Good afternoon, my name is Vincent and I will be conference operator today. At this time I would like to welcome everyone to the Carlisle Companies' Third Quarter 2018 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Mr. Jim Giannakouros, Vice President of Investor Relations and SP&A. Jim, please go ahead.

Thank you, Vincent. Good afternoon everyone, and welcome to Carlisle's third quarter 2018 earnings conference call. We released our financial results after the market closed today and you can find our press release and our earnings call slide presentation on our website at www.carlisle.com in the Investor Relations section. With me today are Chris Koch, President and CEO of Carlisle; and our CFO, Bob Roche. Today's call will begin with Chris and Bob discussing Carlisle's third quarter operating and financial performance, with updated comments on our business outlook and progress towards our vision 2025. Following our prepared remarks, we're happy to open the call up for questions. Before I hand it over to Chris though, I'd refer you to Slide 2 of our presentation. Please note, that certain statements made during this call maybe 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've filed with the SEC before making any investment decision. With that, I'd like to turn the call over to Chris.

Thanks Jim, good afternoon everyone, please turn to Slide 3 of the presentation. As we reported in our press release, Carlisle's third quarter performance reinforces our belief that the momentum we have built in year one of Vision 2025 is on solid footing. In Vision 2025, we target doubling our annual revenues to $8 billion, expanding operating margins to 20%, and generating 15% ROIC. The foundations on which Vision 2025 success rests include driving 5% plus organic revenue growth, utilizing COS consistently to drive efficiencies in operating leverage, building scale with synergistic acquisitions, continuing to invest in and develop exceptional talent, and deploying over $3 billion into capital expenditures, share repurchases and dividends. When coupled with our long-standing and defining management approach of combining continuous improvement, entrepreneurial spirit, decentralization; we create a unique culture that assures that the day-to-day energy, focus and efforts of our employees are directed towards actions that drive results and support the key initiatives within the context of our strategic plan. With three quarters of the year behind us we've gained solid traction on the key pillars we introduced in February under Vision 2025. In the third quarter, we achieved 5.5% organic revenue growth on-track with our long-term growth targets and driven by continued core volume growth and sustained price leadership at CCM, healthy aerospace volume at CIT, and positive trends in the construction and mining end markets within CBF. We remain committed to driving efficiency throughout Carlisle as demonstrated by the acceleration of savings generated by COS in 2018, specifically 1.4% of sales and cost savings within the quarter, well within our long-term target of 1% to 2%. With respect to our goals of deploying $3 billion of capital through 2025 we continue to seek suitable candidates for our med-tech, aerospace, food technologies and building…

Thanks, Chris. Please turn to the revenue bridge on Slide 5 of the presentation. As Chris mentioned in his opening remarks, we are pleased with our overall third quarter revenue performance. Organic growth had a positive 5.5% impact listed by 10% at CIT and 15% at CBF. As we have previously discussed, and was the case in the first half of the year, new revenue recognition standards impacted revenue in the third quarter by 60 basis points and acquisitions contributed 11.7% of sales growth for the quarter. Turning to our margin bridge on Slide 6; operating margin percentage decreased 150 basis points in the quarter to 11.9%. The net impact of revenues had a positive 130 basis point impact. COS drove 140 basis point in margin improvement, acquisitions had a negative 140 basis point impact in the quarter, and finally, rising raw material freight and labor related costs driven largely by CCM but also CBF had a negative 350 basis point impact. On Slide 7 we have provided an EPS bridge. As previously stated, we reported third quarter diluted EPS from continuing operations of $1.59, a 26% increase over last year. Higher volumes contributed $0.15, tax related items added $0.30, COS contributed $0.14, share repurchases added another $0.06, and price realization added $0.15. Offsetting these positives were higher raw material, freight and labor related costs amounting to a 22% year-over-year headwind, higher interest expense, a $0.06 headwind, unfavorable product mix of $0.07 and other costs of $0.12. Our tax rate of 20.5% was lower versus last year due to U.S. tax reform, and we had approximately $5.7 million of one-time tax benefits in the quarter. Now let's turn to Slide 8 to review the third quarter performance by segment in more detail. At CCM, revenues increased 21.3% in the quarter…

