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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_________to_________
Commission file number 1-9278
Carlisle Companies Incorporated
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(Exact name of registrant as specified in its charter)
Delaware 31-1168055)
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization identification no.)
250 South Clinton Street, Suite 201, Syracuse, New York 13202-1258
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (315) 474-2500
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common stock, $1 par value New York Stock Exchange
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Preferred Stock Purchase Rights New York Stock Exchange
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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 X No___
---
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 registrant's 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. [ ]
Aggregate market value of voting common stock held
by non-affiliates at February 24, 1998 $1,276,973,417
Shares of common stock outstanding at February 24, 1998 30,188,136
Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders on April 20, 1998 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 Company's 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, the roofing, real estate
construction, trucking, automotive, foodservice, industrial equipment, lawn and
garden and aircraft manufacturing industries. 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 Company's products are reported by distribution to the
following three industry segments: Construction Materials, Transportation
Products and General Industry. The principal products, services and markets or
customers served in each of the industry segments include:
CONSTRUCTION MATERIALS. The principal products of this segment are rubber,
plastic and fleece back sheeting used predominantly on non-residential flat
roofs and related roofing accessories, including flashings, fasteners, sealing
tapes, coatings and waterproofings. The markets served include new construction,
re-roofing and maintenance of low slope roofs, water containment, HVAC sealants,
and coatings and waterproofings.
TRANSPORTATION PRODUCTS. The principal products of this segment are heavy
duty friction and braking systems for truck and off-highway equipment, rubber
and plastic automotive components, including precision-molded engine components
and blow-molded bumper beams, high grade aerospace wire and specialty electronic
cable, specialty trailers, self-contained ISO 40-foot perishable cargo shipping
containers, standard and custom-built high payload trailers and dump bodies.
Customers include truck OEMs, shipping lines, heavy equipment and truck dealers
and aftermarket distributors, commercial haulers, automotive OEMs and systems
suppliers, and dairy product distributors.
GENERAL INDUSTRY. The principal products of this segment include small
bias-ply rubber tires, stamped and roll-formed wheels, commercial and
institutional plastic foodservice permanentware and catering equipment, fiber
glass and composite material trays and dishes, ceramic tableware, specialty
rubber and plastic cleaning brushes and stainless steel processing equipment and
their related process control systems. Customers include foodservice
distributors, restaurants, golf car manufacturers, power equipment
manufacturers, boat and utility trailer manufacturers and dairy and
pharmaceutical processors.
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):
1997 1996 1995
--------- --------- ---------
Construction Materials........................ $ 322.2 $ 325.2 $ 308.3
Transportation Products....................... 521.2 371.5 278.9
General Industry.............................. 417.1 320.8 235.3
--------- --------- ---------
Total......................................... $ 1,260.5 $ 1,017.5 $ 822.5
In each industry segment, the Company's 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 Company's 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 Company's businesses
have generally been available to date. Uncertain economic conditions, 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, transportation products and general industry 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 1998.
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 Company's three 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. 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.
Order Backlog was $281.6 million at December 31, 1997, and $200.8 million at
December 31, 1996, and $160.7 million at December 31, 1995.
Research and Development expenses increased to $15.8 million in 1997,
compared to $11.9 million in 1996, and $12.3 million in 1995. The 1997 increase
is primarily attributable to product development for the Company's automotive
components operation.
3
The Company employs approximately 8,500 persons on a full-time basis.
The businesses of the construction materials and transportation products
industry segments are generally not seasonal in nature. Within the general
industry segment, distribution of lawn and garden products generally reach peak
sales volume during the first two quarters of the year. The businesses of all
three segments are affected by the state of the general economy.
In 1997, the Company completed the following acquisitions. In April, the
Company acquired the assets of Overland Brakes, Inc., a spring-brake
manufacturing company. In June, the Company acquired The Neilson Wheel Company,
Inc., a producer and distributor of tire and wheel assemblies. In July, the
acquisition of The City Machine and Wheel Company, a manufacturer and
distributor of stamped steel wheels, was completed. In September, the Company
acquired Conestoga Tire & Rim Inc. and Wheeltech North America, Inc.,
distributors of tire and wheel assemblies to various markets in the United
States and Canada. In October, the Company acquired Tilden Corporation, a
value-added distributor of tire and wheel assemblies. In December, the Company
purchased Zimmerman Brush Co., a manufacturer of brushes for the janitorial and
sanitation markets. These acquisitions will add principally to the Company's
general industry segment. In 1997, the Company also completed its divestiture of
Carlisle Engineered Metals Incorporated, a metal roofing company, and sold
Braemar, Inc., a small manufacturer of medical monitoring devices.
In each industry segment, the Company's 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 Company's revenues, operating profit or loss and
identifiable assets by industry segments for the last three fiscal years, the
nature and effect of the restatement of such information as a result of
changes made in the way the Company's products or services are grouped into
industry segments and the principal products in each segment is as follows:
4
(IN THOUSANDS) 1997 1996 1995
- ------------------------------------------- ---------- ---------- ----------
Sales to Unaffiliated Customers(1)
Construction Materials..................... $ 322,228 $ 325,165 $ 308,327
Transportation Products.................... 521,181 371,517 278,867
General Industry........................... 417,141 320,813 235,340
Operating Profit or Loss
Construction Materials..................... $ 49,398 $ 43,582 $ 36,676
Transportation Products.................... 45,101 27,495 20,241
General Industry........................... 50,912 40,260 29,627
Interest, net.............................. (15,337) (8,396) (4,055)
Corporate(2)............................... (13,290) (10,901) (9,631)
Identifiable Assets
Construction Materials..................... $ 177,270 $ 183,836 $ 169,476
Transportation Products.................... 338,770 309,125 210,700
General Industry........................... 320,205 225,282 143,606
Corporate(3)............................... 24,971 24,220 18,641
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(1) Intersegment sales or transfers are not material.
(2) Includes general corporate and idle property expenses.
(3) Consists primarily of cash and cash equivalents, facilities, and other
invested assets.
5
ITEM 2. PROPERTIES
The following table sets forth certain information with respect to the
principal properties and plants of the Company as of December 31, 1997:
O--OFFICE APPROXIMATE
PRINCIPAL PRODUCT M--MANUFACTURING OWNED FLOOR SPACE APPROXIMATE
OR ACTIVITY W--WAREHOUSING LOCATION OR LEASED (SQ. FT.) ACREAGE
- ---------------------------------- ----------------- ------------------- --------------- ------------- -----------------
Corporate headquarters O Syracuse, NY Leased to 2005 15,500 --
Elastomeric membranes O,M,W Carlisle, PA Owned 415,774 79
and related roofing products O,M,W Greenville, IL Owned 165,430 35
O,M,W Stafford, TX Owned 108,500 9
O,M,W Fontana, CA Leased to 2001 72,600 --
O,M,W Sapulpa, OK Owned 34,550 3
O,M,W Wylie, TX Owned 44,000 6
W Greenville, IL Leased to 1999 40,000 --
W Carlisle, PA Leased to 1999 49,600 --
O,W Carollton, TX Leased to 1999 27,000 --
W Herington, Kansas Leased to 1999 32,000 --
------------- ---
989,454 132
------------- ---
Small pneumatic tires and tubes; O,M,W Carlisle, PA Owned 494,000 29
stamped and roll-formed wheels O,M,W Aiken, SC Owned 220,500 23
O,M Port Fortin, Owned 167,604 --
Trinidad, W.I.
