We intend to pay dividends to our shareholders and have increased our dividend rate annually for the past 4144 years. On February 6, 20182, 2021, the Board of Directors declared a regular quarterly dividend of $0.37$0.525 per share, payable on March 1, 20182021, to shareholders of record at the close of business on February 20, 2018.19, 2021.
We repurchased approximately 2.7 million shares in 2017 as part of our plan to return capital to shareholders, utilizing $268.4 million of our cash on hand. As of December 31, 2017, we had authority to repurchase 2.1 million shares. On February 6, 2018, the Board approved a 5.0 million share increase in the Company's stock repurchase program, increasing total authorized shares to 13.7 million, with 7.1 million available for repurchase. Shares may be repurchased at management’s discretion. Purchases may occur from time‑to‑time in the open market and no maximum purchase price has been set. The Company plans to continue to repurchase shares in 2018 on a systematic basis. The decision to repurchase shares will depend on price, availability and other corporate developments.
Debt Instruments
Senior Notes
On November 16, 2017, weFebruary 28, 2020, the Company completed a public offering of $1.0 billion, including $600.0$750.0 million of unsecured senior notes with a stated interest rate of 3.75%2.75% due DecemberMarch 1, 20272030 (the “2027 Notes”) and $400.0 million of notes with a stated interest rate of 3.5% due December 1, 2024 (the “2024“2030 Notes”). The 2024 and 20272030 Notes were issued at a discount of $9.3 million, resulting in net proceeds to the Company of $997.2$740.7 million. The Company incurred costs to issue the 2030 Notes of approximately $22.9 million, inclusive of underwriters’, credit rating agencies’ and attorneys’ fees, loss on treasury lock contracts and other costs. The discount, issuance costs and loss on treasury locks are amortized to interest expense over the life of the 2030 Notes. Interest is paidpayable each JuneMarch 1 and September 1, and commenced on September 1, 2020.
On February 28, 2020, we issued a notice for the redemption in full of our $250.0 million aggregate principal amount of our outstanding 5.125% notes due December 1, commencing15, 2020 (the “2020 Notes”). The 2020 Notes were redeemed on June 1, 2018. The 2024 and 2027 Notes are subject to our existing indenture and accordingly, are subject toMarch 29, 2020 at the same restrictive covenants and limitations as our existing indebtedness.
We also have senior unsecured notes outstanding of $250.0$350.0 million due 2020 (at a stated interest rate of 5.125%), $350.0 million dueNovember 15, 2022 (at a stated interest rate of 3.75%), $400.0 million due December 1, 2024 (at a stated interest rate of 3.5%) and $600.0 million due December 1, 2027 (at a stated interest rate of 3.75%) that are rated BBB by Standard & Poor’s and Baa2 by Moody’s.
Revolving Credit Facility
On February 21, 2017,5, 2020, we entered into a second amendment (the “Amendment”) to our ThirdFourth Amended and Restated Credit Agreement (the “Credit Agreement”“Amendment”) administered by JPMorgan Chase Bank, N.A. Among other things, the Amendment increases the lenders' aggregate revolving commitment from $600.0 million to $1.0 billion and extendsextended the maturity date of the Credit AgreementFacility from December 12, 2018February 21, 2022, to February 21, 2022. The Facility has a feature that allows the Company to increase availability, at our option, by an aggregate amount of up to $500.0 million through increased commitments from existing lenders or the addition of new lenders. Under the Facility, we may also enter into commitments in the form of standby, commercial or direct pay letters of credit for an amount not to exceed $50.0 million. The Facility provides for variable interest pricing based on the credit rating of the senior unsecured bank debt or other unsecured senior debt and is also subject to commitment fees.
During 2017, we borrowed $1.2 billion under the Facility, primarily utilized to fund acquisitions, share repurchases and capital expenditures, and fully repaid the $1.2 billion of2020, borrowings under the Facility totaled $500.0 million with proceeds from our 2024a weighted average interest rate of 1.9%, and 2027 Notes and cash from operations.repayments totaled $500.0 million. As of December 31, 2017, we had2020, there were no amounts outstandingborrowings under our revolving credit facility, withthe Facility and $1.0 billion available for use.of availability. During the year ended and as of December 31, 2019 there were no borrowings under the Facility.
We are required to meet various restrictive covenants and limitations under our senior notes and revolving credit facility including certain leverage ratios, interest coverage ratios and limits on outstanding debt balances held by certain subsidiaries. We were in compliance with all covenants and limitations as of December 31, 20172020 and 2016.2019.
Refer to Note 1214 for further information on our debt instruments.
Contractual Obligations
The following table quantifies certain contractual cash obligations and commercial commitments as of December 31, 2017:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Total | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
| Long-term debt | | $ | 1,600.0 |
| | $ | — |
| | $ | — |
| | $ | 250.0 |
| | $ | — |
| | $ | 350.0 |
| | $ | 1,000.0 |
|
Interest on long-term debt (1) | | 432.3 |
| | 63.7 |
| | 63.7 |
| | 63.7 |
| | 50.9 |
| | 49.8 |
| | 140.5 |
|
| Noncancelable operating leases | | 84.9 |
| | 22.6 |
| | 18.2 |
| | 12.1 |
| | 8.9 |
| | 6.9 |
| | 16.2 |
|
Estimated workers' compensation claims (2) | | 15.4 |
| | 4.3 |
| | 3.0 |
| | 2.1 |
| | 1.5 |
| | 1.1 |
| | 3.4 |
|
Estimated defined benefit plan payments (3) | | 269.7 |
| | 13.7 |
| | 13.9 |
| | 13.9 |
| | 13.3 |
| | 13.2 |
| | 201.7 |
|
| Total commitments | | $ | 2,402.3 |
| | $ | 104.3 |
| | $ | 98.8 |
| | $ | 341.8 |
| | $ | 74.6 |
| | $ | 421.0 |
| | $ | 1,361.8 |
|
| |
(1)
| Future expected interest payments are calculated based on the stated rate for fixed rate debt as of December 31, 2017. |
| |
(2)
| The amount of $15.4 million in obligations for workers compensation claims reflects undiscounted estimated claims reported to the Company and incurred but not yet reported. Our estimate and the related timing is based upon actuarial assumptions and loss development factors and historical loss experience. Refer to Note 11 for further information.
|
| |
(3)
| The amount of $269.7 million in defined benefit plan payments reflects undiscounted estimated employee obligations under the Company’s qualified defined benefit pension plans. The estimated obligation is based upon plan provisions, increases to compensation levels and actuarial assumptions and mortality rate trends. Approximately $234.7 million of the $269.7 million in estimated obligations reflects projected benefit obligations under the Company’s qualified defined benefit plans. We maintain a trust in which plan assets of the trust are expected to fully fund the Company’s projected benefit obligations for its qualified defined benefit plans based upon their fair value measurement as of December 31, 2017, and expected return on assets. Refer to Note 13 for further information.
|
In addition to our debt maturities and other contractual obligations discussed above, we have other commitments, which we expected to fund with available cash, projected operating cash flows, available credit facilities or future financing transactions, if necessary. The above table does not include (i) long‑term deferred revenue, (ii) unrecognized income tax benefits and deferred income tax liabilities and (iii) deferred compensation. As a result of factors such as the timing of book‑tax difference reversals and retirement of employees, it is not reasonably possible to estimate when these will become due.
There were no contracts for the purchase of goods or services that are enforceable and legally binding and/or require minimum quantities with a term exceeding one year as of December 31, 2017, although we routinely enter into purchase agreements for certain key raw materials.
Environmental
We are subject to increasingly stringent environmental laws and regulations, including those relating to air emissions, wastewater discharges, chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land, businesses or offsite disposal facilities liable for their own and for previous owners’ or operators’ releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require the obtainment and compliance with environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material and we do not currently have any significant accruals related to potential future costs of environmental remediation as of December 31, 2017 and 2016, nor do we have any asset retirement obligations recorded at those dates. However, the nature of our operations and our long history of industrial activities at certain of our current or former facilities, as well as those acquired, could potentially result in material environmental liabilities or asset retirement obligations.
While we must comply with existing and pending climate change legislation, regulation, international treaties or accords, current laws and regulations do not have a material impact on our business, capital expenditures or financial position. Future events, including those relating to climate change or greenhouse gas regulation, may require us to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.
Off-Balance Sheet Arrangements
Refer to Note 11 for discussion of off-balance sheet arrangements.
Critical Accounting Estimates
Our significant accounting policies are more fully described in Note 1.1. In preparing the Consolidated Financial Statements in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company’s management must make informed decisions which impact the reported amounts and related disclosures. Such decisions include the selection of the appropriate accounting principles to be applied and assumptions on which to base estimates and judgments that affect the reported amounts of assets, liabilities, sales andrevenues, expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to revenue recognition, deferred revenue and extended product warranties, goodwill and indefinite-lived intangible assets, valuation of long-lived assets, andrevenue recognition, income taxes and extended product warranties on an ongoing basis. The Company bases its estimates on 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, that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
Business Combinations
As noted in “Executive Overview”Executive Overview we have a long-standinghistory and a strategy of acquiring businesses. We account for these business combinations as required by GAAP under the acquisition method of accounting, which requires us to recognize the assets acquired and the liabilities assumed at their acquisition date fair values. Deferred taxes are recorded for any differences between fair value and tax basis of assets acquired and liabilities assumed and can
vary based on the structure of the acquisition as to whether it is a taxable or non-taxable transaction. To the extent the purchase price of the acquired business exceeds the fair values of the assets acquired and liabilities assumed, including deferred income taxes recorded in connection with the transaction, such excess is recognized as goodwill (see further below for our critical accounting estimate regarding post-acquisition accounting for goodwill). The most critical areas of judgment in applying the acquisition method include selecting the appropriate valuation techniques and assumptions that are used to measure the acquired assets and assumed liabilities at fair value, particularly for intangible assets, contingent consideration, acquired tangible assets such as property, plant and equipment, and inventory.
The key techniques and assumptions utilized by type of major acquired asset or liability generally include:
|
| | | | | | | | | | | | | |
| Asset/Liability | | Typical Valuation Technique | | Key Assumptions |
| Technology-based intangible assets | | Relief from royalty method | | - •Estimated future revenues from acquired technology
- •Royalty rates that would be paid if licensed from a third-party
- •Discount rates
|
| Customer-based intangible assets | | Multiple-period excess earnings method | | - •Estimated future revenues from existing customers
- •Rates of customer attrition
- •Discount rates
- •Contributory asset charges
|
| Trademark/trade name intangible assets | | Relief from royalty method | | - •Estimated future revenues from acquired trademark/trade name
- •Economic useful lives (definite vs. indefinite)
- •Royalty rates that would be paid if licensed from a third-party
- •Discount rates
|
| Property, plant & equipment | | Market comparable transactions (real property) and replacement cost, new less economic deprecation (personal property) | | - •Similarity of subject property to market comparable transactions
- •Costs of like equipment in new condition
- •Economic obsolescence rates
|
| Inventory | | Net realizable value less (i) estimated costs of completion and disposal, and (ii) a reasonable profit allowance for the seller | | - •Estimated percentage complete (WIP inventory)
- •Estimated selling prices
- •Estimated completion and disposal costs
- •Estimated profit allowance for the seller
|
Contingent Considerationconsideration | | Discounted future cash flows | | - •Future revenues and/or net earnings
- •Discount rates
|
In selecting techniques and assumptions noted above, we generally engage third-party, independent valuation professionals to assist us in developing the assumptions and applying the valuation techniques to a particular business combination transaction. In particular, the discount rates selected are compared to and evaluated with (i) the industry weighted-average cost of capital, (ii) the inherent risks associated with each type of asset and (iii) the level and timing of future cash flows appropriately reflecting market participant assumptions.
As noted above, goodwill represents a residual amount of purchase price. However, the primary items that generate goodwill include the value of the synergies between the acquired company and our existing businesses and the value of the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. Refer to Note 3 for more information regarding business combinations, specifically the items that generated goodwill in our recent acquisitions.
Subsequent Measurement of Goodwill
Goodwill is not amortized but is tested annually, or more often if impairment indicators are present, for impairment at a reporting unit level, based onlevel. Goodwill is tested for impairment via a comparison ofone-step process by comparing the fair value of the reporting unitgoodwill with its carrying value. InWe recognize an impairment for the first quarter of 2017, we adopted Accounting Standards Update (“ASU”) 2017-04, Simplifyingamount by which the Test for Goodwill Impairment (refer to Note 1). This ASU eliminated Step 2 of the goodwill impairment test. While the elimination of Step 2 will reduce the cost and complexity of performing goodwill impairment tests, it could result in different amounts being recognized in future periods versus the previous two-step test, as we are no longer required to perform a hypothetical purchase price allocation to measure the goodwill impairment. This hypothetical purchase price allocation required the reporting unit's underlying net assets be measured at fair value with differences from their carrying values either increasing or decreasing the hypothetical amount of goodwill and therefore increasing or decreasing any potential goodwill impairment loss. The methods and key assumptions utilized to determineexceeds the fair value of our reporting units will not change as a result of adopting this ASU.
value. We estimate the fair value of our reporting units primarily based on the income approach utilizing the
discounted cash flow method ("DFC"DCF"). We also use fair value estimates derived from and the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which require us to make assumptions about the applicability of those multiples to our reporting units. The discounted cash flow method requires us to estimate future cash flows and discount those amounts to present value.method. The key techniques and assumptions that drive fair value, via the DFC,generally include:
| | | | | | | | |
| Valuation Technique | | Key Assumptions |
| Discounted future cash flows | | •Estimated future revenues •Earnings before interest, taxes, depreciation and amortization ("EBITDA") margins •Discount rates |
| Market multiple method | | •Peer public company group •Financial performance of reporting units relative to peer public company group |
Industry weighted-average cost of capital (“WACC”): We utilize a WACC relative to each reporting unit’s industry as the discount rate for estimated future cash flows. The WACC is intended to represent a rate of return that would be expected by a market place participant.
Revenue growth rates: We utilize a revenue growth rate based on historical growth patterns, industry analysis and management’s experience, which vary based on the reporting unit being evaluated.
Operating margins: We utilize historical and expected operating margins, which vary based on the projections of each reporting unit being evaluated.
We have determined that we have fivefour reporting units and have allocated goodwill to those reporting units as follows:
| | | (in millions) | | December 31, 2017 | | December 31, 2016 | (in millions) | | December 31, 2020 | | December 31, 2019 |
| Carlisle Construction Materials | | $ | 544.3 |
| | $ | 117.5 |
| Carlisle Construction Materials | | $ | 613.0 | | | $ | 597.1 | |
| Carlisle Interconnect Technologies | | 640.3 |
| | 639.1 |
| Carlisle Interconnect Technologies | | 835.6 | | | 835.2 | |
| Carlisle FoodService Products | | 149.7 |
| | 60.3 |
| |
| Carlisle Fluid Technologies | | 171.0 |
| | 167.9 |
| Carlisle Fluid Technologies | | 193.1 | | | 187.5 | |
| Carlisle Brake & Friction | | 96.5 |
| | 96.4 |
| Carlisle Brake & Friction | | 96.5 | | | 96.5 | |
| Total | | $ | 1,601.8 |
| | $ | 1,081.2 |
| Total | | $ | 1,738.2 | | | $ | 1,716.3 | |
Annual Impairment Test
We test our goodwill for impairment annually in the fourth-quarter as of October 1. For the 20172020 impairment test, allthe CCM reporting unit was tested for impairment using a qualitative approach. Under this approach, an entity may assess qualitative factors as well as relevant events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Through the results of our analysis, we determined that it is not more likely than not that the fair value of the CCM reporting unit was less than its carrying value and thus, a quantitative analysis was not performed. The CIT, CFT and CBF reporting units were tested for impairment using ASU 2017-04'sthe quantitative approach described above, resulting in fair value that substantially exceeded theirthe carrying value for each of the above reporting units.
We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in current events or conditions, including changes to the impacts of COVID-19 on our business, result in corresponding changes to our expectations about future estimated cash flows, discount rates and market multiples. If our adjusted expectations of the operating results, both in size and timing, of CIT, CFT and CBF do not materialize, if the discount rate increases (based on increases in interest rates, market rates of return or market volatility) or if market multiples decline, we may be required to record goodwill impairment charges, which may be material.
While we believe our conclusions regarding the estimates of fair value of our reporting units are appropriate, these estimates are subject to uncertainty and by nature include judgments and estimates regarding various factors. These factors such asinclude the rate and extent of growth in the markets that our reporting units serve, the realization of future sales price and volume increases, fluctuations in exchange rates, fluctuations in price and availability of key raw materials, future operating efficiencies and, as it pertains to discount rates, the volatility in interest rates and costs of equity.
2016 CBF Reporting Unit Impairment
During the third quarter of 2016, we recognized a goodwill impairment charge of $130.0 million related to our CBF reporting unit, primarily reflecting continued declines in sales related to overall market conditions and lower expectations of recovery in CBF’s various end markets. We continue to closely monitor actual results versus expectations as well as whether, and to what extent, any significant changes in current events or conditions result in corresponding changes to our expectations about future estimated cash flows as well as the WACC. If our adjusted expectations of recovery, both in size and timing, in CBF’s end markets do not materialize, or the WACC increases (based on increases in interest rates, market rates of return, and market volatility), we may be required to record additional intangible asset and goodwill impairment charges, which may be material. At December 31, 2016, goodwill allocated to the CBF reporting unit totaled $96.5 million and the fair value of the CBF reporting unit exceeded its carrying value by 5%.
Refer to Note 1012 for more information regarding goodwill.
Subsequent Measurement of Indefinite‑LivedIndefinite-Lived Intangible Assets
As discussed above, indefinite-lived intangible assets are recognized and recorded at their acquisition-date fair values.value. Intangible assets with indefinite useful lives are not amortized but are tested annually at the appropriate unit of account, which generally equals the individual asset, or more often if impairment indicators are present. Indefinite-lived intangible assets are tested for impairment via a one-step process by comparing the fair value of the intangible asset with its carrying value. The company recognizesWe recognize an impairment charge for the amount by which the carrying amount exceeds the intangible asset's fair value. We generally estimate the fair value of our indefinite-lived intangible assets consistent with the techniques noted above using our expectations about future cash flows, discount rates and royalty rates for purposes of the annual test. We monitor for significant changes in those
assumptions during interim reporting periods. We also periodically re-assess indefinite-lived intangible assets as to whether theirits useful lives can be determined, and if so, we would begin amortizing any applicable intangible asset.
Annual Impairment Test
We evaluatedtest our indefinite‑livedindefinite-lived intangible assets for impairment annually as of October 1, 2017,1. For the 2020 impairment test, the CCM indefinite-lived intangible assets were tested for impairment using a qualitative approach. The CIT, CFT and determinedCBF indefinite-lived intangible assets were tested for impairment using the quantitative approach described above, resulting in fair values that their fairsubstantially exceeded the carrying values, with the exception of four trade names with an aggregate carrying value of $68.0 million that exceeded their carrying valuesamounts by less than 5%.
We will continue to closely monitor actual results versus expectations as well as whether and to what extent any significant changes in conjunction withcurrent events or conditions, including changes to the impacts of COVID-19 on our annual impairment test.
2016 Wellman® Trade Name Impairment
During 2016, the CBF reporting unit experienced lower than expected sales, primarilybusiness, result in the constructioncorresponding changes to our expectations about future estimated revenues and mining industries. Management considered these results and the potential long-term effect of market conditions on the operationsdiscount rates. If our adjusted expectations of the CBF reporting unitrevenues, both in size and determined that an indicatortiming, of possible impairment existed. During the firstCIT, CFT and second quarters of 2016, management determined that the fair values of theCBF trade names withindo not materialize or if the CBF reporting unit exceeded their carrying values. However, as a resultdiscount rate increases (based on increases in interest rates, market rates of the interim impairment test performed during the third quarter of 2016, management determined that the fair value of the Wellman®return or market volatility), we may be required to record trade name within the CBF reporting unit did not exceed its carrying value. The primary assumptions that drive fair value related to trade names include:impairment charges, which may be material.
Future revenue generated by product sales that utilize the trade name;
Royalty rate that would be paid if the asset was licensed from a third party; and
Discount rate utilized, which reflects the associated industry WACC (discussed above) plus a single asset risk premium.
This interim impairment test resulted in an impairment charge for the Wellman® trade name of $11.5 million in the CBF segment in the third quarter of 2016.
Refer to Note 1012 for more information regarding intangible assets.
Valuation of Long‑LivedLong-Lived Assets
Long‑livedLong-lived assets or asset groups, including amortizable intangible assets, are tested for recoverability whenever events or circumstances indicate that the undiscounted future cash flows do not exceed the carrying amount of the asset or asset group. For purposes of testing for impairment, we group our long‑livedlong-lived assets classified as held and used at the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets and liabilities, which means that in many cases multiple assets are tested for recovery as a group. Our asset groupings vary based on the related business in which the long‑livedlong-lived assets are employed and the interrelationship between those long‑livedlong-lived assets in producing net cash flows; for example, multiple manufacturing facilities may work in concert with one another or may work on a stand‑alonestand-alone basis to produce net cash flows. We utilize our long‑livedlong-lived assets in multiple industries and economic environments and our asset groupings reflect these various factors.
We monitor the operating and cash flow results of our long‑livedlong-lived assets or asset groups classified as held and used to identify whether events and circumstances indicate the remaining useful lives of those assets should be adjusted, or if the carrying value of those assets or asset groups may not be recoverable. Undiscounted estimated future cash flows are compared to the carrying value of the long‑livedlong-lived asset or asset group in the event indicators of impairment are identified. In developing our estimates of future undiscounted cash flows, we utilize our internal estimates of future revenues, costs and other net cash flows from operating the long-lived asset or asset group over the life of the asset or primary asset, if an asset group. This requires us to make judgments about future levels of sales volumes,volume, pricing, raw material costs and other operating expenses.
If the undiscounted estimated future cash flows are less than the carrying amount, we determine the fair value of the asset or asset group and record an impairment charge in current earnings to the extent carrying value exceeds fair value. Fair values may be determined based on estimated discounted cash flows, by prices for like or similar assets in similar markets or a combination of both. There are currently no long‑lived assets orAll of our asset groups classifiedwere recoverable as held and used for which there were indicators of impairment that would require a recoverability test.December 31, 2020.
Long‑livedLong-lived assets or asset groups that are part of a disposal group that meets the criteria to be classified as held for sale are not assessed for impairment, but rather a loss on sale is recorded against the disposal group if fair value, less cost to sell, of the disposal group is less than its carrying value. If the disposal group’s fair value exceeds its carrying value, we record a gain, assuming all other criteria for a sale are met, when the transaction closes.
Revenue Recognition
ForRevenue is recognized when obligations under the three years ended December 31, 2017, we recognized revenue when allterms of a contract with a customer are satisfied; generally, this occurs with the criteria under then existing GAAP were met. Those included:
pervasive evidencetransfer of an arrangement exists,
delivery has occurred,
control of our products or services. Revenue is measured as the amount of total consideration expected to be received in exchange for transferring goods or providing services. Total expected consideration, in certain cases, is estimated at each reporting period, including interim periods, and is subject to change with variability dependent on future events, such as customer takes ownershipbehavior related to future purchase volumes, returns, early payment discounts and assumes riskother customer allowances. Estimates for rights of loss,
collection is probablereturn, discounts and rebates to customers, and other adjustments for variable consideration are provided for at the time of sale as a deduction to revenue, based on an analysis of historical experience and actual sales data. Changes in these
estimates are reflected as an adjustment to revenue in the sales priceperiod identified. Sales, value added and other taxes collected concurrently with revenue-producing activities are excluded from revenue.
We receive payment at the inception of the contract for separately priced extended service warranties, and revenue is fixeddeferred and recognized on a straight-line basis over the life of the contracts. The term of these warranties ranges from five to 40 years. The weighted average life of the contracts as of December 31, 2020, is approximately 20 years.
Additionally, critical judgments and estimates related to revenue recognition relative to certain customer contracts in our CIT and CFT segments, in which they are contract manufacturers or determinable.where they have entered into an agreement to provide both services (engineering and design) and products resulting from those services, include the following:
The first four criteria are generally a matter•Measurement of factrevenue using the key inputs of expected gross margin and inventory in our possession. We utilize an estimate of expected gross margin based on historical margin patterns and management’s experience, which vary based on the termscustomers and conditionsend markets being evaluated. There are multiple unique customer contracts at CIT or CFT. Accordingly, the estimate of sale along with estimates of delivery timesexpected margin is done for those sales with delivery termseach customer discretely. We review the margins for these categories as contracts, customers and an assessment of customer credit risk at theproduct profiles change over time of sale. The most critical judgments involved in revenue recognition are primarily those related to concludingensure that the sales price is determinable.margin expectations reflect the best available data for each category.
Income Taxes
Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We offer various early payment discounts, rebatesare subject to income taxes in the U.S. and other incentives to our customers for competitive reasons. We estimatenumerous foreign jurisdictions. Significant judgments and estimates are required in the impact of these items at the time of sale based on historical experiencedetermination of the ultimate price collected for similar transactions with similar customers, industriesconsolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax basis of assets and geographic marketsliabilities and adjust based on any known eventsits reported amounts in the financial statements, which will result in taxable or conditions that would suggest a different outcome. deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations.
We believe that we have sufficient history and other information available to produce a reliable estimate and concludeit is more likely than not that the price is determinable at the time of sale. We reflect the impact of these various discounts and incentives as a reduction of revenue at the time of sale and subsequently adjust the initial estimate as new information becomes available.
Beginning in 2018, revenue will be recognized under the guidance in Accounting Standards Codification (“ASC”) 606, Revenuebenefit from Contracts with Customers. Refer to Note 1 for more information regarding the effect of adopting the standard on our reported revenue.
Income Taxes
We record income taxes including an estimate of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns.
The amount of income tax that we pay annually is dependent on various factors, including the timing of certain deductions and ongoing audits byU.S. federal, state and foreign net operating loss ("NOL"), and credit carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $7.1 million on the deferred tax authorities, whichassets related to these carryforwards.
We (1) record unrecognized tax benefits as liabilities in accordance with Accounting Standards Codification 740, Income Taxes ("ASC 740") and (2) adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in proposed adjustments. We perform reviews ofa payment that is materially different from our income tax positions on a quarterly basis and accrue for potential uncertain tax positions. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters.
The changes included in the Tax Act are broad and complex. As such, on December 22, 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin 118 (“SAB 118”). SAB 118 expresses viewscurrent estimate of the SEC regarding ASC Topic 740, Income Taxes in the reporting period that includes the enactment date of the Tax Act. The SEC staff issuing SAB 118 recognized that a registrant’s review of certain incomeunrecognized tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. We have recorded provisional amounts for all known and estimable impacts of the Tax Act that are effective for the year ended December 31, 2017. Future adjustments to the provisional numbersbenefit liabilities. These differences will be recordedreflected as discrete adjustmentsincreases or decreases to income tax provisionexpense in the period in which those adjustments become estimable and/or are finalized.new information is available.
We continue to review the anticipated impacts of the global intangible low taxed income and base erosion anti-abuse tax on us, which are not effective until calendar year 2018 and are not expected to impact 2017 amounts. Within the calculation of our tax amounts, we have used assumptions and estimates that may change as a result of future guidance, interpretation and rule-making from various regulatory bodies.
Deferred Revenue and Extended Product Warranty Reserves
We offer extended warranty contracts on sales of certain products, the most significant being those offered on our installed roofing systems within the CCM segment. The lives of these warranties range from five to 40 years. All revenue from the sale of these contracts is deferred and amortized on a straight‑line basis over the life of the contracts. Current costs of services performed under these contracts are expensed as incurred. We also record an additional loss and a corresponding reserve if the total expected costs of providing services under the contract exceed unearnedunamortized deferred revenues equal to such excess. We estimate total expected warranty costs using actuarially derived estimates of future costs of servicing the warranties. The key inputs that are utilized to develop these estimates include historical claims experience by type of roofing membrane, location, and labor and material costs. The estimates of the volume and severity of these claims and associated costs are dependent upon the above assumptions and future results could differ from our current expectations. We currently do not have any material loss reserves recorded associated with our extended product warranties.
New Accounting Standards
Refer to Note 1 for information regarding new accounting standards.
Items Affecting Comparability
Items affecting comparability include costs, and losses or gains related to, among other things, growth and profitability improvement initiatives and other events outside of core business operations (such as asset impairments, exit and disposal and facility rationalization charges, costs of and related to acquisitions, idle capacity and labor costs, asset impairments, net of subsidies, litigation settlement costs, insurance settlements, gains and losses from and costs related to divestitures, losses on debt extinguishment, and discretenon-comparable tax items). Because these items affect our, or any particular operating segment's, financial condition or results in a specific period in which they are recognized, we believe it is appropriate to present the total of these items to provide information regarding the comparability of results of operations period to period.
The components of items affecting comparability for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions, except per share amounts) | | 2017 |
| | Impact to Operating Income | | Impact to Income from Continuing Operations | | Impact to Diluted EPS |
| Exit and disposal costs | | $ | 26.8 |
| | $ | 18.5 |
| | $ | 0.29 |
|
| Other facility rationalization costs | | 9.7 |
| | 7.0 |
| | 0.11 |
|
| Acquisition related costs: | | | |
|
| | |
| Inventory step-up amortization | | 11.5 |
| | 7.1 |
| | 0.11 |
|
| Other acquisition costs | | 3.8 |
| | 3.1 |
| | 0.05 |
|
| Indemnification losses | | — |
| | 4.6 |
| | 0.07 |
|
| Losses from divestitures | | — |
| | 0.5 |
| | 0.01 |
|
| Tax reform (benefit) | | — |
| | (52.6 | ) | | (0.82 | ) |
| Total items affecting comparability | | $ | 51.8 |
| | $ | (11.8 | ) | | $ | (0.18 | ) |
| | | | | | | |
|
| | | | | | | | | | | | |
| | | 2016 |
| (in millions, except per share amounts) | | Impact to
Operating Income | | Impact to Income from Continuing Operations | | Impact to Diluted EPS |
| Exit and disposal costs | | $ | 15.5 |
| | $ | 10.6 |
| | $ | 0.16 |
|
| Other facility rationalization costs | | 3.7 |
| | 2.7 |
| | 0.05 |
|
| Acquisition related costs: | | | |
|
| | |
| Inventory step-up amortization | | 2.0 |
| | 1.2 |
| | 0.02 |
|
| Other acquisition costs | | 4.2 |
| | 2.6 |
| | 0.04 |
|
| Gains from divestitures | | (0.3 | ) | | (0.6 | ) | | (0.01 | ) |
| Total items affecting comparability | | $ | 25.1 |
| | $ | 16.5 |
| | $ | 0.26 |
|
| | | | | | | |
|
| | | | | | | | | | | | |
| | | 2015 |
| (in millions, except per share amounts) | | Impact to
Operating Income | | Impact to Income from Continuing Operations | | Impact to Diluted EPS |
| Exit and disposal costs | | $ | 0.5 |
| | $ | 0.3 |
| | $ | — |
|
| Other facility rationalization costs | | 1.1 |
| | 0.7 |
| | 0.01 |
|
| Acquisition related costs: | | | |
|
| | |
| Inventory step-up amortization | | 8.6 |
| | 5.2 |
| | 0.08 |
|
| Other acquisition costs | | 2.9 |
| | 1.8 |
| | 0.03 |
|
| Total items affecting comparability | | $ | 13.1 |
| | $ | 8.0 |
| | $ | 0.12 |
|
| | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| (in millions, except per share amounts) | | Impact to
Operating Income | | Impact to Income from Continuing Operations | | Impact to Diluted EPS |
| Exit and disposal costs | | $ | 24.5 | | | $ | 18.5 | | | $ | 0.34 | |
| Other facility rationalization costs | | 2.1 | | | 1.6 | | | 0.03 | |
| Acquisition related costs: | | | | | | |
| Inventory step-up amortization | | 0.7 | | | 0.5 | | | 0.01 | |
| Other acquisition costs | | 3.7 | | | 2.9 | | | 0.05 | |
| Idle capacity and labor costs, net of subsidies | | 8.8 | | | 6.7 | | | 0.12 | |
| Impairment charges | | 6.0 | | | 4.6 | | | 0.08 | |
| | | | | | |
| | | | | | |
| Gains from insurance recoveries | | (0.7) | | | (0.6) | | | (0.01) | |
| Gains from divestitures | | (0.8) | | | (2.9) | | | (0.05) | |
| Loss on debt extinguishment | | — | | | 6.6 | | | 0.12 | |
| Indemnification losses | | — | | | 3.2 | | | 0.06 | |
| | | | | | |
| Tax items | | — | | | (16.9) | | (1) | (0.31) | |
| Total items affecting comparability | | $ | 44.3 | | | $ | 24.2 | | | $ | 0.44 | |
| | | | | | |
(1)Excludes $(4.6) million of tax items related to indemnification asset write-offs which had zero impact to income from continuing operations and diluted EPS from continuing operations.
| | | | | | | | | | | | | | | | | | | | |
| | 2019 |
| (in millions, except per share amounts) | | Impact to
Operating Income | | Impact to Income from Continuing Operations | | Impact to Diluted EPS |
| Exit and disposal costs | | $ | 13.7 | | | $ | 10.3 | | | $ | 0.18 | |
| Other facility rationalization costs | | 5.7 | | | 4.4 | | | 0.08 | |
| Acquisition related costs: | | | | | | |
| Inventory step-up amortization | | 3.1 | | | 2.4 | | | 0.04 | |
| Other acquisition costs | | 8.3 | | | 6.9 | | | 0.12 | |
| Gains from contingent consideration | | (5.0) | | | (5.0) | | | (0.09) | |
| | | | | | |
| | | | | | |
| Gains from divestitures | | (2.1) | | | (1.2) | | | (0.02) | |
| Gain from step acquisition, net | | — | | | (0.3) | | | — | |
| Tax items | | — | | | (13.2) | | (1) | (0.23) | |
| Total items affecting comparability | | $ | 23.7 | | | $ | 4.3 | | | $ | 0.08 | |
| | | | | | |
(1)Excludes $(1.9) million of tax items related to indemnification asset write-offs which had zero impact to income from continuing operations and diluted EPS from continuing operations.
The impact to income from continuing operations reflects the tax effect of items affecting comparability, which is based on the statutory rate in the jurisdiction in which the expense or income is deductible or taxable. The per share impact of items affecting comparability to each period is based on diluted shares outstanding using the two-class method (refer to Note 75).
Forward‑LookingRevenues
Our expectations for segment revenues in 2021 follows:
| | | | | | | | | | | | | | |
| | 2021 Revenue | | Primary Drivers |
| Carlisle Construction Materials | | high-single
digit growth | | •Strong replacement roofing demand •Expansion into new platforms, primarily spray foam insulation, architectural metals and Europe |
| Carlisle Interconnect Technologies | | mid-to-high
single-digit decline | | •Longer-term recovery due to prolonged aerospace decline •Growth in medical |
| Carlisle Fluid Technologies | | low-double
digit growth | | •Product introductions •Markets signaling bottom and order books strengthening |
| Carlisle Brake & Friction | | low-double
digit growth | | •Product introductions •Markets signaling bottom and order books strengthening |
| Total Carlisle | | mid-single
digit growth | | |
Cash Flows
Our priorities for the use of cash are to invest in growth and performance improvement opportunities for our existing businesses through capital expenditures, pursue strategic acquisitions that meet shareholder return criteria, pay dividends to shareholders and return value to shareholders through share repurchases.
Capital expenditures in 2021 are expected to be between $150 million and $175 million, which primarily includes continued investments in CCM. Planned capital expenditures for 2021 include new product and capacity expansion, business sustaining projects, and cost reduction efforts.
