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 MARCH 31, 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) 250 SOUTH CLINTON STREET, SUITE 201, SYRACUSE, NEW YORK 13202 315-474-2500 (Address of principal executive office, including zip code) (Telephone Number) 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 May 1, 2001 30,261,292. --------------
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Three Months ended March 31, 2001 and 2000 (dollars in thousands, except per share amounts) (unaudited) <TABLE> <CAPTION> Three Months March 31, 2001 2000 --------- --------- <S> <C> <C> Net sales $ 463,158 $ 434,018 Cost and expenses: Cost of goods sold 378,546 336,527 Selling and administrative expenses 51,512 48,922 Research and development expenses 4,004 4,092 Restructuring charges and other 37,694 -- Other income (842) (1,189) --------- --------- Earnings before interest & income taxes (7,756) 45,666 Interest expense, net 8,214 5,179 --------- --------- Earnings before income taxes (15,970) 40,487 Income taxes (5,781) 15,028 --------- --------- Net earnings $ (10,189) $ 25,459 ========= ========= Average shares outstanding - basic 30,258 30,191 Basic earnings per share $ (0.33) $ 0.84 --------- --------- Average shares outstanding - diluted 30,258 30,526 Diluted earnings per share $ (0.33) $ 0.83 --------- --------- Dividends declared and paid per share $ 0.20 $ 0.18 --------- --------- </TABLE> See accompanying notes to interim financial statements. Page 2 of 11
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES Condensed Consolidated Balance Sheets March 31, 2001 and December 31, 2000 (Dollars in thousands, except share data) (unaudited) <TABLE> <CAPTION> MARCH 31, DEC. 31, 2001 2000 ----------- ----------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,327 $ 8,967 Receivables 263,594 213,656 Inventories (Note 2) 275,267 277,455 Deferred income taxes 20,017 22,344 Prepaid expenses and other 51,664 54,055 ----------- ----------- TOTAL CURRENT ASSETS 619,869 576,477 PROPERTY, PLANT AND EQUIPMENT, NET 393,534 402,614 OTHER ASSETS Patents, goodwill and other intangibles 276,452 251,670 Investments and advances to affiliates 68,122 66,350 Receivables and other assets 10,898 8,568 ----------- ----------- TOTAL OTHER ASSETS 355,472 326,588 =========== =========== $ 1,368,875 $ 1,305,679 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt, including current maturities $ 218,724 $ 173,762 Accounts payable 141,539 108,484 Accrued expenses 125,079 117,702 ----------- ----------- TOTAL CURRENT LIABILITIES 485,342 399,948 LONG-TERM LIABILITIES Long-term debt 282,297 281,864 Product warranties 72,006 72,789 Other liabilities 1,375 3,199 ----------- ----------- TOTAL LONG-TERM LIABILITIES 355,678 357,852 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 shares 39,331 39,331 Additional paid-in capital 10,487 10,268 Cumulative translation adjustments (7,734) (4,624) Retained earnings 602,359 618,595 Cost of shares in treasury - 9,068,666 shares in 2001 and 9,079,356 shares in 2000 (116,588) (115,691) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 527,855 547,879 ----------- ----------- $ 1,368,875 $ 1,305,679 =========== =========== </TABLE> See accompanying notes to interim financial statements. Page 3 of 11
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES Condensed Statements of Consolidated Cash Flows Three Months ended March 31, 2001 and 2000 (Dollars in thousands) (unaudited) <TABLE> <CAPTION> MARCH 31, 2001 2000 -------- -------- <S> <C> <C> OPERATING ACTIVITIES Net earnings $(10,189) $ 25,459 Reconciliation of net earnings to cash flows: Depreciation 14,276 11,968 Amortization 3,820 2,036 -------- -------- Write-down of machinery, equipment, inventory and goodwill 29,533 -- Changes in assets and liabilities, excluding effects of acquisitions and divestitures: Current and long-term receivables (37,870) (22,578) Inventories 4,849 (10,742) Accounts payable and accrued expenses 16,456 (1,053) Prepaid, deferred and current income taxes 3,324 14,321 Long-term liabilities (1,525) 829 Other (3,733) 547 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 18,941 20,787 -------- -------- INVESTING ACTIVITIES Capital expenditures (21,015) (12,874) Acquisitions, net of cash (37,935) (4,929) Proceeds from sale of property, equipment and business 6,374 -- Other (3,219) (3,265) -------- -------- NET CASH USED IN INVESTING ACTIVITIES (55,795) (21,068) -------- -------- FINANCING ACTIVITIES Net change in short-term debt 44,962 483 Proceeds from long-term debt -- -- Reductions of long-term debt (1,024) (365) Dividends (6,047) (5,443) Purchases of treasury shares (677) (1,187) -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 37,214 (6,512) -------- -------- CHANGE IN CASH AND CASH EQUIVALENTS 360 (6,793) CASH AND CASH EQUIVALENTS Beginning of period 8,967 10,417 -------- -------- End of period $ 9,327 $ 3,624 -------- -------- </TABLE> See accompanying notes to interim financial statements. Page 4 of 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended March 31, 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 