SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13
[X] OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13
[ ] OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ____________________
Commission file number 1-9278
CARLISLE COMPANIES INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 31-1168055
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
250 SOUTH CLINTON STREET, SUITE 201, SYRACUSE, NEW YORK 13202
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(Address of principal executive offices) (Zip code)
315-474-2500
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(Registrant's telephone number, including area code)
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 |_|
Shares of common stock outstanding at November 1, 1999 30,128,916
Page 1 of 12
PART I. FINANCIAL INFORMATION
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three Months and Nine Months ended September 30, 1999 and 1998
(Dollars in thousands, except per share amounts)
(unaudited)
Three Months Nine Months
September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net Sales $ 400,855 $ 377,985 $ 1,216,692 $ 1,136,655
Cost and expenses:
Cost of goods sold 310,928 296,037 944,040 887,789
Selling and administrative 42,516 39,291 129,709 119,849
Research and development 3,908 4,146 11,886 12,224
Gain on divestiture of
business($16,600), -- -- 685 --
net of other charges ($15,900)
Other income & expense, net 1,513 3,573 3,694 6,724
----------- ----------- ----------- -----------
Earnings before interest & taxes 45,016 42,084 135,436 123,517
Interest, net (4,893) (5,213) (14,328) (14,675)
----------- ----------- ----------- -----------
Earnings before income taxes 40,123 36,871 121,108 108,842
Income taxes 15,447 14,551 46,626 42,992
----------- ----------- ----------- -----------
Net earnings $ 24,676 $ 22,320 $ 74,482 $ 65,850
=========== =========== =========== ===========
Average shares outstanding - basic 30,178 30,182 30,180 30,180
Basic earnings per share $ .82 $ .74 $ 2.47 $ 2.18
=========== =========== =========== ===========
Average shares outstanding - diluted 30,616 30,616 30,636 30,690
Diluted earnings per share $ .81 $ .73 $ 2.43 $ 2.15
=========== =========== =========== ===========
Dividends declared and
paid per share $ .18 $ .16 $ .50 $ .44
=========== =========== =========== ===========
See accompanying notes to interim financial statements.
Page 2 of 12
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998
(Dollars in thousands, except share amounts)
SEPTEMBER 30, Dec. 31,
1999 1998
----------- -----------
ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 10,721 $ 3,883
Receivables, less allowances of $4,359 in
1999 and $4,864 in 1998 258,772 225,348
Inventories 211,088 193,650
Deferred income taxes 20,319 26,040
Prepaid expenses and other 37,450 29,604
----------- -----------
TOTAL CURRENT ASSETS 538,350 478,525
----------- -----------
PROPERTY, PLANT AND EQUIPMENT 643,556 630,573
Less accumulated depreciation 301,167 275,804
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 342,389 354,769
----------- -----------
OTHER ASSETS
Patents and other intangibles 144,789 139,744
Investments and advances to affiliates 14,828 34,892
Receivables and other assets 7,227 14,922
Deferred Income Tax 25,930 --
----------- -----------
TOTAL OTHER ASSETS 192,774 189,558
----------- -----------
$ 1,073,513 $ 1,022,852
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt, including current maturities $ 3,120 $ 31,241
Accounts payable 109,368 101,859
Accrued expenses 140,987 122,237
----------- -----------
TOTAL CURRENT LIABILITIES 253,475 255,337
----------- -----------
LONG-TERM LIABILITIES
Long-term debt 281,533 273,521
Product warranties and other liabilities 74,594 87,089
----------- -----------
TOTAL LONG-TERM LIABILITIES 356,127 360,610
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value. Authorized
100,000,000 shares; issued 39,330,624 shares 39,331 39,331
Additional paid-in capital 4,862 4,201
Retained earnings 529,510 470,117
Cost of shares in treasury (1999 - 9,201,708
shares; 1998 - 9,148,198 shares) (109,792) (106,744)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 463,911 406,905
----------- -----------
$ 1,073,513 $ 1,022,852
=========== ===========
See accompanying notes to interim financial statements.
