Good afternoon. My name is Kelly and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies First Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I would now like to turn the call over to Jim Giannakouros, Vice President of Investor Relations and FP&A. Jim, please go ahead.

Thank you, Kelly. Good afternoon, everyone, and welcome to Carlisle’s first quarter 2019 earnings conference call. We released our first quarter financial results after the market closed today, and you can find both our press release and earnings call slide presentation on our website at www.carlisle.com in the Investor Relations section. Discussing the results and our updated outlook today are Chris Koch, President and CEO; and Bob Roche, our Chief Financial Officer. Today’s call will begin with Chris discussing our progress towards Vision 2025. Bob will discuss Carlisle’s first quarter operating and financial performance. Following our prepared remarks, we will open up the call for questions. In the meantime, please refer to Slide 2 of our presentation, and where we note that certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of risk factors. A discussion of some of the risks and uncertainties that may affect our results are provided in our press release and in our SEC filings on Forms 10-K and 10-Q. Those considering an investment in Carlisle should read these statements carefully, along with reviewing the reports we file with the SEC, before making an investment decision. With that, I will turn the call over to Chris.

Thanks, Jim. Good afternoon, everyone. Please turn to Slide 3 of the presentation. Carlisle had an excellent first quarter and we are pleased with our progress towards the Vision 2025 goals of $8 billion in revenues, 20% operating income and 15% ROIC. As we continue to build on the success of our first year Vision – of Vision 2025, we remain focused on driving 5% organic growth with operational leverage; utilizing the Carlisle operating system and driving a continuous improvement culture; building scale with synergistic acquisitions; continuing to invest in exceptional talent; and deploying over $3 billion into capital expenditures, share purchases and dividends. In the first quarter, we drove approximately 6% organic growth, ahead of our 5% target rate, as we continue to see solid demand in the CCM and CIT end markets. We remain disciplined to maintain pricing resolve, driving positive price realization across all four segments. Another highlights included the Petersen acquisition in CCM, the realization of expected synergies in our restructured operations in CBF, then the successful launch of new products across all segments. Operating income rose over 20% for the second consecutive quarter, more than double our revenue growth, a further indication that our past restructuring efforts, pricing discipline and savings and efficiencies derived from the Carlisle operating system are paying dividends. COS remains core to our continuous improvement culture and is an integral process for driving efficiencies throughout our business. For the first quarter, COS drove savings of 1.3% of sales, well within our goal of 1% to 2% savings annually. Free cash flow in the first quarter exceeded $86 million, leaving us with an ending cash position of $517 million. Our balance sheet remains strong and we continue to pursue a balanced approach to capital deployment. In the first quarter, we accelerated our…

Thank you, Chris. Please turn to the revenue bridge on Slide 5 of the presentation. As Chris mentioned, we are pleased with our overall first quarter revenue performance. Organic growth was 5.9% in the quarter, driven by strong results in our Commercial Roofing, Aerospace and Test & Measurement markets. Acquisitions contributed 3.9% of sales growth for the quarter and FX was a 90 basis point headwind. Turning to our margin bridge on Slide 6. Q1 operating margin expanded 110 basis points year-over-year. Positive pricing and volume leverage combined for 210 basis points of the year-over-year improvement and COS benefited margin by 130 basis points. Freight, labor and raw material costs were collectively a 150 basis point headwind. Acquisitions were up 50 basis point headwind and restructuring and rationalization costs were a 30 basis point headwind. On Slide 7, we have provided an EPS bridge. As previously stated, we reported record first quarter diluted EPS from continuing operations of $1.33, which compares to $0.92 last year. Higher volumes contributed $0.13, positive price added $0.25, fully offsetting the $0.25 headwind we saw in raw material, freight and labor costs. COS added $0.15 and lower share count added $0.09 versus last year. Now let’s turn to Slide 8 to review the first quarter performance by segment in more detail. At CCM, revenues increased 12%, with acquisitions contributing 6.3% of the growth and organic growth of 6.3%, partially offset by a 50 basis point foreign currency translation headwind. CCM executed extremely well in accomplishing over $14 million of net price cost realization in the quarter. Operating margin at CCM was 13.8%, a 110 basis point increase over last year. Now let’s turn to Slide 9 to review CIT’s results. CIT capped off a solid quarter by growing 10% in the first quarter. Aerospace remained…

