SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
Commission file number 1-9278
CARLISLE COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware |
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31-1168055 |
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.) |
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13925 Ballantyne Corporate Place, Suite 400, Charlotte, North Carolina 28277 |
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( 704) 501-1100 |
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(Address of principal executive office, including zip code) |
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(Telephone Number) |
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Name of each exchange on which registered |
Common stock, $1 par value |
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New York Stock Exchange |
Preferred Stock Purchase Rights |
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New York Stock Exchange |
Indicate by check mark whether the 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 ý No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o
As of February 26, 2004, 31,031,822 shares of common stock of the registrant were outstanding; the aggregate market value of the shares of common stock of the registrant held by non-affiliates was approximately $1,717,875,621 based upon the closing price of the common stock on the New York Stock Exchange on February 26, 2004.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 20, 2004 are incorporated by reference in Part III.
Part I
Item 1. Business.
Carlisle Companies Incorporated was incorporated in 1986 in Delaware as a holding company for Carlisle Corporation, whose operations began in 1917, and its wholly-owned subsidiaries. Unless the context of this report otherwise requires, the words Company and registrant refer to Carlisle Companies Incorporated and its wholly-owned subsidiaries and any divisions or subsidiaries they may have. The Companys diversified manufacturing operations are conducted through its subsidiaries.
The Company manufactures and distributes a wide variety of products across a broad range of industries, including, among others, roofing, construction, trucking, automotive, foodservice, industrial equipment, lawn and garden and aircraft manufacturing. The Company markets its products both as a component supplier to original equipment manufacturers (OEMs), as well as directly to end users.
Sales of the Companys products are reported by distribution to the following six industry segments: Industrial Components, Construction Materials, Automotive Components, Transportation Products, Specialty Products, and General Industry (All Other). The principal products, services and markets or customers served in each of the industry segments include:
Industrial Components. The principal products of this segment are bias-ply, non-automotive rubber tires, stamped and roll-formed wheels, transmission belts and accessories. Customers include golf cart manufacturers and power equipment manufacturers and boat and utility trailer manufacturers.
Construction Materials. The principal products of this segment are rubber and thermoplastic polyolefin roofing membranes and FleeceBACK TM sheeting used predominantly on non-residential flat roofs, related roofing accessories, including flashings, fasteners, sealing tapes, coatings and waterproofings and insulation products. The markets served include new construction, re-roofing and maintenance of low-sloped roofs, water containment, HVAC sealants, and coatings and waterproofing.
Automotive Components. The principal products of this segment are highly engineered rubber and plastic components for first tier suppliers and other manufacturers in the automotive market.
Specialty Products . The principal products of this segment are heavy-duty friction and braking systems for truck and off-highway equipment. Customers include truck manufacturers, heavy equipment and truck dealers and aftermarket distributors.
Transportation Products . The principal products of this segment are specialty trailers, standard and custom-built high payload trailers and dump bodies and stainless steel trailers. Customers include heavy equipment and truck dealers and commercial haulers.
General Industry (All Other). The principal products of this segment include high-grade aerospace wire, specialty electronic cable, cable assemblies and interconnects, commercial and institutional plastic foodservice permanentware and catering equipment, fiberglass and composite material trays and dishes, commercial cookware and servingware, ceramic tableware, specialty rubber and plastic cleaning brushes, stainless steel processing and containment equipment and their related process control systems, and refrigerated fiberglass truck bodies. Customers include aerospace original equipment manufacturers, electronic and communications equipment manufacturers, foodservice distributors, restaurants, food, dairy, beverage and pharmaceutical processors and distributors.
2
The amount of total revenue contributed by the products or services in each industry segment for each of the last three fiscal years is as follows (in millions):
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2003 |
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2002 |
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2001 |
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Industrial Components |
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$ |
631.2 |
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$ |
621.6 |
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$ |
476.3 |
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Construction Materials |
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579.4 |
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488.0 |
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464.9 |
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Automotive Components |
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209.1 |
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235.8 |
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252.0 |
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Specialty Products |
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129.0 |
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121.9 |
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128.9 |
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Transportation Products |
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121.4 |
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119.6 |
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120.3 |
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General Industry - All Other |
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438.1 |
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384.4 |
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407.1 |
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Total |
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$ |
2,108.2 |
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$ |
1,971.3 |
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$ |
1,849.5 |
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In each industry segment, the Companys products are generally distributed either by Company-employed field sales personnel or manufacturers representatives. In a few instances, distribution is through dealers and independent distributors. Since many of the Companys customers are OEMs, marketing methods and certain operations are designed to accommodate the requirements of a small group of high-volume producer-customers.
In each industry segment, satisfactory supplies of raw materials and adequate sources of energy essential for operation of the Companys businesses have generally been available to date. Uncertain economic conditions, as well as conflict in the international arena, however, could cause shortages of some basic materials, particularly those which are petroleum derivatives (plastic resins, synthetic rubber, etc.) and used in the Construction Materials, Industrial Components, Automotive Components, and General Industry (All Other) segments. The Company believes that energy sources are secure and sufficient quantities of raw materials can be obtained through normal sources to avoid interruption of production in 2004.
The Company owns or holds the right to use a variety of patents, trademarks, licenses, inventions, trade secrets and other intellectual property rights which, in the aggregate, are considered significant to the successful conduct of each of the Companys six industry segments. The Company has adopted a variety of measures and programs to ensure the continued validity and enforceability of its various intellectual property rights.
In each industry segment, the Company is engaged in businesses, and its products serve markets, that generally are highly competitive. Product lines serving most markets tend to be price competitive and all lines also compete on service and product performance. Except for Automotive Components, no industry segment is dependent upon a single customer, or a few customers, the loss of which would have a material adverse effect on the segment. Sales to its largest customer represented 36.25% of total Automotive Components segment sales in 2003.
Order Backlog was $419.2 million at December 31, 2003, $305.1 million at December 31, 2002 and $285.6 million at December 31, 2001.
Research and Development expenses were $20.2 million in 2003 compared to $19.9 million in 2002 and $17.3 million in 2001.
The Company employs approximately 11,434 persons on a full-time basis.
Sales and earnings within the Industrial Components segment tend to be somewhat higher in the first six months of the year due to peak sales in the lawn and garden market. The Automotive Components segment also tends to experience slightly higher sales and earnings in the first six months due to the automotive build schedule. Within the Construction Materials segment, sales and earnings tend to be somewhat higher in the second and third quarters due to increased construction activity during those periods. The businesses of the Specialty Products, Transportation Products and General Industry (All Other) segments are generally not seasonal in nature. The businesses of all six segments are affected by the state of the general economy.
3
In 2003, the Company acquired Flo-Pac Corporation, a manufacturer of brooms, brushes, rotary brushes and cleaning tools for the sanitary maintenance industry.
In each industry segment, the Companys compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment is not anticipated to have a material effect upon the capital expenditures, earnings or the financial and competitive position of the Company or its divisions and subsidiaries.
Information on the Companys revenues, earnings and identifiable assets by industry segment for the last three fiscal years is as follows:
In thousands |
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2003 |
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2002 |
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2001 |
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Sales to Unaffiliated Customers (1) |
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Industrial Components |
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$ |
631,209 |
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$ |
621,569 |
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$ |
476,310 |
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Construction Materials |
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579,369 |
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488,047 |
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464,932 |
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Automotive Components |
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209,062 |
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235,822 |
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251,963 |
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Specialty Products |
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129,055 |
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121,922 |
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128,902 |
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Transportation Products |
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121,378 |
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119,566 |
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120,284 |
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General Industry (All Other) |
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438,091 |
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384,354 |
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407,086 |
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Earnings before interest and income taxes |
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Industrial Components |
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$ |
58,111 |
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$ |
54,241 |
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$ |
29,214 |
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Construction Materials |
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77,171 |
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66,404 |
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60,159 |
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Automotive Components |
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4,208 |
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12,454 |
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10,526 |
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Specialty Products |
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4,240 |
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(1,821 |
) |
4,559 |
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Transportation Products |
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5,687 |
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5,962 |
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1,633 |
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General Industry (All Other) |
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16,477 |
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11,230 |
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11,381 |
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Corporate (2) |
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(19,700 |
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(20,819 |
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(50,427 |
) |
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Identifiable Assets |
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Industrial Components |
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$ |
458,265 |
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$ |
444,303 |
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$ |
490,695 |
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Construction Materials |
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292,419 |
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253,951 |
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209,942 |
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Automotive Components |
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128,391 |
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116,201 |
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141,355 |
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Specialty Products |
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76,688 |
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84,237 |
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90,696 |
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Transportation Products |
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50,459 |
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51,538 |
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68,315 |
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General Industry (All Other) |
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342,166 |
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306,227 |
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355,788 |
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Corporate (3) |
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88,521 |
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72,330 |
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58,933 |
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(1) Intersegment sales or transfer are not material.
(2) Includes general corporate expenses.
(3) Consists primarily of cash and cash equivalents, facilities, and other invested assets.
The Companys Internet website address is www.carlisle.com. The Company makes available free of charge on this website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after the electronic filing of such material with the Securities and Exchange Commission.
4
Item 2. Properties
The number, type, location and size of the Companys properties as of December 31, 2003 are shown on the following charts, by segment.
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Number and Nature of Facilities |
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Square Footage (000s) |
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Segment |
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Manufacturing(1) |
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Warehouse |
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Office |
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Owned |
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Leased |
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Industrial Components |
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17 |
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17 |
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1 |
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2,889 |
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1,656 |
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Construction Materials |
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14 |
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4 |
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10 |
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856 |
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1,527 |
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Automotive Components |
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12 |
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2 |
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2 |
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912 |
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373 |
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Specialty Products |
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12 |
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1 |
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2 |
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985 |
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393 |
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Transportation Products |
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11 |
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1 |
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4 |
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988 |
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664 |
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General Industry (All Other) |
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14 |
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4 |
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11 |
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1,416 |
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982 |
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Corporate |
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0 |
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0 |
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2 |
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0 |
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14 |
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Locations |
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Segment |
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North America |
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Europe |
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Other |
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Industrial Components |
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33 |
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0 |
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2 |
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Construction Materials |
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24 |
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1 |
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4 |
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Automotive Components |
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16 |
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0 |
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0 |
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Specialty Products |
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14 |
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1 |
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0 |
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Transportation Products |
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11 |
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4 |
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1 |
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General Industry (All Other) |
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23 |
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5 |
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1 |
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Corporate |
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2 |
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0 |
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0 |
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(1) Also includes facilities which are combined manufacturing, warehouse and office space.
5
Item 3. Legal Proceedings
The Company may be involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, the ultimate outcome of such litigation will not have a material adverse effect on the consolidated financial position of the Company, but may have a material impact on the Companys results of operations for a particular period.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
6
Part II
Item 5. Market for Registrants Common Equity and Related Shareholder Matters.
The Companys common stock is traded on the New York Stock Exchange. As of December 31, 2003, there were 2,015 shareholders of record.
Quarterly cash dividends paid and the high and low prices of the Companys stock on the New York Stock Exchange in 2003 and 2002 were as follows:
2003 |
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First |
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Second |
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Third |
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Fourth |
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Dividends per share |
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$ |
0.2150 |
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$ |
0.2150 |
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$ |
0.2200 |
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$ |
0.2200 |
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Stock Price |
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High |
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$ |
44.19 |
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$ |
46.37 |
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$ |
46.34 |
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$ |
61.67 |
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Low |
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$ |
38.69 |
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$ |
39.75 |
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$ |
41.88 |
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$ |
43.57 |
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2002 |
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First |
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Second |
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Third |
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Fourth |
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Dividends per share |
|
$ |
0.2100 |
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$ |
0.2100 |
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$ |
0.2150 |
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$ |
0.2150 |
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Stock Price |
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High |
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$ |
43.95 |
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$ |
45.65 |
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$ |
47.23 |
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$ |
43.45 |
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Low |
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$ |
33.60 |
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$ |
34.75 |
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$ |
35.55 |
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$ |
32.36 |
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7
Item 6. Selected Financial Data.
Ten-Year Summary
In thousands except shareholders of record and per share data
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2003 |
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2002 |
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2001 |
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2000 |
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1999 |
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1998 |
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1997 |
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1996 |
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1995 |
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1994 |
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Summary of Operations |
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Net sales |
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$ |
2,108,164 |
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1,971,280 |
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1,849,477 |
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1,771,067 |
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1,611,256 |
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1,517,494 |
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1,260,550 |
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1,017,495 |
|
822,534 |
|
692,650 |
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Gross margin |
|
$ |
375,510 |
|
359,475 |
|
321,857 |
|
368,384 |
|
356,989 |
|
328,115 |
|
286,461 |
|
237,698 |
|
197,675 |
|
176,369 |
|
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Selling & administrative expenses |
|
$ |
213,810 |
|
211,802 |
|
207,103 |
|
176,484 |
|
173,375 |
|
160,366 |
|
143,246 |
|
128,676 |
|
109,236 |
|
102,992 |
|
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Research & development |
|
$ |
20,219 |
|
19,929 |
|
17,325 |
|
16,463 |
|
15,761 |
|
16,178 |
|
15,824 |
|
11,900 |
|
12,339 |
|
11,933 |
|
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Interest and other expenses, net |
|
$ |
9,748 |
|
17,244 |
|
59,504 |
|
24,572 |
|
12,370 |
|
11,302 |
|
10,607 |
|
5,082 |
|
3,241 |
|
2,652 |
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Income before cumulative effect of change in accounting principle |
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$ |
88,920 |
|
72,378 |
|
24,841 |
|
96,180 |
|
95,794 |
|
84,866 |
|
70,666 |
|
55,680 |
|
44,081 |
|
35,568 |
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Basic earnings per share |
|
$ |
2.90 |
|
2.38 |
|
0.82 |
|
3.18 |
|
3.18 |
|
2.81 |
|
2.34 |
|
1.84 |
|
1.43 |
|
1.17 |
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Diluted earnings per share |
|
$ |
2.88 |
|
2.37 |
|
0.82 |
|
3.14 |
|
3.13 |
|
2.77 |
|
2.28 |
|
1.80 |
|
1.41 |
|
1.15 |
|
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Cumulative effect of change in accounting principle |
|
$ |
|
|
(43,753 |
) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings per share |
|
$ |
|
|
(1.44 |
) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share |
|
$ |
|
|
(1.43 |
) |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income |
|
$ |
88,920 |
|
28,625 |
|
24,841 |
|
96,180 |
|
95,794 |
|
84,866 |
|
70,666 |
|
55,680 |
|
44,081 |
|
35,568 |
|
||||||||
Basic earnings per share |
|
$ |
2.90 |
|
0.94 |
|
0.82 |
|
3.18 |
|
3.18 |
|
2.81 |
|
2.34 |
|
1.84 |
|
1.43 |
|
1.17 |
|
||||||||
Diluted earnings per share |
|
$ |
2.88 |
|
0.94 |
|
0.82 |
|
3.14 |
|
3.13 |
|
2.77 |
|
2.28 |
|
1.80 |
|
1.41 |
|
1.15 |
|
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Financial Position |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net working capital (1) |
|
$ |
245,038 |
|
157,246 |
|
281,165 |
|
312,192 |
|
300,660 |
|
223,188 |
|
191,450 |
|
175,285 |
|
153,709 |
|
164,669 |
|
||||||||
Property, plant and equipment, net |
|
$ |
454,285 |
|
447,986 |
|
447,660 |
|
402,614 |
|
349,451 |
|
354,769 |
|
294,165 |
|
264,238 |
|
193,133 |
|
158,238 |
|
||||||||
Total assets |
|
$ |
1,436,909 |
|
1,328,787 |
|
1,415,724 |
|
1,305,679 |
|
1,080,662 |
|
1,022,852 |
|
861,216 |
|
742,463 |
|
542,423 |
|
485,283 |
|
||||||||
Long-term debt |
|
$ |
294,581 |
|
293,124 |
|
461,379 |
|
396,864 |
|
281,744 |
|
273,521 |
|
209,642 |
|
191,167 |
|
72,725 |
|
69,148 |
|
||||||||
% of total capitalization (2) |
|
31.8 |
|
34.6 |
|
46.1 |
|
42.0 |
|
37.2 |
|
40.3 |
|
37.6 |
|
38.4 |
|
21.0 |
|
21.8 |
|
|||||||||
Shareholders equity |
|
$ |
631,930 |
|
553,077 |
|
540,284 |
|
547,879 |
|
478,133 |
|
405,435 |
|
347,253 |
|
307,607 |
|
273,582 |
|
247,850 |
|
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Other Data |
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|
|||||||||
Average shares outstanding - basic |
|
30,705 |
|
30,441 |
|
30,260 |
|
30,239 |
|
30,166 |
|
30,179 |
|
30,235 |
|
30,281 |
|
30,759 |
|
30,519 |
|
|||||||||
Average shares outstanding - diluted |
|
30,863 |
|
30,583 |
|
30,450 |
|
30,599 |
|
30,635 |
|
30,674 |
|
31,025 |
|
30,953 |
|
31,226 |
|
30,960 |
|
|||||||||
Dividends paid |
|
$ |
26,695 |
|
25,887 |
|
24,883 |
|
22,989 |
|
20,511 |
|
18,105 |
|
15,868 |
|
14,129 |
|
12,928 |
|
11,605 |
|
||||||||
Per share |
|
$ |
0.87 |
|
0.85 |
|
0.82 |
|
0.76 |
|
0.68 |
|
0.60 |
|
0.53 |
|
0.47 |
|
0.42 |
|
0.38 |
|
||||||||
Capital expenditures |
|
$ |
42,241 |
|
39,336 |
|
65,946 |
|
59,419 |
|
47,839 |
|
95,970 |
|
59,531 |
|
34,990 |
|
37,467 |
|
31,082 |
|
||||||||
Depreciation & amortization |
|
$ |
60,366 |
|
56,994 |
|
63,960 |
|
59,549 |
|
47,414 |
|
45,221 |
|
38,755 |
|
29,758 |
|
23,230 |
|
21,940 |
|
||||||||
Shareholders of record |
|
2,015 |
|
2,170 |
|
2,257 |
|
2,396 |
|
2,546 |
|
2,443 |
|
2,068 |
|
2,145 |
|
2,054 |
|
2,350 |
|
|||||||||
(1) Net working capital defined as total current assets less total current liabilities
(2) % of total capitalization defined as long-term debt divided by long-term debt plus shareholders equity
All share and per share amounts have been restated to reflect the two-for-one stock split on January 15, 1997. Earnings per share amounts prior to 1997 have been restated to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. See the Notes to Consolidated Financial Statements.
8
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Executive Summary
Carlisle Companies Incorporated (Carlisle, the Company, we or our) is a diversified manufacturing company focused on achieving profitable growth internally through new product development and product line extensions, and externally through acquisitions that complement our existing technologies, products and market channels. The Company has thirteen operating companies with more than 11,000 employees serving a variety of niche markets. While Carlisle has offshore manufacturing operations, our markets are primarily in North America. Management focuses on continued year over year improvement in sales and earnings, return on capital employed, free cash flow and return on shareholders equity. We allocate resources to our businesses based on our assessment of their ability to obtain leadership positions in the markets they serve.
The Company had record sales in 2003 of $2.11 billion driven by increased sales volume in our commercial roofing business and improvements across many of our business units. Net earnings increased 23% in 2003 to $88.9 million or $2.88 per share (diluted) as compared to 2002 earnings before the cumulative effect of a change in accounting principle. In 2003, we continued our cost reduction strategies and implemented several consolidations that improved customer response time and provided a lower cost structure. These efforts included consolidating ten reporting units to six at Carlisle Process Systems business operations, combining Carlisle Industrial Brake & Friction and Carlisle Motion Control under one management team, and combining Carlisle Tire & Wheel Company and Carlisle Power Transmission under one management structure. We will continue to execute improvement projects with a goal of increasing operating margins in each business segment. Carlisle maintains a continuous program of creating and realizing efficiencies within its existing operations, as well as pursuing acquisitions and divestitures as dictated by market conditions.
Sales and Net Earnings
Consolidated
Carlisles net sales of $2.11 billion in 2003 exceeded 2002 sales of $1.97 billion by 7%, or $136.9 million. Organic sales growth of $120.5 million, or 6%, included $22.0 million of favorable changes in foreign currency rates. Acquisition growth of $49.7 million in the Construction Materials, Automotive Components, and General Industry segments was partially offset by the sale of Carlisle Power Transmissions European transmission belt business in December 2002. Net sales for this operation in 2002 were $33.3 million. Increased net sales in the Construction Materials and General Industry segments accounted for most of the sales increase in 2003. Net sales in 2002 exceeded 2001 sales of $1.85 billion by 7%, or $121.8 million, primarily as a result of increased sales in the Industrial Components segment from Carlisle Tire & Wheel Company, and the full year effect of the 2001 acquisition of Dayco Industrial Power Transmission, renamed Carlisle Power Transmission in August 2001.
Net earnings in 2003 were $88.9 million, or $2.88 per share (diluted), compared to 2002 earnings of $72.4 million, or $2.37 per share (diluted), before the impact of a change in accounting principle required by Statement of Financial Accounting Standard (SFAS) 142. The improvement was due primarily to increased earnings in most of the Companys operating segments, except Automotive Components and Transportation Products. The evaluation of goodwill in 2002, required by SFAS 142, resulted in a reduction of the carrying value of goodwill for businesses in the Transportation Products and the General Industry segments. The effect of the evaluation resulted in a transitional charge to earnings of $43.8 million after-tax, or $1.43 per share (diluted). The impact of the goodwill impairment in 2002 reduced earnings from operations of $72.4 million to $28.6 million, or $0.94 per share (diluted). The goodwill reduction was reported as a change in accounting principle effective January 1, 2002.
The 2003 net earnings included $0.19 per share (diluted) of plant closure and severance expenses at operations in the Industrial Components, Automotive Components, Specialty Products, and General Industry segments. These
9
charges represented specific programs identified by Carlisle operations to reduce expense, improve productivity, and consolidate facilities. Although Carlisle does not have a formal restructuring plan, the Company continues to evaluate plant closure and cost reduction opportunities.
Net earnings in 2003 reflect a reduction in the Companys effective tax rate from 34.5% in 2002 and 2001, to 32.5% in 2003. The 2002 rate was before the impact of the SFAS 142 goodwill impairment. The lower tax rate had a favorable $0.09 per share (diluted) effect on 2003 net earnings.
Beginning in 2002, in accordance with SFAS 142, goodwill and indefinite-lived intangible assets were no longer amortized. This change had a positive impact of $8.4 million, or $0.28 per share in 2002. The impact on Earnings Before Interest and Income Taxes (EBIT or earnings) by segment in 2002 was as follows: Industrial Components, $2.9 million; Construction Materials, $0.9 million; Automotive Components, $1.7 million; Specialty Products, $0.3 million; Transportation Products, $1.7 million; General Industry, $7.4 million; and Corporate, $(2.2) million.