O,M,W Long Beach, CA Owned 63,500 3
W Trenton, SC Leased to 1999 176,450 --
W Long Beach, CA Leased to 1998 87,000
M Milwaukee, WI Owned 99,000 --
W Waterloo, Ontario Leased to 2007 69,000 --
W Winnepeg, Manitoba Leased to 2002 48,800 --
W Saskatoon, Leased to 2002 30,200 --
Saskatchewan
O,M,W Ontario, CA Leased to 1998 127,345 --
O,M,W Lenexa, KS Leased to 1998 113,000 6
W Perrysburg, OH Leased to 2002 64,300 --
W Villa Rica, GA Leased to 2002 43,000 --
M Shenzhen, China Leased to 1998 84,750 5
------------- ---
1,888,449 66
------------- ---
Molded plastics products for M Oklahoma City, OK Owned 147,000 8
commercial food service; ceramic W Oklahoma City, OK Leased to 1998 254,000 --
tableware O,M,W Fredonia, WI Owned 192,500 12
M Sparta, WI Owned 40,000 3
O,M Zanesville, OH Owned 125,600 16
W Sparta, WI Leased to 1998 18,000 --
------------- ---
777,100 39
------------- ---
Custom-manufactured rubber and M Middlefield, OH Owned 200,600 28
plastics products, including M Crestline, OH Owned 173,000 40
precision-molded engine components M Canton, OH Owned 87,845 17
and blow-molded bumper beams M Lake City, PA Owned 100,000 30
M Trenton, SC Owned 67,695 10
M Belleville, MI Owned 46,000 5
M Erie, PA Owned 95,800 15
M Lapeer, MI Owned 96,530 6
M Tuscaloosa, AL Owned 67,376 15
M,W Erie, PA Leased to 1999 136,050 --
M Canton, OH Leased to 2000 31,840 --
W Mayville, MI Leased to 1998 40,000 --
M,W Ashtabula, OH Leased to 2000 30,000 --
W Trenton, SC Leased to 1998 19,000 --
O Chardon, OH Leased to 1998* 7,500 --
------------- ---
1,199,236 166
------------- ---
6
O--OFFICE APPROXIMATE
PRINCIPAL PRODUCT M--MANUFACTURING OWNED FLOOR SPACE APPROXIMATE
OR ACTIVITY W--WAREHOUSING LOCATION OR LEASED (SQ. FT.) ACREAGE
- ---------------------------------- ----------------- ------------------- --------------- ------------- -----------------
Brake lining for trucks and O,M Ridgway, PA Owned 117,300 7
trailers; brakes and actuation O,M Fredericksburg, VA Owned 90,000 30
systems; friction products O Charlottesville, VA Owned 25,000 4
O,M,W Logansport, IN Owned 112,200 26
O,M Bloomington, IN Owned 250,000 19
O,M Brantford, Ont. Leased to 1999* 24,000 1
W Lancaster, PA Leased to 1999 39,000 --
M,W Pittsburg, KS Leased to 2004 30,000 --
M,W Stockton, CA Leased to 2000 27,600 --
M Nampa, ID Leased to 2007 106,400 5
O,M,W Zevenaar, Holland Owned 26,000 1
------------- ---
847,500 95
------------- ---
Specialized lowbed trailers for O,M Mitchell, SD Owned 242,730 27
construction and commercial O,M Brookville, PA Owned 111,640 22
markets O,M Green Pond, AL Owned 49,860 22
------------- ---
404,230 63
------------- ---
Liquid transport tanks and O,M,W New Lisbon, WI Owned 210,850 31
in-plant processing equipment O,M,W Elroy, WI Owned 84,300 7
O,M,W Winsted, MN Owned 382,894 --
O,M,W Tavares, FL Leased to 1998 73,967 12
------------- ---
752,011 50
------------- ---
High- and medium-temperature O,M,W St. Augustine, FL Owned 166,750 17
insulated wire and cable
Refrigerated marine containers O,M,W Green Cove Leased to 2004 110,000 10
Springs, FL
------------- ---
7,150,230 636
------------- ---
------------- ---
Total plant space of 7,150,230 sq. ft. is used for:
OWNED LEASED TOTAL
---------- ---------- ----------
Office..................................................................... 388,837 76,723 465,560
Manufacturing.............................................................. 3,629,743 554,308 4,184,051
Warehousing................................................................ 963,018 1,369,571 2,332,589
*Other..................................................................... 140,730 27,300 168,030
---------- ---------- ----------
5,122,328 2,027,902 7,150,230
---------- ---------- ----------
---------- ---------- ----------
As of December 31, 1997, an additional 255,283 sq. ft. is leased by the
Company, under various agreements, principally for warehousing and distribution.
All of the manufacturing and most of the office and warehousing space is of
masonry and steel construction and most are equipped with automatic sprinkler
systems. Approximately one-third of the owned office, manufacturing and
warehousing space has been constructed within the last twenty years; the
remaining buildings are from twenty to seventy years old and have been
maintained in good condition.
7
ITEM 3. LEGAL PROCEEDINGS
As of December 31, 1997, other than ordinary routine litigation incidental
to the business, which is being handled in the ordinary course of business,
neither the Company nor any of its subsidiaries is a party to, nor are any of
their properties subject to any material pending legal proceedings, nor are any
such proceedings known to be contemplated by governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
The Company's common stock is traded on the New York Stock Exchange. As of
December 31, 1997, there were 2,068 shareholders of record.
Quarterly cash dividends paid and the high and low prices of the Company's
stock on the New York Stock Exchange in 1997 and 1996 were as follows:
1997 FIRST SECOND THIRD FOURTH
- -------------------------------------------------------------------- ---------- ---------- ---------- ---------
Dividends per share................................................. $ .1225 $ .1225 $ .1400 $ .1400
Stock Price
High.............................................................. $ 35 5/8 $ 37 $ 46 7/8 $ 46 3/4
Low............................................................... $ 29 1/4 $ 27 $ 34 3/4 $ 39 5/8
1996(1)
Dividends per share................................................. $ .1100 $ .1100 $ .1225 $ .1225
Stock Price
High.............................................................. $ 22 9/16 $ 28 3/16 $ 28 1/16 $ 30 1/2
Low............................................................... $ 19 1/16 $ 21 5/8 $ 24 1/4 $ 26 7/8
- ------------------------
(1) All amounts have been restated to reflect the two-for-one stock split
completed on January 15, 1997.
9
ITEM 6. SELECTED FINANCIAL DATA.
(IN THOUSANDS EXCEPT
PER SHARE DATA) 1997 1996 1995 1994 1993
------------ ------------ --------- --------- ---------
SUMMARY OF OPERATIONS
Net Sales................................ $ 1,260,550 1,017,495 822,534 692,650 611,270
Net Earnings from continuing operations.. $ 70,666 55,680 44,081 35,568 28,378
Basic Earnings per share(1)(2)........... $ 2.34 1.84 1.43 1.17 0.93
Diluted Earnings per share(1)(2) ........ $ 2.28 1.80 1.41 1.15 0.92
FINANCIAL POSITION
Total assets............................. $ 861,216 742,463 542,423 485,283 420,363
Long-term debt........................... $ 209,642 191,167 72,725 69,148 59,548
OTHER DATA
Dividends paid........................... $ 15,868 14,129 12,928 11,605 10,705
Per share(1)............................. $ 0.525 0.465 0.420 0.380 0.350
- ------------------------
(1) All share and per share amounts have been restated to reflect two-for-one
stock splits completed on June 1, 1993 and January 15, 1997.
