Carlisle Cos. (CSL) Tops Q3 EPS by 9c

October 21, 2014 6:14 AM

Carlisle Cos. (NYSE: CSL) reported Q3 EPS of $1.31, $0.09 better than the analyst estimate of $1.22. Revenue for the quarter came in at $904.1 million versus the consensus estimate of $870.18 million.


David A. Roberts, Chairman and Chief Executive Officer, said, “We had a very strong third quarter with 13% sales growth and 22% growth in EBIT (earnings before interest and income taxes). Sales were up in all of our segments with exceptional organic sales growth at CCM and CIT. The double digit growth at both CCM and CIT demonstrate healthy market demand as well as solid execution on selling initiatives. We also increased EBIT margin in all of our segments and our consolidated EBIT margin rose 100 basis points to 14.8% reflecting favorable leverage of our sales growth.

“In addition to our outstanding operating performance, we recently announced two important strategic acquisitions that will move us closer to our long term objectives. On October 1, 2014, we completed the acquisition of LHi Technologies (“LHi”), a leading manufacturer of medical cabling and interconnect applications based in Shenzhen, China that will operate within CIT. Our acquisition of LHi will significantly expand our offerings in the high growth market for medical technology as well as further diversify our business.

“On October 8, 2014, we announced the signing of a definitive agreement to purchase Graco Inc.’s liquid finishing brands business (Liquid Finishing Brands) for $590 million in cash. Liquid Finishing Brands, a global manufacturer and supplier of liquid finishing equipment and systems serving diverse end markets for paints and coatings, will operate as a new segment named Carlisle Fluid Technologies (CFT). From our years at Graco, both Chris Koch and I are intimately familiar with the products and end markets in which Liquid Finishing Brands operates. The acquisition of Liquid Finishing Brands meets our strategic criteria to invest in a manufacturer of high margin, highly engineered products with a solid aftermarket, making it a strong fit for Carlisle. The acquisition is subject to regulatory approvals and is estimated to close on or about year end. We expect this acquisition to be accretive to our net earnings in 2015.

“For the third quarter, CCM achieved double digit sales growth on robust demand in commercial construction. EBIT margin was excellent at 16.5%. With the investments we’ve made in new Polyiso, PVC and TPO manufacturing facilities, we now have the capacity to meet growing market demand. We maintain our positive outlook and expect low double digit sales growth for the full year 2014 at CCM.

“CIT continued its strong performance with double digit sales growth generated by strong demand in the aerospace market. CIT’s EBIT margin rose 380 basis points to 20.6% as we continue to achieve excellent sales leverage. The acquisition of LHi will further complement CIT’s medical cable and cable assembly product line. We expect the acquisition of LHi to be accretive to CIT’s EBIT in the first year of acquisition.

“Sales at Carlisle FoodService Products (CFS) grew at a healthy 5.5% with solid performance in both its foodservice and healthcare markets on improvements in selling initiatives. EBIT margin improved 20 basis points to 12.1%.

“Sales at Carlisle Brake & Friction (CBF) also grew moderately. We are seeing positive signs of recovery in the construction market. However, demand in the agriculture market has been declining and is expected to remain weak in the near term due to lower crop prices. Demand in the mining market remains soft.

“As of September 30, 2014 our cash on hand was $805 million. On October 1, 2014, we acquired LHi for an enterprise value of $195 million using cash on hand. We also plan to fund the acquisition of Liquid Finishing Brands with cash on hand and expected cash flow generation in the fourth quarter.”

Roberts concluded by stating, “We maintain our favorable outlook for the remainder of 2014 driven primarily by continued growth at CCM and CIT. We continue to plan for high single-digit percentage sales growth for 2014 as well as higher EBIT and EBIT margin expansion. In addition, the two acquisitions we announced are excellent strategic fits and align with our long term growth and margin profiles. Both acquisitions are being funded from cash on hand leaving us with ample liquidity to further pursue our long-term growth objectives and return capital to our shareholders.”

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