Page 3 of 12
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows
Nine Months ended September 30, 1999 and 1998
(Dollars in thousands)
(unaudited)
1999 1998
--------- ---------
OPERATING ACTIVITIES
Net earnings $ 74,482 $ 65,850
Reconciliation of net earnings to cash flows:
Depreciation 32,191 29,822
Amortization 5,223 5,511
(Gain)on sale of business, net of
other charges (685) --
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Current & long-term receivables (35,871) (52,616)
Inventories (6,111) (13,277)
Accounts payable & accrued expenses 663 16,885
Prepaid, deferred & current income taxes (20,868) 1,461
Long-term liabilities 1,309 (1,889)
Other 745 1,623
--------- ---------
Net cash provided by operating activities 51,078 53,370
--------- ---------
INVESTING ACTIVITIES
Capital expenditures (33,383) (72,720)
Acquisitions, net of cash (28,228) (19,974)
Sales of property, equipment & business 54,828 4,855
Other 127 (3,675)
--------- ---------
Net cash used in investing activities (6,656) (91,513)
--------- ---------
FINANCING ACTIVITIES
Net change in short-term borrowings (28,365) (13,458)
Proceeds from long-term debt 10,000 100,000
Reductions of long-term debt (1,744) (10,719)
Dividends (15,089) (13,278)
Purchases of treasury shares (2,386) (13,750)
--------- ---------
Net cash provided by financing activities (37,584) 48,795
--------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS 6,838 10,652
CASH AND CASH EQUIVALENTS
Beginning of period 3,883 1,732
--------- ---------
End of period $ 10,721 $ 12,384
========= =========
See accompanying notes to interim financial statements.
Page 4 of 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1999 and 1998
(1) The accompanying unaudited condensed consolidated financial statements
include the accounts of Carlisle Companies Incorporated and its
wholly-owned subsidiaries (together, the "Company"). Intercompany
transactions and balances have been eliminated in consolidation. The
unaudited condensed consolidated financial statements have been
prepared in accordance with Article 10-01 of Regulation S-X of the
Securities and Exchange Commission and, as such, do not include all
information required by generally accepted accounting principles.
However, in the opinion of the Company, these financial statements
contain all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial statements for
the interim period presented herein. Results of operations for the
three months and nine months ended September 30, 1999 and 1998 are not
necessarily indicative of the operating results for the full year.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
financial statements be read in conjunction with the financial
statements and notes included in the Company's 1998 Annual Report to
Stockholders.
(2) The components of inventories are as follows:
SEPTEMBER 30, Dec. 31,
1999 1998
-------- --------
(000)'S
First-in, first-out (FIFO) costs:
Finished goods $130,202 $113,852
Work in process 28,343 24,665
Raw materials 65,770 68,979
-------- --------
$224,315 $207,496
Excess of FIFO cost over Last-in,
First-out (LIFO) inventory value (13,227) (13,846)
-------- --------
LIFO inventory value $211,088 $193,650
======== ========
(3) Diluted earnings per share of common stock are based on the weighted
average number of shares outstanding of 30,615,712 for the three months
ended September 30, 1999 and 30,635,996 for the nine months ended
September 30, 1999 assuming the exercise of dilutive stock options.
(4) In January 1999, the Company announced the reduction of its interest in
its perishable cargo business, consisting of its container leasing joint
venture and container manufacturing operations. On January 28, 1999 the
Company sold 85% of its interest in its leasing joint venture. In
connection with the reduction in the Company's interest in the leasing
joint venture, the Company suspended operations at its container
manufacturing facility. As a result, the Company recognized a pretax
Page 5 of 12
gain of $16.6 million in the first quarter of 1999. These operations
are associated with the Company's All Other segment.
In conjunction with the implementation of the 1999 business plan, the
Company completed certain product line realignments, manufacturing
improvements and facility relocations and upgrades at its operating
businesses. As a result, in the first quarter of 1999, the Company
recognized a $15.9 million pretax charge related to certain assets that
were no longer required and were reallocated. Approximately 75% of this
charge related to machinery and equipment primarily associated with the
foodservice, roofing, tire and wheel and automotive components
manufacturing operations, with the remainder related to goodwill and
other intangible assets associated with acquisitions made in prior
years. The amount of the charge related to machinery and equipment was
determined to be the excess of the recorded values over the estimated
fair values. The fair values were determined using estimated market
values or projected future discounted cash flows, whichever was deemed
appropriate. The charge related to the intangible assets was determined
as the excess of the recorded value over the projected future discounted
cash flows.