(2) 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Carlisle Companies Incorporated ("Carlisle" or the "Company") sales grew to
$1.26 billion in 1997, up 24%, or $243.0 million, from 1996 sales of $1.02
billion. This increase is due to the expansion of product lines and market
shares of Carlisle's core businesses and the integration into existing
operations of several acquisitions made in 1996. In 1997, net earnings reached
$70.7 million, or $2.28 per share of common stock, a 27% increase over 1996 net
earnings of $55.7 million, or $1.80 per share. This increase in earnings is
attributable to the higher sales level, and the improved operating margins
resulting from our continued focus on manufacturing and distribution costs.
In 1996, sales increased 24%, or $195.0 million, due to continued growth in
core businesses, as well as acquisitions made in 1996 and to the full-year
effect of acquisitions made in 1995. Net earnings increased 26%, or $11.6
million, in 1996 reflecting both the increased sales levels and reductions in
costs.
Although not having a significant effect on this year's sales or earnings, a
record number of acquisitions were completed in 1997. Throughout the year we
acquired several small bias-ply tire and wheel manufacturing and distributing
companies, which extend both our product offerings and geographic distribution
of tire and wheel assemblies to lawn and garden, trailer and other original
equipment manufacturers. These transactions were as follows: (i) The City
Machine & Wheel Company, (ii) The Neilson Wheel Company, Inc., (iii) Conestoga
Tire & Rim
10
Inc., (iv) Wheeltech North America, Inc., and (v) Tilden Corporation. In
April, we purchased Overland Brakes, Inc., a small spring-brake manufacturing
company, complementing our heavy-duty friction products. In December, we
purchased Zimmerman Brush Co., a small, privately owned manufacturer of
brushes for the janitorial and sanitation market. Also in December, we signed
letters of intent to purchase Hardcast Europe, a Dutch manufacturer of
specialty adhesive and sealant products for the European construction market,
and to establish a joint venture with Lander Plastics, a British manufacturer
of plastic automotive components. The Hardcast Europe acquisition was
completed in January 1998. In addition, we completed the following
divestitures in 1997: (i) in February, we divested the remaining operations of
Carlisle Engineered Metals Incorporated, a metal roofing company and, (ii) in
October, we sold Braemar, Inc., a small manufacturer of medical monitoring
devices.
Several acquisitions made in 1996 were integrated into Carlisle during 1997.
These 1996 acquisitions include the following: (i) Insul-foam, Inc., which
brought new technology to the EPDM rubber roofing market, (ii) Intero, Inc. and
Unique Wheel, Inc., manufacturers of steel and aluminum wheels and rims, (iii)
Scherping Systems, Inc. and Scherping Controls, Inc., companies that design and
manufacture in-plant processing equipment for the cheese industry, (iv)
Hartstone, Inc., which designs and manufactures ceramic tableware, and (v) The
Engineered Plastics Division of Johnson Controls, Inc., which manufactures
highly engineered plastic components for the automotive industry.
OPERATING SEGMENTS
CONSTRUCTION MATERIALS segment sales declined by 0.9% to $322.2 million in
1997, as a slight increase in sales of the ongoing business was offset by the
effect of the divestiture of the remaining assets of Carlisle Engineered Metals.
The 1997 earnings of $49.4 million in this segment were up 13.3% over 1996
earnings of $43.6 million, reflecting improving margins from a changing product
mix, improved warranty results and the elimination of losses due to the
divestiture of the metal roofing company. The 1996 sales of $325.2 million
reflect an increase of 6% over 1995 sales of $308.3 million. An 18.8% jump in
1996 over 1995 earnings is attributable to the increased sales levels and
improved operating margins.
TRANSPORTATION PRODUCTS segment sales reached $521.2 million in 1997,
40.3%, or $149.7 million, over 1996 sales of $371.5 million. The 1996 sales
level is an increase of 33.2%, or $92.7 million over the 1995 level. The
increases in 1997 sales reflect the full-year effect of the consolidation of
The Engineered Plastics Division of Johnson Controls, acquired in October
1996, with Geauga Company to form Carlisle Engineered Products, Inc., which
supplies highly engineered plastic, rubber and metal components to the
automotive industry. Also contributing to the 1997 sales growth in this
segment are the continued robust sales of aircraft wire, increased direct
sales of refrigerated containers, penetration of additional channels of
distribution of heavy-duty friction products to the aftermarket, and
increased sales of specialty trailers to construction markets. The 1996 sales
increase reflects record sales gains from all operations, and, to a lesser
extent, companies acquired in 1996 and 1995. Operating earnings in this
segment climbed 64.0%, or
11
$17.6 million, to $45.1 million. This increase reflects the higher level of
sales of components to the automotive industry, aircraft wire and specialty
trailers, as well as increased margins due to improved manufacturing
processes in the specialty trailer business and especially in the
refrigerated container business.
GENERAL INDUSTRY segment sales grew 30.0%, or $96.3 million, to $417.1
million in 1997. This increase is primarily due to internal growth of tire and
wheel assemblies, plastic foodservice products and in-plant processing equipment
through expanding our market shares of current products and extending existing
products to new markets. The full-year effect of acquisitions made in 1996 and
acquisitions made in 1997 account for approximately 29.0% of the increase in
1997 sales in this segment. In 1996, sales in this segment increased 36.0%, or
$85.5 million, to $320.8 million, reflecting both growth in internal businesses
and acquisitions. Operating earnings in this segment in 1997 increased 26.3%, or
$10.6 million, to $50.9 million, reflecting the higher level of sales. Segment
earnings in 1996 were $40.3 million; a 35.9% or $10.6 million increase over 1995
earnings. The increase in 1996 sales results from the contribution of the
specialty wheel businesses of Intero and Unique Wheel acquired in March 1996 and
from market share gains in the lawn and garden, trailer and golf car markets.
FINANCIAL RESULTS
TOTAL COSTS, which include raw material, manufacturing, selling, general
and administrative costs, expressed as a percentage of total sales, continued
to decline in 1997 to 89.9% of sales, down from 90.5% of sales in 1996. In
1995, these costs were 90.7% percent of sales. This decline in total costs
reflects an ongoing focus on improving purchasing, manufacturing and
distribution of products throughout all Carlisle operations.
GROSS MARGINS, expressed as a percent of sales, represent what is left
after costs of purchasing raw materials and of manufacturing products (i.e.,
cost of goods sold) are subtracted from sales. These margins declined from 24.0%
of sales in 1995 to 23.4% in 1996 and 22.7% in 1997. While operations across all
segments maintained consistent gross margins generally, this decline largely
reflects the changing mix in Carlisle's total sales. In 1997, operations with
lower gross margins, but also with lower corresponding selling, general and
administrative costs, represent greater proportions of total Carlisle sales.
SELLING AND ADMINISTRATIVE costs, expressed as a percent of sales, declined
from 13.3% in 1995 to 12.6% in 1996 and 11.4% in 1997 reflecting both
disciplined cost control throughout all operations and the increasing proportion
of activities with lower cost structures in Carlisle's overall sales.
INTEREST EXPENSE increased to $16.5 million in 1997 from $9.1 million in
1996 and $6.1 million in 1995, due to the increasing level of
12
debt used to finance acquisitions and capital expenditures and relatively
constant interest rates.
