Carlisle Companies Reports a Record Year
5 February 1999
Carlisle Companies Reports a Record Year
SYRACUSE, N.Y.--Feb. 4,1999--Carlisle Companies' Fourth Quarter Earnings
Conference Call is scheduled for 11:00 a.m., Eastern
Daylight Time, Thursday, February 4, 1999.
To participate, please dial 212-676-5370. A playback of
the Conference Call will be available from 5:00 p.m.
(EST) on February 4th until 5:00 p.m. (EST) on
February 5th by dialing 1-800-633-8284.
The reservation number is 3971724.
Carlisle Companies Incorporated reported record earnings of $84.9 million, or diluted earnings per share of $2.77, for its year ending December 31, 1998, an increase of 20 percent over 1997 earnings of $70.7 million, or diluted earnings per share of $2.28. Sales in 1998 increased 20 percent to $1.52 billion compared to $1.26 billion in 1997.
For the fourth quarter, Carlisle reported earnings of $19.0 million, or diluted earnings per share of $0.62, an increase of 15 percent over fourth quarter 1997 earnings of $16.7 million, or diluted earnings per share of $0.54. Sales in the fourth quarter were $380.8 million an increase of 19 percent over fourth quarter 1997 sales of $319.7 million.
Stephen P. Munn, Carlisle's Chairman and CEO, said, "1998 was another year in which Carlisle surpassed its targets for growth in both sales and earnings, setting new records for each. Our companies have developed consistent strategies to grow their businesses both internally and through acquisition. In 1998 our people continued to increase market shares, improve manufacturing processes and target new markets with expanded products to complement our core strengths. With a strong backlog, growing markets and a committed organization we look forward to continued success in 1999."
Carlisle is a diversified manufacturer of products serving construction materials, industrial components, automotive components and general industry markets.
FINANCIAL RESULTS
1998 1997 % Change
Fourth Quarter
Sales $ 380.8 $ 319.7 +19%
Net Earnings 19.0 16.7 +14%
Basic E.P.S. 0.63 0.56 +14%
Diluted E.P.S. 0.62 0.54 +15%
Twelve Months Ended December 31
Sales $1,517.5 $1,260.5 +20%
Net Earnings 84.9 70.7 +20%
Basic E.P.S. 2.81 2.34 +20%
Diluted E.P.S. 2.77 2.28 +20%
SEGMENT FINANCIAL DATA
Fourth Quarter
Sales 1998 1997 % Change
Construction Materials $100.5 $ 82.4 +22%
Industrial Components 112.3 98.0 +15%
Automotive Components 75.0 62.6 +20%
All Other 93.0 76.6 +21%
$380.8 $ 319.6 +19%
Earning before Interest and Taxes 1998 1997 % Change
Construction Materials $12.6 $12.4 +2%
Industrial Components 10.4 9.7 +7%
Automotive Components 5.4 4.1 +32%
All Other 11.0 8.7 +26%
$39.4 $34.9 +13%
Twelve Months Ended December 31, 1997
Sales 1998 1997 % Change
Construction Materials $ 371.5 $ 316.6 +17%
Industrial Components 510.8 396.9 +29%
Automotive Components 272.0 241.3 +13%
All Other 363.2 305.7 +19%
$1,517.5 $1,260.5 +20%
Earning before Interest and Taxes 1998 1997 % Change
Construction Materials $ 53.0 $ 49.1 +8%
Industrial Components 61.3 47.5 +29%
Automotive Components 17.6 18.6 -5%
All Other 38.2 30.1 +27%
$ 170.1 $ 145.3 +17%
Discussion of Results
Carlisle Companies Incorporated sales grew to $1.52 billion in
1998, up 20%, or $256.9 million, from 1997 sales of $1.26 billion.
This increase is primarily due to the expansion of product lines and
market shares of Carlisle's core businesses. While we continue to
integrate several small, complementary acquisitions made in 1997 and
1998, these companies accounted for less than 10% of this sales
increase.
In 1998, net earnings kept pace with these increased sales,
reaching $84.9 million, or $2.77 per share of common stock, a 20%
increase over 1997 net earnings of $70.7 million, or $2.28 per share.
In 1997, sales increased 24%, or $243.0 million, due to continued
growth in core businesses, as well as acquisitions made in 1997 and to
the full-year effect of acquisitions made in 1996. Net earnings
increased 27%, or $15.0 million, in 1997 reflecting both the increased
sales levels and cost reductions.