Net earnings in 2001 of $24.8 million or $0.82 per share (diluted) included a $21.5 million or $0.70 per share (diluted) after-tax restructuring charge recorded in the first quarter. The disappointing results in 2001 were primarily caused by steep declines in demand in many of the markets served by Carlisle. Lower earnings were experienced at most of the operations as management reduced production at several manufacturing operations to control inventory levels. Unabsorbed fixed overhead due to lower levels of production and pricing pressure to maintain market share also contributed to the decrease in earnings.
On May 30, 2003, Carlisle acquired Flo-Pac Corporation, a leading manufacturer of quality brooms, brushes, rotary brushes and cleaning tools for the sanitary maintenance industry. This acquisition is included in the General Industry segment as part of Carlisles FoodService and Sanitary Maintenance business.
During 2002, Carlisle completed one acquisition and one divestiture. MiraDri, a leading provider of waterproofing solutions for commercial and residential applications was acquired in October 2002, and is included in the Construction Materials segment. The European power transmission belt business, which was part of the Dayco Power Transmission business, acquired by Carlisle in August 2001, was sold in December 2002. The sale of the European power transmission business resulted in a $0.8 million pre-tax loss.
Six acquisitions were completed in 2001. These acquisitions were: (1) Stork Friesland B.V. and (2) Siersema Sheffers B.V., both Dutch-based designers and sellers of evaporators and spray dryers for milk powder processing, (3) EcoStar, Inc., a provider of synthetic roofing tiles for the steep-sloped roofing market, (4) Wincanton Engineering Ltd., a UK-based designer and manufacturer of processing equipment for the food, dairy and beverage industries, (5) Connecting Devices, Inc., a designer and manufacturer of RF/microwave connectors and cable assemblies serving the wireless, Internet infrastructure and optoelectronic switch markets, and (6) the Dayco Industrial Power Transmission business of Mark IV Industries, a manufacturer of transmission belts and accessories used by industrial customers to transfer power from motors and engines to motive and stationary drive systems.
10
Operating Segments
The following table summarizes segment net sales and EBIT. The amounts for each segment should be referred to in conjunction with the applicable discussion below.
All amounts in thousands, except percentages.
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
Increase (Decrease)
|
|
|||||||||
|
|
2003 |
|
2002 |
|
2001 |
|
Amount |
|
Percent |
|
Amount |
|
Percent |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Industrial Components |
|
$ |
631,209 |
|
$ |
621,569 |
|
$ |
476,310 |
|
$ |
9,640 |
|
1.6 |
% |
$ |
145,259 |
|
30.5 |
% |
Construction Materials |
|
579,369 |
|
488,047 |
|
464,932 |
|
91,322 |
|
18.7 |
% |
23,115 |
|
5.0 |
% |
|||||
Automotive Components |
|
209,062 |
|
235,822 |
|
251,963 |
|
(26,760 |
) |
-11.3 |
% |
(16,141 |
) |
-6.4 |
% |
|||||
Specialty Products |
|
129,055 |
|
121,922 |
|
128,902 |
|
7,133 |
|
5.9 |
% |
(6,980 |
) |
-5.4 |
% |
|||||
Transportation Products |
|
121,378 |
|
119,566 |
|
120,284 |
|
1,812 |
|
1.5 |
% |
(718 |
) |
-0.6 |
% |
|||||
General Industry (All other) |
|
438,091 |
|
384,354 |
|
407,086 |
|
53,737 |
|
14.0 |
% |
(22,732 |
) |
-5.6 |
% |
|||||
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
2,108,164 |
|
$ |
1,971,280 |
|
$ |
1,849,477 |
|
$ |
136,884 |
|
6.9 |
% |
$ |
121,803 |
|
6.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Earnings Before Interest and Income Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Industrial Components |
|
$ |
58,111 |
|
$ |
54,241 |
|
$ |
29,214 |
|
$ |
3,870 |
|
7.1 |
% |
$ |
25,027 |
|
85.7 |
% |
Construction Materials |
|
77,171 |
|
66,404 |
|
60,159 |
|
10,767 |
|
16.2 |
% |
6,245 |
|
10.4 |
% |
|||||
Automotive Components |
|
4,208 |
|
12,454 |
|
10,526 |
|
(8,246 |
) |
-66.2 |
% |
1,928 |
|
18.3 |
% |
|||||
Specialty Products |
|
4,240 |
|
(1,821 |
) |
4,559 |
|
6,061 |
|
332.8 |
% |
(6,380 |
) |
-139.9 |
% |
|||||
Transportation Products |
|
5,687 |
|
5,962 |
|
1,633 |
|
(275 |
) |
-4.6 |
% |
4,329 |
|
265.1 |
% |
|||||
General Industry (All other) |
|
16,477 |
|
11,230 |
|
11,381 |
|
5,247 |
|
46.7 |
% |
(151 |
) |
-1.3 |
% |
|||||
Corporate |
|
(19,700 |
) |
(20,819 |
) |
(50,427 |
) |
1,119 |
|
5.4 |
% |
29,608 |
|
58.7 |
% |
|||||
|
|
$ |
146,194 |
|
$ |
127,651 |
|
$ |
67,045 |
|
$ |
18,543 |
|
14.5 |
% |
$ |
60,606 |
|
90.4 |
2 |
Industrial Components
The 2% increase in net sales in 2003 above 2002 was a result of organic net sales growth of $42.9 million or 7%. This growth was partially offset by the divestiture of Carlisle Power Transmissions European belt business, which contributed $33.3 million of net sales in 2002. The organic net sales growth of 7% at Carlisle Tire & Wheel Company was primarily a result of higher ATV and consumer outdoor power equipment sales. In 2002 segment net sales increased as a result of the full year effect of acquiring the Dayco Industrial Power Transmission business in August 2001, and higher sales of lawn and garden tires and wheels, trailer tires and wheels, ATV tires, and higher aftermarket sales at Carlisle Tire & Wheel Company.
Carlisle Tire & Wheel Company accounted for the majority of the increase in 2003 earnings on improved sales volume, a favorable sales mix, and higher production volume. This was partially offset by higher costs for major raw material commodities, including natural rubber, synthetic rubber, and steel. Carlisle Power Transmission results in 2003 were marginally ahead of 2002 and included $0.7 million of severance and relocation costs. Carlisle Tire & Wheel Company accounted for 65% of the 2002 earnings improvement over 2001 as a result of increased sales, favorable raw material costs, cost reduction programs, manufacturing efficiencies realized through increased production volume, and the termination of goodwill amortization in 2002 ($2.9 million). The 2002, earnings results included an $0.8 million loss on the sale of Carlisle Power Transmissions European transmission belt business. Earnings for 2001 were impacted by extremely soft markets, price concessions and lower production. Net sales and earnings in this segment are generally higher in the first half of the year due to peak sales volume in the outdoor power equipment market.
11
Construction Materials
Most of the 19% increase in 2003 net sales was attributable to organic sales growth of 13%, with accretive growth from acquisitions accounting for the remaining 6%. The organic sales growth was primarily due to sales of domestic roofing membranes, insulation products and residential roofing tiles. Carlisle SynTec benefited from higher precipitation and lower temperatures during the winter on the east coast, conditions not seen in approximately three years. Heavy spring rain also contributed to increased re-roofing demand. In addition, as the economy showed signs of recovery in the second half of 2003, commercial construction continued its momentum from the first half of the year. The acquisition of MiraDri in the fourth quarter 2002 accounted for 29% of the improvement in 2002 net sales. Overall, 2002 was a difficult year for the Construction Materials segment as commercial construction in the United States was down 16%, and industry shipments of ethylene propylene diene terpolymer (EPDM) or rubber roofing membrane declined approximately 15%. Carlisle SynTec was able to mitigate this decline in demand with higher sales of thermoplastic polyolefin (TPO) roofing membrane and increased sales of niche products. Additionally, EPDM sales in the recreational vehicle and pond lining markets were substantially higher in 2002 than in the prior year, and sales of EcoStar residential roofing tiles showed continued growth.
The 16% improvement in 2003 segment earnings was primarily a result of increased sales volume and a $2.6 million gain on insurance recoveries on fire losses at two small coatings and waterproofing facilities. Partially offsetting this increase was an $0.8 million earnings decline related to its European roofing joint venture (Icopal). The 10% increase in 2002 segment earnings over 2001 was a result of lower raw material costs, cost reduction programs and improved production efficiencies at Carlisle SynTec, increased earnings at Icopal, the acquisition of MiraDri, and the termination of goodwill amortization in 2002 ($0.9 million). Net sales and earnings in this segment are generally higher in the second and third quarters of the year due to increased construction activity during these periods.
Automotive Components
The 11% sales decline in 2003 was due to a reduction in North American vehicle production at Carlisle Engineered Products major customers, customer design changes, and negotiated price reductions as part of long-term agreements. In 2002 segment net sales were down 6% from 2001 due to price concessions and exiting lower margin products.
The 66% decline in 2003 segment earnings was primarily due to plant closure costs that accounted for 43% of the decline in earnings and included direct closure and severance costs and specific transition costs associated with the August 2003 shutdown of Carlisle Engineered Products Erie-Bundy Park, Pennsylvania facility. The remaining earnings decline was a result of lower sales, selling price reductions, and lower factory utilization. The 18% increase in 2002 segment earnings from 2001 was due to the restructuring programs completed in the prior year and the termination of goodwill amortization in 2002 ($1.7 million). Net sales and earnings in the Automotive Components segment are generally higher in the first six months of the year due to the automotive build schedule.
Specialty Products
Net sales for this segment in 2003 were 6% higher than 2002. Most of the increase was due to higher sales of on-highway products to the heavy-duty truck and trailer and brake and axle manufacturers, and aftermarket distribution. Segment sales in 2002 were 5% below 2001, primarily due to a sales decline at Carlisle Industrial Brake & Friction attributed to weak product demand combined with inventory reduction programs at several large customers in both industrial friction and brake components. Carlisle Motion Control net sales were also lower in 2002, with sales to original equipment manufacturers and distributors accounting for most of the decrease in volume.
12
The 2003 segment earnings include $0.6 million of plant closure and severance costs. The negative earnings in 2002 were primarily related to the Carlisle Motion Control operation. Weak demand in the industrial and mobile equipment markets, lower aftermarket sales, reduced production levels, a pension curtailment charge and other shutdown and relocation expenses associated with closing its Ridgway, Pennsylvania facility, and startup costs at its South Hill, Virginia facility, contributed to the unfavorable results at Carlisle Motion Control. Carlisle Industrial Brake & Frictions 2002 earnings were below 2001 earnings due to competitive pricing pressures, lower demand for heavy construction and industrial equipment, and relocation and startup costs. Earnings in 2002 included the favorable effect of the termination of goodwill amortization ($0.3 million).
Segment net sales in 2003 were slightly above 2002 as a result of higher demand for steel dump, small construction, and specialized trailers. The decrease in net sales from 2001 to 2002 was primarily due to exiting low margin business. Improved sales in 2002 of stainless steel tank trailers, OEM-pavers, agricultural live-bottom and construction trailers were offset by lower sales of specialized and commercial trailers and van chassis.
Segment earnings in 2003 were 5% less than 2002 earnings. The lower earnings reflect an unfavorable sales mix of low-margin products. The substantial increase in segment earnings in 2002 over 2001 was generated from production efficiency improvements, increased plant utilization, improved product mix, and the termination of goodwill amortization in 2002 ($1.7 million).
General Industry (All Other)
General Industry segment net sales in 2003 were 14% above 2002 net sales with Carlisle Process Systems accounting for most of the growth in this segment with 2003 net sales 37% higher than 2002. This improvement was a result of increased demand for cheese and powder equipment. Carlisle Walkers net sales improved 16% in 2003 due to increased sales at its Johnson Truck Bodies operation for controlled climate truck bodies sold to the warehouse-to-retail store delivery and home food delivery markets. Carlisle FoodServices 2003 net sales increased 10% from 2002 as a result of acquiring Flo-Pac in May 2003. The 2003 economic recovery was not felt in the Foodservice Equipment and Supply Industry as overall restaurant traffic was below prior year levels and spending in the institutional non-commercial market segment was lower in 2003. Tensolites sales in 2003 were slightly less than 2002 due to the continued downturn in the commercial aerospace and telecommunications industries.
Segment net sales in 2002 were down 6% from 2001 as a result of sales declines at Carlisle Process Systems and Tensolite. Weak market conditions in the dairy business for cheese and powder products was the primary reason for a 33% reduction in Carlisle Process Systems net sales, as manufacturers were reluctant to invest in new capital equipment. Tensolites net sales declined 17% in 2002, with two-thirds of the decrease in the commercial aircraft industry. The remaining decrease in sales at Tensolite was a result of a severe downturn in the electronic and telecommunication markets. Partially offsetting these decreases were net sales increases of 15% at Carlisle Walker and 12% at Carlisle FoodService.
Segment earnings in 2003 improved 47% over 2002. Most of the earnings improvement in 2003 was at Carlisle Process Systems due to the increase in sales volume and a $2.1 million foreign exchange gain on the settlement of loans denominated in foreign currencies. The higher earnings at Tensolite reflect productivity improvements, better utilization of manufacturing capacity, and lower selling and administrative expenses. The earnings improvement at Carlisle FoodService was due to the acquisition of Flo-Pac. Segment earnings include a $3.5 million charge for plant closure and severance costs at Carlisle Walker, Tensolite, and Carlisle FoodService; a $2.2 million charge at a European operation in the Carlisle Walker operation at its Life Sciences organization to correct previously reported earnings in calendar year 2002; and a $0.9 million impairment charge recorded in accordance with SFAS 144. The charge was incurred on a group of assets at Carlisle FoodService and was based on the present value of future cash flows.
13
Segment earnings in 2002 were slightly below 2001 earnings. Higher earnings at Carlisle FoodService and Carlisle Walker were offset by reduced earnings at Carlisle Process Systems and Tensolite. The significant decrease in sales at Carlisle Process Systems resulted in the earnings decline at this operation, with the decrease in earnings at Tensolite a result of reduced sales, lower production to maintain inventories in line with sales demand, and the closing its Andover, Massachusetts plant. Segment earnings in 2002 benefited by $7.4 million from the termination of goodwill amortization following the adoption of SFAS 142 as compared to 2001, but included $4.6 million in shutdown and relocation related costs.
Financial Results
Gross margin (net sales less cost of goods sold expressed as a percent of sales) was 17.8% in 2003, compared to 18.2% in 2002, and 17.4% in 2001. Gross margin in 2003 included plant closure, relocation, and severance expenses of $5.9 million in the Industrial Components, Automotive Components, Specialty Products, and General Industry segments. Raw material costs also trended higher in 2003, primarily as a result of increases in the Industrial Components segment. The margin improvement in 2002 from 2001 reflects improved operating efficiency through cost reduction programs, increased production volume and lower raw material costs, partially offset by plant closure, relocation, and severance cost in 2002 of approximately $3.8 million. Plant utilization of 73% in 2003 was above 68% in 2002 and was a result of increased production and improved plant efficiencies.
Selling and administrative expenses of $213.8 million in 2003 were slightly above $211.8 million in 2002 and were 2% above 2001 of $207.1 million. The divestiture of Carlisle Power Transmissions European belt business resulted in a $6.8 million reduction in 2003 expense, but was partially offset by $5.8 million of selling and administrative expense associated with the Companys acquisitions. The remaining increase in expense from 2002 was a result of increased sales volume and severance costs. Selling and administrative expenses, as a percent of net sales, were 10.1% in 2003, 10.7% in 2002, and 11.2% in 2001. The decrease in expenses, as a percent of net sales, in 2003 reflects cost control measures taken at Carlisle operations. The decrease in 2003 and 2002 expenses from 2001, as a percent of net sales, was primarily a result of the adoption of SFAS 142 that disallowed the amortization of goodwill and indefinite-lived assets beginning in 2002.
Research and development expenses of $20.2 million in 2003 was slightly above $19.9 million in 2002. The increase in 2002 from $17.3 million in 2001 was primarily the full year impact of acquiring Dayco Power Transmission in August 2001.
Other income of $4.7 million in 2003 compares to other expense of $0.1 million in 2002. Other income in 2003 includes a $2.6 million gain from insurance recoveries and a $2.1 million foreign exchange gain on the settlement of long-term loans denominated in foreign currencies. Other income of $2.4 million in 2001 included a $5.2 million pre-tax gain on the sale of the Companys remaining interest in a leasing joint venture, partially offset by plant closure costs.
Interest expense, net of $14.5 million in 2003 was below $17.2 million in 2002 as a result of reduced average borrowings, interest income from Carlisles roofing joint venture in Europe, and interest income on a tax refund. The 2002 net interest expense decreased from $29.1 million in 2001 due to lower interest rates and reduced average borrowings as a result of the cash generated from operations, and increased borrowings under the accounts receivable securitization program.
Income taxes, as a percent of income before taxes, were at an effective tax rate of 32.5% in 2003 compared to 34.5% in 2002 and 2001. The 2002 rate excludes the effect of the SFAS 142 goodwill impairment. The lower rate in 2003 was a result of favorable federal and state audit settlements finalized in 2003 for tax returns filed through calendar year 1999.
Receivables of $218.8 million increased $75.0 million from $143.8 million at the end of 2002. The increase was primarily a result of higher sales volume and a decrease in the utilization of the accounts receivable securitization
14
program bringing total receivables sold through the program to $67.0 million at the end of 2003, compared to $100.0 million at year-end 2002. The decreased utilization of the securitization program was a result of Carlisles improved leverage position as compared to 2002. Receivables declined 21% in 2002 from $181.6 million in 2001 as a result of a $37.0 million increase in the utilization of the accounts receivable securitization program initiated in 2001.
Inventories , valued by the last-in, first-out (LIFO) method (54%) and the first-in, first-out (FIFO) method (46%), were $263.3 million at the end of 2003. The $14.5 million increase from 2002 of $248.8 million was primarily due to acquisitions of $9.2 million and higher inventories in the General Industry and Construction Materials segment to support increased sales demand. In 2002, inventories increased slightly from 2001 of $246.2 million.
Accounts payable of $178.0 million in 2003 were above $148.6 million in 2002 due primarily to increased purchases of materials and supplies to keep pace with the increase in sales volume. Accounts payable in 2002 were slightly below $154.5 million in 2001.
Accrued expenses of $137.8 million at the end of 2003 were 15% above December 31, 2002 of $119.9 million primarily as a result of higher accruals for taxes, insurance, and workers compensation.
Other liabilities of $105.1 million in 2003 were 31% above $80.5 million in 2002. The increase was primarily a result of higher pension and deferred tax liabilities.
Capital expenditures of $42.2 million in 2003 were 7% above $39.3 million in 2002. The major capital expenditures in 2003 included new plants to produce coating and waterproofing products and insulation products for Carlisle SynTec, capacity expansion for the manufacture of transmission belts in China for Carlisle Power Transmission, and the installation of a fully integrated ERP system at several operations at Carlisle Tire & Wheel Company . Capital expenditures in 2002 were $26.6 million lower than 2001 capital spending of $65.9 million. The higher spending in 2001 related to capital investments to expand capacity for the manufacture of heavy duty friction products, TPO roofing membrane, and coatings and waterproofing products. In addition, the Company completed the expansion of its facilities in China and Trinidad related to Carlisle Tire and Wheel Company.
Liquidity and Capital Resources
Sources and Uses of Cash
In thousands |
|
2003 |
|
2002 |
|
2001 |
|
|||
Net cash provided by operating activities |
|
$ |
116,943 |
|
$ |
225,897 |
|
$ |
203,479 |
|
Net cash used in investing activities |
|
(72,065 |
) |
(55,297 |
) |
(218,006 |
) |
|||
Net cash (used in) provided by financing activities |
|
(53,708 |
) |
(169,782 |
) |
1,524 |
|
|||
Effect of exchange rate changes on cash |
|
910 |
|
972 |
|
56 |
|
|||
Change in cash and cash equivalents |
|
$ |
(7,920 |
) |
$ |
1,790 |
|
$ |
(12,947 |
) |
The decrease in cash provided by operating activities of 48% for the twelve month period ended December 31, 2003 as compared with the same period ended December 31, 2002 was partially due to the Companys improved leverage and decreased need for capital provided by the securitization program. Carlisle repurchased $33.0 million, net, in receivables previously sold under the program. An increase in current and long-term receivables of $39.0 million along with a $5.4 million increase in inventories, both driven by higher sales volume, also contributed to the year-over-year reduction in cash provided by operating activities. Tax refunds of approximately $21.0 million, the receipt of $7.8 million from the termination of interest rate swaps and a $36.9 million increase in the utilization of the securitization program contributed to the 2002 operating cash flow. Operating cash flow for 2001 was favorably impacted by a reduction in receivables of $33.1 million for receivables sold through the securitization program as well as a $58.8 million reduction in inventories, excluding
15
the effect of acquisitions. The 2001 decrease in inventories reflected the Companys efforts to effectively manage working capital in relationship to Carlisles overall sales volume.
The increase in cash used in investing activities in 2003 is due to the aforementioned higher capital expenditures and acquisition costs, as well as 2002 expenditures being partially offset by $10.7 million in proceeds for the sale of property, equipment and businesses. Acquisition activity and capital spending was significantly higher in 2001 than in both 2002 and 2003. Cash generated from operations as well as the proceeds received from the sale of treasury shares and the exercise of stock options allowed the Company to reduce debt by $42.9 million during 2003.
Capital expenditures are planned to increase by approximately $30.0 million in 2004. The projected increase is primarily a result of manufacturing expansions in the Construction Materials segment to support growth in its TPO roofing membrane, insulation, and coatings and waterproofing product lines. The Company also expects pension contributions in 2004 to be significantly higher than the $4.8 million in contributions for 2003. Contributions for 2004 could range from an estimated $8.1 million to $14.1 million, with the ultimate contribution dependent upon the outcome of proposed congressional pension funding relief.
Management also monitors the Companys free cash flow defined as cash from operating activities less dividends, capital expenditures and the effect of the Companys securitization program. This measurement is one indicator of Carlisles ability to meet its debt payment obligations as well as its ability to finance future growth of the business through acquisitions and capital investment. The decrease in free cash flow for 2002 to 2003 is due to the aforementioned increase in receivables and inventories to support higher sales volumes as well as 2002 including the previously discussed tax refunds and proceeds from the termination of interest rate swaps. Free cash flow in 2001 reflected significant decreases in receivables and inventories.
In thousands |
|
2003 |
|
2002 |
|
2001 |
|
|||
Net cash provided by operating activities |
|
$ |
116,943 |
|
$ |
225,897 |
|
$ |
203,479 |
|
Dividends |
|
(26,695 |
) |
(25,887 |
) |
(24,883 |
) |
|||
Capital expenditures |
|
(42,241 |
) |
(39,336 |
) |
(65,946 |
) |
|||
Receivable securitization program |
|
33,000 |
|
(36,903 |
) |
(33,097 |
) |
|||
Free cash flow |
|
$ |
81,007 |
|
$ |
123,771 |
|
$ |
79,553 |
|
Carlisle maintains a $250.0 million revolving credit facility, which was fully available at December 31, 2003. The Company also maintains with various financial institutions $35.0 million in committed lines of credit and a $55.0 million uncommitted line of credit. As of December 31, 2003, $90.0 million was available under these lines. At December 31, 2003, $58.0 million was available under the Companys $125.0 million receivables facility.