Thanks, Bob. Please turn to Slide 14, as we discuss our updated 2019 outlook. For Carlisle as a whole, we expect year-over-year growth to be in the high single-digit range. By segment, that CCM driven by what we view as a healthy North American nonresidential construction market, the CCM team’s price discipline, a solid backlog of worker contractors, tight labor markets and the addition of Petersen, we now expect revenues to grow low double digits in 2019. At CIT, despite projections that 737 MAX 8 volumes will be reduced by 20%, we now expect revenue growth to increase to the mid to high single-digit range. We expect continued strength in our core CIT markets of Aerospace, Medical and Test & Measurement. The addition of MicroConnex adds about a point of growth to our previous outlook. CIT will benefit from pricing actions taken in 2018 to offset inflation and other cost increases. We continue to expect approximately $50 million in restructuring charges to be taken at CIT this year related to the consolidation of North American facilities to drive operational improvements and efficiency gains in the business. At CFT, we continue to expect revenue growth in the mid single-digit range, driven by solid global GDP growth, price realization and new product introductions. At CBF, with certain customers adjusting their inventory levels, price discipline of the team and product line rationalization actions taken, we now expect flat year-over-year revenue in 2019. Corporate expense is expected to be approximately $80 million. Depreciation and amortization expense is expected to be approximately $200 million. For the full-year, we expect capital expenditures of about $110 million to $120 million and free cash flow conversion above 100%. Net interest expense is currently expected to be about $55 million to $60 million for the year, and we expect our tax rate to be 25% for 2019. As 2019 continues to unfold, we are well-positioned to take advantage of the momentum generated from our strong first quarter and what we view as a solid global economic outlook. However, we remain vigilant and fully aware of the uncertainties surrounding Brexit, the unresolved U.S.-China trade negotiations and the impact – and the negative impact of these two lingering issues on global economies, especially in China and Europe. Despite these uncertainties with the continued traction we have achieved against our Vision 2025 goals, we expect to deliver record performance in 2019. We remain steadfast in our commitment to achieving our goals and to driving $15 per share of earnings by 2025. This concludes our formal comments. Kelly, we’re now ready for questions.

[Operator Instructions] Our first question comes from the line of Bryan Blair from Oppenheimer. Please go ahead. Your line is open.

Good afternoon, guys. Great start to the year.

Thanks, Bryan.

Hey, Bryan, good afternoon.

I was hoping you could start with CCM price costs another lot of moving parts there. But relatively stable price trends and certain tailwinds in place, MDI in particular. It seems like there could be decent upside to the $40 million $50 million range you talked about before. Is there any update to that assessment?

Yes. Bryan, it’s still early in the year. Right now, we’re on track with what we thought we kind of a little bit ahead in the first quarter and where we thought we’d be. But I don’t – I’m not sure we’re ready to call victory quite yet at one quarter into the year. So we’re continuing and monitoring. We’re hopeful that there could be upside to that lot of moving pieces though.

Okay, that’s fair. And then in terms of M&A strategy, you talked about having prospects across CCM, CIT, CFT. Is there any other color you can offer on pipeline trends or expectations and where we may see the most M&A dollars flow across platforms over the next year or so?

Obviously, our preference would be, I think, to get the medical technologies platform build out as quickly as we could. We still see these opportunities within CCM and some nice activity there. And then we’re very excited about CFT finally being positioned to be able to take on some acquisitions and to drive some of that revenue growth we’ve projected through Vision 2025. So yes, I think the only other color I’d give you is that things are still expensive. Expectations for high multiples is there and we’re going to continue to be disciplined in our approach and make sure we make the right decisions to be able to return the type of investment we – our shareholders expect.

All right. I appreciate the color. Thanks.

Yes.

Your next question comes from the line of Joel Tiss from BMO. Please go ahead. Your line is open.

That was quick. [indiscernible] guys.

Go ahead.

Just one thing that you are talking about at the end of the year that there was uncertainty around the competitive landscape in the CCM business for 2019. Is there any update or the other guys acting rationally or any little help you can give us there?

Yes. I think for the most part, we’ve been pleasantly surprised with the reaction. When we get to certain large jobs, I’d say, the price competition gets a bit more aggressive. Obviously, we’re continuing to drive that Carlisle experience and we expect to – I guess, be paid for the superior customer service and delivery and all that we’re giving Joel. But I think, as a whole, there has been better rational behavior than there has been, say, two, three, four years ago.

