FOOL CONFERENCE CALL
SYNOPSIS*
By Greg Markus
(MF
Boring)
Carlisle Companies
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250 S. Clinton St., Suite 201
Syracuse, NY 13202
(315-474-2500)
ANN ARBOR, Mich. (Feb. 5) -- CARLISLE COMPANIES INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CSL)") else Response.Write("(NYSE: CSL)") end if %> is a diversified manufacturer of products serving three major markets: construction materials, transportation products and general industry. The company reported today that fourth quarter earnings rose 24% to $0.42 per share on sales of $277.5 million, compared with earnings of $0.34 per share on sales of $217.2 million in the fourth quarter of 1995.
DETAILS ON FOURTH QUARTER RESULTS
By segment, fourth quarter sales and earnings before income tax, interest, and corporate expense were (in millions):
Sales %Change Earnings %Change Construction Materials $84.6 + 9% $11.5 + 24% Transportation Products 114.8 + 43% 5.8 + 5% General Industry 78.1 + 31% 9.0 + 45% Total $277.5 + 28% $26.3 + 25%
In the CONSTRUCTION MATERIALS segment, comparisons with last year's fourth quarter are not on an "apples to apples" basis due to divestiture of a business, which affected sales volume but made little difference on earnings.
The GENERAL INDUSTRY segment was strong. Specialty tires and wheels revenue was up strongly, but lawn and garden original equipment manufacturing (OEM) customers went through a significant inventory adjustment. This appears to have worked itself through the system, and current demand looks strong. In the food service operations, Carlisle had a better experience than anticipated, even with expenses associated with the integration of the Hartstone acquisition. The Scherping acquisition contributed to record sales an earnings in this group.
The TRANSPORTATION segment had mixed results. Plastic components operations doubled in size due to the acquisition from Johnson Controls; planned integration expenses plus two strikes at General Motors slowed the rate of earnings growth, yet this operation still had a good quarter. Specialty trailers and containers experienced a continuing slowdown. Construction trailer demand is strengthening, but commercial hauling and dump trailers and dairy tankers continue to experience cyclical lows, which will continue through first half of 1997. Friction business, despite a weak OEM market, had a very good earnings performance due to Carlisle's strong after-market position. The star performer was Carlisle's aerospace cable and wire business. Regarding the refrigerated container manufacturing business, orders dried up industry-wide in the fourth quarter. Bookings are strong in the current [first] quarter, but pricing remains under pressure due to the addition of numerous Chinese suppliers whose products have not yet been proven in use. The combination of lower demand, pricing pressures, and lower aluminum prices resulted in an inventory write-down of both raw goods and aluminum inventory that had approximately a $1.5 million impact on this segment.
1996 FULL-YEAR RESULTS
ACQUISITIONS. The Company completed five acquisitions in 1996: in February, Insulfoam Inc., enhancing its position in the non-residential roofing market; in March, Intero Inc. and Unique Wheel Inc., manufacturers of steel and aluminum rims for trailer wheel manufacturers and wheels for the automotive aftermarket; in August, Scherping Systems Inc. and Scherping Controls Inc., a leading supplier of cheese processing equipment, extending Carlisle's Walker Stainless steel processing equipment capabilities; in September, Hartstone Inc., a designer and manufacturer of ceramic tableware, cookware and decorative kitchenware, adding new products to the Company's foodservice business; in October, the Engineered Plastics Division of Johnson Controls Inc., a supplier of precision-molded engine components and blow-molded bumper beams that are sold to major automakers in North America. The last acquisition has been consolidated with Carlisle's Geauga Co. to form Carlisle Engineered Products.
SALES AND EARNINGS. For the full year, sales increased 24% to $1.02 billion, compared to $822.5 million in 1995. Acquisitions made in 1996 accounted for 42%, or $81.2 million, of the increase. Earnings were $1.80 per share, an increase of 26% compared to $1.41 per share in 1995. By surpassing the $1 billion sales mark, the company achieved a five-year goal set in 1991.
GROSS MARGINS declined slightly to 23.4% in 1996 as compared with 24.0% in 1995. The decline reflects continuing softness in Carlisle's container manufacturing operation, as well as lower gross margins in recently acquired companies. In that regard, Carlisle's strategy is to acquire companies that are fundamentally sound and complement Carlisle's areas of strength but that are not operating as efficiently as they might. Carlisle then works to improve their operating efficiencies and margins.
CASH FLOWS provided by operating activities were $86.0 million in 1996 compared to $55.7 million in 1995.
EQUITY AND DEBT. The company purchased $14.2 million of treasury stock and paid out $14.1 million in dividends in 1996. In addition, 73,800 shares of treasury stock were issued as part of the acquisition of Hartstone, Inc. Carlisle utilized $124.4 million of its revolving credit facilities in 1996 to finance acquisitions. The company issued ten-year bonds for $150 million at the end of January 1997. Net proceeds from these bonds were used to repay amounts outstanding under the company's revolving credit facility ($115 million at December 31, 1996) and other short term debt. Remaining net proceeds will be for general corporate purposes.