During 1998 we acquired three companies that fit well with our
existing businesses. These acquisitions include: (1) Vermont
Electromagnetics Corporation and (2) Quality Microwave Interconnects,
Inc., both of which are manufacturers of specialty cable assemblies
and connectors that will open new opportunities for the growth of our
wire and cable business, and (3) Industrial Tire Products, Inc., a
distributor of industrial and recreational tire and wheel assemblies,
which will help to extend our tire and wheel products to the
replacement market. Additionally, in January, 1998 we completed a
joint venture in the U.K. with Lander Plastics, a British manufacturer
of plastic automotive components, and the acquisition of Hardcast
Europe, a Dutch manufacturer of adhesive and sealant products for the
construction market.
In 1997 we completed a record number of acquisitions. These
acquisitions include several small bias-ply tire and wheel
manufacturing and distributing companies, Overland Brake Incorporated,
a small spring-brake manufacturing company, complementing our
heavy-duty friction products and Zimmerman Brush Co., a small,
privately owned manufacturer of brushes for the janitorial and
sanitation market.
Operating Segments
In accordance with the requirements of the recently issued
Statement of Financial Accounting Standards No. 131, we have recast
our businesses into three identifiable segments and a fourth
classification of All Other. The Construction Materials segment
consists of the manufacturing of membranes and accessories necessary
for rubber (EPDM) and plastic (TPO) roofing systems for
non-residential flat roofs. Also included in this segment is the
manufacture and distribution of coatings and waterproofing products
for construction markets. The Industrial Components segment includes
businesses that manufacture and distribute tire and wheel assemblies,
heavy duty friction and braking products and high-performance cable
and cable assemblies. The Automotive Components segment is engaged in
manufacturing highly engineered plastic and rubber components for Tier
I suppliers and other manufacturers in the automotive industry.
Several businesses, which altogether, have not met the guidelines to
be identified as a separate segment, have been aggregated under an All
Other category. Activities in this category include the manufacturing
and distributing of specialty trailers and dump bodies, stainless
steel in-plant processing equipment, institutional plastic foodservice
permanentware products, and the manufacturing and leasing of inter
modal perishable cargo shipping containers. Earnings before interest
and income taxes (EBIT) herein referred to as "Earnings", are used to
measure the profitability of the business segments. Following is a
general discussion and analysis of the 1998 and 1997 sales and
profitability of these business segments.
Construction Materials
Segment sales grew by 17% in 1998 to $371.5 million, an increase
of $54.9 million over 1997 sales of $316.6 million. This growth is due
to increasing market share, as well as product line extensions to
include insulation products. In 1997, segment sales declined 0.4% from
1996 sales of $318.0 million due to the effect of divesting our metal
roofing business offsetting slightly increased sales in the ongoing
business.
Earnings were up 8% in 1998 to $53.0 million, reflecting the
increased sales levels, partially offset by increased raw material
costs, competitive pricing and a change in product mix, which included
a higher level of lower margin insulation sales. The 1997 earnings of
$49.1 million in this segment were up 14.7% over 1996 earnings of
$42.8 million, reflecting improved margins and warranty results and
the elimination of losses due to the divestiture of the metal roofing
company.
Industrial Components
Segment sales reached $510.8 million in 1998, a 29%, or $113.8
million, increase over 1997 sales of $396.9 million. This increase is
primarily due to the internal growth of tire and wheel assemblies,
especially to the after market; the continued integration of tire and
wheel distribution companies acquired in 1997; increased shipments of
high-quality wire to aircraft manufacturers; and the acquisition of
two high-speed data cable and connector companies. Sales of heavy-duty
friction and braking products increased just 3% in 1998 after robust
gains in 1997. In 1997, sales in this segment climbed 24%, or $76.2
million over the 1996 sales of $320.7 million, reflecting increased
shipments of aircraft wire, increased market penetration of our tire
and wheel products as well as sales gains of heavy-duty friction
materials to the after-market.
Earnings increased 29%, or $13.8 million, to $61.3 million in
1998. This increase generally follows the increased level of segment
sales. In 1997 this segment earned $47.5 million, growing 22%, or $8.7
million, from the 1996 level of $38.8 million. This earnings growth is
consistent with the increase in sales, offset by costs associated with
integrating tire and wheel manufacturers and distributors acquired in
1996 and 1995.