That’s great. And then on, if we could drill down for a second into the Brake & Friction, just you mentioned construction and ag were weak. Is that specific customers, or is that more across the Board? It seems like construction – there’s a little bit of a dichotomy, right, your roofing business is very strong and construction seems like it’s got a backlog?

Yes, Joel, that – yes, I agree. I would say, it’s more specific to us and then regionally as well. This is one of our most global businesses. I think we’ve got about 55% of our sales outside North America. And so we see all sorts of different dynamics within the different regions. So there’s some breakdown there, we can get into that later. But I’d say, it’s more specific to CBS that it is in the general industry.

Okay. Thank you so much.

Your next question comes from the line of Neil Frohnapple from Buckingham Research. Please go ahead. Your line is open.

Hi, good afternoon. What’s driving the higher sales outlook within the CCM segment for the full-year? I mean, does the increase stem primarily from the Q1 performance, or is your outlook for the balance of the year stronger than you previously expected?

Yes. I think we’re seeing Q1 was stronger than we expected and we see that not completely carrying over, but we see a more – a continued healthy backdrop, I’ll call it, with reroofing continuing and our contractors having a healthy backlog.

Okay. That’s helpful, Bob. And then just within CCM, what was the growth rate in Europe for the business in the quarter?

Europe, a little bit over 10%.

Okay, got it. And then just one last one. Could you talk about, I guess, the increased revenue outlook for the CIT segment? It sounds like you’re going to get a 1% net tailwind from the acquisition, but then there’s that 1% offset from the 737 MAX. So just any more color there? And if you can provide an update on the SatCom sales outlook for this year versus 2018? Thanks.

Yes. I mean, you had a bunch there, so I’ll start with SatCom. We’re exactly where we thought we’d be in the first quarter ended up as expected there. I think, you’re right, we do have the acquisition coming through, so that’s going to help us and then the MAX decline. And otherwise, what we’re seeing now is, while we did take our number up and the first quarter was obviously a lot higher than we’re expecting the full-year. There was a little bit of our – some of our declines we saw coming weren’t as strong in the first quarter, but we still expect them to be there for the rest of the year. So it’s a little bit of – things were better in the first quarter, but we don’t expect them to hold up around that 10% for the whole year.

Okay, thanks. I’ll pass it on.

Thanks.

Your next question comes from the line of Tim Wojs from Baird. Please go ahead. Your line is open.

Hey, everybody, good afternoon. Nice job.

Hey, Tim.

Just trying to pick apart price cost a little bit. I’m kind of backing in. I think you said $14 million was kind of the net price cost realization in the quarter.

Okay.

I’m kind of getting to maybe $12 million to $15 million of price and the rest raws. Is that kind of in the ballpark?

No, I think you’d want to – I think, we had higher raws costs and better price realization than you’re characterizing.

Okay, okay. And then I don’t know if it’s going to be helpful or not. But if you just kind of think through the quarter and kind of January, February, March and April, I don’t know if you have the data. But how did volumes kind of trend for you guys by month? Was March the strongest month of the quarter? And has that kind of led into April?

Yes, exactly. I think if you come to the year and you look at how things unfolded, Tim, it looked pretty rough there in January and February. And then I think we held our own pretty much. And as soon as the weather turned and people could get back on the roof, March turned out to be a very strong month and they exited the quarter and then April was just continuing the trend.

Okay, great. And then – and just last one on Accella. I guess, how was the performance in Q1 relative to your expectations? And has your outlook there changed at all for 2019 relative to when we entered the year?

Well, we think the team is doing a great job. We had a lot of changes in the fourth quarter. I think, they’ve executed really well. They met our expectations as what we would have expected or wanted in Q1 and we’re holding to the numbers we talked about for the full-year.

Okay, great. We welcome the rest of your guys.

Thanks, Tim.

Thanks, Tim.

Your next question comes from the line of Garik Shmois from Longbow Research. Please go ahead. Your line is open.

Hey, thanks and congratulations. Just – wondering just on CCM volumes. It looks like coming into the year, you were looking for somewhere in the maybe 3% growth range for this year. And it seems like Q1 tracking a little bit of ahead of that even with, well, I think was some expectation of some weather concerns. So I’m just wondering if anything more specific has changed in the outlook in CCM for demand? And maybe what categories or geographies are outperforming?