Debt Instruments, Guarantees and Covenants
The following table quantifies certain contractual cash obligations and commercial commitments at December 31, 2003:
In thousands |
|
Total |
|
2004 |
|
2005 |
|
2006 |
|
2007 |
|
2008 |
|
Thereafter |
|
||||||||
Short-term credit lines and long-term debt |
|
$ |
295,552 |
|
$ |
7,505 |
|
$ |
1,096 |
|
$ |
590 |
|
$ |
150,339 |
|
$ |
113,081 |
|
$ |
22,941 |
|
|
Noncancellable operating leases |
|
59,321 |
|
12,380 |
|
10,738 |
|
9,403 |
|
6,933 |
|
5,157 |
|
14,710 |
|
||||||||
Purchase Obligations |
|
12,400 |
|
12,400 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Commitments |
|
$ |
367,273 |
|
$ |
32,285 |
|
$ |
11,834 |
|
$ |
9,993 |
|
$ |
157,272 |
|
$ |
118,238 |
|
$ |
37,651 |
|
|
16
The Company has entered into long-term purchase agreements for certain key raw materials. Commitments under these agreements total approximately $12.4 million and expire as of December 31, 2004.
At December 31, 2003, letters of credit amounting to $38.0 million were outstanding, primarily to provide security under insurance arrangements and certain borrowings.
The Company has financial guarantee lines totaling $27.7 million in place for certain of its operations in Asia and Europe to facilitate working capital needs, customer performance, payment obligations and warranty obligations. At December 31, 2003, the Company had issued guarantees of $13.7 million, of which $11.1 million represents amounts recorded in current liabilities in the Companys Consolidated Balance Sheet. The fair value of these guarantees is estimated to equal the amount of the guarantees at December 31, 2003.
Under the Companys various debt and credit facilities, the Company is required to meet various restrictive covenants and limitations, including certain net worth and cash flow ratios, all of which were complied with in 2003 and 2002.
Off-Balance Sheet Arrangements
As previously discussed, Carlisle maintains a receivables securitization program with a financial institution whereby it sells on a continuous basis an undivided interest in certain eligible trade accounts receivable. The Company has formed a wholly-owned, special purpose, bankruptcy-remote subsidiary (SPV) for the sole purpose of buying and selling receivables generated by the Company. The financial position and results of operations of the SPV are consolidated with the Company. The trade accounts receivable are transferred to the SPV irrevocably and without recourse, and the SPV may from time to time sell an undivided interest in these receivables of up to $125.0 million. In accordance with generally accepted accounting principles, the Company recognizes the transactions under this program as a true sale, whereas creditors and rating agencies may view advances on the sale of such interests as a liability. At December 31, 2003 and 2002, the Company had received $67.0 million and $100.0 million, respectively, in advances under this program. Carlisle entered into the securitization program in September 2001 to increase the diversity of its capital funding and to reduce its cost of capital.
Cash Management
Carlisle believes that its operating cash flows, credit facilities, accounts receivable securitization program, lines of credit, and leasing programs provide adequate liquidity and capital resources to fund ongoing operations, expand existing lines of business and make strategic acquisitions. However, the ability to maintain existing credit facilities and access the capital markets can be impacted by economic conditions outside the Companys control. The Companys cost to borrow and capital market access can be impacted by debt ratings assigned by independent rating agencies, based on certain credit measures such as interest coverage, funds from operations and various leverage ratios.
Market Risk
Carlisle is exposed to the impact of changes in interest rates and market values of its debt instruments, changes in raw material prices and foreign currency fluctuations. From time to time the Company may manage its interest rate exposure through the use of interest rate swaps to reduce volatility of cash flows, impact on earnings and to lower its cost of capital. During 2003, the Company executed $75.0 million in notional amount interest rate swaps, which have been designated as fair value hedges. The purpose of these contracts is to hedge the market risk associated with Carlisles fixed rate debt. The Company continues to monitor its interest rate risk and will execute and terminate hedges as appropriate.
17
The Companys operations use certain commodities such as plastics, carbon black, synthetic and natural rubber and steel. As such, the Companys cost of operations is subject to fluctuations as the markets for these commodities change. The Company monitors these risks, but currently has no derivative contracts in place to hedge these risks.
International operations are exposed to translation risk when the local currency financial statements are translated into U.S. dollars. Carlisle monitors this risk, but at December 31, 2003 had no translation risk hedges in place. Overall, currency valuation risk is considered minimal; however, at December 31, 2003 the Company did have currency hedges in place with a total notional amount of $13.6 million for the purpose of hedging cash flow risk associated with certain customer payment schedules. Less than 15% of the Companys 2003 revenues are in currencies other than the U.S. dollar.
Environmental
Carlisle management recognizes the importance of the Companys responsibilities toward matters of environmental concern. Programs are in place to monitor and test facilities and surrounding environments and, where practical, to recycle materials. Carlisle has not incurred material charges relating to environmental matters in 2003 or in prior years, and none are currently anticipated.
Backlog
Carlisle manages and calculates backlog utilizing various methods, each consistent within its respective industry. Backlog is dependant on market conditions, which vary greatly between industries and throughout the year. While management utilizes this measurement to monitor and plan future operations, its variant nature is considered in conjunction with other operational and market conditions. Total backlog at December 31, 2003 of $419.2 million was 37% above $305.1 million in 2002. Most of the increase from 2002 was higher backlog in the General Industry segment at Carlisle Process Systems. The backlog at Carlisle Process Systems included a $70.0 million order received in December 2003 for a new 300,000 square foot cheese and whey production facility to be constructed in Clovis, New Mexico. Due to the nature of the orders at Carlisle Process Systems, backlog can include capital equipment orders for a period of twelve to twenty-four months.
Exit and Disposal Activities
During 2003, the Company incurred plant closure and severance expense of $8.9 million ($6.0 million after-tax, or $0.19 per diluted share) related to certain plant and office closures in the Industrial Components, Automotive Components, Specialty Products, and General Industry segments. Of this amount, $4.4 million related to the payment of non-recurring termination benefits. The remaining $4.5 million related to costs associated with exiting the facilities including the write-off of fixed assets. These charges impacted cost of goods sold by $5.9 million, selling and administrative expenses by $1.6 million and other expenses by $1.4 million.
In 2002, Carlisle incurred plant closure and severance expense of $6.9 million ($4.5 million after-tax, or $0.15 per diluted share) related to plant closures in the Specialty Products and General Industry segments. Most of the expense related to the write-off of inventory and fixed assets, and equipment relocation. These charges impacted cost of goods sold by $3.8 million, selling and administrative expenses by $0.8 million and other expenses by $2.3 million.
In the first quarter 2001, the Company recorded a $21.5 million after-tax, or $0.70 per share (diluted), restructuring charge to earnings. This charge was primarily composed of costs related to exiting and realigning facilities in the Automotive Components and Specialty Products segments. Approximately $16.1 million of the total after-tax charge was related to machinery, equipment, and goodwill write-offs. The remainder represented anticipated cash expenses from involuntary employee terminations and other restructuring costs. As of December 31, 2002, the Company had completed the terminations under the plan and paid approximately $7.0 million pre-tax
18
for involuntary termination benefits. These payments have been charged against the restructuring liability established in the first quarter of 2001.
Critical Accounting Policies
Carlisles significant accounting policies are more fully described in the Notes to Consolidated Financial Statements. Certain of Carlisles accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, our observation of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. The Company considers certain accounting policies related to revenue recognition, estimates of reserves for receivables and inventory, deferred revenue and extended product warranty, valuation of long-lived assets, self-insurance retention, and pensions and other post-retirement plans to be critical policies due to the estimation processes involved.
Revenue Recognition. Almost all of Carlisles consolidated revenues are recognized when pervasive evidence of an arrangement exists, goods have been shipped (or services have been rendered), the customer takes ownership and assumes risk of loss, collection is probable, and the sales price is fixed or determinable. Provisions for discounts and rebates to the customers and other adjustments are provided for at the time of sale as a deduction to revenue. Approximately 6% of 2003 revenue was recognized under the percentage-of-completion method. The products sold under the percentage-of- completion method tend to be sold pursuant to long-term, generally fixed-priced contracts that may extend up to 24 months in duration. The percentage-of-completion method results in the recognition of consistent profit margins over the life of a contract. Amounts recognized in revenue under this method are calculated using the percentage of construction cost completed, on a cumulative cost-to-total cost basis. Cumulative revenues recognized may be less or greater than cumulative costs and profits billed at any point in time during a contracts term.
Allowance for Doubtful Accounts. Carlisle performs ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customers current credit worthiness, as determined by our review of their credit information. Allowances for doubtful accounts are estimated based on the evaluation of potential losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. The reserve for doubtful accounts was $7.2 million at December 31, 2003 and $8.1 million at December 31, 2002. Changes in economic conditions in specific markets in which the Company operates could have an effect on reserve balances required.
Inventories. Carlisle values our inventory at the lower of the actual cost to purchase and/or manufacture the inventory or the current estimated market value of the inventory. We regularly review inventory quantities on hand for excess and obsolete inventory based on our estimated forecast of product demand and production requirements for the next twelve months and issues related to specific inventory items. A significant increase in the demand for our products could result in a short-term increase in the cost of inventory purchases while a significant decrease in demand could result in an increase in the amount of excess inventory on hand.
Deferred Revenue and Extended Product Warranty. The Company offers extended warranty contracts on sales of certain products. All revenue for the sale of these contracts is deferred and amortized on a straight-line basis over the life of the contracts. Costs of services performed under these contracts are charged to established reserves. The Company estimates warranty costs for claims filed using standard quantitative measures based on historical warranty claim experience. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses relating to warranty issues.
Valuation of Long-Lived Assets and Acquired Intangibles. Carlisle adopted SFAS 142 effective January 1, 2002. SFAS 142 requires annual valuations of each applicable underlying business as described below. The
19
business valuation reviews conducted in 2002 resulted in a reduction of the carrying value of goodwill for the Transportation Products segment and the General Industry segment. The goodwill reduction was reported as a cumulative effect of a change in accounting principle retroactive to the beginning of 2002 and resulted in a transitional charge to earnings, net of taxes, of $43.8 million, or $1.43 per share (diluted). With the adoption of this standard, beginning in 2002, goodwill is not amortized. Goodwill amortization was $8.4 million after-tax or $0.28 per share (diluted) in 2001. At December 31, 2003 and December 31, 2002, total assets included $302.6 million and $296.7 million of goodwill, respectively.
As a result of SFAS 142, the Company no longer amortizes goodwill but instead performs a review of goodwill for impairment annually, or earlier, if indicators of potential impairment exist. The fair value of the assets, including goodwill balances, is determined based on discounted estimated future cash flows. The assumptions used to estimate fair value include managements best estimates of future growth rates, capital expenditures, discount rates, and market conditions. If the estimated fair value of a business unit with goodwill is determined to be less than its book value, the Company is required to estimate the fair value of all identifiable assets and liabilities of that business unit. This requires valuation of certain internally developed and unrecognized assets. Once this process is complete, the amount of goodwill impairment, if any, can be determined. These valuations can be significantly affected by estimates of future performance and discount rates over a relatively long period of time, market price valuation multiples and marketplace transactions in related markets. These estimates will likely change over time. Some of our businesses operate in cyclical industries and the valuation of these businesses can be expected to fluctuate as a result of their cyclicality. SFAS 142 does not permit retroactive application to years prior to adoption. Therefore, earnings beginning in 2002 tend to be higher than earlier periods as a result of this accounting change, except for the effects of the impairment provision in current results. We believe it is inappropriate to conclude whether the likelihood of any impairment charge resulting from subsequent annual reviews is more likely in any business segment compared to another segment. Any resulting impairment loss could have an adverse impact on our financial condition and results of operations.
Self Insurance Retention. The Company maintains self-retained liabilities for workers compensation, medical and dental, general liability, property and product liability claims up to applicable retention limits. The Company estimates these retention liabilities utilizing actuarial methods and loss development factors. The Companys historical loss experience is considered in the calculation. The Company is insured for losses in excess of these limits.
Pensions and Other Post-Retirement Plans. Carlisle maintains defined benefit retirement plans for the majority of its employees. The annual net periodic expense and benefit obligations related to these plans are determined on an actuarial basis. This determination requires assumptions to be made concerning the discount rate, long-term return on plan assets and increases to compensation levels. These assumptions are reviewed periodically by management in consultation with its independent actuary. Changes in the assumptions to reflect actual experience can result in a change in the net periodic expense and accrued benefit obligations. The defined benefit plans assets consist primarily of publicly-listed common stocks and corporate bonds, and the market value of these assets is determined under the fair value method. At December 31, 2003, plan assets were allocated 67% in equity securities and 33% in fixed income securities. The Company uses a September 30 measurement date for valuation purposes. Deviations of actual results as compared to expected results are recognized over a five-year period. The expected rate of return on plan assets was 8.75% and the discount rate was 6.10% for the 2003 valuation. While the Company believes 8.75% is a reasonable expectation based on the plan assets mix of fixed income and equity investments, significant differences in our actual experience or significant changes in our assumptions may materially affect the pension obligations and our future expense.
Carlisle also has a limited number of unfunded post-retirement benefit programs that provide certain retirees with medical and prescription drug coverage. The annual net periodic expense and benefit obligations of these programs are also determined on an actuarial basis and are subject to assumptions on the discount rate and increases in compensation levels. The plans have maximum obligation limits for the Company and are therefore not subject to health care cost trend rate assumptions. Like the defined benefit retirement plans, these plans
20
assumptions are reviewed periodically by management in consultation with its independent actuary. Changes in the assumptions can result in a change in the net periodic expense and accrued benefit obligations.
New Accounting Pronouncements
The adoption of new accounting pronouncements in 2003 did not have a material impact on the Companys statement of earnings or financial position. The pronouncements included: SFAS No. 143, Accounting for Asset Retirement Obligations; Financial Accounting Standards Board Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees of Indebtedness of Others; SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities; and SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.
In December 2003, the FASB issued Interpretation No. 46(R) (FIN 46R), Consolidation of Variable Interest Entities. This interpretation addresses the consolidation of Variable Interest Entities (VIEs) as defined by FIN 46R. The Company will be required to apply FIN 46R to variable interests in VIEs created after December 31, 2003. For variable interests in VIEs created before January 1, 2004, this interpretation will be applied as of March 31, 2004. The Company is evaluating the impact of applying FIN 46R but has not yet completed the analysis. It is not expected that the adoption of this interpretation will have a material impact on the Companys statement of earnings or financial position.
In December 2003, FASB issued SFAS No. 132(R), Employers Disclosures about Pensions and Other Postretirement Benefits. The statement replaces SFAS No. 132, Employers Disclosures about Pensions and Other Postretirement Benefits. The disclosure provisions of this standard have been adopted by the Company.
In January 2004, FASB issued FASB Staff Position No. FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the FSP). The Company has elected to defer accounting for the effect of the Act on its post-retirement plans as provided for in the FSP, although the effect is expected to have an immaterial impact on the Companys earnings and financial position.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are made based on known events and circumstances at the time of publication, and as such, are subject in the future to unforeseen risks and uncertainties. It is possible that the Companys future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as: increasing price and product/service competition by foreign and domestic competitors, including new entrants; technological developments and changes; the ability to continue to introduce competitive new products and services on a timely, cost effective basis; the Companys mix of products/services; increases in raw material costs which cannot be recovered in product pricing; domestic and foreign governmental and public policy changes including environmental regulations; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the successful integration and identification of the Companys strategic acquisitions; the cyclical nature of the Companys businesses; and the outcome of pending and future litigation and governmental proceedings. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. Further, any conflict in the international arena may adversely affect the general market conditions and the Companys future performance. The Company undertakes no duty to update forward-looking statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Information concerning market risk is set forth in Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations under the heading Market Risk.
21
Item 8. Financial Statements and Supplementary Data.
Consolidated Statements of Earnings and Shareholders Equity and Other Comprehensive Income
For the years ended December 31. In thousands except treasury shares and per share data.
|
|
2003 |
|
2002 |
|
2001 |
|
|||
Net sales |
|
$ |
2,108,164 |
|
$ |
1,971,280 |
|
$ |
1,849,477 |
|
Cost and expenses: |
|
|
|
|
|
|
|
|||
Cost of goods sold |
|
1,732,654 |
|
1,611,805 |
|
1,527,620 |
|
|||
Selling and administrative expenses |
|
213,810 |
|
211,802 |
|
207,103 |
|
|||
Research and development expenses |
|
20,219 |
|
19,929 |
|
17,325 |
|
|||
Restructuring charges |
|
|
|
|
|
32,811 |
|
|||
Other (income) and expense, net |
|
(4,713 |
) |
93 |
|
(2,427 |
) |
|||
|
|
|
|
|
|
|
|
|||
Earnings before interest and income taxes |
|
146,194 |
|
127,651 |
|
67,045 |
|
|||
Interest expense, net |
|
14,461 |
|
17,151 |
|
29,120 |
|
|||
|
|
|
|
|
|
|
|
|||
Earnings before income taxes and cumulative effect of change in accounting principle |
|
131,733 |
|
110,500 |
|
37,925 |
|
|||
Income taxes |
|
42,813 |
|
38,122 |
|
13,084 |
|
|||
|
|
|
|
|
|
|
|
|||
Income before cumulative effect of change in accounting principle |
|
88,920 |
|
72,378 |
|
24,841 |
|
|||
Goodwill impairment, net of taxes of $12,072 |
|
|
|
(43,753 |
) |
|
|
|||
|
|
|
|
|
|
|
|
|||
Net Income |
|
$ |
88,920 |
|
$ |
28,625 |
|
$ |
24,841 |
|
Earnings per share - Basic |
|
|
|
|
|
|
|
|||
Income before cumulative effect of change in accounting principle |
|
$ |
2.90 |
|
$ |
2.38 |
|
$ |
0.82 |
|
Cumulative effect of change in accounting principle |
|
|
|
(1.44 |
) |
|
|
|||
|
|
|
|
|
|
|
|
|||
Net Income |
|
$ |
2.90 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Earnings per share - Diluted |
|
|
|
|
|
|
|
|||
Income from continuing operations |
|
$ |
2.88 |
|
$ |
2.37 |
|
$ |
0.82 |
|
Cumulative effect of change in accounting principle |
|
|
|
(1.43 |
) |
|
|
|||
Net Income |
|
$ |
2.88 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|||
Basic |
|
30,705 |
|
30,441 |
|
30,260 |
|
|||
Effect of dilutive stock options |
|
158 |
|
142 |
|
190 |
|
|||
Diluted |
|
30,863 |
|
30,583 |
|
30,450 |
|
|
|
Comprehensive
|
|
Common
|
|
Additional
|
|
Accumulated
|
|
Retained
|
|
Cost of
|
|
Unearned
|
|
Total
|
|
|||||||||||
Balance at December 31, 2000 |
|
|
|
39,331 |
|
10,268 |
|
(4,624 |
) |
618,595 |
|
(115,691 |
) |
|
|
547,879 |
|
|||||||||||
Net income |
|
$ |
24,841 |
|
|
|
|
|
|
|
24,841 |
|
|
|
|
|
24,841 |
|
||||||||||
Other comprehensive loss, net of tax |
|
(5,242 |
) |
|
|
|
|
(5,242 |
) |
|
|
|
|
|
|
(5,242 |
) |
|||||||||||
Comprehensive Income |
|
$ |
19,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends - $0.82 per share |
|
|
|
|
|
|
|
|
|
(24,883 |
) |
|
|
|
|
(24,883 |
) |
|||||||||||
Exercise of stock options & other, net of tax |
|
|
|
|
|
7,307 |
|
|
|
|
|
5,232 |
|
|
|
12,539 |
|
|||||||||||
Purchase of 389,246 treasury shares |
|
|
|
|
|
|
|
|
|
|
|
(14,850 |
) |
|
|
(14,850 |
) |
|||||||||||
Balance at December 31, 2001 |
|
|
|
39,331 |
|
17,575 |
|
(9,866 |
) |
618,553 |
|
(125,309 |
) |
|
|
540,284 |
|
|||||||||||
Net income |
|
$ |
28,625 |
|
|
|
|
|
|
|
28,625 |
|
|
|
|
|
28,625 |
|
||||||||||
Other comprehensive income, net of tax |
|
175 |
|
|
|
|
|
175 |
|
|
|
|
|
|
|
175 |
|
|||||||||||
Comprehensive Income |
|
$ |
28,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends - $0.85 per share |
|
|
|
|
|
|
|
|
|
(25,887 |
) |
|
|
|
|
(25,887 |
) |
|||||||||||
Exercise of stock options & other, net of tax |
|
|
|
|
|
5,333 |
|
|
|
|
|
4,707 |
|
|
|
10,040 |
|
|||||||||||
Purchase of 4,119 treasury shares |
|
|
|
|
|
|
|
|
|
|
|
(160 |
) |
|
|
(160 |
) |
|||||||||||
Balance at December 31, 2002 |
|
|
|
39,331 |
|
22,908 |
|
(9,691 |
) |
621,291 |
|
(120,762 |
) |
|
|
553,077 |
|
|||||||||||
Net income |
|
$ |
88,920 |
|
|
|
|
|
|
|
88,920 |
|
|
|
|
|
88,920 |
|
||||||||||
Other comprehensive loss net of tax |
|
(183 |
) |
|
|
|
|
(183 |
) |
|
|
|
|
|
|
(183 |
) |
|||||||||||
Comprehensive Income |
|
$ |
88,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends - $0.87 per share |
|
|
|
|
|
|
|
|
|
(26,695 |
) |
|
|
|
|
(26,695 |
) |
|||||||||||
Exercise of stock options & other, net of tax |
|
|
|
|
|
12,611 |
|
|
|
|
|
|
|
|
|
12,611 |
|
|||||||||||
Issuance of 394,001 treasury shares |
|
|
|
|
|
|
|
|
|
|
|
5,655 |
|
(1,496 |
) |
4,159 |
|
|||||||||||
Amortization of unearned compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
41 |
|
|||||||||||
Balance at December 31, 2003 |
|
|
|
$ |
39,331 |
|
$ |
35,519 |
|
$ |
(9,874 |
) |
$ |
683,516 |
|
$ |
(115,107 |
) |
$ |
(1,455 |
) |
$ |
631,930 |
|
||||
See accompanying Notes to Consolidated Financial Statements.