Forward-Looking Statements
This report contains forward‑lookingforward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‑looking1995, including statements regarding the potential or expected impacts of the global COVID-19 pandemic. Forward-looking statements generally use words such as “expect,” “foresee,” “anticipate,” “believe,” “project,” “should,” “estimate,” “will,” “plans”, “forecast”"expect," "foresee," "anticipate," "believe," "project," "should," "estimate," "will," "plans," "intends," "forecast," and similar expressions, and reflect our expectations concerning the future. 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 our future performance may differ materially from current expectations expressed in these forward‑lookingforward-looking statements, due to a variety of factors such as: risks from the global COVID-19 pandemic, including, for example, expectations regarding the impact of COVID-19 on our businesses, including on customer demand, supply chains and distribution systems, production, our ability to maintain appropriate labor levels, our ability to ship products to our customers, our future results, or our full-year financial outlook; 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‑effectivecost-effective basis; our 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 and industry regulations; threats associated with and efforts to combat terrorism; protection and validity of patent and other intellectual property rights; the identification of strategic acquisition targets and our successful integrationcompletion of any transaction and identificationintegration of our strategic acquisitions; the cyclical nature of our businesses; and the outcome of pending and future litigation and governmental proceedings.proceedings; and the other factors discussed in the reports we file with or furnish to the Securities and Exchange Commission ("SEC") from time to time. In addition, such statements could be affected by general industry and market conditions and growth rates, the condition of the financial
and credit markets 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 general market conditions and our future performance. WeAny forward-looking statement speaks only as of the date on which that statement is made, and we undertake no duty to update forward‑looking statements.any forward-looking statement to reflect events or circumstances, including unanticipated events, after the date on which that statement is made, unless otherwise required by law. New factors emerge from time to time and it is not possible for management to predict all of those factors, nor can it assess the impact of each of those factors on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk in the form of changes in interest rates, foreign currency exchange rates and commodity prices for raw materials. We may, from time to time, enter into derivative financial instruments to manage these risks; however, we do not utilize such instruments or contracts for speculative or trading purposes. In the event that we enter into a derivative financial instrument, it is possible that such future dated contracts could no longer serve as a hedge if the projected cash flow does not occur as anticipated at the time of contract initiation.
Interest Rate Risk
We are exposed to interest rate risks as a result of our borrowing and investing activities, which principally includes long‑termlong-term borrowings used to maintain liquidity and to fund our business operations and capital requirements. We may enter into interest rate swaps from time to time to manage our mix of fixed and variable interest rate debt effectively. We may enter into other interest rate derivatives such as treasury locks or zero cost collars to manage forecasted interest rates associated with bond offerings. As of December 31, 20172020, and 2016,2019, there were no interest rate swaps or other derivative instruments in place and, at both dates, all of our long‑termlong-term debt was fixed‑ratefixed-rate and U.S. Dollar denominated. We also have a $1.0 billion revolving credit facility that allows for borrowings at a variable interest rate. We had no outstanding borrowings under this facility as of December 31, 20172020 and 2016.2019. The nature and amount of our long‑termlong-term debt may vary from time to time as a result of business requirements, market conditions and other factors. We consider the risk to our results of operations from changes in market rates of interest to be minimal as suchour interest bearing debt instruments are fixed‑rate.
fixed-rate.
Foreign Currency Exchange Risk
A portion of our operating cash flows are denominated in foreign currencies. As such we are exposed to market risk from changes in foreign currency exchange rates. We are primarily exposed to the exchange rates of currencies including the Canadian Dollar, Chinese Renminbi, Euro, British Pound, Canadian Dollar and Japanese Yen. We continually evaluate our foreign currency exposure based on current market conditions and the locations in which we conduct our business. We manage most of our foreign currency exposure on a consolidated basis, which allows us to net certain exposures and take advantage of natural offsets. In order to mitigate foreign currency risk, we may, from time to time, enter into derivative financial instruments, generally foreign currency forward contracts, to hedge the cash flows related to certain foreign currency denominated sales and purchase transactions expected within one year and the related recognized trade receivable or payable. The gains and losses on these contracts offset changes in the value of the related exposures. It is our policy to enter into foreign currency derivative financial instruments only to the extent considered necessary to meet the objectives set forth above. We generally do not hedge the risk from translation of sales and earningsforeign currency net investments into U.S. Dollars for financial reporting.
We had foreign exchange contracts with maturities less than one year for instruments that are designated and qualify as an accounting cash flow hedge with an aggregate U.S. Dollar equivalent notional value of $22.3$93.5 million and $17.6$108.1 million as of December 31, 20172020 and 2016,2019, respectively. The gross fair value was $(0.2)$5.0 million and $0.9$2.0 million as of December 31, 20172020 and 2016,2019, respectively. The effective portion of changes in the fair value of the contracts is recorded in accumulated other comprehensive loss in the Consolidated Statements of Shareholders’ Equityincome (loss) and is recognized in operating income when the underlying forecasted transaction impacts earnings. We also had foreign exchange contracts with maturities less than one year for instruments that are not designed as a cash flow hedge, but nonetheless are entered into as an economic hedge of certain foreign currency risk with an aggregate U.S. Dollar equivalent notional value of $38.6$65.4 million and $39.3$124.4 million as of December 31, 20172020 and 2016,2019, respectively. The gross fair value was $0.2 million and $(0.3)$0.6 million as of December 31, 20172020 and 2016,2019, respectively. The unrealized gains and losses resulting from these contracts are not significant and are recognized in other non-operating (income) expense, net within the Consolidated Statements of Earnings and Comprehensive Income and partially offset corresponding foreign exchange gains and losses on the underlying items being economically hedged.
The near termnear-term sensitivity of these contracts to changes in foreign currency exchange rates is also minimal as they are scheduled to mature within 12 months. Further, changes in the fair value of these contracts will be offset by changes in the cash flows of the underlying foreign currency denominated sales, purchases, assets and liabilities which the contracts are intended to mitigate (both accounting and economic hedges).
Commodity Price Risk
We continually address the impact of changes in commodity prices on our results of operations and cash flow. Our exposure to changes in commodity prices is principally indirect as we do not directly purchase exchange‑tradedexchange-traded commodities, but rather purchase raw materials that are a result of further downstream processing (as noted in Item 1 of this Form 10‑K)10-K), primarily inputs resulting from processing crude oil, natural gas, iron ore, gold, silver and copper. We generally manage the risk of changes in commodity prices that impact our raw material costs by seeking to (i) offset increased costs through increases in prices, (ii) alter the nature and mix of raw materials used to manufacture our finished goods or (iii) enter into commodity‑linkedcommodity-linked sales or purchase contracts, all to the extent possible based on competitive and other economic factors. We may also from time to time enter into derivative financial instruments to mitigate such impact however, as of December 31, 20172020 and 20162019 we had no derivative financial instruments in place.
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Carlisle Companies Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheetsheets of Carlisle Companies Incorporated (the “Company”"Company") as of December 31, 2017,2020 and 2019, and the related consolidated statementstatements of earnings,income and comprehensive income, shareholders' equity, and cash flows for each of the yearthree years in the period ended December 31, 2017,2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017,2020 and 2019, and the results of its operations and its cash flows for each of the yearthree years in the period ended December 31, 2017,2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2020, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 16, 2018,11, 2021, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 16, 2018
We have served as the Company’s auditor since 2017.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The shareholders and the Board of Directors of Carlisle Companies Incorporated
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Carlisle Companies Incorporated (the “Company”) as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated February 16, 2018, expressed an unqualified opinion on those financial statements.
As described in Management's Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Accella Holdings LLC., Drexel Metals, Inc., Arbo Holdings Limited and SJ Holdings, Inc. (collectively the “Excluded Acquisitions”), which were acquired on November 1, 2017, July 3, 2017, January 31, 2017 and January 9, 2017, respectively, and whose financial statements constitute 22.2% of total assets and 4.7% of net sales of the consolidated financial statement amounts as of and for the year ended December 31, 2017. Accordingly, our audit did not include the internal control over financial reporting of the Excluded Acquisitions.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill – CFT and CBF Reporting Units –Refer to Notes 1 and 12 to the financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using the income approach utilizing the discounted cash flow method and market approach utilizing the public company market multiple method. The determination of the fair value using the discounted cash flow method requires management to make significant estimates and assumptions related to forecasts of future revenues and earnings before interest, taxes, depreciation, and amortization (EBITDA) margins, and discount rates. The determination of the fair value using the market approach requires management to make significant assumptions related to market revenue multiples and EBITDA multiples from within a comparable industry group. The fair values of the CFT and CBF reporting units exceeded their carrying values and, therefore, no impairment was recognized.
Given the significant judgments management makes to estimate the fair value of the CFT and CBF reporting units, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenues and operating unit EBITDA margins, selection of the discount rates, and the
selection of multiples applied to revenue and EBITDA required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues and operating unit EBITDA margins (“forecasts”), the selection of discount rates, and the selection of comparable market revenue and EBITDA multiples for the CFT and CBF reporting units included the following procedures:
•We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of CFT and CBF, such as controls related to management’s forecasts and the selection of discount rates and comparable market revenue and EBITDA multiples.
•We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical forecasts.
•We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results of the Company and its competitors, (2) internal communications to management, and (3) forecasted information included in industry reports of the Company and companies in its peer group.
•With the assistance of our fair value specialists, we evaluated the discount rates, including testing the underlying source information and the mathematical accuracy of the calculations, and developing a range of independent estimates and comparing those to the discount rates selected by management.
•With the assistance of our fair value specialists, we evaluated the revenue and EBITDA multiples, including testing the underlying source information and mathematical accuracy of the calculations, and evaluating the appropriateness of the Company’s selection of companies in its industry comparable groups.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 11, 2021
We have served as the Company’s auditor since 2017.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Carlisle Companies Incorporated
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Carlisle Companies Incorporated (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated February 11, 2021, expressed an unqualified opinion on those financial statements.
As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Motion Tech Automation, LLC (“MTA”) which was acquired on July 22, 2020 and whose financial statements constitute less than 1% of total assets and net sales of the consolidated financial statement amounts as of and for the year ended December 31, 2020. Accordingly, our audit did not include the internal control over financial reporting of MTA.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 16, 201811, 2021
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheet of Carlisle Companies Incorporated as of December 31, 2016, and the related consolidated statements of earnings and comprehensive income, shareholders' equity, and cash flows for each of the two years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial position of Carlisle Companies Incorporated at December 31, 2016, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Phoenix, Arizona
February 13, 2017,
except for Note 2, as to which the date isContents
February 16, 2018
Carlisle Companies Incorporated
Consolidated Statements of EarningsIncome and Comprehensive Income
| | | | | | | | | | | Years Ended December 31, |
| | | For the Years Ended December 31, | |
| (in millions except per share amounts) | | 2017 | | 2016 | | 2015 | |
| Net sales | | $ | 4,089.9 |
| | $ | 3,675.4 |
| | $ | 3,543.2 |
| |
| (in millions, except per share amounts) | | (in millions, except per share amounts) | | 2020 | | 2019 | | 2018 |
| Revenues | | Revenues | | $ | 4,245.2 | | | $ | 4,811.6 | | | $ | 4,479.5 | |
| | | | | | | | |
| Cost of goods sold | | 2,941.9 |
| | 2,518.1 |
| | 2,536.5 |
| Cost of goods sold | | 3,062.8 | | | 3,439.9 | | | 3,304.8 | |
| Selling and administrative expenses | | 589.4 |
| | 532.0 |
| | 461.9 |
| Selling and administrative expenses | | 641.5 | | | 667.1 | | | 625.4 | |
| Research and development expenses | | 54.9 |
| | 48.1 |
| | 42.8 |
| Research and development expenses | | 54.8 | | | 60.9 | | | 55.1 | |
| Impairment charges | | — |
| | 141.5 |
| | — |
| |
| Other operating (income) expense, net | | (2.0 | ) | | (2.4 | ) | | (1.3 | ) | |
| | Other operating expense (income), net | | Other operating expense (income), net | | 2.5 | | | (10.5) | | | (14.8) | |
| Operating income | | 505.7 |
| | 438.1 |
| | 503.3 |
| Operating income | | 483.6 | | | 654.2 | | | 509.0 | |
| Interest expense, net | | 33.5 |
| | 30.6 |
| | 34.0 |
| Interest expense, net | | 76.6 | | | 66.1 | | | 64.7 | |
| Other non-operating expense (income), net | | 4.0 |
| | (3.0 | ) | | 1.4 |
| |
| Loss on extinguishment of debt | | Loss on extinguishment of debt | | 8.8 | | | 0 | | | 0 | |
| Interest income | | Interest income | | (4.8) | | | (7.9) | | | (11.2) | |
| Other non-operating expense, net | | Other non-operating expense, net | | 1.7 | | | 0.7 | | | 9.6 | |
| Income from continuing operations before income taxes | | 468.2 |
| | 410.5 |
| | 467.9 |
| Income from continuing operations before income taxes | | 401.3 | | | 595.3 | | | 445.9 | |
| Provision for income taxes | | 102.9 |
| | 159.7 |
| | 148.3 |
| Provision for income taxes | | 77.1 | | | 121.6 | | | 87.3 | |
| Income from continuing operations | | 365.3 |
| | 250.8 |
| | 319.6 |
| Income from continuing operations | | 324.2 | | | 473.7 | | | 358.6 | |
| | | | | | | | |
| Discontinued operations: | | |
| | |
| | |
| Discontinued operations: | | | | | | |
| Income (loss) before income taxes | | 0.3 |
| | (1.1 | ) | | 0.1 |
| |
| Income tax provision (benefit) | | 0.1 |
| | (0.4 | ) | | — |
| |
| Income (loss) from discontinued operations | | 0.2 |
| | (0.7 | ) | | 0.1 |
| |
| (Loss) income before income taxes | | (Loss) income before income taxes | | (5.4) | | | (1.8) | | | 300.1 | |
| (Benefit from) provision for income taxes | | (Benefit from) provision for income taxes | | (1.3) | | | (0.9) | | | 47.6 | |
| (Loss) income from discontinued operations | | (Loss) income from discontinued operations | | (4.1) | | | (0.9) | | | 252.5 | |
| Net income | | $ | 365.5 |
| | $ | 250.1 |
| | $ | 319.7 |
| Net income | | $ | 320.1 | | | $ | 472.8 | | | $ | 611.1 | |
| | | | | | | | | | | | | |
| Basic earnings per share attributable to common shares: | | |
| | |
| | |
| Basic earnings per share attributable to common shares: | | | | | | |
| Income from continuing operations | | $ | 5.75 |
| | $ | 3.87 |
| | $ | 4.89 |
| Income from continuing operations | | $ | 5.93 | | | $ | 8.30 | | | $ | 5.92 | |
| Loss from discontinued operations | | — |
| | (0.01 | ) | | — |
| |
| (Loss) income from discontinued operations | | (Loss) income from discontinued operations | | (0.08) | | | (0.02) | | | 4.17 | |
| Basic earnings per share | | $ | 5.75 |
| | $ | 3.86 |
| | $ | 4.89 |
| Basic earnings per share | | $ | 5.85 | | | $ | 8.28 | | | $ | 10.09 | |
| | | | | | | | | | | | | |
| Diluted earnings per share attributable to common shares: | | |
| | |
| | |
| Diluted earnings per share attributable to common shares: | | | | | | |
| Income from continuing operations | | $ | 5.71 |
| | $ | 3.83 |
| | $ | 4.82 |
| Income from continuing operations | | $ | 5.88 | | | $ | 8.21 | | | $ | 5.88 | |
| Loss from discontinued operations | | — |
| | (0.01 | ) | | — |
| |
| (Loss) income from discontinued operations | | (Loss) income from discontinued operations | | (0.08) | | | (0.02) | | | 4.14 | |
| Diluted earnings per share | | $ | 5.71 |
| | $ | 3.82 |
| | $ | 4.82 |
| Diluted earnings per share | | $ | 5.80 | | | $ | 8.19 | | | $ | 10.02 | |
| | | | | | | | | | | | | |
| Average shares outstanding (in thousands): | | | | | | | |
| Average shares outstanding: | | Average shares outstanding: | |
| Basic | | 63,073 |
| | 64,226 |
| | 64,844 |
| Basic | | 54.5 | | | 56.9 | | | 60.4 | |
| Diluted | | 63,551 |
| | 64,883 |
| | 65,804 |
| Diluted | | 55.0 | | | 57.5 | | | 60.8 | |
| | | | | | | | | | | | | |
| Dividends declared and paid per share | | 1.44 |
| | $ | 1.30 |
| | $ | 1.10 |
| |
| | | | | | | | |
| Comprehensive Income: | | |
| | |
| | |
| |
| Comprehensive income: | | Comprehensive income: | | | | | | |
| Net income | | $ | 365.5 |
| | $ | 250.1 |
| | $ | 319.7 |
| Net income | | $ | 320.1 | | | $ | 472.8 | | | $ | 611.1 | |
| Other comprehensive income (loss): | | |
| | |
| | |
| Other comprehensive income (loss): | | | | | | |
| Change in foreign currency translation | | 46.6 |
| | (36.7 | ) | | (29.6 | ) | |
| Change in accrued post-retirement benefit liability, net of tax | | (5.2 | ) | | 1.0 |
| | 4.6 |
| |
| Foreign currency gains (losses) | | Foreign currency gains (losses) | | 39.4 | | | (2.1) | | | (30.3) | |
| Amortization of unrecognized net periodic benefit costs, net of tax | | Amortization of unrecognized net periodic benefit costs, net of tax | | 0 | | | (2.0) | | | (0.4) | |
| Other, net of tax | | (4.9 | ) | | 0.6 |
| | (0.3 | ) | Other, net of tax | | (12.3) | | | 2.1 | | | 0.8 | |
| Other comprehensive income (loss) | | 36.5 |
| | (35.1 | ) | | (25.3 | ) | Other comprehensive income (loss) | | 27.1 | | | (2.0) | | | (29.9) | |
| Comprehensive income | | $ | 402.0 |
| | $ | 215.0 |
| | $ | 294.4 |
| Comprehensive income | | $ | 347.2 | | | $ | 470.8 | | | $ | 581.2 | |
See accompanying Notes to Consolidated Financial Statements
Carlisle Companies Incorporated
Consolidated Balance Sheets
|
| | | | | | | | |
| (in millions except share and per share amounts) | | December 31, 2017 | | December 31, 2016 |
| ASSETS | | |
| | |
|
| Current assets: | | |
| | |
|
| Cash and cash equivalents | | $ | 379.6 |
| | $ | 385.3 |
|
| Receivables, net | | 657.7 |
| | 511.6 |
|
| Inventories | | 507.9 |
| | 377.0 |
|
| Prepaid expenses | | 25.1 |
| | 24.3 |
|
| Other current assets | | 74.3 |
| | 57.0 |
|
| Total current assets | | 1,644.6 |
| | 1,355.2 |
|
| | | | | |
| Property, plant and equipment, net | | 780.9 |
| | 632.2 |
|
| | | | | |
| Other assets: | | |
| | |
|
| Goodwill, net | | 1,601.8 |
| | 1,081.2 |
|
| Other intangible assets, net | | 1,234.4 |
| | 872.2 |
|
| Other long-term assets | | 38.1 |
| | 25.0 |
|
| Total other assets | | 2,874.3 |
| | 1,978.4 |
|
| Total assets | | $ | 5,299.8 |
| | $ | 3,965.8 |
|
| | | | | |
| LIABILITIES AND EQUITY | | |
| | |
|
| Current liabilities: | | |
| | |
|
| Accounts payable | | 352.4 |
| | 243.6 |
|
| Accrued expenses | | 278.4 |
| | 246.7 |
|
| Deferred revenue | | 27.8 |
| | 23.2 |
|
| Total current liabilities | | 658.6 |
| | 513.5 |
|
| | | | | |
| Long-term liabilities: | | |
| | |
|
| Long-term debt | | 1,586.2 |
| | 596.4 |
|
| Deferred revenue | | 188.0 |
| | 172.0 |
|
| Other long-term liabilities | | 338.7 |
| | 217.0 |
|
| Total long-term liabilities | | 2,112.9 |
| | 985.4 |
|
| | | | | |
| Commitments and contingencies (see Note 11) | |
|
| |
|
|
| | | | | |
| Shareholders' equity: | | |
| | |
|
| Preferred stock, $1 par value per share (5,000,000 shares authorized and unissued) | | — |
| | — |
|
| Common stock, $1 par value per share (200,000,000 shares authorized; 61,839,734 and 64,257,182 shares outstanding, respectively) | | 78.7 |
| | 78.7 |
|
| Additional paid-in capital | | 353.7 |
| | 335.3 |
|
| Deferred compensation equity | | 10.4 |
| | 10.3 |
|
| Treasury shares, at cost (16,613,193 and 14,178,801 shares, respectively) | | (649.6 | ) | | (382.6 | ) |
| Accumulated other comprehensive loss | | (85.7 | ) | | (122.2 | ) |
| Retained earnings | | 2,820.8 |
| | 2,547.4 |
|
| Total shareholders' equity | | 2,528.3 |
| | 2,466.9 |
|
| Total liabilities and equity | | $ | 5,299.8 |
| | $ | 3,965.8 |
|
| | | | | | | | | | | | | | |
| (in millions, except par values) | | December 31,
2020 | | December 31,
2019 |
| ASSETS | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 902.2 | | | $ | 351.2 | |
| Receivables, net | | 612.7 | | | 682.5 | |
| Inventories, net | | 503.5 | | | 510.6 | |
| Contract assets | | 84.5 | | | 100.5 | |
| Prepaid expenses | | 37.0 | | | 30.5 | |
| Other current assets | | 69.4 | | | 76.7 | |
| | | | |
| Total current assets | | 2,209.3 | | | 1,752.0 | |
| | | | |
| Property, plant and equipment, net | | 774.1 | | | 783.5 | |
| Goodwill, net | | 1,738.2 | | | 1,716.3 | |
| Other intangible assets, net | | 1,034.8 | | | 1,140.6 | |
| Other long-term assets | | 110.0 | | | 103.6 | |
| | | | |
| Total assets | | $ | 5,866.4 | | | $ | 5,496.0 | |
| | | | |
| LIABILITIES AND EQUITY | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 317.6 | | | $ | 327.3 | |
| Accrued and other current liabilities | | 295.0 | | | 294.5 | |
| Contract liabilities | | 32.5 | | | 27.0 | |
| Current portion of debt | | 1.1 | | | 250.2 | |
| | | | |
| Total current liabilities | | 646.2 | | | 899.0 | |
| | | | |
| Long-term liabilities: | | | | |
| Long-term debt, less current portion | | 2,080.2 | | | 1,341.4 | |
| Contract liabilities | | 235.8 | | | 220.4 | |
| Other long-term liabilities | | 366.5 | | | 392.4 | |
| | | | |
| Total long-term liabilities | | 2,682.5 | | | 1,954.2 | |
| | | | |
| Shareholders' equity: | | | | |
| Preferred stock, $1 par value per share (5.0 shares authorized and unissued) | | 0 | | | 0 | |
| Common stock, $1 par value per share 200.0 shares authorized; 52.9 and 55.7 shares outstanding, respectively) | | 78.7 | | | 78.7 | |
| Additional paid-in capital | | 441.7 | | | 416.6 | |
| Treasury shares, at cost (25.5 and 22.7 shares, respectively) | | (1,814.4) | | | (1,449.7) | |
| Accumulated other comprehensive loss | | (97.0) | | | (124.1) | |
| Retained earnings | | 3,928.7 | | | 3,721.3 | |
| Total shareholders' equity | | 2,537.7 | | | 2,642.8 | |
| Total liabilities and equity | | $ | 5,866.4 | | | $ | 5,496.0 | |
See accompanying notesNotes to Consolidated Financial Statements
Carlisle Companies Incorporated
Consolidated Statements of Cash Flows
| | | | | For the Years Ended December 31, | | | Years Ended December 31, |
| (in millions) | | 2017 | | 2016 | | 2015 | (in millions) | | 2020 | | 2019 | | 2018 |
| Operating activities | | | | | | | |
| Operating activities: | | Operating activities: | | | | | | |
| Net income | | $ | 365.5 |
| | $ | 250.1 |
| | $ | 319.7 |
| Net income | | $ | 320.1 | | | $ | 472.8 | | | $ | 611.1 | |
| Reconciliation of net income to cash flows provided by operating activities: | | |
| | |
| | |
| Reconciliation of net income to cash flows provided by operating activities: | | | | | | |
| Depreciation | | 84.9 |
| | 75.1 |
| | 73.5 |
| Depreciation | | 97.4 | | | 88.4 | | | 86.4 | |
| Amortization | | 84.2 |
| | 62.7 |
| | 55.8 |
| Amortization | | 126.8 | | | 117.0 | | | 104.2 | |
| Impairment charges | | — |
| | 141.5 |
| | — |
| |
| Stock-based compensation, net of tax benefit | | 13.2 |
| | (2.6 | ) | | 2.7 |
| |
| Lease expense | | Lease expense | | 28.1 | | | 27.5 | | | 0 | |
| | Stock-based compensation | | Stock-based compensation | | 29.9 | | | 26.1 | | | 23.9 | |
| Loss on extinguishment of debt | | Loss on extinguishment of debt | | 8.8 | | | 0 | | | 0 | |
| Deferred taxes | | (58.5 | ) | | (25.0 | ) | | (15.8 | ) | Deferred taxes | | (27.0) | | | (8.9) | | | (0.8) | |
| | Gain on sale of discontinued operations, net of tax | | Gain on sale of discontinued operations, net of tax | | 0 | | | 0 | | | (250.4) | |
| Other operating activities, net | | 13.9 |
| | (6.0 | ) | | (1.3 | ) | Other operating activities, net | | 21.9 | | | 5.4 | | | (18.8) | |
| Changes in assets and liabilities, excluding effects of acquisitions: | | |
| | |
| | |
| Changes in assets and liabilities, excluding effects of acquisitions: | | | | | | |
| Receivables | | (53.9 | ) | | 0.3 |
| | (11.8 | ) | Receivables | | 78.9 | | | 1.0 | | | (32.6) | |
| Inventories | | (48.5 | ) | | (12.2 | ) | | 23.0 |
| Inventories | | 16.4 | | | (1.9) | | | (29.0) | |
| Contract assets | | Contract assets | | 13.3 | | | (26.7) | | | (21.9) | |
| Prepaid expenses and other assets | | (20.1 | ) | | (9.2 | ) | | 6.7 |
| Prepaid expenses and other assets | | (6.6) | | | (3.6) | | | (2.0) | |
| Accounts payable | | 42.7 |
| | 21.6 |
| | (2.9 | ) | Accounts payable | | (15.2) | | | 16.5 | | | (39.5) | |
| Accrued expenses | | 20.6 |
| | 23.1 |
| | 62.9 |
| |
| Deferred revenues | | 19.3 |
| | 11.7 |
| | 15.5 |
| |
| Accrued and other current liabilities | | Accrued and other current liabilities | | (5.3) | | | 5.2 | | | (99.9) | |
| Contract Liabilities | | Contract Liabilities | | 20.5 | | | 18.5 | | | 11.8 | |
| Other long-term liabilities | | (4.6 | ) | | 0.1 |
| | 1.2 |
| Other long-term liabilities | | (11.3) | | | (34.2) | | | (3.3) | |
| Net cash provided by operating activities | | 458.7 |
| | 531.2 |
| | 529.2 |
| Net cash provided by operating activities | | 696.7 | | | 703.1 | | | 339.2 | |
| | | | | | | | | | | | | |
| Investing activities | | |
| | |
| | |
| |
| Investing activities: | | Investing activities: | | | | | | |
| Capital expenditures | | Capital expenditures | | (95.5) | | | (88.9) | | | (120.7) | |
| Acquisitions, net of cash acquired | | (934.3 | ) | | (185.5 | ) | | (598.9 | ) | Acquisitions, net of cash acquired | | (35.4) | | | (616.4) | | | (19.5) | |
| Capital expenditures | | (159.9 | ) | | (108.8 | ) | | (72.1 | ) | |
| Proceed from sale of discontinued operation | | Proceed from sale of discontinued operation | | 0 | | | 0 | | | 758.0 | |
| Other investing activities, net | | (0.1 | ) | | 0.9 |
| | 0.2 |
| Other investing activities, net | | 8.3 | | | 10.4 | | | 11.4 | |
| Net cash used in investing activities | | (1,094.3 | ) | | (293.4 | ) | | (670.8 | ) | |
| Net cash (used in) provided by investing activities | | Net cash (used in) provided by investing activities | | (122.6) | | | (694.9) | | | 629.2 | |
| | | | | | | | | | | | | |
| Financing activities | | |
| | |
| | |
| |
| Proceeds from revolving credit facility | | 1,189.0 |
| | — |
| | — |
| |
| Financing activities: | | Financing activities: | | | | | | |
| Borrowings from revolving credit facility | | Borrowings from revolving credit facility | | 500.0 | | | 0 | | | 0 | |
| Repayments of revolving credit facility | | (1,189.0 | ) | | — |
| | — |
| Repayments of revolving credit facility | | (500.0) | | | 0 | | | 0 | |
| Proceeds from notes | | 997.2 |
| | — |
| | — |
| Proceeds from notes | | 740.7 | | | 0 | | | 0 | |
| Repayments of notes | | — |
| | (150.0 | ) | | (1.5 | ) | Repayments of notes | | (258.5) | | | 0 | | | 0 | |
| Repurchases of common stock | | (268.4 | ) | | (75.0 | ) | | (137.2 | ) | Repurchases of common stock | | (382.4) | | | (382.1) | | | (459.8) | |
| Dividends paid | | (92.1 | ) | | (84.5 | ) | | (72.3 | ) | Dividends paid | | (112.4) | | | (102.9) | | | (93.5) | |
| Financing costs | | (8.3 | ) | | — |
| | — |
| Financing costs | | (24.2) | | | 0 | | | 0 | |
| Proceeds from exercise of stock options, net | | (1.2 | ) | | 48.4 |
| | 39.4 |
| |
| Proceeds from exercise of stock options | | Proceeds from exercise of stock options | | 21.3 | | | 37.0 | | | 22.7 | |
| Withholding tax paid related to stock-based compensation | | Withholding tax paid related to stock-based compensation | | (8.3) | | | (10.4) | | | (10.1) | |
| Other financing activities, net | | — |
| | — |
| | (1.4 | ) | Other financing activities, net | | (0.9) | | | (2.8) | | | 0 | |
| Net cash provided (used) in financing activities | | 627.2 |
| | (261.1 | ) | | (173.0 | ) | |
| Net cash used in financing activities | | Net cash used in financing activities | | (24.7) | | | (461.2) | | | (540.7) | |
| | | | | | | | |
| Effect of foreign currency exchange rate changes on cash and cash equivalents | | 2.7 |
| | (2.1 | ) | | (5.5 | ) | Effect of foreign currency exchange rate changes on cash and cash equivalents | | 1.6 | | | 0.6 | | | (1.1) | |
| | | | | | | | |
| Change in cash and cash equivalents | | (5.7 | ) | | (25.4 | ) | | (320.1 | ) | Change in cash and cash equivalents | | 551.0 | | | (452.4) | | | 426.6 | |
| Cash and cash equivalents | | |
| | |
| | |
| |
| Beginning of period | | 385.3 |
| | 410.7 |
| | 730.8 |
| |
| End of period | | $ | 379.6 |
| | $ | 385.3 |
| | $ | 410.7 |
| |
| Less: change in cash and cash equivalents of discontinued operations | | Less: change in cash and cash equivalents of discontinued operations | | 0 | | | 0 | | | 1.3 | |
| Cash and cash equivalents at beginning of period | | Cash and cash equivalents at beginning of period | | 351.2 | | | 803.6 | | | 378.3 | |
| Cash and cash equivalents at end of period | | Cash and cash equivalents at end of period | | $ | 902.2 | | | $ | 351.2 | | | $ | 803.6 | |
See accompanying notesNotes to Consolidated Financial Statements
Carlisle Companies Incorporated
Consolidated Statements of Shareholders’ Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | Common Stock Outstanding | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Shares in Treasury | | Total Shareholders' Equity |
| Shares | | Amount | | | | | Shares | | Cost | |
| Balance as of January 1, 2018 | 61.8 | | | $ | 78.7 | | | $ | 364.1 | | | $ | (85.7) | | | $ | 2,820.8 | | | 16.6 | | | $ | (649.6) | | | $ | 2,528.3 | |
| Adoption of accounting standards | — | | | — | | | — | | | (6.5) | | | 13.0 | | | — | | | — | | | 6.5 | |
| Net income | — | | | — | | | — | | | — | | | 611.1 | | | — | | | — | | | 611.1 | |
| Other comprehensive loss, net of tax | — | | | — | | | — | | | (29.9) | | | — | | | — | | | — | | | (29.9) | |
| Dividends - $1.54 per share | — | | | — | | | — | | | — | | | (93.5) | | | — | | | — | | | (93.5) | |
| Repurchases of common stock | (4.4) | | | — | | | — | | | — | | | — | | | 4.4 | | | (467.0) | | | (467.0) | |
Issuances and deferrals, net for stock-based compensation (1) | 0.5 | | | — | | | 27.7 | | | — | | | — | | | (0.5) | | | 14.2 | | | 41.9 | |
| Balance as of December 31, 2018 | 57.9 | | | $ | 78.7 | | | $ | 391.8 | | | $ | (122.1) | | | $ | 3,351.4 | | | 20.5 | | | $ | (1,102.4) | | | $ | 2,597.4 | |
| Net income | — | | | — | | | — | | | — | | | 472.8 | | | — | | | — | | | 472.8 | |
| Other comprehensive loss, net of tax | — | | | — | | | — | | | (2.0) | | | — | | | — | | | — | | | (2.0) | |
| Dividends - $1.80 per share | — | | | — | | | — | | | — | | | (102.9) | | | — | | | — | | | (102.9) | |
| Repurchases of common stock | (2.8) | | | — | | | — | | | — | | | — | | | 2.8 | | | (374.9) | | | (374.9) | |
Issuances and deferrals, net for stock-based compensation (1) | 0.6 | | | — | | | 24.8 | | | — | | | — | | | (0.6) | | | 27.6 | | | 52.4 | |
| Balance as of December 31, 2019 | 55.7 | | | $ | 78.7 | | | $ | 416.6 | | | $ | (124.1) | | | $ | 3,721.3 | | | 22.7 | | | $ | (1,449.7) | | | $ | 2,642.8 | |
| Net income | — | | | — | | | — | | | — | | | 320.1 | | | — | | | — | | | 320.1 | |
| Other comprehensive income, net of tax | — | | | — | | | — | | | 27.1 | | | — | | | — | | | — | | | 27.1 | |
| Dividends - $2.05 per share | — | | | — | | | — | | | — | | | (112.7) | | | — | | | — | | | (112.7) | |
| Repurchases of common stock | (3.1) | | | — | | | — | | | — | | | — | | | 3.1 | | | (382.4) | | | (382.4) | |
Issuances and deferrals, net for stock-based compensation (1) | 0.3 | | | — | | | 25.1 | | | — | | | — | | | (0.3) | | | 17.7 | | | 42.8 | |
| Balance as of December 31, 2020 | 52.9 | | | $ | 78.7 | | | $ | 441.7 | | | $ | (97.0) | | | $ | 3,928.7 | | | 25.5 | | | $ | (1,814.4) | | | $ | 2,537.7 | |
(1)Issuances and deferrals, net for stock-based compensation reflects share activity related to option exercises, net of tax, restricted and performance shares vested, and net issuances and deferrals associated with deferred compensation equity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions except share and per share amounts) | Common Stock Outstanding | | Additional Paid-In Capital | | Deferred Compensation Equity | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Shares in Treasury | | Total Shareholders' Equity |
| Shares | | Amount | | | | | | Shares | | Cost | |
| Balance as of January 1, 2015 | 64,691,059 |
| | $ | 78.7 |
| | $ | 247.8 |
| | $ | 6.0 |
| | $ | (61.8 | ) | | $ | 2,134.4 |
| | 13,723,201 |
| | $ | (200.1 | ) | | $ | 2,205.0 |
|
| Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 319.7 |
| | — |
| | — |
| | 319.7 |
|
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (25.3 | ) | | — |
| | — |
| | — |
| | (25.3 | ) |
| Cash dividends - $1.10 per share | — |
| | — |
| | — |
| | — |
| | — |
| | (72.3 | ) | | — |
| | — |
| | (72.3 | ) |
| Repurchases of common stock | (1,496,411 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | 1,496,411 |
| | (137.2 | ) | | (137.2 | ) |
Issuances and deferrals, net for stock based compensation (1) | 856,952 |
| | — |
| | 45.6 |
| | 2.0 |
| | — |
| | — |
| | (836,371 | ) | | 9.9 |
| | 57.5 |
|
| Balance as of December 31, 2015 | 64,051,600 |
| | $ | 78.7 |
| | $ | 293.4 |
| | $ | 8.0 |
| | $ | (87.1 | ) | | $ | 2,381.8 |
| | 14,383,241 |
| | $ | (327.4 | ) | | $ | 2,347.4 |
|
| Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 250.1 |
| | — |
| | — |
| | 250.1 |
|
| Other comprehensive loss, net of tax | — |
| | — |
| | — |
| | — |
| | (35.1 | ) | | — |
| | — |
| | — |
| | (35.1 | ) |
| Cash dividends - $1.30 per share | — |
| | — |
| | — |
| | — |
| | — |
| | (84.5 | ) | | — |
| | — |
| | (84.5 | ) |
| Repurchases of common stock | (782,057 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | 782,057 |
| | (75.7 | ) | | (75.7 | ) |
Issuances and deferrals, net for stock based compensation (1) | 987,639 |
| | — |
| | 41.9 |
| | 2.3 |
| | — |
| | — |
| | (986,497 | ) | | 20.5 |
| | 64.7 |
|
| Balance as of December 31, 2016 | 64,257,182 |
| | $ | 78.7 |
| | $ | 335.3 |
| | $ | 10.3 |
| | $ | (122.2 | ) | | $ | 2,547.4 |
| | 14,178,801 |
| | $ | (382.6 | ) | | $ | 2,466.9 |
|
| Net income | — |
| | — |
| | — |
| | — |
| | — |
| | 365.5 |
| | — |
| | — |
| | 365.5 |
|
| Other comprehensive income, net of tax | — |
| | — |
| | — |
| | — |
| | 36.5 |
| | — |
| | — |
| | — |
| | 36.5 |
|
| Cash dividends - $1.44 per share | — |
| | — |
| | — |
| | — |
| | — |
| | (92.1 | ) | | — |
| | — |
| | (92.1 | ) |
| Repurchases of common stock | (2,719,538 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | 2,719,538 |
| | (268.4 | ) | | (268.4 | ) |
Issuances and deferrals, net for stock based compensation (1) | 302,090 |
| | — |
| | 18.4 |
| | 0.1 |
| | — |
| | — |
| | (285,146 | ) | | 1.4 |
| | 19.9 |
|
| Balance as of December 31, 2017 | 61,839,734 |
| | $ | 78.7 |
| | $ | 353.7 |
| | $ | 10.4 |
| | $ | (85.7 | ) | | $ | 2,820.8 |
| | 16,613,193 |
| | $ | (649.6 | ) | | $ | 2,528.3 |
|
| |
(1)
| Issuances and deferrals, net for stock based compensation reflects share activity related to option exercises, net of tax, restricted and performance shares vested and net issuances and deferrals associated with deferred compensation equity. |
See accompanying notesNotes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Note 1—1—Summary of Accounting Policies
Nature of Business
Carlisle Companies Incorporated, its wholly owned subsidiaries and their subsidiaries, referred to herein as the “Company” or “Carlisle,” is a global diversified company that designs, manufactures and markets a wide range of products that serve a broad range of markets including commercial roofing, energy, agriculture, mining, construction, aerospace and defense electronics, medical technology, transportation, general industrial, protective coatings, wood and auto refinishing and foodservice and healthcare sanitary maintenance.refinishing. The Company markets its products as a component supplier to original equipment manufacturers, distributors and directly to end-users.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and accounts have been eliminated. During the fourth quarter of 2017, the Company revised (i) the Consolidated Statement of Earnings to include a subtotal of operating income, with non-operating (income) expense reflected as a separate line item below interest expense, net and (ii) its segment measure of profit and loss to operating income (previously earnings before interest and taxes). The Company has reclassified certain prior periodperiods' amounts to conform towith the current period presentation of operating income, including other operating (income) expense, operating incomeon the Consolidated Balance Sheets and other non-operating (income) expense in the Consolidated Statements of EarningsCash Flows to reclassify contract assets from accounts receivable, net to a separately disclosed line item and operating income in Notes 2on the Consolidated Balance Sheets and 19. These changes were madeConsolidated Statement of Shareholders' Equity to better reflectcombine the Company's resultspresentation of operations and to be consistent with the change in the measure of operating performance evaluated by the Chief Operating Decision Maker, the Company's Chief Executive Officer.deferred compensation equity into additional paid-in capital.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“United States” or “U.S.”) 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.
