Carlisle(CSL) - 2023 Q3 - Quarterly Report

PART I—Financial Information Financial Statements Unaudited condensed consolidated financial statements for Q3 2023 show decreased revenues and net income from continuing operations, reduced total assets, strong operating cash flow, and significant financing activities Condensed Consolidated Statements of Income and Comprehensive Income Q3 & Nine Months 2023 vs 2022 Income Statement Highlights (in millions, except per share amounts) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,259.8 | $1,497.0 | $3,459.4 | $4,299.5 | | Operating Income | $299.9 | $324.0 | $729.2 | $995.3 | | Income from Continuing Operations | $216.9 | $233.3 | $527.2 | $705.0 | | Net Income | $265.6 | $254.7 | $561.9 | $749.8 | | Diluted EPS (Continuing Operations) | $4.32 | $4.42 | $10.32 | $13.35 | | Diluted EPS (Total) | $5.29 | $4.83 | $11.00 | $14.20 | Condensed Consolidated Balance Sheets Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $108.0 | $364.8 | | Total current assets | $3,657.0 | $2,245.0 | | Total Assets | $6,816.0 | $7,222.0 | | Long-term debt, less current portion | $2,283.2 | $2,281.1 | | Total Liabilities | $3,892.2 | $4,197.6 | | Total Stockholders' Equity | $2,923.8 | $3,024.4 | - Assets held for sale increased significantly from $2,371.8 million ($599.8 million current + $1,772.0 million long-term) at year-end 2022 to $2,259.4 million (all current) as of September 30, 2023, reflecting the planned divestitures of the CFT and CIT segments[8][59] Condensed Consolidated Statements of Cash Flows Nine Months Ended Sep 30 Cash Flow Summary (in millions) | Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $812.4 | $588.6 | | Net cash used in investing activities | $(86.7) | $(10.7) | | Net cash used in financing activities | $(994.5) | $(273.2) | | Change in cash and cash equivalents | $(268.8) | $301.0 | - Financing activities in the first nine months of 2023 were primarily driven by $580.0 million in common stock repurchases and a $300.0 million repayment of notes[10] Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $3,024.4 million at the end of 2022 to $2,923.8 million as of September 30, 2023, primarily due to $585.3 million in share repurchases and $119.5 million in dividends, which more than offset the $561.9 million in net income[16] Notes to Condensed Consolidated Financial Statements The notes detail the basis of presentation, segment information, and significant events, including the reclassification of CFT and CIT segments to discontinued operations and the company's continuing focus on CCM and CWT - The company's results are now reported through two segments: Carlisle Construction Materials (CCM) and Carlisle Weatherproofing Technologies (CWT)[60][61] - The Carlisle Fluid Technologies (CFT) and Carlisle Interconnect Technologies (CIT) segments have been reclassified as discontinued operations, with assets and liabilities held for sale, consistent with the company's pivot to a pure-play building products company[59][67] - On September 1, 2023, the company redeemed its $300.0 million 0.55% unsecured senior notes due 2023[105] - Subsequent to the quarter's end, on October 2, 2023, the company completed the sale of CFT for $520 million in gross cash proceeds, and on October 11, 2023, agreed to acquire assets from Polar Industries for $36.0 million[21][22] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic pivot to a pure-play building products company, resilient Q3 operating margins despite revenue decline, strong capital deployment, and plans for 'Vision 2030' - The company has effectively completed its portfolio restructuring, or "Pivot", to become a pure-play building products company, with the CIT segment reclassified to discontinued operations[26][27] - In the first nine months of 2023, the company returned $119.3 million in dividends and repurchased $580.0 million of its shares[29] - Management plans to release its new strategic vision, 'Vision 2030', in December 2023, which will build upon the successes of 'Vision 2025' with a focus on building products[31] Consolidated Results of Operations Consolidated Revenue Change (in millions) | Period | 2023 Revenue | 2022 Revenue | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Q3 | $1,259.8 | $1,497.0 | $(237.2) | (15.8)% | | YTD | $3,459.4 | $4,299.5 | $(840.1) | (19.5)% | - Revenue decreased