ended March 31, 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. Certain reclassifications have been made to prior year information in order to conform to 2001 presentation. (2) The components of inventories are as follows: <TABLE> <CAPTION> MARCH 31, DEC. 31, 2001 2000 --------- --------- (000)'S <S> <C> <C> First-in, first-out (FIFO) costs: Finished goods $ 171,378 $ 175,861 Work in process 33,339 31,687 Raw materials 83,639 82,694 --------- --------- $ 288,356 $ 290,242 Excess of FIFO cost over Last-in, First-out (LIFO) inventory value (13,089) (12,787) --------- --------- LIFO inventory value $ 275,267 $ 277,455 ========= ========= </TABLE> (3) 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. (4) Earnings per share of common stock are based on the weighted average number of shares outstanding of 30,257,825 for the three months ended March 31, 2001. The calculation of diluted earnings per share excludes the effect of dilutive securities aggregating approximately 254,000 shares because they would have been antidilutive. (5) 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. Page 5 of 11
(6) 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 $29.4 million and severance and other employee costs of $8.2 million. As of March 31, 2001, payments of $0.3 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 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. (7) Financial information for operations by reportable business segment is included in the following summary: <TABLE> <CAPTION> MARCH 2001 - YTD SEGMENT INFORMATION TABLE Total IN THOUSANDS Sales EBIT Assets ----- ---- ------ <S> <C> <C> <C> Construction materials $ 91,818 $ 8,939 $ 273,606 Industrial components 191,770 18,721 554,160 Automotive components 68,844 3,111 123,648 All other 110,726 3,259 371,766 Corporate -- *(41,786) 45,695 ----------- ----------- ----------- $ 463,158 $ (7,756) $ 1,368,875 ----------- ----------- ----------- <CAPTION> MARCH 2000 - YTD SEGMENT INFORMATION TABLE Total IN THOUSANDS Sales EBIT Assets ----- ---- ------ <S> <C> <C> <C> Construction materials $ 87,580 $ 8,924 $ 231,256 Industrial components 162,975 24,435 365,314 Automotive components 83,431 7,194 192,469 All other 100,032 8,611 284,269 Corporate -- (3,498) 42,036 ----------- ----------- ----------- $ 434,018 $ 45,666 $ 1,115,344 ----------- ----------- ----------- </TABLE> - ---------- * In the first quarter of 2001, the restructuring charges were recorded at the corporate level. See Note 6 in the Notes to Condensed Consolidated Financial Statements. Page 6 of 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Carlisle Companies Incorporated reported first quarter sales of $463 million and a net loss for the quarter of $10.2 million or $0.33 per share (diluted). After factoring out the effect of a $24.0 million after-tax restructuring charge recorded in the quarter, net earnings from operations were $13.9 million, or $0.45 per share. Sales for the quarter were up 7% over last year's first quarter sales of $434 million. Carlisle Tire & Wheel, Carlisle Process Systems, Tensolite and Carlisle SynTec led the Company in sales growth. Net earnings before the restructuring charge were $13.9 million, or $0.45 per share versus $25.5 million, or $0.83 per share for the first quarter of 2000. The reduction in net earnings was caused by continued decline in demand in many of our markets. Carlisle is experiencing the recessionary conditions that exist throughout the manufacturing community. Demand among the automotive and other industrial transportation industries has been especially soft. The weakness in demand has resulted in aggressive pricing as competitors seek to maintain volume and control inventories. Raw material and utility price pressures have increased our cost base. These conditions, coupled with the diminishing absorption of fixed costs due to lower production volumes, have affected our results unfavorably. In the first quarter of 2001, the Company recorded a $24.0 million after tax, or $0.79 per share, restructuring charge to earnings. Our policy is to continually evaluate all of the businesses and markets in which we participate. Accordingly, we are consolidating and realigning facilities in order to improve future operating performance. The $24.0 million after tax restructuring charge is primarily (84%) composed of costs related to exiting and realigning facilities that have under performed in the automotive components and transportation businesses and are 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. It is intended that the actions required to exit and realign these operations will be completed within the next twelve months. 