Foreign Currency Matters
Cash EquivalentsThe functional currency of the Company’s subsidiaries outside the United States is the currency of the primary economic environment in which the subsidiary operates. Assets and liabilities of these operations are translated to the U.S. Dollar at the exchange rate in effect at each balance sheet date. 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 and from the remeasurement of monetary assets and liabilities and associated income statement activity of foreign subsidiaries where the functional currency is the U.S. Dollar and the records are maintained in the local currency are included in other non-operating expense, net.
Discontinued Operations
Highly liquid investmentsThe results of operations for the Company's Carlisle FoodService Products ("CFS") segment have been classified as discontinued operations for all periods presented in the Consolidated Statements of Income. Refer to Note 4 for additional information.
Revenue Recognition
Revenue is recognized when obligations under the terms of a contract with a maturitycustomer are satisfied; generally, this occurs with the transfer of three monthscontrol of the Company’s products or less when acquired are considered cash equivalents.
services. Revenue Recognition
Revenues are recognized when persuasive evidenceis measured as the amount of an arrangement exists,total consideration expected to be received in exchange for transferring goods have been shipped (or services have been rendered), theor providing services. Total expected consideration, in certain cases, is estimated at each reporting period, including interim periods, and is subject to change with variability dependent on future events, such as customer takes ownershipbehavior related to future purchase volumes, returns, early payment discounts and assumes risk of loss, collection is probable and the sales price is fixed or determinable.
Provisionsother customer allowances. Estimates for rights of return, discounts and rebates to customers and other adjustments for variable consideration are provided for at the time of sale as a deduction to revenue. Costs relatedrevenue, based on an analysis of historical experience and actual sales data. Changes in these estimates are reflected as an adjustment to standard warrantiesrevenue in the period identified. Sales, value added and other taxes collected concurrently with revenue-producing activities are estimatedexcluded from revenue.
The Company receives payment at the timeinception of salethe contract for separately priced extended service warranties, and recordedrevenue is deferred and recognized on a straight-line basis over the life of the contracts. The term of these warranties ranges from five to 40 years. The weighted average life of the contracts as of December 31, 2020, is approximately 20 years.
The Company recognizes revenue over-time for certain contracts that provide for the manufacture of highly customized products with no alternative use and provide the Company the right to payment for work performed to date, including a componentnormal margin for that effort.
Refer to Note 6 for further information on revenue recognition.
Costs to Obtain a Contract
Costs of costobtaining or fulfilling a contract are recognized as expense as incurred, as the amortization period of goods sold.these costs would be one year or less. These costs generally include sales commissions and are included in selling, general and administrative costs.
Shipping and Handling Costs
Costs incurred to physically transfer product to customer locations are recorded as a component of cost of goods sold. Charges passed on to customers are recorded into net sales.revenues.
Other Non-operating (Income) Expense,
net
Other non-operating (income) expense, net primarily includes foreign currency exchange (gains) losses, indemnification (gains) losses associated with acquired businesses, (income) loss from equity method investments and (gains) losses on sales of a business.
The Company accounts for stock-based compensation under the fair-value method. Accordingly, equity-classified stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as compensation cost over the requisite service period. The requisite service period generally matches the stated vesting period of the award but may be shorter if the employee is retirement-eligible and, under the award’s terms, may fully vest upon retirement from the Company. The Company recognizes compensation cost for awards that have graded vesting features under the graded vesting method, which considers each separately vesting tranche as though they were, in substance, multiple awards.
Additionally, the Company accounts for liability-classified stock-based compensation cost under the fair value method, with the fair value of the award remeasured as of the date of the financial position. The Company recognizes compensation cost over the requisite service period based on the remeasured fair value of the award. The requisite service period generally matches the stated vesting period of the award but may be shorter if the employee is retirement-eligible and, under the award’s terms, may fully vest upon retirement from the Company.
The Company also accounts for forfeitures of stock-based awards as they occur. Refer to Note 7 for additional information regarding stock-based compensation.
Income Taxes
Income taxes are recorded in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740, IncomeTaxes, which includes an estimate of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Cash Equivalents
Highly liquid investments with a maturity of three months or less when acquired are considered cash equivalents.
Receivables and Allowance for Doubtful Accounts
Credit Losses
Receivables are stated at amortized cost net realizable value.of allowance for credit losses. The Company performs ongoing evaluations of its customers’ current creditworthiness, as determined by the review of their credit information to determine if events have occurred subsequent to the recognition of the revenue and the related receivable that provides evidence that such receivable will be realized atin an amount less than that recognized at the time of sale. Estimates of net realizable valuecredit losses are based on historical losses, adjusting for current economic conditions, geographic considerations, and in some cases, evaluating specific customer accounts for risk of loss. The allowance for doubtful accounts was $6.6 million, $4.0 million and $4.7 million as of December 31, 2017, 2016 and 2015, respectively. Changes in economic conditions in specific markets in which the Company operates could have an effect on reserve balances required and on the ability to recognize revenue until cash is collected or collectability is probable.
Changes in the Company's allowance for doubtful accounts for the years ended December 31credit losses by segment follows: |
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Balance as of January 1 | | $ | 4.0 |
| | $ | 4.7 |
| | $ | 4.8 |
|
| Provision charged to expense | | 1.3 |
| | 0.3 |
| | 0.1 |
|
| Amounts acquired | | 2.0 |
| | 0.4 |
| | 1.5 |
|
| Amounts written off, net of recoveries | | (0.7 | ) | | (1.4 | ) | | (1.7 | ) |
| Balance as of December 31 | | $ | 6.6 |
| | $ | 4.0 |
| | $ | 4.7 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Corporate | | Total |
| Balance as of December 31, 2018 | | $ | 2.4 | | | $ | 1.0 | | | $ | 0.5 | | | $ | 1.2 | | | $ | 0 | | | $ | 5.1 | |
| Current period provision | | 0 | | | 0.8 | | | 0.1 | | | 0 | | | 0.5 | | | 1.4 | |
| Amounts acquired | | 0.1 | | | 0 | | | 0.5 | | | 0 | | | 0 | | | 0.6 | |
| Amounts written off | | (0.3) | | | (0.2) | | | 0 | | | 0 | | | 0 | | | (0.5) | |
| Balance as of December 31, 2019 | | $ | 2.2 | | | $ | 1.6 | | | $ | 1.1 | | | $ | 1.2 | | | $ | 0.5 | | | $ | 6.6 | |
| Current period provision | | 0.8 | | | 0.1 | | | 0.1 | | | 0.6 | | | 0 | | | 1.6 | |
| | | | | | | | | | | | |
| Amounts written off | | (0.6) | | | (0.4) | | | (0.4) | | | 0 | | | 0 | | | (1.4) | |
| Balance as of December 31, 2020 | | $ | 2.4 | | | $ | 1.3 | | | $ | 0.8 | | | $ | 1.8 | | | $ | 0.5 | | | $ | 6.8 | |
Inventories
Inventories are valued at lower of cost and net realizable value with cost determined primarily on an average cost basis. Cost of inventories includes direct as well as certain indirect costs associated with the acquisition and production process. These costs include raw materials, direct and indirect labor and manufacturing overhead. Manufacturing overhead includes materials, depreciation and amortization related to property, plant and equipment and other intangible assets used directly and indirectly in the acquisition and production of inventory, and costs related to the Company’s distribution network such as inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other such costs associated with preparing the Company’s products for sale.
Deferred Revenue and Extended Product Warranty
The Company offers extended warranty contracts on sales of certain products; the most significant being those offered on its installed roofing systems within the CCM segment. The term of these warranties range from five to 40 years. All revenue from the sale of these contracts is deferred and amortized on a straight‑line basis over the life of the contracts. The weighted average life of the contracts is approximately 19 years. Current costs of services performed under these contracts are expensed as incurred and included in cost of goods sold. The Company would record a reserve within accrued expenses if the total expected costs of providing services at a product line level exceed unearned revenues. Total expected costs of providing extended product warranty services are actuarially determined using standard quantitative measures based on historical claims experience and management judgment. Refer to Note 1410 for additionalfurther information regarding deferred revenue and extended product warranties.inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at cost including interest costs associated with qualifying capital additions. 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 a straight‑linestraight-line basis over the estimated useful lives of the assets. Depreciation includes the amortization of capital leases. Asset lives are generally 20 to 40 years for buildings, five to 15 years for machinery and equipment and two to 20 years for leasehold improvements. Leasehold improvements are amortized based on the shorter of the underlying lease term or the asset’s estimated useful life. Refer to Note 11 for further information regarding property, plant and equipment.
Valuation of Long‑LivedLong-Lived Assets
Long‑livedLong-lived assets or asset groups, including amortizable intangible assets, are tested for impairment whenever events or circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. The Company groups its long‑livedlong-lived assets classified as held and used at the lowest level for which identifiable cash flows are largely independent of the cash flows from other assets and liabilities for purposes of testing for impairment. The Company’s
asset groupings vary based on the related business in which the long‑livedlong-lived assets are employed and the interrelationship between those long‑livedlong-lived assets in producing net cash flows; for example, multiple manufacturing facilities may work in concert with one another or may work on a stand‑alonestand-alone basis to produce net cash flows. The Company utilizes its long‑livedlong-lived assets in multiple industries and economic environments and its asset groupings reflect these various factors.
The Company monitors the operating and cash flow results of its long‑livedlong-lived assets or asset groups classified as held and used to identify whether events and circumstances indicate the remaining useful lives of those assets should be adjusted or if the carrying value of those assets or asset groups may not be recoverable. Undiscounted estimated future cash flows are compared with the carrying value of the long‑livedlong-lived asset or asset group in the event indicators of impairment are identified. If the undiscounted estimated future cash flows are less than the carrying amount, the Company determines the fair value of the asset or asset group and records an impairment charge in current
earnings to the extent carrying value exceeds fair value. Fair values may be determined based on estimated discounted cash flows by prices for like or similar assets in similar markets or a combination of both.
Long‑livedLong-lived assets or asset groups that are part of a disposal group that meets the criteria to be classified as held for sale are not assessed for impairment, but rather a loss is recorded against the disposal group if fair value, less cost to sell, of the disposal group is less than its carrying value.
Goodwill and Other Intangible Assets
Intangible assets are recognized and recorded at their acquisition date fair values. Intangible assets that are subject to amortization are amortized on a straight-line basis over their useful lives. Definite-lived intangible assets consist primarily of acquired customer relationships, patents and technology, certain trade names and non-compete agreements. The Company determines the useful life of its definite-lived intangible assets based on multiple factors including the size and make-up of the acquired customer base, the expected dissipation of those customers over time, the Company’s own experience in the particular industry, the impact of known trends such as technological obsolescence, product demand or other factors and the period over which expected cash flows are used to measure the fair value of the intangible asset at acquisition. The Company periodically re-assesses the useful lives of its definite-lived intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate.
Intangible assets with indefinite useful lives are not amortized but are tested annually, or more often if impairment indicators are present, for impairment via a one-step process by comparing the fair value of the intangible asset with its carrying value. If the intangible asset’s carrying value exceeds its fair value, an impairment charge is recorded in current earnings for the excess. The Company estimates the fair value of its indefinite-lived intangible assets based on the income approach utilizing the discounted cash flow method. The Company’s annual testing date for indefinite-lived intangible assets is October 1.1st. The Company periodically re-assesses indefinite-lived intangible assets as to whether their useful lives can be determined and, if so, begins amortizing any applicable intangible asset.
Goodwill is not amortized but is tested annually, or more often if impairment indicators are present, for impairment at a reporting unit level. The Company’s annual testing date for goodwill is October 1.1st. The Company has five4 reporting units, that align with its reportable segments.
Refer to Note 1012 for additional information regarding goodwill and other intangible assets.
Extended Product Warranty Reserves
Lease Arrangements
The Company is a party to various lease arrangements that include scheduled rent increases, rent holidays or may provide for contingent rentals or incentive payments to be made tooffers extended warranty contracts on sales of certain products; the Companymost significant being those offered on its installed roofing systems within the CCM segment. Current costs of services performed under these contracts are expensed as part of the terms of the lease. Scheduled rent increasesincurred and rent holidays are included in cost of goods sold. The Company would record a reserve within accrued expenses if the determinationtotal expected costs of minimum lease payments when assessing lease classificationproviding services at a product line level exceed unamortized deferred revenues. Total expected costs of providing extended product warranty services are actuarially determined using standard quantitative measures based on historical claims experience and along with any lease incentives, are included in rent expense on a straight‑line basis over the lease term. Scheduled rent increases that are dependent upon a change in an index or rate such as the consumer price index or prime rate are included in the determination of rental expense at the time the rate or index changes. Contingent rentals are excluded from the determination of minimum lease payments when assessing lease classificationmanagement judgment. Refer to Notes 6 and are included in the determination of rent expense when the event that will require additional rents is considered probable. See Note 1113 for additional information regarding rent expense.
Contingenciesdeferred revenue and Insurance Recoveries
The Company is exposed to losses related to various potential claims related to its employee obligations and other matters in the normal course of business, including commercial, employee or regulatory litigation. The Company records a liability related to such potential claims, both those reported to the Company and incurred but not yet reported, when probable and reasonably estimable. With respect to workers’ compensation obligations, the Company utilizes actuarial models to estimate the ultimate total cost of such claims, primarily based on historical loss experience and expectations about future costs of providing workers’ compensation benefits.
extended product warranties.
The Company maintains occurrence‑based insurance contracts related to certain contingent losses primarily workers’ compensation, medical and dental, general liability, property and product liability claims up to applicable retention limits as part of its risk management strategy. The Company records a recovery under these insurance contracts when such recovery is deemed probable. Refer to Note 11Pension for additional information regarding contingencies and insurance recoveries.
Pension
The Company maintains defined benefit pension plans primarily for certain domestic employees. The annual net periodic benefit cost and projected benefit obligations related to these plans are determined on an actuarial basis annually on December 31, unless a remeasurement event occurs in an interim period. This determination requires assumptions to be made concerning general economic conditions (particularly interest rates), expected return on plan assets, increases to compensation levels and mortality rate trends. Changes in the assumptions to reflect actual experience can result in a change in the net periodic benefit cost and projected benefit obligations.
The defined benefit pension plans’ assets are measured at fair value annually on December 31, unless a remeasurement event occurs in an interim period. The Company uses the market related valuation method to determine the value of plan assets for purposes of determining the expected return on plan assets component of net periodic benefit cost. The market related valuation method recognizes the change of the fair value of the plan assets over five years. If actual experience differs from these long-term assumptions, the difference is recorded as an actuarial gain (loss) and amortized into earnings over a period of time based on the average future service period,
which may cause the expense related to providing these benefits to increase or decrease. Refer to Note 1315 for additional information regarding these plans and the associated plan assets.
Income Taxes
Income taxes are recorded in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740, IncomeLeases Taxes, which includes
The Company determines if an estimatearrangement is a lease at inception by evaluating if the asset is explicitly or implicitly identified or distinct, if the Company will receive substantially all of taxes payablethe economic benefit or refundableif the lessor has an economic benefit and the ability to substitute the asset. Operating leases are included in other long-term assets, accrued and other current liabilities, and other long-term liabilities.
Right-of-use assets ("ROU assets") represent the Company's right to use an underlying asset for the current yearlease term and deferred taxlease liabilities and assets forrepresent its obligation to make lease payments arising from the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Deferred taxlease. Operating lease ROU assets and liabilities reflectare recognized at commencement date based on the net tax effectspresent value of temporary differences betweenfixed and known lease payments over the carrying amountslease term. Variable payments are not included in the ROU asset or lease liability and can vary from period to period based on the use of assetsan asset during the period or the Company's proportionate share of common costs. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and liabilitiesexcludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for financial reporting purposeslease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and lease expense for these leases is recognized on a straight-line basis over the amounts usedlease term.
The Company has lease agreements with lease components and non-lease components. The Company has elected to apply the practical expedient to account for income tax purposes.these components as a single lease component, for all classes of underlying assets. Refer to Note 617 for additional information regarding income taxes including Staff Accounting Bulletin 118 (“SAB 118”) impacts.leases.
Contingencies and Insurance Recoveries
Stock‑Based Compensation
The Company accounts for stock‑based compensation underis exposed to losses related to various potential claims related to its employee obligations and other matters in the fair‑value method. Accordingly, equity classified stock‑based compensation cost is measured at the grant date, based on the fair valuenormal course of the award and is recognized as expense over the requisite service period, which generally matches the stated vesting period of the award but may also be shorter if thebusiness, including commercial, employee, is retirement‑eligible and under the award’s terms may fully vest upon retirement from the Company.environmental or other regulatory litigation. The Company recognizesrecords a liability related to such potential claims, both those reported to the Company and incurred but not yet reported, when probable and reasonably estimable. The Company's policy is to expense for awards that have graded vesting featureslegal defense costs related to such matters as incurred.
The Company maintains occurrence-based insurance contracts related to certain contingent losses primarily workers’ compensation, medical and dental, general liability, property and product liability claims up to applicable retention limits as part of its risk management strategy. The Company records a recovery under the graded vesting method, which considers each separately vesting tranche as though they were,these insurance contracts when such recovery is deemed probable. Insurance proceeds in substance, multiple awards.excess of realized losses are gain contingencies and not recorded until realized. Refer to Note 517 for additional information regarding stock-based compensation.
Foreign Currency Matters
The functional currency of the Company’s subsidiaries outside the United States is the currency of the primary economic environment in which the subsidiary operates. Assetscontingencies and liabilities of these operations are translated to the U.S. Dollar at the exchange rate in effect at each balance sheet date. 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 and from the remeasurement of monetary assets and liabilities and associated income statement activity of foreign subsidiaries where the functional currency is the U.S. Dollar and the records are maintained in the local currency are included in other non-operating (income) expense, net.
Derivative Instruments and Hedge Accounting
From time-to-time,time to time, the Company may enter into derivative financial instruments to hedge various risks to cash flows or the fair value of recognized assets and liabilities, including those arising from fluctuations in foreign currencies, interest rates and commodities. The Company recognizes these instruments at the time they are entered into and measures them at fair value. For instruments that are designated and qualify as cash flow hedges under U.S. GAAP, the changes in fair value period-to-period, less any ineffective portion,excluded components, are classified in accumulated other comprehensive income, in the Consolidated Statements of Shareholders’ Equity, until the underlying transaction being hedged impacts earnings. Any ineffectiveness isThe excluded components are recorded in current period income. For those instruments that are designated and qualify as fair value hedges under U.S. GAAP, the changes in fair value period-to-period of both the derivative instrument and underlying hedged item are recognized currently in earnings. For those instruments not designated or do not qualify as hedges under U.S. GAAP, the changes in fair value period-to-period are classified immediately in current period income, within other non-operating (income) expense, net within the Consolidated Statements of Earnings and Comprehensive Income.net. Refer to Note 18 for a description of the Company's current derivative instrument and hedging activities.
New Accounting Standards Adopted
Effective January 1, 2017,In June 2016, the Company adoptedFinancial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2016-09,2016-13, Compensation – Stock CompensationMeasurement of Credit Losses on Financial Instruments (Topic 718): Improvements to Employee Share-Based Payment Accounting326) (“("ASU 2016-09”2016-13"). The ASU simplifies several aspects of the which adds to accounting for stock compensation, including:
principles generally accepted in the U.S. an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under ASU 2016-13, an entity recognizes, as an allowance, its estimate of lifetime expected credit losses, which the FASB believes will result in more timely recognition of such losses.
The Company adopted ASU 2016-13 and all related amendments effective January 1, 2020, using the modified retrospective method, which allows for a prospective basis, all income tax effects of awards are recognized incumulative-effect adjustment to the statement of operations as tax expense or benefit at the time that the awards vest or are settled, which resulted in a $7.9 million discrete income tax benefit for 2017.
On a prospective basis, all income tax effects of awards are recognized in the statement of cash flows as only operating activities.
The cash paid to a tax authority when shares are withheld to satisfy the tax withholding obligation are classified as financing activities on the statement of cash flows on a retrospective basis. The adoption had no impact on cash flows presentation as the Company has historically presented these amounts as financing activities.
Companies are required to elect the method of accounting for forfeitures of share-based payments, either by recognizing such forfeitures as they occur or estimating the number of awards expected to be forfeited and adjusting such estimate when it is deemed likely to change. The Company elected to account for forfeitures as they occur and the adoption did not have a material impact on stock-based compensation expense.
Effective January 1, 2017, the Company adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating step 2 of the goodwill impairment test, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount. Instead, entities should measure an impairment charge for the excess of carrying amount over the fair value of the respective reporting unit. The elimination of step 2 will reduce the complexity and cost of the subsequent measurement of goodwill.
Effective October 1, 2017, the Company adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”), which expands an entity's ability to hedge nonfinancial risk and financial risk components and reduces complexity in fair value hedges of interest rate risk. ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line item as the hedged item. The guidance also ceases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. ASU 2017-12 requires the use of a modified retrospective approach for cash flow and net investment hedges that existposition as of the beginning of the first reporting period in which the guidance is effective. Periods prior to the adoption date of adoption.that are presented for comparative purposes are not adjusted. The adoption of this standard did not have a significantrequire an implementation adjustment and did not materially impact on the Company's earnings,consolidated net income or cash flows or financial position.flows.
New Accounting Standards Issued But Not Yet Adopted
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single, comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance issued by the FASB, including industry specific guidance. ASU 2014-09 provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts with customers to provide goods and services. The standard allows for either full retrospective or modified retrospective adoption. The company will adopt the standard, using the modified retrospective approach, for interim and annual periods beginning on January 1, 2018. ASU 2014-09 also requires entities to disclose both quantitative and qualitative information to enable users of the financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
To date, the Company's assessment has included (i) utilizing questionnaires to assist with identifying its revenue streams, (ii) performing sample contract analysis and (iii) assessing the identified differences in recognition and measurement that may result from adopting ASU 2014-09. The Company has made conclusions regarding separately-priced extended warranty contracts and variable consideration for four of its segments. The Company continues its analysis for the CIT segment with respect to (i) contracts with multi-year prospective volume rebates and (ii) whether certain contracts’ revenues will be recognized over time or at a point in time, but does not anticipate significant changes in its current revenue recognition pattern. Based on the evaluation to date, the Company does not anticipate the adoption of this standard will have a material impact on reported current net sales. However, given the Company's acquisition strategy within diverse business segments, including assessing the revenues from the recently acquired Accella Holdings LLC, there may be additional revenue streams acquired during the year of adoption that require evaluation to determine the impact on net sales. Further, the Company anticipates providing incremental disaggregated revenue disclosures, including net sales by end market in its Condensed Consolidated Financial Statements, beginning in the first quarter of 2018. The Company continues to evaluate the impact of a cumulative catch-up adjustment, if any, and does not expect it to be significant to the Consolidated Balance Sheet.
In February 2016, the FASB issued ASU 2016-02, Leases(Topic 842)(“ASU 2016-02”) which requires lessees to recognize a lease liability for the obligation to make lease payments, measured at the present value on a discounted basis, and a right-of-use (“ROU”) asset for the right to use the underlying asset for the duration of the lease term, measured at the lease liability amount adjusted for lease prepayments, lease incentives received and initial direct costs. The lease liability and ROU asset are recognized in the balance sheet at the commencement of the lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. Classification will be based on criteria that are largely similar to those applied in current lease accounting. ASU 2016-02 is effective for the Company beginning January 1, 2019, and requires the use of a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period presented in the financial statements. The Company plans to adopt on January 1, 2019. The Company has not yet determined the impact of adopting the standard on the Consolidated Financial Statements.
In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating income, if such measure is presented. The other components of net benefit cost, including amortization of prior service cost/credit and settlement and curtailment effects, are to be included in non-operating income. ASU 2017-07 also stipulates that only the service cost component of net benefit cost is eligible for capitalization into inventory or other tangible assets. The effective date for adoption of this guidance is January 1, 2018, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on the Consolidated Financial Statements, however does not believe this update will have a significant impact.
Note 2—2—Segment Information
The Company has organizedreports its results of operations into five primarythrough the following 4 segments, based on the products it sells, each of which representrepresents a reportable segment as follows:
Carlisle Construction Materials (“CCM”)—the principal products of this segment are insulation materials, rubber (EPDM), thermoplastic polyolefin (TPO)produces a complete range of building envelope products for commercial, industrial and polyvinyl chloride (PVC)residential buildings, including single-ply roofing, membranes used predominantly on non-residential low-sloped roofs, related roofing accessories, including flashings, fasteners, sealing tapes and coatings and waterproofing products. CCM also manufactures and distributes energy-efficient rigid foam insulation panels for substantially all roofing applications. The markets served primarily include new construction, re-roofinginsulations, spray polyurethane foam technologies, architectural metal, heating, ventilation and maintenanceair conditioning ("HVAC") hardware and sealants, below-grade waterproofing, and air and vapor barrier systems focused on the weatherproofing and thermal performance of low-sloped roofs, water containment, HVAC sealants and coatings and waterproofing. In addition, CCM offers a broad range of specialty polyurethane products and solutions across a broad diversity of markets and applications.the building envelope.
Carlisle Interconnect Technologies (“CIT”)—the principal products of this segment areproduces high-performance wire cable, connectors, contacts and cable, assembliesincluding optical fiber, for the transfer of powercommercial aerospace, military and data primarily for the aerospace,defense electronics, medical defense electronics,device, industrial, and test and measurement equipment and select industrial markets.
Carlisle FoodService Products (“CFS”)—On February 1, 2018, the Company announced the signing of a definitive agreement to sell CFS (refer to Note 20). The principal products of this segment include commercial and institutional foodservice permanentware, table coverings, cookware, catering equipment, fiberglass and composite material CIT's product portfolio also includes sensors, connectors, contacts, cable assemblies, complex harnesses, racks, trays, and dishes, industrial brooms, brushes, mopsinstallation kits, in addition to engineering and rotary brushes for commercial and non‑commercial foodservice operators and sanitary maintenance professionals.certification services.
Carlisle Fluid Technologies (“CFT”)—the principal products of this segment are industrialproduces highly engineered liquid, powder, sealants and powderadhesives finishing equipment and integrated system solutions for spraying, pumping, mixing, metering and curing of a variety of coatings used in the transportation,automotive manufacture, general industrial, protective coating, wood, specialty and autoautomotive refinishing markets.
Carlisle Brake & Friction (“CBF”)—the principal products of this segment include high-performance brakesproduces high performance and friction material andsevere duty brake, clutch and transmission friction materialapplications for the construction, agriculture, mining, aircraft, on-highway aerospace and motor sportsother industrial markets.
As discussed in Note 1, during the fourth quarter of 2017, the Company revised its segment measure of profit and loss to operating income (previously earnings before interest and taxes).The Company has reclassified certain prior period amounts to conform to the current period presentation of operating income.
Summary financial information by reportable business segment for the years ended December 31 follows:
|
| | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Net Sales | | Operating Income | | Assets | | Depreciation and Amortization | | Capital Spending |
| 2017 | | | | | | | | | | |
| Carlisle Construction Materials | | $ | 2,336.2 |
| | $ | 421.9 |
| | $ | 1,898.6 |
| | $ | 41.9 |
| | $ | 61.0 |
|
| Carlisle Interconnect Technologies | | 815.3 |
| | 89.5 |
| | 1,473.0 |
| | 55.8 |
| | 53.2 |
|
| Carlisle FoodService Products | | 339.1 |
| | 39.5 |
| | 469.3 |
| | 22.8 |
| | 8.9 |
|
| Carlisle Fluid Technologies | | 281.4 |
| | 16.1 |
| | 678.7 |
| | 23.0 |
| | 8.8 |
|
| Carlisle Brake & Friction | | 317.9 |
| | 2.6 |
| | 433.8 |
| | 23.0 |
| | 26.8 |
|
| Segment Total | | 4,089.9 |
| | 569.6 |
| | 4,953.4 |
| | 166.5 |
| | 158.7 |
|
Corporate and unallocated (1) | | — |
| | (63.9 | ) | | 346.4 |
| | 2.6 |
| | 1.2 |
|
| Total | | $ | 4,089.9 |
| | $ | 505.7 |
| | $ | 5,299.8 |
| | $ | 169.1 |
| | $ | 159.9 |
|
| 2016 | | |
| | |
| | |
| | |
| | |
|
| Carlisle Construction Materials | | 2,052.6 |
| | 430.3 |
| | 891.6 |
| | 35.6 |
| | 24.9 |
|
| Carlisle Interconnect Technologies | | 834.6 |
| | 143.9 |
| | 1,446.3 |
| | 48.8 |
| | 43.9 |
|
| Carlisle FoodService Products | | 250.2 |
| | 31.5 |
| | 206.1 |
| | 9.1 |
| | 8.2 |
|
| Carlisle Fluid Technologies | | 269.4 |
| | 31.2 |
| | 640.9 |
| | 20.7 |
| | 11.7 |
|
| Carlisle Brake & Friction | | 268.6 |
| | (135.9 | ) | (2 | ) | 389.9 |
| | 20.8 |
| | 9.4 |
|
| Segment Total | | 3,675.4 |
| | 501.0 |
| | 3,574.8 |
| | 135.0 |
| | 98.1 |
|
Corporate and unallocated (1) | | — |
| | (62.9 | ) | | 391.0 |
| | 2.8 |
| | 10.7 |
|
| Total | | $ | 3,675.4 |
| | $ | 438.1 |
| | $ | 3,965.8 |
| | $ | 137.8 |
| | $ | 108.8 |
|
| 2015 | | |
| | |
| | |
| | |
| | |
|
| Carlisle Construction Materials | | $ | 2,002.6 |
| | $ | 351.1 |
| | $ | 899.2 |
| | $ | 37.3 |
| | $ | 21.0 |
|
| Carlisle Interconnect Technologies | | 784.6 |
| | 143.0 |
| | 1,264.0 |
| | 44.3 |
| | 31.6 |
|
| Carlisle FoodService Products | | 242.6 |
| | 27.3 |
| | 199.0 |
| | 9.7 |
| | 6.3 |
|
| Carlisle Fluid Technologies | | 203.2 |
| | 20.9 |
| | 659.5 |
| | 15.0 |
| | 1.9 |
|
| Carlisle Brake & Friction | | 310.2 |
| | 17.4 |
| | 553.0 |
| | 21.4 |
| | 11.1 |
|
| Segment Total | | 3,543.2 |
| | 559.7 |
| | 3,574.7 |
| | 127.7 |
| | 71.9 |
|
Corporate and unallocated (1) | | — |
| | (56.4 | ) | | 376.2 |
| | 1.6 |
| | 0.2 |
|
| Total | | $ | 3,543.2 |
| | $ | 503.3 |
| | $ | 3,950.9 |
| | $ | 129.3 |
| | $ | 72.1 |
|
| |
(1)
| Corporate operating income includes other unallocated costs, primarily general corporate expenses. Corporate assets consist primarily of cash and cash equivalents, deferred taxes and other invested assets. |
| |
(2)
| Includes impairment charges of $141.5 million. Refer to for further discussion. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Revenues | | Operating Income (Loss) | | Assets | | Depreciation
and
Amortization | | Capital
Expenditures |
| 2020 | | | | | | | | | | |
| Carlisle Construction Materials | | $ | 2,995.6 | | | $ | 581.6 | | | $ | 2,045.3 | | | $ | 98.0 | | | $ | 52.0 | |
| Carlisle Interconnect Technologies | | 731.6 | | | (2.1) | | | 1,740.9 | | | 77.5 | | | 14.5 | |
| Carlisle Fluid Technologies | | 242.7 | | | 5.3 | | | 679.6 | | | 23.4 | | | 4.7 | |
| Carlisle Brake & Friction | | 275.3 | | | (3.7) | | | 419.8 | | | 21.5 | | | 10.2 | |
| Segment Total | | 4,245.2 | | | 581.1 | | | 4,885.6 | | | 220.4 | | | 81.4 | |
Corporate and unallocated (1) | | 0 | | | (97.5) | | | 980.8 | | | 3.8 | | | 14.1 | |
| | | | | | | | | | |
| Total | | $ | 4,245.2 | | | $ | 483.6 | | | $ | 5,866.4 | | | $ | 224.2 | | | $ | 95.5 | |
| 2019 | | | | | | | | | | |
| Carlisle Construction Materials | | $ | 3,233.3 | | | $ | 576.0 | | | $ | 2,097.8 | | | $ | 93.9 | | | $ | 30.1 | |
| Carlisle Interconnect Technologies | | 972.9 | | | 131.6 | | | 1,880.4 | | | 63.0 | | | 23.6 | |
| Carlisle Fluid Technologies | | 278.4 | | | 24.0 | | | 707.5 | | | 24.1 | | | 3.5 | |
| Carlisle Brake & Friction | | 327.0 | | | 21.3 | |
| 441.3 | | | 21.7 | | | 19.1 | |
| Segment Total | | 4,811.6 | | | 752.9 | | | 5,127.0 | | | 202.7 | | | 76.3 | |
Corporate and unallocated (1) | | 0 | | | (98.7) | | | 369.0 | | | 2.7 | | | 12.6 | |
| | | | | | | | | | |
| Total | | $ | 4,811.6 | | | $ | 654.2 | | | $ | 5,496.0 | | | $ | 205.4 | | | $ | 88.9 | |
| 2018 | | | | | | | | | | |
| Carlisle Construction Materials | | $ | 2,880.3 | | | $ | 435.4 | | | $ | 1,870.7 | | | $ | 77.9 | | | $ | 50.0 | |
| Carlisle Interconnect Technologies | | 933.8 | | | 117.3 | | | 1,446.4 | | | 58.3 | | | 27.2 | |
| Carlisle Fluid Technologies | | 291.6 | | | 37.1 | | | 678.0 | | | 22.9 | | | 11.5 | |
| Carlisle Brake & Friction | | 373.8 | | | (0.8) | | | 446.6 | | | 23.5 | | | 22.4 | |
| Segment Total | | 4,479.5 | | | 589.0 | | | 4,441.7 | | | 182.6 | | | 111.1 | |
Corporate and unallocated (1) | | 0 | | | (80.0) | | | 807.5 | | | 2.9 | | | 1.5 | |
| Discontinued operations | | — | | | — | | | 0 | | | 5.1 | | | 8.1 | |
| Total | | $ | 4,479.5 | | | $ | 509.0 | | | $ | 5,249.2 | | | $ | 190.6 | | | $ | 120.7 | |
(1)Corporate operating loss includes other unallocated costs, primarily general corporate expenses. Corporate assets consist primarily of cash and cash equivalents, deferred taxes and other invested assets.
