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

Thank you, Chantal. Good afternoon, everyone. And welcome to Carlisle's second quarter 2019 earnings conference call. We released our second quarter financial results after the market closed today, and you can find both our press release and earnings call slide presentation on our Web site at www.carlisle.com in the Investor Relations section.Discussing the results and our updated outlook today are, Chris Koch, President and Chief Executive Officer and Bob Roche, our Chief Financial Officer. Today's call will begin with Chris discussing our progress towards Vision 2025 and business trends experienced during the second quarter. Bob will discuss Carlisle's second quarter financial performance. Following Chris and Bob's remarks, we will open up the line for questions.Before we begin, please refer to Slide 2 of our presentation 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. I'm pleased to report Carlisle had a record second quarter and made significant headway toward our vision 2025 goals of $8 billion in revenues, 20% operating income and 15% ROIC, all driving to $15 of earnings per share in 2025.To reach these goals, we remain focused on driving 5% organic growth with operational leverage, utilizing the Carlisle operating system and driving a continuous improvement culture, building scale of synergistic acquisitions, continuing to invest in exceptional talent and deploying over $3 billion into capital expenditures, share repurchases and dividends.We launched Vision 2025 in the first quarter of 2017. And we are excited about our progress thus far, particularly in our two largest segments, CCM and CIT that together account for approximately 90% of our total segment operating income. CCM status as a best-in-class building product supplier continues to be exhibited through its price leadership, sustainable mid single-digit organic growth supported by a multiyear commercial re-roofing cycle and a margin profile we believe is sustainable. Carlisle Construction Materials continues to leverage its strong brand and its expansion throughout the building envelope, which could not be done without delivering the premium Carlisle experience that our contractors and distributor partners have come to rely on.Looking back on CIT's history, we weathered a transition in technology within in-flight entertainment solutions in 2017, but have come out of it well focused on driving the margins in excess of 20%. The team has restructured several operations over the past few years and is tracking well in its 2019 facility consolidation efforts. Our engineering expertise, brand, strong relationships with OEMs and increased focus on a more profitable mix of business has elevated margins and we are solidly on pace to deliver mid-teens this year.Our long-term…

Thank you, Chris. Please turn to the revenue bridge on Slide 5 of the presentation. As Chris mentioned earlier, we are pleased with our overall second quarter revenue performance. Organic growth was 2.3% in the quarter, driven by strong results in our non-residential roofing, commercial aero and defense and space markets. Acquisitions contributed 4.7% of sales growth for the quarter and FX was a 60 basis points headwind.Turning to our margin bridge on Slide 6. Q2 operating margin expanded 290 basis points; positive pricing and volume leverage combine for 140 basis points of the year-over-year improvement; COS added 120 basis points; freight, labor and raw material costs, netted to a 50 basis point improvement; and net restructuring and rationalization costs were an additional 40 basis point headwind. Partially offsetting these positives, acquisitions were a 60 basis points headwind.On Slide 7 we have provided an EPS bridge. As Chris mentioned earlier, we reported record second quarter diluted EPS from continuing operations of $2.65, which compares to $1.87 last year; positive volume price contributed $0.24 for the year-over-year increase; COS, which includes sourcing initiatives, contributed $0.17; raw material, freight and labor costs netted to a $0.13 benefit; and lower share count added an additional $0.15.Now let's turn to Slide 8 to review the second quarter performance price by segment in more detail. At CCM, revenues increased 10.4% with acquisitions contributing 6.1% of the growth and organic growth of 4.7%, partially offset by a 40 basis points foreign currency translation headwind. CCM executed extremely well in delivering approximately $30 million of net price cost realization in the quarter. Operating margin at CCM was 19.9% in the quarter, a 280 basis point improvement over the last year. While the microenvironment for commodities helped us in the first half of the year, we are extremely…