Automotive Components
In 1998 segment sales jumped 13% to $272.0 million, a $30.7
million increase over 1997 sales of $241.3 million. This increase is
due to internal growth, which was dampened by the General Motors
strike in the summer months. The dramatic increase in 1997 sales of
94%, from $124.1 million, reflects the full-year consolidation of The
Engineered Products Division of Johnson Controls, acquired in October
1996, to form Carlisle Engineered Products.
Earnings of $17.6 million in this segment did not keep pace with
sales, falling 5% from the 1997 level of $18.6 million. This decline
is due primarily to inefficiencies generated by the rapid ramp-up of
production for new programs interrupted by the General Motors strike.
Earnings grew 98% in 1997 following the increased sales level in that
year.
All Other Category
Aggregate sales of companies included in the all other category
grew 19%, or $57.5 million, to $363.2 million in 1998. This increase
is primarily due to growth in the specialty trailers business and the
manufacturing of refrigerated containers of our perishable cargo
business. Plastic permanentware products, which are manufactured and
distributed to the institutional foodservice industry, contributed to
this growth, growing its sales by 7% in 1998. In 1997 total sales in
this category increased 20% to $305.7 million related to increased
sales of specialty trailers to construction markets, the full year
effect of acquisitions in the in-plant processing and ceramic
tableware manufacturing businesses made in 1996 and increased direct
sales of manufactured refrigerated containers.
Aggregate earnings of the businesses in this category grew 27% to
$38.2 million in 1998. This growth is due to general increased sales
levels, improved manufacturing efficiencies and increased share of the
leasing market in our perishable cargo business. In 1997 the earnings
of these businesses grew 48% to $30.1 million. This increase is due to
the increased level of sales and increased margins due to improved
manufacturing processes in the specialty trailer business and,
especially in the refrigerated container business. In January, 1999 we
announced the suspension of our container manufacturing operations in
Green Cove Springs, Florida and the sale, to our partner, of the major
portion of our interest in Carlisle Leasing International Company,
significantly reducing our activity in the refrigerated container
business.
Financial Results
-- Gross margin, expressed as a percent of sales, represents the
difference between net sales and cost of goods sold. These
margins declined from 23.4% of sales in 1996 to 22.7% in 1997 and
21.6% in 1998. This decline largely reflects the competitive
marketplace and changing mix in Carlisle?s total sales. In 1998,
operations with lower gross margins, but also with lower
corresponding selling, general and administrative costs,
represent greater proportions of total Carlisle sales.
-- Selling and administrative costs, expressed as a percent of
sales, declined from 12.6% in 1996 to 11.4% in 1997 and 10.6% in
1998 reflecting both disciplined cost control throughout all
operations and the increasing proportion of activities with lower
cost structures in Carlisle's overall business.
-- Total costs, which include raw material, manufacturing, selling,
general and administrative costs, expressed as a percentage of
total sales, remain fairly consistent with 1997 levels,
increasing slightly in 1998 to 90.0% of sales, up from 89.9% of
sales in 1997. Improvements in total costs, evident throughout
Carlisle, were offset by the impact of the GM strike and the
change in product mix in the construction materials operations.
The 1997 decline from 1996's level of 90.5% percent of sales was
due to improved purchasing, manufacturing and distribution of
products throughout all Carlisle operations.
-- Interest expense increased to $22.7 million in 1998 from $16.5
million in 1997 and $9.1 million in 1996, due to the increasing
level of debt used to finance planned capital expenditures and
acquisitions, amid slightly lower overall interest rates.
-- Other, net increased to $8.4 million in 1998 due to one-time
gains recognized on the sales of various assets, as well as
overall improvements in earnings of equity investments.
-- Income taxes, for financial reporting purposes, have remained
constant at an effective rate of 39.5% of earnings before tax in
1998, 1997 and 1996, generally reflecting stable Federal and
state tax rates. Taxes are discussed more completely in the Notes
to Consolidated Financial Statements.
-- Receivables were $225.3 million, an increase of 21.9% over the
1997 level of $184.8 million. The high level of December sales
throughout most of Carlisle's businesses drives this increase.
The 1997 level of receivables represents a 16.6% increase over
1996, and is primarily attributable to a higher level of sales,
partially offset by an increasing portion of sales from
businesses that require a lower investment in receivables, and an
ongoing effort to manage receivables at all operations.
