SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001
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
(Exact name of registrant as specified in its charter)
DELAWARE 31-1168055
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
<Table>
Brixham Green One, 15800 John J. Delaney Drive, Charlotte, NC 28277 704-752-1100
(Address of principal executive office, including zip code) (Telephone Number)
</Table>
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 August 1, 2001 30,260,245.
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CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three Months and Six Months ended June 30, 2001 and 2000
(dollars in thousands, except per share amounts)
(unaudited)
<Table>
<Caption>
Three Months Six Months
June 30, June 30,
2001 2000 2001 2000
--------- --------- --------- ---------
Net sales $ 490,433 $ 479,430 $ 953,591 $ 913,448
Cost and expenses:
Cost of goods sold 399,790 371,894 778,336 708,422
Selling and administrative expenses 52,521 46,526 104,034 95,449
Research and development expenses 4,467 4,075 8,472 8,166
Restructuring charges and other -- -- 37,694 --
Other (income) & expense (246) (717) (1,090) (1,906)
--------- --------- --------- ---------
Earnings before interest & income taxes 33,901 57,652 26,145 103,317
Interest expense, net 7,898 6,989 16,112 12,167
--------- --------- --------- ---------
Earnings before income taxes 26,003 50,663 10,033 91,150
Income taxes 9,411 18,723 3,630 33,750
--------- --------- --------- ---------
Net earnings $ 16,592 $ 31,940 $ 6,403 $ 57,400
========= ========= ========= =========
Average shares outstanding - basic 30,262 30,255 30,259 30,223
Basic earnings per share $ 0.55 $ 1.06 $ 0.21 $ 1.90
--------- --------- --------- ---------
Average shares outstanding - diluted 30,494 30,615 30,499 30,592
Diluted earnings per share $ 0.54 $ 1.04 $ 0.21 $ 1.87
--------- --------- --------- ---------
Dividends declared and paid per share $ 0.20 $ 0.18 $ 0.40 $ 0.36
--------- --------- --------- ---------
</Table>
See accompanying notes to interim financial statements.
Page 2 of 12
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CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2001 and December 31, 2000
(Dollars in thousands, except per share data)
<Table>
<Caption>
JUNE 30, 2001 Dec. 31, 2000
------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,225 $ 8,967
Receivables, less allowances of $6,161 in 2001 and $5,688 in 2000 285,622 213,656
Inventories (Note 2) 247,489 277,455
Deferred income taxes 20,195 22,344
Prepaid expenses and other 59,123 54,055
----------- -----------
TOTAL CURRENT ASSETS 621,654 576,477
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 397,579 402,614
----------- -----------
OTHER ASSETS
Patents, goodwill and other intangibles 275,966 251,670
Investments and advances to affiliates 68,782 66,350
Receivables and other assets 22,646 8,568
----------- -----------
TOTAL OTHER ASSETS 367,394 326,588
----------- -----------
$ 1,386,627 $ 1,305,679
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt, including current maturities $ 206,480 $ 173,762
Accounts payable 139,114 108,484
Accrued expenses 150,153 117,702
----------- -----------
TOTAL CURRENT LIABILITIES 495,747 399,948
----------- -----------
LONG-TERM LIABILITIES
Long-term debt 283,199 281,864
Product warranties 70,531 72,789
Other liabilities 2,176 3,199
----------- -----------
TOTAL LONG-TERM LIABILITIES 355,906 357,852
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value. Authorized and unissued 5,000,000 shares
Common stock, $1 par value. Authorized 100,000,000 shares; issued 39,330,624 39,331 39,331
Additional paid-in capital 11,027 10,268
Cumulative translation adjustment (8,426) (4,624)
Retained earnings 612,892 618,595
Cost of shares in treasury - 9,070,621 shares in 2001 and 9,079,356 shares in 2000 (119,850) (115,691)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 534,974 547,879
----------- -----------
$ 1,386,627 $ 1,305,679
=========== ===========
</Table>
See accompanying notes to interim financial statements.