Thanks Bob. Please turn to Slide 14 as we discuss our updated 2019 outlook. For Carlisle, we continue to expect year-over-year growth to be in the high single-digit range. By segment, at CCM, driven by what we view as a healthy North American non-residential construction market. The CCM teams' price discipline, a solid backlog and work of contractors tight labor markets and the addition of Petersen Aluminum, we continue to expect revenues to grow low double-digits in 2019.With CIT, we continue to expect revenue growth to increase mid to high single-digits. We expect continued strength in our core CIT markets of aerospace and medical, and CIT continues to benefit from pricing actions taken in 2018 to offset inflation and other cost increases. Our restructuring plans and related charges of $15 million remain on track, which is a reminder related to the consolidation of North American facilities to drive operational improvements and efficiency gains.At CFT, we continue to expect revenue growth in the mid-single-digit range, driven by the acquisitions of Hosco IDS, Shinhang and Ecco, strong price realization and new product introductions. At CBF, given lower than expected volumes year-to-date in part due to the robust sales volume levels last year and some softness in end markets resulting in adjustments to inventory levels at our customers, we now expect year-over-year revenues to decline mid-single-digits.Tuning to our corporate items. Corporate expense is now expected to be approximately $95 million for the year. Depreciation and amortization expense is still expected to be approximately $200 million. For the full year, we expect capital expenditures of $110 million and free cash flow conversion above 110%. Net interest expense is currently expected to be approximately $58 million for the year. And we now expect our tax rate to be approximately 23%.As we pivot to the second half of 2019, we are well-positioned to build on our record second quarter performance and continue the progress towards Vision 2025, and the goals of $8 billion in revenues, 20% operating income and 15% ROIC. We remain steadfast in our commitment to achieving our goals and driving to the $15 of earnings per share by 2025. We expect to deliver record performance in 2019 and we will continue to demonstrate excellent price discipline focused on integration and restructuring efforts, and to drive continuous improvement in all our operations.I am extremely pleased that Carlisle employees around the globe embody an entrepreneurial spirit, are committed to excellence in all we do, and are focused on delivering results for the Carlisle shareholders. This concludes our formal comments. Chantel, we are now ready for questions.

[Operator Instructions] Your first question comes from Tim Wojs with Baird. Your line is open.

So I guess just a couple questions on CCM. I guess, Chris, with you're getting to the $40 million -- I think you're at $44 million or so of net price costs for the year. What's the right, or maybe the updated way for us to think about that in the second half, both maybe from a price realization perspective and then a commodities perspective?

Yes, I'll give you the overall and then Bob could break it down. But I think we're going to be in the $60 million to $65 million range now for the full year. So that's up from $40 million to $50 million projection we had earlier. And my guess is that price is going to be about $15 million of that with -- I would say that $15 million on the upper end and maybe $10 million on the lower end.

So that would imply probably on the fourth quarter you may see a little bit of price slippage?

I would think, yes. We might see some price slippage, yes.

And then, may be bigger picture just on CCM from a volume perspective. Where do you think you're at in the re-roofing cycle on the commercial side? If you had -- I know it's hard to triangulate. But do you think you're in the second or third inning of the cycle, or do you think you are closer with respect to this thing?

On the roofing cycle, I think, I don't know that we have that graph that we've produced. But in general, we started entering that re-roofing cycle, the bigger re-roofing cycle maybe five, six years ago. And so I think if you think about this, it's not really an inning format, Tim, because we believe that re-roofing cycle will continue as we continue to put in new construction. But right now, I'd say over the short-term, we're entering the sweet spot of the re-roofing cycle.

And then I guess lastly, just this is more of a modeling question. But historically, I think the third quarter has been close to the second quarter in terms of absolute revenue dollars, and just trying to understand that obviously with different last year due to some of the weather challenges in September. I'm just trying to understand if there's any reason why that historical relationship of maybe near parity from Q2 and Q3 shouldn't hold?

No, I would think there would be pretty much -- I would think we would see it playing out the same way we've seen it in the past, maybe a slight decline something in the low single digits, maybe 1% or 2% difference between Q2 and Q3. The only caveat is that last year that was such -- there's such an impact from weather that obviously the year-over-year gains will be big and with a strong backlog we have, and there might be some upside to that.

