Carlisle Companies Incorporated (CSL)

CSL 
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Carlisle Companies Inc. (CSL)

Q4 2008 Earnings Call

February 05, 2009 9:00 am ET

Executives

David Roberts - Chairman, President and CEO

Steven Ford - VP and CFO

Analysts

Peter Lisnic - Robert W. Baird

Saul Ludwig

Wendy Caplan

Mark Zeff

Presentation

Operator

Good morning. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter Earnings 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. (Operator Instructions).

I would now like to turn the call over to our Chairman, President and CEO of Carlisle

Company Mr. David Roberts. Sir, you may begin.

David Roberts

Thank you, Ashley. Good morning and welcome to our 2008 year-end conference call. With me is Steve Ford our CFO; and Kevin [Zimo], our Treasurer.

Before I turn the floor over to Steve, I will take you through a detailed discussion of 2008. I would like to give you an update on the conditions that we saw in 2008, and really an update on the initiatives that we announced during the year.

2008 was a difficult year for us, primarily related to raw material costs and a slowing economy later in the year. Our material cost increase were about $142 million as compared to 2007. We were able to offset approximately 80% of those costs to productivity improvements and price increases. That left us with unrecovered material cost increases, which was a major contributor to our margin decline during the year.

The good news is we are starting to see these costs subside. We still have some higher cost inventory, mainly in tire and wheel, and that will work its way through the system during the first quarter and possibly the second quarter, just because of the slowing that we are seeing in the economy. The materials are headed in the right direction.

During the year we announced a number of factory consolidations and distribution consolidations. Let me give you an update on how we are proceeding on those. They are all on schedule and actually costing less than we originally planned. The Anderson, South Carolina and Marlin, Texas Insulfoam plants are now closed. Both plants are listed for sale. We actually have an offer on the Anderson, South Carolina plan. We hope to have that sale complete sometime in the first quarter and we do not really anticipate any additional forthcoming charges for either facility.

In our foodservice business, our East Point Georgia facility was closed on January 30th and all operations had moved into primarily at Sparta, Wisconsin facility. We have a few people onsite in East Point to get the facility into a saleable condition, but these costs will not be significant and there really are no further charges coming as a result of that facility closing either.

The consolidation of our three California wheel plants into Ontario is proceeding as planned and should be complete some time by late summer. 2009 expenses to consolidate these facilities are going to be about $2 million with a payback for about a year and half.

The consolidation of the five tire distribution centers that we announced in the third quarter which include the Quinton, Tennessee; Springfield, Tennessee; Mt. Pleasant, Texas and two facilities in Spokane, Washington are now complete. We still have some lease termination costs that we are working through with the building owners, but we do not anticipate these exceeding what we announced during the third quarter conference call.

The remaining distribution center that we are consolidating is Lithia Springs, Georgia, and that has been moved into our new McDonough site. That will occur sometime mid to late April of this year. To make these moves possible, we actually installed the state-of-an-art material handling system in McDonough, which has made that facility actually one of the highest checked out tire distribution centers in the country. Once Lithia Springs is consolidated, our first debt in consolidation distribution centers in the McDonough will be complete.

Not announced last year but what we are in the process of doing is our consolidation of our China tire plants. We are in the beginning stages of moving tire production out of [Beijing] and into our tire plant in (inaudible). This move began this month and will be completed in November. The expenses for the consolidation are $3.5 million and we are anticipating an annual savings of approximately $5 million from that consolidation.

We are also planning for other plant consolidations in closing during the year but we are still in the planning stage as I am not in a position to really announce what facilities are and what the charges are going to be associated with those consolidations. Once those plans are finalized and we would notify the appropriate people, we will announce our plans to the public.

We are planning for a $10 million to $15 million charge, restructuring charge in 2009, of which 3 million of that will be a carryover from the restructuring we announced in 2008. Permanent payback calculations for the expenditures that are generally in the less than two-year range, so we get a good payback on the closing of these facilities.

We continue to make progress implementing the Carlisle operating system. We made significant strides during the second half of 2008 to put us well on the path of 15% operating earnings and a free cash conversion rate in excess of 100%.

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