Geographic Area Information—Net sales are based on the country to which the product was delivered. Net sales by region for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| United States | | $ | 3,162.2 |
| | $ | 2,835.7 |
| | $ | 2,659.4 |
|
| International: | | |
| | | | |
| Europe | | 411.3 |
| | 381.8 |
| | 384.4 |
|
| Asia | | 272.2 |
| | 241.9 |
| | 225.5 |
|
| Canada | | 90.9 |
| | 77.2 |
| | 114.9 |
|
| Mexico and Latin America | | 79.3 |
| | 76.1 |
| | 81.6 |
|
| Middle East and Africa | | 43.4 |
| | 42.6 |
| | 55.7 |
|
| Other | | 30.6 |
| | 20.1 |
| | 21.7 |
|
| Net sales | | $ | 4,089.9 |
| | $ | 3,675.4 |
| | $ | 3,543.2 |
|
Long‑livedLong-lived assets, excluding deferred tax assets and intangible assets, by region as of December 31 follows:
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| United States | | $ | 551.0 | | | $ | 571.8 | |
| International: | | | | |
| Europe | | 127.3 | | | 117.1 | |
| Asia | | 41.9 | | | 44.7 | |
| Mexico | | 29.9 | | | 31.3 | |
| United Kingdom | | 28.0 | | | 28.1 | |
| Other | | 0.2 | | | 0.2 | |
| Total long-lived assets | | $ | 778.3 | | | $ | 793.2 | |
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| United States | | $ | 618.1 |
| | $ | 495.5 |
|
| International: | | |
| | |
|
| Europe | | 83.4 |
| | 48.4 |
|
| Asia | | 46.6 |
| | 38.3 |
|
| Mexico and Latin America | | 37.0 |
| | 28.4 |
|
| United Kingdom | | 27.2 |
| | 21.3 |
|
| Other | | 0.5 |
| | 0.3 |
|
| Total long-lived assets | | $ | 812.8 |
| | $ | 632.2 |
|
A summary of revenues based on the country to which the product was delivered and reconciliation of disaggregated revenue by segment follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| United States | | $ | 2,677.5 | | | $ | 540.9 | | | $ | 109.4 | | | $ | 102.5 | | | $ | 3,430.3 | |
| International: | | | | | | | | | | |
| Europe | | 201.4 | | | 65.3 | | | 46.3 | | | 82.0 | | | 395.0 | |
| Asia | | 17.8 | | | 69.9 | | | 74.9 | | | 66.2 | | | 228.8 | |
| Canada | | 77.7 | | | 3.4 | | | 5.2 | | | 3.3 | | | 89.6 | |
| Mexico | | 4.3 | | | 33.7 | | | 4.6 | | | 8.7 | | | 51.3 | |
| Middle East and Africa | | 11.7 | | | 15.0 | | | 1.6 | | | 1.0 | | | 29.3 | |
| Other | | 5.2 | | | 3.4 | | | 0.7 | | | 11.6 | | | 20.9 | |
| Total international | | 318.1 | | | 190.7 | | | 133.3 | | | 172.8 | | | 814.9 | |
| Total revenues | | $ | 2,995.6 | | | $ | 731.6 | | | $ | 242.7 | | | $ | 275.3 | | | $ | 4,245.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| United States | | $ | 2,895.5 | | | $ | 699.5 | | | $ | 124.1 | | | $ | 128.0 | | | $ | 3,847.1 | |
| International: | | | | | | | | | | |
| Europe | | 204.2 | | | 71.7 | | | 54.8 | | | 97.6 | | | 428.3 | |
| Asia | | 19.7 | | | 107.9 | | | 87.9 | | | 72.8 | | | 288.3 | |
| Canada | | 89.7 | | | 5.5 | | | 6.2 | | | 3.3 | | | 104.7 | |
| Mexico | | 3.0 | | | 53.0 | | | 2.7 | | | 11.3 | | | 70.0 | |
| Middle East and Africa | | 13.1 | | | 23.0 | | | 1.9 | | | 1.4 | | | 39.4 | |
| Other | | 8.1 | | | 12.3 | | | 0.8 | | | 12.6 | | | 33.8 | |
| Total international | | 337.8 | | | 273.4 | | | 154.3 | | | 199.0 | | | 964.5 | |
| Total revenues | | $ | 3,233.3 | | | $ | 972.9 | | | $ | 278.4 | | | $ | 327.0 | | | $ | 4,811.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| United States | | $ | 2,552.6 | | | $ | 634.0 | | | $ | 116.9 | | | $ | 157.8 | | | $ | 3,461.3 | |
| International: | | | | | | | | | | |
| Europe | | 186.2 | | | 89.7 | | | 58.6 | | | 109.0 | | | 443.5 | |
| Asia | | 16.4 | | | 114.0 | | | 100.1 | | | 76.0 | | | 306.5 | |
| Canada | | 97.9 | | | 4.8 | | | 6.5 | | | 2.9 | | | 112.1 | |
| Mexico | | 4.1 | | | 48.2 | | | 5.4 | | | 14.3 | | | 72.0 | |
| Middle East and Africa | | 15.2 | | | 27.7 | | | 2.5 | | | 1.4 | | | 46.8 | |
| Other | | 7.9 | | | 15.4 | | | 1.6 | | | 12.4 | | | 37.3 | |
| Total international | | 327.7 | | | 299.8 | | | 174.7 | | | 216.0 | | | 1,018.2 | |
| Total revenues | | $ | 2,880.3 | | | $ | 933.8 | | | $ | 291.6 | | | $ | 373.8 | | | $ | 4,479.5 | |
Customer Information
—Net sales to
Revenues from Beacon Roofing Supply, Inc. accounted for approximately 10%11.2%, 11.0% and 11.8% of the Company’s consolidated net salesrevenues during the yearyears ended December 31, 2015.2020, 2019 and 2018, respectively. Additionally, revenues from ABC Supply Co. accounted for approximately 11.4% and 10.5% of the Company's consolidated revenues during the years ended December 31, 2020 and 2019, respectively. Sales to this customerboth of these customers originate in the CCM segment. No customerNaN other customers accounted for 10%10.0% or more of the Company’s total net salesrevenues for the years ended December 31, 20172020, 2019 and 2016.2018.
Note 3—Acquisitions
2020 Acquisitions
Motion Tech Automation, LLC
On July 22, 2020, the Company acquired 100% of the equity of Motion Tech Automation, LLC ("MTA") for consideration of $33.3 million, including $0.3 million of cash acquired and post-closing adjustments, which were finalized in the third quarter of 2020. The acquired products and services include sensors, manufacturing services, distribution services and engineering services to packaging and label, life sciences, semiconductor, fluid handling, and test and measurement customers.
For the period from July 22, 2020 to December 31, 2020, the related product lines contributed revenues of $9.9 million and an operating loss of $0.5 million to the Company's consolidated results. The results of operations of the acquired business are reported within the CIT and CFT segments.
Consideration of $16.6 million has been preliminarily allocated to goodwill, $4.3 million to definite-lived intangible assets, $4.3 million to inventory, $2.8 million to accounts receivable and $1.3 million to accounts payable. In accordance with the purchase agreement, Carlisle is indemnified for up to $1.6 million, and recorded an indemnification asset of $1.5 million in other long-term assets relating to the indemnification for pre-acquisition debt and tax withholdings liabilities. The preliminary fair value and weighted average useful lives of the acquired definite-lived intangible assets are as follows:
| | | | | | | | | | | | | | |
| (in millions) | | Fair Value | | Weighted Average Useful Life
(in years) |
| Technologies | | $ | 2.3 | | | 9 |
| Customer relationships | | 1.0 | | | 9 |
| Trade names | | 1.0 | | | 5 |
| Total | | $ | 4.3 | | | |
All of the $16.6 million preliminary value allocated to goodwill is deductible for tax purposes. Goodwill of $11.0 million, $2.8 million and $2.8 million has been preliminarily assigned to the CCM, CFT and CIT reporting units, respectively, which aligns with the reportable segments.
2019 Acquisitions
Providien, LLC
On November 20, 2019, the Company completed its acquisition of Providien, LLC ("Providien"), for consideration of $331.3 million, including $3.4 million of cash acquired and post-closing adjustments, which were finalized in the first quarter of 2020. The product lines acquired include thermoforming, medical device contract manufacturing, precision machining and metals, and medical injection molding for the global medical device market.
For the period from November 20, 2019 to December 31, 2019, the related product lines contributed revenues of $11.3 million and operating income of $0.1 million to the Company's consolidated results. The results of operations of the acquired business are reported as part of the CIT segment.
The following table summarizes the consideration transferred to acquire Providien and the allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using
the acquisition method of accounting which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values with the remainder allocated to goodwill.
| | | | | | | | | | | | | | | | | | | | |
| | Preliminary
Allocation | | Measurement
Period
Adjustments | | Final
Allocation |
| (in millions) | | As of 11/20/2019 | | | As of 11/20/2020 |
| Total cash consideration transferred | | $ | 332.1 | | | $ | (0.8) | | | $ | 331.3 | |
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
| Cash and cash equivalents | | 3.4 | | | — | | | 3.4 | |
| Receivables, net | | 9.8 | | | — | | | 9.8 | |
| Inventories, net | | 2.7 | | | (0.3) | | | 2.4 | |
| Contract assets | | 29.1 | | | (4.5) | | | 24.6 | |
| Prepaid expenses and other current assets | | 2.3 | | | (0.9) | | | 1.4 | |
| Property, plant and equipment | | 12.9 | | | — | | | 12.9 | |
| Definite-lived intangible assets | | 135.4 | | | (2.7) | | | 132.7 | |
| Other long-term assets | | 7.1 | | | (0.3) | | | 6.8 | |
| Accounts payable | | (6.0) | | | 0.2 | | | (5.8) | |
| Income tax payable | | (0.7) | | | 0.8 | | | 0.1 | |
| Accrued and other current liabilities | | (7.0) | | | — | | | (7.0) | |
| Other long-term liabilities | | (8.1) | | | 1.1 | | | (7.0) | |
| Deferred income taxes | | (27.1) | | | 8.1 | | | (19.0) | |
| Total identifiable net assets | | 153.8 | | | 1.5 | | | 155.3 | |
| Goodwill | | $ | 178.3 | | | $ | (2.3) | | | $ | 176.0 | |
The goodwill recognized in the acquisition of Providien reflects market participant synergies attributable to significant raw material purchase synergies with CIT, other administrative synergies, the value of the assembled workforce to Carlisle and opportunities for product line expansions. The Company acquired $9.8 million of gross contractual accounts receivable, of which less than $0.1 million was not expected to be collected at the date of acquisition. All of the goodwill has been assigned to the CIT reporting unit, which aligns with the CIT reportable segment. Goodwill totaled $176.0 million, of which $67.5 million is deductible for tax purposes. The fair values and weighted average useful lives of the acquired definite-lived intangible assets are as follows:
| | | | | | | | | | | | | | |
| (in millions) | | Fair Value | | Weighted Average Useful Life
(in years) |
| Customer relationships | | $ | 108.7 | | | 14 |
| Technologies | | 19.5 | | | 7 |
| Trade names | | 4.4 | | | 2 |
| Total | | $ | 132.6 | | | |
The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $19.0 million.
Petersen Aluminum Corporation
On January 11, 2019, the Company acquired 100% of the equity of Petersen Aluminum Corporation ("Petersen"), for consideration of $207.2 million, including $5.2 million of cash acquired and post-closing adjustments, which were finalized in the first quarter of 2019. The products acquired include architectural metal roof panels, steel and aluminum flat sheets and coils, wall panels, perimeter roof edge systems and related accessories for commercial, residential, institutional, industrial and agricultural markets.
For the period from January 11, 2019 to December 31, 2019, the related product lines contributed revenues of $176.2 million and operating income of $9.8 million to the Company's consolidated results. The results of operations of the acquired business are reported as part of the CCM segment.
The following table summarizes the consideration transferred to acquire Petersen and the allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the
2017 Acquisitionsacquisition method of accounting, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values with the remainder allocated to goodwill.
| | | | | | | | | | | | | | | | | | | | |
| | Preliminary
Allocation | | Measurement
Period
Adjustments | | Final
Allocation |
| (in millions) | | As of 1/11/2019 | | | As of 1/11/2020 |
| Total cash consideration transferred | | $ | 207.2 | | | $ | — | | | $ | 207.2 | |
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
| Cash and cash equivalents | | 5.2 | | | — | | | 5.2 | |
| Receivables, net | | 11.5 | | | — | | | 11.5 | |
| Inventories, net | | 39.5 | | | (0.3) | | | 39.2 | |
| Prepaid expenses and other current assets | | 2.1 | | | — | | | 2.1 | |
| Property, plant and equipment | | 17.8 | | | — | | | 17.8 | |
| Definite-lived intangible assets | | 109.3 | | | 0.8 | | | 110.1 | |
| Other long-term assets | | 9.5 | | | — | | | 9.5 | |
| Accounts payable | | (5.9) | | | — | | | (5.9) | |
| Income tax payable | | 1.7 | | | — | | | 1.7 | |
| Accrued and other current liabilities | | (8.7) | | | — | | | (8.7) | |
| Other long-term liabilities | | (12.4) | | | (0.1) | | | (12.5) | |
| Deferred income taxes | | (25.4) | | | (0.2) | | | (25.6) | |
| Total identifiable net assets | | 144.2 | | | 0.2 | | | 144.4 | |
| Goodwill | | $ | 63.0 | | | $ | (0.2) | | | $ | 62.8 | |
The goodwill recognized in the acquisition of Petersen reflects market participant synergies attributable to significant raw material purchase synergies with CCM, other administrative synergies and the assembled workforce to Carlisle, in addition to opportunities for product line expansions. The Company acquired $11.6 million of gross contractual accounts receivable, of which $0.1 million was not expected to be collected at the date of acquisition. All of the goodwill has been assigned to the CCM reporting unit, which aligns with the CCM reportable segment, and NaN of the goodwill is deductible for tax purposes. The $110.1 million value allocated to definite-lived intangible assets consists of $79.7 million of customer relationships with a useful life of 11 years, $27.9 million of trade names with a useful life of 17 years and various acquired technologies of $2.5 million with a useful life of 10 years. In accordance with the purchase agreement, Carlisle is indemnified for up to $5.2 million, and recorded an indemnification asset of $5.2 million in other long-term assets relating to the indemnification for pre-acquisition income tax liabilities. During 2020 the Company released $3.0 million of the indemnification asset related to escrow expirations. The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $25.6 million.
MicroConnex Corporation
On April 1, 2019, the Company acquired 100% of the equity of MicroConnex Corporation ("MicroConnex") for cash consideration of $46.2 million, including $0.8 million of cash acquired and post-closing adjustments, which were finalized in the third quarter of 2019. The acquired product lines include highly engineered microminiature flex circuits and sensors for the medical and test and measurement markets.
For the period from April 1, 2019 to December 31, 2019, the related product lines contributed revenues of $10.2 million and operating loss of $0.8 million to the Company's consolidated results. The results of operations of the acquired business are reported within the CIT segment.
Consideration of $15.2 million has been allocated to goodwill, $27.4 million to definite-lived intangible assets, $0.9 million to inventory, $3.4 million to accounts receivable, $0.6 million to accounts payable and $7.0 million to deferred income taxes. Definite-lived intangible assets consist of customer relationships with a useful life of 12 years, trade names with a useful life of 17 years and acquired technologies with a useful life of five years. NaN of the $15.2 million allocated to goodwill is deductible for tax purposes. All of the goodwill has been assigned to the CIT reporting unit, which aligns with the reportable segment.
Prior Acquisition Matters
Accella Holdings LLCPrior Acquisition Matters
On November 1, 2017, the Company acquired 100% of the equity of Accella Holdings LLC, the parent company to Accella Performance Materials Inc. (collectively “Accella”), a specialty polyurethane platform, from Accella Performance Materials LLC, a subsidiary of Arsenal Capital Partners, for total consideration of $670.7 million, subject to a cash, working capital and indebtedness settlement, which the Company expects to finalize in the first quarter of 2018. Accella offers a wide range of polyurethane products and solutions across a broad diversity of markets and applications. The Company funded the acquisition with borrowings from the Revolving Credit Facility (refer to Note 12 for subsequent refinancing transactions).
Accella contributed net sales of $64.0 million and an operating loss of $9.0 million for the period from November 1, 2017, to December 31, 2017. The operating loss for the period from November 1, 2017, to December 31, 2017, includes $5.5 million of incremental cost of goods sold related to measuring inventory at fair value, $2.0 million, $1.8 million and $0.8 million of amortization expense of customer relationships, acquired technology and trade names, respectively and $1.1 million of acquisition-related costs related primarily to professional fees. The results of operations of the acquired business are reported as part of the CCM segment.
The Accella amounts included in the pro forma financial information below are based on Accella’s historical results and therefore may not be indicative of the actual results if owned by Carlisle. The pro forma adjustments represent management’s best estimates based on information available at the time the pro forma information was prepared and may differ from the adjustments that may actually have been required. Accordingly, pro forma information should not be relied upon as being indicative of the historical results that would have been realized had the acquisition occurred as of the date indicated or that may be achieved in the future.
The unaudited combined pro forma financial information presented below includes net sales and income from continuing operations, net of tax, of the Company as if the business combination had occurred on January 1, 2016, based on the purchase price allocation presented below:
|
| | | | | | | | |
| | | Unaudited Pro Forma |
| | | Twelve Months Ended December 31, |
| (in millions) | | 2017 | | 2016 |
| Net sales | | $ | 4,439.4 |
| | $ | 4,029.8 |
|
| Income from continuing operations | | 351.8 |
| | 235.2 |
|
The pro forma financial information reflects adjustments to Accella's historical financial information to apply the Company's accounting policies and to reflect the additional depreciation and amortization related to the preliminary fair value adjustments of the acquired net assets of $10.8 million in 2017 and $8.5 million in 2016, together with the
associated tax effects. Also, the pro forma financial information reflects costs of goods sold related to the fair valuation of inventory and acquisition-related costs described above as if they occurred in 2016.
The following table summarizes the consideration transferred to acquire Accella and the preliminary allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values with the remainder allocated to goodwill. The fair values are preliminary and subject to change pending receipt of the final valuation for all acquired assets and liabilities.
|
| | | | |
| | | Preliminary Allocation |
| (in millions) | | As of 11/1/2017 |
| Total cash consideration transferred | | $ | 670.7 |
|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | |
| Cash and cash equivalents | | $ | 16.5 |
|
| Receivables, net | | 66.8 |
|
| Inventories | | 48.5 |
|
| Prepaid expenses and other current assets | | 0.9 |
|
| Property, plant and equipment | | 59.6 |
|
| Definite-lived intangible assets | | 240.0 |
|
| Other long-term assets | | 15.6 |
|
| Accounts payable | | (45.5 | ) |
| Income tax payable | | 2.0 |
|
| Accrued expenses | | (23.2 | ) |
| Other long-term liabilities | | (15.6 | ) |
| Deferred income taxes | | (83.5 | ) |
| Total identifiable net assets | | 282.1 |
|
| Goodwill | | $ | 388.6 |
|
The goodwill recognized in the acquisition of Accella is attributable to its significant supply chain efficiencies and other administrative opportunities and the strategic value of the business to Carlisle, in addition to opportunities for product line expansions. The Company acquired $68.5 million of gross contractual accounts receivable, of which $1.7 million was not expected to be collected at the date of acquisition. Goodwill of $38.5 million is tax deductible, primarily in the United States. All of the goodwill has been preliminarily assigned to the CCM reporting unit which aligns with the CCM reportable segment. The $240.0 million value allocated to definite-lived intangible assets consists of $146.0 million of customer relationships with useful lives ranging from 9 to 12 years, various acquired technologies of $66.0 million with useful lives ranging from 3 to 14 years and trade names of $28.0 million with useful lives ranging from 4 to 14 years. In accordance with the purchase agreement, Carlisle is indemnified for up to $25.0 million, and recorded an indemnification asset of $15.6 million in other long-term assets relating to the indemnification for a pre-acquisition income tax liability. The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $83.5 million. See Note 6 for further information regarding tax uncertainties acquired in the Accella acquisition.
Excluding Accella, proforma results of operations for the 2017 acquisitions have not been presented because the effect of these acquisitions was not material to the Company's financial condition or results of operations for any of the periods presented.
Drexel Metals
On July 3, 2017, the Company acquired 100% of the equity of Drexel Metals, Inc., (“Drexel Metals”) for total consideration of $55.8 million. Drexel Metals is a leading provider of architectural standing seam metal roofing systems for commercial, institutional and residential applications.
For the period from July 3, 2017, to December 31, 2017, Drexel Metals contributed net sales of $26.8 million and an operating loss of $0.2 million to the Company's consolidated results. The results of operations of the acquired business are reported within the CCM segment.
Consideration has been preliminarily allocated to goodwill of $26.9 million, $19.0 million to definite-lived intangible assets, $10.4 million to indefinite-lived intangible assets, $8.8 million to inventory, $5.3 million to accounts receivable, $5.8 million to accounts payable and $10.8 million to deferred income and other taxes payable. Definite-lived intangible assets consist of customer relationships with an estimated useful life of nine years. Of the $26.9 million of goodwill, none is deductible for tax purposes. All of the goodwill was assigned to the CCM reporting unit, which aligns with the reportable segment.
Arbo
On January 31, 2017, the Company acquired 100% of the equity of Arbo Holdings Limited (“Arbo”) for total consideration of GBP 9.1 million or $11.5 million, including the estimated fair value of contingent consideration of GBP 2.0 million or $2.5 million and a working capital settlement, which was finalized in the second quarter of 2017. Arbo is a provider of sealants, coatings and membrane systems used for waterproofing and sealing buildings and other structures.
For the period from January 31, 2017, to December 31, 2017, Arbo contributed net sales of $14.0 million and operating income of $0.3 million to the Company's consolidated results. The results of operations of the acquired business are reported within the CCM segment.
Consideration has been allocated to goodwill of $4.7 million, $2.2 million to definite-lived intangible assets, $2.1 million to inventory, $1.6 million to indefinite-lived intangibles, $1.5 million to accounts receivable, $1.4 million to accounts payable and $1.4 million to deferred income and other taxes payable. Definite-lived intangible assets consist of customer relationships with an estimated useful life of 15 years. Of the $4.7 million of goodwill, $1.3 million is deductible for tax purposes. All of the goodwill was assigned to the CCM reporting unit, which aligns with the reportable segment.
San Jamar
On January 9, 2017, the Company acquired 100% of the equity of SJ Holdings, Inc. (“San Jamar”) for total consideration of $217.2 million. San Jamar is a provider of universal dispensing systems and food safety products for foodservice and hygiene applications. San Jamar complements the operating performance at CFS by adding new products, opportunities to expand the Company's presence in complementary sales channels and a history of profitable growth.
For the period from January 9, 2017, to December 31, 2017, San Jamar contributed net sales of $86.3 million and operating income of $5.9 million to the Company's consolidated results. The results of operations of the acquired business are reported within the CFS segment.
The following table summarizes the consideration transferred to acquire San Jamar and the preliminary allocation and measurement period adjustments to arrive at the final allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values, with the remainder allocated to goodwill.
|
| | | | | | | | | | | | |
| | | Preliminary
Allocation | | Measurement
Period
Adjustments | | Final Allocation |
| (in millions) | | As of 1/9/2017 | | | As of 12/31/2017 |
| Total consideration transferred | | $ | 217.2 |
| | $ | — |
| | $ | 217.2 |
|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
|
| Cash and cash equivalents | | $ | 3.5 |
| | $ | — |
| | $ | 3.5 |
|
| Receivables | | 9.1 |
| | — |
| | 9.1 |
|
| Inventories | | 13.1 |
| | 0.4 |
| | 13.5 |
|
| Prepaid expenses and other current assets | | 2.3 |
| | 0.2 |
| | 2.5 |
|
| Property, plant and equipment | | 4.2 |
| | — |
| | 4.2 |
|
| Definite-lived intangible assets | | 135.1 |
| | (0.2 | ) | | 134.9 |
|
| Indefinite-lived intangible assets | | 23.6 |
| | — |
| | 23.6 |
|
| Other long-term assets | | 3.2 |
| | — |
| | 3.2 |
|
| Accounts payable | | (7.0 | ) | | (0.1 | ) | | (7.1 | ) |
| Income tax payable | | (0.5 | ) | | — |
| | (0.5 | ) |
| Accrued expenses | | (4.3 | ) | | (0.7 | ) | | (5.0 | ) |
| Other long-term liabilities | | (4.8 | ) | | 0.3 |
| | (4.5 | ) |
| Deferred income taxes | | (47.2 | ) | | (2.4 | ) | | (49.6 | ) |
| Total identifiable net assets | | 130.3 |
| | (2.5 | ) | | 127.8 |
|
| Goodwill | | $ | 86.9 |
| | $ | 2.5 |
| | $ | 89.4 |
|
The valuation of property, plant and equipment, intangible assets and income tax obligations is final as of December 31, 2017. The goodwill recognized in the acquisition of San Jamar is attributable to its experienced workforce, expected operational improvements through implementation of the Carlisle Operating System ("COS"), opportunities for product line expansions in addition to supply chain efficiencies and other administrative opportunities and the significant strategic value of the business to Carlisle. Of the $89.4 million of goodwill, $5.2 million is deductible for tax purposes. All of the goodwill was assigned to the CFS reporting unit, which aligns with the reportable segment. The $134.9 million value allocated to definite-lived intangible assets consists of $97.8 million of customer relationships with an estimated useful life of 13 years, various acquired technologies of $36.4 million with useful lives ranging from seven to 10 years and a non-compete agreement of $0.7 million with an estimated useful life of two years. Indefinite-lived intangible assets consist of acquired trade names.
As a result of the acquisition, the Company recognized approximately $4.5 million of pre-acquisition tax liabilities, with a corresponding indemnification asset of $3.6 million, as the seller has indemnified Carlisle for certain of these liabilities. The indemnification asset will be subsequently measured and recognized on the same basis as the corresponding liability. The related seller indemnification asset will expire in stages through the third quarter of 2021 unless claims are made against the seller prior to that date.
2016 Acquisitions
Proforma results of operations for the 2016 acquisitions have not been presented because the effect of these acquisitions was not material to the Company's financial condition or results of operations for any of the periods presented.
Star Aviation
On October 3, 2016, the Company acquired 100% of the equity of Star Aviation, Inc. (“Star Aviation”), for total consideration of $82.7 million. Star Aviation is a provider of design and engineering services, testing and certification work and manufactured products for in-flight connectivity applications on commercial, business and military aircraft.
The following table summarizes the consideration transferred to acquire Star Aviation and the preliminary allocation and measurement period adjustments to arrive at the final allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values, with the remainder allocated to goodwill.
|
| | | | | | | | | | | | |
| | | Preliminary
Allocation | | Measurement
Period
Adjustments | | Final Allocation |
| (in millions) | | As of 10/3/2016 | | | As of 9/30/2017 |
| Total consideration transferred | | $ | 82.7 |
| | $ | — |
| | $ | 82.7 |
|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
| Cash and cash equivalents | | $ | 0.3 |
| | $ | — |
| | $ | 0.3 |
|
| Receivables | | 5.9 |
| | (0.1 | ) | | 5.8 |
|
| Inventories | | 3.1 |
| | (0.2 | ) | | 2.9 |
|
| Prepaid expenses and other current assets | | 0.1 |
| | — |
| | 0.1 |
|
| Property, plant and equipment | | 3.3 |
| | (0.3 | ) | | 3.0 |
|
| Definite-lived intangible assets | | 29.0 |
| | — |
| | 29.0 |
|
| Accounts payable | | (1.3 | ) | | 0.2 |
| | (1.1 | ) |
| Accrued expenses | | (0.8 | ) | | 0.1 |
| | (0.7 | ) |
| Total identifiable net assets | | 39.6 |
| | (0.3 | ) | | 39.3 |
|
| Goodwill | | $ | 43.1 |
| | $ | 0.3 |
| | $ | 43.4 |
|
The valuation of property, plant and equipment and intangible assets is final as of September 30, 2017. The goodwill recognized in the acquisition of Star Aviation is attributable to its experienced workforce, expected operational improvements through implementation of the COS, opportunities for product line expansions in addition to supply chain efficiencies and other administrative opportunities and the significant strategic value of the business to Carlisle. Goodwill of $43.4 million is deductible for tax purposes in the U.S. All of the goodwill was assigned to the CIT reporting unit which aligns with the reportable segment. The $29.0 million value allocated to definite-lived intangible assets consists of $23.9 million of customer relationships with useful lives ranging from five to 10 years, various acquired technologies of $4.7 million with useful a useful life of six years and a non-compete agreement of $0.4 million with a useful life of five years.
Micro-Coax
On June 10, 2016, the Company acquired 100% of the equity of Micro-Coax, Inc. and Kroll Technologies, LLC, (collectively “Micro-Coax”) for total consideration of $96.6 million. The acquired business is a provider of high-performance, high frequency coaxial wire and cable and cable assemblies to the defense, satellite, test and measurement and other industrial markets.
The following table summarizes the consideration transferred to acquire Micro-Coax and the preliminary allocation and measurement period adjustments to arrive at the final allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values, with the remainder allocated to goodwill.
|
| | | | | | | | | | | | |
| | | Preliminary Allocation | | Measurement Period Adjustments | | Final Allocation |
| (in millions) | | As of 6/10/2016 | | | As of 6/30/2017 |
| Total consideration transferred | | $ | 97.3 |
| | $ | (0.7 | ) | | $ | 96.6 |
|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
| Cash and cash equivalents | | $ | 1.5 |
| | $ | — |
| | $ | 1.5 |
|
| Receivables | | 6.3 |
| | — |
| | 6.3 |
|
| Inventories | | 8.6 |
| | — |
| | 8.6 |
|
| Prepaid expenses and other current assets | | 0.4 |
| | (0.1 | ) | | 0.3 |
|
| Property, plant and equipment | | 30.0 |
| | (14.0 | ) | | 16.0 |
|
| Definite-lived intangible assets | | 31.5 |
| | (5.0 | ) | | 26.5 |
|
| Indefinite-lived intangible assets | | 2.0 |
| | (2.0 | ) | | — |
|
| Other long-term assets | | 1.0 |
| | — |
| | 1.0 |
|
| Accounts payable | | (1.7 | ) | | — |
| | (1.7 | ) |
| Accrued expenses | | (2.4 | ) | | (0.1 | ) | | (2.5 | ) |
| Total identifiable net assets | | 77.2 |
| | (21.2 | ) | | 56.0 |
|
| Goodwill | | $ | 20.1 |
| | $ | 20.5 |
| | $ | 40.6 |
|
The valuation of property, plant and equipment and intangible assets is final as of June 30, 2017. The goodwill recognized in the acquisition of Micro-Coax is attributable to its experienced workforce, expected operational improvements through implementation of the COS, opportunities for product line expansions in addition to supply chain efficiencies and other administrative opportunities and the significant strategic value of the business to Carlisle. Goodwill of $40.6 million is deductible for tax purposes in the U.S. All of the goodwill was assigned to the CIT reporting unit which aligns with the reportable segment. The $26.5 million value allocated to definite-lived intangible assets consists of $14.5 million of customer relationships with a useful life of 12 years, various acquired technologies of $10.6 million with a useful life of seven years, an amortizable trade name of $0.9 million with a useful life of 10 years and a non-compete agreement of $0.5 million with a useful life of three years.
MS Oberflächentechnik AG
On February 19, 2016, the Company acquired 100% of the equity of MS Oberflächentechnik AG (“MS Powder”), a Swiss-based developer and manufacturer of powder coating systems and related components, for total consideration of CHF 12.3 million, or $12.4 million, including the estimated fair value of contingent consideration of CHF 4.3 million, or $4.3 million.
Consideration has been allocated to definite-lived intangible assets of $9.7 million, $4.1 million to indefinite-lived intangible assets and $2.2 million to deferred tax liabilities, with $2.9 million allocated to goodwill. Definite-lived intangible assets consist of $8.3 million of technology with a useful life of seven years and customer relationships of $1.4 million with a useful life of 10 years. None of the goodwill is deductible for tax purposes. All of the goodwill was assigned to the CFT reporting unit, which aligns with the reportable segment.
2015 Acquisition
Finishing Brands
On April 1, 2015, the Company acquired 100% of the Finishing Brands business from Graco Inc. for total consideration of $611.1 million. The Company funded the acquisition with cash on hand. The Company reports the results of the acquired business as the CFT segment.
Finishing Brands contributed net sales of $203.2 million and operating income of $20.9 million for the period from April 1, 2015 to December 31, 2015. Operating income for the period from April 1, 2015 to December 31, 2015 includes $8.6 million of incremental cost of goods sold related to measuring inventory at fair value and $0.7 million of acquisition-related costs related primarily to professional fees, as well as $9.3 million and $3.9 million of amortization expense of customer relationships and acquired technology, respectively.
The Finishing Brands amounts included in the pro forma financial information below are based on the Finishing Brands’ historical results and therefore may not be indicative of the actual results if operated by Carlisle. The pro forma adjustments represent management’s best estimates based on information available at the time the pro forma information was prepared and may differ from the adjustments that may actually have been required. Accordingly, pro forma information should not be relied upon as being indicative of the historical results that would have been realized had the acquisition occurred as of the date indicated or that may be achieved in the future.
The unaudited combined pro forma financial information presented below includes net sales and income from continuing operations, net of tax, of the Company as if the business combination had occurred on January 1, 2014, based on the purchase price allocation presented below:
|
| | | | |
| | | Unaudited Pro Forma |
| (in millions) | | Twelve Months Ended December 31, 2015 |
| Net sales | | $ | 3,604.4 |
|
| Income from continuing operations | | 332.2 |
|
The pro forma financial information reflects adjustments to Finishing Brands’ historical financial information to apply the Company's accounting policies and to reflect the additional depreciation and amortization related to the preliminary fair value adjustments of the acquired net assets, together with the associated tax effects. Also, the pro forma financial information reflects costs of goods sold related to the fair valuation of inventory and acquisition-related costs described above as if they occurred in 2014.
