023 and December 31, 2022, the Company had $15.9 million and $15.8 million in letters of credit and bank guarantees outstanding, respectively. The Company has multiple arrangements to obtain letters of credit, which include an agreement with unspecified availability and separate agreements for up to $110.0 million in letters of credit, of which $94.1 million was available for use as of March 31, 2023.

The Company recognizes net periodic benefit cost based on the actuarial analysis performed at the previous year end, adjusted if certain significant events occur during the year. The components of net periodic benefit cost follows:

(1)Includes amortization of unrecognized actuarial loss and prior service credits and excludes provision for income tax of $(0.1) million and $(0.3) million for the three months ended March 31, 2023 and 2022, respectively.

The components of net periodic benefit cost, other than the service cost component, are included in other non-operating expense, net.

The Company uses foreign currency forward contracts to hedge a portion of its foreign currency exchange rate exposure to forecasted foreign currency denominated cash flows. These instruments are not held for speculative or trading purposes.

A summary of the Company's designated and non-designated hedges follows:

(1)The fair value of foreign currency forward contracts is included in other current assets (accrued and other current liabilities). The fair value was estimated using observable market inputs such as forward and spot prices of the underlying exchange rate pair. Based on these inputs, derivative assets and liabilities are classified as Level 2 in the fair value hierarchy.

For instruments that are designated and qualify as cash flow hedges, the Company had foreign currency forward contracts with maturities less than one year. The changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) and recognized in the same line item as the impact of the hedged item, revenues or cost of sales, when the underlying forecasted transaction impacts earnings. The change in accumulated other comprehensive loss related to foreign currency cash flow hedges was immaterial for the three months ended March 31, 2023 and 2022. Gains and losses on the contracts representing hedge components excluded from the assessment of hedge effectiveness are recognized in the same line item as the hedged item, revenues or cost of sales, currently.

For instruments that are not designated as a cash flow hedge, the Company had foreign exchange contracts with maturities less than one year. The unrealized gains and losses resulting from these contracts were immaterial for the three months ended March 31, 2023 and 2022, and are recognized in other non-operating expense, net and partially offset corresponding foreign exchange gains and losses on these balances.

The Company has established a Rabbi Trust to provide for a degree of financial security to cover its obligations under its deferred compensation plan. Contributions to the Rabbi Trust by the Company are made at the discretion of management and generally are made in cash and invested in money-market funds. The Company consolidates the Rabbi Trust and therefore includes the investments in its Condensed Consolidated Balance Sheets. As of March 31, 2023 and December 31, 2022, the Company had $5.0 million and $4.0 million of cash, respectively, and $10.5 million and $8.1 million of short-term investments, respectively. The short-term investments are classified as trading securities and are measured at fair value using quoted market prices in active markets (i.e., Level 1 measurements) with changes in fair value recorded in net income and the associated cash flows presented as operating cash flows.

In accordance with its investment policy, the Company invests its excess cash from time-to-time in investment grade bonds and other securities to achieve higher yields. As of March 31, 2023 and December 31, 2022, the Company had $19.5 million and $19.8 million of investment grade bonds, respectively. The investment grade bonds are classified as available-for-sale and measured at fair value using quoted market prices in active markets (i.e., Level 1 measurements) with changes in fair value recorded in accumulated comprehensive income (loss), until realized, and the associated cash flows presented as investing cash flows.

Other financial instruments include cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and long-term debt. The carrying value for cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses approximates fair value because of their short-term nature and generally negligible credit losses (refer to Note 12 for the fair value of long-term debt).

Over the years, the Company has been named as a defendant, along with numerous other defendants, in lawsuits in various courts in which plaintiffs have alleged injury due to exposure to asbestos-containing friction products produced and sold predominantly by the Company’s discontinued Motion Control business between the late-1940s and the mid-1980s and roofing products produced and sold by Henry Company LLC, which the Company acquired on September 1, 2021. The Company has been subject to liabilities for indemnity and defense costs associated with these lawsuits.

The Company has recorded a liability for estimated indemnity costs associated with pending and future asbestos claims. As of March 31, 2023, the Company believes that its accrual for these costs is not material to the Company's financial position, results of operations, or operating cash flows.

The Company recognizes expenses for defense costs associated with asbestos claims during the periods in which they are incurred. Refer to the 2022 Annual Report on Form 10-K for the Company's accounting policy related to litigation defense costs.

The Company currently maintains insurance coverage and is the beneficiary of other arrangements that provide coverage for asbestos-related claims and associated defense costs. The Company records the insurance coverage as a long-term receivable in an amount it reasonably estimates is probable of recovery for pending and future asbestos-related indemnity claims. Since the Company’s insurance policies and other arrangements contain various coverage exclusions, limits of coverage, cost-sharing obligations and self-insured retentions and may be subject to insurance coverage disputes, the Company may recognize expenses for indemnity and defense costs in particular periods if and when it becomes probable that such costs will not be covered by insurance.

The Company is also involved in various other legal actions and proceedings arising in the ordinary course of business. In the opinion of management, the ultimate outcomes of such actions and proceedings, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or operating cash flows.