Yes, Bob can weigh in on this, too. I think we’re – I think actually in volume, we’re seeing what we expected in that 3%, 4%, 5% range on sales volume. Price, I think was the thing that made us a little bit better than we thought in the first quarter in terms of surprises, I guess. Acquisitions contributed, that’s something planned on. If we look the geographies, Canada was stronger on a year-over-year basis. It didn’t have great increases, but last first quarter was pretty strong. Europe delivered as we talked about – Bob just talked about over 10%, that was good. Across the product line, we’re seeing good growth. We haven’t really seen much share difference than what we see in the industry averages. So I think, it was a great first quarter. The reroofing piece is maybe the thing that we always have trouble understanding exactly how those market dynamics work at 70%, 75% of the business and it’s a little bit less tractable than, I would say, the new construction, so that can always be a variable. And then, again, the weather and how the weather played out in the first quarter with demand was interesting. So I think the year is pretty much starting off the way we would like it, maybe a little bit more positive. And I think on the price raws thing, as Bob said, we’re right on track, maybe a little bit to the higher-end of the $50 million, but overall I think a pretty good start Bob.

Yes. And Garik, I don’t know if you’re talking about the first quarter or the full-year. But first quarter, we did see a little more volume and a little more price than expected, because as we talked about in the fourth quarter, we did have – the last couple of years have been really strong growth in the first quarter and we’re expecting that maybe to moderate a little and it didn’t, which was great. And then for the full-year, we did up our guidance a little because of the strong quarter we saw on volume and then feedback we’re getting from contractors on backlogs. So that’s sort of the difference in what we’re thinking.

Okay, thanks. And I guess, you partially answered my follow-up just around market share. From the sounds of it, if I heard you correctly, you are growing more in line with the market. Is that your expectations for the balance of the year?

Yes, I think, that’s correct, Garik. There are obviously differences between EPDM, TPO, PVC, that – but on the whole, we’re right there with what we see as the market growth and we’re pretty happy with that given the price discipline we showed.

Okay, great.

Your next question comes from the line of Charley Brady from SunTrust. Please go ahead. Your line is open.

Hey, thanks. Good afternoon, guys.

Good afternoon, Charley.

Hey, I just wanted to drill back a little bit on CCM and the – I don’t know if you discussed this. I know it’s a fourth quarter $14 million price cost. But I wonder what your expectation is for the full- year on price cost for CCM?

So that remains – the benefit would be between Bob had talked about as we entered in this quarter $40 million to $50 million, and I think we’re saying today is with the better than expected first quarter, we’re probably going to be at the higher-end of that all things being equal.

Great, thanks. And then on the CFT business, can you just talk about kind of where the progress is on cross-selling some of those products into the CCM platform? Obviously, it’s a natural fit with that.

Exactly. Yes, the – there’s a lot of work being done and I would say, it’s done on the market analysis side, certainly in the polyurethane foam side with the Accella business, and there’s some with the adhesives and sealants and waterproofing that we do in CCM. Now that equipment – the issue is that CFT had never been in those businesses before. And so the engineers and the team at CFT are working on that, but it’s early. I think that’s going to be something we’re going to see start to unfold in 2020, 2021. We think it takes somewhere between 18 and 24 months to launch a product. And so we look at when we started working on their cross-selling. I would say a lot of work being done on the development activity, but probably not seeing anything hit the market for, at least, until 2020.

Yes, gotcha. It’s helpful. And I guess just on CIT, you touched this a little bit. But I mean, Q1 clearly better than expected, given that you had positive – you had tough comp in rev rec. You had – the exit of some of the lower-margin med stuff a year ago. Can you just dig into a little bit more on really what’s driving that strong growth in the face of kind of those two issues you’re facing?

Yes. I mean, aerospace continues to be strong, I mean, very strong market content for plane and the production of planes. I mean, every talks about 787 MAX, but everybody else is building as much as they can every month. So that’s doing really well. We’re getting more content per plane. There is some, I’ll call it, a little bit of noise within the new standards of rev rec for our team, because now the standards are talking about that we actually got to recognize revenue when we start building the inventory related to the contract versus when you ship it out the door. So there’s some moving between quarters because of that and that had a little bit to do with the first quarter, I’ll call it, excess growth because of the build there. But overall, just a really healthy backdrop from where we are.

Great. Just – so just one more from me. On kind of freight and labor cost, are you seeing any kind of relief, particularly on the freight side? Is that coming in, or is there still a significant headwind to what you’re doing on margins?