INCOME TAXES, for financial reporting purposes, have remained constant at
an effective rate of 39.5% of earnings before tax in 1997, 1996 and 1995,
generally reflecting stable Federal and state tax rates. Taxes are discussed
more completely in the Notes to Consolidated Financial Statements.
ACCOUNTS RECEIVABLE were $184.8 million, an increase of 16.6% over the 1996
level of $158.5 million. This increase is consistent with a higher level of
sales, partially offset by an increasing portion of sales from businesses that
require a lower investment in accounts receivable, and an ongoing effort to
manage receivables at all operations. The 1996 level of accounts receivable
represent a 25.2% increase over 1995, and is primarily attributable to
acquisitions made during the year.
INVENTORIES, valued primarily by the last-in, first-out (LIFO) method, were
$180.3 million at year-end 1997, a 31.5% increase over 1996 year-end level of
$137.1 million. Approximately one-third of this increase is due to acquisitions
made during the year, while normal seasonal buildup, strong demand and backlogs
at most operations explain the remaining two-thirds. The year-end 1996 inventory
level increased $15.4 million over 1995 levels, or 12.7%, due primarily to
acquisitions made during the year.
CAPITAL EXPENDITURES totaled $59.5 million in 1997, a significant increase
over 1996 level of $35.0 million. This increase is primarily attributable to
investments in injection-molding and blow-molding equipment to meet growth
opportunities in Carlisle's automotive components operation. Additionally, other
significant projects in 1997 include plant and equipment to manufacture TPO
roofing membranes, additional warehousing space for finished specialty tire and
wheel assemblies and EPDM roofing products, increased production capacity of
heavy-duty friction products, increased capacity to produce Tufflite-TM- wire
and in-plant processing equipment for the food and pharmaceutical industries. In
1996, the major projects include equipment to produce a pressure-sensitive tape
line for EPDM rubber roofing systems, presses and tire building machines for a
specialty tire plant in Trinidad, and cable wrapping equipment for Tufflite-TM-
wire.
LIQUIDITY, CAPITAL RESOURCES AND ENVIRONMENTAL
CASH FLOWS provided by operating activities were $83.0 million in 1997,
a slight decline from $86.0 million in 1996. This decline is primarily due to
higher levels of inventories offsetting increases in net earnings and
depreciation and amortization charges to earnings. Cash flows from operating
activities were $55.7 million in 1995. Cash used in investing activities was
$93.2 million; a decrease from the 1996 level of $165.4 million, resulting
from lower levels of acquisitions in 1997 partially offset by the increased
level of capital expenditures. In 1995, the cash used in investing activities
was $100.7 million, which includes acquisition expenditures of $67.0 million.
The net cash provided by financing activities in 1997 was $3.6 million, which
reflects increases in debt offset by dividend payments and stock repurchases.
The
13
cash provided by financing activities of $84.5 million in 1996 was
essentially due to increases in debt financing.
Carlisle has a $125.0 million revolving credit facility available for
acquisitions and general corporate purposes. In January 1997, Carlisle issued to
the public $150.0 million of ten-year bonds at a rate of 7.25%. The net proceeds
from these bonds were used to repay amounts outstanding under the revolving
credit facility and to fund other needs throughout 1997. The Company's primary
sources of liquidity and capital are cash flows from operations and borrowing
capacity. Carlisle continues to maintain substantial flexibility to meet
anticipated needs for liquidity and capital investment opportunities.
Carlisle management recognizes the importance of the Company's
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 any material charges
relating to environmental matters in 1997 or in prior years, and none are
currently anticipated.
The Company has remediation programs in place for its systems that are
not currently Year 2000 compliant. The total cost of compliance is not
expected to have a material impact on the Company's operations, liquidity or
capital resources. However, we are unable to predict all the implications of
the Year 2000 issue as it relates to our customers, suppliers and other
entities.
BACKLOG AND FUTURE OUTLOOK
BACKLOG was $281.6 million at December 31, 1997 compared to $200.8
million in 1996. This 40.2% increase in backlog reflects stronger positions
at all major operations within the Company, especially in the container
manufacturing operation.
Our companies have developed consistent strategies to grow their
businesses both internally and through acquisitions. In 1997, Carlisle
continued to increase market shares, improve manufacturing processes and
target new markets with expanded products to complement the Company's core
strengths. With a record backlog, management is confident that our ongoing
commitment to these proven strategies will yield favorable results in 1998.
ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments
of an Enterprise and Related Information." This statement adopts the management
approach to classifying the segments of an enterprise, which is different from
the current industry approach. The provisions of this statement will be
implemented with the year ending December 31, 1998.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED STATEMENT OF EARNINGS
FOR YEARS ENDED DECEMBER 31
(IN THOUSANDS EXCEPT PER SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
------------ ------------ ----------
Net sales..................................................................... $ 1,260,550 $ 1,017,495 $ 822,534
Cost and expenses:
Cost of goods sold.......................................................... 974,089 779,797 624,860
Selling and administrative expenses......................................... 143,246 128,676 109,236
Research and development expenses........................................... 15,824 11,900 12,339
------------ ------------ ----------
1,133,159 920,373 746,435
Other income (deductions):
Investment income........................................................... 1,172 666 2,020
Interest expense............................................................ (16,502) (9,062) (6,075)
Other, net.................................................................. 4,723 3,314 814
------------ ------------ ----------
(10,607) (5,082) (3,241)
------------ ------------ ----------
Earnings before income taxes.................................................. 116,784 92,040 72,858
Income taxes.................................................................. 46,118 36,360 28,777
Net earnings.................................................................. $ 70,666 $ 55,680 $ 44,081
------------ ------------ ----------
------------ ------------ ----------
Average shares outstanding-basic.............................................. 30,235 30,281 30,759
Basic earnings per share...................................................... $ 2.34 $ 1.84 $ 1.43
------------ ------------ ----------
Average shares outstanding-diluted............................................ $ 31,025 30,953 31,266
Diluted earnings per share.................................................... $ 2.28 $ 1.80 $ 1.41
------------ ------------ ----------
------------ ------------ ----------
See accompanying Notes to Consolidated Financial Statements.
15
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands except per share data)
ADDITIONAL COST OF
COMMON PAID-IN RETAINED SHARES IN
STOCK CAPITAL EARNINGS TREASURY
--------- ----------- ---------- ----------
Balance at
December 31, 1994................................................ $ 19,665 $ 7,958 $ 282,919 $ (62,692)
Net earnings................................................... -- -- 44,081 --
Cash dividends--$0.420 per share............................... -- -- (12,928) --
Exercise of stock options & other.............................. -- 1,358 -- 2,344
Purchase of 496,616 treasury shares............................ -- -- -- (9,448)
--------- ----------- ---------- ----------
Balance at
December 31, 1995................................................ $ 19,665 $ 9,316 $ 314,072 $ (69,796)
Net earnings................................................... -- -- 55,680 --
Cash dividends -$0.465 per share............................... -- -- (14,129) --
Exercise of stock options & other.............................. -- 3,765 -- 3,098
Purchase of 649,966 treasury shares............................ -- -- -- (14,168)
--------- ----------- ---------- ----------
19,665 13,081 355,623 (80,866)
Two-for-one stock split........................................ 19,666 (12,601) (7,065) --
--------- ----------- ---------- ----------
Balance at
December 31, 1996................................................ $ 39,331 $ 480 $ 348,558 $ (80,866)
Net earnings................................................... -- -- 70,666 --
Cash dividends--$0.525 per share............................... -- -- (15,868) --
Exercise of stock options & other.............................. -- 1,350 -- 3,295
Purchase of 550,980 treasury shares............................ -- -- -- (18,110)
--------- ----------- ---------- ----------
Balance at
December 31, 1997................................................ $ 39,331 $ 1,830 $ 403,356 $ (95,681)
--------- ----------- ---------- ----------
See accompanying Notes to Consolidated Financial Statements.