Page 3 of 12
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CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows
Six Months Ended June 30, 2001 and 2000
(Dollars in thousands)
(unaudited)
<Table>
<Caption>
2001 2000
-------- ---------
OPERATING ACTIVITIES
Net earnings $ 6,403 $ 57,400
Reconciliation of net earnings to cash flows:
Depreciation 28,467 25,065
Amortization 7,630 4,852
Write-down of machinery, equipment, inventory and goodwill 29,525 --
Changes in assets and liabilities, excluding effects of
acquisitions and divestitures:
Current and long-term receivables (66,025) (21,234)
Inventories 32,502 (10,463)
Accounts payable and accrued expenses 21,059 586
Prepaid, deferred and current income taxes 2,878 6,890
Long-term liabilities (2,953) (6,350)
Other (3,365) (923)
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 56,121 55,823
-------- ---------
INVESTING ACTIVITIES
Capital expenditures (36,955) (26,451)
Acquisitions, net of cash (37,934) (129,619)
Proceeds from sale of property, equipment and business 6,635 32
Other (4,699) 4,463
-------- ---------
NET CASH USED IN INVESTING ACTIVITIES (72,953) (151,575)
-------- ---------
FINANCING ACTIVITIES
Net change in short-term debt 32,718 109,428
Proceeds from long-term debt -- 0
Reductions of long-term debt (122) (1,885)
Dividends (12,106) (10,889)
Purchases of treasury shares (3,400) (3,491)
-------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 17,090 93,163
-------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS 258 (2,589)
CASH AND CASH EQUIVALENTS
Beginning of period 8,967 10,417
-------- ---------
End of period $ 9,225 $ 7,828
======== =========
</Table>
See accompanying notes to interim financial statements.
Page 4 of 12
<Page>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 2001 and 2000
(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 six months ended June 30,
2001 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 2000 Annual Report to Stockholders and 2000 Form
10-K.
(2) The components of inventories are as follows:
<Table>
<Caption>
JUNE 30, Dec. 31,
2001 2000
--------- ---------
(000)'S
First-in, first-out (FIFO) costs:
Finished goods $ 153,604 $ 175,861
Work in process 28,030 31,687
Raw materials 79,872 82,694
--------- ---------
$ 261,506 $ 290,242
Excess of FIFO cost over Last-in,
First-out (LIFO) inventory value (14,017) (12,787)
--------- ---------
LIFO inventory value $ 247,489 $ 277,455
========= =========
</Table>
(3) On June 29, 2001, upon expiration of its $200 million 364-Day Revolving
Credit Facility, the Company renewed the 364-Day facility and increased
the amount available to $225 million.
(4) The Company has recently completed several acquisitions and has
tentatively considered the carrying value of the acquired assets to
approximate their fair value, with all of the excess of those acquisition
costs being attributable to goodwill. The Company is in the process of
fully evaluating the assets acquired and, as a result, the purchase price
allocation among the tangible and intangible assets acquired and their
useful lives may change.
(5) Diluted earnings per share of common stock are based on the weighted
average number of shares outstanding of 30,494,023 for the three months
ended June 30, 2001 and 30,499,166 for the six months ended June 30, 2001,
assuming the exercise of dilutive stock options.
Page 5 of 12
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(6) RECENT ACCOUNTING STANDARDS -
Effective January 1, 2001, the Company implemented SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This
statement standardizes the accounting for derivatives and hedging
activities and requires that all derivatives be recognized in the
statement of financial position as either assets or liabilities at fair
value. Changes in the fair value of derivatives that do not meet the hedge
accounting criteria are to be reported in earnings. Implementation of this
pronouncement did not have a material effect since the Company has not
utilized derivative financial instruments or entered into hedging
transactions.
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Standards (SFAS) Number 141, "Business
Combinations" which establishes that all business combinations be
accounted for by the purchase method of accounting and establishes new
standards for recognizing goodwill and intangible assets. Under the
provisions of this pronouncement, an intangible asset is recognized apart
from goodwill if it arises from contractual or other legal rights or if it
is separable. The Statement applies to all business combinations initiated
after June 30, 2001 and to all business combinations accounted for by the
purchase method of accounting for which the acquisition date is July 1,
2001 or later. Additionally, this Statement requires that the provisions
regarding the recognition of goodwill and intangibles under SFAS 142 be
applied to its business combinations accounted for by the purchase method
of accounting for which the acquisition date was prior to July 1, 2001.
In June 2001, the FASB also issued SFAS 142, "Goodwill and Other
Intangible Assets" which establishes new standards for how goodwill and
other intangible assets are to be accounted for subsequent to their
acquisition. This statement must be adopted by the company January 1,
2002. Under this statement, goodwill is classified as an infinite-lived
asset and is no longer subject to amortization but rather will be
evaluated on at least an annual basis for impairment based on fair-value.
To comply with the provisions of this statement, the Company is required
to reassess the useful lives of its intangible assets acquired on or
before June 30, 2001. The Company will also be required to perform
impairment tests on all goodwill recorded as of January 1, 2002 and record
any impairment charges by December 31, 2002. Additionally, in the initial
period of adoption and in each subsequent period thereafter until all
periods presented are consistent with the provisions of this
pronouncement, the Company is required to present adjusted net income for
prior periods. The Company is currently evaluating what impact SFAS 141
and SFAS 142 will have on its results of operations.