Thanks, Bob. Please turn to Slide 15 as we discuss or updated 2018 outlook. For Carlisle overall, given the impact of the September shortfall of CCM, we are lowering our 2018 consolidated revenue outlook slightly from approximately 20% to high-teens percent growth. By segment, at CCM driven by continued healthy underlying demand in the commercial construction market and including contributions from acquisitions, we now expect revenues to grow in the low 20% range with the change to forecast predominantly the aforementioned drivers we experienced in September. CCM will continue to maintain discipline around pricing actions and freight surcharges to offset the previously discussed inflationary cost pressures. And finally, we'll move forward with the structural improvement plans at Accella including facility optimization, accelerated implementation of the Carlisle operating system, and a more aggressive reduction of SG&A, notably all within a solid demand backdrop. We're excited about Accella, our deal thesis remains intact and we view it as a platform on which we can build organically and augment via M&A. In the CIT segment, we continue to expect double-digit revenue growth driven by a strong aerospace market, growth within the med-tech platform and continued year-over-year growth of SatCom connectivity sales. We remain focused on converting a strong pipeline for new products, our projects driving to higher content per aircraft and seeking high quality acquisitions from our med-tech and aerospace businesses. At CFT, we continue to expect revenue growth in the mid-single digit range for 2018 with our significant efforts in investment to restructure the business the fluid technologies platform is exhibiting targeted margin expansion while focusing on operational excellence launching new projects and seeking acquisitions to continue to build out this platform. At CBF we continue to expect revenues to grow in the mid-teens. We are seeing continued improvements in key end-markets…

[Operator Instructions] We have your first question, it comes from the line of Tim Wojs from Baird.

So maybe just on CCM; could you give us -- so just a couple of clarifications. So first, it sounds like; was price more than offset the higher costs in the core CCM business, it's sounds like about $11.5 million of price and $9 million of cost?

That's exactly right Tim.

And just on the guidance; I mean the lowering of -- kind of the organic guides it to low to mid-single versus mid-to-high. It does require a little bit of sequential moderation I think in the growth rate in the fourth quarter; so I'm just trying to marry maybe that comment with the comment that October has actually picked back up due to some of the September shortfalls?

Tim, I think October is returning to those expected levels we had for October. I don't -- I think the modulation and the slight reduction really comes from the fact that we don't -- unless some extraordinary situation occurs from on a weather perspective and we extend fall deeply into the winter. We don't think we're going to make up that September shortfall in any measurable way. As we said, labor is very tight, the backlogs are there, I might think it just continues to build backlog and when the winter comes it will have to move into the spring.

So I mean, the expectation would be that you'd still -- you could still see a mid-single digit growth market in CCM next year?

Definitely.

And then could you just baseline us on what Accella profitability was in the third quarter because it's sounds like -- I think year-to-date it might be breakeven; so if it's still kind of breakeven on an underlying basis?

Yes, including the synergies that we get in by putting them together with CCM, about 1% to 2% profitability right now in the quarter.

And then, any change to the commentary you made before in terms of pricing being $30 million and cost inflation being about $40 million headwind?

No, that's good.

Your next question comes from the line of Charlie Brady from SunTrust. Your line is now open.

Vincent, maybe we can pick that one up in a minute. Move on to the next question.

We have your next question, it comes from the line of Neil Frohnapple from Buckingham Research.

I just wanted to go back to the Accella profitability in 2018. I think Bob you just mentioned 1% or 2% profitability in the quarter, but can you just level at us for what the expectation will be for this segment for the full year of '18 relative to the high single-digit margin commentary for 2019?

Yes, now we're expecting in the low to mid-single-digits, so 3% to 5%.

So call it 500 basis points sort of improvement in '19 on 20% of segment sales; so that should be -- if my math is right, a 100 basis point tailwind to total CCM segment margins; does that sound about right, just from the improvements in Accella?