Carlisle Companies Incorporated (“Carlisle”, the “Company”, “we”, “us” or “our”) is a leading manufacturer and supplier of innovative building envelope products and solutions for more energy efficient buildings. Through our building products businesses, Carlisle Construction Materials ("CCM") and Carlisle Weatherproofing Technologies ("CWT"), and family of leading brands, we deliver innovative, labor-reducing and environmentally responsible products and solutions to customers through the Carlisle Experience. Carlisle is committed to generating superior stockholder returns and maintaining a balanced capital deployment approach, including investments in our businesses, strategic acquisitions, share repurchases and continued dividend increases. We are also a leading provider of products to the aerospace, medical technologies and general industrial markets through our 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.

The first quarter of 2023 continued to reflect the destocking efforts by distributors and contractors in the building products industry. Additionally, inclement weather during the first quarter disrupted contractors' ability to complete jobs and to address pent-up demand.

Underlying demand in the non-residential construction markets remains strong, with positive indicators such as growing demand for energy-efficient solutions for buildings and a multi-year backlog of re-roofing projects. We remain mindful of growing concerns over continued Federal Bank interest rate hikes and the possibility of a recession in the back half of 2023. For CCM however, where approximately two-thirds of revenue is tied to non-discretionary re-roofing demand, we continue to expect healthy activity both for the remainder of this year and for the foreseeable future.

Notably, the anticipated seasonal ramp in construction activity for 2023 is underway, with sequentially improved orders and shipments in April. Given strong contractor backlogs, the visible pipeline is robust. The latest non-residential construction indicators such as the ABI, Dodge Momentum Index, and ABC Contractor Backlog continued to support our confidence in a solid demand backdrop this year. Additionally, constrained labor markets continue to limit contractors' ability to service and complete the backlog and growing demand for the market's energy-efficient building envelope solutions. As a result, backlogs continue to be strong, new products that remove labor from the job site are desired, and the value brought to the contractor through the Carlisle Experience continues to be in high demand.

Our teams remain committed to delivering on Vision 2025, which includes meeting the needs of our end users, distributors and contractors by providing industry-leading, energy-efficient solutions with the highest quality standards. We also remain committed to, and are increasing investment in, innovation that addresses contractor labor constraints that pressure their ability to service current demand effectively and cost efficiently. Recent product launches that reduce installation times for our customers include our 16-foot thermoplastic polyolefin (“TPO”) product that results in fewer seams, our ReadyFlash technology that improves flash-off time, and our self-adhering technology on 12' and 16' TPO. We aim to be our customers' manufacturer of choice, competing on and earning a fair price for the value we create. We are excited about our product launches this year that demonstrate both our commitment to helping facilitate ease of installation, as well as meeting the growing demand for "circular" products. As a reminder, circular products reduce waste to a minimum by being productively used and reused, as opposed to a single use product ultimately destined for the landfill.

Several months after announcing our commitment to achieve Net-Zero greenhouse gas ("GHG") emissions across our entire value chain by 2050, we continue to take important steps towards achieving this ambitious goal. For example, we have committed to purchasing several million pounds of bio-methylene diphenyl diisocyanate ("MDI") and bio-polyol, to test and develop bio-based raw materials into our production. We have also replaced approximately 25% of our sourced prime carbon black in certain products with recycled material. Lastly, we are piloting end-of-life management of tear-off ethylene propylene diene monomer (“EPDM”) where we collect and process it into consumer rubber products. These steps all further our progress towards our sustainability mission that is built on i) improving the energy efficiency of buildings, ii) reducing emissions in our value stream, and iii) reducing the volume of construction materials in landfills.

We remain committed to superior capital allocation, which includes returning capital to stockholders. In the first three months of 2023, we used cash generated from operations to return $38.9 million to stockholders in the form of cash dividends and repurchased $50.0 million of shares, adding to our cumulative share repurchases since 2017 of over $2.2 billion. As of March 31, 2023, we had 3.2 million shares available for repurchase under our share repurchase program. We invested $40.2 million into our businesses in the form of capital expenditures to drive innovation and the Carlisle Experience.

Exiting the first quarter, we remain confident in our ability to execute throughout all segments, with improving momentum in CCM's orders entering the spring and summer construction season, and with CWT, CIT and CFT all tracking on plan for 2023 with upside potential.

(1)Adjusted EBITDA and adjusted EBITDA margin are intended to provide investors and others with information about Carlisle's and our segments' performance without the effect of items that, by their nature, tend to obscure 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 more information about, and a detailed reconciliation of, these items.

Revenues decreased in the first quarter of 2023 primarily reflecting lower volumes in our construction market segments, CCM and CWT, as distributors continue destocking, which has been prolonged by inclement weather conditions, partially offset by higher volumes in the aerospace and medical end markets of our CIT segment and price realization across all segments.

The decrease in operating margin percentage in the first quarter of 2023 primarily reflected lower volumes, wage inflation and unfavorable product mix, partially offset by price realization and savings from the Carlisle Operating System ("COS").

Diluted earnings per share from continuing operations decreased in the first quarter of 2023 primarily reflecting lower operating income performance ($1.96 per share) partially offset by lower interest expense and higher interest income ($0.12 per share), reduced average shares outstanding ($0.04 per share) and a lower effective tax rate ($0.03 per share).

We generated $149.6 million in operating cash flow in the first three months of 2023 and utilized cash on hand and cash provided by operations to return capital to stockholders through share repurchases and dividends, and to fund capital expenditures.

Revenues decreased in the first quarter of 2023 primarily reflecting lower volumes in our construction market segments, CCM and CWT, as distributors continue destocking, which has been prolonged by inclement weather conditions, partially offset by price realization and higher volumes in the aerospace and medical end markets of our CIT segment and price realization across all segments.