(7) In the first quarter of 2001, the Company recorded a restructuring charge
of $37.7 million ($24.0 million after tax or $0.79 per diluted share)
primarily composed of costs to exit and realign facilities that have
under-performed in the automotive components and transportation
businesses. Included in this total are facility closures and write-downs
of property, plant and equipment, inventory and goodwill of $29.5 million
and severance and other employee costs of $8.2 million. As of June 30,
2001, payments of $0.9 million have been made for these charges. The
Company anticipates that the remaining costs and actions required to exit
and realign these operations will be completed by the end of the first
quarter of 2002.
For facilities to be closed, the tangible assets to be disposed of have
been written down to their estimated fair value, less cost of disposal.
All intangible assets associated with the facility closures have been
evaluated and the carrying value of goodwill adjusted if necessary. The
carrying value of intangible assets was evaluated based upon expected
future operating cash
Page 6 of 12
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flows. Considerable management judgment is necessary to estimate fair
value, accordingly, actual results could vary significantly from such
estimates. The restructuring initiative provides for a reduction of
approximately 980 employees related to position eliminations from the
facility closures and streamlining of operations. As of June 30, 2001,
approximately 40% of these reductions have been made.
(8) Financial information for operations by reportable business segment is
included in the following summary:
<Table>
<Caption>
JUNE 2001 - YTD
SEGMENT INFORMATION TABLE TOTAL
IN THOUSANDS SALES EBIT ASSETS
-------- ---------- ----------
Construction materials $221,527 $ 26,431 $ 307,664
Industrial components 360,417 29,908 529,523
Automotive components 140,193 7,374 135,101
General Industry (All other) 231,454 8,263 365,500
Corporate -- *(45,831) 48,839
-------- ---------- ----------
$953,591 $ 26,145 $1,386,627
-------- ---------- ----------
<Caption>
JUNE 2000 - YTD
SEGMENT INFORMATION TABLE TOTAL
IN THOUSANDS SALES EBIT ASSETS
-------- ---------- ----------
Construction materials $188,397 $ 25,009 $ 240,540
Industrial components 346,935 50,792 465,409
Automotive components 164,472 14,178 179,064
General Industry (All other) 213,644 18,922 312,020
Corporate -- (5,584) 52,525
-------- ----------- ----------
$913,448 $ 103,317 $1,249,558
-------- ----------- ----------
</Table>
*In the first quarter of 2001, the restructuring charges were recorded at
the corporate level. See Note 7 in the Notes to Condensed Consolidated
Financial Statements.
Page 7 of 12
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Carlisle Companies Incorporated ("Carlisle" or the "Company") reported record
sales of $490.4 million, up 2% over 2000. Net earnings of $16.6 million or $0.54
per share (diluted), compared to $1.04 per share in the second quarter 2000.
Second quarter sales were driven by increased volume in the Construction
Materials segment and growth through acquisition in the General Industry
segment. The reduction in earnings is primarily attributable to the continued
decline in demand at operations serving transportation, telecommunications, and
outdoor power equipment markets. As the slow market conditions experienced in
the beginning of the year continued into the second quarter, Carlisle management
reduced production at several manufacturing operations in order to control
inventory levels. Diminished absorption of fixed costs on lower production,
continued pricing pressures to maintain market share, and higher utility and raw
material costs were the primary factors responsible for the lower gross margin.
Manufacturing costs continued to receive the utmost attention and cost reduction
programs continued. However, the favorable impact of these initiatives was more
than offset by lower production levels. Acquisitions made in the last twelve
months contributed $27 million of sales growth and $.4 million of earnings.
Net sales in the first half of 2001 were $953.6 million, a 4% increase over
2000. Current year to date net earnings of $6.4 million or $0.21 per share,
include the $24.0 million or $0.79 per share, after tax restructuring charge
recorded in the first quarter. After factoring out the effect of the
restructuring charge, net earnings from operations were $30.4 million or $1.00
per share. This result compares to $1.87 per share over the same period in 2000.
Construction Materials sales of $130 million in the second quarter increased 29%
over 2000 second quarter sales of $101 million. The increase was primarily in
the domestic roofing market on higher shipments of rubber membrane and
accessories, thermoplastic polyolefin (TPO) roofing membrane, and insulation
shipments. Although operating earnings improved 9% over last year the increase
did not keep pace with sales. Steps implemented in 2000 to reduce selling and
administrative costs had a positive impact on current year operating costs, but
did not offset the market pressures on selling prices, and increased raw
material costs. Comparative results were also impacted by stronger sales of
lower margin products.