22
Consolidated Balance Sheets
As of December 31. In thousands except share data.
|
|
2003 |
|
2002 |
|
||
Assets |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
26,848 |
|
$ |
34,768 |
|
Receivables, less allowances of $7,159 in 2003 and $8,103 in 2002 |
|
218,819 |
|
143,782 |
|
||
Inventories |
|
263,275 |
|
248,801 |
|
||
Deferred income taxes |
|
30,866 |
|
29,208 |
|
||
Prepaid expenses and other current assets |
|
44,573 |
|
37,836 |
|
||
Total current assets |
|
584,381 |
|
494,395 |
|
||
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
454,285 |
|
447,986 |
|
||
Other assets: |
|
|
|
|
|
||
Patents, goodwill and other intangible assets, net |
|
310,437 |
|
305,624 |
|
||
Investments and advances to affiliates |
|
79,957 |
|
74,120 |
|
||
Receivables and other assets |
|
7,849 |
|
6,662 |
|
||
Total other assets |
|
398,243 |
|
386,406 |
|
||
|
|
$ |
1,436,909 |
|
$ |
1,328,787 |
|
|
|
|
|
|
|
||
Liabilities and Shareholders Equity |
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
Short-term debt, including current maturities of long-term debt |
|
$ |
7,505 |
|
$ |
53,038 |
|
Accounts payable |
|
177,957 |
|
148,608 |
|
||
Deferred revenue |
|
16,097 |
|
15,631 |
|
||
Accrued expenses |
|
137,784 |
|
119,872 |
|
||
Total current liabilities |
|
339,343 |
|
337,149 |
|
||
|
|
|
|
|
|
||
Long-term liabilities: |
|
|
|
|
|
||
Long-term debt |
|
294,581 |
|
293,124 |
|
||
Deferred revenue |
|
65,929 |
|
64,957 |
|
||
Other liabilities |
|
105,126 |
|
80,480 |
|
||
Total long-term liabilities |
|
465,636 |
|
438,561 |
|
||
|
|
|
|
|
|
||
Shareholders equity: |
|
|
|
|
|
||
Preferred stock, $1 par value. Authorized and unissued 5,000,000 shares Common stock, $1 par value. Authorized 100,000,000 shares; |
|
|
|
|
|
||
39,330,624 shares issued; 30,991,870 outstanding in 2003 and 30,597,869 outstanding in 2002 |
|
39,331 |
|
39,331 |
|
||
Additional paid-in capital |
|
35,519 |
|
22,908 |
|
||
Accumulated other comprehensive loss |
|
(9,874 |
) |
(9,691 |
) |
||
Retained earnings |
|
683,516 |
|
621,291 |
|
||
Unearned compensation |
|
(1,455 |
) |
|
|
||
Cost of shares in treasury - 8,338,754 shares in 2003 and 8,732,755 shares in 2002 |
|
(115,107 |
) |
(120,762 |
) |
||
Total shareholders equity |
|
631,930 |
|
553,077 |
|
||
|
|
$ |
1,436,909 |
|
$ |
1,328,787 |
|
See accompanying Notes to Consolidated Financial Statements.
23
Consolidated Statements of Cash Flows
For the years ended December 31. In thousands.
|
|
2003 |
|
2002 |
|
2001 |
|
|||
Operating activities |
|
|
|
|
|
|
|
|||
Net income |
|
$ |
88,920 |
|
$ |
28,625 |
|
$ |
24,841 |
|
Reconciliation of net earnings to cash flows: |
|
|
|
|
|
|
|
|||
Depreciation |
|
58,677 |
|
54,996 |
|
49,845 |
|
|||
Amortization |
|
1,689 |
|
1,998 |
|
14,115 |
|
|||
Deferred taxes |
|
8,754 |
|
17,723 |
|
17,464 |
|
|||
Earnings in equity investments |
|
(3,259 |
) |
(4,447 |
) |
(2,936 |
) |
|||
Goodwill transitional impairment, net of tax |
|
|
|
43,753 |
|
|
|
|||
Restructuring charge |
|
|
|
|
|
24,650 |
|
|||
Foreign exchange gains |
|
(2,103 |
) |
|
|
|
|
|||
Loss (gain) on divestiture and sales of fixed assets |
|
595 |
|
1,599 |
|
(4,880 |
) |
|||
Changes in assets and liabilities, excluding effects of acquisitions and divestitures: |
|
|
|
|
|
|
|
|||
Current and long-term receivables |
|
(39,019 |
) |
26,190 |
|
2,230 |
|
|||
(Repurchase) sale of receivables under securitization |
|
(33,000 |
) |
36,903 |
|
33,097 |
|
|||
Inventories |
|
(5,433 |
) |
(998 |
) |
58,814 |
|
|||
Accounts payable and accrued expenses |
|
32,182 |
|
(6,747 |
) |
(1,857 |
) |
|||
Prepaid and current income taxes |
|
10,807 |
|
18,924 |
|
(6,220 |
) |
|||
Long-term liabilities |
|
(1,440 |
) |
(401 |
) |
(5,126 |
) |
|||
Termination of interest rate hedge |
|
|
|
7,750 |
|
|
|
|||
Other operating activities |
|
(427 |
) |
29 |
|
(558 |
) |
|||
Net cash provided by operating activities |
|
116,943 |
|
225,897 |
|
203,479 |
|
|||
Investing activities |
|
|
|
|
|
|
|
|||
Capital expenditures |
|
(42,241 |
) |
(39,336 |
) |
(65,946 |
) |
|||
Acquisitions, net of cash |
|
(33,507 |
) |
(27,030 |
) |
(174,619 |
) |
|||
Proceeds from sale of property, equipment and business |
|
3,784 |
|
10,734 |
|
20,012 |
|
|||
Other investing activities |
|
(101 |
) |
335 |
|
2,547 |
|
|||
Net cash used in investing activities |
|
(72,065 |
) |
(55,297 |
) |
(218,006 |
) |
|||
Financing activities |
|
|
|
|
|
|
|
|||
Net change in short term borrowings and revolving credit lines |
|
(45,638 |
) |
(151,852 |
) |
29,060 |
|
|||
Proceeds from long-term debt |
|
5,198 |
|
|
|
|
|
|||
Reductions of long-term debt |
|
(2,503 |
) |
(1,923 |
) |
(342 |
) |
|||
Dividends |
|
(26,695 |
) |
(25,887 |
) |
(24,883 |
) |
|||
Treasury shares and stock options, net |
|
16,812 |
|
9,880 |
|
(2,311 |
) |
|||
Other financing activities |
|
(882 |
) |
|
|
|
|
|||
Net cash (used in) provided by financing activities |
|
(53,708 |
) |
(169,782 |
) |
1,524 |
|
|||
Effect of exchange rate changes on cash |
|
910 |
|
972 |
|
56 |
|
|||
Change in cash and cash equivalents |
|
(7,920 |
) |
1,790 |
|
(12,947 |
) |
|||
Cash and cash equivalents |
|
|
|
|
|
|
|
|||
Beginning of year |
|
34,768 |
|
32,978 |
|
45,925 |
|
|||
End of year |
|
$ |
26,848 |
|
$ |
34,768 |
|
$ |
32,978 |
|
See accompanying Notes to Consolidated Financial Statements.
24
Notes to Consolidated Financial Statements
Note 1 - Summary of Accounting Policies
Nature of Business
Carlisle Companies Incorporated, its wholly-owned subsidiaries and their divisions or subsidiaries, referred to herein as the Company or Carlisle, manufacture and distribute a wide variety of products across a broad range of industries, including, among others, roofing, construction, trucking, automotive, foodservice, industrial equipment, lawn and garden and aircraft manufacturing. The Company markets its products both as a component supplier to original equipment manufacturers, as well as directly to end-users.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates where the Company does not have control but exercises significant influence are accounted for under the equity method. Equity income related to such investments is recorded in Other (income) and expense, net on the Companys Consolidated Statements of Earnings and Shareholders Equity and Other Comprehensive Income. All material intercompany transactions and accounts have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (United States) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Debt securities with a remaining maturity of three months or less when acquired are cash equivalents. Cash and cash equivalents are stated at cost, which approximates market value.
Revenue Recognition
A substantial majority of the consolidated revenues are recognized when persuasive evidence of an arrangement exists, goods have been shipped (or services have been rendered), the customer takes ownership and assumes risk of loss, collection is probable, and the sales price is fixed or determinable. A small percentage of revenues are recognized based on the percentage-of-completion method. Revenue recognized under this method amounted to 6% of total revenues in 2003, 7% in 2002 and 9% in 2001. Provisions for discounts and rebates to the customers and other adjustments are provided for at the time of sale as a deduction to revenue.
Allowance for Doubtful Accounts
We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customers current credit worthiness, as determined by our review of their credit information. Allowances for doubtful accounts are estimated based on the evaluation of potential losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some cases, evaluating specific customer accounts for risk of loss. Changes in economic conditions in specific markets in which the Company operates could have an effect on reserve balances required.
Inventories
Inventories are valued at the lower of cost or market. In 2003, 54% of the cost of inventories was determined by the last-in, first-out (LIFO) method as compared to 53% in 2002. The remainder is determined by the first-in, first-out (FIFO) method.
Deferred Revenue and Extended Product Warranty
The Company offers extended warranty contracts on sales of certain products. All revenue for the sale of these contracts is deferred and amortized on a straight-line basis over the life of the contracts. Costs of services performed under these
25
contracts are charged to established reserves. The Company estimates warranty costs for claims filed using standard quantitative measures based on historical warranty claim experience. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses relating to warranty issues.
Pre-Production Costs Related to Long-Term Supply Arrangements
The Company incurs costs to develop and design products and molds, dies and other tools under certain long-term supply agreements. Current assets are recognized as costs are incurred for pre-production design and development costs and for molds, dies and other tools for which the Company will be reimbursed under its long-term supply agreements. At December 31, 2003 and 2002, the Company had recorded $11.3 and $5.4 million, respectively, million in current assets for these reimbursable costs.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Costs allocated to property, plant and equipment of acquired companies are based on estimated fair value at the date of acquisition. Depreciation is principally computed on the straight-line basis over the estimated useful lives of the assets. Asset lives are 20 to 40 years for buildings, 5 to 15 years for machinery and equipment and 3 to 10 years for leasehold improvements.
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. In accordance with this standard, the Company performs impairment tests on its long-lived assets, excluding goodwill and other intangible assets, when circumstances indicate that their carrying amounts may not be recoverable. If required, recoverability is tested by comparing the estimated future undiscounted cash flows of the asset or asset group to its carrying value. If the carrying value is not recoverable, the asset or asset group is written down to market value.
Patents, Goodwill and Other Intangible Assets
Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. Under the provisions of this pronouncement, the Company is no longer amortizing goodwill or other intangible assets with indefinite lives, but such assets will be subject to periodic testing of impairment. As required by SFAS 142, the Company completed an initial review of its reporting units for goodwill impairment as of January 1, 2002 and determined the fair value of goodwill in two segments, the Transportation Products and General Industry segments, was less than its book value. All business valuations were performed using discounted cash flow models. The impairment loss is shown net of tax as a cumulative effect of a change in accounting principle on the Consolidated Statements of Earnings and Shareholders Equity. See Note 5 - Goodwill and Other Intangible Assets. The Company uses an annual valuation date of October 1 to assess the fair value of goodwill.
Patents and other intangible assets, recorded at cost, amounted to $7.9 million and $8.9 million at December 31, 2003 and 2002, respectively (net of accumulated amortization of $18.9 million and $18.8 million). Intangible assets that are subject to amortization are amortized on a straight-line basis over their useful lives. The carrying value of intangible assets with indefinite useful lives is not subject to amortization but is tested at least annually for impairment. Costs allocated to patents and other intangible assets of acquired companies are based on estimated fair value at the date of acquisition. See Note 5 - Goodwill and Other Intangible Assets.
Prior to the adoption of SFAS 142, goodwill was amortized on a straight-line basis over various periods not exceeding 30 years. Recoverability was tested where indicators of impairment were present based on projected future cash flows. Goodwill, representing the excess of acquisition cost over the fair value of specifically identifiable assets acquired and liabilities assumed, was $296.7 million at December 31, 2002, net of accumulated amortization of $32.2 million.
Pension and Other Post Retirement Benefits
Carlisle maintains defined benefit retirement plans for the majority of its employees. Benefits are based on years of service and employees compensation prior to retirement. The annual net periodic expense and benefit obligations of these programs are determined on an actuarial basis. The cost of this program is being funded currently.
26
Carlisle also has a limited number of unfunded post-retirement benefit programs that provide certain retirees with medical and prescription drug coverage. The annual net periodic expense and benefit obligations of these programs are also determined on an actuarial basis.
Derivative Financial Instruments
Effective January 1, 2001, the Company adopted SFAS 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivatives be recorded at fair value on the balance sheet and establishes criteria for designation and effectiveness of derivative transactions for which hedge accounting is applied. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If a fair value hedge is terminated before maturity, the adjusted carrying amount of the hedged asset or liability remains as a component of the carrying amount of that asset or liability until it is disposed. If the hedged item is an interest-bearing financial instrument, the adjusted carrying amount is amortized into earnings over the remaining life of the instrument. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the income statement when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.
The Company is subject to market risk from exposures to changes in interest rates due to its financing, investing and cash management activities. The Company uses interest rate swap agreements, from time to time, to manage the interest rate risk of its floating and fixed rate debt portfolio. The Company, on a periodic basis, assesses the initial and ongoing effectiveness of its hedging relationships.
The Companys international operations are exposed to translation risk when the local currency financial statements are translated into U.S. Dollars. Carlisle monitors this risk, but at December 31, 2003 had no contracts in place for hedging net investment risk.
Currency valuation risk is considered minimal; however, at December 31, 2003 the Company had currency hedges in place with a total notional amount of $13.6 million for the purpose of hedging cash flow risk associated with certain customer payment schedules. Less than 15% of the Companys 2003 revenues are in currencies other than the U.S. Dollar.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences of the differences between financial statement carrying amounts of assets and liabilities and their respective tax basis. These balances are measured using enacted tax rates expected to apply to taxable income in the years in which such temporary differences are expected to be recovered or settled. If a portion or all of a deferred tax asset is not expected to be realized, a valuation allowance is recognized.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development or normal use of the asset. The Company adopted SFAS No. 143 on January 1, 2003. This adoption did not have a material impact on the Companys statement of earnings or financial position.
In November 2002, the FASB issued FASB Interpretation No. (FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. This interpretation elaborates the disclosure requirements to be made by a guarantor in its financial statements about obligations under certain guarantees that it has issued and requires a guarantor to recognize, at inception of the guarantee, a liability for the fair-value of the obligation undertaken in issuing the guarantee. The Company adopted the measurement provisions of this interpretation as of January 1, 2003. This adoption did not have a material impact on the Companys statement of earnings or financial position.
27
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This pronouncement amends and clarifies the accounting and reporting for derivative instruments, including embedded derivatives, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 149 amends SFAS No. 133 to reflect the decisions made as part of the Derivatives Implementation Group and in other FASB projects or deliberations. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. As of September 30, 2003, the Company had adopted the provisions of this statement. This adoption did not have an impact on the Companys statement of earnings or financial position.
On May 15, 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity. This statement defines three classes of freestanding financial instruments that are required to be classified as liabilities (or assets in some circumstances) by the issuer because these instruments embody obligations for the issuer. Generally, the provisions of this statement were effective for financial instruments entered into or modified after May 31, 2003 and were otherwise effective at the beginning of the first interim period beginning after June 15, 2003. As of September 30, 2003, the Company had adopted all provisions of this statement. This adoption did not have an impact on the Companys statement of earnings or financial position.
In December 2003, the FASB issued Interpretation No. 46(R) (FIN 46R), Consolidation of Variable Interest Entities. This interpretation addresses the consolidation of Variable Interest Entities (VIEs) as defined by FIN 46R. VIEs are entities to which the usual condition of consolidation (ownership of a majority voting interest) does not apply. This interpretation focuses on financial interests that indicate control. It concludes that in the absence of clear control through voting interests, a companys exposure (variable interest) to the economic risks and potential rewards from the variable interest entitys assets and activities are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the values of the VIEs assets and liabilities. Variable interests may arise from financial instruments, service contracts, nonvoting ownership interests and other arrangements. If a company holds a majority of the variable interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities and the results of operations of the VIE in its financial statements. The Company will be required to apply FIN 46R to variable interests in VIEs created after December 31, 2003. For variable interests in VIEs created before January 1, 2004, this interpretation will be applied as of March 31, 2004.
The Company is evaluating the impact of applying FIN 46R but has not yet completed this analysis. It is expected that the adoption of this interpretation will not have a material impact on the Companys statement of earnings or financial position.
In December 2003, FASB issued SFAS No. 132(R), Employer Disclosures about Pensions and Other Postretirement Benefits. The statement replaces SFAS No. 132, Employer Disclosures about Pensions and Other Postretirement Benefits. The disclosure provisions of this standard have been adopted herein.
In January 2004, FASB issued FASB Staff Position No. FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the FSP). The FSP permits employers that sponsor post-retirement benefit plans (plan sponsors) that provide prescription drug benefits to retirees to make a one-time election to defer accounting for any effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). Without the FSP, plan sponsors would be required to account for the effects of the Act in the fiscal period that includes December 8, 2003, the date the Act was signed in to law. The Company has elected to defer accounting for the effect of the Act on its post-retirement plans as provided for in the FSP, although the effect is expected to have an immaterial impact on the Companys earnings and financial position.
Employee Stock-based Compensation Arrangements
The Company accounts for awards of stock-based employee compensation based on the intrinsic value method under the Accounting Principles Board Opinion 25. As such, no stock-based compensation is recorded in the determination of Net Income, as options granted have an option price equal to the market price of the underlying stock on the grant date. The following table illustrates the effect on Net Income and Earnings per share had the Company applied the fair value method of accounting for stock-based employee compensation under SFAS 123, Accounting for Stock-Based Compensation.
28
In thousands (except per share data)
|
|
Years Ended December 31 |
|
|||||||
|
|
2003 |
|
2002 |
|
2001 |
|
|||
Net Income, as reported |
|
$ |
88,920 |
|
$ |
28,625 |
|
$ |
24,841 |
|
Less: Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects |
|
(1,487 |
) |
(1,314 |
) |
(1,058 |
) |
|||
Proforma net income |
|
$ |
87,433 |
|
$ |
27,311 |
|
$ |
23,783 |
|
|
|
|
|
|
|
|
|
|||
Basic EPS (as reported) |
|
$ |
2.90 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Basic EPS (proforma) |
|
$ |
2.85 |
|
$ |
0.90 |
|
$ |
0.79 |
|
|
|
|
|
|
|
|
|
|||
Diluted EPS (as reported) |
|
$ |
2.88 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Diluted EPS (proforma) |
|
$ |
2.83 |
|
$ |
0.89 |
|
$ |
0.78 |
|
The pro forma effect includes only the vested portion of options granted in and after 1995. Options vest over a two-year period. Compensation cost was estimated using the Black-Scholes model with the following assumptions:
Earnings Per Share
Basic earnings per share excludes the dilutive effects of potentially dilutive options, warrants and convertible securities. Diluted earnings per share reflects the potential dilution that would occur if options, warrants or other convertible securities were exercised. The only difference between basic and diluted earnings per share of the Company is the effect of dilutive stock options. Stock options to purchase approximately 163,000 shares in 2003, 508,000 shares in 2002 and 809,000 shares in 2001 were excluded from the calculation of potentially dilutive options as such options had exercise prices in excess of the average market value of the Companys common stock during these periods.
Foreign Currency Translation
The Company has determined that the local currency is the functional currency for its subsidiaries outside the United States. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. Income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of shareholders equity in Accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions are included in Other income and expense, net.
Reclassifications
Certain reclassifications have been made to prior years information to conform to the current years presentation. In December 2002, $11.7 million of cash in transit was reclassified to Accounts payable. Also in December 2002 and 2001, $1.2 million and $2.3 million, respectively, of customer rebates were reclassified from allowances for doubtful accounts (netted with Receivables) to Accrued expenses.
Reclassifications have also been made to the Consolidated Statements of Cash Flows for the years ended December 31, 2002 and December 31, 2001. For the year ended December 31, 2002, earnings from equity investments of $4.4 million has been presented separately as has cash received of $7.8 million from the termination of an interest rate swap agreement. Also in 2002, the effect of exchange rate changes on cash has been recalculated to $1.0 million. For the year
29
ended December 31, 2001, cash in transit of $36.9 million at the beginning of the year and $17.4 million at the end of the year has been reclassified to Accounts payable, reducing the amount of cash provided by operating activities. Also, the effect of exchange rate changes on cash was recalculated to $0.1 million.
Note 2 - Receivables Facility
In September 2001, the Company entered into an agreement (the Receivables Facility) with a financial institution whereby it sells on a continuous basis an undivided interest in certain eligible trade accounts receivable. Pursuant to the Receivables Facility, the Company formed a wholly-owned, special purpose, bankruptcy-remote subsidiary (SPV). The financial position and results of operations of the SPV are consolidated with the Company. The SPV was formed for the sole purpose of buying and selling receivables generated by the Company. Under the Receivables Facility, the Company, irrevocably and without recourse, transfers all applicable trade accounts receivables to the SPV. The SPV, in turn, has sold and, subject to certain conditions, may from time to time sell an undivided interest in these receivables and is permitted to receive advances of up to $125.0 million from the multi-seller conduit administered by an independent financial institution for the sale of such an undivided interest.
The Company accounts for its transfers of receivables to the SPV, together with the SPVs sale of undivided interests in the SPVs receivables to the conduit, as sales under SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The interest rate paid to the conduit on amounts outstanding under the Receivables Facility is equal to the conduits pooled commercial paper rate, which was 1.12% and 1.45% at December 31, 2003 and December 31, 2002, respectively. The Companys loss on the sales of these receivables is reported in Other income and expense, net, and amounted to $1.5 million during 2003, $1.6 million during 2002 and $1.3 million in 2001.
At December 31, 2003, the outstanding balance of receivables serviced by the SPV was $228.1 million compared to $161.9 million as of December 31, 2002 and $112.6 million as of December 31, 2001. Of this balance, the SPV had sold $67.0 million of undivided interest to the conduit as of December 31, 2003 compared to $100.0 million as of December 31, 2002, and $63.1 million at December 31, 2001. The Companys retained interest in the SPVs receivables is classified in trade accounts receivable in the Companys consolidated financial statements at its relative fair value and amounted to $160.5 million as of December 31, 2003 compared to $59.9 million as of December 31, 2002 and $48.7 million as of December 31, 2001. This retained interest is subordinate to, and provides credit enhancement for, the conduits ownership interest in the SPVs receivable, and is available to the conduit to pay any fees or expenses due to the conduit, and to absorb all credit losses incurred on any of the SPVs receivables.
Note 3 Inventories
The components of inventories at December 31 are as follows:
In thousands |
|
2003 |
|
2002 |
|
||
FIFO (approximates current costs): |
|
|
|
|
|
||
Finished goods |
|
$ |
169,698 |
|
$ |
162,213 |
|
Work in process |
|
26,224 |
|
21,004 |
|
||
Raw materials |
|
80,137 |
|
77,776 |
|
||
|
|
276,059 |
|
260,993 |
|
||
Excess FIFO cost over LIFO value |
|
(12,784 |
) |
(12,192 |
) |
||
Inventories |
|
$ |
263,275 |
|
$ |
248,801 |
|
30
Note 4 - Property, Plant and Equipment
The components of property, plant and equipment at December 31 are:
In thousands |
|
2003 |
|
2002 |
|
||
Land |
|
$ |
15,328 |
|
$ |
9,934 |
|
Buildings and leasehold improvements |
|
232,852 |
|
216,078 |
|
||
Machinery and equipment |
|
641,023 |
|
608,864 |
|
||
Projects in progress |
|
21,332 |
|
23,185 |
|
||
|
|
910,535 |
|
858,061 |
|
||
Accumulated depreciation |
|
(456,250 |
) |
(410,075 |
) |
||
Property, plant and equipment, net |
|
$ |
454,285 |
|
$ |
447,986 |
|
Capitalized interest was $0.8 million in 2003 and $1.4 million in 2002.