primarily due to lower sales in non-residential and residential construction end markets, caused by project delays, higher interest rates, and prolonged distributor destocking[34][38] - Gross margin percentage increased in Q3 2023 to 37.0% from 34.4% in Q3 2022, driven by lower raw material costs; for the nine-month period, gross margin percentage was flat at 35.1%[40] - Operating margin for Q3 2023 increased to 23.8% from 21.6% year-over-year, primarily due to lower raw material costs; however, for the first nine months, operating margin decreased to 21.1% from 23.1% due to lower sales volumes[35][45] Segment Results of Operations Q3 2023 Segment Performance (in millions) | Segment | Revenue | % Change YoY | Operating Income | Operating Margin | | :--- | :--- | :--- | :--- | :--- | | CCM | $914.0 | (16.2)% | $272.5 | 29.8% | | CWT | $345.8 | (15.0)% | $58.8 | 17.0% | - Carlisle Construction Materials (CCM) revenue decreased due to market underperformance and distributor destocking, with operating margin declining from higher per-unit costs due to lower volumes[77] - Carlisle Weatherproofing Technologies (CWT) revenue decreased due to a slowdown in residential construction, but its operating margin increased significantly, reflecting operating efficiencies, strategic sourcing, and synergies from a prior acquisition[131] Liquidity and Capital Resources - Total cash and cash equivalents decreased from $364.8 million at the end of 2022 to $108.0 million as of September 30, 2023, primarily due to share repurchases, debt repayment, and dividends, partially offset by cash from operations[132] - Operating cash flow for the first nine months of 2023 increased to $812.4 million from $588.6 million in the prior year, mainly due to favorable working capital changes[138] - The company maintains a $1.0 billion revolving credit facility, which had no outstanding balance as of September 30, 2023[142] Outlook Q4 2023 Revenue Outlook vs. Q4 2022 | Segment | Expected Revenue Change | | :--- | :--- | | CCM | -3% to -5% | | CWT | ~ -10% | | Total CSL | -5% to -7% | - For Q4 2023, the company expects corporate expenses of ~$30 million, D&A of ~$40 million, capex of ~$40 million, net interest expense of ~$13 million, and a base tax rate of 23% to 24%[158] Quantitative and Qualitative Disclosure about Market Risk The company reports no material changes in its market risk during the first nine months of 2023, referring to its 2022 Annual Report on Form 10-K for detailed information - There have been no material changes in the Company's market risk for the nine months ended September 30, 2023[161] Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during Q3 - As of September 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective[162] - No changes in the Company's internal control over financial reporting occurred during the third quarter of 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[163] PART II—Other Information Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business, with specific details provided in Note 14 of the financial statements - Information about legal proceedings, including asbestos-related claims, is included in Note 14 of the financial statements[165][122] Risk Factors There have been no material changes to the company's risk factors as disclosed in its 2022 Annual Report on Form 10-K - There have been no material changes in the Company's risk factors from those disclosed in the 2022 Annual Report on Form 10-K[166] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2023, the company repurchased 1.2 million shares of common stock, and the Board approved a 7.5 million share increase to the repurchase program, leaving 8.6 million shares available Share Repurchases for Q3 2023 | Month | Total Shares Purchased (millions) | Average Price Paid Per Share | | :--- | :--- | :--- | | July | 0.4 | $266.52 | | August | 0.5 | $274.32 | | September | 0.3 | $267.34 | | Total | 1.2 | N/A | - On August 3, 2023, the Board of Directors approved a 7.5 million share increase in the share repurchase program; as of the end of the quarter, 8.6 million shares remained available for repurchase[167] Other Information The company reported that no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during Q3 2023 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the fiscal quarter ended September 30, 2023[171]