The following table summarizes the consideration transferred to acquire Finishing Brands and the preliminary allocation and measurement period adjustments to arrive at the final allocation of the purchase price among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and assumed liabilities based upon their acquisition date fair values with the remainder allocated to goodwill. The measurement period adjustments resulted primarily from finalizing valuations of inventory with corresponding measurement period adjustment to deferred taxes.
|
| | | | | | | | | | | | |
| | | Preliminary Allocation | | Measurement Period Adjustments | | Final Allocation |
| (in millions) | | As of 4/1/2015 | | | As of 3/31/2016 |
| Total cash consideration transferred | | $ | 610.6 |
| | $ | 0.5 |
| | $ | 611.1 |
|
| Recognized amounts of identifiable assets acquired and liabilities assumed: | | | | | | |
| Cash and cash equivalents | | $ | 12.2 |
| | $ | — |
| | $ | 12.2 |
|
| Receivables | | 57.3 |
| | 1.2 |
| | 58.5 |
|
| Inventories | | 40.9 |
| | 2.2 |
| | 43.1 |
|
| Prepaid expenses and other current assets | | 6.4 |
| | (0.2 | ) | | 6.2 |
|
| Property, plant and equipment | | 41.0 |
| | (0.2 | ) | | 40.8 |
|
| Definite-lived intangible assets | | 216.0 |
| | — |
| | 216.0 |
|
| Indefinite-lived intangible assets | | 125.0 |
| | — |
| | 125.0 |
|
| Deferred income tax assets | | 1.9 |
| | (1.2 | ) | | 0.7 |
|
| Other long-term assets | | 3.8 |
| | (0.3 | ) | | 3.5 |
|
| Line of credit | | (1.4 | ) | | — |
| | (1.4 | ) |
| Accounts payable | | (16.3 | ) | | — |
| | (16.3 | ) |
| Income tax payable | | (1.9 | ) | | (0.1 | ) | | (2.0 | ) |
| Accrued expenses | | (15.6 | ) | | — |
| | (15.6 | ) |
| Deferred income tax liabilities | | (28.8 | ) | | 0.6 |
| | (28.2 | ) |
| Other long-term liabilities | | (5.6 | ) | | (0.7 | ) | | (6.3 | ) |
| Total identifiable net assets | | 434.9 |
| | 1.3 |
| | 436.2 |
|
| Goodwill | | $ | 175.7 |
| | $ | (0.8 | ) | | $ | 174.9 |
|
The goodwill recognized in the acquisition of Finishing Brands is attributable to its experienced workforce, the expected operational improvements through implementation of the COS, opportunities for geographic and product line expansions in addition to supply chain efficiencies and other administrative opportunities and the significant strategic value of the business to Carlisle. The Company acquired $60.0 million of gross contractual accounts receivable, of which $1.5 million was not expected to be collected at the date of acquisition. Goodwill of $132.9 million is tax deductible, primarily in the United States. All of the goodwill was assigned to the CFT reporting unit which aligns with the reportable segment. Indefinite-lived intangible assets of $125.0 million represent acquired trade names. The $216.0 million value allocated to definite-lived intangible assets consists of $186.0 million of customer relationships with a useful life of 15 years and various acquired technologies of $30.0 million with useful lives ranging from five to eight years. The Company recorded an indemnification asset of $3.0 million in other long-term assets relating to the indemnification of Carlisle for a pre-acquisition income tax liability in accordance with the purchase agreement. The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $28.2 million. See Note 10 for further information regarding deferred tax liabilities acquired in the Finishing Brands acquisition.
Prior Acquisition Matters
LHi Technology
Accella Holdings LLC
In conjunction with the October 2014November 2017 acquisition of LHi Technology (“LHi”Accella Holdings LLC, the parent company to Accella Performance Materials Inc. (collectively "Accella"), the Company recorded an indemnification asset of $8.7$15.6 million in other long-term assets relating to the indemnification of Carlisle for certain pre-acquisition liabilities, principally related to direct and indirect tax uncertainties. During the third quarter2020, 2019 and 2018, $4.7 million, $1.9 million and $4.6 million, respectively, of 2016, the Company concluded that $2.6 million of the indirect tax uncertainties were no longer probable, thereforeresolved, resulting in the reversal of the related indemnification assetassets and corresponding liabilities.
Note 4—Discontinued Operations
On March 20, 2018, the corresponding liability. DuringCompany completed the sale of CFS to The Jordan Company of New York, NY for gross proceeds of $758.0 million, including a working capital adjustment, which was finalized in the third quarter of 2017, the escrow covering the remaining direct and indirect tax uncertainties expired and the remaining indirect tax uncertainties were no longer probable, resulting in the reversal2018.
A summary of the $6.1 million indemnification asset and corresponding $1.5 million liability, with
the net change of $4.6 million reflected in the non-operating (income) expense, netresults from discontinued operations included in the Consolidated StatementStatements of Earnings. Income follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Revenue | | $ | 0 | | | $ | 0 | | | $ | 69.5 | |
| | | | | | |
| Cost of goods sold | | 0 | | | 0 | | | 49.5 | |
| Other operating expense, net | | 0 | | | 0 | | | 16.7 | |
| Operating income | | 0 | | | 0 | | | 3.3 | |
| Other non-operating expense, net | | 5.4 | | | 1.8 | | | 0 | |
| (Loss) income from discontinued operations before income taxes | | (5.4) | | | (1.8) | | | 3.3 | |
| Gain on sale of discontinued operations | | 0 | | | 0 | | | 296.8 | |
| (Benefit from) provision for income taxes | | (1.3) | | | (0.9) | | | 47.6 | |
| (Loss) income from discontinued operations | | $ | (4.1) | | | $ | (0.9) | | | $ | 252.5 | |
A summary of cash flows from discontinued operations included in the Consolidated Statements of Cash Flows follows: | | | | | | | | | | | | |
| (in millions) | | | | | | 2018 |
| Net cash used in operating activities | | | | | | $ | (2.0) | |
| Net cash used in investing activities | | | | | | (8.1) | |
Net cash provided by financing activities (1) | | | | | | 11.4 | |
| Change in cash and cash equivalents from discontinued operations | | | | | | $ | 1.3 | |
Note 4(1)—ExitRepresents borrowings from the Carlisle cash pool to fund capital expenditures and Disposal Activitiesacquisitions.
Note 5—Earnings Per Share
The Company’s restricted shares contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. The computation below of earnings per share excludes income attributable to the unvested restricted shares from the numerator and excludes the dilutive impact of those underlying shares from the denominator.
The computation below of earnings per share includes the income attributable to the vested and deferred restricted shares and restricted stock units in the numerator and includes the dilutive impact of those underlying shares in the denominator.
Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and performance share awards are included in the calculation of diluted earnings per share considering those are contingently issuable. Neither is considered to be a participating security as they do not contain non-forfeitable dividend rights.
Income from continuing operations and share data used in the basic and diluted earnings per share computations using the two-class method follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions except per share amounts) | | 2020 | | 2019 | | 2018 |
| Income from continuing operations | | $ | 324.2 | | | $ | 473.7 | | | $ | 358.6 | |
| Less: dividends declared | | (112.7) | | | (102.9) | | | (93.5) | |
| Undistributed earnings | | 211.5 | | | 370.8 | | | 265.1 | |
Percent allocated to common shareholders (1) | | 99.7 | % | | 99.7 | % | | 99.7 | % |
| | | 210.9 | | | 369.7 | | | 264.3 | |
| Add: dividends declared to common shares, restricted share units and vested and deferred restricted and performance shares | | 112.2 | | | 102.7 | | | 93.1 | |
| Income from continuing operations attributable to common shareholders | | $ | 323.1 | | | $ | 472.4 | | | $ | 357.4 | |
| | | | | | |
| Shares: | | | | | | |
| Basic weighted-average shares outstanding | | 54.5 | | | 56.9 | | | 60.4 | |
| Effect of dilutive securities: | | | | | | |
| Performance awards | | 0.3 | | | 0.2 | | | 0.1 | |
| Stock options | | 0.2 | | | 0.4 | | | 0.3 | |
| Diluted weighted-average shares outstanding | | 55.0 | | | 57.5 | | | 60.8 | |
| | | | | | |
| Per share income from continuing operations attributable to common shares: | | | | | | |
| Basic | | $ | 5.93 | | | $ | 8.30 | | | $ | 5.92 | |
| Diluted | | $ | 5.88 | | | $ | 8.21 | | | $ | 5.88 | |
| | | | | | |
(1) Basic weighted-average shares outstanding | | 54.5 | | | 56.9 | | | 60.4 | |
| Basic weighted-average shares outstanding and unvested restricted shares expected to vest | | 54.7 | | | 57.1 | | | 60.6 | |
| Percent allocated to common shareholders | | 99.7 | % | | 99.7 | % | | 99.7 | % |
To calculate earnings per share for income from discontinued operations and for net income, the denominator for both basic and diluted earnings per share is the same as used in the above table.
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| (Loss) income from discontinued operations attributable to common shareholders for basic and dilutive earnings per share | | $ | (4.1) | | | $ | (0.9) | | | $ | 251.8 | |
| Net income attributable to common shareholders for basic and diluted earnings per share | | 319.0 | | | 471.5 | | | 609.2 | |
Anti-dilutive stock options excluded from EPS calculation (1) | | 0.3 | | | 0 | | | 0.8 | |
(1)Represents stock options excluded from the calculation of diluted earnings per share as such options’ assumed proceeds upon exercise would result in the repurchase of more shares than the underlying award.
Note 6—Revenue Recognition
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer in exchange for payment and is the unit of account. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when or as the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation to transfer individual goods or services. For contracts with multiple performance obligations, the contract's transaction price is allocated to each performance obligation using the Company’s best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is observable prices.
The Company’s performance obligations are satisfied, and control is transferred, either at a point in time or over time as work progresses. For the majority of the Company’s products, control is transferred, and revenue is recognized when the product is shipped from the manufacturing facility or delivered to the customer, depending on shipping terms. Revenue is recognized over time primarily for separately priced extended service warranties in the CCM segment and certain highly customized product contracts in the CIT and CFT segments. Revenues for separately priced extended service warranties are recognized over the life of the contract. Revenues for highly customized product contracts are recognized based on the proportion of costs incurred to date, relative to total
estimated costs to complete the contract and are generally incurred over twelve months or less. Highly customized product contract costs generally include labor, material and overhead. A summary of the timing of revenue recognition and reconciliation of disaggregated revenue by reportable segment follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| Products transferred at a point in time | | $ | 2,972.2 | | | $ | 422.9 | | | $ | 240.4 | | | $ | 275.3 | | | $ | 3,910.8 | |
| Products and services transferred over time | | 23.4 | | | 308.7 | | | 2.3 | | | 0 | | | 334.4 | |
| Total revenues | | $ | 2,995.6 | | | $ | 731.6 | | | $ | 242.7 | | | $ | 275.3 | | | $ | 4,245.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| Products transferred at a point in time | | $ | 3,211.1 | | | $ | 531.7 | | | $ | 278.4 | | | $ | 327.0 | | | $ | 4,348.2 | |
| Products and services transferred over time | | 22.2 | | | 441.2 | | | 0 | | | 0 | | | 463.4 | |
| Total revenues | | $ | 3,233.3 | | | $ | 972.9 | | | $ | 278.4 | | | $ | 327.0 | | | $ | 4,811.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| Products transferred at a point in time | | $ | 2,859.0 | | | $ | 540.7 | | | $ | 291.6 | | | $ | 373.8 | | | $ | 4,065.1 | |
| Products and services transferred over time | | 21.3 | | | 393.1 | | | 0 | | | 0 | | | 414.4 | |
| Total revenues | | $ | 2,880.3 | | | $ | 933.8 | | | $ | 291.6 | | | $ | 373.8 | | | $ | 4,479.5 | |
Remaining performance obligations for extended service warranties represent the transaction price for the remaining stand-ready obligation to perform warranty services. A summary of estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of December 31, 2020 follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter |
| Extended service warranties | | $ | 22.9 | | | $ | 21.7 | | | $ | 20.5 | | | $ | 19.4 | | | $ | 18.5 | | | $ | 155.3 | |
The Company has undertaken operational restructuring and other cost reduction actionsapplied the practical expedient to streamline processes and manage costs throughout various departments within the Company. The Company implemented cost reduction plans, which resultednot disclose information about remaining performance obligations that have original expected durations of one year or less.
Contract Balances
Contract liabilities relate to payments received in exit, disposal and employee termination benefit costs, primarily resulting from planned reductions in workforce, facility consolidations and relocations and lease termination costs, as further discussed below by operating segment.
CIT
During 2017, the Company initiated plans to relocate certainadvance of its aerospace manufacturing operations in Littleborough, United Kingdom to an existing manufacturing operation in Nogales, Mexico. During 2017, exit and disposal costs totaled $2.0 million. This project was substantially complete as of December 31, 2017.
As previously announced, the Company is incurring costs to relocate certain of its medical manufacturing operations in Shenzhen, China toperformance under a new manufacturing operation in Dongguan, China. During 2017, employee termination benefit costs associated with this plan totaled $6.1 million. Cumulative exit and disposal costs recognized totaled $14.1 million through December 31, 2017, with total costs expected to approximate $15.2 million. The remaining costs are expected to be incurred principally through the second half of 2018. Other associated costs are not expected to be significant.
During the third quarter of 2017, the Company entered into a letter of undertaking with the Chinese government, whereby the Company designated $10.1 million in cash specifically for the payment of employee termination benefits associated with the Chinese medical business action discussed above. Cash payments began in August 2017 out of these designated funds and will continue through the first half of 2018. The designated cash balance as of December 31, 2017, totaled $4.6 million.
CFT
During 2017, the Company initiated plans to restructure its global footprint. These plans involve exiting manufacturing operations in Brazil and Mexico, exiting the systems sales business in Germany and relocating the manufacturing operations currently in Angola, Indiana to its existing Bournemouth, United Kingdom manufacturing operations. During 2017, exit and disposal costs totaled $10.4 million, primarily reflecting employee termination benefit costs and accelerated depreciation. Total costs are expected to approximate $10.5 million, with the remaining costs expected to be incurred in first-quarter 2018.
As previously announced, the Company is incurring costs related to the relocation of CFT's administrative functions and facilities within the U.S. During 2017, exit and disposal cost totaled $1.0 million, primarily reflecting relocation and facility closure costs. This project was substantially complete as of December 31, 2017, with cumulative exit and disposal costs of $5.1 million.
CBF
During 2017, the Company announced that it would exit its manufacturing operations in Tulsa, Oklahoma and relocate the majority of those operations to its existing manufacturing facility in Medina, Ohio. This action is expected to take approximately 18 to 21 months to complete. Total associated exit and disposal costs are expected to be between $17.5 million to $21.0 million, including:
Non-cash accelerated depreciation of long-lived assets at the Oklahoma facility, which is primarily property, plant and equipment that will not be transferred to Ohio (between $5.0 million to $6.5 million expected to be recognized ratably through the first quarter of 2019),
Costs to relocate and install equipment (between $5.0 million to $6.0 million, expected to be incurred primarily in the second half of 2018),
Employee retention and termination benefits (approximately $2.5 million, expected to be incurred ratably through the second half of 2018),
Other associated costs related to the closure of the facility and internal administration of the project (between $5.0 million to $6.0 million, expected to be incurred primarily in the second half of 2018).
During 2017, exit and disposal expense totaled $5.1 million,contract, primarily related to employee termination benefitsextended service warranties in the CCM segment, systems contracts in the CFT segment and accelerated depreciation.highly customized product contracts in the CIT segment. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract. A summary of the change in contract liabilities follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Balance as of January 1 | | $ | 247.4 | | | $ | 227.4 | | | $ | 215.8 | |
| Revenue recognized | | (68.4) | | | (69.1) | | | (79.5) | |
| Revenue deferred | | 89.3 | | | 87.6 | | | 90.5 | |
| Acquired liabilities | | 0 | | | 1.5 | | | 0.6 | |
| Balance as of December 31 | | $ | 268.3 | | | $ | 247.4 | | | $ | 227.4 | |
Consolidated SummaryContract assets relate to the Company's right to payment for performance completed to date under a contract, primarily related to highly customized product contracts within the CIT and CFT segments. Accounts receivable are recorded when the right to payment becomes unconditional, which generally occurs over twelve months or less. A summary of the change in contract assets follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Balance as of January 1 | | $ | 100.5 | | | $ | 44.7 | | | $ | 0 | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Balance as of December 31 | | 84.5 | | | 100.5 | | | 44.7 | |
| Change in contract assets | | $ | (16.0) | | | $ | 55.8 | | | $ | 44.7 | |
Exit and disposal costs by activityThe change in contract assets for the yearsyear ended December 31, follows:2020, primarily reflects the recognition of revenue exceeding billings of $13.3 million and measurement period adjustments net of acquired contract assets, of $3.3
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Employee severance and benefit arrangements | | $ | 17.8 |
| | $ | 10.1 |
| | $ | — |
|
| Accelerated depreciation | | 3.7 |
| | 0.4 |
| | — |
|
| Relocation costs | | 1.5 |
| | 3.8 |
| | — |
|
| Other restructuring costs | | 3.8 |
| | 1.2 |
| | 0.5 |
|
| Total exit and disposal costs | | $ | 26.8 |
| | $ | 15.5 |
| | $ | 0.5 |
|
54
Exitmillion, partially offset by currency translation and disposal costs by segmentother of $0.6 million. The change in contract assets for the yearsyear ended December 31, follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Carlisle Interconnect Technologies | | 9.5 |
| | $ | 7.6 |
| | $ | — |
|
| Carlisle Fluid Technologies | | 11.4 |
| | 4.1 |
| | — |
|
| Carlisle Brake & Friction | | 5.1 |
| | — |
| | 0.5 |
|
| Corporate | | 0.8 |
| | 3.8 |
| | — |
|
| Total exit and disposal costs | | $ | 26.8 |
| | $ | 15.5 |
| | $ | 0.5 |
|
Exit2019, primarily reflects acquired contract assets of $29.1 million and disposal costs by financial statement line itemexcess billings over recognized revenue of $26.7 million. The change in contract assets for the yearsyear ended December 31, 2018, primarily reflects the adoption of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606") of $22.8 million and excess billings over recognized revenue of $21.9 million.
Revenues by End-Market
A summary of revenues disaggregated by major end-market industries and reconciliation of disaggregated revenue by segment follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| General construction | | $ | 2,839.0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2,839.0 | |
| Aerospace | | 0 | | | 348.1 | | | 0 | | | 14.9 | | | 363.0 | |
| Heavy equipment | | 69.8 | | | 0 | | | 0 | | | 220.3 | | | 290.1 | |
| Medical | | 0 | | | 222.7 | | | 0 | | | 0 | | | 222.7 | |
| Transportation | | 0 | | | 0 | | | 132.4 | | | 30.0 | | | 162.4 | |
| General industrial and other | | 86.8 | | | 160.8 | | | 110.3 | | | 10.1 | | | 368.0 | |
| Total revenues | | $ | 2,995.6 | | | $ | 731.6 | | | $ | 242.7 | | | $ | 275.3 | | | $ | 4,245.2 | |
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Cost of goods sold | | 10.9 |
| | $ | — |
| | $ | 0.5 |
|
| Selling and administrative expenses | | 15.8 |
| | 15.0 |
| | — |
|
| Research and development expenses | | 0.1 |
| | — |
| | — |
|
| Other operating (income) expense, net | | — |
| | 0.5 |
| | — |
|
| Total exit and disposal costs | | $ | 26.8 |
| | $ | 15.5 |
| | $ | 0.5 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| General construction | | $ | 3,035.6 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 3,035.6 | |
| Aerospace | | 0 | | | 641.4 | | | 0 | | | 23.3 | | | 664.7 | |
| Heavy equipment | | 100.2 | | | 0 | | | 0 | | | 259.5 | | | 359.7 | |
| Medical | | 0 | | | 162.3 | | | 0 | | | 0 | | | 162.3 | |
| Transportation | | 0 | | | 0 | | | 152.2 | | | 33.5 | | | 185.7 | |
| General industrial and other | | 97.5 | | | 169.2 | | | 126.2 | | | 10.7 | | | 403.6 | |
| Total revenues | | $ | 3,233.3 | | | $ | 972.9 | | | $ | 278.4 | | | $ | 327.0 | | | $ | 4,811.6 | |
Changes in exit and disposal liabilities for the years ended December 31 follows:
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | CIT | | CFT | | CBF | | Corporate | | Total |
| Balance as of December 31, 2016 | | $ | 7.6 |
| | $ | 0.7 |
| | $ | — |
| | $ | 0.7 |
| | $ | 9.0 |
|
| Charges | | 9.5 |
| | 11.4 |
| | 5.1 |
| | 0.8 |
| | 26.8 |
|
| Cash payments | | (12.2 | ) | | (3.9 | ) | | (1.5 | ) | | (1.5 | ) | | (19.1 | ) |
| Other adjustments and non-cash settlements | | — |
| | (1.5 | ) | | (2.1 | ) | | — |
| | (3.6 | ) |
| Balance as of December 31, 2017 | | $ | 4.9 |
| | $ | 6.7 |
| | $ | 1.5 |
| | $ | — |
| | $ | 13.1 |
|
The liability of $13.1 million as of December 31, 2017, primarily relates to employee severance and benefit arrangements and is included in accrued expenses in the Consolidated Balance Sheet.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2018 |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | Total |
| General construction | | $ | 2,661.4 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 2,661.4 | |
| Aerospace | | 0 | | | 620.3 | | | 0 | | | 21.5 | | | 641.8 | |
| Heavy equipment | | 112.1 | | | 0 | | | 0 | | | 300.7 | | | 412.8 | |
| Medical | | 0 | | | 146.4 | | | 0 | | | 0 | | | 146.4 | |
| Transportation | | 0 | | | 0 | | | 154.9 | | | 41.1 | | | 196.0 | |
| General industrial and other | | 106.8 | | | 167.1 | | | 136.7 | | | 10.5 | | | 421.1 | |
| Total revenues | | $ | 2,880.3 | | | $ | 933.8 | | | $ | 291.6 | | | $ | 373.8 | | | $ | 4,479.5 | |
Note 5—Stock‑Based Compensation
Note 7—Stock-Based Compensation
Incentive Compensation Program
The Company maintains an Incentive Compensation Program (the “Program”) for executives, certain other employees of the Company and its operating segments and subsidiaries and the Company’s non-employee directors. Members of the Board of Directors (the "Board") that receive stock-based compensation are treated as employees for accounting purposes. The Program was approved by shareholders on May 6, 2015. The Program allows for up to 4.2 million awards to eligible employees of stock options, restricted stock, stock appreciation rights, performance shares and units or other awards based on Company common stock. As of December 31, 2017, 3.32020, 1.2 million shares were available for grant under this plan.
During the year ended December 31, 2017,2020, the Company awarded 364,675395 thousand stock options, 91,09869 thousand restricted stock awards, 47,28546 thousand performance share awards and 13,3998 thousand restricted stock units as part of the Program with an aggregate grant-date fair value of approximately $26.8$33.5 million to be expensedrecognized over the requisite service period for each award.
Stock-based compensation expense, which is included in sellingcost by award type follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Stock option awards | | $ | 11.2 | | | $ | 10.8 | | | $ | 11.0 | |
| Restricted stock awards | | 8.9 | | | 7.4 | | | 7.7 | |
| Performance share awards | | 7.9 | | | 6.0 | | | 7.4 | |
| Restricted stock units | | 1.4 | | | 1.3 | | | 1.4 | |
| Stock appreciation rights | | 3.4 | | | 8.6 | | | 0 | |
| Total stock-based compensation cost incurred | | 32.8 | | | 34.1 | | | 27.5 | |
| Capitalized cost during the period | | (4.5) | | | (10.6) | | | (1.3) | |
| Amortization of capitalized cost during the period | | 1.6 | | | 7.9 | | | 0.8 | |
| Total stock-based compensation expense | | $ | 29.9 | | | $ | 31.4 | | | $ | 27.0 | |
| Income tax benefit | | $ | 9.6 | | | $ | 12.9 | | | $ | 10.6 | |
In 2018, the Board authorized a grant of stock options to U.S. employees and administrative expenses instock appreciation rights to employees outside of the Consolidated Statement of Earnings,U.S. This grant contributed $5.1 million and $11.5 million to stock-based compensation costs for the years ended December 31, follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Stock option awards | | $ | 7.7 |
| | $ | 6.1 |
| | $ | 5.1 |
|
| Restricted stock awards | | 6.0 |
| | 4.5 |
| | 5.9 |
|
| Performance share awards | | 5.6 |
| | 4.7 |
| | 6.3 |
|
| Restricted stock units | | 1.4 |
| | 1.2 |
| | 1.1 |
|
| Total stock-based compensation expense | | $ | 20.7 |
| | $ | 16.5 |
| | $ | 18.4 |
|
The Company recognized an income tax benefit of $12.5 million related to total stock-based compensation expense for the year ended2020 and December 31, 2017.2019, respectively. Compensation cost of $6.1 million and $3.2 million was capitalized as inventory as of December 31, 2020 and December 31, 2019, respectively. Inventory is recognized in costs of goods sold when that related inventory is sold.
Stock Option Awards
Options issuedStock options awarded under the Program generally vest on a straight-line basis over a three year-year period on the anniversary date of the grant. All stock options have a maximum contractual term life of 10 years. Shares issued to cover stock options issued under the Program may be issued from shares held in treasury, from new issuances of shares or a combination of the two. Unrecognized compensation cost related to stock options of $5.1$6.6 million as of December 31, 2017,2020, is to be recognized over a weighted-average period of 1.871.2 years.
The Company utilizes the Black‑Scholes-MertonBlack-Scholes-Merton (“BSM”) option pricing model to determine the fair value of its stock option awards.options. The BSM relies on certain assumptions to estimate an option’s fair value. The weighted average assumptions used in the determination of fair value for stock option awards for the years ended December 31options follows:
|
| | | | | | | | | | | | |
| (in millions, except per share amounts) | | 2017 | | 2016 | | 2015 |
| Expected dividend yield | | 1.3 | % | | 1.4 | % | | 1.1 | % |
| Expected life (in years) | | 5.58 |
| | 5.61 |
| | 5.71 |
|
| Expected volatility | | 25.6 | % | | 27.5 | % | | 27.3 | % |
| Risk-free interest rate | | 1.9 | % | | 1.4 | % | | 1.4 | % |
| Weighted-average grant date fair value (per share) | | $ | 24.57 |
| | $ | 19.30 |
| | $ | 21.19 |
|
| Fair value of options granted | | $ | 8.8 |
| | $ | 7.2 |
| | $ | 6.7 |
|
| Intrinsic value of options exercised | | $ | 8.5 |
| | $ | 56.4 |
| | $ | 42.7 |
|
| Fair value of options vested | | $ | 5.4 |
| | $ | 4.7 |
| | $ | 4.6 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions, except per share amounts) | | 2020 | | 2019 | | 2018 | | 2018
One-time Grant |
| Expected dividend yield | | 1.3 | % | | 1.6 | % | | 1.4 | % | | 1.4 | % |
Expected term (in years) | | 4.8 | | 4.9 | | 5.5 | | 3.9 |
| Expected volatility | | 21.9 | % | | 21.3 | % | | 23.1 | % | | 20.7 | % |
| Risk-free interest rate | | 1.4 | % | | 2.5 | % | | 2.6 | % | | 2.6 | % |
Weighted-average grant date fair value (per share) | | $ | 29.29 | | | $ | 21.07 | | | $ | 23.71 | | | $ | 21.91 | |
| Fair value of options granted | | $ | 11.6 | | | $ | 9.7 | | | $ | 9.1 | | | $ | 13.6 | |
The expected lifeterm of optionsa stock option is based on the assumption that all outstanding stock options will be exercised at the midpoint of the valuation date (if vested) or the vesting dates (if unvested) and the stock options’ expiration date. The expected volatility is based on historical volatility, as well as implied volatility of the Company’s call options. The risk-free interest rate is based on rates of U.S. Treasury issues with a remaining life equal to the expected lifeterm of the stock option. The expected dividend yield is based on the projected annuallatest quarterly dividend payment per share, annualized, divided by the average three-month stock price atas of the date of grant.
A summary of stock options outstanding and activity follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares (in thousands) | | Weighted-Average Exercise Price (per share) | | Weighted-Average Contractual Term (in years) | | Aggregate Intrinsic Value (in millions) |
| Outstanding as of December 31, 2019 | | 1,825 | | | $ | 101.95 | | | | | |
| Options granted | | 395 | | | 159.49 | | | | | |
| Options exercised | | (229) | | | 95.49 | | | | | |
| Options forfeited / expired | | (165) | | | 119.11 | | | | | |
| Outstanding as of December 31, 2020 | | 1,826 | | | 114.03 | | | 7.0 | | $ | 78.8 | |
| Vested and exercisable as of December 31, 2020 | | 768 | | | 98.25 | | | 5.4 | | $ | 44.5 | |
Additional information related to stock option activity during the yearyears ended December 31 2017, follows:
|
| | | | | | | | | | | | | |
| | | Number of Shares | | Weighted-Average Exercise Price | | Weighted-Average Contractual Term | | Aggregate Intrinsic Value (in millions) |
| Outstanding as of December 31, 2016 | | 1,263,665 |
| | $ | 70.95 |
| | | | |
| Options granted | | 364,675 |
| | 107.63 |
| | | | |
| Options exercised | | (165,959 | ) | | 56.61 |
| | | | |
| Options forfeited / expired | | (31,069 | ) | | 92.49 |
| | | | |
| Outstanding as of December 31, 2017 | | 1,431,312 |
| | 81.49 |
| | 6.8 | | $ | 46.2 |
|
| Vested and exercisable as of December 31, 2017 | | 732,408 |
| | 66.24 |
| | 5.2 | | $ | 34.7 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Intrinsic value of options exercised | | $ | 11.9 | | | $ | 25.4 | | | $ | 18.4 | |
| Fair value of options vested | | $ | 7.9 | | | $ | 6.3 | | | $ | 10.2 | |
Restricted Stock Awards
Restricted stock awarded under the Program is generally released to the recipient after a period of approximately three years. Unrecognized compensation cost related to restricted stock awards of $9.0$6.6 million as of December 31, 2017,2020, is to be recognized over a weighted-average period of 2.11.7 years. The fair value of shares vested during the year ended December 31, 2017, was $11.4 million.
Information related to restricted stock awards during the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions, except per share amounts) | | 2017 | | 2016 | | 2015 |
| Weighted-average grant date fair value (per share) | | $ | 106.78 |
| | $ | 84.73 |
| | $ | 90.54 |
|
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Weighted-average grant date fair value (per share) | | $ | 147.78 | | | $ | 112.70 | | | $ | 114.27 | |
A summary of restricted stock awards outstanding and activity follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares (in thousands) | | Weighted-Average Grant Date Fair Value (per share) | | Weighted-Average Contractual Term (in years) | | Aggregate Intrinsic Value (in millions) |
| Outstanding as of December 31, 2019 | | 173 | | | $ | 109.62 | | | | | |
| Shares granted | | 69 | | | 147.78 | | | | | |
| Shares vested | | (66) | | | 114.39 | | | | | |
| Shares forfeited | | (10) | | | 123.70 | | | | | |
| Outstanding as of December 31, 2020 | | 166 | | | 122.88 | | | 0.8 | | $ | 26.0 | |
Additional information related to restricted stock award activity during the yearyears ended December 31 2017, follows:
|
| | | | | | | |
| | | Number of Shares | | Weighted-Average Grant Date Fair Value |
| Outstanding as of December 31, 2016 | | 225,265 |
| | $ | 82.59 |
|
| Shares granted | | 91,098 |
| | 106.78 |
|
| Shares vested | | (105,282 | ) | | 77.41 |
|
| Shares forfeited | | (2,760 | ) | | 94.21 |
|
| Outstanding as of December 31, 2017 | | 208,321 |
| | 95.63 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Intrinsic value of restricted stock exercised | | $ | 9.6 | | | $ | 5.6 | | | $ | 11.7 | |
| Fair value of restricted stock vested | | $ | 7.5 | | | $ | 4.6 | | | $ | 9.8 | |
Performance Share Awards
Performance shares vest based on the employee rendering three years of service to the Company and the attainment of a market condition over the performance period, which is based on the Company’s relative total shareholder return versus the S&P Midcap 400 Index® over a pre-determined time period as determined by the Compensation Committee of the Board of Directors.Board. Unrecognized compensation cost related to performance share awards of $6.7$7.7 million as of December 31, 2017,2020, is to be recognized over a weighted-average period of 1.661.8 years. The fair value of shares vested during the year ended December 31, 2017, was $11.6 million.
For purposes of determining diluted earnings per share, the performance share awards are considered contingently issuable shares and are included in diluted earnings per share based upon the number of shares that would have been awarded had the conditions at the end of the reporting period continued until the end of the performance period. See Note 75 for further information regarding earnings per share computations.
The Company utilizes the Monte-Carlo simulation approach based on a three year-year measurement period to determine the fair value of performance shares. Such approach entails the use of assumptions regarding the future performance of the Company’s stock and those of the S&P Midcap 400 Index®. Those assumptions include expected volatility, risk‑freerisk-free interest rates, correlation coefficients and dividend reinvestment. Dividends accrue on the performance shares during the performance period and are to be paid in cash based upon the number of awards ultimately earned.
Information related to performance shares during the years ended December 31 follows:
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2019 | | 2018 |
| Weighted-average grant date fair value (per share) | | $ | 222.50 | | | $ | 149.27 | | | $ | 140.20 | |
|
| | | | | | | | | | | | |
(in millions, except per share amounts)
| | 2017 | | 2016 | | 2015 |
| Weighted-average grant date fair value (per share) | | $ | 141.83 |
| | $ | 119.08 |
| | $ | 112.39 |
|
A summary of performance shares outstanding and activity follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares (in thousands) | | Weighted-Average Grant Date Fair Value (per share) | | Weighted-Average Contractual Term (in years) | | Aggregate Intrinsic Value (in millions) |
| Outstanding as of December 31, 2019 | | 143 | | | $ | 143.94 | | | | | |
| Awards granted | | 46 | | | 222.50 | | | | | |
| Awards vested | | (80) | | | 141.79 | | | | | |
| Awards converted | | 36 | | | 141.81 | | | | | |
| Awards forfeited | | (9) | | | 167.03 | | | | | |
| Outstanding as of December 31, 2020 | | 136 | | | 170.34 | | | 0.9 | | $ | 21.2 | |
Additional information related to performance share activity during the yearyears ended December 31 2017, follows:
|
| | | | | | | |
| | | Number of Shares | | Weighted-Average Grant Date Fair Value |
| Outstanding as of December 31, 2016 | | 219,559 |
| | |
| Units granted | | 47,285 |
| | $ | 141.83 |
|
| Units converted (withheld) | | (8,786 | ) | | 112.39 |
|
| Units vested and issued | | (86,619 | ) | | 95.72 |
|
| Units vested and deferred | | (17,413 | ) | | 95.72 |
|
| Units forfeited | | (2,760 | ) | | 126.66 |
|
| Outstanding as of December 31, 2017 | | 151,266 |
| | 123.99 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Intrinsic value of performance share awards exercised | | $ | 12.9 | | | $ | 5.0 | | | $ | 5.3 | |
| Fair value of performance share awards vested | | $ | 11.3 | | | $ | 5.9 | | | $ | 5.2 | |
Restricted Stock Units
RestrictedUp to and including February 4, 2020, restricted stock units arewere awarded to eligible directors andwhich are fully vested and are expensed upon grant date. The restricted stock units are paid in shares of Company common stock after the director ceases to serve as a member of the Board, or if earlier, upon a change in control of the Company. The Company granted 13,399, 14,359 and 12,157Effective May 6, 2020, eligible directors will no longer be issued restricted stock units, but instead will be awarded restricted stock awards that will vest on the earlier of (i) one year from the date of grant; (ii) the director’s retirement from the Board upon reaching age 72 or after completing 18 consecutive years of service on the Board; or (iii) a change in 2017, 2016 and 2015, respectively. Units had a weighted-average grant date fair value per sharecontrol of $107.87, $83.31 and $90.54 in 2017, 2016 and 2015, respectively. the Company.
Additional information related to restricted stock unit activity during the years ended December 31 follows:
| | | | | | | | | | | | | | | | | | | | |
| (in thousands, except per share amounts) | | 2020 | | 2019 | | 2018 |
| Restricted stock units granted | | 8 | | | 12 | | | 13 | |
Weighted-average grant date fair value (per share) (1) | | $ | 161.41 | | | $ | 110.79 | | | $ | 108.72 | |
(1)Restricted stock unitsunits' fair value is based on the closing market price of the stock on the respective dates of the grants.
Stock appreciation rights issued under the 2018 one-time grant discussed above, cliff vest on May 2, 2021, at which date they will immediately vest and be settled in cash. Unrecognized compensation cost related to stock appreciation rights of $2.0 million as of December 31, 2020, is to be recognized over a weighted-average period of 0.3 years.
The stock appreciation rights are classified as liability awards and are measured at fair value at each balance sheet date. The Company utilizes the BSM option pricing model to determine the fair value of its stock appreciation rights. The BSM relies on certain assumptions to estimate a stock appreciation right's fair value. The weighted average assumptions used in the December 31, 2020 determination of fair value for stock appreciation rights follows:
| | | | | | | | |
| (in millions, except per share amounts) | | 2018 One-time Grant |
| Expected dividend yield | | 1.5 | % |
| Expected term (in years) | | 0.3 |
| Expected volatility | | 30.1 | % |
| Risk-free interest rate | | 0.1 | % |
| Weighted-average grant date fair value (per share) | | $ | 48.24 | |
| Fair value of stock appreciation rights granted | | $ | 13.5 | |
The expected life of stock appreciation rights is based on the time from the valuation date to the vest date. The expected volatility is based on historical volatility as well as implied volatility of the Company’s call options. The risk-free interest rate is based on rates of U.S. Treasury issues with a remaining life equal to the expected life of the stock appreciation right. The expected dividend yield is based on the latest quarterly dividend payment per share, annualized, divided by the average three-month stock price as of the date of grant.