16
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31
(IN THOUSANDS EXCEPT SHARE DATA) 1997 1996
----------- -----------
ASSETS
Current assets
Cash and cash equivalents............................................................. $ 1,732 $ 8,312
Receivables, less allowances of $5,180 in 1997 and $4,097 in 1996..................... 184,796 158,463
Inventories .......................................................................... 180,331 137,092
Deferred income taxes................................................................. 28,462 25,036
Prepaid expenses and other............................................................ 22,212 17,030
----------- -----------
Total current assets................................................................ 417,533 345,933
----------- -----------
Property, plant and equipment, net...................................................... 294,165 264,238
----------- -----------
Other assets
Patents, goodwill and other intangibles............................................... 121,772 108,648
Investments and advances to affiliates................................................ 16,467 11,976
Receivables and other assets.......................................................... 11,279 9,854
Deferred income taxes................................................................. -- 1,814
----------- -----------
Total other assets.................................................................. 149,518 132,292
----------- -----------
$861,216 $ 742,463
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt, including current maturities......................................... $ 24,332 $ --
Accounts payable...................................................................... 75,936 74,338
Accrued expenses...................................................................... 125,815 96,310
----------- -----------
Total current liabilities........................................................... 226,083 170,648
----------- -----------
Long-term liabilities
Long-term debt........................................................................ 209,642 191,167
Product warranties.................................................................... 73,715 71,478
Deferred compensation and other liabilities........................................... 2,940 1,667
----------- -----------
Total long-term liabilities......................................................... 286,297 264,312
----------- -----------
Shareholders' equity
Preferred stock, $1 par value. Authorized and unissued 5,000,000 shares
Common stock, $1 par value. Authorized 50,000,000 shares; issued 39,330,624 shares.... 39,331 39,331
Additional paid-in capital............................................................ 1,830 480
Retained earnings..................................................................... 403,356 348,558
Cost of shares in treasury-9,171,915 shares in 1997 and 8,979,300 shares in 1996...... (95,681) (80,866)
----------- -----------
Total shareholders' equity.......................................................... 348,836 307,503
----------- -----------
$861,216 $ 742,463
----------- -----------
----------- -----------
See accompanying Notes to Consolidated Financial Statements.
17
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS)
OPERATING ACTIVITIES
Net earnings................................................................. $ 70,666 $ 55,680 $ 44,081
Reconciliation of net earnings to cash flows:
Depreciation............................................................... 32,477 25,320 20,331
Amortization............................................................... 6,278 4,438 2,899
(Gain)/loss on sales of property, equipment and business..................... (993) 216 570
Changes in assets and liabilities, excluding effects of acquisitions and
divestitures:
Current and long-term receivables.......................................... (19,659) (13,237) (8,616)
Inventories................................................................ (31,118) (5,837) (17,324)
Accounts payable and accrued expenses...................................... 9,245 16,667 1,928
Prepaid, deferred and current income taxes................................. 10,887 (4,260) (993)
Long-term liabilities...................................................... 3,279 4,939 7,429
Other...................................................................... 1,924 2,106 5,398
---------- ---------- ----------
Net cash provided by operating activities.................................... 82,986 86,032 55,703
---------- ---------- ----------
Investing Activities
Capital expenditures....................................................... (59,531) (34,990) (37,467)
Acquisitions, net of cash.................................................. (45,380) (133,719) (67,006)
Sales of property, equipment and business.................................. 15,815 3,489 2,794
Other ..................................................................... (4,090) (155) 1,014
---------- ---------- ----------
Net cash used in investing activities........................................ (93,186) (165,375) (100,665)
Financing Activities
Proceeds from short-term debt.............................................. 13,458 -- --
Proceeds from long-term debt............................................... 150,000 124,358 --
Reductions of long-term debt............................................... (125,860) (11,604) (436)
Dividends.................................................................. (15,868) (14,129) (12,928)
Purchases of treasury shares............................................... (18,110) (14,168) (9,448)
---------- ---------- ----------
Net cash provided by (used in) financing activities.......................... 3,620 84,457 (22,812)
---------- ---------- ----------
Change in cash and cash equivalents ......................................... (6,580) 5,114 (67,774)
Cash and cash equivalents
Beginning of year.......................................................... 8,312 3,198 70,972
---------- ---------- ----------
End of year................................................................ $ 1,732 $ 8,312 $ 3,198
---------- ---------- ----------
---------- ---------- ----------
See accompanying Notes to Consolidated Financial Statements.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carlisle Companies Incorporated and Subsidiaries
SUMMARY OF ACCOUNTING POLICIES
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 majority control, none of which are significant,
are accounted for under the equity method. All material intercompany
transactions and accounts have been eliminated.
REVENUE RECOGNITION. The Company recognizes revenues from product sales upon
shipment to the customer. The substantial majority of the Company's product
sales are to customers in the United States.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles 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 considered cash equivalents. Cash and
cash equivalents are stated at cost, which approximates market value.
INVENTORIES. Inventories are valued at lower of cost or market. Cost for
inventories is determined for a majority of the Company's inventories by the
last-in, first-out (LIFO) method with the remainder determined by the
first-in, first-out (FIFO) method.
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.
PATENTS, GOODWILL AND OTHER INTANGIBLES. Patents and other intangibles,
recorded at cost, amounted to $5.3 million and $6.9 million at December 31,
1997 and 1996, respectively (net of accumulated amortization of $14.6 million
and $12.8 million, respectively), and are amortized over their remaining
lives, which average five years. Goodwill, representing the excess of
acquisition cost over the fair value of specifically identifiable assets
acquired, was $116.5 million and $101.8 million at December 31, 1997 and
1996, respectively (net of accumulated amortization of $7.8 million and $3.6
million, respectively), and is amortized on a straight line basis over
various periods not exceeding 30 years. The Company evaluates the
recoverability of goodwill based on the estimated, undiscounted future cash
flows attributable to the operations with which the goodwill is associated.
19
PRODUCT WARRANTIES. The Company offers warranties on the sales of certain of
its products and records an accrual for estimated future claims. Such
accruals are based upon historical experience and management's estimate of
the level of future claims.
LEASES. The Company is obligated under various noncancelable operating
leases for certain facilities and equipment. Rent expense was $5.4 million,
$2.6 million and $2.8 million, in 1997, 1996, and 1995, respectively.
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 bases.
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.
NET EARNINGS PER SHARE. In 1997, the Financial Accounting Standards Board
issued Statement No. 128, "Earnings per Share." SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share excludes the dilutive
effects of options, warrants, and convertible securities. Diluted earnings
per share gives effect to all dilutive securities that were outstanding
during the period. All earnings per share amounts have been presented or
restated to conform to the SFAS No. 128 requirements. The only difference
between basic and diluted earnings per share of the Company is the effect of
dilutive stock options.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair market values of the
Company's financial instruments approximate their recorded values.
RECLASSIFICATIONS. Certain reclassifications have been made to prior years'
information to conform to 1997 presentation.