-- Inventories, valued primarily by the last-in, first-out (LIFO)
method, were $193.6 million at year-end 1998, a 7.4% increase
over the 1997 year-end level of $180.3 million. This modest
increase is the result of increased capacity at most operations,
partially offset by a renewed Company-wide focus on inventory
management. The year-end 1997 inventory level increased $43.2
million over 1996 levels, or 31.5%, due primarily to acquisitions
made during the year, normal seasonal buildup, strong demand and
backlogs at most operations.
-- Capital expenditures totaled $96.0 million in 1998, a significant
increase over the 1997 level of $59.5 million. This increase is
primarily attributable to investments in injection-molding and
blow-molding equipment to meet growth opportunities in Carlisle?s
automotive components operation. Additionally, other significant
projects in 1998 include expanded warehousing and distribution
facilities for foodservice products, finished specialty tire and
wheel assemblies and EPDM roofing products, increased production
capacity of specialty tire and wheel assemblies, specialty
trailer products, Tufflite wire and high-speed data wire
and cable assemblies, and plant and equipment to manufacture
insulation and TPO roofing membranes. In 1997, the major projects
include injection and blow-molding equipment, plant and equipment
to produce TPO roofing membrane, warehousing for specialty tire
and wheel assemblies and EPDM roofing membranes, increased
capacity to produce Tufflite wire and in-plant processing
equipment for the food and pharmaceutical industries.
Liquidity, Capital Resources and Environmental
Cash flows provided by operating activities rose to $97.6 million
in 1998, from $83.0 million in 1997. This increase is primarily due to
increases in net earnings and depreciation and amortization charges to
earnings slightly offset by higher working capital levels. Cash flows
from operating activities were $86.0 million in 1996. Cash used in
investing activities was $133.8 million; an increase from the 1997
level of $93.2 million, resulting from the increased level of capital
expenditures and equity investments, slightly offset by lower
acquisition spending. In 1996, the cash used in investing activities
was $165.4 million, which includes $133.7 million of acquisition
expenditures. The net cash provided by financing activities in 1998
was $38.3 million, which reflects the net increase in debt, after the
early payment of higher cost debt, dividend payments and stock
repurchases. The net cash provided by financing activities in 1997 was
essentially due to increases in debt offset by dividend payments and
stock repurchases.
Carlisle has a $125.0 million revolving credit facility available
for acquisitions and general corporate purposes. In May 1998, Carlisle
issued to the public $100.0 million of ten-year bonds at a rate of
6.70%. The net proceeds from these bonds were used to repay amounts
outstanding under the revolving credit facility and to fund other
needs throughout 1998. The Company's primary sources of liquidity and
capital are cash flows from operations and borrowing capacity.
Carlisle continues to maintain substantial flexibility to meet
anticipated needs for liquidity and capital investment opportunities.
Carlisle management recognizes the importance of the Company?s
responsibilities toward matters of environmental concern. Programs are
in place to monitor and test facilities and surrounding environments
and, where practical, to recycle materials. Carlisle has not incurred
any material charges relating to environmental matters in 1998 or in
prior years, and none are currently anticipated.
Year 2000
During the last several years, and in the normal course of
business, the Company has replaced a substantial portion of its older
computer software and systems with new systems that are Year 2000
compliant. With respect to the remaining information systems, as well
as the Company's embedded technology, the Company has adopted a
program (involving both internal personnel and third-party
consultants) of ( i ) assessment, (ii) remediation, and (iii)
authentication. As of this filing, the Company has substantially
completed the assessment phase and is pursuing appropriate remedial
action for the systems determined to be non-compliant. The
authentication phase includes simulated testing in a Year 2000
environment. The estimated cost of the Company's completed and
remaining efforts is not expected to exceed $500,000. The Company also
has a formal communication process with its significant suppliers and
large customers and once the assessment phase is completed, the
Company will determine what remedial action should be taken (including
contingency plans).
The Company has completed the remediation phase of its program
throughout most of its operations, with the remaining operations
expected to be completed by mid-1999, and the authentication phase
continuing throughout 1999. The Company believes that upon completion
of the program, the Year 2000 issue will not pose a significant
operational problem for its computer systems. However, there can be no
guarantee that the failure of third parties to become Year 2000-ready
would not have a material adverse effect on the Company's financial
condition or operations.