Note 5 - Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2002 are as follows:
In thousands |
|
Industrial
|
|
Construction
|
|
Automotive
|
|
Specialty
|
|
Transportation
|
|
General
|
|
Total |
|
|||||||
Balance as of January 1, 2002 |
|
$ |
132,991 |
|
$ |
9,057 |
|
$ |
40,277 |
|
$ |
2,728 |
|
$ |
20,400 |
|
$ |
123,179 |
|
$ |
328,632 |
|
Goodwill acquired during year |
|
|
|
23,276 |
|
|
|
|
|
|
|
|
|
23,276 |
|
|||||||
Goodwill divested during year |
|
(3,294 |
) |
|
|
|
|
|
|
|
|
|
|
(3,294 |
) |
|||||||
Purchase accounting adjustments |
|
582 |
|
|
|
|
|
|
|
|
|
|
|
582 |
|
|||||||
Impairment loss |
|
|
|
|
|
|
|
|
|
(20,400 |
) |
(35,424 |
) |
(55,824 |
) |
|||||||
Currency translation |
|
89 |
|
780 |
|
|
|
4 |
|
|
|
2,452 |
|
3,325 |
|
|||||||
Balance as of December 31, 2002 |
|
$ |
130,368 |
|
$ |
33,113 |
|
$ |
40,277 |
|
$ |
2,732 |
|
$ |
|
|
$ |
90,207 |
|
$ |
296,697 |
|
Goodwill acquired during year |
|
|
|
|
|
|
|
|
|
|
|
6,014 |
|
6,014 |
|
|||||||
Goodwill divested during year |
|
|
|
|
|
|
|
(1,900 |
) |
|
|
|
|
(1,900 |
) |
|||||||
Purchase accounting adjustments |
|
|
|
(1,815 |
) |
|
|
|
|
|
|
|
|
(1,815 |
) |
|||||||
Currency translation |
|
342 |
|
1,135 |
|
|
|
65 |
|
|
|
2,018 |
|
3,560 |
|
|||||||
Balance as of December 31, 2003 |
|
$ |
130,710 |
|
$ |
32,433 |
|
$ |
40,277 |
|
$ |
897 |
|
$ |
|
|
$ |
98,239 |
|
$ |
302,556 |
|
No impairment loss was recognized during 2003 pursuant to the Companys analysis of its Goodwill and Other Intangible Assets. An impairment loss of $55.8 million, pre-tax, was recognized in 2002 which reflects the transitional impact from the Companys adoption of SFAS 142. The reported change in accounting principle for this impairment was net of income taxes. SFAS 142 does not permit retroactive application of the change in accounting for goodwill and other intangible assets. However, prior year net income, adjusted to exclude goodwill amortization, is as follows:
31
Goodwill and Other Intangible Assets - Adoption of Statement 142
In thousands |
|
For the Year Ended December 31 |
|
|||||||
(except per share amounts) |
|
2003 |
|
2002 |
|
2001 |
|
|||
Reported net income |
|
$ |
88,920 |
|
$ |
28,625 |
|
$ |
24,841 |
|
Add: Goodwill amortization |
|
|
|
|
|
8,393 |
|
|||
Adjusted net income |
|
$ |
88,920 |
|
$ |
28,625 |
|
$ |
33,234 |
|
Basic earnings per share: |
|
|
|
|
|
|
|
|||
Reported net income |
|
$ |
2.90 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Goodwill amortization |
|
|
|
|
|
0.28 |
|
|||
Adjusted net income |
|
$ |
2.90 |
|
$ |
0.94 |
|
$ |
1.10 |
|
Diluted earnings per share |
|
|
|
|
|
|
|
|||
Reported net income |
|
$ |
2.88 |
|
$ |
0.94 |
|
$ |
0.82 |
|
Goodwill amortization |
|
|
|
|
|
0.28 |
|
|||
Adjusted net income |
|
$ |
2.88 |
|
$ |
0.94 |
|
$ |
1.10 |
|
The Companys other intangible assets as of December 31, 2003, are as follows:
In thousands |
|
Acquired
|
|
Accumulated
|
|
Net Book
|
|
|||
Assets subject to amortization |
|
|
|
|
|
|
|
|||
Patents |
|
$ |
9,095 |
|
$ |
(7,302 |
) |
$ |
1,793 |
|
Software licenses |
|
1,800 |
|
(600 |
) |
1,200 |
|
|||
Tradenames |
|
1,500 |
|
(700 |
) |
800 |
|
|||
Other |
|
10,390 |
|
(10,302 |
) |
88 |
|
|||
Assets not subject to amortization |
|
|
|
|
|
|
|
|||
Trademarks |
|
4,000 |
|
|
|
4,000 |
|
|||
|
|
$ |
26,785 |
|
$ |
(18,904 |
) |
$ |
7,881 |
|
The Companys other intangible assets as of December 31, 2002, were as follows:
In thousands |
|
Acquired
|
|
Accumulated
|
|
Net Book
|
|
|||
Assets subject to amortization |
|
|
|
|
|
|
|
|||
Patents |
|
$ |
9,455 |
|
$ |
(7,249 |
) |
$ |
2,206 |
|
Software license |
|
1,800 |
|
(343 |
) |
1,457 |
|
|||
Tradename |
|
1,500 |
|
(400 |
) |
1,100 |
|
|||
Other |
|
10,990 |
|
(10,826 |
) |
164 |
|
|||
Assets not subject to amortization |
|
|
|
|
|
|
|
|||
Trademark |
|
4,000 |
|
|
|
4,000 |
|
|||
|
|
$ |
27,745 |
|
$ |
(18,818 |
) |
$ |
8,927 |
|
Estimated amortization expense over the next five years is as follows: $0.9 million in 2004, $0.9 million in 2005, $0.7 million in 2006, $0.5 million in 2007, and $0.4 million in 2008.
32
Note 6 - Investments and Advances to Affiliates
Investments and advances to unconsolidated affiliates are as follows:
In thousands |
|
Ownership |
|
2003 |
|
2002 |
|
||
Icopal A/S |
|
25% |
|
$ |
66,896 |
|
$ |
61,513 |
|
Other investments |
|
27-60% |
|
13,061 |
|
12,607 |
|
||
Investments and advances to affiliates |
|
|
|
$ |
79,957 |
|
$ |
74,120 |
|
Combined unaudited summarized financial information for the Companys unconsolidated affiliates is as follows:
In thousands |
|
2003 |
|
2002 |
|
||
Income Statement Information |
|
|
|
|
|
||
Net sales |
|
$ |
739,139 |
|
$ |
637,110 |
|
Pre-tax earnings |
|
23,860 |
|
26,115 |
|
||
Net earnings |
|
15,883 |
|
17,376 |
|
||
Balance Sheet Information |
|
|
|
|
|
||
Current assets |
|
$ |
426,188 |
|
$ |
299,877 |
|
Non-current assets |
|
832,956 |
|
722,844 |
|
||
Current liabilities |
|
546,620 |
|
252,399 |
|
||
Non-current liabilities |
|
222,335 |
|
318,364 |
|
||
Equity |
|
490,188 |
|
451,958 |
|
Note 7 Borrowings
Short-term credit lines and long-term debt includes:
In thousands |
|
2003 |
|
2002 |
|
||
6.70% senior notes due 2008 |
|
$ |
100,000 |
|
$ |
100,000 |
|
7.25% senior notes due 2007, includes fair value adjustment of $6,534 and $8,303 respectively (see Note 8) |
|
156,534 |
|
158,303 |
|
||
Revolving credit lines |
|
|
|
33,000 |
|
||
Industrial development and revenue bonds through 2018 |
|
26,835 |
|
25,385 |
|
||
Other, including capital lease obligations |
|
18,717 |
|
16,624 |
|
||
Short-term credit lines |
|
|
|
12,850 |
|
||
|
|
$ |
302,086 |
|
$ |
346,162 |
|
Less current maturities and short term credit lines |
|
(7,505 |
) |
(53,038 |
) |
||
Long-term debt |
|
$ |
294,581 |
|
$ |
293,124 |
|
In June 2003, the Companys revolving credit facilities that provided for borrowings of up to $375 million were replaced with a $250 million three-year syndicated revolving credit facility (2003 Facility). The 2003 Facility provides for interest at the Euro-Dollar rate plus a margin of 0.375% to 1.7%. The specific rate of the 2003 Facility is based on the Companys long-term debt rating as determined by certain rating agencies and the amount of outstanding borrowings. The one-month Euro-Dollar rate was 1.0% at December 31, 2003. The 2003 Facility was fully available at December 31, 2003.
The Company also maintains with various financial institutions $35 million in committed lines of credit and a $55 million uncommitted line of credit. As of December 31, 2003, $90 million was available under these lines. At December 31, 2003, $58 million was available under the Companys $125 million receivables facility. At December 31, 2003, letters of credit amounting to $38 million were outstanding primarily to provide security under insurance arrangements and certain borrowings.
33
Under the Companys various debt and credit facilities, the Company is required to meet various restrictive covenants and limitations, including certain net worth and cash flow ratios, all of which were complied with in 2003 and 2002.
The industrial development and revenue bonds are collateralized by letters of credit, Company guarantees and/or by the facilities and equipment acquired through the proceeds of the related bond issuances. The weighted average interest rates on the revenue bonds for 2003 and 2002 were 1.77% and 1.94%, respectively. The Company estimates the fair value of its industrial development and revenue bonds approximates their carrying value.
Other borrowings for 2003 and 2002 include capital lease obligations of $9.2 million and $7.7 million, respectively for the funding of production facility expansions. Interest rates on these borrowings ranged from 1.93% to 7.58% in 2003.
Cash payments for interest were $18.7 million in 2003, $21.8 million in 2002, and $30.5 million in 2001. Interest expense, net is shown net of interest income of $3.1 million in 2003, $3.5 million in 2002, and $3.7 million in 2001.
The aggregate amount of short-term and long-term debt maturing in each of the next five years is approximately $7.5 million in 2004, $1.1 million in 2005, $0.6 million in 2006, $150.3 million in 2007, $113.1 million in 2008, and $23.0 million thereafter.
The fair value of the Companys senior notes is based on current year yield rates plus the Companys estimated credit spread available for financings with similar terms and maturities. As of December 31, 2003, the fair value of the Companys 6.70% senior notes is approximately $104.8 million. The fair value of the Companys 7.25% senior notes is approximately $162.8 million at December 31, 2003.
Note 8 - Derivative Financial Instruments
On April 11, 2003, the Company executed $75 million notional amount interest rate swaps, which have been designated as fair value hedges. The purpose of these contracts is to hedge the market risk associated with the Companys fixed rate debt. These fair value hedges have been deemed effective at the origination date and at December 31, 2003. The valuation of these contracts at December 31, 2003 resulted in an asset of $0.3 million, included in non-current receivables on the Companys Consolidated Balance Sheet, and a corresponding increase in the fair value of the Companys 7.25% senior notes, reflected in long-term debt.
In December 2001, the Company entered into a $150.0 million notional amount interest rate swap, which was designated as a fair value hedge, to hedge a portion of the exposure associated with its fixed rate debt. This fair value hedge was deemed effective at the origination date. On July 16, 2002, the Company terminated $50.0 million notional amount of this fair value hedge resulting in a gain of $1.6 million, which is amortized to reduce interest expense until January 2007, the original termination date of the swap. On September 19, 2002, the Company terminated the remaining $100.0 million notional amount on the fair value hedge resulting in a gain of $7.3 million, which is amortized to reduce interest expense until January 2007. At December 31, 2003, the Company had a remaining unamortized gain of $6.2 million reflected in long-term debt.
Also in December 2001, the Company entered into a $150.0 million notional amount interest rate swap, designated as a cash flow hedge, to hedge the cash flows for a portion of its variable rate debt. The cash flow hedge was deemed effective at the origination. On July 16, 2002, the cash flow hedge was terminated, resulting in a loss of $1.6 million, which was amortized to interest expense until June 2003, the original termination date of the swap.
The Company has also executed certain currency hedges with a total notional amount of $13.6 million. These currency contracts serve to hedge the Companys cash flow risk associated with certain customer payment schedules. The change in the fair value position of these hedge contracts as of December 31, 2003 was not material.
On May 30, 2003, the Company acquired Flo-Pac Corporation for approximately $32.0 million. Flo-Pac is a manufacturer of brooms, brushes, rotary brushes and cleaning tools for the sanitary maintenance industry. The operating
34
results for this business since the acquisition date are included in the General Industry segment. The Company has preliminarily allocated the purchase price among the acquired assets and liabilities assumed; however, the Company is in the process of fully evaluating these assets and as a result, the purchase price allocation may change. This allocation did not have a material impact on any major asset or liability captions presented on the Companys Consolidated Balance Sheet.
On October 3, 2002, the Company acquired the MiraDri division of Nicolon Corporation for approximately $26.2 million. MiraDri provides waterproofing solutions for commercial and residential roofing applications. The operating results for this business since the acquisition date are included in the Construction Materials segment. The Company has completed the allocation of the purchase price among the acquired assets and assumed liabilities, resulting in goodwill of $17.4 million. The impact on other major asset and liability captions presented on the Companys Consolidated Balance Sheet was not material.
On February 25, 2002, the Company purchased the remaining minority interest in an unconsolidated investment. Results of operations for this business, which have been included in the Construction Materials segment, did not have a material effect on the results of this segment or on the Companys consolidated results.
The Company acquired the Dayco Industrial Power Transmission business of Mark IV Industries on August 17, 2001, for $138.6 million and accounted for this acquisition under the purchase method. As part of the Industrial Components segment, this units results of operations from August 17, 2001, have been included in the accompanying statements of earnings. If this unit had been included in the annual results of 2001 operations, the unaudited pro-forma results for the Company would have reported Net sales of $1,971 million, Net earnings of $33 million and diluted earnings per share of $1.07.
The Company also completed other acquisitions within the last three years, all of which have been accounted for under the purchase method of accounting. Results of operations for these acquisitions, which have been included in the consolidated financial statements since their respective acquisition dates, did not have a material effect on consolidated operating results of the Company in the years of the acquisitions.
Note 10 - Shareholders Equity
The Company has a Shareholders Rights Agreement that is designed to protect shareholder investment values. A dividend distribution of one Preferred Stock Purchase Right (the Rights) for each outstanding share of the Companys common stock was declared, payable to shareholders of record on March 3, 1989. The Rights are attached to the issued and outstanding shares of the Companys common stock and will become exercisable under certain circumstances, including the acquisition of 25% of the Companys common stock, or 40% of the voting power, in which case all rights holders except the acquirer may purchase the Companys common stock at a 50% discount.
If the Company is acquired in a merger or other business combination, and the Rights have not been redeemed, rights holders may purchase the acquirers shares at a 50% discount. On August 7, 1996, the Company amended the Shareholders Rights Agreement to, among other things, extend the term of the Rights until August 6, 2006.
Common shareholders of record on May 30, 1986 are entitled to five votes per share. Common stock acquired subsequent to that date entitles the holder to one vote per share until held four years, after which time the holder is entitled to five votes.
The Company maintains an Executive Incentive Program (the Program) for executives and certain other employees of the Company and its operating divisions and subsidiaries. The Program contains a plan, for those who are eligible, to receive cash bonuses and/or shares of restricted stock. The Program also has a stock option plan available to certain employees. The Company also maintains a stock option plan for its non-employee directors. Options issued under both these plans vest one-third upon grant, one-third on the first anniversary of grant and the remaining one-third on the second anniversary of grant.
35
Under the Companys restricted stock plan, shares are released to the recipient after a period of three years. At December 31, 2003, under the Companys restricted stock plan, 46,564 non-vested shares were outstanding and 2,105,005 shares were available for issuance.
The activity under the stock option plan is as follows:
|
|
Number of
|
|
Weighted
|
|
|
Outstanding at December 31, 2000 |
|
1,567,010 |
|
$ |
29.20 |
|
Options granted |
|
178,500 |
|
38.91 |
|
|
Options exercised |
|
(388,958 |
) |
16.57 |
|
|
Options cancelled |
|
(20,000 |
) |
35.19 |
|
|
Outstanding at December 31, 2001 |
|
1,336,552 |
|
$ |
34.30 |
|
Options granted |
|
185,500 |
|
37.85 |
|
|
Options exercised |
|
(304,531 |
) |
21.28 |
|
|
Options cancelled |
|
(19,000 |
) |
43.97 |
|
|
Outstanding at December 31, 2002 |
|
1,198,521 |
|
$ |
37.77 |
|
Options granted |
|
189,500 |
|
40.06 |
|
|
Options exercised |
|
(266,619 |
) |
21.28 |
|
|
Options cancelled |
|
(77,932 |
) |
38.45 |
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2003 |
|
1,043,470 |
|
$ |
38.36 |
|
|
|
|
|
|
|
|
Available for grant at December 31, 2003 |
|
752,714 |
|
|
|
The following tables summarize information about stock options outstanding as of December 31, 2003:
Range of
Exercise
|
|
Number
|
|
Weighted
|
|
Weighted
|
|
||
$12.32-17.25 |
|
|
800 |
|
0.8 |
|
$ |
16.25 |
|
19.88-29.50 |
|
|
150,332 |
|
3.0 |
|
28.83 |
|
|
32.75-48.38 |
|
|
892,338 |
|
6.7 |
|
39.98 |
|
|
|
|
|
1,043,470 |
|
|
|
|
|
|
Exercisable Options:
Range of
Exercise
|
|
Number
|
|
Weighted
|
|
||
$12.32-17.25 |
|
|
800 |
|
$ |
16.25 |
|
19.88-29.50 |
|
|
150,332 |
|
28.83 |
|
|
32.75-48.38 |
|
|
634,282 |
|
39.63 |
|
|
|
|
|
785,414 |
|
|
|
|
At December 31, 2002, 1,017,466 options were exercisable at a weighted average price of $38.43.
36
Note 12 - Other Comprehensive Income (Loss)
The tables below present the pre-tax, tax and after-tax components of other comprehensive income (loss) for the three-year period ended December 31, 2003:
In thousands |
|
Pre-Tax
|
|
Tax Expense
|
|
After-Tax
|
|
|||
|
|
|
|
|
|
|
|
|||
Year Ended December 31, 2001 |
|
|
|
|
|
|
|
|||
Minimum pension liability |
|
$ |
(4,863 |
) |
$ |
(1,678 |
) |
$ |
(3,185 |
) |
Foreign currency translation |
|
(1,891 |
) |
|
|
(1,891 |
) |
|||
Loss on hedging activities |
|
(253 |
) |
(87 |
) |
(166 |
) |
|||
Other Comprehensive Loss |
|
$ |
(7,007 |
) |
$ |
(1,765 |
) |
$ |
(5,242 |
) |
|
|
|
|
|
|
|
|
|||
Year Ended December 31, 2002 |
|
|
|
|
|
|
|
|||
Minimum pension liability |
|
$ |
(7,388 |
) |
$ |
(2,549 |
) |
$ |
(4,839 |
) |
Foreign currency translation |
|
5,845 |
|
489 |
|
5,356 |
|
|||
Loss on hedging activities |
|
(522 |
) |
(180 |
) |
(342 |
) |
|||
Other Comprehensive Income (Loss) |
|
$ |
(2,065 |
) |
$ |
(2,240 |
) |
$ |
175 |
|
|
|
|
|
|
|
|
|
|||
Year Ended December 31, 2003 |
|
|
|
|
|
|
|
|||
Minimum pension liability |
|
$ |
(13,942 |
) |
$ |
(4,941 |
) |
$ |
(9,001 |
) |
Foreign currency translation |
|
9,106 |
|
840 |
|
8,266 |
|
|||
Gain on hedging activities |
|
893 |
|
341 |
|
552 |
|
|||
Other Comprehensive Loss |
|
$ |
(3,943 |
) |
$ |
(3,760 |
) |
$ |
(183 |
) |
The accumulated balances for each classification of comprehensive income (loss) are as follows:
In thousands |
|
Foreign
|
|
Minimum
|
|
Cash Flow
|
|
Accumulated
|
|
||||
Balance at December 31, 2001 |
|
$ |
(6,514 |
) |
$ |
(3,186 |
) |
$ |
(166 |
) |
$ |
(9,866 |
) |
Net current period change |
|
5,356 |
|
(4,839 |
) |
(850 |
) |
(333 |
) |
||||
Reclassification adjustments for gains (losses) reclassified into earnings |
|
|
|
|
|
508 |
|
508 |
|
||||
Balance at December 31, 2002 |
|
(1,158 |
) |
(8,025 |
) |
(508 |
) |
(9,691 |
) |
||||
Net current period change |
|
9,953 |
|
(9,001 |
) |
44 |
|
996 |
|
||||
Reclassification adjustments for gains (losses) reclassified into earnings |
|
(1,687 |
) |
|
|
508 |
|
(1,179 |
) |
||||
Balance at December 31, 2003 |
|
$ |
7,108 |
|
$ |
(17,026 |
) |
$ |
44 |
|
$ |
(9,874 |
) |
37
Note 13 - Retirement Plans
The Company maintains defined benefit retirement plans for the majority of its employees. Benefits are based primarily on years of service and earnings of the employee. The plans weighted-average asset allocation at December 31, 2003 and 2002, by asset category was as follows:
|
|
2003 |
|
2002 |
|
U.S. equity securities |
|
51 |
% |
30 |
% |
International equity securities |
|
16 |
% |
10 |
% |
Fixed-income securities |
|
33 |
% |
60 |
% |
Plan Assets at end of year |
|
100 |
% |
100 |
% |
Carlisle employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. From time to time, the Company will target an asset allocation to enhance total return. During 2003, the Company established a target allocation of 65% equity securities and 35% fixed income securities. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity and fixed-income investments. Equity investments are diversified across U.S. and international stocks, as well as growth, value, and large and small capitalizations. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews, annual liability measures and periodic asset/liability studies.