A summary of stock appreciation awards outstanding and activity follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Shares (in thousands) | | Weighted-Average Exercise Price (per share) | | Weighted-Average Contractual Term (in years) | | Aggregate Intrinsic Value (in millions) |
| Outstanding as of December 31, 2019 | | 362 | | | $ | 106.85 | | | | | |
| | | | | | | | |
| Awards exercised | | (3) | | | 106.85 | | | | | |
| Awards forfeited | | (78) | | | 106.85 | | | | | |
| Outstanding as of December 31, 2020 | | 281 | | | 106.85 | | | 0.3 | | $ | 13.9 | |
Deferred Compensation - Equity
Certain employees are eligible to participate in the Company’s Non-qualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Participants may elect to defer all or part of their restricted and performance shares. Participants have elected to defer 280,98284 thousand and 294,57486 thousand shares of Company common stock as of December 31, 20172020 and 2016,2019, respectively. Company stock held for future issuance of vested awards is classified as deferred compensation equityadditional paid in capital in the Consolidated Balance Sheets and is recorded at grant date fair value. Such deferred shares are included in basic earnings per share.
Note 68—Exit and Disposal Activities—Income Taxes
U.S. Tax Reform
On December 22, 2017, the U.S. enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to existing tax law including, among other things, a reduction to the U.S. federal corporate income tax rate from 35% to 21% and a one-time tax on deferred foreign income ("Transition Tax").
The changes included in the Tax Act are broad and complex. As such, on December 22, 2017, the Securities and Exchange Commission (“SEC”) issued SAB 118. SAB 118 expresses views of the SEC regarding ASC Topic 740, Income Taxes in the reporting period that includes the enactment date of the Tax Act. The SEC staff issuing SAB 118 recognized that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. If a company does not have the necessary information available, prepared or analyzed for certain income tax effects of the Tax Act, SAB 118 allows a company to report provisional numbers and adjust those amounts during the measurement period not to extend beyond one year. The Company has recorded provisional amounts for all knownundertaken operational restructuring and estimable impactsother cost reduction actions to streamline processes and manage costs throughout various departments. These actions resulted in exit, disposal and employee termination benefit costs, primarily resulting from planned reductions in workforce, facility consolidation and relocation, and lease termination costs. The primary actions are discussed below by operating segment.
CIT
During the third quarter of 2020, the Tax Act that are effective forCompany initiated plans to exit its manufacturing operations in Kent, Washington, as a result of market declines from the coronavirus pandemic ("COVID-19"). Select operations will be relocated to existing facilities primarily in North America. The project is estimated to take 12 to 18 months to complete. During the year ended December 31, 2017. Future adjustments2020, exit and disposal costs totaled $6.6 million primarily for employee termination benefit costs and facility cleanup costs. Total exit and disposal costs are expected to approximate $13.2 million, with approximately $6.6 million costs remaining to be incurred, primarily in 2021.
During the provisional numbers will be recorded as discrete adjustmentssecond quarter of 2020, the Company initiated plans to income tax provisionexit its manufacturing operations in Mobile, Alabama, and relocate the periodmajority of those operations to its existing manufacturing facility in which those adjustments become estimable and/or are finalized.Franklin, Wisconsin. This project is substantially complete with cumulative exit and disposal costs of $1.6 million, primarily for employee termination benefit costs and the impairment of certain assets, recognized through December 31, 2020.
ForThe Company has completed its project to relocate its aerospace connectors manufacturing operations in El Segundo, California, and Riverside, California, to existing lower cost operations in North America. During the year ended December 31, 2017,2020, exit and disposal costs totaled $2.3 million, primarily for facility clean up, travel and employee termination benefit costs. Cumulative exit and disposal costs of $10.9 million were recognized through December 31, 2020.
CBF
During the estimated impactfirst quarter of 2020, the Tax ActCompany initiated plans to consolidate certain operations globally to reduce costs and streamline processes by consolidating certain positions within selling, general and administrative, and manufacturing functions, and exited less profitable product lines that resulted in a provisional taxasset write-offs. This project is substantially complete with cumulative exit and disposal costs of $5.5 million, primarily for employee termination benefit costs and the impairment of $57.7 million. This benefit is comprised of a charge of $32.5 million related to the Transition Tax and a benefit of $90.2 million from the rate reduction impacting the valuation of the Company’s U.S. deferred tax balances.certain assets, recognized through December 31, 2020.
The Company continuesimplemented restructuring activities to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) on the Company, which are not effective until calendar year 2018 and are not expected to impact 2017 balances. Within the calculation of the Company’s tax balances, the Company has used assumptions
and estimates that may changereduce its overall headcount as a result of future guidance, interpretationgeneral market declines from COVID-19. CIT, CFT and rule-making from various regulatory bodies.
Income Tax Disclosures
A summary of pre‑tax income from U.S.CCM incurred $3.7 million, $3.4 million and non-U.S. operations for$1.0 million, respectively, in severance expense during the yearsyear ended December 31, follows:2020.
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Continuing operations: | | | | | | |
| U.S. domestic | | $ | 395.2 |
| | $ | 319.0 |
| | $ | 393.8 |
|
| Foreign | | 73.0 |
| | 91.5 |
| | 74.1 |
|
| Total pre-tax income from continuing operations | | 468.2 |
| | 410.5 |
| | 467.9 |
|
| Discontinued operations: | | |
| | |
| | |
|
| U.S. domestic | | 0.3 |
| | (1.1 | ) | | 0.1 |
|
| Foreign | | — |
| | — |
| | — |
|
| Total pre-tax income (loss) from discontinued operations | | 0.3 |
| | (1.1 | ) | | 0.1 |
|
| Total pre-tax income | | $ | 468.5 |
| | $ | 409.4 |
| | $ | 468.0 |
|
59
Consolidated Summary
The Company's exit and disposal costs by activity follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Employee severance and benefit arrangements | | $ | 16.7 | | | $ | 7.5 | | | $ | 3.2 | |
| Accelerated depreciation and impairments | | 3.2 | | | 0.2 | | | 2.3 | |
| Facility cleanup costs | | 2.5 | | | 0 | | | 0 | |
| Relocation costs | | 0.4 | | | 0.9 | | | 6.3 | |
| Lease termination costs | | 0 | | | 1.8 | | | 1.1 | |
| Other restructuring costs | | 1.7 | | | 3.3 | | | 5.0 | |
| Total exit and disposal costs | | $ | 24.5 | | | $ | 13.7 | | | $ | 17.9 | |
The Company's exit and disposal costs by segment follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Carlisle Interconnect Technologies | | $ | 14.3 | | | $ | 8.5 | | | $ | 3.2 | |
| Carlisle Brake & Friction | | 5.5 | | | 2.2 | | | 13.6 | |
| Carlisle Fluid Technologies | | 3.7 | | | 2.7 | | | 1.1 | |
| Carlisle Construction Materials | | 1.0 | | | 0.3 | | | 0 | |
| | | | | | |
| Total exit and disposal costs | | $ | 24.5 | | | $ | 13.7 | | | $ | 17.9 | |
The Company's exit and disposal costs by financial statement line item follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Cost of goods sold | | $ | 12.9 | | | $ | 7.1 | | | $ | 15.5 | |
| Selling and administrative expenses | | 9.5 | | | 5.6 | | | 1.9 | |
| Research and development expenses | | 0.3 | | | 0.1 | | | 0.1 | |
| Other operating expense, net | | 1.8 | | | 0.9 | | | 0.4 | |
| Total exit and disposal costs | | $ | 24.5 | | | $ | 13.7 | | | $ | 17.9 | |
The Company's change in exit and disposal activities liability follows:
| | | | | | | | |
| (in millions) | | Total |
| Balance as of December 31, 2019 | | $ | 5.2 | |
| Charges | | 24.5 | |
| Cash payments | | (23.0) | |
| | |
| Balance as of December 31, 2020 | | $ | 6.7 | |
The liability of $6.7 million as of December 31, 2020, primarily relates to employee severance and benefit arrangements and is included in accrued and other current liabilities.
Note 9—Income Taxes
Sources of Pre-Tax Income and Related Tax Provision by Region
Geographic sources of income before income taxes consists of the following:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Continuing operations: | | | | | | |
| U.S. domestic | | $ | 336.9 | | | $ | 484.7 | | | $ | 352.2 | |
| Foreign | | 64.4 | | | 110.6 | | | 93.7 | |
| Income from continuing operations before income taxes | | 401.3 | | | 595.3 | | | 445.9 | |
| | | | | | |
| Discontinued operations: | | | | | | |
| U.S. domestic | | (5.4) | | | (1.8) | | | 299.8 | |
| Foreign | | 0 | | | 0 | | | 0.3 | |
| Income from discontinued operations before income taxes | | (5.4) | | | (1.8) | | | 300.1 | |
| | | | | | |
| Total income before income taxes | | $ | 395.9 | | | $ | 593.5 | | | $ | 746.0 | |
The provision for income taxes from continuing operations forconsists of the years ended December 31 follows:following:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Current expense: | | | | | | |
| Federal and State | | $ | 133.0 |
| | $ | 155.5 |
| | $ | 140.1 |
|
| Foreign | | 28.4 |
| | 29.2 |
| | 24.0 |
|
| Total current expense | | 161.4 |
| | 184.7 |
| | 164.1 |
|
| Deferred expense (benefit): | | |
| | |
| | |
|
| Federal and State | | (64.7 | ) | | (15.5 | ) | | (12.7 | ) |
| Foreign | | 6.2 |
| | (9.5 | ) | | (3.1 | ) |
| Total deferred expense (benefit) | | (58.5 | ) | | (25.0 | ) | | (15.8 | ) |
| Total tax expense | | $ | 102.9 |
| | $ | 159.7 |
| | $ | 148.3 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Current provision: | | | | | | |
| Federal and State | | $ | 79.5 | | | $ | 105.9 | | | $ | 62.0 | |
| Foreign | | 23.3 | | | 23.4 | | | 25.9 | |
| Total current provision | | 102.8 | | | 129.3 | | | 87.9 | |
| | | | | | |
| Deferred benefit: | | | | | | |
| Federal and State | | (14.4) | | | (6.9) | | | 7.9 | |
| Foreign | | (11.3) | | | (0.8) | | | (8.5) | |
| Total deferred benefit | | (25.7) | | | (7.7) | | | (0.6) | |
| | | | | | |
| Total provision for income taxes | | $ | 77.1 | | | $ | 121.6 | | | $ | 87.3 | |
Rate Reconciliation
A reconciliation of the tax provision from continuing operations computed at the U.S. federal statutory rate to the actual tax provision for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Taxes at the 35% U.S. statutory rate | | $ | 163.9 |
| | $ | 143.7 |
| | $ | 163.8 |
|
| State and local taxes, net of federal income tax benefit | | 10.8 |
| | 8.6 |
| | 1.9 |
|
| Benefit of foreign earnings taxed at lower rates | | (6.7 | ) | | (8.1 | ) | | (7.9 | ) |
| Benefit for domestic manufacturing deduction | | (10.4 | ) | | (12.6 | ) | | (11.5 | ) |
| Tax credits | | (2.3 | ) | | (10.7 | ) | | — |
|
| Tax impact of impairment of goodwill | | — |
| | 41.2 |
| | — |
|
| Impact of U.S. tax reform | | (57.7 | ) | | — |
| | — |
|
| Change in investment assertion on foreign earnings | | 5.1 |
| | — |
| | — |
|
| Other, net | | 0.2 |
| | (2.4 | ) | | 2.0 |
|
| Tax expense | | $ | 102.9 |
| | $ | 159.7 |
| | $ | 148.3 |
|
| Effective income tax rate on continuing operations | | 22.0 | % | | 38.9 | % | | 31.7 | % |
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Taxes at U.S. statutory rate | | $ | 84.3 | | | $ | 125.0 | | | $ | 93.6 | |
| State and local taxes, net of federal income tax benefit | | 10.7 | | | 15.2 | | | 10.8 | |
| Foreign earnings taxed at different rates | | 3.3 | | | 0.8 | | | 1.1 | |
| Change in unrecognized tax benefit | | (11.5) | | | (2.8) | | | (7.8) | |
| Return to provision adjustments | | (2.7) | | | (7.6) | | | (2.3) | |
| | | | | | |
| Tax credits | | (5.0) | | | (5.2) | | | (3.0) | |
| Impact of U.S. tax reform | | 0 | | | 0 | | | (3.3) | |
| | | | | | |
| Other, net | | (2.0) | | | (3.8) | | | (1.8) | |
| Provision for income taxes | | $ | 77.1 | | | $ | 121.6 | | | $ | 87.3 | |
| Effective income tax rate on continuing operations | | 19.2 | % | | 20.4 | % | | 19.6 | % |
Cash payments for income taxes, net of refunds, were $142.8$120.9 million, $192.3$120.6 million and $123.0$203.0 million, in 2017, 20162020, 2019 and 2015,2018, respectively.
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Employee benefits | | $ | 38.2 | | | $ | 29.8 | |
| Deferred revenue | | 24.4 | | | 22.9 | |
| Lease liabilities | | 14.8 | | | 16.3 | |
| Inventory reserves | | 7.5 | | | 7.6 | |
| Deferred state tax attributes | | 7.2 | | | 8.3 | |
| Warranty reserves | | 5.4 | | | 4.6 | |
| Foreign loss carryforwards | | 5.3 | | | 4.4 | |
| Allowance for credit losses | | 3.3 | | | 3.3 | |
| Federal tax credit carryovers | | 3.3 | | | 2.4 | |
| Other, net | | 8.7 | | | 5.0 | |
| Gross deferred assets | | 118.1 | | | 104.6 | |
| Valuation allowances | | (7.1) | | | (5.3) | |
| Deferred tax assets after valuation allowances | | 111.0 | | | 99.3 | |
| | | | |
| Intangibles | | (205.8) | | | (219.0) | |
| Property, plant and equipment | | (57.8) | | | (55.8) | |
| Right of use assets | | (13.2) | | | (15.0) | |
| Undistributed foreign earnings | | (4.6) | | | (13.6) | |
| | | | |
| Gross deferred liabilities | | (281.4) | | | (303.4) | |
| | | | |
| Net deferred tax liabilities | | $ | (170.4) | | | $ | (204.1) | |
Deferred tax assets and liabilities are classified as long-term. Foreign deferred tax assets (liabilities) as of December 31and liabilities are grouped separately from U.S. domestic assets and liabilities and are analyzed on a jurisdictional basis.
Deferred tax assets and liabilities included in the Consolidated Balance Sheet follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Deferred revenue | | $ | 20.1 |
| | $ | 26.9 |
|
| Warranty reserves | | 4.7 |
| | 7.1 |
|
| Inventory reserves | | 8.7 |
| | 12.1 |
|
| Allowance for doubtful accounts | | 3.7 |
| | 4.5 |
|
| Employee benefits | | 31.3 |
| | 45.2 |
|
| Foreign loss carryforwards | | 3.8 |
| | 2.9 |
|
| Federal tax credit carryovers | | 3.1 |
| | 6.6 |
|
| Deferred state tax attributes | | 13.6 |
| | 14.6 |
|
| Other, net | | 2.4 |
| | 7.0 |
|
| Gross deferred assets | | 91.4 |
| | 126.9 |
|
| Valuation allowances | | (4.3 | ) | | (1.3 | ) |
| Deferred tax assets after valuation allowances | | $ | 87.1 |
| | $ | 125.6 |
|
| | | | | |
| Undistributed foreign earnings | | (7.9 | ) | | (1.7 | ) |
| Depreciation | | (42.7 | ) | | (42.4 | ) |
| Amortization | | (47.3 | ) | | (60.7 | ) |
| Acquired identifiable intangibles | | (188.3 | ) | | (134.7 | ) |
| Gross deferred liabilities | | (286.2 | ) | | (239.5 | ) |
| Net deferred tax liabilities | | $ | (199.1 | ) | | $ | (113.9 | ) |
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Other long-term assets | | $ | 3.5 | | | $ | 3.6 | |
| Other long-term liabilities | | (173.9) | | | (207.7) | |
| Net deferred tax liabilities | | $ | (170.4) | | | $ | (204.1) | |
Valuation Allowances
As of December 31, 2017,2020, the Company had no0 deferred tax assets related to net operating loss (“NOL”) carryforwards for U.S. federal tax purposes but had a deferred tax asset for state NOL carryforwards and credits of approximately $9.5 million (expiring 2018 through 2037) and deferred tax assets related to NOL carryforwards in foreign jurisdictions of approximately $3.8$3.1 million (expiring 2022 through 2026)2040). The Company believes that it is likely that certain of the state attributes will expire unused and therefore has established a valuation allowance of approximately $1.2$0.4 million against the deferred tax assets associated with these attributes. The Company believes that substantially all of the foreign NOLs will be utilized before expiration and thereforealso has not established a valuation allowance against the deferred tax assets associated with theserelated to NOL carryforwards. Ascarryforwards in foreign jurisdictions of December 31, 2017, the Company has $3.1approximately $5.3 million, of federal passive foreign tax credit carryover (expiringwhich begin to expire in 2023).2022. The Company believes that it is unlikelylikely that passivecertain foreign source incomeNOL carryforwards will be generated to utilizeexpire unused and therefore has established a valuation allowance of approximately $3.5 million. As of December 31, 2020, the passiveCompany had foreign tax credit before expirationcarryforwards of $3.2 million, which begin to expire in 2028. The Company believes it is likely the credits will expire unused and therefore has established a full valuation allowance.
Deferred tax assets and liabilities are classified as long-term. Foreign deferred tax assets and (liabilities) are grouped separately from U.S. domestic assets and liabilities and are analyzed on a jurisdictional basis.
Deferred tax assets (liabilities) included in the Consolidated Balance Sheet as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Other long-term assets | | $ | 1.4 |
| | $ | 1.1 |
|
| Other long-term liabilities | | (200.5 | ) | | (115.0 | ) |
| Net deferred tax liabilities | | $ | (199.1 | ) | | $ | (113.9 | ) |
The Company is not required to provide income taxes on the excess of the amount of the financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. The Company’s excess of financial reporting over the tax basis of investments in foreign subsidiaries is approximately equal to the cumulative unremitted earnings and cumulative translation adjustments of its foreign subsidiaries. The Company reconsiders this assertion quarterly. The Company’s cumulative unremitted earnings and cumulative translation adjustments at December 31, 2017, were approximately $608.0 million.
The Company previously intended to permanently reinvest substantially all of the earnings of its foreign subsidiaries. The Transition Tax resulted in elimination of the taxable basis differences in our foreign subsidiaries related to foreign earnings for US tax purposes. However, basis differences still may remain at the local country level. The Company has determined that an amount approximately equal to foreign cash balances will no longer beand other certain assets is not permanently reinvested for local countrywithholding tax purposes, which results in an accrual of $7.9 million related$4.6 million. It is not practicable to withholding taxes.calculate deferred tax balances on other basis differences.
Unrecognized Tax Benefits
Unrecognized tax benefits reflect the difference between the tax benefits of positions taken or expected to be taken on income tax returns and the tax benefits that meet the criteria for current recognition in the financial statements. The Company periodically assesses its unrecognized tax benefits.
A summary of the movement in gross unrecognized tax benefits (before estimated interest and penalties) for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Balance as of January 1 | | $ | 24.6 |
| | $ | 27.7 |
| | $ | 23.8 |
|
| Additions based on tax positions related to current year | | 3.0 |
| | 0.6 |
| | 0.9 |
|
| Additions related to acquisition positions | | 15.8 |
| | — |
| | 3.0 |
|
| Adjustments for tax positions of prior years | | 1.5 |
| | — |
| | 1.3 |
|
| Reductions due to statute of limitations | | (3.3 | ) | | (2.1 | ) | | (1.2 | ) |
| Reductions due to settlements | | (1.7 | ) | | (1.4 | ) | | — |
|
| Adjustments due to foreign exchange rates | | 0.7 |
| | (0.2 | ) | | (0.1 | ) |
| Balance as of December 31 | | $ | 40.6 |
| | $ | 24.6 |
| | $ | 27.7 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Balance as of January 1 | | $ | 35.9 | | | $ | 27.3 | | | $ | 37.4 | |
| Additions based on tax positions related to current year | | 0.4 | | | 0.3 | | | 3.3 | |
| Reductions due to statute of limitations | | (10.8) | | | (5.0) | | | (12.0) | |
| Adjustments related to acquired uncertain tax positions | | (0.8) | | | 11.6 | | | 0 | |
| Adjustments for tax positions of prior years | | 0 | | | 2.0 | | | 0 | |
| Reductions due to settlements | | 0 | | | (0.1) | | | (1.2) | |
| Adjustments due to foreign exchange rates | | (0.2) | | | (0.2) | | | (0.2) | |
| Balance as of December 31 | | $ | 24.5 | | | $ | 35.9 | | | $ | 27.3 | |
If the unrecognized tax benefits as of December 31, 2017,2020, were to be recognized, approximately $44.3$28.6 million would impact the Company’s effective tax rate. The amount impacting the Company’s effective rate is calculated by adding accrued interest and penalties to the gross unrecognized tax benefit excluding positions related to discontinued operations and subtracting the tax benefit associated with state taxes and interest.
The Company classifies and reports interest and penalties associated with unrecognized tax benefits as a component of the income tax provision on the Consolidated Statements of EarningsIncome and as a long‑termlong-term liability on the Consolidated Balance Sheets. The total amount of such interest and penalties accrued, but excluded from the table above, at the years ending 2017, 20162020, 2019 and 20152018 were $6.5$8.2 million, $4.7$9.2 million and $4.9$5.1 million, respectively.
The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. During the year theThe Company is working with the IRS to complete its compliance assurance process for the 20162019 tax year. The Company is also currently working with the IRS to complete its compliance assurance audit for the 2017 tax year and expects conclusion of the process within the next twelve months.
Generally, state income tax returns are subject to examination for a period of three years to five years after filing. Substantially all material state tax matters have been concluded for tax years through 2012.2013. Various state income
tax returns for subsequent years are in the process of examination. At this stage the outcome is uncertain; however, the Company believes that contingencies have been adequately provided for. Statutes of limitation vary among the foreign jurisdictions in which the Company operates. Substantially all foreign tax matters have been concluded for tax years through 2008.2009. The Company believes that foreign tax contingencies associated with income tax examinations underway or open tax years have been provided for adequately.
Based on the outcome of certain examinations or as a result of the expiration of statutes of limitations for certain jurisdictions, the Company believes that within the next 12 months it is reasonably possible that previously unrecognized tax benefits could decrease by approximately $6$9.0 million to $7$10.0 million. These previously unrecognized tax benefits relate to a variety of tax issues including tax matters relating to prior acquisitions and various state matters.
Note 7—Earnings Per Share
The Company’s restricted shares and restricted stock units contain non-forfeitable rights to dividends and are considered participating securities for purposes of computing earnings per share pursuant to the two-class method. The computation below of earnings per share excludes the income attributable to the unvested restricted shares and restricted stock units from the numerator and excludes the dilutive impact of those underlying shares from the denominator. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and performance share awards are included in the calculation of diluted earnings per share considering those are contingently issuable. Neither is considered to be a participating security as they do not contain non‑forfeitable dividend rights.
The following reflects income from continuing operations and share data used in the basic and diluted earnings per share computations using the two‑class method for the years ended December 31:
|
| | | | | | | | | | | | |
| (in millions except share and per share amounts) | | 2017 | | 2016 | | 2015 |
| Income from continuing operations | | $ | 365.3 |
| | $ | 250.8 |
| | $ | 319.6 |
|
| Less: dividends declared - common stock outstanding, restricted shares and restricted share units | | (92.1 | ) | | (84.5 | ) | | (72.3 | ) |
| Undistributed earnings | | 273.2 |
| | 166.3 |
| | 247.3 |
|
Percent allocated to common shareholders (1) | | 99.3 | % | | 99.3 | % | | 99.3 | % |
| | | 271.3 |
| | 165.0 |
| | 245.6 |
|
| Add: dividends declared - common stock | | 90.9 |
| | 83.6 |
| | 71.4 |
|
| Income from continuing operations attributable to common shares | | $ | 362.2 |
| | $ | 248.6 |
| | $ | 317.0 |
|
| | | | | | | |
| Shares (in thousands): | | |
| | |
| | |
|
| Weighted-average common shares outstanding | | 63,073 |
| | 64,226 |
| | 64,844 |
|
| Effect of dilutive securities: | | |
| | |
| | |
|
| Performance awards | | 137 |
| | 257 |
| | 253 |
|
| Stock options | | 341 |
| | 400 |
| | 707 |
|
| Adjusted weighted-average common shares outstanding and assumed conversion | | 63,551 |
| | 64,883 |
| | 65,804 |
|
| | | | | | | |
| Per share income from continuing operations: | | |
| | |
| | |
|
| Basic | | $ | 5.75 |
| | $ | 3.87 |
| | $ | 4.89 |
|
| Diluted | | $ | 5.71 |
| | $ | 3.83 |
| | $ | 4.82 |
|
| | | | | | | |
(1) Basic weighted-average common shares outstanding | | 63,073 |
| | 64,226 |
| | 64,844 |
|
| Basic weighted-average common shares outstanding, unvested restricted shares expected to vest and restricted share units | | 63,513 |
| | 64,682 |
| | 65,304 |
|
| Percent allocated to common shareholders | | 99.3 | % | | 99.3 | % | | 99.3 | % |
The denominator for both basic and diluted earnings per share is the same as used in the above table to calculate per share amounts for the income from discontinued operations andNote 10—Inventories, net income. The income from discontinued operations and net income for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions except share amounts presented in thousands) | | 2017 | | 2016 | | 2015 |
| Income (loss) from discontinued operations | | $ | 0.2 |
| | $ | (0.7 | ) | | $ | 0.1 |
|
| Net income attributable to common shareholders for basic and diluted earnings per share | | $ | 362.4 |
| | $ | 248.0 |
| | $ | 317.1 |
|
Anti-dilutive stock options excluded from EPS calculation (1) | | 320.6 |
| | 23.1 |
| | 257.5 |
|
| |
(1)
| Represents stock options excluded from the calculation of diluted earnings per share as such options’ assumed proceeds upon exercise would result in the repurchase of more shares than the underlyingaward.
|
| | | | | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 | |
| Raw materials | | $ | 193.1 | | | $ | 207.5 | | (1) |
| Work-in-process | | 85.5 | | | 85.3 | | (1) |
| Finished goods | | 266.0 | | | 254.3 | | (1) |
| Reserves | | (41.1) | | | (36.5) | | |
| Inventories, net | | $ | 503.5 | | | $ | 510.6 | | |
Note 8(1)—InventoriesAs corrected from $241.0 million for raw materials, $45.2 million for work-in-process and $260.9 million for finished goods, as previously reported.
The components of inventories as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Finished goods | | $ | 291.9 |
| | $ | 218.6 |
|
| Work-in-process | | 64.0 |
| | 51.3 |
|
| Raw materials | | 185.5 |
| | 143.4 |
|
| Reserves | | (33.5 | ) | | (36.3 | ) |
| Inventories | | $ | 507.9 |
| | $ | 377.0 |
|
Note 9—11—Property, Plant and Equipment, net
The components of property, plant and equipment, net of accumulated depreciation as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Land | | $ | 74.5 |
| | $ | 60.2 |
|
| Buildings and leasehold improvements | | 389.1 |
| | 342.5 |
|
| Machinery and equipment | | 896.9 |
| | 784.7 |
|
| Projects in progress | | 127.2 |
| | 57.5 |
|
| Property, plant and equipment, gross | | 1,487.7 |
| | 1,244.9 |
|
| Accumulated depreciation | | (706.8 | ) | | (612.7 | ) |
| Property, plant and equipment, net | | $ | 780.9 |
| | $ | 632.2 |
|
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Land | | $ | 72.9 | | | $ | 75.8 | |
| Buildings and leasehold improvements | | 499.1 | | | 479.8 | |
| Machinery and equipment | | 971.1 | | | 926.0 | |
| Projects in progress | | 59.6 | | | 54.7 | |
| Property, plant and equipment, gross | | 1,602.7 | | | 1,536.3 | |
| Accumulated depreciation | | (828.6) | | | (752.8) | |
| Property, plant and equipment, net | | $ | 774.1 | | | $ | 783.5 | |
Capitalized interest totaled $2.4$1.3 million, $0.9$1.2 million and $1.0$2.2 million for 2017, 20162020, 2019 and 2015,2018, respectively.
Note 10—12—Goodwill and Other Intangible Assets, net
Goodwill
The changes in the carrying amount of goodwill, net for the years ended December 31by segment follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | CCM | | CIT | | CFT | | CBF (1) | | Total |
| Net balance as of December 31, 2018 | | $ | 532.8 | | | $ | 643.1 | | | $ | 169.5 | | | $ | 96.4 | | | $ | 1,441.8 | |
Goodwill acquired during year (2), (3) | | 64.3 | | | 194.1 | | | 16.1 | | | 0 | | | 274.5 | |
| | | | | | | | | | |
| Measurement period adjustments | | 0.5 | | | (1.9) | | | 1.6 | | | 0 | | | 0.2 | |
| Currency translation and other | | (0.5) | | | (0.1) | | | 0.3 | | | 0.1 | | | (0.2) | |
| Net balance as of December 31, 2019 | | $ | 597.1 | | | $ | 835.2 | | | $ | 187.5 | | | $ | 96.5 | | | $ | 1,716.3 | |
Goodwill acquired during year (2), (3) | | 12.5 | | | 2.8 | | | 2.8 | | | 0 | | | 18.1 | |
| | | | | | | | | | |
| Measurement period adjustments | | 0 | | | (2.3) | | | 0 | | | 0 | | | (2.3) | |
| Currency translation and other | | 3.4 | | | (0.1) | | | 2.8 | | | 0 | | | 6.1 | |
| Net balance as of December 31, 2020 | | $ | 613.0 | | | $ | 835.6 | | | $ | 193.1 | | | $ | 96.5 | | | $ | 1,738.2 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | CCM | | CIT | | CFT | | CBF | | CFS | | Total |
| Net balance as of December 31, 2015 | | $ | 118.7 |
| | $ | 555.4 |
| | $ | 173.4 |
| | $ | 226.6 |
| | $ | 60.3 |
| | $ | 1,134.4 |
|
Goodwill acquired during year (1) | | — |
| | 83.7 |
| | 2.9 |
| | — |
| | — |
| | 86.6 |
|
| Impairment charges | | — |
| | — |
| | — |
| | (130.0 | ) | | — |
| | (130.0 | ) |
| Measurement period adjustments | | — |
| | — |
| | (0.3 | ) | | — |
| | — |
| | (0.3 | ) |
| Currency translation and other | | (1.2 | ) | | — |
| | (8.1 | ) | (2) | (0.2 | ) | | — |
| | (9.5 | ) |
| Net balance as of December 31, 2016 | | $ | 117.5 |
| | $ | 639.1 |
| | $ | 167.9 |
| | $ | 96.4 |
| | $ | 60.3 |
| | $ | 1,081.2 |
|
Goodwill acquired during year (1) | | 420.2 |
| | — |
| | — |
| | — |
| | 86.9 |
| | 507.1 |
|
| Impairment charges | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Measurement period adjustments | | — |
| | 0.3 |
| | — |
| | — |
| | 2.5 |
| | 2.8 |
|
| Currency translation and other | | 6.6 |
| | 0.9 |
| | 3.1 |
| | 0.1 |
| | — |
| | 10.7 |
|
| Net balance as of December 31, 2017 | | $ | 544.3 |
| | $ | 640.3 |
| | $ | 171.0 |
| | $ | 96.5 |
| | $ | 149.7 |
| | $ | 1,601.8 |
|
| |
(1)(1)CBF goodwill is presented net of accumulated impairment losses of $130.0 million recorded in prior periods. No other segments have incurred impairment losses.
| See Note 3 for further information on goodwill resulting from recent acquisitions. |
| |
(2)
| Includes a $4.9 million correction of certain deferred tax liabilities acquired in the Finishing Brands acquisition. |
The Company’s other intangible assets, net as(2)See Note 3 for further information on goodwill resulting from recent acquisitions.
(3)In addition to the acquisitions disclosed in Note 3, the Company acquired 1 business for an aggregate purchase price of December 31, 2017, follows:$3.2 million during 2020 and 5 businesses for an aggregate purchase price of $42.4 million during 2019.
|
| | | | | | | | | | | | |
| (in millions) | | Acquired Cost | | Accumulated Amortization | | Net Book Value |
| Assets subject to amortization: | | | | | | |
| Technology and intellectual property | | $ | 309.4 |
| | $ | (100.7 | ) | | $ | 208.7 |
|
| Customer relationships | | 979.6 |
| | (260.6 | ) | | 719.0 |
|
| Trade names and other | | 44.6 |
| | (13.7 | ) | | 30.9 |
|
| Assets not subject to amortization: | | |
| | |
| | |
|
| Trade names | | 275.8 |
| | — |
| | 275.8 |
|
| Other intangible assets, net | | $ | 1,609.4 |
| | $ | (375.0 | ) | | $ | 1,234.4 |
|
The Company’s other intangible assets, net as of December 31, 2016, follows:
|
| | | | | | | | | | | | |
| (in millions) | | Acquired Cost | | Accumulated Amortization | | Net Book Value |
| Assets subject to amortization: | | | | | | |
| Intellectual property | | $ | 200.7 |
| | $ | (72.4 | ) | | $ | 128.3 |
|
| Customer relationships | | 704.3 |
| | (201.6 | ) | | 502.7 |
|
| Other | | 15.4 |
| | (11.7 | ) | | 3.7 |
|
| Assets not subject to amortization: | | |
| | |
| | |
|
| Trade names | | 237.5 |
| | — |
| | 237.5 |
|
| Other intangible assets, net | | $ | 1,157.9 |
| | $ | (285.7 | ) | | $ | 872.2 |
|
Other Intangible Assets, net
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| (in millions) | | Acquired Cost | | Accumulated Amortization | | Net Book Value | | Acquired Cost | | Accumulated Amortization | | Net Book Value |
| Assets subject to amortization: | | | | | | | | | | | | |
| Customer relationships | | $ | 1,060.6 | | | $ | (436.4) | | | $ | 624.2 | | | $ | 1,054.4 | | | $ | (354.9) | | | $ | 699.5 | |
| Technology and intellectual property | | 313.6 | | | (208.9) | | | 104.7 | | | 304.1 | | | (167.0) | | | 137.1 | |
| Trade names and other | | 117.7 | | | (50.4) | | | 67.3 | | | 100.0 | | | (38.7) | | | 61.3 | |
| Assets not subject to amortization: | | | | | | | | | | | | |
| Trade names | | 238.6 | | | — | | | 238.6 | | | 242.7 | | | — | | | 242.7 | |
| Other intangible assets, net | | $ | 1,730.5 | | | $ | (695.7) | | | $ | 1,034.8 | | | $ | 1,701.2 | | | $ | (560.6) | | | $ | 1,140.6 | |
The remaining weighted-average amortization period of intangible assets subject to amortization as of December 31, 2017,2020, follows (in years):
|
| | | | | | | |
Intellectual propertyCustomer relationships | | 7.39.1 |
Customer relationshipsTechnology and intellectual property | | 10.85.8 |
| Trade names and other | | 9.19.9 |
| Total assets subject to amortization | | 10.08.7 |
Intangible assets subject to amortization as of December 31, 2017,2020, will be amortized as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
| Estimated future amortization expense | | $ | 112.2 |
| | $ | 111.6 |
| | $ | 108.6 |
| | $ | 103.4 |
| | $ | 94.5 |
| | $ | 428.3 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter |
| Estimated future amortization expense | | $ | 118.9 | | | $ | 103.1 | | | $ | 97.4 | | | $ | 88.3 | | | $ | 85.2 | | | $ | 303.3 | |
The net carrying values of the Company’s other intangible assets, net by reportable segment as of December 31 follows:
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Carlisle Construction Materials | | $ | 300.9 | | | $ | 345.3 | |
| Carlisle Interconnect Technologies | | 384.8 | | | 441.0 | |
| Carlisle Fluid Technologies | | 261.3 | | | 272.8 | |
| Carlisle Brake & Friction | | 73.9 | | | 80.2 | |
| Corporate | | 13.9 | | | 1.3 | |
| Total | | $ | 1,034.8 | | | $ | 1,140.6 | |
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Carlisle Construction Materials | | $ | 325.1 |
| | $ | 55.2 |
|
| Carlisle Interconnect Technologies | | 344.5 |
| | 379.1 |
|
| Carlisle Fluid Technologies | | 302.5 |
| | 313.7 |
|
| Carlisle Brake & Friction | | 92.9 |
| | 99.3 |
|
| Carlisle FoodService Products | | 169.4 |
| | 24.9 |
|
| Total | | $ | 1,234.4 |
| | $ | 872.2 |
|
2016 ImpairmentNote 13—Accrued and Other Current Liabilities
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Compensation and benefits | | $ | 109.3 | | | $ | 109.5 | |
| Customer incentives | | 68.0 | | | 69.9 | |
| Standard product warranties | | 30.5 | | | 29.2 | |
| Income and other accrued taxes | | 14.8 | | | 22.7 | |
| Other accrued liabilities | | 72.4 | | | 63.2 | |
| Accrued and other current liabilities | | $ | 295.0 | | | $ | 294.5 | |
In the third quarter of 2016, the Company concluded that its expectations of recovery in the near term in CBF’s related end markets had declined to the extent that it was more likely than not that the fair value of the Wellman® trade name and CBF reporting unit were below their carrying values. As a result, in the third quarter of 2016 the Company recognized impairment charges within its CBF segment of $11.5 million related to the Wellman® trade name and $130.0 million of goodwill, resulting in a carrying value of $35.4 million and $96.5 million, respectively. Consistent with its accounting policies effective at the date of impairment, the Company performed the impairment tests for these assets through a one-step process for the Wellman® trade name and a two-step process for goodwill.