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. The subsequent discussion of operations by segment excludes the effect of the restructuring charge. Construction Materials sales of $92 million for the first quarter were up 5% over 2000 first quarter sales of $88 million. Sales in the domestic roofing market rose over last year as a result of increased thermoplastic polyolefin (TPO) roofing membrane and insulation shipments. A portion of the first quarter increase can be attributed to the unusually slow December, which was the result of the harsh weather conditions experienced throughout the Northeast and Central Midwestern regions. Operating earnings of $8.9 million for the Construction Materials segment were flat over the first quarter of 2000. Although sales were up, margins were down due to the effects of higher raw material costs. In addition, this segment's product mix included fast growing but lower margin TPO roofing membrane and insulation products. Sales in the Automotive Components segment declined over the first quarter of 2000. Throughout the first quarter of 2001, assembly locations at each of the major domestic automotive OEM's experienced multiple weeks of production shutdowns. Automotive build requirements have fluctuated as the industry has moved aggressively to reduce vehicle inventories in face of uncertain demand. Earnings in this segment were down 57% as compared to the first quarter of 2000, due to the reductions in production volumes this quarter. Page 7 of 11
Industrial Component sales of $192 million were up 18% over last year. This sales increase came principally from the acquisition of the Consumer Tire & Wheel Division of Titan International, which was acquired by Carlisle Tire & Wheel in April of 2000, offsetting some slowness in the core lawn and garden markets. Tensolite's sales were up for the quarter, as a result of its acquisition of UniTrek in July of 2000. In addition, in March of 2001, Tensolite acquired Connecting Devices, Inc., a designer and manufacturer of RF/microwave connectors and cable assemblies serving the wireless, Internet infrastructure and opto-electronic switch markets. Carlisle Motion Control and Carlisle Industrial Brake & Friction have seen softness in the heavy duty truck, and heavy construction and mining equipment markets, offsetting some slight improvement in aftermarket businesses. Earnings in the Industrial Components segment were down 23% over last year, reflecting the impact of reduced volumes in Carlisle's core businesses and the impact of lower margins in acquired businesses. General Industry sales of $111 million were up 11% over the first quarter of 2000. Carlisle Systems & Equipment led the segment in sales growth as a result of completed acquisitions. These sales gains were partially offset by the ongoing weakness in the transportation markets, particularly in the trailer markets of Carlisle Transportation Products and Johnson Truck Bodies. Carlisle FoodService's sales were up over last year as a result of the acquisition of Dura-Ware in February of 2000. Unfortunately, some of FoodService's other businesses have experienced softness, as consumer discretionary spending has decreased. ACQUISITIONS Carlisle has completed five acquisitions in the first quarter of 2001: Stork Friesland B.V. and Siersema Sheffers B.V., both Dutch based designers and sellers of evaporators and spray dryers for milk powder processing; EcoStar, Inc, a provider of synthetic roofing tiles for the steep-slope roofing market; Wincanton Engineering Ltd., a UK based designer and manufacturer of processing equipment for the food, dairy, and beverage industries; and Connecting Devices, Inc., a designer and manufacturer of RF/microwave connectors and cable assemblies serving the wireless, Internet infrastructure and opto-electronic switch markets. Although acquisitions completed since the first quarter of 2000 contributed $51 million of sales revenue and no earnings in the first quarter of 2001, we are optimistic that the synergies that will come as well as the strategic development provided will result in attractive investments for the Carlisle shareholder. CASH FLOWS Cash flow from operations of $18.9 million was down $1.8 million from a year ago. This decrease was primarily the result of lower earnings recorded in the first quarter of 2001. Two factors principally impacted working capital. First, receivable collections slowed as an unusual number of our customers delayed payments. Second, inventory levels were up versus the first quarter of 2000 as a result of acquisitions completed in 2000 and early 2001. Additionally, we experienced a slower first quarter in our lawn and garden markets as compared to a strong first quarter in 2000. Action programs are in place to reduce working capital and improvement is expected in the second quarter. BACKLOG Backlog of $301 million as of March 31, 2001, was up 23% over March 2000 backlog of $246 million and up 13% over December 2000. Significant increases occurred at Tensolite and Carlisle Systems & Equipment, helped by acquisitions. Page 8 of 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS. The Company has not utilized derivative financial instruments or derivative commodity instruments in our 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 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 9 of 11
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 May 11, 2001 By: /s/ Dennis J. Hall --------------------- ----------------------------------- Dennis J. Hall Vice Chairman Page 10 of 11