The change in projected benefit obligation:
In thousands |
|
2003 |
|
2002 |
|
||
Benefit obligation at beginning of year |
|
$ |
141,246 |
|
$ |
133,212 |
|
Service cost |
|
6,448 |
|
5,903 |
|
||
Interest cost |
|
9,340 |
|
9,413 |
|
||
Amendments/obligations acquired |
|
1,934 |
|
777 |
|
||
Curtailment (gain) loss |
|
(1,058 |
) |
48 |
|
||
Actuarial loss |
|
16,809 |
|
1,421 |
|
||
Benefits paid |
|
(9,181 |
) |
(9,528 |
) |
||
Benefit obligation at end of year |
|
$ |
165,538 |
|
$ |
141,246 |
|
The change in plan assets:
In thousands |
|
2003 |
|
2002 |
|
||
Fair value of plan assets at beginning of year |
|
$ |
96,329 |
|
$ |
105,545 |
|
Actual return on plan assets |
|
12,919 |
|
(1,667 |
) |
||
Company contributions |
|
4,818 |
|
1,979 |
|
||
Acquisitions |
|
944 |
|
|
|
||
Benefits paid |
|
(9,181 |
) |
(9,528 |
) |
||
Fair value of plan assets at end of year |
|
$ |
105,829 |
|
$ |
96,329 |
|
38
Reconciliation of the accrued benefit cost recognized in the financial statements:
In thousands |
|
2003 |
|
2002 |
|
||
Funded status |
|
$ |
(59,709 |
) |
$ |
(44,917 |
) |
Unrecognized net actuarial loss |
|
36,818 |
|
23,954 |
|
||
Unrecognized prior service cost |
|
(2,446 |
) |
(2,390 |
) |
||
Unrecognized transition asset |
|
|
|
(190 |
) |
||
Company contributions |
|
108 |
|
70 |
|
||
Accrued benefit cost |
|
$ |
(25,229 |
) |
$ |
(23,473 |
) |
The Company includes accrued pension costs in other liabilities on the Companys Consolidated Balance Sheet.
The accumulated benefit obligation for all defined benefit pension plans was $160.0 million and $131.3 million at December 31, 2003 and 2002, respectively. Carlisle expects to contribute $8.1 million to $14.1 million to its pension plans during 2004 with the actual contribution contingent on the outcome of congressional pension funding relief.
Components of net periodic benefit cost for years ended December 31:
In thousands |
|
2003 |
|
2002 |
|
2001 |
|
|||
Service cost |
|
$ |
6,448 |
|
$ |
5,903 |
|
$ |
5,041 |
|
Interest cost |
|
9,340 |
|
9,413 |
|
8,188 |
|
|||
Expected return on plan assets |
|
(10,177 |
) |
(10,747 |
) |
(9,775 |
) |
|||
Curtailment expense |
|
271 |
|
811 |
|
|
|
|||
Net amortization and deferral |
|
(259 |
) |
(446 |
) |
(907 |
) |
|||
Net periodic benefit cost |
|
$ |
5,623 |
|
$ |
4,934 |
|
$ |
2,547 |
|
The curtailment charge of $0.3 million in 2003 was due primarily to the Companys closure of its Carlisle Engineered Products Erie-Bundy Park, Pennsylvania plant which was part of the Automotive Components segment. The 2002 curtailment charge of $0.8 million resulted from the Companys closure of its Motion Control Ridgway, Pennsylvania plant which was part of the Specialty Products segment.
Assumptions for benefit obligations at December 31:
|
|
2003 |
|
2002 |
|
Discount rate |
|
6.10 |
% |
6.75 |
% |
Rate of compensation increase |
|
3.50 |
% |
3.50 |
% |
Assumptions for net period benefit cost for years ended December 31:
|
|
2003 |
|
2002 |
|
2001 |
|
Discount rate |
|
6.75 |
% |
7.25 |
% |
7.75 |
% |
Rate of compensation increase |
|
3.50 |
% |
4.00 |
% |
4.50 |
% |
Expected long-term return on plan assets |
|
8.75 |
% |
9.00 |
% |
9.25 |
% |
The Company considers several factors in determining the long-term rate of return for plan assets. Current market factors such as inflation and interest rates are evaluated and consideration is given to the diversification and rebalancing of the portfolio. The Company also looks to peer data and historical returns for reasonability and appropriateness.
The 2003 and 2002 pension plan disclosures were determined using a September 30 measurement date. The Company recognized an intangible asset of $2.6 million and $3.1 million as of December 31, 2003 and 2002, respectively, primarily
39
for unamortized prior service costs, which is recorded in other assets. The increase in the minimum liability included in other comprehensive income, pre-tax, for 2003, 2002 and 2001 was $13.9 million, $7.4 million and $4.9 million, respectively.
Additionally, the Company maintains retirement savings plans covering a significant portion of its employees. Expenses for these plans were approximately $7.9 million in 2003, $7.2 million in 2002 and $6.8 million in 2001. The Company also sponsors an employee stock ownership plan (ESOP) as part of one of its existing savings plans. Costs for the ESOP are included in the previously stated expenses. The ESOP is available to eligible domestic employees and represents a match in Carlisle Companies Incorporated common stock of contributions made by plan participants to the savings plan up to a maximum of 4.00% of a participants eligible compensation. Participants are not allowed to direct their contributions to the savings plan to investment in the Companys common stock. A breakdown of shares held by the ESOP at December 31 is as follows:
|
|
2003 |
|
2002 |
|
2001 |
|
Shares held by the ESOP |
|
1,657,198 |
|
1,777,878 |
|
1,826,740 |
|
The Company also has a limited number of unfunded post-retirement benefit programs. Carlisles liability for post-retirement medical benefits is limited to a maximum obligation; therefore, the Companys liability is not materially affected by an assumed health care cost trend rate. Company contributions equaled benefits paid under the programs.
The Companys 2003 and 2002 disclosures for its post-retirement benefit programs is determined based on a September 30 measurement date.
The change in post-retirement medical projected benefit obligation:
In thousands |
|
2003 |
|
2002 |
|
||
Benefit obligation at beginning of year |
|
$ |
13,219 |
|
$ |
13,701 |
|
Service cost |
|
87 |
|
4 |
|
||
Interest cost |
|
834 |
|
763 |
|
||
Participant contributions |
|
622 |
|
266 |
|
||
Actuarial loss |
|
2,566 |
|
291 |
|
||
Benefits paid |
|
(2,430 |
) |
(1,806 |
) |
||
Curtailment gain |
|
(1,988 |
) |
|
|
||
Benefit obligation at end of year |
|
$ |
12,910 |
|
$ |
13,219 |
|
Reconciliation of the post-retirement medical accrued benefit cost recognized in the financial statements:
In thousands |
|
2003 |
|
2002 |
|
||
Funded status |
|
$ |
(12,910 |
) |
$ |
(13,219 |
) |
Unrecognized net actuarial loss |
|
2,395 |
|
358 |
|
||
Unrecognized transition obligation |
|
1,987 |
|
2,207 |
|
||
Contributions |
|
444 |
|
385 |
|
||
Accrued benefit cost |
|
$ |
(8,084 |
) |
$ |
(10,269 |
) |
The Company includes accrued benefit costs for its post-retirement program in other liabilities on the Companys Consolidated Balance Sheet.
Company contributions in 2004 are estimated to be consistent with contributions made in 2003.
Carlisles post-retirement benefit obligations were determined using an assumed discount rate of 6.10%, and 6.75% for years ended December 31, 2003 and 2002, respectively.
40
Components of net periodic benefit cost for years ended December 31:
In Thousands |
|
2003 |
|
2002 |
|
||
Service cost |
|
$ |
87 |
|
$ |
4 |
|
Interest cost |
|
834 |
|
763 |
|
||
Curtailment gain |
|
(1,538 |
) |
|
|
||
Net amortization and deferral |
|
268 |
|
247 |
|
||
Net periodic benefit cost |
|
$ |
(349 |
) |
$ |
1,014 |
|
The curtailment gain of $1.5 million in 2003 was due primarily to the Companys closure of its Carlisle Engineered Products Erie-Bundy Park, Pennsylvania plant which was part of the Automotive Components segment.
The Companys post-retirement medical benefit cost for 2003, 2002 and 2001 was determined using an assumed discount rate of 6.75%, 7.25% and 7.75%, respectively.
The provision for income taxes is as follows:
In thousands |
|
2003 |
|
2002 |
|
2001 |
|
|||
Current expense (income) |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
31,434 |
|
$ |
16,027 |
|
$ |
(4,042 |
) |
State, local and other |
|
2,625 |
|
4,372 |
|
(338 |
) |
|||
|
|
$ |
34,059 |
|
$ |
20,399 |
|
$ |
(4,380 |
) |
Deferred expense (income) |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
7,894 |
|
$ |
8,741 |
|
$ |
16,118 |
|
State, local and other |
|
860 |
|
(3,090 |
) |
1,346 |
|
|||
|
|
$ |
8,754 |
|
$ |
5,651 |
|
$ |
17,464 |
|
Total provision |
|
$ |
42,813 |
|
$ |
26,050 |
|
$ |
13,084 |
|
The 2002 tax provision includes the tax benefit of $12,072 on the impairment of goodwill.
Deferred tax assets (liabilities) are comprised of the following at December 31:
In thousands |
|
2003 |
|
2002 |
|
||
Extended warranty |
|
$ |
17,640 |
|
$ |
17,116 |
|
Inventory reserves |
|
2,066 |
|
2,177 |
|
||
Doubtful receivables |
|
2,400 |
|
2,732 |
|
||
Employee benefits |
|
27,557 |
|
18,011 |
|
||
Other, net |
|
3,335 |
|
5,215 |
|
||
Gross deferred assets |
|
$ |
52,998 |
|
$ |
45,251 |
|
Depreciation |
|
(53,741 |
) |
(42,175 |
) |
||
Amortization |
|
(6,070 |
) |
990 |
|
||
Gross deferred liabilities |
|
$ |
(59,811 |
) |
$ |
(41,185 |
) |
Net deferred tax (liabilities) assets |
|
$ |
(6,813 |
) |
$ |
4,066 |
|
In assessing whether deferred tax assets are realizable, the Company considers if it is more likely than not that they will be realized. Realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company has not recognized deferred tax benefits on certain state and foreign tax attributes in the amount of $0.3 million as realization of these benefits is uncertain. Based on historical levels of taxable income and projections of future taxable income over the periods in which deferred tax assets
41
are deductible, the Company believes it is more likely than not the benefits of the remaining deductible differences will be realized.
A reconciliation of taxes computed at the statutory rate to the tax provision is as follows:
In thousands |
|
2003 |
|
2002 |
|
2001 |
|
|||
Federal income taxes at statutory rate |
|
$ |
46,106 |
|
$ |
19,137 |
|
$ |
13,274 |
|
Benefit for export sales |
|
(1,750 |
) |
(1,613 |
) |
(1,111 |
) |
|||
State and local taxes, net of federal income tax benefit |
|
2,290 |
|
2,611 |
|
912 |
|
|||
Rate difference on foreign earnings |
|
(695 |
) |
(1,675 |
) |
116 |
|
|||
Tax effect of goodwill impairment |
|
|
|
7,467 |
|
|
|
|||
Settlement of IRS audit |
|
(3,777 |
) |
|
|
|
|
|||
Other, net |
|
639 |
|
123 |
|
(107 |
) |
|||
|
|
$ |
42,813 |
|
$ |
26,050 |
|
$ |
13,084 |
|
Effective income tax rate |
|
32.5 |
% |
47.6 |
% |
34.5 |
% |
The 2002 tax provision includes the tax benefit of $12,072 on the impairment of goodwill.
Cash payments for income taxes were $20.1 million, $12.7 million and $12.4 million in 2003, 2002 and 2001, respectively.
In millions |
|
2003 |
|
2002 |
|
||
Indefinitely Reinvested |
|
$ |
51.3 |
|
$ |
46.7 |
|
Not Indefinitely Reinvested |
|
12.8 |
|
9.5 |
|
||
Total |
|
$ |
64.1 |
|
$ |
56.2 |
|
The amount of undistributed foreign earnings was $42.4 million in 2001.
The Company is obligated under various noncancelable operating leases for certain facilities and equipment. Rent expense was $12.7 million, $17.4 million and $15.4 million in 2003, 2002 and 2001, respectively. Future minimum payments under its various noncancelable operating leases in each of the next five years are approximately $12.4 million in 2004, $10.7 million in 2005, $9.4 million in 2006, $6.9 million in 2007, $5.2 million in 2008 and $14.7 million thereafter.
The Company has financial guarantee lines totaling $27.7 million in place for certain of its operations in Asia and Europe to facilitate working capital needs, customer performance and payment and warranty obligations. At December 31, 2003, the Company had issued guarantees of $13.7 million, of which $11.1 million represents amounts recorded in current liabilities. The fair value of these guarantees is estimated to equal the amount of the guarantees at December 31, 2003.
42
The following table presents the change in the Companys aggregate product warranty liabilities:
In thousands |
|
2003 |
|
2002 |
|
||
Beginning reserve |
|
$ |
9,045 |
|
$ |
8,117 |
|
Current year provision |
|
13,662 |
|
14,020 |
|
||
Current year claims |
|
(13,465 |
) |
(13,092 |
) |
||
Ending reserve |
|
$ |
9,242 |
|
$ |
9,045 |
|
The Company has entered into long-term purchase agreements for certain key raw materials expiring December 31, 2004. Commitments are variable based on changes in commodity price indices. Based on pricing in effect at December 31, 2003, commitments under these agreements total approximately $12.4 million.
The Company maintains self-retained liabilities for workers compensation, medical and dental, general liability, property and product liability claims up to applicable retention limits. The Company is insured for losses in excess of these limits.
The Company may be involved in various legal actions from time to time arising in the normal course of business. In the opinion of management, the ultimate outcome of such litigation will not have a material adverse effect on the consolidated financial position of the Company, but may have a material impact on the Companys results of operations for a particular period.
Note 16 Exit and Disposal Activities
In 2003, the Company recorded plant closure and severance costs in the amount of $8.9 million ($6.0 million after-tax or $0.19 per diluted share) related to certain plant and office closures in the Industrial Components, Automotive Components, Specialty Products, and General Industry segments. Of this amount, $4.4 million related to the payment of non-recurring termination benefits. The remaining $4.5 million related to costs associated with exiting the facilities including the write-off of fixed assets. These charges impacted cost of goods sold by $5.9 million, selling and administrative expenses by $1.6 million and other expenses by $1.4 million. There were no significant liabilities remaining on the Companys Consolidated Balance Sheet as a result of these activities as of December 31, 2003.
In 2002 Carlisle incurred plant closure and severance expense of $6.9 million ($4.5 million after-tax, or $0.15 per diluted share related to plant closures within the Specialty Products and General Industry segments. Most of the expense related to the write-off of inventory and fixed assets, and equipment relocation. These charges impacted cost of goods sold by $3.8 million, selling and administrative expenses by $0.8 million and other expenses by $2.3 million. There were no remaining liabilities associated with these activities as of December 31, 2002.
In 2001, the Company recorded a restructuring charge of $32.8 million ($21.5 million after-tax or $0.70 per share diluted). This charge is primarily composed of costs to exit and realign under-performing facilities in the Automotive Components and Specialty Products segments. Included in this total are facility closure costs and write-downs of property, plant and equipment, and goodwill of $24.6 million and severance and other costs of $8.2 million. For facilities to be closed, the tangible assets to be disposed of were written down to their estimated fair value, less cost of disposal. All intangible assets associated with the facility closures were evaluated and the carrying value of these assets, based upon expected future operating cash flows, was adjusted if necessary. The restructuring initiative provided for a reduction of approximately 980 employees related to position eliminations from the facility closures and the realignment of operations. As of December 31, 2002, the Company had completed the terminations under the plan and paid approximately $7.0 million pre-tax for involuntary termination benefits.
On December 30, 2002, the Company sold the European operations of its Carlisle Power Transmission business. These operations contributed $33.3 million in net sales to the Industrial Components segment. As a result of this transaction, the Company recognized a pre-tax loss of $0.8 million, which is included in Other income and expense, net. Carlisle Power Transmission and the buyer of this business will manufacture and supply various products to each other on an ongoing basis.
43
On December 31, 2001, the Company sold its remaining interest in its leasing joint venture. As a result, the Company recognized a pre-tax gain of $5.2 million, which is included in Other income and expense, net.
The Companys reportable segments have been organized around differences in products and services, and operating segments have been aggregated. The accounting policies of the segments are the same as those described in the summary of accounting policies. The chief operating decision maker evaluates segment performance by earnings before interest and income taxes. The Companys operations are reported in the following segments:
Industrial Components the principal products of this segment are bias-ply, non-automotive rubber tires, stamped and roll-formed wheels, transmission belts and accessories. Customers include golf cart manufacturers and power equipment manufacturers and boat and utility trailer manufacturers.
Construction Materials the principal products of this segment are rubber (EPDM) and thermoplastic polyolefin (TPO) roofing membranes and FleeceBACK TM sheeting used predominantly on non-residential flat roofs, related roofing accessories, including flashings, fasteners, sealing tapes, coatings and waterproofings and insulation products. The markets served include new construction, re-roofing and maintenance of low-sloped roofs, water containment, HVAC sealants, and coatings and waterproofings.
Automotive Components the principal products of this segment are highly engineered rubber and plastic components for first tier suppliers and other manufacturers in the automotive market.
Specialty Products the principal products of this segment are heavy-duty friction and braking systems for truck and off-highway equipment. Customers include truck manufacturers, heavy equipment and truck dealers and aftermarket distributors.
General Industry (All Other) the principal products of this segment include high-grade aerospace wire, specialty electronic cable, cable assemblies and interconnects, commercial and institutional plastic foodservice permanentware and catering equipment, fiberglass and composite material trays and dishes, commercial cookware and servingware, ceramic tableware, specialty rubber and plastic cleaning brushes, stainless steel processing and containment equipment and their related process control systems, and refrigerated fiberglass truck bodies. Customers include aerospace original equipment manufacturers, electronic and communications equipment manufacturers, foodservice distributors, restaurants, food, dairy, beverage and pharmaceutical processors and distributors.
Corporate includes general corporate expenses. Corporate assets consist primarily of cash and cash equivalents, facilities, and other invested assets.
44
Geographic Area Information sales are attributable to the United States and to all foreign countries based on the country in which subsidiaries are domiciled. Sales by country for the years ended December 31 are as follows (in thousands):
Country |
|
2003 |
|
2002 |
|
2001 |
|
|||
United States |
|
$ |
1,857,785 |
|
$ |
1,718,630 |
|
$ |
1,653,093 |
|
Canada |
|
67,866 |
|
62,924 |
|
55,831 |
|
|||
China |
|
40,637 |
|
33,345 |
|
5,309 |
|
|||
Mexico |
|
39,072 |
|
27,298 |
|
40,670 |
|
|||
United Kingdom |
|
36,712 |
|
42,910 |
|
39,185 |
|
|||
All Other |
|
66,092 |
|
86,173 |
|
55,389 |
|
|||
Net Sales |
|
$ |
2,108,164 |
|
$ |
1,971,280 |
|
$ |
1,849,477 |
|
Note: In prior years presentation, sales were attributed to the United States and to all foreign countries based on customer location.
Long-lived assets, comprised of net property, plant and equipment, goodwill and other intangible assets, investments and other long-term assets, located in foreign countries are as follows (in thousands):
Country |
|
2003 |
|
2002 |
|
||
Denmark* |
|
$ |
70,144 |
|
$ |
63,369 |
|
China |
|
28,908 |
|
27,925 |
|
||
United Kingdom |
|
23,894 |
|
21,400 |
|
||
Netherlands |
|
21,835 |
|
21,866 |
|
||
Mexico |
|
7,034 |
|
5,605 |
|
||
Canada |
|
5,217 |
|
3,965 |
|
||
All Other |
|
6,408 |
|
6,599 |
|
||
Total |
|
$ |
163,440 |
|
$ |
150,729 |
|
* Includes investment in and advances to the Companys European roofing joint venture
45
Financial information for operations by reportable business segment is included in the following summary:
Segment Financial Data
In thousands |
|
Sales |
|
Earnings Before
|
|
Assets |
|
Depreciation
|
|
Capital
|
|
|||||
2003 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Industrial Components |
|
$ |
631,209 |
|
$ |
58,111 |
|
$ |
458,265 |
|
$ |
20,338 |
|
$ |
16,150 |
|
Construction Materials |
|
579,369 |
|
77,171 |
|
292,419 |
|
9,452 |
|
8,432 |
|
|||||
Automotive Components |
|
209,062 |
|
4,208 |
|
128,391 |
|
8,142 |
|
2,010 |
|
|||||
Specialty Products |
|
129,055 |
|
4,240 |
|
76,688 |
|
5,744 |
|
1,877 |
|
|||||
Transportation Products |
|
121,378 |
|
5,687 |
|
50,459 |
|
2,360 |
|
1,731 |
|
|||||
General Industry (All other) |
|
438,091 |
|
16,477 |
|
342,166 |
|
12,866 |
|
11,705 |
|
|||||
Corporate |
|
|
|
(19,700 |
) |
88,521 |
|
1,464 |
|
336 |
|
|||||
|
|
$ |
2,108,164 |
|
$ |
146,194 |
|
$ |
1,436,909 |
|
$ |
60,366 |
|
$ |
42,241 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Industrial Components |
|
$ |
621,569 |
|
$ |
54,241 |
|
$ |
444,303 |
|
$ |
19,051 |
|
$ |
10,892 |
|
Construction Materials |
|
488,047 |
|
66,404 |
|
253,951 |
|
8,217 |
|
6,593 |
|
|||||
Automotive Components |
|
235,822 |
|
12,454 |
|
116,201 |
|
8,051 |
|
4,725 |
|
|||||
Specialty Products |
|
121,922 |
|
(1,821 |
) |
84,237 |
|
6,017 |
|
5,169 |
|
|||||
Transportation Products |
|
119,566 |
|
5,962 |
|
51,538 |
|
2,513 |
|
2,081 |
|
|||||
General Industry (All other) |
|
384,354 |
|
11,230 |
|
306,227 |
|
11,772 |
|
8,176 |
|
|||||
Corporate |
|
|
|
(20,819 |
) |
72,330 |
|
1,373 |
|
1,700 |
|
|||||
|
|
$ |
1,971,280 |
|
$ |
127,651 |
|
$ |
1,328,787 |
|
$ |
56,994 |
|
$ |
39,336 |
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|||||
Industrial Components |
|
$ |
476,310 |
|
$ |
29,214 |
|
$ |
490,695 |
|
$ |
16,054 |
|
$ |
18,049 |
|
Construction Materials |
|
464,932 |
|
60,159 |
|
209,942 |
|
8,415 |
|
17,273 |
|
|||||
Automotive Components |
|
251,963 |
|
10,526 |
|
141,355 |
|
10,193 |
|
3,620 |
|
|||||
Specialty Products |
|
128,902 |
|
4,559 |
|
90,696 |
|
6,625 |
|
10,581 |
|
|||||
Transportation Products |
|
120,284 |
|
1,633 |
|
68,315 |
|
3,460 |
|
1,601 |
|
|||||
General Industry (All other) |
|
407,086 |
|
11,381 |
|
355,788 |
|
17,691 |
|
11,131 |
|
|||||
Corporate |
|
|
|
(50,427 |
) |
58,933 |
|
1,522 |
|
3,691 |
|
|||||
|
|
$ |
1,849,477 |
|
$ |
67,045 |
|
$ |
1,415,724 |
|
$ |
63,960 |
|
$ |
65,946 |
|
Beginning in the first quarter of 2003, the Companys custom molder of thermoset plastic components operation was included in the Specialty Products segment to reflect a change in reporting responsibility and the realignment of manufacturing processes. This operation was previously included in the General Industry (All Other) segment. Prior years information has been revised to reflect this change.
As discussed in Note 1 under the heading Reclassifications, the Company has reclassified cash in transit to Accounts payable for the periods ended December 31, 2002 and 2001. The table presented above reflects these reclassifications by segment.