Industrial Component sales decreased 8% from the second quarter 2000 with
operating earnings down 58%. Most of the change was the result of lower sales
and earnings at Carlisle Tire & Wheel Company. Shipments to original equipment
customers were significantly off when compared to a year ago, particularly in
the lawn and garden markets. As a result of the sharp decline in orders from
these customers, CT&W reduced production throughout many of its operations. In
addition, competitive pricing pressures in other markets, and rising energy and
raw material costs negatively impacted operating earnings. Carlisle Industrial
Brake & Friction and Motion Control also reported lower sales and earnings. The
market softness experienced during the first quarter in the heavy duty truck,
heavy construction and mining equipment markets continued into the second
quarter. Sales at Tensolite were up in the second quarter as a result of the
acquisition of UniTrek, in July 2000, and Connecting Devices, in March of this
year. Tensolite earnings continued to be negatively impacted by softness in the
telecommunications market.
Automotive Components sales for the quarter were down 12%, which reflect lower
automotive build levels. Operating earnings of $4.2 million, decreased 39% as
compared to the same period last year as production levels were adjusted to
coincide with softer demand. The benefits of reduced overhead and labor costs,
as a result of the restructuring charge recorded in the first quarter, were more
than offset by the under absorption of fixed costs due to lower production
levels.
Page 8 of 12
<Page>
General Industry sales of $121 million were up 6% over the second quarter 2000,
while operating earnings were down 55%. Reduced production volume at most of the
operations in this business segment was the primary factor behind the
deterioration in earnings. Excluding the contribution of acquisitions,
Transportation Products net sales were below the second quarter 2000, and
earnings declined due to competitive pricing, unabsorbed fixed costs associated
with lower production levels, and increased utility costs. Carlisle FoodService
sales and earnings were down from last year as consumer discretionary spending
continued to be limited due to the uncertainty in the economy. Lower sales,
coupled with production cutbacks, are the primary factors causing the decrease
in earnings. Sales at Carlisle Systems & Equipment increased primarily as a
result of acquisitions completed over the last nine months. Earnings in this
business have been negatively impacted by depressed conditions in the perishable
food delivery markets served by Johnson Truck Bodies.
CASH FLOWS
Cash flow from operations in the second quarter was $37 million, up from $35
million in 2000. For the six months ended June 30, 2001, cash generated from
operations of $56 million was equal to a year ago. The increase for the quarter
was attributable to working capital improvements as demonstrated by a $28
million reduction in inventory. Higher receivable balances, principally due to
special dating programs in the roofing business, dampened working capital
improvements.
BACKLOG
The June 30, 2001 backlog of $290 million was 10% over June 30, 2000 of $264
million. Improved backlog positions at Tensolite and Carlisle Systems &
Equipment were driven by acquisitions and increased market demand.
FIRST QUARTER 2001 RESTRUCTURING UPDATE
In the first quarter of 2001, the Company recorded a $24.0 million after tax, or
$0.79 per share, restructuring charge to earnings. The $24.0 million after tax
restructuring charge was primarily (84%) composed of costs related to exiting
and realigning facilities that had under performed in the automotive components
and transportation businesses and were not forecasted to perform at our
standard. Approximately $18.8 million after tax (78%) of the total charge is
related to machinery, equipment, inventory and goodwill write-offs. The
remainder of $5.2 million after tax represents anticipated cash expenses from
involuntary employee terminations and other restructuring costs. The Company is
proceeding with the exit and realignment of certain facilities and expects to
have these actions completed by the first quarter of 2002. To date, 40% of the
workforce reductions have taken place. The Company expects the future savings of
reduced depreciation and employee expense to approximate $1.8 million, or $0.06
per share, on an annual basis.
Page 9 of 12
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS.
The Company has not utilized derivative financial instruments or
derivative commodity instruments in its cash and cash equivalents.
Our transactions are predominantly conducted, and our accounts are
primarily denominated, in United States dollars. Accordingly, the
Company had limited exposure to significant foreign currency risk.
Even so, our financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak
economic conditions in our markets.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company's 2001 Annual Meeting of Shareholders was held on April
20, 2001.
(b) At the 2001 Annual Meeting of Shareholders, the election of four
directors were approved as follows:
<Table>
<Caption>
DIRECTOR FOR AGAINST WITHHELD NON-VOTE
-------- --- ------- -------- --------
Donald G. Calder 36,479,654 -- 286,122 --
Dennis J. Hall 35,678,738 -- 1,086,038 --
Eriberto R. Scocimara 36,458,031 -- 307,745 --
Robin W. Sternbergh 36,472,711 -- 294,065 --
</Table>
ITEM 6. 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.
(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 10 of 12
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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 August 10, 2001 By: /s/ Dennis J. Hall
----------------- ---------------------------
Dennis J. Hall
Vice Chairman and Chief Financial Officer
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