The net effect of the above items is reflected under the caption "gain
on divestiture of business and other charges" on the accompanying
Consolidated Statement of Earnings.
(5) Financial information for operations by reportable business segment is
included in the following summary:
SEPTEMBER 1999 - YTD
SEGMENT INFORMATION
Sales Ebit Assets
---------- ---------- ----------
Construction Materials $ 301,366 $ 44,749 $ 207,242
Industrial Components 408,974 52,694 332,503
Automotive Components 237,148 16,070 223,136
All Other 269,204 30,301 237,850
Corporate/Eliminations *(8,378) 72,782
---------- ---------- ----------
$1,216,692 $ 135,436 $1,073,513
========== ========== ==========
Page 6 of 12
SEPTEMBER 1998 - YTD
SEGMENT INFORMATION
Sales EBIT Assets
----------- ----------- -----------
Construction Materials $ 270,965 $ 40,404 $ 227,349
Industrial Components 398,508 50,881 311,393
Automotive Components 196,970 12,243 209,980
All Other 270,212 27,130 249,228
Corporate/Eliminations (7,141) 9,655
----------- ----------- -----------
$ 1,136,655 $ 123,517 $ 1,007,605
=========== =========== ===========
Reconciliation of earnings before interest and income taxes to earnings before
income taxes:
1999 1998
-------- --------
Earnings before interest and income $135,436 $123,517
taxes
Investment Income 1,944 1,991
Interest expense 16,272 16,666
-------- --------
Earnings before income taxes $121,108 $108,842
======== ========
*In the first quarter of 1999, the gain on the divestiture of the Company's
perishable cargo business and charges related to certain assets were recorded at
the corporate level. See Note 4 in the Notes to Condensed Consolidated Financial
Statements.
Page 7 of 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Carlisle Companies Incorporated ("Carlisle" or the "Company") reported record
third quarter sales of $401 million, up 6% over 1998, and net earnings of $25
million or $.81 per share (diluted), an increase of 11% versus third quarter
1998. Increased earnings over 1998, in Construction Materials, Systems and
Equipment (included in General Industry) and Automotive Components were
partially offset by lower earnings in the Industrial Components segment,
resulting primarily from reduced demand for aircraft wire.
For the nine-month period ended September 30, 1999, sales rose 7% to $1.2
billion and net earnings increased 13%, to $74 million or $2.43 per share, over
the same period in 1998. The Automotive Components and Construction Materials
segments, and Carlisle Systems and Equipment were the leading contributors to
the sales gain. Carlisle Tire and Wheel, of the Industrial Components segment,
led the earnings increase with Carlisle SynTec (Construction Materials),
Carlisle Systems & Equipment (General Industry), and Carlisle Engineered
Products (Automotive Components) contributing to the positive results.
On a comparable basis, after eliminating the impact of the Perishable Cargo
business, which the Company exited in January 1999, third quarter sales and
earnings increased 12% and 16%, respectively, over the third quarter of 1998.
For the nine-month period ended September 30, 1999, comparable sales increased
11% and net earnings increased 16% over last year.
Construction Materials sales of $114 million is a 6% increase over 1998.
Earnings before interest and taxes ("EBIT") for this segment increased 16%.
Domestic roofing sales were up over 1998, with TPO and insulation product lines
contributing to the increase. Operating margins of 17% were higher than third
quarter 1998 due to improved performances at the insulation operation plus
warranty expense reduction as a result of favorable weather conditions and
improved technology. The operational improvements achieved in the insulation and
roofing businesses offset margin reductions due to product mix, raw material
price increases and competitive pricing. Also, during the quarter, the Company
recognized a gain on the sale of certain assets associated with its metal
roofing business, which was divested in 1997.
Industrial Components experienced a 5% increase in sales for the quarter while
EBIT declined 10% versus third quarter 1998. Operating margins were lower than
the same period in 1998, as a result of lower volumes at the Tensolite and
Industrial Brake and Friction operations, coupled with weaker market conditions
in lawn and garden. The aerospace wire business at Tensolite continues to be
impacted by inventory reductions at one of its customers. The heavy duty
friction operations' sales benefited from record truck build levels offset by
lower heavy-duty aftermarket sales, while the braking operations experienced
reduced demand from the mining and oil exploration industries.