20
INVENTORIES
The components of inventories are:
1997 1996
---------- ----------
In Thousands
FIFO cost (approximates current costs):
Finished goods........................................................................... $ 111,403 $ 82,253
Work in process.......................................................................... 23,250 17,574
Raw materials............................................................................ 60,375 51,872
---------- ----------
$ 195,028 $ 151,699
Excess of FIFO cost over LIFO value...................................................... (14,697) (14,607)
---------- ----------
$ 180,331 $ 137,092
---------- ----------
---------- ----------
PROPERTY, PLANT & EQUIPMENT
The components of property, plant and equipment are:
1997 1996
---------- ----------
In Thousands
Land...................................................................................... $ 6,804 $ 6,316
Buildings & leasehold improvements........................................................ 123,432 114,384
Machinery & equipment..................................................................... 383,560 341,296
Projects in progress...................................................................... 25,686 21,016
---------- ----------
539,482 483,012
Accumulated depreciation.................................................................. (245,317) (218,774)
---------- ----------
$ 294,165 $ 264,238
---------- ----------
---------- ----------
BORROWINGS
Long-term debt includes:
1997 1996
---------- ----------
In Thousands
Short-term obligations to be refinanced................................................... $ -- $ 124,358
7.25% senior notes due 2007............................................................... 150,000 --
8.09% senior notes due 1998-2002 48,000 48,000
Industrial Development and Revenue Bonds due through 2014................................. 12,460 12,505
Other, including capital lease obligations................................................ 10,056 7,005
---------- ----------
$ 220,516 $ 191,868
Less current maturities................................................................... (10,874) (701)
---------- ----------
$ 209,642 $ 191,167
---------- ----------
---------- ----------
On January 28, 1997, the Company issued $150 million in notes due in 2007 at
an interest rate of 7.25%. The net proceeds were used to repay all amounts
outstanding under the Company's revolving credit facility, to repay other
short-term indebtedness, and for general corporate purposes.
21
In 1997, the Company amended its revolving credit facility with various
banks to reduce the amount from $150 million to $125 million. As of December 31,
1997, $123 million was available under this facility. The Company has available
unsecured lines of credit from banks of $20 million, of which $18.5 million was
available as of December 31, 1997.
At December 31, 1997, letters of credit amounting to $19.5 million were
outstanding, primarily to provide security under insurance arrangements and
certain borrowings.
The weighted average interest rates on the revenue bonds for 1997 and 1996
were 4.2% and 3.5%, respectively.
The debt facilities contain various restrictive covenants and limitations,
all of which were complied with in 1997 and 1996. The industrial development and
revenue bonds are collateralized by the facilities and equipment acquired
through the proceeds of the related bond issuances.
Cash payments for interest were $12.3 million in 1997, $6.9 million in 1996,
and $5.9 million in 1995.
The aggregate amount of long-term debt maturing in each of the next five
years is approximately $10.9 million in 1998, $11.4 million in 1999 through
2001, and $10.4 million in 2002.
ACQUISITIONS
In each of the last three years, the Company has completed various
acquisitions, all of which have been accounted for as purchases. 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
acquisition.
22
SHAREHOLDERS' EQUITY
On October 4, 1996, the Company's Board of Directors authorized a
two-for-one stock split which was completed on January 15, 1997, to
shareholders of record on January 2, 1997. The split resulted in the issuance
of 19,665,312 new shares of common stock including 4,489,650 shares issued as
treasury shares. In addition, authorized shares were increased from
25,000,000 to 50,000,000. All references in the financial statements to
average number of shares outstanding and related prices, per share amounts,
and stock option plan data have been restated to reflect the split.
The Company has a Shareholders' Rights Agreement which is designed to
protect shareholder investment values. A dividend distribution of one Preferred
Stock Purchase Right for each outstanding share of the Company's common stock
was declared, payable to shareholders of record on March 3, 1989. The Rights
will become exercisable under certain circumstances, including the acquisition
of 25% of the Company's common stock, or 40% of the voting power, in which case
all rights holders except the acquiror may purchase the Company's 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 acquiror's 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.
EMPLOYEE STOCK OPTIONS & INCENTIVE PLAN
The Company maintains an Executive Incentive 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 who are not eligible to receive
cash or restricted stock awards.
At December 31, 1997, 24,885 nonvested shares were outstanding and 2,190,266
shares were available for issuance under the Company's restricted stock plan.
23
The activity under the stock option plan is as follows:
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
----------- -----------
Outstanding at December 31, 1994.......................................................... 1,253,272 $ 11.60
Options granted........................................................................... 442,000 17.87
Options exercised......................................................................... (211,476) 9.49
Options surrendered....................................................................... (4,798) 12.32
-----------
Outstanding at December 31, 1995.......................................................... 1,478,998 $ 13.77
Options granted........................................................................... 396,000 20.73
Options exercised......................................................................... (175,892) 10.05
Options surrendered....................................................................... (2,276) 12.32
-----------
Outstanding at December 31, 1996.......................................................... 1,696,830 15.77
Options granted........................................................................... 214,000 29.50
Options exercised......................................................................... (340,584) 11.71
-----------
Outstanding at December 31, 1997.......................................................... 1,570,246 18.52
Available for grant at December 31, 1997.................................................. 74,182
-----------
-----------
The following tables summarize information about stock options outstanding as
of December 31, 1997:
Options Outstanding:
RANGE OF
EXERCISE NUMBER WEIGHTED AVERAGE WEIGHTED AVERAGE
PRICES OUTSTANDING REMAINING YRS. EXERCISE PRICE
- -------------- ----------- ------------------- -----------------
$ 8.07-9.78 175,732 4.5 $ 9.01
12.32-17.25 367,182 6.6 15.07
17.32-19.63 392,000 8.0 17.63
19.88-29.50 635,332 9.3 23.69
-----------
1,570,246
-----------
Options Exercisable:
RANGE OF
EXERCISE NUMBER WEIGHTED AVERAGE
PRICES EXERCISABLE EXERCISE PRICE
- -------------- ----------- -----------------
$ 8.07-9.78 175,732 $ 9.01
12.32-17.25 367,182 15.07
17.32-19.63 392,000 17.63
19.88-29.50 362,221 22.47
----------
1,297,135
----------
At December 31, 1996, 1,285,497 options were exercisable at a weighted
average price of $14.52.
In accordance with the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company applies APB Opinion 25 and related
interpretations in accounting for its stock compensation plans and, accordingly,
does not recognize compensation cost for its stock option plan. Compensation
cost was estimated using the Black-Scholes model with the following assumptions:
dividend yield of 1.75 percent;
24
a life of 7 years; volatility of 24 percent; and risk-free interest rate of 6
percent. The weighted-average fair value of those stock options granted in
1997, 1996, and 1995 was $9.61, $6.75, and $5.82, respectively. If the
Company had elected to recognize compensation cost based on the fair value of
the options granted at grant date as prescribed by SFAS No. 123, the pro
forma effect on net earnings and earnings per share, in 1997 ,1996 and 1995,
would have been approximately $1.5 million or $.05 per share, $1.1 million or
$.03 per share and $0.5 million or $.02 per share, respectively. Pursuant to
the transition provisions of SFAS No. 123, the pro forma effect includes only
the vested portion of options granted during and after 1995. Options vest
over a three year period.
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. Plan assets consist primarily of publicly-listed common stocks and
corporate bonds.