46
Quarterly Financial Data
Unaudited
In thousands except per share data
|
|
First |
|
Second |
|
Third |
|
Fourth |
|
Year |
|
||
2003 |
|
|
|
|
|
|
|
|
|
|
|
||
Net sales |
|
$ |
475,688 |
|
554,413 |
|
549,524 |
|
528,539 |
|
$ |
2,108,164 |
|
Gross profit |
|
$ |
90,168 |
|
101,060 |
|
96,073 |
|
88,209 |
|
$ |
375,510 |
|
Operating expenses |
|
$ |
56,746 |
|
58,505 |
|
59,437 |
|
59,341 |
|
$ |
234,029 |
|
Net Income |
|
$ |
17,093 |
|
28,560 |
|
24,531 |
|
18,736 |
|
$ |
88,920 |
|
Basic earnings per share |
|
$ |
0.56 |
|
0.93 |
|
0.80 |
|
0.61 |
|
$ |
2.90 |
|
Diluted earnings per share |
|
$ |
0.56 |
|
0.93 |
|
0.80 |
|
0.59 |
|
$ |
2.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Dividends per share |
|
$ |
0.215 |
|
0.215 |
|
0.220 |
|
0.220 |
|
$ |
0.87 |
|
Stock price: |
|
|
|
|
|
|
|
|
|
|
|
||
High |
|
$ |
44.19 |
|
46.37 |
|
46.34 |
|
61.67 |
|
|
|
|
Low |
|
$ |
38.69 |
|
39.75 |
|
41.88 |
|
43.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2002 |
|
|
|
|
|
|
|
|
|
|
|
||
Net sales |
|
$ |
455,101 |
|
552,283 |
|
499,972 |
|
463,924 |
|
$ |
1,971,280 |
|
Gross profit |
|
$ |
83,381 |
|
101,272 |
|
91,949 |
|
82,873 |
|
$ |
359,475 |
|
Operating expenses |
|
$ |
57,004 |
|
58,867 |
|
58,647 |
|
57,213 |
|
$ |
231,731 |
|
Income before cumulative effect of change in accounting principle |
|
$ |
12,831 |
|
24,741 |
|
19,940 |
|
14,866 |
|
$ |
72,378 |
|
Basic earnings per share |
|
$ |
0.42 |
|
0.81 |
|
0.65 |
|
0.49 |
|
$ |
2.38 |
|
Diluted earnings per share |
|
$ |
0.42 |
|
0.81 |
|
0.65 |
|
0.49 |
|
$ |
2.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net Income |
|
$ |
(30,922 |
) |
24,741 |
|
19,940 |
|
14,866 |
|
$ |
28,625 |
|
Basic earnings per share |
|
$ |
(1.02 |
) |
0.81 |
|
0.65 |
|
0.49 |
|
$ |
0.94 |
|
Diluted earnings per share |
|
$ |
(1.02 |
) |
0.81 |
|
0.65 |
|
0.49 |
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Dividends per share |
|
$ |
0.210 |
|
0.210 |
|
0.215 |
|
0.215 |
|
$ |
0.85 |
|
Stock price: |
|
|
|
|
|
|
|
|
|
|
|
||
High |
|
$ |
43.95 |
|
45.65 |
|
47.23 |
|
43.45 |
|
|
|
|
Low |
|
$ |
33.60 |
|
34.75 |
|
35.55 |
|
32.36 |
|
|
|
Note: the sum of the quarterly per share amounts may not agree to the respective annual amounts due to rounding.
47
Independent Auditors Report
The Board of Directors
Carlisle Companies Incorporated
We have audited the accompanying consolidated balance sheets of Carlisle Companies Incorporated and subsidiaries as of December 31, 2003 and 2002, and the related statements of earnings, shareholders equity and other comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of Carlisle Companies Incorporated and subsidiaries as of December 31, 2001 and for year ended December 31, 2001, were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements in their report dated January 31, 2002, before the revisions described in Note 1 to the Consolidated Financial Statements in Summary of Accounting Policies under Reclassifications and Note 19 to the Consolidated Financial Statements in Segment Information.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Carlisle Companies Incorporated and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the Consolidated Financial Statements in Summary of Accounting Policies under Patents, Goodwill and Other Intangible Assets, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which resulted in a change in the Companys method of accounting for goodwill and other intangible assets.
As discussed above, the consolidated financial statements of Carlisle Companies Incorporated and subsidiaries as of December 31, 2001 and for the year ended December 31, 2001, were audited by other auditors who have ceased operations. As described in Note 1 to the Consolidated Financial Statements in Summary of Accounting Policies under Patents, Goodwill and Other Intangible Assets, these consolidated financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which was adopted by the Company as of January 1, 2002. As described in Note 1 to the Consolidated Financial Statements in Summary of Accounting Policies under Reclassifications, these consolidated financial statements have been revised to reflect certain reclassifications to conform to the 2003 presentation. As described in Note 19, the Company changed the composition of its reportable segments in 2003, and the amounts in the 2001 financial statements relating to reportable segments have been restated to conform to the 2003 composition of reportable segments. We audited the adjustments that were applied to revise the 2001 consolidated financial statements. In our opinion, such adjustments and disclosures for 2001 are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 consolidated financial statements of Carlisle Companies Incorporated and subsidiaries other than with respect to such adjustments and disclosures and, accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statements taken as a whole.
/s/ KPMG LLP |
|
Charlotte, North Carolina |
|
February 3, 2004 |
48
Report of Independent Public Accountants
To Carlisle Companies Incorporated:
We have audited the accompanying consolidated balance sheets of Carlisle Companies Incorporated (a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of earnings and shareholders equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Carlisle Companies Incorporated as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
|
/s/ Arthur Andersen LLP |
|
New York, New York
January 31, 2002
The above audit report of Arthur Andersen LLP, the Companys former independent public accountants, is a copy of the original report dated January 31, 2002 rendered by Arthur Andersen LLP on the Companys consolidated financial statements included in the Companys Form 10-K filed March 21, 2002, and has not been reissued by Arthur Andersen LLP since that date. The Company is including this copy of the Arthur Andersen LLP audit report pursuant to Rule 2-02(e) of Regulation S-X under the Securities Act of 1933.
49
Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosure.
On May 1, 2002, the Board of Directors of the Company, as recommended by its Audit Committee, decided to no longer engage Arthur Andersen LLP (Arthur Andersen) as the Companys independent public accountants and engaged KPMG LLP (KPMG) to serve as the Companys independent public accountants. KPMG has served as the Companys auditors for the 2002 and 2003 fiscal years.
Arthur Andersens reports on the Companys consolidated financial statements for the year ended 2001 did not contain as adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
During the year ended December 31, 2001 and through the date of the change in the Companys independent public accountants, there were no disagreements with Arthur Andersen on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Arthur Andersens satisfaction, would have caused them to make reference to the subject matter in connection with their report on the Companys consolidated financial statements for such years; and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Arthur Andersen with a copy of the foregoing disclosures. Attached as Exhibit 16 to the Companys Form 8-K, dated May 1, 2002, is a copy of Arthur Andersens letter, dated May 6, 2002, stating its agreement with such statements.
During the year ended December 31, 2001 and prior to the date the Company engaged KPMG, the Company did not consult with KPMG with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Companys consolidated financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
Item 9A. Controls and Procedures.
(a) Under the supervision and with the participation of the Companys management, including the Companys chief executive officer and acting chief financial officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation and as of December 31, 2003, the chief executive officer and acting chief financial officer concluded that the Companys disclosure controls and procedures are effective. Notwithstanding the foregoing, there can be no assurance that the Companys disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in the Companys periodic reports.
(b) There were no significant changes in the Companys internal control over financial reporting identified in connection with the evaluation required by paragraph (a) above that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
50
Part III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth certain information relating to each executive officer of the Company, as furnished to the Company by the executive officers. Except as otherwise indicated each executive officer has had the same principal occupation or employment during the past five years.
Name |
|
Age |
|
Positions With Company |
|
Period of Service |
|
|
|
|
|
|
|
|
|
Stephen P. Munn |
|
61 |
|
Chairman of the Board |
|
September, 1988 to date |
|
|
|
|
|
since January, 1994; and Chief |
|
|
|
|
|
|
|
Executive Officer from September, |
|
|
|
|
|
|
|
1988 to February, 2001. |
|
|
|
|
|
|
|
|
|
|
|
Richmond D. McKinnish |
|
54 |
|
Chief Executive Officer since |
|
August, 1974 to date |
|
|
|
|
|
February, 2001; President, since |
|
|
|
|
|
|
|
March, 2000; and Executive Vice President |
|
|
|
|
|
|
|
from March, 1999 to March 2000 |
|
|
|
|
|
|
|
|
|
|
|
Kirk F. Vincent(1) |
|
55 |
|
Vice President and Chief Financial |
|
August, 2001 to |
|
|
|
|
|
Officer since August, 2001 |
|
November 13, 2003 |
|
|
|
|
|
Formerly employed by J&L Specialty |
|
|
|
|
|
|
|
Steel, Inc., a stainless steel provider, |
|
|
|
|
|
|
|
as Executive Vice President Finance |
|
|
|
|
|
|
|
& Administration and Chief Financial |
|
|
|
|
|
|
|
Officer from March, 1998 to August, 2001 |
|
|
|
|
|
|
|
and Vice President Finance and Law from |
|
|
|
|
|
|
|
December, 1991 to March, 1998. |
|
|
|
|
|
|
|
|
|
|
|
Kevin G. Forster |
|
50 |
|
President, Asia-Pacific since September |
|
August, 1990 to date |
|
|
|
|
|
1997. |
|
|
|
|
|
|
|
|
|
|
|
Steven J. Ford |
|
44 |
|
Vice President, Secretary and General |
|
July, 1995 to date |
|
|
|
|
|
Counsel since July, 1995. |
|
|
|
The officers have been elected to serve at the pleasure of the Board of Directors of the Company. There are no family relationships between any of the above officers, and there is no arrangement or understanding between any officer and any other person pursuant to which he was selected an officer.
Information required by Item 10 with respect to directors of the Company is incorporated by reference to the Companys definitive proxy statement filed with the Securities and Exchange Commission on March 11, 2004.
The Company has adopted a Business Code of Ethics covering, among others, its principal executive officer, principal accounting officer, and controller. The Business Code of Ethics is published on the Companys website: www.carlisle.com. Any amendment to, or waiver of, any provision of the Business Code of Ethics effecting such senior officers will be disclosed on the Companys website.
(1) Mr. Vincent resigned from the Company, effective November 13, 2003.
51
Item 11. Executive Compensation.
Information required by Item 11 is incorporated by reference to the Companys definitive proxy statement filed with the Securities and Exchange Commission on March 11, 2004.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information required by Item 12 is incorporated by reference to the Companys definitive proxy statement filed with the Securities and Exchange Commission on March 11, 2004.
Item 13. Certain Relationships and Related Transactions.
Not applicable.
Item 14. Principal Accountant Fees and Services.
Information required by Item 14 is incorporated by reference to the Companys definitive proxy statement filed with the Securities and Exchange Commission on March 11, 2004.
52
Part IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Financial statements required by Item 8 are as follows:
Consolidated Statements of Earnings, years ended December 31, 2003, 2002 and 2001 |
Consolidated Statements of Shareholders Equity, years ended December 31, 2003, 2002 and 2001 |
Consolidated Statements of Cash Flows, years ended December 31, 2003, 2002 and 2001 |
|
Financial Statement Schedules |
|
|
Exhibits applicable to the filing of this report are as follows: |
(3) |
By-laws of the Company. (a) |
(3.1) |
Restated Certificate of Incorporation as amended April 22, 1991. (d) |
(3.2) |
Certificate of Amendment of the Restated Certificate of Incorporation dated |
|
December 20, 1996. (f) |
(3.3) |
Certificate of Amendment of the Restated Certificate of Incorporation dated April 29, 1999. (i) |
(4) |
Shareholders Rights Agreement, February 8, 1989. (a) |
(4.1) |
Amendment to Shareholders Rights Agreement, dated August 7, 1996. (e) |
(4.2) |
Trust Indenture. (g) |
(10.1) |
Executive Incentive Program. (b) |
(10.2) |
Amendment to Executive Incentive Program. (h) |
(10.3) |
Representative copy of Executive Severance
Agreement, dated December 19, 1990, between the Company and certain
individuals, including the five most highly
|
(10.4) |
Summary Plan Description of Carlisle
Companies Incorporated Director Retirement
|
(10.5) |
Amendment to the Carlisle Companies Incorporated Director Retirement Plan. |
(10.6) |
Nonemployee Director Stock Option Plan (i) |
(10.7) |
Amended and Restated Non-Employee Director Stock Option Plan (j) |
(10.8) |
Carlisle Companies Incorporated Deferred Compensation Plan for Non-Employee Directors. |
(12) |
Ratio of Earnings to Fixed Charges. |
(21) |
Subsidiaries of the Registrant. |
(23.1) |
Consent of Independent Public Accountants. |
(23.2) |
Notice Regarding Consent of Arthur Andersen LLP. |
(31.1) |
Rule 13a-14(a)/15d-14(a) Certifications. |
(31.2) |
Rule 13a-14(a)/15d-14(a) Certifications. |
(32) |
Section 1350 Certification. |
(a) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference. |
|
|
(b) |
Filed with the Companys definitive proxy statement dated March 9, 1994 and incorporated herein by reference. |
|
|
(c) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference. |
53
(d) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference. |
|
|
(e) |
Filed as an Exhibit to Form 8-A/A filed on August 9, 1996 and incorporated herein by reference. |
|
|
(f) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference. |
|
|
(g) |
Filed as an Exhibit to the Companys registration statement on Form S-3 (No. 333-16785) and incorporated herein by reference. |
|
|
(h) |
Filed with the Companys definitive proxy statement dated March 9, 1998 and incorporated herein by reference. |
|
|
(i) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. |
|
|
(j) |
Filed as an Exhibit to the Companys annual report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference. |
On October 15, 2003, the Company furnished to the Commission on Form 8-K the Companys press release reporting earnings for the period ended September 30, 2003.
54
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities 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
/s/ |
Philip C. Aldinger, Jr. |
|
|
|
|
||
By: |
Philip C. Aldinger, Jr., Controller |
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ |
Richmond D. McKinnish |
|
/s/ Donald G. Calder |
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|
|
|
||||
Richmond D. McKinnish, President, |
Donald G. Calder, Director |
||||
Chief Executive Officer and a |
|
||||
Director |
|
||||
(Principal Executive Officer) |
/s/ Robin S. Callahan |
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||||
|
Robin S. Callahan, Director |
||||
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|
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/s/ |
Philip C. Aldinger, Jr. |
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|
||||
(Acting Principal Financial Officer and |
/s/ Paul J. Choquette, Jr. |
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|||
Acting Principal Accounting Officer) |
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||||
|
Paul J. Choquette, Jr., Director |
||||
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/s/ |
Stephen P. Munn |
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|
/s/ Peter L.A. Jamieson |
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|||
Stephen P. Munn, Chairman of |
|
||||
the Board of Directors |
Peter L.A. Jamieson, Director |
||||
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||||
|
/s/ Peter F. Krogh |
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|||
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|
||||
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Peter F. Krogh, Director |
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|||
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||||
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/s/ Anthony W. Ruggiero |
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|||
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|
||||
|
Anthony W. Ruggiero, Director |
||||
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|
||||
|
/s/ Lawrence A. Sala |
|
|||
|
|
||||
|
Lawrence A. Sala, Director |
||||
55
|
/s/ Eriberto R. Scocimara |
|
|
|
|
|
Eriberto R. Scocimara, Director |
|
|
|
|
March 11, 2004 |
/s/ Magalen C. Webert |
|
|
|
|
|
Magalen C. Webert, Director |
56
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
(Dollars in thousands)
|
|
Column B |
|
Column C
|
|
Column D |
|
|
|
|||||||
Column A |
|
|
|
|
Column E |
|
||||||||||
|
|
Balance at
|
|
Charged to
|
|
Charged to
|
|
|
|
|
|
|||||
|
|
|
|
|
|
Balance at
End
|
|
|||||||||
Fiscal Year |
|
|
|
|
Deductions (2) |
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2001* |
|
$ |
5,688 |
|
$ |
2,044 |
|
$ |
1,272 |
|
$ |
(1,945 |
) |
$ |
7,059 |
|
2002* |
|
$ |
7,059 |
|
$ |
4,039 |
|
$ |
(182 |
) |
$ |
(2,813 |
) |
$ |
8,103 |
|
2003 |
|
$ |
8,103 |
|
$ |
2,384 |
|
$ |
449 |
|
$ |
(3,777 |
) |
$ |
7,159 |
|
* Customer rebates previously included in allowance for doubtful accounts have been reclassified to accrued expenses
(1) Primarily relates to acquisitions and divestitures
(2) Accounts written off, net of recoveries
57
Report of Independent Public Accountants on Schedule II
Independent Auditors Report
The Board of Directors
Carlisle Companies Incorporated:
Under date of February 3, 2004, we reported on the consolidated balance sheets of Carlisle Companies Incorporated and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of earnings, shareholders equity and other comprehensive income, and cash flows for the years then ended, as contained in the annual report on Form 10-K for the year 2003. In connection with our audit of the aforementioned consolidated financial statements, we also audited the related 2003 and 2002 consolidated financial statement schedule as listed in Item 15 of this Form 10-K. This financial statement schedule is the responsibility of the Companys management. Our responsibility is to express an opinion on this financial statement schedule based on our audit. The consolidated financial statements and consolidated financial statement schedule of Carlisle Companies Incorporated and subsidiaries for the year ended December 31, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those consolidated financial statements and consolidated financial statement schedule in their reports dated January 31, 2002.
In our opinion, such consolidated financial statement schedule, when considered in relation to the basic 2003 and 2002 consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed above, the consolidated financial statements and consolidated financial statement schedule for the year ended December 31, 2001, were audited by other auditors who have ceased operations. As described in Note 1 to the Consolidated Financial Statements in Summary of Accounting Policies under Reclassifications, the consolidated financial statement schedule has been revised to reflect certain reclassifications to conform to 2003 presentation. We audited the adjustments that were applied to revise the 2001 consolidated financial statement schedule. In our opinion, such adjustments and disclosures for 2001 are appropriate and have been properly applied. However, we were not engaged to audit, review or apply any procedures to the 2001 consolidated financial statement schedule of Carlisle Companies Incorporated and subsidiaries other than with respect to such adjustments and disclosures, and accordingly, we do not express an opinion or any other form of assurance on the 2001 consolidated financial statement schedule.
/s/ KPMG LLP |
|
Charlotte, North Carolina |
|
February 3, 2004 |
58
The following report is a copy of a report previously issued by Arthur Andersen LLP and it has not been reissued by Arthur Andersen LLP. This report applies to Supplemental Schedule II Valuation and Qualifying Accounts and Allowance for Doubtful Accounts for the year ended December 31, 2001. Please note that the referenced schedule is listed in Item 15, and not Item 14 as described in the report.
Report of Independent Public Accountants on Schedule II
To Carlisle Companies Incorporated:
We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Carlisle Companies Incorporated included in this Form 10-K, and have issued our report thereon dated January 31, 2002. Our audits were made for the purpose of forming an opinion on those financial statements taken as a whole. The schedule listed in Item 14 of this Form 10-K is the responsibility of the Companys management and is presented for purposes of complying with the Securities and Exchange Commissions rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statement and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
|
/s/ Arthur Andersen LLP |
|
New York, New York
January 31, 2002
59
CARLISLE COMPANIES INCORPORATED
COMMISSION FILE NUMBER 1-9278
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2003
EXHIBIT LIST
(10.5) |
Amendment to the Carlisle Companies Incorporated Director Retirement Plan |
|
|
(10.8) |
Carlisle Companies Incorporated Deferred Compensation Plan for Non-Employee Directors |
|
|
(12) |
Ratio of Earnings to Fixed Charges |
|
|
(21) |
Subsidiaries of the Registrant |
|
|
(23.1) |
Consent of Independent Public Accountants |
|
|
(23.2) |
Notice Regarding Consent of Arthur Andersen LLP |
|
|
(31.1) |
Rule 13a-14a/15d-14(a) Certifications |
|
|
(31.2) |
Rule 13a-14a/15d-14(a) Certifications |
|
|
(32) |
Section 1350 Certification |
60
Exhibit 10.5
AMENDMENT TO THE
CARLISLE COMPANIES INCORPORATED
DIRECTOR RETIREMENT PLAN
The Carlisle Companies Incorporated Director Retirement Plan (Plan) is hereby amended, effective as of December 31, 2003, as follows.
(1) Explanation of Amendment
The Plan is amended (i) to freeze the accrual of all future benefits, (ii) to waive the requirement that a participant serve on the Board of Directors (Board) of Carlisle Companies Incorporated (Company) for five years in order to be eligible for a benefit and (iii) to provide each participant who is currently serving on the Board with a one-time opportunity to elect, in lieu of all other benefits to which he or she would otherwise be entitled under the Plan, to receive his or her previously-earned benefits in one of four forms.
(2) Amendment
The Plan is hereby amended by adding the following at the end thereof:
Freeze and Amendment of the Plan .
A. No benefits shall be earned under the Plan for service after December 31, 2003. The amount of all benefits earned under the Plan prior to January 1, 2004 is frozen effective as of December 31, 2003.
B. The requirement that a non-employee director serve on the Board for a minimum of five years in order to be entitled to receive a benefit under the Plan is hereby waived for any non-employee director who is serving on the Board as of December 31, 2003.
C. Each non-employee director who is serving on the Board as of December 31, 2003 shall have a one-time irrevocable opportunity to elect, in lieu of all other benefits to which he or she would otherwise be entitled under the Plan, to receive his or her previously-earned benefits in one of the following four forms, which benefits shall be payable in accordance with the terms of his or her Pension Election Agreement: (i) an immediate lump sum, (ii) installment payments commencing in February 2004, (iii) installment payments commencing on a date selected by the non-employee director (but no later than the date on which he or she attains age 70) and (iv) a credit to his or her account under the Carlisle Companies Incorporated Deferred Compensation Plan for Non-Employee Directors. An eligible directors election is subject to two conditions: (i) he or she must remain as an active member of the Board until January 15, 2004 and (ii) his or her election is subject to the approval of the Companys Chief Executive Officer. Elections must be in accordance with procedures specified by the Company.
1
IN WITNESS WHEREOF, the Company has caused the Plan to be amended effective as of December 31, 2003.
|
CARLISLE COMPANIES INCORPORATED |
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|
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|
|
|||
|
By: |
|
/s/ Steven J. Ford |
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|
Steven J. Ford, Secretary |
2
Exhibit 10.8
CARLISLE COMPANIES INCORPORATED
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
Carlisle Companies Incorporated hereby establishes, effective as of January 1, 2004, the Carlisle Companies Incorporated Deferred Compensation Plan for Non-Employee Directors on the terms and conditions hereinafter set forth. The Plan provides each eligible non-employee director with the opportunity to (i) defer all or a portion of his annual retainer and meeting fees and (ii) elect to receive a one-time credit to his Account under the Plan in lieu of benefits to which he would otherwise be entitled under the Companys Director Retirement Plan.