Wellman® Trade Name ImpairmentStandard Product Warranties
The Company basedoffers various standard warranty programs on its estimate of fair value of the Wellman® trade name on the income approach utilizing the discounted future cash flow method. As part of estimating discounted future cash flows attributable to the Wellman® trade name, management estimated future revenues, royalty ratesproducts, primarily for certain installed roofing systems, high-performance cables and discount rates. These represent the most significant assumptions usedassemblies, fluid technologies and braking products. The Company’s liability for such warranty programs is included in accrued expenses. The change in the Company’s evaluation of the fair value of the Wellman® trade name (i.e., Level 3 measurements). As a result, management determined that the fair value of the Wellman® trade name was below its carrying value and recorded an impairment charge equal to the difference as noted above.
CBF Goodwill Impairment
Similarly, for Step 1 of the two-step goodwill impairment test, the Company estimated the fair value of the CBF reporting unit based on the income approach utilizing the discounted cash flow method. Estimated industry weighted average cost of capital, revenue growth rates and operating margins for the CBF reporting unit represent the most significant assumptions used in the Company’s evaluation of fair value (i.e., Level 3 measurements). As a result, the Company determined that the fair value of the CBF reporting unit was below its carrying value by approximately 25% and therefore Step 2 of the goodwill impairment test was required to measure the amount of the Goodwill impairment. In performing the Step 2 analysis, the Company was required to allocate the reporting units’ fair value to the estimated fair values of the CBF reporting unit’s underlying asset andstandard product warranty liabilities both those recognized and unrecognized, with the residual amount reflecting the implied value of goodwill at September 30, 2016.
See Note 1 for further information regarding the valuation of goodwill and indefinite‑lived intangible assets.
Note 11—Commitments and Contingencies
Leases
The Company currently leases a portion of its manufacturing facilities, distribution centers and equipment. Some of the leases include scheduled rent increases stated in the lease agreement, generally expressed as a stated percentage increase of the minimum lease payment over the lease term. The Company currently has no leases that require rent to be paid based on contingent events. Rent expense was $30.2 million, $27.4 million and $25.9 million in 2017, 2016 and 2015, respectively, inclusive of rent based on scheduled rent increases and rent holidays recognized on a straight‑line basis.
Future minimum payments under its various non‑cancelable operating leases in future years follows:
| | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 |
| Balance as of January 1 | | $ | 29.2 | | | $ | 31.9 | |
| Provision | | 14.7 | | | 17.1 | |
| | | | |
| Claims | | (14.1) | | | (19.6) | |
| Foreign exchange | | 0.7 | | | (0.2) | |
| Balance as of December 31 | | $ | 30.5 | | | $ | 29.2 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | Thereafter |
| Future minimum payments | | $ | 22.6 |
| | $ | 18.2 |
| | $ | 12.1 |
| | $ | 8.9 |
| | $ | 6.9 |
| | $ | 16.2 |
|
Workers’ Compensation Claims and Related LossesNote 14—Long-term Debt
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Fair Value (1) |
| (in millions) | | December 31,
2020 | | December 31,
2019 | | December 31,
2020 | | December 31,
2019 |
| 2.75% Notes due 2030 | | $ | 750.0 | | | $ | 0 | | | $ | 804.8 | | | $ | 0 | |
| 3.75% Notes due 2027 | | 600.0 | | | 600.0 | | | 679.3 | | | 623.4 | |
| 3.5% Notes due 2024 | | 400.0 | | | 400.0 | | | 438.3 | | | 414.2 | |
| 3.75% Notes due 2022 | | 350.0 | | | 350.0 | | | 366.9 | | | 361.4 | |
| 5.125% Notes due 2020 | | 0 | | | 250.0 | | | 0 | | | 255.0 | |
| | | | | | | | |
| Unamortized discount, debt issuance costs and other | | (18.7) | | | (8.4) | | | | | |
| Total long term-debt | | $ | 2,081.3 | | | $ | 1,591.6 | | | | | |
| Less current portion of long-term debt | | 1.1 | | | 250.2 | | | | | |
| Total long term-debt, net of current portion | | $ | 2,080.2 | | | $ | 1,341.4 | | | | | |
(1)The Company has accrued approximately $14.9 million and $18.1 million related to workers’ compensation claims as of December 31, 2017 and 2016, respectively. As of December 31, 2017, $4.6 million and $10.3 million were included in accrued expenses and other long‑term liabilities, respectively. As of December 31, 2016, $5.8 million and $12.3 million were included in accrued expenses and other long‑term liabilities, respectively. The liability related to workers’ compensation claims, both those reported to the Company and those incurred but not yet reported,fair value is estimated based on actuarial estimates, loss development factors andcurrent yield rates plus the Company’s historical loss experience.estimated credit spread available for financings with similar terms and maturities. Based on these inputs, debt instruments are classified as Level 2 in the fair value hierarchy.
2.75% Notes Due 2030
On February 28, 2020, the Company completed a public offering of $750.0 million of unsecured senior notes with a stated interest rate of 2.75% due March 1, 2030 (the “2030 Notes”). The 2030 Notes were issued at a discount of $9.3 million, resulting in proceeds to the Company maintains occurrence‑based insurance coverage with certain insurance carriers in accordance with its risk management practices that provides for reimbursement of workers’ compensation claims in excess of $0.5$740.7 million. The Company records a recovery receivable fromincurred costs, primarily underwriting fees, to issue the insurance carriers when such recovery is deemed probable based2030 Notes of approximately $6.5 million. Additionally in the first quarter of 2020, the Company entered into interest rate derivative instruments to hedge variability in future interest payments on the nature2030 Notes of the claim10-year US Treasury Rate ("treasury locks"), which were designated as hedges, and historysettled resulting in a loss of recoveries. As$16.4 million. The discount and issuance costs of December 31, 2017 and 2016,$15.8 million are reflected net within long-term debt on the Company did not have any significant recovery receivables recorded for workers’ compensation claims.
Letters of Credit and Guarantees
During the normal course of business, the Company enters into commitments in the form of letters of credit and bank guarantees to provide financial and performance assurance to third parties. As of December 31, 2017 and 2016, the Company had $26.3 million and $28.7 million letters of credit and bank guarantees outstanding, respectively. The Company has multiple arrangements to obtain letters of credit, which include an agreement with an unspecified availability and separate agreements for up to $80.0 million in letters of credit, of which $55.9 million was available as of December 31, 2017.
Litigation
Over the years, the Company has been named as a defendant, along with numerous other defendants, in lawsuits in various state courts in which plaintiffs have alleged injury due to exposure to asbestos‑containing brakes, which Carlisle manufactured in limited amounts between the late‑1940’sConsolidated Balance Sheets and the mid‑1980’s. In addition to compensatory awards, these lawsuits may also seek punitive damages. Generally, the Company has obtained dismissals or settlementsloss on treasury locks of its asbestos‑related lawsuits with no material effect on its financial condition, results of operations or cash flows. The Company maintains insurance coverage that applies to the Company’s defense costs and payments of settlements or judgments$16.4 million is reflected in connection with asbestos‑related lawsuits. At this time, the amount of reasonably possible additional asbestos claims, if any, is not material to the Company’s financial position, results of operations or operating cash flows although these matters could result in the Company being subject to monetary damages, costs or expenses and charges against earnings in particular periods.
The Company may occasionally be involved in variousaccumulated other legal actions arising in the normal course of business. In the opinion of management, the ultimate outcome of such actions, either individually or in the aggregate, will not have a material adverse effectcomprehensive income on the consolidated financial position, results of operations for a particular period or annual operating cash flowsConsolidated Balance Sheets. These costs are amortized to interest expense over the life of the Company.
Environmental Matters
The Company2030 Notes using the effective interest method. Interest is subject to increasingly stringent environmental lawspaid each March 1 and regulations, including those relating to air emissions, wastewater dischargesSeptember 1, and chemical and hazardous waste management and disposal. Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances or wastes. Other environmental laws and regulations require the obtainment of and compliance with environmental permits. To date, costs of complying with environmental, health and safety requirements have not been material and the Company does not currently have any significant accruals related to potential future costs of environmental remediation as of December 31, 2017 and 2016, nor does the Company have any asset retirement obligations recorded at those dates. However, the nature of the Company’s operations and its long history of industrial activities at certain of its current or former facilities, as well as those acquired, could potentially result in material environmental liabilities or asset retirement obligations.
While the Company must comply with existing and pending climate change legislation, regulation, international treaties or accords, current laws and regulations do not have a material impactcommenced on its business, capital expenditures or financial position. Future events, including those relating to climate change or greenhouse gas regulation, could require the Company to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.
Note 12—Long-term Debt
The Company's borrowings as of December 31 follows:
|
| | | | | | | | | | | | | | | | |
| | | 2017 | | 2016 | | Fair Value (1) |
| (in millions) | | | | 2017 | | 2016 |
| 3.75% Notes due 2027 | | $ | 600.0 |
| | $ | — |
| | $ | 607.1 |
| | $ | — |
|
| 3.5% Notes due 2024 | | 400.0 |
| | — |
| | 403.7 |
| | — |
|
| 3.75% Notes due 2022 | | 350.0 |
| | 350.0 |
| | 358.9 |
| | 347.2 |
|
| 5.125% Notes due 2020 | | 250.0 |
| | 250.0 |
| | 264.8 |
| | 263.1 |
|
| Unamortized discount, debt issuance costs and other | | (13.8 | ) | | (3.6 | ) | | | | |
| Total long term-debt | | 1,586.2 |
| | 596.4 |
| | | | |
| Less current portion of long-term debt | | — |
| | — |
| | | | |
| Total long term-debt, net of current portion | | $ | 1,586.2 |
| | $ | 596.4 |
| | | | |
| |
(1)
| The fair value is estimated based on current yield rates plus the Company’s estimated credit spread available for financings with similar terms and maturities. Based on these inputs, debt instruments are classified as Level 2 in the fair value hierarchy. |
In August 2016, the Company utilized cash on hand to repay the outstanding principal balance of $150.0 million on the 6.125% senior unsecured notes.
3.75% Notes Due 2027
On November 16, 2017, the Company completed a public offering of $600.0 million of notes with a stated interest rate of 3.75% due December 1, 2027 (the “2027 Notes”). The 2027 Notes were issued at a discount of $2.4 million, resulting in proceeds to the Company of $597.6 million. The Company incurred costs to issue the 2027 Notes of approximately $7.7 million, inclusive of underwriters’, credit rating agencies’ and attorneys’ fees and other costs. The discount and issuance costs are amortized to interest expense over the life of the 2027 Notes. Interest is paid each June 1 and December 1, commencing on June 1, 2018.1.
3.5% Notes Due 2024
On November 16, 2017, the Company completed a public offering of $400.0 million of notes with a stated interest rate of 3.5% due December 1, 2024 (the “2024 Notes”). The 2024 Notes were issued at a discount of $0.4 million, resulting in proceeds to the Company of $399.6 million. The Company incurred costs to issue the 2024 Notes of approximately $4.5 million, inclusive of underwriters’, credit rating agencies’ and attorneys’ fees and other costs.
The discount and issuance costs are amortized to interest expense over the life of the 2024 Notes. Interest is paid each June 1 and December 1, commencing on June 1, 2018.1.
3.75% Notes Due 2022
On November 20, 2012, the Company completed a public offering of $350.0 million of notes with a stated interest rate of 3.75% due November 15, 2022 (the “2022 Notes”). The 2022 Notes were issued at a discount of $1.1 million, resulting in proceeds to the Company of $348.9 million. The Company incurred costs to issue the 2022 Notes of approximately $2.9 million, inclusive of underwriters’, credit rating agencies’ and attorneys’ fees and other costs. Both the discount and issuance costs are being amortized to interest expense over the life of the 2022 Notes. Interest is paid each May 15 and November 15.
5.125% Notes Due 2020
On December 9, 2010, the Company completed a public offering of $250.0 million of notes with a stated interest rate of 5.125% due December 15, 2020 (the “2020 Notes”). The 2020 Notes were issued at a discount of approximately $1.1 million, resulting in proceeds to the Company of approximately $248.9 million. The Company incurred costs to issue the 2020 Notes of approximately $1.9 million, inclusive of underwriters’, credit rating agencies’ and attorneys’ fees and other costs. Interest on the 2020 Notes is paid each June 15 and December 15.
Notes Terms and Redemption Features
The 2030, 2027, 2024 2022 and 20202022 Notes (jointly the “Notes”) are presented net of the related discount and debt issuance costs in long‑termlong-term debt. The Notes may be redeemed at the Company's option, in whole or in part, plus accrued and unpaid interest, at any time prior to the dates stated below, at a price equal to the greater of (i) 100%100.0% of the principal amounts; or (ii) the sum of the present values of the remaining scheduled payments of principal and interest discounted to the redemption date on a semi-annual basis at the Treasury Rate plus a spread (noted below). The Notes may also be redeemed at any time after the dates noted below, in whole or in part, at the Company's option at 100%100.0% of the principal amount, plus accrued and unpaid interest.
|
| | | | | | | | | | | | | |
| Debt Instrument | | Date | | Spread |
| 2.75% Notes due 2030 | | December 1, 2029 | | 20 basis points |
| 3.75% Notes due 2027 | | September 1, 2027 | | 25 basis points |
| 3.5% Notes due 2024 | | October 1, 2024 | | 20 basis points |
| 3.75% Notes due 2022 | | August 15, 2022 | | 35 basis points |
5.125% Notes due 2020 | | September 15, 2020 | | 35 basis points |
Upon a change-in-control triggering event, the Company will be required to offer to repurchase the Notes at 101%101.0% of the principal amount, plus accrued and unpaid interest.
The Notes are subject to the Company's existing indenture dated January 15, 1997, and accordingly, are subject to the same restrictive covenants and limitations as the Company's existing indebtedness. The Notes are general unsecured obligations of the Company and rank equally with the Company's existing and future unsecured and unsubordinated indebtedness. The Notes are subordinate to any existing or future debt or other liabilities of the Company's subsidiaries.
Revolving Credit Facility (the “Facility”)
On October 20, 2011,February 5, 2020, the Company entered into a Third Amended and Restated Credit Agreement (“the Credit Agreement”) administered by J.P. Morgan Chase Bank, N.A. (“JPMorgan Chase”). On December 12, 2013, the Company executed an amendment to the facility to amend certain terms and extend the term of the facility to December 12, 2018.
On February 21, 2017, the Company entered into a second amendment (the "Amendment") to the Company's ThirdFourth Amended and Restated Credit Agreement (the “Credit Agreement”“Amendment”) administered by JPMorgan Chase Bank, N.A. Among other things, the Amendment increased the lenders' aggregate revolving commitment from $600.0 million to $1.0 billion and extended the maturity date of the Facility from December 12, 2018February 21, 2022, to February 21, 2022.5, 2025. During the first quarter of 2017,2020, the Company incurred $1.4$1.3 million of debt issuancefinancing costs to finalize the amendment, which will beare recognized ratably over the extended maturity date of the Facility. The Facility has a feature that allows the Company to increase availability, at the Company'sits option, by an aggregate amount of up to $500.0 million through increased commitments from existing lenders or the addition of new lenders. Under the Facility the Company may also enter into commitments in the form of standby, commercial, or direct pay letters of credit for an amount not to exceed $50.0 million. The Facility provides
for grid-based interest pricing based on the credit rating of the senior unsecured bank debt or other unsecured senior debt. The Facility is also subject to fees based on applicable rates as defined in the agreement and the aggregate commitment, regardless of usage.
The Facility provides for variable interest pricing based on the credit rating of the senior unsecured bank debt or other unsecured senior debt. The Facility is also subject to fees based on applicable rates as defined in the agreement and the aggregate commitment, regardless of usage. The Facility requires the Company to meet various restrictive covenants and limitations including certain leverage ratios, interest coverage ratios and limits on outstanding debt balances held by certain subsidiaries.
As of December 31, 2017,2020, the Company had 0 borrowings and $1.0 billion available under its Amended Credit Agreement. During 2017 the Company borrowed and repaid $1.2 billion under the Facility. There were noDuring 2020, borrowings and repayments under the Facility in 2016totaled $500.0 million with a weighted average interest rate of 1.9%. During 2019 and 2018, the Company had 0 borrowings or repayments under the Facility.
Covenants and Limitations
Under the Company’s debt and credit facilities, the Company is required to meet various restrictive covenants and limitations, including limitations on certain leverage ratios, interest coverage and limits on outstanding debt balances held by certain subsidiaries. The Company was in compliance with all covenants and limitations as of December 31, 2020 and 2019.
Letters of Credit and Guarantees
During the normal course of business, the Company enters into commitments in 2017the form of letters of credit and 2016.bank guarantees to provide its own financial and performance assurance to third parties. The Company has not issued any guarantees on behalf of any third parties. As of December 31, 2020, and 2019, the Company had $25.2 million and $25.5 million, in letters of credit and bank guarantees outstanding, respectively. The Company has multiple arrangements to obtain letters of credit, which include an agreement with an unspecified availability and separate agreements for up to $80.0 million in letters of credit, of which $54.9 million was available as of December 31, 2020.
Interest Payments
Cash payments for interest were $29.6$66.2 million, $35.9$63.7 million and $35.1$65.4 million in 2017, 20162020, 2019 and 2015,2018, respectively.
Note 15—Employee Benefit Plans Note 13—Retirement Plans
Defined Benefit Plans
The Company maintains defined benefit retirement plans, primarily for certain domestic employees, as presented below. All plans are frozen to new entrants, with the exception of the executive supplemental and director defined benefit pension plans.plan. Benefits are based primarily on years of service and earnings of the employee.
The significant assumptions used in the measurement of the projected benefit obligation and net periodic benefit cost primarily include the discount rate, rate of compensation increase and expected long-term return on plan assets. Weighted‑averageWeighted-average assumptions for the projected benefit obligation follows:
| | | | | | | | | | | | | | |
| | | December 31,
2020 | | December 31,
2019 |
| Discount rate | | 2.1 | % | | 3.0 | % |
| Rate of compensation increase | | 3.8 | % | | 3.8 | % |
Weighted-average assumptions for net periodic benefit cost follows:
| | | | | | | | | | | | | | | | | | | | |
| | | 2020 | | 2019 | | 2018 |
| Discount rate | | 3.0 | % | | 4.1 | % | | 3.5 | % |
| Rate of compensation increase | | 3.8 | % | | 3.8 | % | | 3.8 | % |
| Expected long-term return on plan assets | | 6.6 | % | | 6.3 | % | | 6.3 | % |
| | | | | | |
The weighted-average cash balance interest crediting rate for the Company's cash balance defined benefit plans was 4.0% for the years ended December 31, follows:
|
| | | | | | |
| | | 2017 | | 2016 |
| Discount rate | | 3.49 | % | | 3.86 | % |
| Rate of compensation increase | | 3.81 | % | | 3.82 | % |
Weighted‑average assumptions for net periodic benefit cost for the years ended December 31 follows:
|
| | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Discount rate | | 3.91 | % | | 4.35 | % | | 3.87 | % |
| Rate of compensation increase | | 3.82 | % | | 4.29 | % | | 4.29 | % |
| Expected long-term return on plan assets | | 6.30 | % | | 6.20 | % | | 6.30 | % |
2020, 2019 and 2018.
The Company considers several factors in determining the long-term rate of return for plan assets. Asset-class return expectations are set using a combination of empirical and forward-looking analyses. Capital market
assumptions for the composition of the Company’s asset portfolio are intended to capture the behavior of asset classes observed over several market cycles. The Company also looks to historical returns for reasonabilityreasonableness and appropriateness.
The following table reconcilesA reconciliation of the change in the projected benefit obligation, the change in plan assets and the funded status for the years ended December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Funded status | | | | |
| Projected benefit obligation | | | | |
| Beginning of year | | $ | 172.5 |
| | $ | 174.3 |
|
| Change in benefit obligation: | | |
| | |
|
| Service cost | | 2.6 |
| | 3.4 |
|
| Interest cost | | 5.3 |
| | 5.4 |
|
| Plan amendments | | 0.7 |
| | (0.1 | ) |
| Actuarial (gain)/loss | | 15.5 |
| | 1.2 |
|
| Benefits paid | | (13.8 | ) | | (11.7 | ) |
| End of year | | $ | 182.8 |
| | $ | 172.5 |
|
| Fair value of plan assets | | |
| | |
|
| Beginning of year | | $ | 163.2 |
| | $ | 162.7 |
|
| Change in plan assets: | | |
| | |
|
| Actual return on plan assets | | 14.9 |
| | 11.2 |
|
| Company contributions | | 1.4 |
| | 1.0 |
|
| Benefits paid | | (13.8 | ) | | (11.7 | ) |
| End of year | | $ | 165.7 |
| | $ | 163.2 |
|
| | | | | |
| (Unfunded) status end of year | | $ | (17.1 | ) | | $ | (9.3 | ) |
| | | | | |
| Accumulated benefit obligation at end of year | | $ | 181.1 |
| | $ | 171.5 |
|
| | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 |
| Funded status | | | | |
| Projected benefit obligation | | | | |
| Balance as of January 1 | | $ | 178.9 | | | $ | 167.5 | |
| Change in benefit obligation: | | | | |
| Service cost | | 3.0 | | | 2.8 | |
| Interest cost | | 4.5 | | | 6.1 | |
| Plan amendments | | 0 | | | (0.1) | |
| Actuarial loss | | 14.5 | | | 17.2 | |
| Benefits paid | | (14.5) | | | (14.6) | |
| Balance as of December 31 | | $ | 186.4 | | | $ | 178.9 | |
| Fair value of plan assets | | | | |
| Balance as of January 1 | | $ | 156.5 | | | $ | 148.6 | |
| Change in plan assets: | | | | |
| Actual return on plan assets | | 18.9 | | | 20.9 | |
| Company contributions | | 1.5 | | | 1.6 | |
| Benefits paid | | (14.5) | | | (14.6) | |
| Balance as of December 31 | | $ | 162.4 | | | $ | 156.5 | |
| | | | |
| Unfunded status as of December 31 | | $ | (24.0) | | | $ | (22.4) | |
| | | | |
| Accumulated benefit obligation as of December 31 | | $ | 185.2 | | | $ | 178.0 | |
The Company’s projected benefit obligation includes approximately $22.3$23.4 million and $21.7$21.8 million related to the Company’s executive supplemental and director defined benefit pension plans as of December 31, 20172020 and 2016,2019, respectively. The Company’s accumulated benefit obligation includes approximately $20.7$22.2 million and $20.6$20.9 million related to the Company’s executive supplemental and director defined benefit pension plans as of December 31, 20172020 and 2016,2019, respectively. The executive supplemental and director defined benefit plans have no0 plan assets and the Company is not required to fundpre-fund the obligations. The U.S. plans required to be funded by the Company were fully funded as of December 31, 2017 and 2016.
The net pension assets (liabilities) included in the Consolidated Balance Sheets as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Long-term assets | | $ | 5.2 |
| | $ | 12.4 |
|
| Current liabilities | | (1.4 | ) | | (1.4 | ) |
| Long-term liabilities | | (20.9 | ) | | (20.3 | ) |
| Net pension asset (liability) | | $ | (17.1 | ) | | $ | (9.3 | ) |
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| | | | |
| Current liabilities | | $ | (1.5) | | | $ | (1.5) | |
| Long-term liabilities | | (22.5) | | | (20.9) | |
| Net pension liability | | $ | (24.0) | | | $ | (22.4) | |
The amounts included in accumulated other comprehensive as of December 31income (loss) that have not been recognized in net periodic pension cost follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Unrecognized actuarial losses (gross) | | $ | 48.8 |
| | $ | 40.2 |
|
| Unrecognized actuarial losses (net of tax) | | 38.0 |
| | 25.3 |
|
| Unrecognized prior service costs (gross) | | 1.3 |
| | 0.9 |
|
| Unrecognized prior service costs (net of tax) | | 1.1 |
| | 0.5 |
|
The Company estimates that $0.3 million ($0.2 million net of tax) of prior service cost and $4.3 million ($3.4 million net of tax) of actuarial losses will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2018.
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Unrecognized actuarial losses (gross) | | $ | 52.4 | | | $ | 52.1 | |
| Unrecognized actuarial losses (net of tax) | | 42.3 | | | 41.5 | |
| Unrecognized prior service costs (gross) | | 0.5 | | | 0.8 | |
| Unrecognized prior service costs (net of tax) | | 0.4 | | | 0.6 | |
The components of net periodic benefit cost for the years ended December 31 follows:
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2020 | | 2019 | | 2018 |
| Service cost | | $ | 3.0 | | | $ | 2.8 | | | $ | 3.1 | |
| Interest cost | | 4.5 | | | 6.1 | | | 5.5 | |
| Expected return on plan assets | | (9.8) | | | (9.7) | | | (10.3) | |
| Amortization of unrecognized net loss | | 5.1 | | | 3.1 | | | 4.3 | |
| Amortization of unrecognized prior service credit | | 0.2 | | | 0.2 | | | 0.3 | |
| Net periodic benefit cost | | $ | 3.0 | | | $ | 2.5 | | | $ | 2.9 | |
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Service cost | | $ | 2.6 |
| | $ | 3.4 |
| | $ | 3.7 |
|
| Interest cost | | 5.3 |
| | 5.4 |
| | 7.1 |
|
| Expected return on plan assets | | (10.2 | ) | | (10.1 | ) | | (10.2 | ) |
| Amortization of unrecognized net loss | | 2.3 |
| | 2.1 |
| | 4.1 |
|
| Amortization of unrecognized prior service credit | | 0.2 |
| | 0.2 |
| | 0.2 |
|
| Net periodic benefit cost | | $ | 0.2 |
| | $ | 1.0 |
| | $ | 4.9 |
|
68
Disclosures on investment policies and strategies, categories of plan assets and the fair value measurements of plan assets are included below.
The Company employs a liability driven investment approach whereby plan assets are invested primarily in fixed income investments to match the changes in the projected benefit obligation of funded plans related to changes in interest rates. Risk tolerance is established through careful consideration of projected benefit obligations, plan funded status and the Company’s other obligations and strategic investments.
The established target allocation is 88%88.0% fixed income securities and 12%12.0% equity securities. Fixed income investments are diversified across core fixed income,U.S. treasury, long and intermediate duration and high yield bonds. Equity investments are diversified across large capitalization U.S. and international stocks. Investment risk is measured and monitored on an ongoing basis through investment portfolio reviews, annual projected benefit liability measurements and asset/liability studies.
The fair value measurement of the plans’ assets by asset category as of December 31 follows:
| | | | | | | | | | | | | | |
| | | Quoted Prices in Active Markets for Identical Assets (Level 1) |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Cash | | $ | 0.6 | | | $ | 0.6 | |
| U.S. treasury bonds | | 21.0 | | | 20.9 | |
| Mutual funds: | | | | |
Equity mutual funds (1) | | 19.0 | | | 17.8 | |
Fixed income mutual funds (2) | | 121.8 | | | 117.2 | |
| Total | | $ | 162.4 | | | $ | 156.5 | |
|
| | | | | | | | |
| | | Quoted Prices in Active Markets for Identical Assets (Level 1) |
| (in millions) | | 2017 | | 2016 |
| Cash | | $ | 0.6 |
| | $ | 0.6 |
|
| Mutual funds: | | |
| | |
|
Equity mutual funds (1) | | $ | 19.4 |
| | $ | 20.6 |
|
Fixed income mutual funds (2) | | 145.6 |
| | 142.0 |
|
| Total | | $ | 165.6 |
| | $ | 163.2 |
|
| |
(1)(2)This category is comprised of investments in mutual funds that invest in U.S. corporate fixed income securities, including asset-backed securities; high yield fixed income securities primarily rated BB, B, CCC, CC, C and D; and US dollar denominated debt securities of government, government related and corporate issuers in emerging market countries. | This category is comprised of investments in mutual funds that invest in equity securities such as large publicly traded companies listed in the S&P 500 Index; small to medium sized companies with market capitalization in the range of the Russell 2500 Index; and foreign issuers in emerging markets. |
| |
(2)
| This category is comprised of investments in mutual funds that invest in U.S. corporate and government fixed income securities, including asset‑backed securities; high yield fixed income securities primarily rated BB, B, CCC, CC, C and D; and US dollar denominated debt securities of government, government related and corporate issuers in emerging market countries. |
The Company made contributions of $1.4$1.5 million and $1.0$1.6 million during 20172020 and 2016,2019, respectively, which pertain to the Company’s executive supplemental and director defined benefit pension plans. This contribution covers current participant benefits as these plans have no0 plan assets. NoNaN minimum contributions to the pension plans were required in 20172020 and 2016.2019. During 2018,2021, the Company expects to pay approximately $1.4$1.5 million in participant benefits under the executive supplemental and director plans. In light of the plans’ funded status, the Company does not expect to make discretionary contributions to its pension plans in 2018.
A summary of estimated future benefits to be paid for the Company’s defined benefit pension plans as of December 31, 2017,2020, follows:
|
| | | | |
| (in millions) | | Estimated Benefit Payments |
| 2018 | | $ | 13.7 |
|
| 2019 | | 14.2 |
|
| 2020 | | 14.4 |
|
| 2021 | | 14.1 |
|
| 2022 | | 14.2 |
|
| 2023-2027 | | 69.2 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | 2026-2030 |
| Estimated benefit payments | | $ | 13.9 | | | $ | 14.3 | | | $ | 14.6 | | | $ | 14.4 | | | $ | 14.7 | | | $ | 62.7 | |
Defined Contribution PlanPlans
401K Plan
The Company maintains defined contribution savings plans covering a significant portion of its eligible employees. Participant contributions are matched by the Company up to a 4.0% maximum of eligible compensation, subject to compensation and contribution limits as defined by the Internal Revenue Service. Employer contributions for the savings plan were $14.8$16.9 million, $13.3$16.6 million and $12.2$15.2 million in 2017, 20162020, 2019 and 2015,2018, respectively.
Matching contributions are invested in funds as directed by participants. Eligible participants may also elect to invest up to 50.0% of the Company’s matching contribution in Company common stock. Common shares held by the contribution savings plan as of December 31 follows:
|
| | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Common shares held | | 1.1 |
| | 1.2 |
| | 1.3 |
|
Note 14—Deferred Revenue
Deferred revenue consists primarily of unearned revenue related to separately priced extended warranty contracts on sales of certain products, the most significant being those offered on its installed roofing systems within the CCM segment. Other deferred revenue primarily relates to customer prepayments on sales within the CFT segment.
The amount of deferred revenue recognized related to separately priced extended product warranty contracts for the years ended December 31 follows:
|
| | | | | | | | | | | | |
| (in millions) | | 2017 | | 2016 | | 2015 |
| Extended product warranty contracts amortization | | $ | 20.4 |
| | $ | 19.5 |
| | $ | 18.5 |
|
The deferred revenue liability as of December 31 is summarized as follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Extended product warranty contracts - current | | $ | 19.8 |
| | $ | 18.8 |
|
| Customer prepayments - current | | 8.0 |
| | 4.4 |
|
| Extended product warranty contracts - long-term | | 188.0 |
| | 172.0 |
|
| Deferred revenue | | $ | 215.8 |
| | $ | 195.2 |
|
Expected costs of services to be performed under extended product warranty contracts are actuarially determined. Any expected costs in excess of the deferred revenue liability are recognized within accrued expenses.
Note 15—Accrued Expenses
The components of accrued expenses as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Compensation and benefits | | $ | 104.1 |
| | $ | 97.9 |
|
| Customer incentives | | 70.7 |
| | 58.1 |
|
| Standard product warranties | | 30.9 |
| | 29.5 |
|
| Income and other accrued taxes | | 19.4 |
| | 14.2 |
|
| Other accrued expenses | | 53.3 |
| | 47.0 |
|
| Accrued expenses | | $ | 278.4 |
| | $ | 246.7 |
|
Standard Product Warranties
The Company offers various standard warranty programs on its products, primarily for certain installed roofing systems, high-performance cables and assemblies, fluid technologies, braking products and foodservice equipment. The Company’s liability for such warranty programs is included in accrued expenses. The change in the Company’s standard product warranty liabilities as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Balance as of January 1 | | $ | 29.5 |
| | $ | 28.9 |
|
| Current year provision | | 16.8 |
| | 23.7 |
|
| Acquired warranty obligation | | 0.1 |
| | — |
|
| Current year claims | | (16.5 | ) | | (22.9 | ) |
| Current year foreign exchange | | 1.0 |
| | (0.2 | ) |
| Balance as of December 31 | | $ | 30.9 |
| | $ | 29.5 |
|
Note 16—Other Long‑Term Liabilities
The components of other long‑term liabilities as of December 31 follows:
|
| | | | | | | | |
| (in millions) | | 2017 | | 2016 |
| Deferred taxes and other tax liabilities | | $ | 262.6 |
| | $ | 144.1 |
|
| Pension and other post-retirement obligations | | 26.6 |
| | 27.1 |
|
| Deferred compensation | | 24.7 |
| | 21.2 |
|
| Long-term workers' compensation | | 10.3 |
| | 12.3 |
|
| Other | | 14.5 |
| | 12.3 |
|
| Other long-term liabilities | | $ | 338.7 |
| | $ | 217.0 |
|
| | | | | | | | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 | | December 31,
2018 |
| Common shares held | | 0.8 | | | 0.9 | | | 1.0 | |
Deferred Compensation
- Cash
The Company’s Deferred Compensation Plan allows certain eligible participants to defer a portion of their cash compensation and provides a matching contribution to the deferred compensation plan of up to 4.0% of eligible compensation. Eligible participants may elect to receive in-service distributions of deferred compensation or may be deferred up to 10 years and distributed
defer receipt of distributions until retirement via lump sum or annual payment installments over an additionala maximum period of 10 year period.years. Participants allocate their deferred compensation amongst various investment options with earnings accruing to the participant.
The Company has established a Rabbi Trust to provide for a degree of financial security to cover these obligations.its obligations with its deferred compensation plan. Contributions to the Rabbi Trust by the Company are made at the discretion of management and generally are made in cash and invested in money-market funds. The Company consolidates the Rabbi Trust and therefore includes the investments in its Consolidated Balance Sheets. As of December 31, 20172020, and 2016,2019, the Company had $13.2$6.6 million and $11.7$6.1 million of cash, respectively, and $4.0$7.7 million and $2.6$5.5 million of short-term investments, respectively. Management has classified these instruments as trading securities and therefore gains and lossesThe short-term investments are measured at fair value using quoted market prices in active markets (i.e. Level 1 measurements) with changes in fair value recorded in earnings, withnet income and the associated cash flows presented as operating cash flows.
Workers’ Compensation Claims and Related Losses
The Company maintains occurrence-based insurance coverage with certain insurance carriers in accordance with its risk management practices that provides for reimbursement of workers’ compensation claims in excess of $0.5 million. The Company records a recovery receivable from the insurance carriers when such recovery is deemed probable based on the nature of the claim and history of recoveries. The liability related to workers’ compensation claims, both those reported to the Company and those incurred but not yet reported, is estimated based on actuarial estimates, loss development factors and the Company’s historical loss experience. A summary of the receivable and liability related to workers' compensation claims follows:
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Other current assets | | $ | 0 | | | $ | 0.6 | |
| Other long-term assets | | 4.9 | | | 4.8 | |
| Total recovery receivable | | $ | 4.9 | | | $ | 5.4 | |
| | | | |
| Accrued and other current liabilities | | $ | 4.2 | | | $ | 4.2 | |
| Other long-term liabilities | | 18.8 | | | 12.9 | |
| Total workers' compensation liability | | $ | 23.0 | | | $ | 17.1 | |
The increase in workers' compensation liability in 2020 primarily relates to workers' compensation accruals associated with a former business disposed of in 2005.