Your next question comes from Bryan Blair with Oppenheimer. Your line is open.

Yeah. Good morning guys. Great quarter in CCM. So with mid single-digit growth there against challenging stack comps, obviously, difficult weather. Just wondering if you could quantify the impact of weather in the quarter and more than offsetting that? How much growth, either in dollar terms or percentage contributions in the quarter you got from new products? And also if you can parse out maybe product launch where you're likely taking share?

I think, the weather, it is, Bryan, always hard to figure out what we lost. I think it's pretty similar to what we had in Q1. I'm going to say, somewhere between three and four days that amount and on roofing days we take the aggregate across North America. And then on new products, I'll let Bob answer that question for you.

Yes, I mean, we were up significantly but at a small base, Bryan. We continue to grow that with the new glue and adhesives and membranes that we're putting out. But relative to the total, it's still a small number.

And then in the slide you call out that you think platform profitability is improving. I think you have guided some mid single-digit range for the year previously. Is there any update to that level of profitability?

Yes. First of all, we're very excited about the new team that came in. And in the fourth quarter, we made all those changes, really got focus back on integrating the business in the CCM. And we will exit the year at 10% and that will give us being on track for our model of exactly what we projected this year. So, I am really pleased with that and the team is delivering there.

And one more on CFT, if I can. You've maintained the mid single-digit guide for the year relatively tough first half, particularly in 2Q. Looking into the back half, how much are you baking into that guide for MPI contribution to organic there versus the M&A that you have?

The new product introduction are going to -- they're going to start to roll out here end of September, October. But when you think about what's left in the year, I don't think. There might be little bit of stocking of those new units. But I don't think it will be of that impactful. The bulk of this is going to be our acquisitions. And obviously, there'd be some organic declines in sales and I think there'll be close to probably what we experienced in the second quarter. And what we're really looking for obviously is to get some of this trade disagreement resolved, see the Chinese economy and especially the Chinese automotive market, recover and help us out there.

Your next question comes from Kevin Hocevar with Northcoast Research. Your line is open.

Just wondering if you can comment on the backlog you're seeing in CCM. It sounds like weather has been a factor here in the first half of the year really, and it sounds like backlogs are really goodSounds like backlogs are really good and already get backlog got even better because the project seem to be deferred. So if all the stars align here and we just got sunny weather the rest of the year, what could volumes be up here in the back half of the year based on what you're seeing and hearing your customer base? And I know there seems to be labors been an issue in terms of maybe capping the amount of the growth there to be. But what could growth look like here in the back half of the year if we get some normal weather patterns?

Kevin, when we look back, the gating factor is labor at our contractor. So the backlog is great. We think if everything went well and we had great weather, 5% to 7% -- if I get up to 7%, can happen in the market place in the volume basis.

And you mentioned to previous question about the price cost equation expecting some type of price slippage as we go through the year. Are you seeing anything right now, or is there just an assumption in there that if draws continue to trend down that eventually there's some type of slippage. And given the backlogs and seemingly strong underlying demand, can that hold that better and maybe you hold price despite raw materials coming down?

Yes, I mean, I think -- we're assuming that it would be relatively flat. We don't think there'd be much slippage. Some of our competitors went out in the first half with price increases. Now, that didn't drive a lot of change in behavior, I'm going to call. It did signal to the marketplace that the manufacturers are serious about maintaining price.So we're pretty comfortable that all the work we did late last year to get these price increases in should hold out for the rest of the year now. Yes, that can change quickly if something happens. But we're pretty confident that we can maintain at least close to -- I'm going to say, when we got the fourth quarter of last year, we have them all baked in. So we would assume in the fourth quarter we'd be at least flat year-on-year on price.