SECTION I
DEFINITIONS
For the purposes hereof, the following words and phrases shall have the meanings set forth below, unless their context clearly requires a different meaning:
1.1. Account means the bookkeeping account maintained under the Plan by the Administrator on behalf of each Participant pursuant to Section 2.4.
1.2. Administrator means the administrator appointed to administer the Plan. Unless and until otherwise specified, the Administrator under the Plan shall be the Board. Pursuant to Section 3, from time to time the Administrator may delegate to the management of the Company its responsibilities, including its recordkeeping responsibilities, under the Plan. Where used herein, the Administrator shall be deemed to include representatives of the Companys management to whom administrative responsibilities, including recordkeeping responsibilities, have been delegated.
1.3. Beneficiary or Beneficiaries means the person or persons, including one or more trusts, designated by a Participant in accordance with the Plan to receive payment of the remaining balance of the Participants Account in the event of the death of the Participant prior to the Participants receipt of the entire amount credited to his Account.
1.4. Board means the Board of Directors of the Company.
1.5. Company means Carlisle Companies Incorporated and its successors, including, without limitation, the surviving corporation resulting from any merger or consolidation of Carlisle Companies Incorporated with any other corporation, limited liability company, joint venture, partnership or other entity.
1.6. Election Agreement means a Participants agreement, on a form provided by the Administrator, to defer his Fees.
1.7. Eligible Director means, unless otherwise determined by the Administrator, each member of the Board who is not an employee of the Company or any of its affiliates. Each Eligible Director shall continue as such until his Termination of Service Date.
1
1.8. Fees means the annual retainer, meeting fees and other similar amounts (as determined by the Administrator from time to time) payable by the Company to a Participant in consideration for his service as a member of the Board.
1.9. Insolvent means that the Company has become subject to a pending voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code or has become unable to pay its debts as they mature.
1.10. Participant means any Eligible Director who has at any time elected to defer the receipt of Fees in accordance with the Plan or who has received a credit pursuant to Section 2.3(ii) and who, in conjunction with his Beneficiary, has not received a complete distribution of the amount credited to his Account.
1.11. Pension Election Agreement means a Participants agreement, on a form provided by the Administrator, to receive a credit to his Account under the Plan in lieu of all benefits to which he would otherwise be entitled under the Carlisle Companies Incorporated Director Retirement Plan.
1.12. Plan means this deferred compensation plan, which shall be known as the Carlisle Companies Incorporated Deferred Compensation Plan for Non-Employee Directors.
1.13. Termination of Service Date means the date a Participant ceases to be a member of the Board for any reason.
1.14. Year means the 12-month period ending on each December 31.
SECTION II
DEFERRALS, CONTRIBUTIONS AND ACCOUNTS
2.1. Eligibility . Subject to Section 2.3, an Eligible Director may elect to defer receipt of all or a specified part of his Fees for any Year in accordance with Section 2.2. An Eligible Directors entitlement to defer shall cease with respect to the Year following the Year in which he ceases to be an Eligible Director.
2.2. Election to Defer . An Eligible Director who desires to defer all or part of his Fees pursuant to the Plan must complete and deliver an Election Agreement to the Administrator before the first day of the Year for which such Fees would otherwise be earned. Notwithstanding the above, in the event that an individual first becomes an Eligible Director during the course of a Year, the individuals Election Agreement must be filed no later than thirty (30) days following the date he first becomes an Eligible Director and such Election Agreement shall be effective only with regard to Fees earned following the filing of the Election Agreement with the Administrator. An Election Agreement that is timely delivered to the Administrator shall be effective with respect to Fees earned in all Years following the Year in which the Election Agreement is delivered to the Administrator, unless such Election Agreement is revoked or modified (which revocation or modification shall be effective on the first day of the Year following the Year in which such revocation or modification is delivered to the Administrator) or until terminated automatically upon either the termination of the Plan, the Company becoming Insolvent or the Participants Termination of Service Date.
2
2.3. Amount Deferred .
(i) Elective Deferrals . A Participant shall designate on the Election Agreement the portion of his Fees that is to be deferred in accordance with the following rules. A Participant may defer up to 100% of the Fees that he would otherwise receive during the Year for services performed as an Eligible Director.
(ii) Converted Benefit . Each Eligible Director who earned benefits under the Carlisle Companies Incorporated Director Retirement Plan and who elects on his Pension Election Agreement to receive an amount under the Plan in lieu of such benefits shall have a credit made to his Account in the amount set forth in his Pension Election Agreement.
2.4. Accounts .
(i) Crediting of Deferrals . Fees that a Participant elects to defer shall be credited to his Account on the date the Fees would otherwise have been paid to the Participant.
(ii) Crediting of Converted Benefit . Any amount credited to a Participants Account pursuant to Section 2.3(ii) shall be credited as soon as practicable after the date on which the Participant elects to receive such credit.
(iii) Investment Procedures . Until fully distributed under the Plan, amounts held in a Participants Account shall be credited with gains, losses and earnings based on investment directions made by the Participant on an Election Agreement provided by the Administrator. The initial investment options available under the Plan shall be (a) an investment option deemed to be invested solely in shares of the common stock, par value of one dollar ($1.00), of the Company, with dividends deemed to be reinvested in such shares (the Company Stock Fund) and (b) a fixed rate investment option, which rate is subject to change from time to time and is compounded annually (the Fixed Rate Fund). Each Participant may change his investment elections one time per Year, which change will be effective on the first day of such Year, by submitting an Election Agreement to the Administrator during the period commencing on November 1 and ending on December 31 of the preceding Year, provided, however, that a Participant may not change from the Company Stock Fund to the Fixed Rate Fund if, immediately after such change, he fails to satisfy the Companys share ownership guidelines. The Administrator specifically retains the right in its sole discretion to change the investment options from time to time. By giving investment directions in accordance with the Plan, each Participant shall thereby acknowledge and agree that the Company is not and shall not be required to make any investment in connection with the Plan, nor is it required to follow the Participants investment directions in any actual investment it may make or acquire in connection with the Plan or in determining the amount of any actual or contingent liability or obligation of the Company thereunder or relating thereto. The Plan is unfunded. A Participants Account represents the Companys unsecured obligation to pay the amount credited to such bookkeeping account. Amounts credited to a Participants Account are not actually used to purchase the investments selected by the Participant.
2.5. Date of Distribution . Except as otherwise provided herein, the distribution of a Participants Account shall be made or shall commence as soon as administratively practicable after the Participants Termination of Service Date.
3
2.6. Form of Distribution . The Participants entire Account (including the amount of each investment option in which the Account is deemed invested) shall be distributed in cash, at the election of the Participant, (i) in a single lump sum or (ii) in quarterly installments over a period of ten years. Payment shall commence on the date specified in Section 2.5, except as otherwise provided herein. The payment to a Participant or his Beneficiary of a single lump sum or of the installments payable hereunder shall discharge all obligations of the Company to such Participant or Beneficiary under the Plan with respect to that Account. In the event that a Participants Account is paid in installments, the amount of each installment shall be equal to the quotient obtained by dividing the Participants Account balance as of the date of such installment payment by the number of installment payments remaining to be made to or in respect of such Participant at the time of the calculation. In the event that no valid election is made regarding the Participants form of distribution, the Participants Account shall be paid in a single lump sum. Notwithstanding the payment form elected by a Participant on his first Election Agreement, a Participant may elect on a form provided by the Administrator to change the form of payment of his Account to a form of payment otherwise permitted hereunder provided that any election made less than one year prior to the Participants Termination of Service Date shall not be valid, and in such case, the distribution shall be made in accordance with the latest valid election of the Participant.
2.7. Death of a Participant . If a Participant dies after payment of his Account in installments has commenced, the remaining balance of his Account shall continue to be paid to his Beneficiary or Beneficiaries in accordance with the payment schedule that has already commenced. If a Participant dies before payment from his Account has commenced, the Participants Account shall be paid to his Beneficiary or Beneficiaries in cash in a single lump sum as soon as administratively practicable after the Participants death. Each Participant shall designate a Beneficiary or Beneficiaries on a Beneficiary designation form provided by the Administrator. A Participants Beneficiary designation may be changed at any time prior to his death by the execution and delivery of a new Beneficiary designation. The Beneficiary designation on file with the Company that bears the latest date at the time of the Participants death shall govern. Notwithstanding the above, in the absence of a Beneficiary designation, the amount of the Participants Account shall be paid to the Participants estate in a lump sum amount within 90 days after the appointment of an executor or administrator or as otherwise determined by the Administrator.
2.8. Acceleration . Notwithstanding any other provision of the Plan, each Participant shall be permitted, at any time, to make an election to receive, payable as soon as administratively practicable after such election is received by the Administrator, a distribution of part or all of his Account in a single lump sum, if (and only if) the amount in the Participants Account subject to such distribution is reduced by 10%, which 10% amount shall thereupon irrevocably be forfeited.
2.9. Vesting of Accounts . Subject to Section 2.8, each Participant shall at all times have a nonforfeitable interest in his Account balance.
SECTION III
ADMINISTRATION
The Administrator shall be responsible for the general administration of the Plan and for carrying out the provisions hereof. The Administrator shall have all such powers as may be necessary to carry out the provisions of the Plan, including the power to (i) resolve all questions relating to eligibility for participation in the Plan and the amount in the Account of any Participant and all questions pertaining to claims for benefits and procedures for claim review, (ii) resolve all other questions arising under the Plan, including any factual questions and questions
4
of construction, and (iii) take such further action as the Company shall deem advisable in the administration of the Plan. The actions taken and the decisions made by the Administrator hereunder shall be final and binding upon all interested parties. Any Participant who would otherwise be entitled to act on behalf of the Administrator shall recuse himself from any decision of the Administrator that is made solely with respect to him. The Administrator shall provide a procedure for handling claims of Participants or their Beneficiaries under the Plan. Such procedure shall provide adequate written notice within a reasonable period of time with respect to the denial of any such claim as well as a reasonable opportunity for a full and fair review by the Administrator of any such denial. From time to time, the Administrator may delegate to the management of the Company its responsibilities, including its recordkeeping responsibilities, under the Plan.
SECTION IV
AMENDMENT AND TERMINATION
4.1. Amendment . The Company reserves the right to amend the Plan at any time by action of the Board; provided, however, that no such action shall reduce the Account balance of any Participant or Beneficiary without his consent.
4.2. Termination . The Company reserves the right to terminate the Plan at any time by action of the Board. In the event that the Company terminates the Plan, each Participant shall receive a distribution of his Account, at the discretion of the Administrator, either (i) in a single lump sum as soon as administratively practicable following termination of the Plan or (ii) in a single lump sum or in installments, as elected by the Participant, commencing as soon as administratively practicable following his Termination of Service Date.
SECTION V
MISCELLANEOUS
5.1. Non-alienation of Deferred Compensation . Except as permitted by the Plan, no right or interest under the Plan of any Participant or Beneficiary shall, without the written consent of the Company, be (i) assignable or transferable in any manner, (ii) subject to alienation, anticipation, sale, pledge, encumbrance, attachment, garnishment or other legal process or (iii) in any manner liable for or subject to the debts or liabilities of the Participant or Beneficiary.
5.2. Interest of Participant .
(i) The obligation of the Company under the Plan to make payment of amounts reflected in an Account merely constitutes the unsecured promise of the Company to make payments from its general assets and no Participant or Beneficiary shall have any interest in, or a lien or prior claim upon, any property of the Company. It is the intention of the Company that the Plan be unfunded for tax purposes.
(ii) In the event that the Company purchases an insurance policy or policies insuring the life of any Participant (or any other property) to allow the Company to recover the cost of providing the benefits, in whole or in part, hereunder, neither the Participants nor their Beneficiaries or other distributees shall have nor acquire any rights whatsoever therein or in the proceeds therefrom. The Company or its delegate shall be the sole owner and beneficiary of any such policy or policies and, as such, shall possess and may exercise all incidents of ownership therein. A Participants participation in the underwriting or other steps necessary to acquire such policy or policies may be required by the
5
Company and, if required, shall not be a suggestion of any beneficial interest in such policy or policies to such Participant or any other person.
5.3. Claims of Other Persons . The provisions of the Plan shall in no event be construed as giving any other person, firm or corporation any legal or equitable right as against the Company or the officers, employees or directors of the Company, except any such rights as are specifically provided for in the Plan or are hereafter created in accordance with the terms and provisions of the Plan.
5.4. Severability . The invalidity and unenforceability of any particular provision of the Plan shall not affect any other provision hereof, and the Plan shall be construed in all respects as if such invalid or unenforceable provision were omitted.
5.5. Construction . Except to the extent preempted by federal law, the provisions of the Plan shall be governed and construed in accordance with the laws of the State of North Carolina. Unless the context clearly requires otherwise, the masculine pronoun wherever used herein shall be construed to include the feminine pronoun.
5.6. Successors . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume this Plan. This Plan shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the Company for the purposes of this Plan), and the heirs, beneficiaries, executors and administrators of each Participant. In the event that any successor to the Company shall fail to assume this Plan, the Plan shall immediately terminate and each Participant shall immediately receive distribution of his Account in a single lump sum.
5.7. Withholding of Taxes and Other Amounts . The Company may withhold or cause to be withheld from any amounts deferred or payable under the Plan any taxes or other amounts as shall be legally required.
5.8. Electronic or Other Media . Notwithstanding any other provision of the Plan to the contrary, including any provision that requires the use of a written instrument, the Administrator may establish procedures for the use of electronic or other media in communications and transactions between the Plan or the Administrator and Participants and Beneficiaries. Electronic or other media may include, but are not limited to, e-mail, the Internet, intranet systems and automated telephonic response systems.
EXECUTED this 3 rd day of December, 2003.
|
CARLISLE COMPANIES INCORPORATED |
||
|
|
|
|
|
By: |
/s/ Richmond D. McKinnish |
|
|
|
Richmond D. McKinnish |
|
|
|
Chief Executive Officer and President |
6
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Companys ratio of earnings to fixed charges for periods indicated:
Year Ended December 31, |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
1999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of Earnings to Fixed Charges |
|
7.26 |
|
5.36 |
|
1.95 |
|
5.27 |
|
7.41 |
|
For purposes of computing the ratio of earnings to fixed charges, earnings are defined as earnings before income taxes plus fixed charges. Fixed charges consist of interest expense (including capitalized interest) and the portion of rental expense that is representative of the interest factor (deemed to be one-third of minimum operating lease rentals). The earnings to fixed charges calculation reflects the Companys proportionate share of income, expense and fixed charges attributable to the Companys investment in majority-owned unconsolidated subsidiaries and joint ventures.
1
Exhibit 21
CARLISLE COMPANIES INCORPORATED
Subsidiaries of the Registrant
Carlisle Companies Incorporated (Registrant)
Domestic Subsidiaries |
|
State of
|
|
|
|
Carlisle China Coatings & Waterproofing, Inc. |
|
Delaware |
Carlisle China Stainless Equipment, Inc. |
|
Delaware |
Carlisle Coatings & Waterproofing Incorporated |
|
Delaware |
Carlisle Corporation |
|
Delaware |
Carlisle Engineered Products, Inc. |
|
Delaware |
Carlisle Flight Services, Inc. |
|
Delaware |
Carlisle FoodService Products Incorporated |
|
Delaware |
Carlisle Insurance Company |
|
Vermont |
Carlisle Intangible Company |
|
Delaware |
Carlisle International, Inc. |
|
Delaware |
Carlisle Internet Sales Company |
|
Delaware |
Carlisle Management Company |
|
Delaware |
Carlisle Power Transmission Products, Inc. |
|
Nevada |
Carlisle Process Systems, Inc. |
|
Delaware |
Carlisle Roofing Systems, Inc. |
|
Delaware |
Carlisle SPV, Inc. |
|
Delaware |
Carlisle SynTec Incorporated |
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Delaware |
Carlisle Tire & Wheel Company |
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Delaware |
Hartstone, Inc. (d/b/a Carlisle Home Products) |
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Delaware |
Johnson Truck Bodies, Inc. |
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Wisconsin |
Kenro Incorporated |
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Delaware |
Motion Control Industries, Inc. |
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Delaware |
Tensolite Company |
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Delaware |
Trail King Industries, Inc. |
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South Dakota |
Versico Incorporated |
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Delaware |
Walker Stainless Equipment Company, Inc. |
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Delaware |
1
Foreign Subsidiaries |
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Jurisdiction |
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Beijing Carlisle Waterproofing Materials Ltd. |
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China |
Carlisle Asia Pacific Limited |
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Hong Kong |
Carlisle C.O.G. GmbH |
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Germany |
Carlisle China Coatings & Waterproofing |
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Delaware |
Carlisle Corporation of Canada Ltd. |
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Canada |
Carlisle Den Bosch, BV |
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Netherlands |
Carlisle Europe BV |
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Netherlands |
Carlisle Europe Off-Highway BV |
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Netherlands |
Carlisle Europe On-Highway BV |
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Netherlands |
Carlisle Financial Services BV |
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Netherlands |
Carlisle FoodService Products Europe BV |
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Netherlands |
Carlisle Foreign Sales Corp. |
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Virgin Islands |
Carlisle Hardcast Europe BV |
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Netherlands |
Carlisle Holding Ltd. |
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United Kingdom |
Carlisle Holdings ApS |
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Netherlands |
Carlisle Mexico, S.A. DE C.V. |
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Mexico |
Carlisle Process Systems A/S |
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Denmark |
Carlisle Process Systems BV |
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Netherlands |
Carlisle Process Systems GmbH |
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Germany |
Carlisle Process Systems Ltd. |
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United Kingdom |
Carlisle Process Systems Limited |
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New Zealand |
Carlisle Producto S. De R.I. De C.V. |
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Mexico |
Carlisle Tire & Wheel Company of Canada, Ltd. |
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Canada |
Carlisle Tire & Rubber (Free Zone) Limited |
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Trinidad |
CSL Manufacturing CV |
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Netherlands |
Damrow A/S |
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Denmark |
DynAir of Canada Ltd. |
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Canada |
Extract Technology Limited (d/b/a Carlisle Life Sciences Europe) |
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United Kingdom |
Hardcast France |
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France |
Icopal A/S |
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Denmark |
Icopal Holding, A/S |
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Denmark |
Japan Power Brakes |
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Japan |
Lander Carlisle Holding, Ltd. |
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United Kingdom |
Lander Carlisle Ltd. |
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United Kingdom |
Pharmaceutical Biotech Systems Ltd. |
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United Kingdom |
Pharmaspace, Ltd. |
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United Kingdom |
Pulidora, SA de C.V. |
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Mexico |
Scherping Systems of Denmark ApS |
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Denmark |
Shanghai Carlisle Stainless Equipment Co. Ltd. |
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China |
Techdania Invest ApS |
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Denmark |
Trail King SA de CV |
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Mexico |
2
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Carlisle Companies Incorporated:
We consent to the incorporation by reference into the previously filed Registration Statements on Form S-8 (Nos. 33-28052, 33-56737, 333-52411, 333-49742, 33-66932, and 333-99261) and on Form S-3 (Nos. 33-56735, 333-16785, 333-71028, and 333-88998) of Carlisle Companies Incorporated of our report dated February 3, 2004, with respect to the consolidated balance sheets of Carlisle Companies Incorporated and subsidiaries as of December 31, 2003 and 2002 and the related consolidated statements of earnings, shareholders equity and other comprehensive income and cash flows for the years then ended, and the related financial statement schedule, which report appears in the December 31, 2003, annual report on Form 10-K of Carlisle Companies Incorporated.
Our report refers to a change in the Companys method of accounting for goodwill and other intangible assets. Our report also refers to our audit of the adjustments that were applied and disclosures added to revise the 2001 consolidated financial statements, as more fully described in the Notes to the Consolidated Financial Statements. Our report also refers to our audit of the adjustments and disclosure that were changes since the Company changed the composition of its reportable segments in 2003, and the amounts in the 2001 financial statements relating to reportable segments were restated to conform to the 2003 composition of reportable segments. However, we were not engaged to audit, review, or apply any procedures to the 2001 consolidated financial statements other than with respect to such adjustments and disclosures.
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/s/ KPMG LLP |
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Charlotte, North Carolina
March 8, 2004
1
Exhibit 23.2
NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP
Section 11(a) of the Securities Act of 1933 provides that in case any part of a registration statement, when such part became effective, contained an untrue statement of a material fact, or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement (unless it is proved that at the time of such acquisition such person knew of such untruth or omission) may sue, among others, an accountant who has with his consent been named as having certified any part of the registration statement, or as having prepared any report which is used in connection with the registration statement. On May 1, 2002 the Company replaced Arthur Andersen LLP (Arthur Andersen) as its independent auditors. After reasonable efforts, the Company has been unable to obtain Arthur Andersens written consent to the incorporation by reference of Arthur Andersens audit report with respect to the Companys financial statements as of and for the years ended December 31, 2001 and December 31, 2000 into previously filed Registration Statements File Nos. 33-28052, 33-56737, 333-52411, 33-66932, 33-56735, 333-16785, 333-49742, 333-99261, 333-71028 and 333-88998. Such audit report is included in this Form 10-K. Under these circumstances, Rule 437a under the Securities Act of 1933 permits the Company to file this Form 10-K, which is incorporated by reference into the above-listed registration statements, without a written consent from Arthur Andersen. As a result, Arthur Andersen will not have any liability under Section 11(a) of the Securities Act for any untrue statements of material fact contained in the financial statements audited by Arthur Andersen or any omissions of a material fact required to be stated therein. Accordingly, an investor would be unable to assert a claim against Arthur Andersen under Section 11(a) of the Securities Act.
1
Exhibit 31.1
Rule 13a-14(a)/15d-14(a) Certifications
I, Richmond D. McKinnish, certify that:
1. I have reviewed this annual report on Form 10-K of Carlisle Companies Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud , whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 11, 2004
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/s/ Richmond D. McKinnish |
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Name: Richmond D. McKinnish |
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Title: President and Chief Executive Officer |
1
Exhibit 31.2
Rule 13a-14(a)/15d-14(a) Certifications
I, Philip C. Aldinger, Jr., acting chief financial officer, certify that:
1. I have reviewed this annual report on Form 10-K of Carlisle Companies Incorporated;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5 . The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: March 11, 2004
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/s/ Philip C. Aldinger, Jr. |
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Name: Philip C. Aldinger, Jr. |
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Title: Controller and
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1
Exhibit 32
Section 1350 Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Carlisle Companies Incorporated, a Delaware corporation (the Company), does hereby certify that:
The Annual Report on Form 10-K for the period ended December 31, 2003 (the Form 10-K) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Dated: March 11, 2004 |
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By: |
/s/ |
Richmond D. McKinnish |
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Name: Richmond D. McKinnish |
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Title: President and Chief Executive Officer |
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Dated: March 11, 2004 |
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By: |
/s/ |
Philip C. Aldinger, Jr. |
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Name: Philip C. Aldinger, Jr. |
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Title: Controller and Acting Chief Financial Officer |
1