Pension expense includes:
1997 1996 1995
---------- ---------- ----------
In Thousands
Service cost.................................................................. $ 4,366 $ 3,374 $ 2,335
Interest cost on projected benefit obligation................................. 6,734 6,122 5,682
Actual return on plan assets.................................................. (17,976) (6,440) (5,982)
Net amortization and deferral................................................. 10,496 (80) (38)
---------- ---------- ----------
Total pension expense......................................................... $ 3,620 $ 2,976 $ 1,997
---------- ---------- ----------
---------- ---------- ----------
The funded status of the plans at December 31 was:
1997 1996
---------- ----------
In Thousands
Actuarial present value of accumulated benefit obligation
Vested.................................................................................... $ 80,936 $ 72,709
Non-vested................................................................................ 6,362 1,435
---------- ----------
$ 87,298 $ 74,144
---------- ----------
---------- ----------
Plan assets at fair value................................................................. $ 104,015 $ 90,737
Projected benefit obligation.............................................................. (99,551) (86,135)
---------- ----------
Plan assets in excess of projected benefit obligation..................................... 4,464 4,602
Unamortized transition asset.............................................................. (3,589) (4,285)
Unrecognized prior service costs.......................................................... (3,889) 3,031
Unrecognized net gains.................................................................... (9,078) (11,695)
---------- ----------
Accrued pension expense .................................................................. $ (12,092) $ (8,347)
---------- ----------
---------- ----------
25
The projected benefit obligation was determined using an assumed discount
rate of 7.25% in 1997 and 7.75% in 1996 and 1995. The assumed rate of
compensation increase was 4% in 1997 and 4.5% in 1996 and 1995; and the expected
rate of return on plan assets was 8.75% in 1997, 1996, and 1995.
Additionally, the Company maintains a retirement savings plan covering
substantially all employees other than those employees under collective
bargaining agreements. Plan expense was $4.7 million, $3.2 million, and $2.7
million, in 1997, 1996, and 1995, respectively.
The Company also has a limited number of unfunded post-retirement benefit
programs for which the expense, inclusive of the components of service costs,
interest costs and the amortization of the unrecognized transition obligation,
was approximately $0.4 million in 1997 and $0.6 million in 1996 and 1995. The
present value of the Company's obligation under these plans is not significant.
INCOME TAXES
The provision for income taxes was as follows:
1997 1996 1995
--------- --------- ---------
In Thousands
Currently payable
Federal........................................................................ $ 39,262 $ 27,954 $ 24,828
State, local and other......................................................... 8,242 9,788 7,742
--------- --------- ---------
$ 47,504 $ 37,742 $ 32,570
Deferred (benefit)
Federal........................................................................ $ (1,363) $ (1,238) $ (3,563)
State, local and other......................................................... (23) (144) (230)
--------- --------- ---------
$ (1,386) $ (1,382) $ (3,793)
--------- --------- ---------
Total Provision.................................................................. $ 46,118 $ 36,360 $ 28,777
--------- --------- ---------
--------- --------- ---------
Deferred tax assets (liabilities) are comprised of the following at December
31:
1997 1996
---------- ----------
In Thousands
Product warranty.......................................................................... $ 35,346 $ 34,232
Inventory reserves........................................................................ 3,197 2,703
Doubtful receivables...................................................................... 1,719 2,423
Employee benefits......................................................................... 12,114 7,206
Other, net................................................................................ 12,088 9,699
---------- ----------
Deferred assets........................................................................... $ 64,464 $ 56,263
---------- ----------
Depreciation.............................................................................. $ (37,394) $ (29,037)
Other, net................................................................................ (1,606) (376)
---------- ----------
Deferred liabilities...................................................................... (39,000) (29,413)
---------- ----------
Net deferred tax assets................................................................... $ 25,464 $ 26,850
---------- ----------
---------- ----------
26
No valuation allowance is required for the deferred tax assets based on the
Company's past tax payments and estimated future taxable income.
A reconciliation of taxes computed at the statutory rate with the tax
provision is as follows:
1997 1996 1995
--------- --------- ---------
In Thousands
Federal income taxes at statutory rate........................................... $ 40,875 $ 32,214 $ 25,500
State income taxes, net of federal income tax benefit............................ 3,842 2,912 2,706
Other, net....................................................................... 1,401 1,234 571
--------- --------- ---------
$ 46,118 $ 36,360 $ 28,777
Effective income tax rate........................................................ 39.5% 39.5% 39.5%
Cash payments for income taxes were $30.7 million, $40.5 million, and $28.7
million in 1997, 1996, and 1995, respectively.
27
SEGMENT INFORMATION
The Company's operations are classified into the following business
segments:
CONSTRUCTION MATERIALS--the principal products of this segment are rubber,
plastic and fleece back sheeting used predominantly on non-residential flat
roofs and related roofing accessories, including flashings, fasteners, sealing
tapes, coatings and waterproofings. The markets served include new construction,
re-roofing and maintenance of low slope roofs, water containment, HVAC sealants,
and coatings and waterproofings.
TRANSPORTATION PRODUCTS--the principal products of this segment are heavy
duty friction and braking systems for truck and off-highway equipment, rubber
and plastic automotive components, high grade aerospace wire and specialty
electronic cable, specialty trailers, self-contained ISO 40-foot perishable
cargo shipping containers, standard and custom-built high payload trailers and
dump bodies. Customers include truck OEMs, shipping lines, heavy equipment and
truck dealers and aftermarket distributors, commercial haulers, automotive OEMs
and systems suppliers, and dairy product distributors.
GENERAL INDUSTRY--the principal products of this segment include small
bias-ply rubber tires, stamped and roll-formed wheels, commercial and
institutional plastic foodservice permanentware and catering equipment, fiber
glass and composite material trays and dishes, ceramic tableware, specialty
rubber and plastic cleaning brushes and stainless steel processing equipment and
their related process control systems. Customers include golf car manufacturers,
power equipment manufacturers, boat and utility trailer manufacturers, food
service distributors and dealers, and dairy and pharmaceutical processors.
CORPORATE--includes general corporate and idle property expenses. Corporate
assets consist primarily of cash and cash equivalents, facilities, and other
invested assets.
28
Financial information for operations by reportable business segment is
included in the following summary:
In Thousands
EARNINGS
BEFORE DEPREC.