Yes, the math sounds appropriate because we expect to go back to the 8% now in '19.

And then just given the price increases you've implemented year-to-date in CCM and Bob you sounded positive that these will continue to hold in the fourth quarter. If we assume these continue to stick at these current levels through 2019, just hypothetically, and then raw costs are flat from here. What is the carryover at least for the first half of 2019 look like from a price cost standpoint?

Well, we're getting about $20 million in the back half, a little over $20 million in the back half. So you would assume some of that would carry through to the first half and then you'd be flat in the first half; so let's just say $15 million of carryover on a conservative basis.

And then as far as along the same lines from a material cost standpoint including freight, what would that carryover sort of look like in the first half of '19 relative to that $15 million?

I think as we look at freight or I'm going to say total costs have been reasonably flat quarter-on-quarter; so it's been about $10 million a quarter versus last year. So if it stays where it is you would expect nothing, but we continue to see freight increase and we don't know what's happening to oil; so like I said based on the $10 million a quarter, you would think if it stays where it is today you'd be fine for the -- even for the full year next year.

The $10 million increase in the 2018 forecast for restructuring facility or asset rationalization to get to the $33 million to $37 million; I guess just more importantly, what's the outlook for 2019 because assuming that was the pull-forward, that should come down which will help underlying profitability next year. So, I know there is always going to be some sort of restructuring in the business but can you just kind of help us understand what that tailwind could be in 2019?

I mean we're thinking about $15 million for '19 on a normalized restructuring basis and we think that's sort of our normal run rate going forward because we're always going to have projects to get cost out, spread across all the businesses in all the locations.

Your next question comes from the line of Charlie Brady from SunTrust Robinson.

On Accella, did you guys quantify or could you quantify the cost on that restructuring and kind of what that payback is going to be now? It sounds like things are being accelerated. And then I guess, the differential it sounds like pricing went up, it's too high and pull it back down, maybe some granularity about what the delta between that was?

On the pricing Charlie, I think it was a very marginal pricing on the delta change, everything was kind of in -- I'm going to say in the mid-single digits on pricing and we pulled back a bit. So we still did make some progress for the year on pricing but it was just marginally enough to I think have a few people switch, and obviously the product still maintains a lot of great characteristics as it was desired and so those folks would come back in October and at that marginally reduced product price they're back in the game. And Bob will take on the first question.

Your first one is related to what the restructuring cost was; you know, we don't expect a lot of it's going to be -- we don't have a lot of big facilities to close or plans to move. A lot of it's SG&A and getting more efficient in our factory, so we don't expect a big restructuring to come out of that either in the fourth quarter for next year, and that's kind of encompassed in the $15 million I talked about a little bit earlier.

On CCM, if you've covered this, I apologize; the extra cost in the executive exit costs, can you quantify that?

Yes, we put out a $5.5 million [ph].

Your next question comes from the line of Garik Shmois from Longbow Research.

I was wondering if you could provide how CCM volumes are tracking prior to September just to get an idea of how strong underlying demand was before weather hit?

Well, we were down -- I'm going to say mid -- we were down mid-teens in September, and prior to that it was high single-digit. So that's without giving too much competitive information away I would say it's high single-digits in July and August, and then obviously the weather hit and down mid-teens, consistent by the way with the industry; and we look at our industry associations and are very consistent with what we saw across the entire competitive landscape at single plant roofing.

And I guess just to that, I think there was a question really or just around the single-digit growth into next year but given the trends prior to September high single-digits, I think that's how you're growing if not a little bit better earlier in the year. Is recognizing that there is labor constraints and timing issues heading into the fourth quarter which or weather is uncertain but is there anything that you're seeing from an end-market standpoint that changes the outlook, either better or worse if you look out to 2019 just from where you're hearing from your customers?