I’m going to say, it’s a significant headwind year-over-year. I think it’s kind of flattened out at that high level. But we still – I wouldn’t say, we’ve seen any great improvement in availability of trucks or labor or truckers of that. And so it’s still a tough thing to deal with. But from a cost perspective, I’d say, it’s flattened out.

Great. I’m going to state one more here, sorry. Just on CIT again, Airbus has a number of potential program wins with you coming up in 2020. Can you just maybe, to the extent you can, talk about the opportunity you see in getting deeper into Airbus?

Well, it’s a big opportunity. I mean, that was one of the things we constructed the Nogales plant. That was a key structural piece that we needed to help us get some – start at Airbus. We’ve had success with the SatCom at Airbus. We did win one of the Supplier of the Year Award and one of their segments when we first started, which was nice recognition. We made an acquisition in the UK that had EASA certification last year, and that helped us again build more structural capacity and capabilities to address Airbus. So the team is doing a great job. They’re spending a lot of time in Airbus. They’re showing the product or the technology that we’ve got. We’re working on many projects, and I think we’re making good progress. But as you know, to become specified on – in aerospace takes a long time. I mean, that’s the tough part of it. The great part of it is, once you’re specified, you tend to hang on to that for a while. So I think it’s a very good opportunity for us. I think the team has done a great job making the inroads there and we’d look to see increased performance at Airbus in the future.

Great. Thanks very much.

Your last question comes from the line of Kevin Hocevar from Northcoast Research. Please go ahead. Your line is open.

Hey, everybody, nice start to the year.

Thank you, Kevin.

Maybe with the 737 MAX, you mentioned that will be a 1% headwind to the year. Is the assumption there just that it’s not produced for the balance of the year, or do you have some assumptions that ramps at some point in 2019?

That’s just the 20% reduction calculated out through the end of the year.

Okay. And then in terms of – oil prices have moved higher here throughout the last several months. And I know raws that you use – a lot of raws you use in the CCM segment are oil as a precursor, but your raws have different supply demand dynamics and pricing doesn’t always move the same. So I’m wondering if you could comment on what you’re seeing? Is – you mentioned that the $40 million to $50 million price raw estimate, you’re now thinking you’ll be at the higher-end of that. So what’s going better? Is it pricing than expected? Is it raw less inflation and raw – or more tailwinds in raw? And what is the assumption in raw materials there? Do you have an assumption that we start to see a pickup in inflation as year goes on, or curious if you can comment on that?

Ladies and gentlemen, we have lost the speakers. Please continue to hold.

Hey, sorry, I think I got connected there. Kevin?

We’re now reconnected.

That was not agile. Sorry, everyone. We’ve – somehow, we’re disconnected and we apologize. Thanks for your patience and for staying on the line. So, Kevin, did we answer that?

I don’t know, I didn’t hear. I think you were disconnected.

Can you repeat the question, please? And we will absolutely answer it.

Yes. just so oil prices have moved higher and I know your raws are a precursor to a lot of raws you buy, but your raws have different supply/demand dynamics. And it seems like your raws have slightly moved up. So you mentioned that price you expect to be towards the higher-end of that $40 million to $50 million tailwind this year now. So wondering what’s the makeup there? Is pricing going better than expected? Are you seeing less inflation or better tailwind from raws than you expected? And what are you assuming in raw materials there? Do you assume that you start to see inflationary pressures pick up, because oil has come up, or do you not expect that to happen?

Yes. In the original $40 million to $50 million, we talked about a couple of months ago, we did assume that it would turnaround – start turning around by the second-half of the year and that that’s still the case. We didn’t see a lot of tailwind in the first quarter, because obviously you tie up some savings in inventory. We do have a natural build in the fourth quarter and the slower season to build up for the busy season. So we didn’t see a lot of any tailwind in the first quarter. We expect that to carry over for the next two a little bit. But do – we do have some increase built into the back-half of the year, we always have.

Gotcha. Okay, thank you very much.

Okay.

There’s no further questions at this time. I’ll now turn the call back to Chris Koch for closing remarks.

Well, thanks, Kelly, and apologize to everyone for that disconnection there. This concludes the first quarter 2019 earnings call. Thank you, again. We look forward to speaking with everyone on the next earnings call. Kelly, thanks.

This concludes today’s conference call. You may now disconnect.