INCOME & CAPITAL
SALES TAXES ASSETS AMORT. SPENDING
------------ ---------- ---------- ---------- ----------
1997
Construction Materials............................. $ 322,228 $ 49,398 $ 177,270 $ 6,401 $ 8,109
Transportation Products............................ 521,181 45,101 338,770 16,738 24,856
General Industry................................... 417,141 50,912 320,205 14,723 26,357
Interest, net...................................... -- (15,337) -- -- --
Corporate.......................................... -- (13,290) 24,971 893 209
------------ ---------- ---------- ---------- ----------
$ 1,260,550 $ 116,784 $ 861,216 $ 38,755 $ 59,531
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
1996
Construction Materials............................. $ 325,165 $ 43,582 $ 183,836 $ 6,220 $ 6,580
Transportation Products............................ 371,517 27,495 309,125 11,637 16,960
General Industry................................... 320,813 40,260 225,282 11,201 11,360
Interest, net...................................... -- (8,396) -- -- --
Corporate.......................................... -- (10,901) 24,220 700 90
------------ ---------- ---------- ---------- ----------
$ 1,017,495 $ 92,040 $ 742,463 $ 29,758 $ 34,990
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
1995
Construction Materials............................. $ 308,327 $ 36,676 $ 169,476 $ 5,810 $ 9,622
Transportation Products............................ 278,867 20,241 210,700 9,617 14,175
General Industry................................... 235,340 29,627 143,606 7,076 13,404
Interest, net...................................... -- (4,055) -- -- --
Corporate.......................................... -- (9,631) 18,641 727 266
------------ ---------- ---------- ---------- ----------
$ 822,534 $ 72,858 $ 542,423 $ 23,230 $ 37,467
------------ ---------- ---------- ---------- ----------
------------ ---------- ---------- ---------- ----------
QUARTERLY FINANCIAL DATA
(In thousands except per share
data) (unaudited)
FIRST SECOND THIRD FOURTH YEAR
------------ ---------- --------- --------- ------------
1997
Net sales.......................................... $ 287,819 337,372 315,707 319,652 $ 1,260,550
Gross margin....................................... $ 63,592 76,712 75,089 71,068 $ 286,461
Operating expenses................................. $ 38,319 38,925 40,273 41,553 $ 159,070
Net earnings....................................... $ 13,421 20,980 19,518 16,747 $ 70,666
Basic earnings per share(1)........................ $ 0.44 0.69 0.65 0.56 $ 2.34
Diluted earnings per share(1)...................... $ 0.43 0.68 0.63 0.54 $ 2.28
Dividends per share................................ $ 0.1225 0.1225 0.1400 0.1400 $ 0.5250
Stock price:
High............................................. $ 35 5/8 37 46 7/8 46 3/4
Low.............................................. $ 29 1/4 27 34 3/4 39 5/8
1996
Net sales.......................................... $ 225,121 262,315 252,603 277,456 $ 1,017,495
Gross margin....................................... $ 52,371 64,484 62,638 58,205 $ 237,698
Operating expenses................................. $ 33,733 35,273 35,551 36,019 $ 140,576
Net earnings....................................... $ 10,639 16,441 15,461 13,139 $ 55,680
Basic earnings per share(1)........................ $ 0.35 0.54 0.51 0.43 $ 1.84
Diluted earnings per share(1) $ 0.35 0.53 0.50 0.42 $ 1.80
Dividends per share................................ $ 0.1100 0.1100 0.1225 0.1225 0.4650
Stock price:
High............................................. $ 22 9/16 28 3/16 28 1/16 30 1/2
Low.............................................. $ 19 1/16 21 5/8 24 1/4 26 7/8
(1) The 1996 and first three quarters of 1997 earnings per share amounts have
been restated to comply with Statement of Financial Accounting Standards No.
128, "Earnings Per Share."
29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Carlisle Companies Incorporated:
We have audited the accompanying consolidated balance sheets of Carlisle
Companies Incorporated (a Delaware corporation) and subsidiaries as of
December 31, 1997 and 1996 and the related consolidated statements of
earnings, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. 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 and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
/s/ Arthur Andersen LLP
New York, New York
January 26, 1998
30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
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 of December 31, 1997, 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 55 Chief Executive Officer since September, September, 1988 to
1988, and Chairman of the Board since date
January, 1994, and President from
September, 1988 to February, 1995.
Dennis J. Hall 56 President, since February, 1995, and August, 1989 to
Executive Vice President, Treasurer and date
Chief Financial Officer, from August, 1989
to February, 1995.
Scott C. Selbach 42 Vice President, Corporate Development July, 1989 to date
since August 1997. Formerly President,
Europe from August, 1995 to August, 1997
and Vice President, Secretary and General
Counsel from July, 1989 to August, 1995.
Robert J. Ryan, Jr. 53 Vice President, Treasurer and Chief January, 1996 to
Financial Officer. Formerly President of date
Disciplined Capital Management, Syracuse,
NY.
Steven J. Ford 38 Vice President, Secretary and General July, 1995 to date
Counsel, since July, 1995. Formerly an
associate with Bond, Schoeneck & King,
Syracuse, NY.
31
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 Company's definitive proxy statement filed with
the Securities and Exchange Commission on March 9, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement filed with the Securities and Exchange
Commission on March 9, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement filed with the Securities and Exchange
Commission on March 9, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
Financial statements required by Item 8 are as follows:
Consolidated Statement of Earnings, years ended December 31, 1997, 1996 and
1995
Consolidated Statement of Shareholders' Equity, years ended December 31,
1997, 1996 and 1995
Consolidated Balance Sheet, December 31, 1997 and 1996
Consolidated Statement of Cash Flows, years ended December 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
Financial statement supplementary notes applicable to the filing of this
report are as follows:
PAGE
-----
1. Other current liabilities 35
All other schedules are omitted because the required information is
inapplicable or the information is presented in the financial statements or
related notes.
32
Exhibits applicable to the filing of this report are as follows:
(3) By-laws of the Company.*
(3.1) Restated Certificate of Incorporation as amended April 22, 1991.****
(3.2) Certificate of Amendment of the Restated Certificate of Incorporation dated December
20, 1996.******
(4) Shareholders' Rights Agreement, February 8, 1989.*
(4.1) Amendment to Shareholders' Rights Agreement, dated August 7, 1996.*****
(10.1) Executive Incentive Program.**
(10.2) Representative copy of Executive Severance Agreement, dated December 19, 1990,
between the Company and certain individuals, including the five most highly
compensated executive officers of the Company.***
(10.3) Summary Plan Description of Carlisle Companies Incorporated Director Retirement
Program, effective November 6, 1991.***
(12) Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule as of December 31, 1996 and for the twelve months ended
December 31 1996.
- ------------------------
*Filed as an Exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1988 and incorporated herein by reference.
**Filed with the Company's definitive proxy statement dated March 9, 1994
and incorporated herein by reference.
***Filed as an Exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1990 and incorporated herein by reference.
****Filed as an Exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1991 and incorporated herein by reference.
*****Filed as an Exhibit to Form 8-A/A filed on August 9, 1996 and incorporated
herein by reference.
******Filed as an Exhibit to the Company's annual report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by reference.
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
The Company will furnish to the Commission upon request its long-term debt
instruments not listed in this Item.
33
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/ Dennis J. Hall
By: Dennis J. Hall, President and a Director
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/ Stephen P. Munn /s/ Peter F. Krogh
Stephen P. Munn, Chairman, Chief Executive Peter F. Krogh, Director
Officer and a Director
(Principal Executive Officer) /s/ Donald G. Calder
/s/ Robert J. Ryan, Jr. Donald G. Calder, Director
Robert J. Ryan, Jr., Vice President, /s/ Paul J. Choquette, Jr.
Treasurer and Chief Financial Officer
(Principal Financial Officer and Paul J. Choquette, Jr. Director
Principal Accounting Officer)
/s/ Henry J. Forrest
Henry J. Forrest, Director
March 9, 1998
34
CARLISLE COMPANIES INCORPORATED AND SUBSIDIARIES
SUPPLEMENTARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1. Other Current Liabilities-- Other current liabilities at December 31
consist of the following:
(000'S)
---------------------
1997 1996
---------- ---------
Employee compensation and benefits $ 32,268 $ 25,304
Product warranties 29,710 28,371
Insurance 12,250 9,888
Other accrued expenses 51,587 32,747
---------- ---------
$ 125,815 $ 96,310
---------- ---------
---------- ---------
35
CARLISLE COMPANIES INCORPORATED
COMMMISSION FILE NUMBER 1-9278
FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1997
EXHIBIT LIST
(12) Ratio of Earnings to Fixed Charges
(21) Subsidiaries of the Registrant
(23) Consent of Independent Public Accountants
(27) Financial Data Schedule as of December 31, 1997 and for the twelve months ended
December 31, 1997
36