Backlog and Future Outlook
Backlog was $262.1 million at December 31, 1998 compared to
$281.6 million in 1997. Notwithstanding stronger positions at all
major operations within the Company, and especially in the automotive
components operation, our backlog decreased 7% due to an unusually
high backlog, associated with a large one-time contract, at the
container manufacturing operation, at December 31, 1997. Excluding the
container contract, backlog in the Company is up a healthy 14%.
Our companies continue to implement consistent strategies to grow
their businesses both internally and through acquisition. In 1998,
Carlisle increased market shares, improved manufacturing processes and
targeted new markets with expanded products to complement the
Company's strengths. As 1998 closes, we are optimistic about the
opportunities waiting for us in 1999. With a strong backlog position,
growing markets and a committed organization, we look forward to
continued success in 1999.
CONDENSED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands, except per share data; unaudited)
BALANCE SHEET
December 31
Assets 1998 1997
---------- ----------
Cash and cash equivalents $ 3,883 $ 1,732
Receivables 225,348 184,796
Inventories 193,650 180,331
Deferred income taxes 26,040 28,462
Prepaid expenses and other 29,604 22,212
---------- ----------
Total current assets 478,525 417,533
Plant and equipment, net 354,769 294,165
Other assets 190,365 149,518
---------- ----------
$1,023,659 $ 861,216
========== ==========
Liabilities and Equity
Short-term debt, including
current maturities $ 31,241 $ 24,332
Accounts payable 101,859 75,936
Accrued expenses 123,044 125,815
---------- ----------
Total current liabilities 256,144 226,083
Long-term debt 273,521 209,642
Other liabilities 87,089 76,655
Shareholders' equity 406,905 348,836
---------- ----------
$ 1,023,659 $ 861,216
========== ==========
INCOME STATEMENT
(Amounts in thousands, except per share data; unaudited)
Fourth Quarter Twelve Months Ended Dec. 31
% %
1998 1997 Change 1998 1997 Change
Net Sales $380,839 $319,652 19.1% $1,517,494 $1,260,550 20.4%
Cost of goods
sold 301,590 248,584 21.3% 1,189,379 974,089 22.1%
Sell and
admini-
strative
expenses 40,517 37,435 8.2% 160,366 143,246 12.0%
Research and
development
expenses 3,954 4,118 -4.0% 16,178 15,824 2.2%
Operating
earnings 34,778 29,515 17.8% 151,571 127,391 19.0%
Interest
and other
expense, net 3,351 2,020 65.9% 11,302 10,607 6.6%
Earnings
before
income taxes 31,427 27,495 14.3% 140,269 116,784 20.1%
Income taxes 12,410 10,748 15.5% 55,403 46,118 20.1%
Net earnings $19,017 $16,747 13.6% $84,866 $70,666 20.1%
Basic
earnings
per share $0.63 $0.56 12.5% $2.81 $2.34 20.1%
Diluted
earnings
per share $0.62 $0.54 14.8% $2.77 $2.28 21.5%
Dividends $4,827 $4,221 $18,105 $15,868
Per share $0.16 $0.14 14.3% $0.60 $0.525 14.3%
Average
shares
outstanding
-basic 30,178 30,160 30,179 30,235
Average
shares
outstanding
-diluted 30,625 31,027 30,674 31,025
CASH FLOWS
(Amounts in thousands, except per share data; unaudited)
Twelve Months
1998 1997
Operating Activities
Net earnings $ 84,866 $ 70,666
Reconciliation of net
earnings to cash flows:
Depreciation and amortization 45,221 38,755
Working capital (30,406) (27,366)
Other (2,070) 931
97,611 82,986
Investing Activities
Capital expenditures (95,970) (59,531)
Acquisitions, net of cash (31,577) (45,380)
Sales of property, equipment
and businesses 11,344 15,815
Other (17,568) (4,090)
(133,771) (93,186)
Financing Activities
Net proceeds from
short-term debt 15,827 13,458
Proceeds from long-term debt 104,235 150,000
Reductions of long-term debt (49,274) (125,860)
Dividends (18,105) (15,868)
Purchases of treasury shares (14,372) (18,110)
38,311 3,620
Change in cash and cash
equivalents 2,151 (6,580)
Cash and cash equivalents
Beginning of period 1,732 8,312
End of period $ 3,883 $ 1,732