Not really, when we look at the ABI, and we look at Dodge [ph] and these other reports and then we just take the commentary from the field; I mean pretty much the verticals that we're in, that we highlight warehouse education, you know, office, stores, things like that -- not much modulation downward or upward on what we've seen earlier in the year, and I think again just to reiterate the big question is 'where would that extra labor come from to complete the jobs.' The backlog is still strong, demand is still there, underlying demand for both re-roofing and new, and I think the question going into '19 is, is there a pool of labor that we can draw on in some way to expand the ability to take on new roofing projects.

Just wondering if you look out to next year, just some of the comments on Accella improving, how sensitive would it be if we're in a relatively stagnant housing environment given the daughters [ph] have talked about decelerating orders. How sensitive to business would it be into your outlook if housing does stagnate into next year?

Well, I think stagnating is not good for anyone in the resi-housing market, but I think the interesting thing with Accella is -- remember this is a new technology, we're really very low market share versus the traditional type of insulation, we've been gaining a lot of traction as energy costs have been fairly high and Accella's value proposition really starts to play out. I think Bob referenced once that at a job site he was in there trying to reduce the size of the heating, and ventilating, and air conditioning units in homes because of the extra insulating power of foam and it offsets that, so it becomes cost neutral. So our real goal with Accella is to continue to penetrate the insulation market in resi and so I think we'd offset some of that stagnation with our efforts to grow that new technology into the construction market. Vincent, maybe we could have the next question, please?

The next question comes from the line of Kevin Hocevar from Northcoast Research.

On Slide 7 you show that product mix was a $0.07 headwind at EPS; what is driving that exactly? I mean some of that's going to be Accella, right?

It's a big part of it as it's less profitable, and then we have some of that out of CIT as well as we talked about with medical coming upto the profitability levels, we want with the factory move and then SatCom, again, continuing to get efficiency out of our factory in Franklin [ph]. So those are the three big drivers of it.

You updated the guidance for full year organic growth in CCM in the low-to-mid single-digits, and as you kind of play with the model to see -- you're running at about 2% pricing and volume suffered here in September, obviously pretty hard like you said down mid-teens in September. But as you also mentioned, up kind of -- up again and so where you'd expect in October? And it seems like if you plug in a mid-single digit type volume growth number you're going to come in at the very high end of that guidance range of that low to mid-single digit organic growth range for the year. So just kind of curious, what would it take to see low single-digits; is there some upside there? Just wanted to get a sense for that range and how comfortable you are with where you think that could shake out?

In the fourth quarter and first quarter, there were always once that -- again, we're just going to go back to weather, that would be one that again I mentioned -- if we could get a dry warmer fourth quarter across the U.S. we would do well. Texas is our biggest market, that had record rainfall, obviously any recovery there is going to be important. Also labor, we can see some relief on labor that will -- would help but I think the biggest thing that would affect any upside is just -- how does that fourth quarter look from an ability to get on the roof Kevin, we think we missed something like overall maybe four to five days -- roofing days in September, and you can see the impact. So if we could pick up three to five roofing days in the fourth quarter, it wouldn't probably have the same impact as September did but it could be very beneficial to us.

And CFT in all the margins, 13% excluding the onetime benefit there; so obviously real nice progress there. So how should we think of that margin progressing as we exit the year, I think you guys have kind of talked about maybe exiting the mid-teens. So how should we think off -- is that still a good way to think about that and how should we think of that margin progressing in 2019?

Yes, we're still on-track for what we talked about earlier in the year and exiting -- approaching mid-teens. And I think the nice progress we made in the third quarter gives us lot of confidence in that. And then going into '19, right, you do have some modulations throughout the year, it's not an even volume year; so we expect 150 to 200 basis points as I talked about before -- improvement year-on-year in the full year.

Your next question comes from the line of Bryan Blair from Oppenheimer.

I called out the strong new product growth in CCM; I'm assuming that a rapid lot contributed to that. I was just wondering if you could parse out what is driving that growth and perhaps what the revenue base is that is growing at that percentage?