Page 8 of 12
Automotive Components third quarter sales increased 20% over 1998 and EBIT more
than doubled for the same period versus 1998. Strong demand at the automotive
OEM assembly plants continued through the third quarter. The Company has made
strides in improving its earnings during the third quarter, by overcoming
operational inefficiencies it has experienced throughout the year. The auto
manufacturers and the U.A.W. have reached contract agreement, which removes a
major cause for uncertainty in this segment.
The General Industry (All Other) segment reported sales of $95 million, down
slightly versus 1998 third quarter. After eliminating the sales of the
Perishable Cargo business, sales of this segment were up 27% over the third
quarter of 1998 and EBIT increased 31%. The acquisition of Johnson Truck Bodies,
a manufacturer of home delivery grocery vehicles, in May of 1999, has
contributed favorably to this segment's results in both sales and earnings. The
Company's cheese systems operations, Scherping Systems, and Walker Stainless'
in-plant processing equipment operations produced stronger sales performances
over 1998 and have implemented operational improvements resulting in healthier
earnings at both companies. The Company's foodservice operations experienced a
strong sales quarter, and were able to capitalize on operational improvements to
increase earnings year over year. Trail King, the Company's specialized trailer
operation, posted favorable sales gains as highway spending continues.
The Letter of Intent providing for the merger of Titan International Inc. into
Carlisle expired on September 18, 1999. There have not been any meaningful
discussions between the parties since that date and none are planned.
Carlisle will continue its disciplined acquisition efforts, with a focus on
good candidates that will increase the value of a Carlisle shareholding, and
has redeployed its activities accordingly.
Cash generated from operations for the third quarter was $29 million, an
increase of $13 million over third quarter 1998. For the first nine months, cash
generated from operations was $51 million compared to $53 million for the same
period of 1998. The slight decrease is attributable to improved earnings, higher
depreciation and amortization, and the change in receivables, offset by the
payment of deferred taxes associated with the divestiture of the Perishable
Cargo business in the first quarter of 1999.
Carlisle's consolidated backlog of $218 million at September 30, 1999 is down
15% versus September 30, 1998. The majority of the unfavorable comparison
includes the effect of a major contract in 1998 at the now divested
Perishable Cargo business. On a comparable basis the decline was 4%. Stronger
backlog positions have been experienced at the Systems and Equipment
businesses with Scherping Systems, and the addition of Johnson Truck Bodies
showing the largest gains. Tensolite continues to be impacted by weak
aerospace wire purchases. In September, a moderate decline was encountered by
Carlisle Tire and Wheel in the lawn and garden market.
During the last several years, and in the normal course of business, Carlisle
has replaced a substantial portion of its older computer software
Page 9 of 12
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. At
this time, the Company has completed the assessment and remediation phases. The
authentication phase, which includes simulated testing in a Year 2000
environment, will continue throughout 1999. The estimated cost of the Company's
completed and remaining efforts is not expected to exceed $500,000.
Carlisle has a formal communication program with its significant suppliers and
large customers. As part of this program, Carlisle has, and will continue to (1)
evaluate the supplier's year 2000 compliance plans and state of readiness and
(2) determine whether a year 2000-related event will impede the ability of a
particular supplier to continue to provide goods and services. Contingency plans
have or will be adopted for any significant supplier that does not provide an
appropriate and timely response to Carlisle or if the results of a risk
assessment identify a business process at risk of a Year 2000 failure.
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.
Page 10 of 12
PART II. OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
(a) Exhibits applicable to the filing of this report are as follows:
(12) Ratio of Earnings to Fixed Charges.
(27) Financial Data Schedule as of September 30, 1999 and for the nine
months ended September 30, 1999.
(b) Report on Form 8-K:
No reports on Form 8-K were filed during the quarter for which this report
on Form 10-Q is filed.
Page 11 of 12
SIGNATURE
Pursuant to the requirements of the Securities and 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
Date NOVEMBER 12, 1999 By: /s/ JOHN S. BARSANTI
----------------------------
John S. Barsanti
Vice President,
and Chief Financial Officer
Page 12 of 12