Note 16—Other Long-Term Liabilities
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
Deferred taxes and other tax liabilities (1) | | $ | 206.7 | | | $ | 252.7 | |
Operating lease liabilities (2) | | 55.1 | | | 61.8 | |
Deferred compensation (3) | | 23.4 | | | 28.5 | |
Pension and other post-retirement obligations (3) | | 26.6 | | | 25.5 | |
Long-term workers' compensation (3) | | 18.8 | | | 12.9 | |
| Other | | 35.9 | | | 11.0 | |
| Other long-term liabilities | | $ | 366.5 | | | $ | 392.4 | |
(1)Refer to Note 9 for additional deferred tax discussion.
(2)Refer to Note 17 for additional operating lease liabilities discussion.
(3)Refer to Note 15 for additional pension, deferred compensation and workers' compensation discussion.
Note 1717—Commitments and Contingencies—Accumulated Other Comprehensive Loss
Leases
Lease Costs, Assets and Liabilities
The changesCompany has operating leases primarily for manufacturing facilities, warehouses, offices and certain equipment. These leases have remaining lease terms of one to 14 years, some of which include one or more
options to renew, with renewal terms that can extend the leases to one or 20 years or more. The components of lease cost follow:
| | | | | | | | | | | | | | | | | | |
| | | | |
| (in millions) | | | | | | 2020 | | 2019 |
| Operating lease cost | | | | | | $ | 28.1 | | | $ | 27.5 | |
| Variable lease cost | | | | | | 3.9 | | | 5.0 | |
| Short-term lease cost | | | | | | 4.2 | | | 3.1 | |
| Total lease cost | | | | | | $ | 36.2 | | | $ | 35.6 | |
A summary of lease assets and liabilities follows:
| | | | | | | | | | | | | | |
| (in millions) | | December 31,
2020 | | December 31,
2019 |
| Assets: | | | | |
Operating lease right-of-use assets(1) | | $ | 70.5 | | | $ | 78.0 | |
| Liabilities: | | | | |
Operating lease liabilities - current(2) | | 22.5 | | | 22.2 | |
Operating lease liabilities - long-term(3) | | 55.1 | | | 61.8 | |
| Total lease liabilities | | $ | 77.6 | | | $ | 84.0 | |
(1)Included in accumulated other comprehensive loss by component,long-term assets.
(2)Included in accrued and other current liabilities.
(3)Included in other long-term liabilities.
Maturity of lease liabilities as of December 31, 2020, follow:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 | | Thereafter | | Total |
| Lease payments | | | | $ | 24.5 | | | $ | 18.3 | | | $ | 12.4 | | | $ | 8.4 | | | $ | 4.7 | | | $ | 18.9 | | | $ | 87.2 | |
| Less: imputed interest | | | | | | | | | | | | | | | | (9.6) | |
| Total lease liabilities | | | | | | | | | | | | | | | | $ | 77.6 | |
Lease Term and Discount Rate
| | | | | | | | | | | | | | |
| | December 31,
2020 | | December 31,
2019 |
| Operating leases: | | | | |
| Weighted-average remaining lease term (in years) | | 5.8 | | 6.3 |
| Weighted-average discount rate | | 3.4 | % | | 3.8 | % |
Supplemental Cash Flow Information
Cash paid for amounts included in the measurement of operating lease liabilities totaled $25.2 million and $25.0 million for the years ended December 31, follows:2020 and 2019, respectively. Operating lease right-of-use assets obtained in exchange for new operating lease liabilities totaled $18.2 million for the year ended December 31, 2020. Operating lease right-of-use assets obtained in exchange for new operating lease liabilities totaled $100.5 million for the year ended December 31, 2019, of which $69.6 million related to the adoption of ASC 842.
Litigation
Over the years, the Company has been named as a defendant, along with numerous other defendants, in lawsuits in various courts in which plaintiffs have alleged injury due to exposure to asbestos-containing friction products produced and sold predominantly by the Company’s discontinued Motion Control business between the late-1940s and the mid-1980s. The Company has been subject to liabilities for indemnity and defense costs associated with these lawsuits.
The Company has recorded a liability for estimated indemnity costs associated with pending and future asbestos claims. As of December 31, 2020, the Company believes that its accrual for these costs is not material to the Company's financial position, results of operations, or operating cash flows.
The Company recognizes expenses for defense costs associated with asbestos claims during the periods in which they are incurred. Refer to Note 1 for the Company’s accounting policy related to litigation defense costs.
The Company currently maintains insurance coverage with respect to asbestos-related claims and associated defense costs. The Company records the insurance coverage as a long-term receivable in an amount it reasonably
|
| | | | | | | | | | | | | | | | |
| (in millions) | | Accrued post-retirement benefit liability | | Foreign currency translation | | Other | | Total |
| Balance as of January 1, 2015 | | $ | (27.4 | ) | | $ | (60.0 | ) | | $ | 0.3 |
| | $ | (87.1 | ) |
| Other comprehensive (loss) income before reclassifications | | (0.6 | ) | | (36.7 | ) | | 0.6 |
| | (36.7 | ) |
Amounts reclassified from accumulated other comprehensive loss (1) | | 2.3 |
| | — |
| | (0.1 | ) | | 2.2 |
|
| Income tax (expense) benefit | | (0.7 | ) | | — |
| | 0.1 |
| | (0.6 | ) |
| Other comprehensive income (loss) | | 1.0 |
| | (36.7 | ) | | 0.6 |
| | (35.1 | ) |
| Balance as of December 31, 2016 | | (26.4 | ) | | (96.7 | ) | | 0.9 |
| | (122.2 | ) |
| Other comprehensive (loss) income before reclassifications | | (11.2 | ) | | 46.6 |
| | (4.4 | ) | | 31.0 |
|
Amounts reclassified from accumulated other comprehensive loss (1) | | 2.5 |
| | — |
| | (0.5 | ) | | 2.0 |
|
| Income tax (expense) benefit | | 3.5 |
| | — |
| | — |
| | 3.5 |
|
| Other comprehensive income (loss) | | (5.2 | ) | | 46.6 |
| | (4.9 | ) | | 36.5 |
|
| Balance as of December 31, 2017 | | $ | (31.6 | ) | | $ | (50.1 | ) | | $ | (4.0 | ) | | $ | (85.7 | ) |
| |
(1)
| The accrued post‑retirement benefit liability reclassification pertains to the amortization of unrecognized actuarial gains and losses and prior service credits which is included in net periodic benefit cost. See Note 13 for additional pension discussion.
|
estimates is probable of recovery for pending and future asbestos-related indemnity claims. Since the Company’s insurance policies contain various coverage exclusions, limits of coverage and self-insured retentions and may be subject to insurance coverage disputes, the Company may recognize expenses for indemnity and defense costs in particular periods if and when it becomes probable that such costs will not be covered by insurance.
The Company is also involved in various other legal actions and proceedings arising in the ordinary course of business. In the opinion of management, the ultimate outcomes of such actions and proceedings, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or operating cash flows.
Note 18—18—Financial Instruments
Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts to hedge a portion of its foreign currency exchange rate exposure to forecasted foreign currency denominated cash flows. These instruments are not held for speculative or trading purposes.
For instruments that areA summary of the Company's designated and qualify as anon-designated cash flow hedge, the Company had foreign currency forward contracts with maturities less than one year and an aggregate U.S. Dollar equivalent notional value of $22.3 million and $17.6 million as of December 31, 2017 and 2016, respectively. The gross fair value was $(0.2) million and $0.9 million as of December 31, 2017 and 2016, respectively. The changes in the fair value of the contracts are recorded in accumulated other comprehensive income (loss) in the Consolidated Statements of Shareholders’ Equity and recognized in the same Income Statement line item as the impact of the hedged item, revenues or cost of sales, when the underlying forecasted transaction impacts earnings. Gains and losses on the contracts representing hedge components excluded from the assessment of hedge effectiveness are recognized in the same income statement line item as the hedged item, revenues or cost of sales, currently.hedges follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2019 |
| (in millions) | | Fair Value (1) | | Notional Value | | Fair Value (1) | | Notional Value |
| Designated hedges | | $ | 5.0 | | | $ | 93.5 | | | $ | 2.0 | | | $ | 108.1 | |
| Non-designated hedges | | $ | 0.2 | | | $ | 65.4 | | | $ | 0.6 | | | $ | 124.4 | |
For instruments that are not designed as a cash flow hedge, the Company had foreign exchange contracts with maturities less than one year and an aggregate U.S. Dollar equivalent notional value of $38.6 million and $39.3 million as of December 31, 2017 and 2016, respectively. The gross fair value was $0.2 million and $(0.3) million as of December 31, 2017 and 2016, respectively. The unrealized gains and losses resulting from these contracts were immaterial and are recognized in other non-operating income, net and partially offset corresponding foreign exchange gains and losses on these balances.
(1)The fair value of foreign currency forward contracts is included in other current assets. The fair value was estimated using observable market inputs such as forward and spot prices of the underlying exchange rate pair. Based on these inputs, derivative assets and liabilities are classified as Level 2 in the fair value hierarchy.
Note 19—Quarterly Financial Data (Unaudited)
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2017 |
| (in millions except per share data) | | First | | Second | | Third | | Fourth | | Year |
| Net sales | | $ | 857.3 |
| | $ | 1,071.7 |
| | $ | 1,089.1 |
| | $ | 1,071.8 |
| | $ | 4,089.9 |
|
| Gross margin | | 247.7 |
| | 314.0 |
| | 311.5 |
| | 274.8 |
| | 1,148.0 |
|
| Operating income | | 96.0 |
| | 159.0 |
| | 146.7 |
| | 104.0 |
| | 505.7 |
|
| Income from continuing operations | | 61.5 |
| | 102.3 |
| | 86.4 |
| | 115.1 |
| | 365.3 |
|
| Net income | | 61.8 |
| | 102.3 |
| | 86.3 |
| | 115.1 |
| | 365.5 |
|
Basic earnings per share from continuing operations (1) | | $ | 0.95 |
| | $ | 1.59 |
| | $ | 1.38 |
| | $ | 1.84 |
| | $ | 5.75 |
|
Diluted earnings per share from continuing operations (1) | | $ | 0.94 |
| | $ | 1.58 |
| | $ | 1.37 |
| | $ | 1.82 |
| | $ | 5.71 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | | 2016 |
| (in millions except per share data) | | First | | Second | | Third | | Fourth | | Year |
| Net sales | | $ | 794.0 |
| | $ | 996.9 |
| | $ | 991.0 |
| | $ | 893.5 |
| | $ | 3,675.4 |
|
| Gross margin | | 245.4 |
| | 321.2 |
| | 323.6 |
| | 267.1 |
| | 1,157.3 |
|
| Operating income | | 110.1 |
| | 177.6 |
| | 35.7 |
| | 114.7 |
| | 438.1 |
|
| Income (loss) from continuing operations | | 68.5 |
| | 115.3 |
| | (9.5 | ) | | 76.5 |
| | 250.8 |
|
| Net income (loss) | | 68.5 |
| | 115.2 |
| | (9.8 | ) | | 76.2 |
| | 250.1 |
|
Basic earnings (loss) per share from continuing operations (1) | | $ | 1.06 |
| | $ | 1.78 |
| | $ | (0.15 | ) | | $ | 1.18 |
| | $ | 3.87 |
|
Diluted earnings (loss) per share from continuing operations (1) | | $ | 1.05 |
| | $ | 1.75 |
| | $ | (0.15 | ) | | $ | 1.17 |
| | $ | 3.83 |
|
| |
(1)
| The sum of quarterly earnings per share amounts may not equal the year due to rounding. |
Note 20—Subsequent Events
On February 1, 2018,For instruments that are designated and qualify as a cash flow hedge, the Company announced the signing of a definitive agreement to sell its CFS operations tohad foreign currency forward contracts with maturities less than one year. The Jordan Company for $750 million in cash, subject to certain adjustments. The transaction is subject to customary closing conditions, including regulatory clearances, and is expected to closechanges in the first quarterfair value of 2018.the contracts are recorded in accumulated other comprehensive income (loss) and recognized in the same line item as the impact of the hedged item, revenues or cost of sales, when the underlying forecasted transaction impacts earnings. Gains and losses on the contracts representing hedge components excluded from the assessment of hedge effectiveness are recognized in the same line item as the hedged item, revenues or cost of sales, currently.
Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (in millions) | | Accrued
post-retirement benefit liability | | Foreign currency translation | | Derivative contracts | | Total |
| Balance as of January 1, 2019 | | $ | (38.5) | | | $ | (80.4) | | | $ | (3.2) | | | $ | (122.1) | |
| | | | | | | | |
| Other comprehensive income (loss): | | | | | | | | |
| Other comprehensive (loss) income before reclassifications | | (6.0) | | | (2.1) | | | 1.3 | | | (6.8) | |
Amounts reclassified from accumulated other comprehensive income (loss)(1) | | 3.4 | | | — | | | 0.8 | | | 4.2 | |
| Income tax benefit | | 0.6 | | | — | | | 0 | | | 0.6 | |
| Other comprehensive (loss) income | | (2.0) | | | (2.1) | | | 2.1 | | | (2.0) | |
| Balance as of December 31, 2019 | | (40.5) | | | (82.5) | | | (1.1) | | | (124.1) | |
| | | | | | | | |
| Other comprehensive income (loss): | | | | | | | | |
| Other comprehensive (loss) income before reclassifications | | (5.3) | | | 39.4 | | | (10.3) | | | 23.8 | |
Amounts reclassified from accumulated other comprehensive income (loss)(1) | | 5.3 | | | — | | | (2.0) | | | 3.3 | |
| | | | | | | | |
| Other comprehensive income (loss) | | 0 | | | 39.4 | | | (12.3) | | | 27.1 | |
| Balance as of December 31, 2020 | | $ | (40.5) | | | $ | (43.1) | | | $ | (13.4) | | | $ | (97.0) | |
(1)The accrued post-retirement benefit liability reclassification pertains to the amortization of unrecognized actuarial gains and losses and prior service credits which is included in net periodic benefit cost. See Note 15 for additional pension discussion.
Other Financial Instruments
Other financial instruments include cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and long-term debt. The carrying value for cash and cash equivalents, accounts receivable, net, accounts payable and accrued expenses approximates fair value because of its short-term nature and generally negligible credit losses (refer to Note 14 for the fair value of long-term debt).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
(a)Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s chief executive officer and chief financial officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a‑15.13a-15. Based upon that evaluation and as of December 31, 2017,2020, the chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are effective.
Management has prepared a report on the Company’s internal control over financial reporting in which management has determined that the Company’s controls are effective. A copy of management’s report is set forth below.
(b)Changes in internal controls. During the fourth quarter of 2017,2020, there were no changes in the Company’sCompany's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’sCompany's internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of the Company’s management, including the chief executive officer and chief financial officer, the Company evaluated the effectiveness of the design and operation of its internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s
chief executive officer and chief financial officer concluded that the Company’s internal control over financial reporting was effective as of December 31, 2017.2020.
As discussed in Note 3 to the Consolidated Financial Statements in Item 8, the Company completed the acquisitionsacquisition of SJ Holdings, Inc. on January 9, 2017, Arbo Holdings Limited on January 31, 2017, Drexel Metals, Inc.Motion Tech Automation, LLC ("MTA") on July 3, 2017, and Accella Holdings LLC on November 1, 2017, (collectively the “Acquired Businesses”).22, 2020. Management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the Acquired Businesses,MTA, which represented 22.2%less than 1% of total assets as of December 31, 2017,2020, and 4.7% of net salesrevenues for the year then ended.
The internal controls over financial reporting have been assessed by Deloitte & Touche LLP, whose report with respect to the effectiveness of internal controls over financial reporting is included herein at Item 8.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, and Executive Officers of the Registrant.
and Corporate Governance.
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 | | Position with Company | | Period of Service |
| D. Christian Koch | | 5255 | | Chairman of the Board since May 2020, Director, President and Chief Executive Officer since January 2016; President and Chief Operating Officer from May 2014 to December 2015; Group President, Carlisle Diversified Products from June 2012 to May 2014; President, Carlisle Brake & Friction from January 2009 to June 2012; President, Carlisle Asia‑Pacific from February 2008 to January 2009. | | February 2008 to date |
John W. Altmeyer | | 58 | | President, Carlisle Construction Materials since July 1997. | | June 1989 to date |
| Titus B. Ball | | 4447 | | Vice President, Chief Accounting Officer since May 2016; Director of Internal Audit from April 2011 to April 2016. | | January 2010 to date |
Shelley J. Bausch | | 52 | | President, Carlisle Fluid Technologies since October 2017; Vice President, PPG Industrial Coatings from January 2014 to September 2017; Business Vice President, Finished Products, Dow Corning Corporation from April 2011 to January 2014. | | October 2017 to date |
| John E. Berlin | | 5659 | | President, Carlisle Interconnect Technologies since February 1995. | | January 1990 to date |
Steven J. Ford | | 58 | | Vice President, Secretary and General Counsel since July 1995 and Vice President, Chief Financial Officer from November 2008 to February 2017. | | July 1995 to date |
Trent A. Freiberg | | 43 | | President, Carlisle FoodService Products since July 2012. | | July 2008 to date |
| Karl T. Messmer | | 4750 | | President, Carlisle Brake & Friction since November 2015; Vice President & General Manager, Networking Solutions, Belden Inc. from October 2010 to September 2015. | | November 2015 to date |
| Amelia Z. Murillo | | 4346 | | Vice President, Financial Planning & Analysis and Treasurer since January 2021. Vice President, Human Resources sincefrom February 2016;2016 to December 2020; Vice President, Finance & Administration, Carlisle Interconnect Technologies from October 2008 to April 2014. | | February 2016 to date |
| Robert M. Roche | | 5053 | | Vice President, Chief Financial Officer since February 2017; Senior Vice President, Business Finance, Tyco International from August 2014 to February 2017, Chief Operating Officer & Senior Vice President, Business Finance, Tyco International from December 2014 to August 2015, and Senior Vice President, Audit, Tyco International from January 2013 to August 2014. | | February 2017 to date |
| Scott C. Selbach | | 6265 | | Vice President, Secretary and General Counsel since May 2018; Vice President, Corporate Development sincefrom April 2006.2006 to May 2018. | | April 2006 to date |
| Nicholas J. Shears | | 62 | | President since May 2019; Interim President from September 2018 to April 2019; Executive Vice President, Sales & Marketing from January 2017 to August 2018; Vice President, Sales & Marketing from October 1999 to December 2016, Carlisle Construction Materials. | | April 1984 to date |
| Lori A. Snyder | | 42 | | Vice President, Human Resources since January 2021; Vice President, Human Resources, Carlisle Construction Materials from August 2011 to December 2020. | | January 2021 to date |
| Douglas C. Taylor | | 4851 | | Vice President, Carlisle Operating System since June 2014; Director of Operational Excellence, Demmer Corporation from March 2013 to June 2014. | | June 2014 to date |
| Laura P. Walsh | | 38 | | Vice President & Chief Information Officer since January 2020; Vice President, Information Technology from September 2018 to December 2019; Vice President, Chief Information Officer, Lydall, Inc. from July 2016 to August 2018; Vice President, Information Technology, Unimin Corporation from July 2014 to June 2016. | | September 2018 to date |
| Kevin P. Zdimal | | 4750 | | Vice President, Corporate Development since May 2018, Vice President, Business Development sincefrom May 2016 to May 2018, Vice President and Chief Accounting Officer from May 2010 to May 2016. | | September 1995 to date |
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 or she was selected as an officer.
Information required by Item 10 with respect to directors of the Company is incorporated by reference to the Company’sCompany's definitive proxy statement, set forth under the caption "Corporate Governance" to be filed with the Securities and Exchange Commission no later than 40 days before the Annual Meeting of Shareholders to be held on May 2, 2018.5, 2021.
The Company has adopted a Business Code of Ethics covering, among others, its principal executive officer and all management involved in financial reporting. The Business Code of Ethics is published on the Company’s website: www.carlisle.com. Any amendment to, or waiver of, any provision of the Business Code of Ethics affecting such senior officers will be disclosed on the Company’s website.
In the Company’s definitive proxy statement we describe the procedures under which shareholders can recommend nominees for the Board of Directors. There have been no changes to those procedures since the Company’s definitive proxy statement dated March 8, 2017.
Item 11. Executive Compensation.
Information required by Item 11 is incorporated by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 40 days before the Annual Meeting of Shareholders to be held on May 2, 2018.5, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Security Ownership of Certain Beneficial Owners and Management
Information required by Item 12 is incorporated by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 40 days before the Annual Meeting of Shareholders to be held on May 2, 2018.5, 2021.
Securities Authorized for Issuance under Equity Compensation Plans
The number of securities to be issued upon the exercise of stock optionsequity awards under the Company’s equity compensation plans, the weighted average exercise price of the options and the number of securities remaining for future issuance as of December 31, 2017,2020, follows:
| | | | | | | | | | | | | | | | | | | | |
(in thousands, except per share amounts) | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| (a) | | (b) | | (c) |
| Equity compensation plans approved by equity security holders | | 2,264 | | (1) | $ | 114.03 | | | 1,211 | |
| Equity compensation plans not approved by equity security holders | | — | | | n/a | | — | |
| Total | | 2,264 | | | $ | 114.03 | | | 1,211 | |
|
| | | | | | | | | | | |
| | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average price of outstanding options, warrants and rights | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |
| Plan Category | | (a) | | (b) | | (c) | |
| Equity compensation plans approved by equity security holders | | 1,790,899 |
| (1) | $ | 86.72 |
| | 3,251,102 |
| (2) |
| Equity compensation plans not approved by equity security holders | | — |
| | n/a |
| | — |
| |
| Total | | 1,790,899 |
| | $ | 86.72 |
| | 3,251,102 |
| |
| |
(1)
| The number of securities to be issued does not include performance share awards, which are payable solely in cash. The number of securities to be issued also does not include restricted stock units as these awards vest immediately upon issuance. |
| |
(2)
| Includes 1,271,033 of shares which may be issued as stock awards. Shares available for award under the Carlisle Companies Incorporated Incentive Compensation Program were approved on May 6, 2015. |
Item 13. Certain Relationships and Related Transactions.
Transactions, and Director Independence.
Information required by Item 13 is incorporated by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 40 days before the Annual Meeting of Shareholders to be held on May 2, 2018.5, 2021.
Item 14. Principal AccountantAccounting Fees and Services.
Information required by Item 14 is incorporated by reference to the Company’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 40 days before the Annual Meeting of Shareholders to be held on May 2, 2018.5, 2021.
PART IV
Item 15. Exhibits, and Financial Statement Schedules.
(a)(1). Financial statements required by Item 8 are as follows:
|
| | | | |
Consolidated Statements of EarningsIncome and Comprehensive Income, years ended December 31, 2017, 20162020, 2019 and 2015 2018 | |
Consolidated Balance Sheets, December 31, 20172020 and 2016 2019 | |
Consolidated Statements of Cash Flows, years ended December 31, 2017, 20162020, 2019 and 2015 2018 | |
Consolidated Statements of Shareholders’ Equity, years ended December 31, 2017, 20162020, 2019 and 2015 2018 | |
| Notes to Consolidated Financial Statements | |
(a)(2). Financial Statement Schedules:
Included in Item 8, as applicable.
(a)(3). Exhibits applicable to the filing of this report are listed in the following exhibit index.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carlisle Companies Incorporated |
| Exhibit Index |
| Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
| Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | | | | | | | | | |
Carlisle Companies Incorporated |
Exhibit Index |
Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | Master Transaction Agreement, dated October 20, 2013, between the Company and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Asset Purchase Agreement, date October 20, 2013, between Carlisle Transportation Products, Inc., Carlisle Intangible Company and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Asset Purchase Agreement, dated October 20, 2013, between Carlisle Canada and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Stock Purchase Agreement, dated October 20, 2013, between Carlisle International BV and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Equity Purchase Agreement, dated October 20, 2013, between Carlisle Asia Pacific Limited and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Asset Purchase Agreement, dated October 20, 2013, between Carlisle Asia Pacific Limited and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Form of Trademark License Agreement between the Company, Carlisle Intangible Company and CTP Transportation Products, LLC. | | | | 8-K | | 001-09278 | | 10/22/2013 |
| | Asset Purchase Agreement, dated October 7, 2014, between the Company, Carlisle Fluid Technologies, Inc., Graco Inc. and Finishing Brands Holdings Inc. | | | | 8-K | | 001-09278 | | 10/8/2014 |
| | Amendment No. 1 to Asset Purchase Agreement, dated March 6, 2015, between the Company, Carlisle Fluid Technologies, Inc., Graco Inc. and Finishing Brands Holdings Inc. | | | | 8-K | | 001-09278 | | 3/9/2015 |
| | Form of Cross License Agreement (as amended by Amendment No. 1 to Asset Purchase Agreement), by and among the Company, Carlisle Fluid Technologies, Inc., Finishing Brands Holdings Inc., Graco Inc. and Gema Switzerland GmbH. | | | | 8-K | | 001-09278 | | 3/9/2015 |
| | Securities Purchase Agreement, dated September 29, 2017, between Accella Performance Materials LLC, Accella Holdings LLC and Carlisle Construction Materials, LLC. | | | | 8-K | | 001-09278 | | 10/2/2017 |
| | Stock Purchase Agreement, dated as of January 31, 2018, by and among Carlisle, LLC, Carlisle FoodService Products, Incorporated, CFSP Acquisition Corp. and Carlisle Companies Incorporated. | | | | 8-K | | 001-09278 | | 2/2/2018 |
| | Restated Certificate of Incorporation of the Company. | | | | 10-Q | | 001-09278 | | 10/21/2015 |
| | Amended and Restated Bylaws of the Company. | | | | 8-K | | 001-09278 | | 12/14/2015 |
| | Form of Trust Indenture between the Company and Fleet National Bank. | | | | S-3 | | 333-16785 | | 11/26/1996 |
| | First Supplemental Indenture, dated as of August 18, 2006, among the Company, U.S. Bank National Association (as successor to State Street Bank and Trust Company, as successor to Fleet National Bank) and The Bank of New York Trust Company, N.A. | | | | 8-K | | 001-09278 | | 8/18/2006 |
| | Second Supplemental Indenture, dated as of December 9, 2010, among the Company, U.S. Bank National Association (as successor to State Street Bank and Trust Company, as successor to Fleet National Bank) and The Bank of New York Mellon Trust Company, N.A. | | | | 8-K | | 001-09278 | | 12/10/2010 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carlisle Companies Incorporated |
| Exhibit Index |
| Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
| Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | | | | | | | | | |
| | Third Supplemental Indenture, dated as of November 20, 2012, among the Company, U.S. Bank National Association (as successor to State Street Bank and Trust Company, as successor to Fleet National Bank) and The Bank of New York Mellon Trust Company, N.A. | | | | 8-K | | 001-09278 | | 11/20/2012 |
| | Form of 3.500% Notes due 2024. | | | | 8-K | | 001-09278 | | 11/16/2017 |
| | Form of 3.750% Notes due 2027. | | | | 8-K | | 001-09278 | | 11/16/2017 |
|
| | | | 8-K | | 001-09278 | | 11/16/2017 |
| | Fourth Supplemental Indenture, dated as of February 20, 2020, among the Company, U.S. Bank National Association (as successor to State Street Bank and Trust Company, as successor to Fleet National Bank) and The Bank of New York Mellon Trust Company, N.A. | | | | 8-K | | 001-9278 | | 2/28/2020 |
| | Form of 2.750% Notes due 2030. | | | | 8-K | | 001-9278 | | 2/28/2020 |
| | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. | | X | | | | | | |
Carlisle Companies Incorporated |
Exhibit Index |
Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | Carlisle Companies Incorporated Amended and Restated Executive Incentive Program. | | | | Schedule 14A | | 001-09278 | | 3/20/2012 |
| | Form of Carlisle Companies Incorporated Nonqualified Stock Option Agreement. | | | | 10-Q | | 001-09278 | | 11/8/2004 |
| | Form of Carlisle Companies Incorporated Restricted Share Agreement with Non-Compete Covenant. | | | | 10-Q | | 001-09278 | | 7/22/2014 |
| | Form of Amended and Restated Executive Severance Agreement. | | | | 10-K | | 001-09278 | | 2/27/2009 |
10.5**P | | Summary Plan Description of Carlisle Companies Incorporated Director Retirement Plan, effective November 6, 1991. | | | | 10-K | | 001-09278 | | 3/24/1992 |
| | Amendment to the Carlisle Companies Incorporated Director Retirement Plan. | | | | 10-K | | 001-09278 | | 3/11/2004 |
| | Carlisle Companies Incorporated Amended and Restated Nonemployee Director Equity Plan. | | | | Schedule 14A | | 001-09278 | | 3/9/2005 |
| | Form of Carlisle Companies Incorporated Stock Option Agreement for Nonemployee Directors. | | | | 8-K | | 001-09278 | | 2/7/2005 |
| | Form of Carlisle Companies Incorporated Nonqualified Stock Option Agreement for Nonemployee Directors. | | | | 8-K | | 001-09278 | | 5/10/2005 |
| | Form of Carlisle Companies Incorporated Restricted Share Agreement for Nonemployee Directors. | | | | 8-K | | 001-09278 | | 5/10/2005 |
| | Form of Carlisle Companies Incorporated Restricted Stock Unit Agreement for Nonemployee Directors. | | | | 10-K | | 001-09278 | | 2/27/2009 |
| | Carlisle Companies Incorporated Amended and Restated Deferred Compensation Plan for Nonemployee Directors. | | | | 10-K | | 001-09278 | | 2/27/2009 |
| | Carlisle Companies Incorporated Amended and Restated Incentive Compensation Program, effective January 1, 2015. | | | | Schedule 14A | | 001-09278 | | 3/20/2015 |
| | Letter Agreement, dated June 5, 2007, between David A. Roberts and the Company. | | | | 8-K | | 001-09278 | | 6/12/2007 |
| | Nonqualified Stock Option Agreement, dated as of June 21, 2007, between the Company and David A. Roberts. | | | | 10-Q | | 001-09278 | | 8/6/2007 |
| | Restricted Share Agreement, dated as of June 21, 2007, between the Company and David A. Roberts. | | | | 10-Q | | 001-09278 | | 8/6/2007 |
| | Letter Agreements, dated January 11, 2008 and December 31, 2008, between D. Christian Koch and the Company. | | | | 10-K | | 001-09278 | | 2/27/2009 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carlisle Companies Incorporated |
| Exhibit Index |
| Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
| Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | | | | | | | | | |
| | Letter Agreement, dated August 4, 2011, between Fred A. Sutter and the Company. | | | | 10-Q | | 001-09278 | | 10/25/2011 |
| | Carlisle Corporation Amended and Restated Supplemental Pension Plan. | | | | 10-K | | 001-09278 | | 2/10/2012 |
| | Amendment No. 1 to the Carlisle Corporation Supplemental Pension Plan, adopted February 4, 2014. | | | | 10-Q | | 001-09278 | | 4/22/2014 |
| | Form of Carlisle Companies Incorporated Performance Share Agreement. | | | | 10-Q | | 001-09278 | | 4/27/2010 |
| | Carlisle Companies Incorporated Amended and Restated Nonqualified Deferred Compensation Plan, dated January 1, 2012. | | | | 10-K | | 001-09278 | | 2/10/2012 |
| | Carlisle Companies Incorporated Nonqualified Benefit Plan Trust, dated February 2, 2010, by and between the Company and Wachovia Bank, National Association. | | | | 10-Q | | 001-09278 | | 4/27/2010 |
|
| | | | | | | | | | |
Carlisle Companies Incorporated |
Exhibit Index |
Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | Third Amended and Restated Credit Agreement, dated as of October 20, 2011, among the Company, Carlisle Management Company, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto. | | | | 10-Q | | 001-09278 | | 10/25/2011 |
| | First Amendment to Third Amended and Restated Credit Agreement, dated as of December 12, 2013, by and among the Company, Carlisle Corporation, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto. | | | | 8-K | | 001-09278 | | 12/17/2013 |
| | Letter Agreement, dated January 5, 2017, between Robert Roche and the Company. | | | | 8-K | | 001-09278 | | 2/15/2017 |
| | Form of Executive Severance Agreement. | | | | 8-K | | 001-09278 | | 2/15/2017 |
| | Second Amendment to Third Amended and Restated Credit Agreement, dated as of February 21, 2017, by and among Carlisle Companies Incorporated, Carlisle Corporation, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto. | | | | 8-K | | 001-09278 | | 2/24/2017 |
| | Form of Executive Severance Agreement | | | | 8-K/A | | 001-09278 | | 4/12/2017 |
| | RatioForm of Earnings to Fixed Charges.Trademark License Agreement between Carlisle Intangible Company, LLC and Carlisle FoodService Products, Incorporated. | | X | | 8-K | | 001-09278 | | 2/2/2018 |
| | Letter Agreement, dated August 22, 2018, between the Company and John W. Altmeyer | | | | 8-K | | 001-09278 | | 9/13/2018 |
| | Carlisle LLC Amended and Restated Supplemental Pension Plan, effective January 1, 2019. | | | | 10-Q | | 001-09278 | | 4/25/2019 |
| | Carlisle Companies Incorporated Amended and Restated Incentive Compensation Program, effective January 1, 2019. | | | | 10-Q | | 001-09278 | | 4/25/2019 |
| | Fourth Amended and Restated Credit Agreement, dated as of February 5, 2020, by and among Carlisle Companies Incorporated, Carlisle LLC, JPMorgan Chase Bank, N.A., as administrative agent and the lenders party thereto. | | | | 8-K | | 001-09278 | | 2/7/2020 |
| | Amended and Restated Director Deferred Compensation Plan. | | | | 10-Q | | 001-9278 | | 7/23/2020 |
| | Subsidiaries of the Registrant. | | X | | | | | | |
| | Consent of Independent Registered Public Accounting Firm – Deloitte & Touche LLP. | | X | | | | | | |
| | Consent of Independent Registered Public Accounting Firm – Ernst & Young LLP. | | X | | | | | | |
| | Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). | | X | | | | | | |
| | Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). | | X | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Carlisle Companies Incorporated |
| Exhibit Index |
| Exhibit | | | | Filed with this Form 10-K | | Incorporated by Reference |
| Number | | Exhibit Title | | | Form | | File No. | | Date Filed |
| | | | | | | | | | |
| | Section 1350 Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | X | | | | | | |
101.1101.INS | | Inline XBRL Instance | | X | | | | | | |
| 101.SCH | | Inline XBRL Taxonomy Extension Schema | | X | | | | | | |
| 101.CAL | | Inline XBRL Taxonomy Extension Calculation | | X | | | | | | |
| 101.LAB | | Inline XBRL Taxonomy Extension Labels | | X | | | | | | |
| 101.PRE | | Inline XBRL Taxonomy Extension Presentation | | X | | | | | | |
| 101.DEF | | Inline XBRL Taxonomy Extension Definition | | X | | | | | | |
| 104 | | Cover Page Interactive Data File.File (embedded within the Inline XBRL document) | | X | | | | | | |
*Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementary to Securities and Exchange Commission upon request.
** Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
P Indicates paper filing.
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
CARLISLE COMPANIES INCORPORATED |
| | | | | | | |
| By: /s/ Robert M. Roche | | |
Robert M. Roche, Vice President and | | |
| Chief Financial Officer | | |
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/ D. Christian Koch | | /s/ Robin J. Adams |
D. Christian Koch, Director, | | Robin J. Adams, Director |
President, and Chief Executive Officer and Chairman of the Board | | |
| (Principal Executive Officer) | | |
| | |
| /s/ Robert M. Roche | | /s/ Robert G. Bohn |
Robert M. Roche, Vice President and | | Robert G. Bohn, Director |
| Chief Financial Officer | | |
| (Principal Financial Officer) | | |
| | |
| /s/ Titus B. Ball | | /s/ Jonathan R. Collins |
Titus B. Ball, Vice President and | | Jonathan R. Collins, Director |
| Chief Accounting Officer | | |
| (Principal Accounting Officer) | | /s/ James D. Frias |
| | James D. Frias, Director |
| | |
| | /s/ Terry D. GrowcockMaia A. Hansen |
| | Terry D. Growcock, Maia A. Hansen, Director
|
| | |
| | /s/ Gregg A. Ostrander |
| | Gregg A. Ostrander, Director |
| | |
| | /s/ Corrine D. Ricard |
| | Corrine D. Ricard, Director |
| | |
| | /s/ David A. Roberts |
| | David A. Roberts, Director
|
| | |
| | /s/ Lawrence A. Sala |
| | Lawrence A. Sala, Director |
| | |
| | /s/ Jesse G. Singh |
| | Jesse G. Singh, Director |
| | |
| | |
February 16, 2018