The revenue base is pretty small, I mean it's $20 million to $30 million right now, and 20 last year, 30 days here that we're talking about there. And it's rapid lock and it's some new ceiling capabilities we have with appeal as well, so we have a couple of new products fit in there.

And as they continue to gain scale, is it fair to assume that those are margin accretive?

Yes, I would say both -- really, the rapid block, this is the Velcro [ph] applied roofing has got a great margin profile and very good pricing characteristics, it's taking about half the labor off. We have an appeal which obviously reduces the cleanup on a roof and that has some great margin, and then there are cap-grip [ph] and some others -- again are taking either VOCs out or reducing labor and ease-of-use in increasing the performance. So yes, we're definitely trying to drive in ROIC mindset in that and get value for the products -- the new products we're introducing.

Your next question comes from the line of Liam Burke from B.Riley FBR.

Chris, you mentioned that in the CIT there was a product mix that setback operating margins slightly, and aerospace was a big grower. Was the new projects within the aerospace or what created that margin headwind within the -- I'm presuming within the aerospace there?

It revolves around the SatCom business, any efficiencies related to our Franklin and Mobile [ph] factories. At SatCom we have had tremendous growth obviously in these two years in SatCom and these factories are processing that and growing and establishing their manufacturing operations as we do it. I think we expanded Franklin twice over the last three years, so it really relates to that SatCom efficiency. And the other piece I would touch on is the medical in Dongguan, obviously when we did the factory move it's a startup, we figured it went fairly smoothly but as with any startup we have issues around scrap and around the lower efficiency of performance out of new employees in a new environment. So those are the big hits in CIT.

And COS, you're taking that to the next level to get to your long-term 2025 objectives. How are you tracking in terms of -- you've got some ambitious goal within those programs, how is that tracking towards your long-term goal?

I think it's right in there, this quarter as we mentioned it was at 1.5% I think and we were right in that 1% to 2% that we want, we think it's picking up speed, we've made some investments, both in people, in software, in our factories to drive that Liam; so every day we build on that. And the other nice thing is, I think it's starting to really take on some of the -- I would say ownership within the divisions and this is no longer just a corporate project after 10 years or a corporate-led project, it's now embedded and people can see the benefits from it. So the great thing is that the savings are seen and experienced in the divisions and they are the one's pushing it. So we feel very comfortable that we'll get to that 2% savings.

Your next question comes from the line of Joel Tiss from BMO.

I don't know if you -- if this number was called out at all but how much was the gain in CFT from the sale of the Mexican facility?

$2.3 million.

And then the insight on Slide 7, that $0.12 of other costs in the third quarter, what is that from?

I mean, a big part of that's the retirement cost that we talked about in the 8-K.

I think $0.07 of the $0.12 is [indiscernible] and on the other $0.05 really relates to some onetime medical expenses we had and that's it.

And then, just -- I don't want 2019 guidance but I'm just holistically trying to think if the pricing that's in the system now, is there enough in CCM to be able to offset what seems reasonable to expect is coming in 2019 in terms of cost increases or is there going to have to be more pricing there?

I think what we're seeing now with MDI and oil seems to be modulating; I think we're pretty comfortable, the wildcard is freight, it's how high is that really going to go. So we may need to do further freight actions to be able to make up for that but we're feeling pretty good now with the big gains we have made that we should be -- even year-on-year.

And Joel, the gains on the other side of Accella are really going to come from operational improvements, things we control. I think that pricing we've -- based upon how we pushed in the third quarter, I think we have a really good feel for what we can do on price in Accella and now we're turning in, we'd work on cost improvements and manufacturing efficiencies.

Your next question comes from the line of Neil Frohnapple from Buckingham Research. Neil just got disconnected. We have no further questions in queue. Mr. Koch, any closing remarks?

Vincent, thank you very much, I appreciate that. And this concludes our third quarter 2018 earnings call. I want to thank everybody on the call for their participation, and we look forward to speaking to all of you at the next earnings call. Thanks again.

Thank you. This concludes today's conference call. You may now disconnect.