ORDER BACKLOG was $200.8 million at December 31, 1996, a 25% increase over the comparable figure one year ago. Stronger backlog positions were evident throughout all major operations within the company.
ACCOUNTS RECEIVABLE were $158.5 million at year end 1996. The average days sales in the average accounts receivables outstanding declined to 55 days in 1996 from 56 days in 1995, from 60 days in 1994.
1996 RESULTS BY SEGMENT
CONSTRUCTION MATERIALS. Sales increased 6% in 1996 to $325.2 million compared to $308.3 million in 1995. Segment earnings increased by 19%, to $43.6 million, due to a favorable product mix and effective cost control.
TRANSPORTATION PRODUCTS. Sales were $371.5 million in 1996, a 33% increase over 1995. While acquisitions accounted for 36% of the sales growth in 1996 over 1995, all operations in this segment recorded sales gains. Segment earnings improved 34%. Earnings in the custom-molded plastics and rubber operations increased 23% due to new product introductions and the additional capacity brought by acquisitions. Earnings from friction and brake products improved 19% due to increased margins from sales in the replacement market and productivity improvements, offset by a decline in sales to truck and trailer OEMs due to reduced build levels. The market for commercial trailers and dump trailers was soft in 1996. On the other hand, sales of aircraft wire increased 63% due to increases in the production of commercial aircraft, and earnings outpaced sales due to improved manufacturing productivity. Lastly, Carlisle's refrigerated container leasing joint venture continued to grow in sales and earnings, offsetting losses in container manufacturing operations.
GENERAL INDUSTRY. Segment sales were $320.8 million in 1996, a 36% increase over 1995. Segment earnings were $40.3 million, also a 36% increase. Sales in the company's specialty tire and wheel operations increased 36%, due to recent acquisitions and continued market share gains. These sales gains were offset to a degree by softening in the Lawn & Garden OEM market. Sales in the foodservice operations increased 3%, despite weakened market conditions; although sales gains were modest, foodservice earnings increased by 20% due largely to productivity improvements.
PROSPECTS FOR 1997
OVERALL BUSINESS OPERATIONS. Carlisle enters 1997 in a strong position, with excellent growing businesses in diverse industries and geographic markets. The company has a stated commitment to grow sales and earnings by 15% per year. In the conference call, company spokesmen said that based on what they know now, they would have to foul up pretty badly not to be able to do that in 1997. The company intends to continue to improve working capital management; days sales outstanding has come down, but the company intends to improve further. Also, the company believes they have not been sufficiently aggressive in implementing just-in-time operations, and they will emphasize that in 1997; so turnover ratio will see further improvement.
CONSTRUCTION MATERIALS. The introduction of new products and continued growth in industrial construction as well as the repair and replacement of existing commercial roofs should produce solid results and improved margins. The company does not foresee any significant changes in raw material costs in 1997. Good and improving warranty experience in the field will help going forward. Regarding the Insulfoam acquisition, Carlisle spokesmen said they only wish it were larger. Insulfoam helps Carlisle's technical reputation and is particularly attractive in some overseas markets. It is not yet big enough to have much of an impact on overall business results for 1997, but Carlisle is working to enlarge the Insulfoam capacity.
TRANSPORTATION. Continued growth in the segment is expected in 1997, and Carlisle expects to see margins approaching 8%. The high-performance aircraft wire business has record backlogs, with orders stretching into 1998. As integration of the Johnson Controls acquisition progresses, margins should continue to improve there, with a goal of a 10% operating margin. As for the specialty trailer business, Carlisle intentionally bought into it as a cyclical low was at hand; the construction-oriented part of that business is reviving sooner than the company anticipated, and cost controls are helping to improve margins. Sales of dairy tankers continue to be soft; Carlisle bought the dairy tanker business primarily to acquire the in-plant processing equipment, however, and that piece of the business is solid. In the commercial dump trailer business, Carlisle has had some difficulty getting costs under control while integrating two new companies and adding new equipment and facilities, but management believes they are coming out of that phase. Stable sales and earnings are anticipated from heavy-duty friction and brake products due to aftermarket demand and new product development. Business in the current quarter looks strong in the refrigerated container side, and the inventory write-downs taken in 1996 contribute to an improved competitive position in 1997; but pricing pressures will probably continue in the container manufacturing business until customers come to recognize the differences between a quality product and some of the new, unproven Chinese products. Carlisle entered this business in part to manufacture containers that it uses in its very profitable leasing operations. The question the company is currently examining is whether it can buy rather than manufacture the kinds of containers it needs for its high-end specialty leasing business.
GENERAL INDUSTRY. Solid results are expected from Carlisle's leading position in specialty tires and wheels. Additional product offerings and market development in food service operations, along with strong demand for stainless steel in-plant processing equipment, will also contribute to growth.
FINANCIAL POSITION. Current total debt stands at approximately $215 million, including a $150 million bond offering that closed on January 28, 1997. Offsetting that, Carlisle has approximately $25 million in cash. Interest costs are running approximately $14-15 million per year. Year-end shares outstanding numbered 30.9 million.
* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.