And Kevin, let me clarify that slippage, I should have done it for Tim. When I was thinking about slippage, I was more thinking about the significant gains we had in Q1 and Q2. And then there's going to be slippage from that. And obviously, we're lapping that pricing and so we're not going to have that. So I don't -- I think Bob is exactly right that as we go into three and four -- yes, I think we'll be relatively flat.

Okay, that's a good clarification. And then on the corporate spends, you're looking for $80 million as of last quarter. Now it's up to $95 million. Just curious incentive comps gone up given the good results, or what's the reason for the increase in the corporate expense?

There's a couple of things there. Some of the share based comp. We issued SARs last year with a nice run up we had in the stock over the last quarter or two that adds to it. We have been out in the marketplace certainly doing a lot of work on acquisition, some of which we haven't closed on. That's about a third of it. And then incentive comp with the good results is higher than last year and higher than expected, and that's another third of it. So you take the increase, it's probably a third across those three things.

[Operator Instructions] Your next question comes from Garik Shmois with Longbow Research. Your line is open.

Hi, thanks and congratulations on the quarter. I wanted to ask on CFT margins. How we should think about that moving forward, just given the maybe temporarily challenged end market environment, plus the acquisitions that look like they're going to be a little bit dilutive to margins. So should this rate of margin compression that we saw in the second quarter be sustainable or and when should we start to see an acceleration of margin assuming you get some resolution?

Yes, I mean I think the compression, so we went from about what 10.6% last year down to about 5% this year. Now that included some acquisitions. So going into the third quarter, we would expect close to 450 basis point decline year-on-year and that's a lot. I mean, some of that's acquisitions, but a lot of that is just leverage on the volume. We do pretty good on our gross margin line. So we lose volume. It's -- It's tough.And then as we get to the fourth quarter, we're expecting volumes to be up like they always are, but the compression in margin from the 14.6% last year would be down a little bit, but not as much as the second and third quarters because volume comes back.

And then any color just on CIT margins in the second half of the year, just given the acquisition that you're making. I guess a similar question, should we expect any -- any margin mix impact from the acquisitions and any update that you can have on the 737 MAX. I think last quarter you had called out maybe 100 basis points of headwinds. Is there any update to how that's been tracking?

I think on the margins on CIT probably a little bit lower in the third and fourth quarter. In the second quarter, we had some good mix and everything in the second quarter, but not down much more of the same at CIT for the third and fourth quarter. And then on the MAX, Boeing went from 52 a month to 42 a month earlier this year. We still haven't seen our orders to us to the subs going down at all. There is still filling up the supply chain getting ready to go back, continue to beef up production.We're expecting that now that it pushed out to maybe the end of the year, next year, that's going to hit us soon and it's about $1 million a month if it does hit us. So for the rest of the year, it would be $5 million that we get it shortly.

Your next question comes from Neil Frohnapple with Buckingham Research. Your line is open.

Hey guys, congrats on a nice quarter. Just a quick follow-up on Fluid Technologies. Did you say what the acquisitions will contribute to revenue on a full year basis going forward?

$20 million full year.

That's second half.

Second half. Sorry -- rest of this year.

$40 million in the second half, okay. And then switching gears, can you talk more about the revenue outlook for break in friction. I mean is it your sense that underlying construction ag mining demand is deteriorating or are the revenue declines related more to temporary inventory rebalancing. Just any more color that would be helpful?

I think most of it for us was this heavy buying last year solid uptick and then we have added some of our biggest customers rebalancing. I think our outlook is pretty much in line with the OEs there. I think we've seen some struggling in North America due to the trade negotiations. Also the wet weather. So I don't really know, in some ways, if we have a super accurate demand going forward that would make a call either for something other than just what we've seen in the second quarter. So I think our anticipation as we look forward into Q3 and four is that we're going to see a lot of what we saw in Q1 and two.

There are no further questions at this time, I'll now turn the call back over to the presenters.

Thanks, Chantal. This concludes our second quarter 2019 earnings call. Thanks everyone for your participation. We look forward to speaking with you at our next earnings call. Thank you.

This concludes today's call. You may now disconnect.